Registration Nos. 33-38766 and 811-6239
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 9 [ X ]
TAX-FREE FUND FOR UTAH
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[ X ] on October 31, 1997 pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[___] on (date) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new
effective date for a previous post-effective amendment.
Registrant hereby declares, pursuant to Section (a)(1) of Rule 24f-
2 under the Investment Company Act of 1940, that Registrant has
registered an indefinite number of its shares under the Securities
Act of 1933 pursuant to that Section and that the Rule 24f-2 Notice
for Registrant's fiscal year ended June 30, 1997 was filed in
August 1997.
<PAGE>
TAX-FREE FUND FOR UTAH
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights
4..............Introduction; Investment of the Fund's
Assets; Investment Restrictions; General
Information
5..............Management Arrangements
5A.............**
6..............General Information; Dividend and Tax
Information
7..............Net Asset Value per Share; How to Invest in
the Fund; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Fund's Assets; Municipal
Bonds; Investment Restrictions
14.............Trustees and Officers
15.............General Information (Prospectus caption);
Trustees and Officers
16.............Additional Information as to Management
Arrangements; General Information
17.............Additional Information as to Management
Arrangements
18.............General Information
19.............Limitations of Redemptions in Kind;
Computation of Net Asset Value; Automatic
Withdrawal Plan; Distribution Plan
20.............Additional Tax Information
21.............How to Invest in the Fund (Prospectus
caption); General Information
22.............Performance
* Not applicable or negative answer
** Contained in the annual report of the Registrant
<PAGE>
Tax-Free Fund For Utah
380 Madison Avenue
Suite 2300
New York, NY 10017
800-UTAH-YES
(800-882-4937)
212-697-6666
Prospectus
Class A Shares
Class C Shares October 31, 1997
The Fund is a mutual fund whose objective is to seek to
provide as high a level of current income exempt from Utah and
regular Federal income taxes as is consistent with preservation of
capital by investing principally in municipal obligations of Utah
issuers which pay interest exempt from Utah State and Federal
income taxes. These municipal obligations must, at the time of
purchase, either be rated within the four highest credit ratings
(considered as investment grade) assigned by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, or, if unrated, be
determined to be of comparable quality to municipal obligations so
rated by the Fund's Sub-Adviser, First Security Investment
Management, Inc.
The Fund is intended as an investment through which Utah
investors can participate in the financing of various Utah-oriented
public purpose projects which assist in the economic development of
the State and the quality of life of its residents. While the Fund
will seek to have 100% of its assets invested in tax-free municipal
obligations of Utah issuers, it may invest up to 35% of the Fund's
assets in tax-free municipal obligations of issuers of other
states.
The Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information about the Fund dated October 31, 1997 (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request to
the Fund's Shareholder Servicing Agent, at the address given below,
or by calling the telephone number(s) given below. The Additional
Statement contains information about the Fund and its management
not included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus. Only
when you have read both the Prospectus and the Additional Statement
are all material facts about the Fund available to you.
SHARES OF THE FUND ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY FIRST SECURITY INVESTMENT MANAGEMENT,
INC., FIRST SECURITY BANK OF UTAH, N.A., OR ITS BANK OR NON-BANK
AFFILIATES OR BY ANY OTHER BANK. SHARES OF THE FUND ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR
GOVERNMENT SPONSORED AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact the
Fund's Shareholder Servicing Agent: after November 8, 1997:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Call 800-446-8824 toll free
Before November 8, 1997:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-446-8824 toll free or 732-855-5731
For General Inquiries & Yield Information,
Call 800-882-4937 toll free or 212-697-6666
The Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
[PICTURE]
St. George Water Treatment Facility
[PICTURE]
Primary Childrens Hospital in Salt Lake City
[PICTURE]
Intermountain Health Care Facility
[PICTURE]
Single Family Mortgage Bonds for Utah Housing
[LOGO]
TAX-FREE FUND FOR UTAH
[PICTURE]
St. George Regional Sewer Project
[PICTURE]
University of Utah
[PICTURE]
Salt Lake City International Airport
[PICTURE]
Jordan School District Elementary School
[PICTURE]
Davis School District Middle School
The Fund invests in tax-free municipal securities, primarily the
kinds of obligations issued by various communities and political
subdivisions within Utah. Most of these securities are used to
finance long-term municipal projects; examples are pictured above.
(See "Investment of the Fund's Assets.") The municipal obligations
which financed these particular projects were included in the
Fund's portfolio as of September 30, 1997, and together represented
22.64% of the Fund's portfolio. Since the portfolio is subject to
change, the Fund may not necessarily own these specific securities
at the time of the delivery of this Prospectus.
<PAGE>
HIGHLIGHTS
Tax-Free Fund For Utah (the "Fund"), founded by Aquila
Management Corporation (the "Manager") in 1992 and one of the
Aquilasm Group of Funds, is an open-end, non-diversified management
investment company (a "mutual fund") which invests in tax-free
municipal bonds, principally obligations issued by the State of
Utah, its counties and various other local authorities to finance
such long-term projects as schools, roads, hospitals and water
facilities throughout Utah or to finance short-term needs. (See
"Introduction.")
Tax-Free Income - The municipal obligations in which the Fund
invests pay interest which is exempt from both regular Federal
income taxes and State of Utah income taxes (except Utah income tax
on corporations). Dividends paid by the Fund from this income are
likewise free of both such taxes. It is, however, possible that in
certain circumstances a small portion of the dividends paid by the
Fund will be subject to income taxes. The Federal alternative
minimum tax may apply to some investors, but its impact will be
limited since not more than 20% of the Fund's net assets can be
invested in obligations paying interest which is subject to this
tax. The receipt of exempt-interest dividends from the Fund may
result in some portion of social security payments or railroad
retirement benefits being included in taxable income. Capital gains
distributions, if any, are taxable. (See "Dividend and Tax
Information.")
Investment Grade - The Fund will acquire only those municipal
obligations which, at the time of purchase, are within the four
highest credit ratings assigned by Moody's Investors Service, Inc.
or Standard & Poor's Corporation, or are determined to be of
comparable quality by the Fund's Sub-Adviser, First Security
Investment Management, Inc. In general there are nine separate
credit ratings, ranging from the highest to the lowest credit
ratings for municipal obligations. Obligations within the top four
ratings are considered "investment grade," but those in the fourth
rating may have speculative characteristics as well. (See
"Investment of the Fund's Assets.")
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Fund," which includes applicable sales charge
information.)
Additional Investments - You may make additional investments
at any time and in any amount, directly or, if in an amount of $50
or more, through the convenience of having your investment
electronically transferred from your financial institution account
into the Fund by Automatic Investment or Telephone Investment. (See
"How to Invest in the Fund.")
Alternative Purchase Plans - The Fund provides two alternative
ways for individuals to invest. (See "Alternative Purchase Plans.")
One way permits individual investors to pay distribution and
certain service charges principally at the time they purchase
shares; the other way permits investors to pay such costs over a
period of time, but without paying anything at time of purchase,
much as goods can be purchased on an installment plan. For this
purpose the Fund offers the following classes of shares, which
differ in their expense levels and sales charges:
* Front-Payment Class Shares ("Class A Shares") are
offered to anyone at net asset value plus a sales charge, paid
at the time of purchase, at the maximum rate of 4.0% of the
public offering price, with lower rates for larger purchases.
(See "How to Purchase Class A Shares.") Class A Shares are
subject to an asset retention service fee under the Fund's
Distribution Plan at the rate of 0.20 of 1% of the average
annual net assets represented by the Class A Shares. (See
"Distribution Plan" and "Table of Expenses.")
* Level-Payment Class Shares ("Class C Shares") are offered to
anyone at net asset value with no sales charge payable at the
time of purchase but with a level charge for service and
distribution fees for six years after the date of purchase at
the aggregate annual rate of 1% of the average annual net
assets of the Class C Shares. (See "Distribution Plan" and
"Shareholder Services Plan for Class C Shares.") Six years
after the date of purchase, Class C Shares are automatically
converted to Class A Shares. If you redeem Class C Shares
before you have held them for 12 months from the date of
purchase you will pay a contingent deferred sales charge
("CDSC"); this charge is 1%, calculated on the net asset value
of the Class C Shares at the time of purchase or at
redemption, whichever is less. There is no CDSC after Class C
Shares have been held beyond the applicable period. (See
"Alternative Purchase Plans," "Computation of the Holding
Periods for Class C Shares" and "How to Purchase Class C
Shares.")
The Fund also issues Institutional Class Shares ("Class Y
Shares") that are sold only to certain institutional investors and
Financial Intermediary Class Shares ("Class I Shares") which are
offered and sold only through certain financial intermediaries.
Class Y Shares and Class I Shares are not offered by this
Prospectus.
Class A Shares and Class C Shares are only offered for sale
in certain states. (See "How to Invest in the Fund.") If shares of
the Fund are sold outside those states the Fund can redeem them. If
your state of residence is not Utah, the dividends from the Fund
may be subject to income taxes of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of the Fund.
Monthly Income - Dividends are declared daily and paid
monthly. At your choice, dividends are paid by check mailed to you,
directly deposited into your financial institution account, or
automatically reinvested without sales charge in additional shares
of the Fund at the then-current net asset value. Specific classes
of shares will have different dividend amounts due to their
particular expense levels. (See "Dividend and Tax Information.")
Many Different Issues - You have the advantages of a portfolio
which consists of over 70 issues with different maturities. (See
"Investment of the Fund's Assets.")
Local Portfolio Management - Fee Arrangements - First
Security Investment Management, Inc. of Salt Lake City, Utah,
serves as the Fund's Investment Sub-Adviser, providing experienced
local professional management. The Sub-Adviser was incorporated in
1984 and is a subsidiary of First Security Investment Services,
Inc., which in turn is a wholly-owned subsidiary of First Security
Corporation, a Utah-headquartered financial services organization
with consolidated assets of $13.1 billion as of August 31, 1997. In
addition to advising the Fund, First Security's advisory experience
includes the management of The Achievement Family of Funds, funds
unrelated to the Fund, and the provision of investment management
services to banks and thrift institutions, corporate and
profit-sharing trusts, Taft-Hartley, municipal and state retirement
funds, charitable foundations, endowments and individual investors
throughout the United States. First Security is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended. It has offices at 61 South Main Street, Salt Lake City,
Utah 84111, 119 North 9th Street, Boise, Idaho 83730, 219 Central
Avenue, N.W., Albuquerque, New Mexico 87102 and 530 Las Vegas
Boulevard, Las Vegas Nevada 89101. First Security Bank of Utah,
N.A., an affiliate of First Security, is the largest bank in the
State of Utah and one of the largest banks in the Rocky Mountain
region. The Fund pays fees at a rate of up to 0.50 of 1% of average
annual net assets to its Manager which in turn pays up to 0.23 of
1% of average annual net assets to its Sub-Adviser (for total fees
at a rate of up to 0.50 of 1% of average annual net assets),
although some or all of these fees may be waived temporarily.
Redemptions - Liquidity - You may redeem any amount of your
account on any business day at the next determined net asset value
by telephone, FAX or mail request, with proceeds being sent to a
predesignated financial institution if you have elected Expedited
Redemption. Proceeds will be wired or transferred through the
facilities of the Automated Clearing House, wherever possible, upon
request, if in an amount of $1,000 or more, or will be mailed. For
these and other redemption procedures see "How to Redeem Your
Investment." There are no penalties or redemption fees for
redemption of Class A Shares. However, there is a contingent
deferred sales charge with respect to certain Class A Shares which
have been purchased in amounts of $1 million or more (see "Purchase
of $1 Million or More"). If you redeem Class C Shares before you
have held them for 12 months from the date of purchase you will pay
a contingent deferred sales charge ("CDSC") at the rate of 1%. (See
"Alternative Purchase Plans" - "Class C Shares.")
Certain Stabilizing Measures - The Fund will employ such
traditional measures as varying maturities, upgrading credit
standards for portfolio purchases, broadening diversification and
increasing its position in cash, in an attempt to protect against
declines in the value of its investments and other market risks.
(See "Certain Stabilizing Measures.")
Exchanges - You may exchange Class A or Class C Shares of the
Fund into corresponding classes of shares of other Aquila-sponsored
tax-free municipal bond mutual funds or two Aquila-sponsored equity
funds. You may also exchange them into shares of the
Aquila-sponsored money market funds. The exchange prices will be
the respective net asset values of the shares. (See "Exchange
Privilege.")
Risks and Special Considerations - The share price, determined
on each business day, varies with the market prices of the Fund's
portfolio securities, which fluctuate with market conditions,
including prevailing interest rates. Accordingly, the proceeds of
redemptions may be more or less than your original cost. (See
"Factors Which May Affect the Value of the Fund's Investments and
Their Yields.") The Fund's assets, being primarily or entirely Utah
issues, are subject to economic and other conditions affecting
Utah. (See "Risk Factors and Special Considerations Regarding
Investment in Utah Double-Exempt Obligations.") Moreover, the Fund
is classified as a "non-diversified" investment company, because it
may choose to invest in the obligations of a relatively limited
number of issuers. (See "Investment of the Fund's Assets.")
Statements and Reports - You will receive statements of your
account monthly as well as each time you add to your account or
take money out. Additionally, you will receive a Semi-Annual Report
and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
TABLE OF EXPENSES
Class A Class C
Shareholder Transaction Expenses Shares Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases.......... 4.00% None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None None
Maximum Deferred Sales Charge ..................... None(1) 1.00%(2)
Redemption Fees ................................... None None
Exchange Fee ...................................... None None
Annual Fund Operating Expenses(3)(4)
(as a percentage of average net assets)
Management Fee After Waiver(5).......... .......... 0.06% 0.06%
12b-1 Fee After Expense Reimbursement.............. 0.00% 0.75%
All Other Expenses After Expense
Reimbursement..................................... 0.30% 0.55%
Service Fee ..................................... None 0.25%
Other Expenses(6)................................ 0.30% 0.30
Total Fund Operating Expenses After Expense
Reimbursement and Fee Waiver................... 0.36% 1.36%
Example (7)
You would pay the following expenses on a $1,000 investment, assuming
a 5% annual return and redemption at the end of each time period:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A Shares.............. $44 $51 $59 $84
Class C Shares
With complete redemption
at end of period....... $24 $43 $74 $111(7)
With no redemption $14 $43 $74 $111(7)
<FN>
(1) Certain shares purchased in transactions of $1 million or more without
a sales charge may be subject to a contingent deferred sales charge of up
to 1% upon redemption during the first four years after purchase. See
"Purchase of $1 Million or More."
</FN>
<FN>
(2) A contingent deferred sales charge of 1% is imposed on the redemption
proceeds of the shares (or on the original price, whichever is lower) if
redeemed during the first 12 months after purchase.
</FN>
<FN>
(3) Estimated based upon amounts incurred by the Fund during its most
recent fiscal year, restated to reflect current arrangements.
</FN>
<FN>
(4) Fees are being waived by the Adviser and Administrator and it is
anticipated that once the asset size of the Fund reaches approximately $60
million these waivers will be increasingly reduced as the asset size of
the Fund increases, so that when assets exceed approximately $100 million
a substantial portion or all of these fees will be paid. Also, operating
expenses are being subsidized through reimbursement by the Administrator.
This subsidy is being phased out progressively so that the Fund will bear
its own expenses, other than advisory and administration fees, once its
asset size reaches approximately $60 million. The undertakings of the
Adviser and the Administrator as to fee waivers and the practices of the
Administrator as to expense reimbursement may operate to reduce the fees
and expenses of the Fund (see "Management Arrangements"). Other expenses
do not reflect a 0.01% expense offset in custodian fees received for
uninvested cash balances. Without fee waivers and expense reimbursement
and including the offset in custodian fees, expenses would have been
incurred at the following annual rates: for Class A Shares, management
fee, 0.50%; 12b-1 fee, 0.20%; other expenses, 0.63%, for total operating
expenses of 1.33%; for Class C Shares, management fee, 0.50%; 12b-1 fee,
0.75%; service fee, 0.25%; other expenses, 0.63%, for total operating
expenses of 2.13%.
</FN>
<FN>
(5) The Fund pays the Manager an advisory fee at the annual rate of 0.50%
of 1% of average annual net assets of which 0.44 of 1% is currently being
waived; the Manager pays the Sub-Adviser a sub-advisory fee at the annual
rate of 0.23 of 1% of average annual net assets of which 0.17 of 1% is
currently being waived. (See "Management Arrangements.")
</FN>
<FN>
(6) The expense example is based upon the above shareholder transaction
expenses (in the case of Class A Shares, this includes a sales charge of
$40 for a $1,000 investment) and estimated annual Fund operating expenses.
It is also based upon amounts at the beginning of each year which
includes the prior year's assumed results. A year's results consist of
an assumed 5% annual return less total operating expenses; the expense
ratio was applied to an assumed average balance (the year's starting
investment plus one-half the year's results). Each figure represents the
cumulative expenses so determined for the period specified.
</FN>
<FN>
(7) Six years after the date of purchase, Class C Shares are automatically
converted to Class A Shares.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL MUTUAL
FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING THE ABOVE
EXAMPLE. THE ASSUMED 5% ANNUAL RETURN SHOULD NOT BE INTERPRETED AS A
PREDICTION OF AN ACTUAL RETURN, WHICH MAY BE HIGHER OR LOWER. THE EXAMPLE
ALSO REFLECTS THE MAXIMUM SALES CHARGE. SEE "HOW TO INVEST IN THE FUND".
The purpose of the above table is to assist the investor in
understanding the various costs that an investor in the Fund will bear
directly or indirectly. The above table should not be considered as a
commitment or prediction that any fees, or that any particular portion
of fees, will be waived, or that any particular expenses will be
reimbursed. (See "Management Arrangements" for a more complete
description of the various investment advisory and administration fees.)
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights has been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon is included
in the Fund's June 30, 1997 financial statements contained in its Annual
Report, which are incorporated by reference into the Additional Statement.
The information provided in the table should be read in conjunction with
the financial statements and related notes. A copy of these financial
statements can be obtained without charge by calling or writing the
Shareholder Servicing Agent at the address and telephone numbers on the
cover of the Prospectus.
Class A(1) Class C(2)
Year Year Period(4)
Ended Ended Ended
June 30 June 30, June 30,
1997 1996 1995 1994 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year .................. $9.74 $9.59 $9.32 $10.00 $9.74 9.77
Income from Investment
Operations:
Net investment income .... 0.52 0.54 0.55 0.55 0.44 0.05
Net gain (loss) on
securities (both realized
and unrealized) ........ 0.21 0.15 0.27 (0.65) 0.21 (0.03)
Total from Investment
Operations ............. 0.73 0.69 0.82 (0.10) 0.65 0.02
Less Distributions:
Dividends from net
investment income ...... (0.53) (0.54) (0.55) (0.55) (0.45) (0.05)
Distributions from
capital gains .......... - - - (0.03) - -
Total Distributions ...... (0.53) (0.54) (0.55) (0.58) (0.45) (0.05)
Net Asset Value, End of
Year ..................... $9.94 $9.74 $9.59 $9.32 $9.94 $9.74
Total Return (not reflecting
sales load) (%).......... 7.72 7.17 9.09 (1.09) 6.80 0.20+
Ratios/Supplemental Data
Net Assets, End of Year
($ thousands) ......... 29.071 28,881 27,536 26,116 41 0.1
Ratio of Expenses to
Average Net Assets(%)... 0.27 0.19 0.08 0.03 1.07 0.14+
Ratio of Net Investment
Income to Average Net
Assets (%).............. 5.45 5.49 5.85 5.58 4.65 0.50+
Portfolio Turnover Rate(%) 5.09 11.15 22.92 27.53 5.09 11.15
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and
the expense offset in custodian fees for uninvested cash balances
would have been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income($)... 0.42 0.43 0.43 0.40 0.35 0.04
Ratio of Expenses to
Average Net Assets(%).... 1.33 1.30 1.30 1.60 2.13 0.23+
Ratio of Net Investment
Income to Average Net
Assets(%)................ 4.39 4.37 4.63 4.00 3.59 0.42+
<CAPTION>
Class A(1)
Period (3)
ended
June 30, 1993
<C>
9.60
0.50
0.40
0.90
(0.50)
-
(0.50)
10.00
9.67+
12,938
0*
5.64*
36.52+
0.27
2.67*
2.97*
<FN>
(1) Designated as Class A Shares on May 21, 1996.
</FN>
<FN>
(2) New Class of Shares established on May 21, 1996.
</FN>
<FN>
(3) From July 24, 1992 (commencement of operations) to June 30, 1993.
</FN>
<FN>
(4) From May 21, 1996 through June 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
<PAGE>
INTRODUCTION
The Fund's shares are designed to be a suitable investment for
investors (other than corporations) who seek income exempt from
State of Utah and regular Federal income taxes.
You may invest in shares of the Fund as an alternative to
direct investments in Utah Double-Exempt Obligations, as defined
below, which may include obligations of certain non-Utah issuers.
The Fund offers you the opportunity to keep assets fully invested
in a vehicle that provides a professionally managed portfolio of
Utah Double-Exempt Obligations which may, but not necessarily will,
be more diversified, higher yielding or more stable and more liquid
than you might be able to obtain on an individual basis by direct
purchase of Utah Double-Exempt Obligations.
Through the convenience of a single security consisting of
shares of the Fund, you are also relieved of the inconvenience
associated with direct investments of fixed denominations,
including the selecting, purchasing, handling, monitoring call
provisions and safekeeping of Utah Double-Exempt Obligations.
Utah Double-Exempt Obligations are a type of municipal
obligation. Municipal obligations are issued by or on behalf of
states, territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities to obtain
funds for various public purposes. The two principal
classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less
while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government
guarantee; tax anticipation notes; revenue anticipation notes; bond
anticipation notes; construction loan notes; and floating and
variable rate demand notes. Municipal obligations include municipal
lease/purchase agreements which are similar to installment purchase
contracts for property or equipment. The purposes for which
municipal obligations such as bonds are issued include the
construction of a wide range of public facilities such as highways,
bridges, schools, hospitals, housing, mass transportation, streets
and water and sewer works. Other public purposes for which
municipal obligations may be issued include the refunding of
outstanding obligations, the obtaining of funds for general
operating expenses and the obtaining of funds to lend to other
public institutions and facilities.
INVESTMENT OF THE FUND'S ASSETS
In seeking its objective of providing as high a level of
current income which is exempt from both State of Utah and regular
Federal income taxes as is consistent with the preservation of
capital, the Fund will invest in Utah Double-Exempt Obligations (as
defined below). There is no assurance that the Fund will achieve
its objective, which is a fundamental policy of the Fund. (See
"Investment Restrictions.")
As used in the Prospectus and the Additional Statement, the
term "Utah Double-Exempt Obligations" means obligations, including
those of non-Utah issuers, of any maturity which pay interest
which, in the opinion of bond counsel or other appropriate counsel,
is exempt from regular Federal income taxes and from Utah income
taxes other than taxes on corporations. Although exempt from
regular Federal income tax, interest paid on certain types of Utah
Double-Exempt Obligations, and dividends which the Fund might pay
from this interest, are preference items as to the Federal
alternative minimum tax; for further information, see "Dividend and
Tax Information." As a fundamental policy, at least 80% of the
Fund's net assets will be invested in Utah Double-Exempt
Obligations the income paid upon which will not be subject to the
alternative minimum tax; accordingly, the Fund can invest up to 20%
of its net assets in obligations the income from which is subject
to the Federal alternative minimum tax. The Fund may refrain
entirely from purchasing these types of Utah Double-Exempt
Obligations. While non-taxable to individuals and other taxpayers,
interest received from Utah and other municipal issuers is subject
to State of Utah taxes on corporations. (See "Utah Tax Information"
under "Dividend and Tax Information" below.)
Interest on bonds or other obligations issued by or under
the authority of states other than Utah and their agencies and
instrumentalities, Puerto Rico, Guam, the Northern Mariana Islands,
and the Virgin Islands are exempt from Utah income taxes (other
than certain taxes on corporations), as well as Federal income
taxes. The Fund will not purchase obligations of non-Utah issuers
unless Utah Double-Exempt Obligations of Utah issuers of the
desired quality, maturity and interest rate are not available. In
selecting Utah Double-Exempt Obligations of non-Utah issuers, the
Fund will choose obligations which in the judgement of First
Security Investment Management, Inc., the Fund's investment adviser
(the "Sub-Adviser"), are most appropriate to achieve the objectives
of the Fund.
As a Utah-oriented fund, under normal circumstances at least
65% of the Fund's total assets will be invested in Utah
Double-Exempt Obligations of Utah issuers. The Fund invests only in
Utah Double-Exempt Obligations.
In general, there are nine separate credit ratings ranging
from the highest to the lowest quality standards for municipal
obligations. So that the Fund will have a portfolio of
quality-oriented (investment grade) securities, the Utah
Double-Exempt Obligations which the Fund will purchase must, at the
time of purchase, either (i) be rated within the four highest
credit ratings assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"); or (ii) if
unrated, be determined to be of comparable quality to municipal
obligations so rated by the Sub-Adviser, subject to the direction
and control of the Fund's Board of Trustees. Municipal obligations
rated in the fourth highest credit rating are considered by such
rating agencies to be of medium quality and thus may present
investment risks not present in more highly rated obligations. Such
bonds lack outstanding investment characteristics and may in fact
have speculative characteristics as well; changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is
the case for higher grade bonds. If after purchase the rating of
any rated Utah Double-Exempt Obligation is downgraded such that it
could not then be purchased by the Fund, or, in the case of an
unrated Utah Double-Exempt Obligation, if the Sub-Adviser
determines that the unrated obligation is no longer of comparable
quality to those rated obligations which the Fund may purchase, it
is the current policy of the Fund to cause any such obligation to
be sold as promptly thereafter as the Sub-Adviser in its discretion
determines to be consistent with the Fund's objectives; such
obligation remains in the Fund's portfolio until it is sold. In
addition, because a downgrade often results in a reduction in the
market price of a downgraded obligation, sale of such an obligation
may result in a loss. (See Appendix A to the Additional Statement
for further information as to these ratings.) The Fund can purchase
industrial development bonds only if they meet the definition of
Utah Double-Exempt Obligations, i.e., the interest on them is
exempt from State of Utah and regular Federal income taxes other
than Utah income taxes on corporations.
The Fund is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940 Act").
The Fund also intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code (the "Code").
One of the tests for such qualification under the Code is, in
general, that at the end of each fiscal quarter of the Fund, at
least 50% of its assets must consist of (i) cash; and (ii)
securities which, as to any one issuer, do not exceed 5% of the
value of the Fund's assets. If the Fund had elected to register
under the 1940 Act as a "diversified" investment company, it would
have to meet the same test as to 75% of its assets. The Fund may
therefore not have as much diversification among securities, and
thus diversification of risk, as if it had made this election under
the 1940 Act. In general, the more the Fund invests in the
securities of specific issuers, the more the Fund is exposed to
risks associated with investments in those issuers. The Fund's
assets, being primarily or entirely Utah issues, are accordingly
subject to economic and other conditions affecting Utah. (See "Risk
Factors and Special Considerations Regarding Investment in Utah
Double-Exempt Obligations.")
Certain Stabilizing Measures
The Fund will employ such traditional measures as varying
maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash and
cash equivalents in attempting to protect against declines in the
value of its investments and other market risks.
Floating and Variable Rate Demand Notes
Floating and variable rate demand notes are tax-exempt
obligations which may have a stated maturity in excess of one year,
but permit the holder to demand payment of principal at any time,
or at specified intervals not exceeding one year, in each case upon
not more than 30 days' notice. The issuer of such notes normally
has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the note plus
accrued interest upon a specified number of days' notice to the
noteholders. The interest rate on a floating rate demand note is
based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand note is adjusted
automatically at specified intervals.
Participation Interests
The Fund may purchase from financial institutions
participation interests in Utah Double-Exempt Obligations (such as
industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund an undivided
interest in the underlying Utah Double-Exempt Obligations in the
proportion that the Fund's participation interest bears to the
total amount of the underlying Utah Double-Exempt Obligations. All
such participation interests must meet the Fund's credit
requirements. (See "Limitation to 10% as to Certain Investments.")
When-Issued and Delayed Delivery Purchases
The Fund may buy Utah Double-Exempt Obligations on a
when-issued or delayed delivery basis when it has the intention of
acquiring them. The Utah Double-Exempt Obligations so purchased are
subject to market fluctuation and no interest accrues to the Fund
until delivery and payment take place; their value at the delivery
date may be less than the purchase price. The Fund cannot enter
into when-issued commitments exceeding in the aggregate 15% of the
market value of the Fund's total assets, less liabilities other
than the obligations created by when-issued commitments. If the
Fund chooses to dispose of the right to acquire a when-issued
obligation prior to its acquisition, it could, as with the
disposition of any other portfolio holding, incur a gain or loss
due to market fluctuation; any such gain would be a taxable
short-term gain. The Fund places an amount of assets equal in value
to the amount due on the settlement date for the when-issued or
delayed delivery securities being purchased in a segregated account
with the Custodian, which is marked to market every business day.
(See the Additional Statement for further information.)
Limitation to 10% as to Certain Investments
The Fund cannot purchase Utah Double-Exempt Obligations that
are not readily marketable if thereafter more than 10% of its net
assets would consist of such investments. However, this 10% limit
does not include any Utah Double-Exempt Obligations as to which the
Fund can exercise the right to demand payment in full within three
days and as to which there is a secondary market. Floating and
variable rate demand notes and participation interests (including
municipal lease/purchase obligations) are considered illiquid
unless determined by the Board of Trustees to be readily
marketable. (See the Additional Statement.)
Current Policy as to Certain Obligations
The Fund will not invest more than 25% of its total assets in
(i) Utah Double-Exempt Obligations the interest on which is paid
from revenues of similar type projects or (ii) industrial
development bonds, unless the Prospectus and/or the Additional
Statement are supplemented to reflect the change and to give
additional information.
Factors Which May Affect the Value
of the Fund's Investments and Their Yields
The value of the Utah Double-Exempt Obligations in which the
Fund invests will fluctuate depending in large part on changes in
prevailing interest rates, and may be subject to other market,
credit and economic factors as well. If the prevailing interest
rates go up after the Fund buys Utah Double-Exempt Obligations, the
value of these obligations will normally go down; if these rates go
down, the value of these obligations will normally go up. Changes
in value and yield based on changes in prevailing interest rates
may have different effects on short-term Utah Double-Exempt
Obligations than on long-term obligations. Long-term obligations
(which often have higher yields) may fluctuate in value more than
short-term ones. The Fund's portfolio will represent a blend of
short-term and long-term obligations designed to reduce
fluctuations in the net asset value of the shares of the Fund.
Risk Factors and Special Considerations Regarding Investment in
Utah Double-Exempt Obligations of Utah Issuers
The Fund provides Utah residents with the benefits of
investing primarily in obligations of issuers of the State of Utah,
thereby participating in the financing of various Utah-oriented
public purpose projects which assist in the economic development of
the State and the quality of life of its residents. However, since
the Fund invests primarily in obligations of Utah issuers, there is
less diversification of the portfolio of the Fund and there may be
less breadth to the market for its portfolio securities than is
available for obligations of non-Utah issuers. In addition, the
yield of obligations of Utah issuers in which the Fund invests may
not be as high as that available from obligations of issuers of
other states, for various reasons, including favorable evaluation
in credit markets of the credit quality of Utah issuers as compared
to other issuers. The following is a discussion of various factors
that might influence the ability of Utah issuers to pay principal
and interest when due on the Utah Double-Exempt Obligations
contained in the portfolio of the Fund. Such information is derived
from sources that are generally available to investors and is
believed by the Fund to be accurate but has not been independently
verified and may not be complete.
Utah's economy is dominated by service industries, trade,
government and various manufacturing sectors. While Utah's economy
has significantly outperformed the national economy for several
years, and its overall employment growth rate in recent years has
ranked among the highest in the nation, there can be no assurance
that such conditions will continue in the future.
The population of the State has increased in recent years,
with the increase being attributable to both natural population
increase and net in-migration. From fiscal years 1984 through 1989
the State experienced out-migration because of an economy outpaced
by the growth of its labor force and a decline in the State's
energy producing industries. In fiscal year 1996, Utah's population
rose 2.2% to 2,000,100, including 13,400 in-migrants. It is not
known at the present time whether current trends will continue.
Utah has more school-age children and fewer working adults, as a
percentage of its population, than any other state; hence, to pay
the State's education costs, Utah households pay more in state and
local taxes per household than the national average. This current
relatively high level of taxation could adversely affect the
ability of Utah issuers to raise taxes substantially or at all.
A large percentage of the land in Utah is owned by the
Federal Government or included in Indian reservations, thereby
reducing the tax base of the State and its political subdivisions.
Since 1991, defense-related employment has lost 15,000 jobs.
However, the conversion of one large military facility to
manufacturing will soon be completed. Some communities in the State
contain major industries heavily dependent on defense-related
government contracts for their revenues. The termination of such
government contracts could increase unemployment and reduce taxes
paid by such industries.
The ability of Utah and its political subdivisions to
borrow money and to levy and collect taxes is limited by
constitutional and statutory restrictions such as debt limitations
and limitations on revenue increases. In recent years attempts have
been made by popular initiative to further restrict the borrowing
and taxing capacity of the State and its political subdivisions. It
is not possible to predict whether any such proposals will be
enacted in the future or their possible impact on State or local
government financing.
The State receives revenues from three principal sources;
(a) taxes and licenses; (b) Federal grants-in-aid; and (c) fees,
the State's share of mineral royalties, bonuses on Federal land and
other miscellaneous charges and receipts. In the 1996 fiscal year,
24.8% of those revenues came from sales taxes. The State collects
an individual income tax and a corporate franchise tax, but all net
revenues from such taxes are distributed to local school
districts.
Local governments are heavily dependent on ad valorem property
tax revenues, but also can receive revenues from other local taxes
and fees. There can be no assurance that a material downturn in the
State's economy, with the resulting impact on State and local
finances, will not adversely affect the market value of the Utah
Double-Exempt Obligations held in the Fund or the ability of the
respective obligors to make debt service payments on such Utah
Double-Exempt Obligations.
The availability of water is a significant concern in Utah.
During the past decade the State has experienced periods of both
flooding and drought. Water issues will likely affect the growth
and prosperity of the State in the future.
The Utah Double-Exempt Obligations in which the Fund may
invest from time to time include general obligation bonds, revenue
bonds, industrial revenue bonds and special tax assessment bonds,
and the sensitivity of each of these types of investments to the
general and economic factors discussed above may vary
significantly. No assurance can be given as to the effect, if any,
that these factors, individually or in the aggregate, may have on
any individual Utah Double-Exempt Obligations or on the Fund as a
whole.
Obligations of non-Utah issuers are subject to the risks of
general economic and other factors affecting those issuers.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the Prospectus
and the Additional Statement as "fundamental policies," cannot be
changed unless the holders of a "majority," as defined in the 1940
Act, of the Fund's outstanding shares vote to change them. (See the
Additional Statement for a definition of such a majority.) All
other policies can be changed from time to time by the Board of
Trustees without shareholder approval. Some of the more important
of the Fund's fundamental policies, not otherwise identified in the
Prospectus, are set forth below; others are listed in the
Additional Statement.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than Utah
Double-Exempt Obligations meeting the standards stated under
"Investment of the Fund's Assets."
2. The Fund has industry investment requirements.
The Fund cannot buy the obligations 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; the Fund will
consider that a non-governmental user of facilities financed by
industrial development bonds is an issuer in an industry.
3. The Fund cannot make loans.
The Fund can buy those Utah Double-Exempt Obligations which it
is permitted to buy (see "Investment of the Fund's Assets"); this
is investing, not making a loan. The Fund cannot lend its portfolio
securities.
4. The Fund can borrow only in limited amounts for special
purposes.
The Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage or
pledge its assets only in connection with such borrowing and only
up to the lesser of the amounts borrowed or 5% of the value of its
total assets. Interest on borrowings would reduce the Fund's
income. Except in connection with borrowings, the Fund will not
issue senior securities. The Fund will not purchase any Utah
Double-Exempt Obligations while it has any outstanding borrowings
which exceed 5% of the value of its total assets.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Fund's
classes of shares and offering price per share of each class is
determined as of 4:00 p.m., New York time, on each day that the New
York Stock Exchange is open (a "business day"),by dividing the
value of the Fund's net assets (i.e., the value of the assets less
liabilities) allocable to each class by the total number of shares
of such class then outstanding. Determination of the value of the
Fund's assets is subject to the direction and control of the Fund's
Board of Trustees. In general, it is based on market value, except
that Utah Obligations maturing in 60 days or less are generally
valued at amortized cost; see the Additional Statement for further
information.
ALTERNATIVE PURCHASE PLANS
In this Prospectus, the Fund provides individual investors
with the option of two alternative ways to invest in the Fund,
through two separate classes of shares. All classes represent
interests in the same portfolio of Utah Double-Exempt Obligations.
The primary difference between the classes of shares offered to
individuals lies in their sales charge structures and ongoing
expenses, as described below. You should choose the class that best
suits your own circumstances and needs.
If you choose to purchase Class A Shares you will pay the
applicable sales charge at the time of your purchase. By purchasing
Class C Shares, you will pay a sales charge over a period of six
years after purchase but without paying anything at time of
purchase, much as goods can be purchased on an installment plan.
You are subject to a contingent deferred sales charge, described
below, but only if you redeem your Class C Shares before they have
been held 12 months from your purchase. (See "Computation of
Holding Periods for Class C Shares.")
Class A Shares, "Front-Payment Class Shares," are offered
to anyone at net asset value plus a sales charge, paid at the
time of purchase, at the maximum rate of 4.0% of the public
offering price, with lower rates for larger purchases. When
you purchase Class A Shares, the amount of your investment is
reduced by the applicable sales charge. Class A Shares are
subject to an asset retention service fee under the Fund's
Distribution Plan at the rate of 0.20 of 1% of the average
annual net assets represented by the Class A Shares. (See
"Distribution Plan" and "Table of Expenses.") Certain Class A
Shares purchased in transactions of $1 million or more are
subject to a contingent deferred sales charge. (See "Purchase
of $1 Million or More.")
Class C Shares, "Level-Payment Class Shares," are offered
to anyone at net asset value with no sales charge payable at
purchase but with a level charge for distribution fees and
service fees for six years after the date of purchase at the
aggregate annual rate of 1% of the average annual net assets
of the Class C Shares. (See "Distribution Plan" and
"Shareholder Services Plan for Class C Shares.") Six years
after the date of purchase, Class C Shares, including Class C
Shares acquired in exchange for other Class C Shares under the
Exchange Privilege (see "Exchange Privilege"), are
automatically converted to Class A Shares. If you redeem Class
C Shares before you have held them for 12 months from the date
of purchase, you will pay a contingent deferred sales charge
("CDSC") at the rate of 1%, calculated on the net asset value
of the redeemed Class C Shares at the time of purchase or of
redemption, whichever is less. The amount of any CDSC will be
paid to the Distributor. The CDSC does not apply to shares
acquired through the reinvestment of dividends on Class C
Shares or to any Class C Shares held for more than 12 months
after purchase. For purposes of applying the CDSC and
determining the time of conversion, the 12-month and six-year
holding periods are considered modified by up to one month
depending upon when during a month your purchase of such
shares is made. (See "Computation of Holding Periods for Class
C Shares" and "How to Purchase Class C Shares.")
In determining whether a CDSC is payable on a redemption of
Class C Shares, it will be assumed that the redemption is made
first of any shares acquired as dividends or distributions, second
of any Class C Shares you have held for more than 12 months from
the date of purchase and finally of those Class C Shares as to
which the CDSC is payable which you have held the longest. This
will result in your paying the lowest possible CDSC.
Computation of Holding Periods for Class C Shares
For purposes of determining the holding period for Class C
Shares, all of your purchases made during a calendar month will be
deemed to have been made on the first business day of that month at
the average cost of all purchases made during that month. The
12-month CDSC holding period will end on the first business day of
the 12th calendar month after the date your purchase is deemed to
have been made. Accordingly, the CDSC holding period applicable to
your Class C Shares may be up to one month less than the full 12
months depending upon when your actual purchase was made during a
month. Running of the 12-month CDSC holding period will be
suspended for one month for each period of thirty days during which
you have held shares of a money market fund you have received in
exchange for Class C Shares under the Exchange Privilege. (See
"Exchange Privilege.")
Your Class C Shares will automatically convert to Class A
Shares six years after the date of purchase, together with a
pro-rata portion of all Class C Shares representing dividends and
other distributions paid in additional Class C Shares. The Class C
Shares so converted will no longer be subject to the higher
expenses borne by the Class C Shares. The conversion will be
effected at relative net asset values on the first business day of
the month following that in which the sixth anniversary of your
purchase of the Class C Shares occurred, except as noted below.
Accordingly, the holding period applicable to your Class C Shares
may be up to one month more than the six years depending upon when
your actual purchase was made during a month. Because the per share
value of Class A Shares may be higher than that of Class C Shares
at the time of conversion, you may receive fewer Class A Shares
than the number of Class C Shares converted. If you have made one
or more exchanges of Class C Shares among the Aquila-sponsored
tax-free municipal bond funds or equity funds under the Exchange
Privilege, the six-year holding period is deemed to have begun on
the date you purchased your original Class C Shares of the Fund or
of another of the Aquila bond or equity funds. The six-year holding
period will be suspended by one month for each period of thirty
days during which you hold shares of a money market fund you have
received in exchange for Class C Shares under the Exchange
Privilege. (See "Exchange Privilege.")
The following chart summarizes the principal differences
between Class A Shares and Class C Shares.
<TABLE>
<CAPTION>
Class A Class C
<S> <C> <C>
Initial Sales Maximum of 4% of the None
Charge public offering price
Contingent None (except for Maximum CDSC of 1% if
Deferred certain purchases shares redeemed before 12
Sales Charge over $1 Million) months; 0% after 12 months
Distribution and 0.20 of 1% Distribution fee of 0.75
Service Fees of 1% and a service fee
of 0.25 of 1% for a total
of 1%, payable for six
years
Other Information Initial sales charge Shares convert to Class
waived or reduced in A Shares after six years
some cases
</TABLE>
Factors to Consider in Choosing Classes of Shares
This discussion relates to the major differences between Class
A Shares and Class C Shares. It is recommended that any investment
in the Fund be considered long-term in nature.
Over time, the cumulative total cost of the 1% annual service
and distribution fees on the Class C Shares will equal or exceed
the total cost of the initial 4% maximum initial sales charge and
0.20 of 1% annual fee payable for Class A Shares. For example, if
equal amounts were paid at the same time for Class A Shares (where
the amount invested is reduced by the amount of the sales charge)
and for Class C Shares (which carry no sales charge at the time of
purchase) and the net asset value per share remained constant over
time, the total of such costs for Class C Shares would equal the
total of such costs for Class A Shares after approximately four and
two-thirds years. This example assumes no redemptions and
disregards the time value of money. Purchasers of Class C Shares
have all of their investment dollars invested from the time of
purchase, without having their investment reduced at the outset by
the initial sales charge payable for Class A Shares. If you invest
in Class A Shares you will pay the entire sales charge at the time
of purchase. Accordingly, if you expect to redeem your shares
within a reasonably short time after purchase, you should consider
the total cost of such an investment in Class A Shares compared
with a similar investment in Class C Shares. The example under
"Table of Expenses" shows the effect of Fund expenses for both
classes if a hypothetical investment in each of the classes is held
for 1, 3, 5 and 10 years. (See the Table of Expenses.)
Dividends and other distributions paid by the Fund with
respect to shares of each class are calculated in the same manner
and at the same time. The dividends actually paid with respect to
Class C Shares will be lower than those paid on Class A Shares
because Class C Shares bear higher distribution and service fees
and will have a higher expense ratio. In addition, the dividends of
each class can vary because each class will bear certain
class-specific charges. For example, each class will bear the costs
of printing and mailing annual reports to its own shareholders.
HOW TO INVEST IN THE FUND
The Fund's shares may be purchased through any investment
broker or dealer (a "selected dealer") which has a sales agreement
with Aquila Distributors, Inc. (the "Distributor") or through the
Distributor. There are two ways to make an initial investment: (i)
order the shares through your investment broker or dealer, if it is
a selected dealer; or (ii) mail the Application with payment to the
Fund's Shareholder Servicing Agent (the "Agent") at the address on
the Application. If you purchase Class A Shares, the applicable
sales charge will apply in either instance. Subsequent investments
are also subject to the applicable sales charges. You are urged to
complete an Application and send it to the Agent so that expedited
shareholder services can be established at the time of your
investment. Unless your initial investment is specified to be made
in Class C Shares, it will be made in Class A Shares.
The minimum initial investment for Class A Shares and Class C
Shares is $1,000, except as otherwise stated in the Prospectus or
Additional Statement. You may also make an initial investment of at
least $50 by establishing an Automatic Investment Program. To do
this you must open an account for automatic investments of at least
$50 each month and make an initial investment of at least $50. (See
below and "Automatic Investment Program" in the Application.) Such
investment must be drawn in United States dollars on a United
States commercial or savings bank, a credit union or a United
States branch of a foreign commercial bank (each of which is a
"Financial Institution"). You may make subsequent investments in
the same class of shares in any amount (unless you have an
Automatic Withdrawal Plan). Your subsequent investment may be made
through a selected dealer or by forwarding payment to the Agent,
with the name(s) of account owner(s), the account number, the name
of the Fund and the class of shares to be purchased. With
subsequent investments, please send the pre-printed stub attached
to the Fund's confirmations.
Subsequent investments of $50 or more in shares of the same
class as your initial investment can be made by electronic funds
transfer from your demand account at a Financial Institution. To
use electronic funds transfer for your purchases, your Financial
Institution must be a member of the Automated Clearing House and
the Agent must have received your completed Application designating
this feature, or, after your account has been opened, a Ready
Access Features form available from the Distributor or the Agent.
A pre-determined amount can be regularly transferred for investment
("Automatic Investment"), or single investments can be made upon
receipt by the Agent of telephone instructions from anyone
("Telephone Investment"). The maximum amount of each Telephone
Investment is $50,000. Upon 30 days' written notice to
shareholders, the Fund may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
The offering price is the net asset value per share for Class
C Shares and the net asset value per share plus the applicable
sales charge for Class A Shares. The offering price determined on
any day applies to all purchase orders received by the Agent from
selected dealers that day, except that orders received by it after
4:00 p.m. New York time will receive that day's offering price only
if such orders were received by selected dealers from customers
prior to such time and transmitted to the Distributor prior to its
close of business that day (normally 5:00 p.m. New York time); if
not so transmitted, such orders will be filled at the next
determined offering price. Selected dealers are required to
transmit orders promptly. Investments by mail are made at the
offering price next determined after receipt of the purchase order
by the Agent. Purchase orders received on other than a business day
will be executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next business
day. In the case of Telephone Investment your order will be filled
at the next determined offering price. If your order is placed
after the time for determining the net asset value of the Fund
shares for any day it will be executed at the price determined on
the following business day. The sale of shares will be suspended
during any period when the determination of net asset value is
suspended and may be suspended by the Distributor when the
Distributor judges it in the Fund's best interest to do so.
At the date of the Prospectus, Class A Shares and Class C
Shares of the Fund are available only in the following states:
Arizona, Colorado, District of Columbia, Florida, Hawaii, New
Jersey, New York and Utah.
If you do not reside in one of these states you should not
purchase shares of the Fund. If Class A Shares or Class C Shares of
the Fund are sold outside of these states the Fund can redeem them.
Such a redemption may result in a loss to you and may have tax
consequences.
In addition, if your state of residence is not Utah, the
dividends from the Fund may not be exempt from income tax of the
state in which you reside. Accordingly, you should consult your tax
adviser before acquiring shares of the Fund.
How to Purchase Class A Shares (Front-Payment Class Shares)
The following table shows the amount of the sales charge to
a "single purchaser" (defined below) together with the dealer
discounts paid to dealers and the agency commissions paid to
brokers (collectively called the "commissions") for Class A
Shares:
<TABLE>
<CAPTION>
Sales Sales Commissions
Charge Charge as as
as Approximate Percentage
Percentage Percentage of
Offering of Amount Offering
Price Invested Price
<S> <C> <C> <C>
Less than $25,000........ 4.00% 4.17% 3.50%
$25,000 but less
than $50,000............ 3.75% 3.90% 3.50%
$50,000 but less
than $100,000........... 3.50% 3.63% 3.25%
$100,000 but less
than $250,000........... 3.25% 3.36% 3.00%
$250,000 but less
than $500,000........... 3.00% 3.09% 2.75%
$500,000 but less
than $1,000,000......... 2.50% 2.56% 2.25%
</TABLE>
For purchases of $1 million or more see "Purchase of $1
Million or More," below.
The table of sales charges is applicable to purchases of
Class A Shares by a "single purchaser," i.e.: (a) an individual;
(b) an individual together with his or her spouse and their
children under the age of 21 purchasing Class A Shares for his, her
or their own accounts; (c) a trustee or other fiduciary purchasing
Class A Shares for a single trust estate or a single fiduciary
account; and (d) a tax-exempt organization enumerated in Section
501(c)(3) or (13) of the Code.
Upon notice to all selected dealers, the Distributor may
reallow up to the full amount of the applicable sales charge as
shown in the above schedule during periods specified in such
notice. During periods when all or substantially all of the entire
sales charge is reallowed, such selected dealers may be deemed to
be underwriters as that term is defined in the Securities Act of
1933.
Purchase of $1 Million or More
Class A Shares issued under the following circumstances are
called "CDSC Class A Shares": (i) Class A Shares issued in a single
purchase of $1 million or more by a single purchaser; and (ii) all
Class A Shares issued in a single purchase to a single purchaser
the value of which, when added to the value of the CDSC Class A
Shares and Class A Shares on which a sales charge has been paid,
already owned at the time of such purchase, equals or exceeds $1
million. CDSC Class A Shares also include certain Class A Shares
issued under the program captioned "Special Dealer Arrangements,"
below. CDSC Class A Shares do not include (i) Class A Shares
purchased without sales charge pursuant to the terms described
under "General," below and (ii) Class A Shares purchased in
transactions of less than $1 million and when certain special
dealer arrangements are not in effect under "Certain Investment
Companies" set forth under "Reduced Sales Charges," below.
When you purchase CDSC Class A Shares you will not pay a sales
charge at the time of purchase, and the Distributor will pay to any
dealer effecting such a purchase an amount equal to 1% of the sales
price of the shares purchased for purchases of $1 million but less
than $2.5 million, 0.50 of 1% for purchases of $2.5 million but
less than $5 million, and 0.25 of 1% for purchases of $5 million or
more.
If you redeem all or part of your CDSC Class A Shares
during the four years after your purchase of such shares, at the
time of redemption you will be required to pay to the Distributor
a special contingent deferred sales charge based on the lesser of
(i) the net asset value of your redeemed CDSC Class A Shares at the
time of purchase or (ii) the net asset value of your redeemed CDSC
Class A Shares at the time of redemption (the "Redemption Value").
The special charge will be an amount equal to 1% of the Redemption
Value if the redemption occurs within the first two years after
purchase, and 0.50 of 1% of the Redemption Value if the redemption
occurs within the third or fourth year after purchase. The special
charge will apply to redemptions of CDSC Class A Shares purchased
without a sales charge pursuant to a Letter of Intent, as described
below under "Reduced Sales Charges for Certain Purchases of Class
A Shares." The special charge does not apply to shares acquired
through the reinvestment of dividends on CDSC Class A Shares or to
any CDSC Class A Shares held for more than four years after
purchase. In determining whether the special charge is applicable,
it will be assumed that the CDSC Class A Shares you have held the
longest are the first CDSC Class A Shares to be redeemed, unless
you instruct the Agent otherwise. It will also be assumed that if
you have both CDSC Class A Shares and non-CDSC Class A Shares the
non-CDSC Class A Shares will be redeemed first.
For purposes of determining the holding period for CDSC Class
A Shares, all of your purchases made during a calendar month will
be deemed to have been made on the first business day of that month
at the average cost of all purchases made during that month. The
four-year holding period will end on the first business day of the
48th calendar month after the date your purchase is deemed to have
been made. Accordingly, the CDSC holding period applicable to your
CDSC Class A Shares may be up to one month less than the full 48
months depending upon when your actual purchase was made during a
month. Running of the 48-month CDSC holding period will be
suspended for one month for each period of thirty days during which
you have held shares of a money market fund you have received in
exchange for CDSC Class A Shares under the Exchange Privilege. (See
"Exchange Privilege.")
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation: If you are a "single purchaser" you
may benefit from a reduction of the sales charge in accordance with
the above schedule for subsequent purchases of Class A Shares if
the cumulative value (at cost or current net asset value, whichever
is higher) of Class A Shares you have previously purchased with a
sales charge and still own, together with Class A Shares of your
subsequent purchase with such a charge, amounts to $25,000 or
more.
Letters of Intent: The foregoing schedule of reduced sales
charges will also be available to "single purchasers" who enter
into a written Letter of Intent (included in the Application)
providing for the purchase, within a thirteen-month period, of
Class A Shares of the Fund through a single selected dealer or
through the Distributor. Class A Shares of the Fund which you
previously purchased during a 90-day period prior to the date of
receipt by the Distributor of your Letter of Intent and which you
still own may also be included in determining the applicable
reduction. For further details, including escrow provisions, see
the Letter of Intent provisions of the Application.
General: Class A Shares may be purchased at the next
determined net asset value by the Fund's Trustees and officers, by
the directors, officers and certain employees, retired employees
and representatives of the Sub-Adviser and its parent and
affiliates, the Administrator and the Distributor, by selected
dealers and brokers and their officers and employees, by certain
persons connected with firms providing legal, advertising or public
relations assistance, by certain family members of, and plans for
the benefit of, the foregoing, and for the benefit of trust or
similar clients of banking institutions over which these
institutions have full investment authority if the Fund or the
Distributor has entered into an agreement relating to such
purchases. Except for the last category, purchasers must give
written assurance that the purchase is for investment and that the
Class A Shares will not be resold except through redemption. There
may be tax consequences of these purchases. Such purchasers should
consult their own tax counsel. Class A Shares may also be issued at
net asset value in a merger, acquisition or exchange offer made
pursuant to a plan of reorganization to which the Fund is a
party.
The Fund permits the sale of its Class A Shares at prices
that reflect the reduction or elimination of the sales charge to
investors who are members of certain qualified groups meeting the
following requirements. A qualified group is (i) a group or
association, or a category of purchasers who are represented by a
fiduciary, professional or other representative (other than a
registered broker-dealer), which (ii) satisfies uniform criteria
which enable the Distributor to realize economies of scale in its
costs of distributing Class A Shares, (iii) gives its endorsement
or authorization (if it is a group or association) to an investment
program to facilitate solicitation of its membership by a broker or
dealer; and (iv) complies with the conditions of purchase that are
set forth in any agreement entered into between the Fund and the
group, representative or broker or dealer. At the time of purchase
you must furnish the Distributor with information sufficient to
permit verification that the purchase qualifies for a reduced sales
charge, either directly or through a broker or dealer.
Certain Investment Companies: Class A Shares of the Fund may
be purchased at net asset value without sales charge (except as set
forth below under "Special Dealer Arrangements") to the extent that
the aggregate net asset value of such Class A Shares does not
exceed the proceeds from a redemption (a "Qualified Redemption"),
made within 120 days prior to such purchase, of shares of another
investment company on which a sales charge, including a contingent
deferred sales charge, has been paid. Additional information is
available from the Distributor.
To qualify, the following special procedures must be followed:
1. A completed Application (included in the Prospectus) and
payment for the Class A Shares to be purchased must be sent to the
Distributor, Aquila Distributors, Inc., 380 Madison Avenue, Suite
2300, New York, NY 10017 and should not be sent to the Shareholder
Servicing Agent of the Fund. (This instruction replaces the mailing
address contained on the Application.)
2. The Application must be accompanied by evidence
satisfactory to the Distributor that the prospective shareholder
has made a Qualified Redemption in an amount at least equal to the
net asset value of the Class A Shares to be purchased. Satisfactory
evidence includes a confirmation of the date and the amount of the
redemption from the investment company, its transfer agent or the
investor's broker or dealer, or a copy of the investor's account
statement with the investment company reflecting the redemption
transaction.
3. You must complete and return to the Distributor a Transfer
Request Form, which is available from the Distributor.
The Fund reserves the right to alter or terminate this
privilege at any time without notice. The Prospectus will be
supplemented to reflect such alteration or termination.
Special Dealer Arrangements: During certain periods determined
by the Distributor, the Distributor (not the Fund) will pay to any
dealer effecting a purchase of Class A Shares of the Fund using the
proceeds of a Qualified Redemption the lesser of (i) 1% of such
proceeds or (ii) the same amounts described under "Purchase of $1
Million or More" above, on the same terms and conditions. Class A
Shares of the Fund issued in such a transaction will be CDSC Class
A Shares and if you thereafter redeem all or part of such shares
during the four-year period from the date of purchase you will be
subject to the special contingent deferred sales charge described
under "Purchase of $1 Million or More," above, on the same terms
and conditions. Whenever the Special Dealer Arrangements are in
effect the Prospectus will be supplemented.
How to Purchase Class C Shares (Level-Payment Class Shares)
Level-Payment Class Shares (Class C Shares) are offered at
net asset value with no sales charge payable at purchase. A level
charge is imposed for service and distribution fees for the first
six years after the date of purchase at the aggregate annual rate
of 1% of the average annual net assets of the Fund represented by
the Class C Shares. If you redeem Class C Shares before you have
held them for 12 months from the date of purchase you will pay a
contingent deferred sales charge ("CDSC"). The CDSC is charged at
the rate of 1%, calculated on the net asset value of the redeemed
Class C Shares at the time of purchase or at redemption, whichever
is less. There is no CDSC after Class C Shares have been held
beyond the applicable period. The CDSC does not apply to Class C
Shares acquired through the reinvestment of dividends on Class C
Shares.
The Distributor will pay to any dealer effecting a purchase of
Class C Shares an amount equal to 1% of the sales price of the
Class C Shares purchased.
Additional Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of any
class of shares of the Fund. Additional compensation may include
payment or partial payment for advertising of the Fund's shares,
payment of travel expenses, including lodging, incurred in
connection with attendance at sales seminars taken by qualifying
registered representatives to locations within or outside of the
United States, other prizes or financial assistance to securities
dealers in offering their own seminars or conferences. In some
instances, such compensation may be made available only to certain
dealers whose representatives have sold or are expected to sell
significant amounts of such shares. Dealers may not use sales of
the Fund's shares to qualify for the incentives to the extent such
may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers,
Inc. The cost to the Distributor of such promotional activities and
such payments to participating dealers will not exceed the amount
of the sales charges in respect of sales of all classes of shares
of the Fund effected through such participating dealers, whether
retained by the Distributor or reallowed to participating dealers.
No such additional compensation to dealers in connection with sales
of shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and dealers may receive different levels of
compensation for selling different classes of shares.
Systematic Payroll Investments
If your employer has established with the Fund a Systematic
Payroll Investment Plan ("Payroll Plan") you may arrange for
systematic investments into the Fund through a Payroll Plan.
Investments can be made in either Class A Shares or Class C Shares.
In order to participate in a Payroll Plan, you should make
arrangements with your own employer's payroll department, and you
must complete and sign any special application forms which may be
required by your employer. You must also complete the Application
included in the Prospectus. Once your application is received and
put into effect, under a Payroll Plan the employer will make a
deduction from payroll checks in an amount you determine, and will
remit the proceeds to the Fund. An investment in the Fund will be
made for you at the offering price, which includes applicable sales
charges determined as described above, when the Fund receives the
funds from your employer. The Fund will send a confirmation of each
transaction to you. To change the amount of or to terminate your
participation in the Payroll Plan (which could take up to ten
days), you must notify your employer.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to you
in an account maintained for you at the Agent in full and
fractional shares of the Fund (rounded to the nearest 1/1000th of
a share).
No share certificates will be issued for Class C Shares.
Share certificates for Class A Shares will be issued only if you so
request in writing to the Agent. All share certificates previously
issued by the Fund represent Class A Shares. No certificates will
be issued for fractional Class A Shares or if you have elected
Automatic Investment or Telephone Investment for Class A Shares
(see "How to Invest in the Fund" above) or Expedited Redemption
(see "How to Redeem Your Investment" below). If certificates for
Class A Shares are issued at your request, Expedited Redemption
Methods described below will not be available. In addition, you may
incur delay and expense if you lose the certificates.
The Fund and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule provides in
substance that an investment company may not engage directly or
indirectly in financing any activity which is primarily intended to
result in the sale of its shares except pursuant to a written plan
adopted under the Rule. The Plan has three parts.
Under one part of the Plan, the Fund is authorized to make
payments with respect to Class A Shares ("Class A Permitted
Payments") to Qualified Recipients, which payments shall be made
through the Distributor or shareholder servicing agent as
disbursing agent and may not exceed, for any fiscal year of the
Fund (as adjusted for any part or parts of a fiscal year during
which payments under the Plan are not accruable or for any fiscal
year which is not a full fiscal year), 0.20 of 1% of the average
annual net assets represented by the Class A Shares of the Fund.
Such payments shall be made only out of the Fund's assets allocable
to the Class A Shares. "Qualified Recipients" means broker-dealers
or others selected by the Distributor, including but not limited to
any principal underwriter of the Fund, with which the Fund or the
Distributor has entered into written agreements and which have
rendered assistance (whether direct, administrative, or both) in
the distribution and/or retention of the Fund's Class A Shares or
servicing of accounts of shareholders owning Class A Shares.
Under another part of the Plan, the Fund is authorized to make
payments with respect to Class C Shares ("Class C Permitted
Payments") to Qualified Recipients. Class C Permitted Payments
shall be made through the Distributor or shareholder servicing
agent as disbursing agent, and may not exceed, for any fiscal year
of the Fund (as adjusted for any part or parts of a fiscal year
during which payments under the Plan are not accruable or for any
fiscal year which is not a full fiscal year), 0.75 of 1% of the
average annual net assets represented by the Class C Shares of the
Fund. Such payments shall be made only out of the Fund's assets
allocable to the Class C Shares. "Qualified Recipients" means
broker-dealers or others selected by the Distributor, including but
not limited to any principal underwriter of the Fund, with which
the Fund or the Distributor has entered into written agreements and
which have rendered assistance (whether direct, administrative, or
both) in the distribution and/or retention of the Fund's Class C
Shares or servicing of accounts of shareholders owning Class C
Shares. Payments with respect to Class C Shares during the first
year after purchase are paid to the Distributor and thereafter to
other Qualified Recipients.
During the fiscal year ended June 30, 1997, $58,706 was
paid to Qualified Recipients under the Plan with respect to Class
A Shares, of which $1,749 was retained by the Distributor. (See the
Additional Statement for a description of the Distribution Plan.)
During the same period, $119 was paid to Qualified Recipients with
respect to Class C Shares of which the Distributor received
$119.
Another part of the Plan is designed to protect against any
claim against or involving the Fund that some of the expenses which
might be considered to be sales-related which the Fund pays or may
pay come within the purview of the Rule. The Fund believes that
except for Permitted Payments it is not financing any such activity
and does not consider any payment enumerated in this part of the
Plan as so financing any such activity. However, it might be
claimed that some of the expenses the Fund pays come within the
purview of the Rule. If and to the extent that any payment as
specifically listed in the Plan (see the Additional Statement) is
considered to be primarily intended to result in or as indirect
financing of any activity which is primarily intended to result in
the sale of Fund shares, these payments are authorized under the
Plan. In addition, if the Administrator, out of its own funds,
makes payment for distribution expenses such payments are
authorized. (See the Additional Statement.)
Shareholder Services Plan for Class C Shares
Under a Shareholder Services Plan, the Fund is authorized
to make payments with respect to Class C Shares ("Service Fees") to
Qualified Recipients. Service Fees shall be paid through the
Distributor or shareholder servicing agent as disbursing agent, and
may not exceed, for any fiscal year of the Fund (as adjusted for
any part or parts of a fiscal year during which payments under the
Plan are not accruable or for any fiscal year which is not a full
fiscal year), 0.25 of 1% of the average annual net assets
represented by the Class C Shares of the Fund. Such payments shall
be made only out of the Fund's assets represented by the Class C
Shares. "Qualified Recipients" means broker-dealers or others
selected by the Distributor, including but not limited to any
principal underwriter of the Fund, with which the Fund or the
Distributor has entered into written agreements and which have
agreed to provide personal services to holders of Class C Shares
and/or maintenance of Class C Shares shareholder accounts. (See the
Additional Statement.) Service Fees with respect to Class C Shares
will be paid to the Distributor. During the fiscal year ended June
30, 1997, payments of $40 were made under this Plan to the
Distributor.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your shares at the net asset
value next determined after acceptance of your redemption request
at the Agent (subject to any applicable contingent deferred sales
charge for redemptions of Class C Shares and CDSC Class A Shares).
For redemptions of Class C Shares and CDSC Class A Shares, at the
time of redemption a sufficient number of additional shares will be
redeemed to pay for any applicable contingent deferred sales
charge. Redemptions can be made by the various methods described
below. There is no minimum period for any investment in the Fund,
except for shares recently purchased by check, Automatic Investment
or Telephone Investment as discussed below. Except for CDSC Class
A Shares (see "Purchase of $1 Million or More") there are no
redemption fees or withdrawal penalties for Class A Shares. Class
C Shares are subject to a contingent deferred sales charge if
redeemed before they have been held 12 months from the date of
purchase. (See "Alternative Purchase Plans.") A redemption may
result in a transaction taxable to you. If you own both Class A
Shares and Class C Shares and do not specify which you wish to
redeem, it will be assumed that you wish to redeem Class A Shares.
For your convenience the Fund offers expedited redemption for
all classes of shares to provide you with a high level of liquidity
for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
For your convenience the Fund offers expedited redemption
for to provide you with a high level of liquidity for your
investment. You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares not
represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have predesignated
or
b) by check in the amount of $50,000 or less, mailed to you,
if your shares are registered in your name at the Fund and the
check is sent to your address of record, provided that there
has not been a change of your address of record during the 30
days preceding your redemption request. You can make only one
request for telephone redemption by check in any 7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-446-8824 toll free
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter of
instruction sent after November 8, 1997 to: PFPC Inc., 400 Bellevue
Parkway, Wilmington, DE 19809. Before November 8, 1997 send your
letter of instructions to Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 732-855-5730 or by mail at
581 Main Street, Woodbridge, NJ 07095-1198. The letter must provide
account name(s), account number, amount to be redeemed, and any
payment directions and be signed by the registered holder(s).
Signature guarantees are not required. See "Redemption Payments",
below for payment methods.
If you wish to have redemption proceeds sent directly to a
Financial Institution Account you should so elect on the Expedited
Redemption section of the Application or the Ready Access Features
form and provide the required information concerning your Financial
Institution account number. The Financial Institution account must
be in the exclusive name(s) of the shareholder(s) as registered
with the Fund. You may change the designated Financial Institution
account at any time by completing and returning a Ready Access
Features form. For protection of your assets, this form requires
signature guarantees and possible additional documentation.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Class A
Shares to be redeemed with payment instructions should be sent
(after November 8, 1997) in blank (unsigned) to the Fund's
Shareholder Servicing Agent: PFPC Inc., 400 Bellevue Parkway,
Wilmington, DE 19809. Before November 8, 1997 send your
certificates to Administrative Data Management Corp., Attn:
Aquilasm Group of Funds, 581 Main Street, Woodbridge, NJ. A stock
assignment form signed by the registered shareholder(s) exactly as
the account is registered must also be sent to the Shareholder
Servicing Agent.
For your own protection, it is essential that certificates be
mailed separately from signed redemption documentation. Because of
possible mail problems, it is also recommended that certificates be
sent by registered mail, return receipt requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration of
the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required if
sufficient documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
In all other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent bank,
a participant in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or
the New York Stock Exchange, Inc. Medallion Signature Program
(MSP). A notary public is not an acceptable signature
guarantor.
2. Non-Certificate Shares. If you own non-certificate
shares registered on the books of the Fund, and you have not
elected Expedited Redemption to a predesignated Financial
Institution account, you must use the Regular Redemption Method.
Under this redemption method you should send a letter of
instruction (after November 8, 1997) to: to the Fund's Shareholder
Servicing Agent: PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809. Before November 8, 1997 send your letter to Administrative
Data Management Corp., Attn: Aquilasm Group of Funds, 581 Main
Street, Woodbridge, NJ 07095-1198. The letter must contain:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above.
Redemption Payments
Redemption payments will ordinarily be mailed to you at
your address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. The Fund may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. The Fund
has no present intention of making this charge. Upon 30 days'
written notice to shareholders, the Fund may modify or terminate
the use of the Automated Clearing House to make redemption payments
at any time or charge a service fee, although no such fee is
presently contemplated. If any such changes are made, the
Prospectus will be supplemented to reflect them. If you use a
broker or dealer to arrange for a redemption, you may be charged a
fee for this service.
The Fund will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven days
after acceptance of such a redemption request. However, the right
of redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is
restricted as determined by the Securities and Exchange Commission
by rule or regulation; (ii) during periods in which an emergency,
as determined by the Securities and Exchange Commission, exists
which causes disposal of, or determination of the net asset value
of, the portfolio securities to be unreasonable or impracticable;
or (iii) for such other periods as the Securities and Exchange
Commission may permit. Payment for redemption of shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the Financial
Institution on which the purchase check was drawn, or from which
the funds for Automatic Investment or Telephone Investment were
transferred, satisfactory to the Agent and the Fund, that the
purchase check or Automatic Investment or Telephone Investment will
be honored. Possible delays in payment of redemption proceeds can
be eliminated by using wire payments or Federal Reserve drafts to
pay for purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by the distribution in kind of
securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. (See the Additional Statement for details.)
The Fund has the right to compel the redemption of shares held
in any account if the aggregate net asset value of such shares is
less than $500 as a result of shareholder redemptions or failure to
meet the minimum investment level under an Automatic Purchase
Program. If the Board elects to do this, shareholders who are
affected will receive prior written notice and will be permitted 60
days to bring their accounts up to the minimum before this
redemption is processed.
Reinvestment Privilege
You may reinvest without payment of any additional sales
charge all or part of any redemption proceeds within 120 days of a
redemption of shares in shares of the Fund of the same class as the
shares redeemed at the net asset value next determined after the
Agent receives your reinvestment order. In the case of Class C
Shares or CDSC Class A Shares on which a contingent deferred sales
charge was deducted at the time of redemption, the Distributor will
refund to you the amount of such sales charge, which will be added
to the amount of the reinvestment. The Class C Shares or CDSC Class
A Shares issued on reinvestment will be deemed to have been
outstanding from the date of your original purchase of the redeemed
shares, less the period from redemption to reinvestment. The
reinvestment privilege for any class may be exercised only once a
year, unless otherwise approved by the Distributor. If you have
realized a gain on the redemption of your shares, the redemption
transaction is taxable, and reinvestment will not alter any capital
gains tax payable. If there has been a loss on the redemption, some
or all of the loss may be tax deductible, depending on the amount
reinvested and the length of time between the redemption and the
reinvestment. You should consult your own tax advisor on this
matter.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase Class A Shares of the Fund having a net asset value of at
least $5,000. The Automatic Withdrawal Plan is not available for
Class C Shares.
Under an Automatic Withdrawal Plan you will receive a monthly
or quarterly check in a stated amount, not less than $50. If such
a plan is established, all dividends and distributions must be
reinvested in your shareholder account. Redemption of Class A
Shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. (See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.)
Purchases of additional Class A Shares concurrently with
withdrawals are undesirable because of sales charges when purchases
are made. Accordingly, you may not maintain an Automatic Withdrawal
Plan while simultaneously making regular purchases of Class A
Shares. While an occasional lump sum investment may be made, such
investment should normally be an amount at least equal to three
times the annual withdrawal or $5,000, whichever is less.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
Change in Management Arrangements
On October 24, 1997, the management arrangements described
below were approved by the Fund's shareholders and went into
effect. The new arrangements are designed to change the form of the
Fund's investment advisory and administration arrangements to a new
structure involving an adviser and a sub-adviser. The proposed
arrangements do not result in any change in overall management fees
paid by the Fund, nor any change in the parties providing these
services. Marketing efforts and positioning of the Fund will remain
the same with a strong local niche orientation.
Under the new arrangements, Aquila Management Corporation
("Aquila"), which since inception of the Fund has served as the
Fund's administrator, in addition became investment adviser under
a new agreement (the "Advisory and Administration Agreement") under
which it also continues to provide the Fund with all administrative
services. Also, by adoption of a Sub-Advisory Agreement between
Aquila and First Security Investment Management, Inc. (the
"Sub-Adviser"), the former investment advisory agreement was
replaced by one under which Aquila appointed the Sub-Adviser as
Sub-Adviser to the Fund. Under the Sub-Advisory Agreement, the
Sub-Adviser will continue to provide the Fund with advisory
services of the kind which it formerly provided as adviser. The
duties of the administrator, previously performed under an
administration agreement, are now performed by Aquila under the
Advisory and Administration Agreement where Aquila is referred to
as the "Manager." The former administration agreement terminated
upon approval of the new agreements.
The Advisory and Administration Agreement
The Advisory and Administration Agreement between the Fund
and Aquila Management Corporation (the "Manager") has several
parts, most of which are substantially identical to corresponding
provisions in the Fund's former advisory agreements and
administration agreement. The Advisory and Administration Agreement
contains provisions relating to investment advice for the Fund and
management of its portfolio that are substantially identical to
prior advisory agreements, except that the Manager has the power to
delegate its advisory functions to a sub-adviser, which it will
employ at its own expense. It has delegated these duties to the
Sub-Adviser. The Advisory and Administration Agreement contains
provisions relating to administrative services that are
substantially identical to those contained in the Fund's current
administration agreement.
The Advisory and Administration Agreement provides that
subject to the direction and control of the Board of Trustees of
the Fund, the Manager shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold
by the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund; and
(iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of pricing
information satisfactory to the Fund and, unless otherwise directed
by the Board of Trustees, provide for pricing of the Fund's
portfolio at least quarterly using another such source satisfactory
to the Fund.
The Advisory and Administration Agreement provides that,
subject to the termination provisions described below, the Manager
may at its own expense delegate to a qualified organization (the
"Sub-Adviser"), affiliated or not affiliated with the Manager, any
or all of the above duties. Any such delegation of the duties set
forth in (i), (ii) or (iii) above shall be by a written agreement
(the "Sub-Advisory Agreement") approved as provided in Section 15
of the Investment Company Act of 1940. The Manager has delegated
all of such functions to the Sub-Adviser in the Sub-Advisory
Agreement.
The Advisory and Administration Agreement provides that
subject to the direction and control of the Board of Trustees of
the Fund, the Manager shall provide all administrative services to
the Fund other than those relating to its investment portfolio
which have been delegated to a Sub-Adviser of the Fund under the
Sub-Advisory Agreement; as part of such administrative duties, the
Manager shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and for
the maintenance of the headquarters of the Fund;
(ii) oversee all relationships between the Fund and any
sub-adviser, transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of agreements in
relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for the
effective operation of the Fund and for the sale, servicing or
redemption of the Fund's shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share and the
dividends (provided that if there is a Sub-Adviser, daily pricing
of the Fund's portfolio shall be the responsibility of the
Sub-Adviser under the Sub-Advisory Agreement) or, at its expense
and responsibility, delegate such duties in whole or in part to a
company satisfactory to the Fund;
(iv) maintain the Fund's books and records, and prepare (or
assist counsel and auditors in the preparation of) all required
proxy statements, reports to the Fund's shareholders and Trustees,
reports to and other filings with the Securities and Exchange
Commission and any other governmental agencies, and tax returns,
and oversee the insurance relationships of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be necessary to
register or maintain the registration of the Fund and/or its shares
under the securities or "Blue-Sky" laws of all such jurisdictions
as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such inquiry
or communication is more properly to be responded to by the Fund's
shareholder servicing and transfer agent or distributor, oversee
such shareholder servicing and transfer agent's or distributor's
response thereto.
The Advisory and Administration Agreement contains
provisions relating to compliance of the investment program,
responsibility of the Manager for any investment program managed by
it, allocation of brokerage, and responsibility for errors that are
substantially the same as the corresponding provisions in the
Sub-Advisory Agreement. (See the Additional Statement.)
The Advisory and Administration Agreement provides that the
Manager shall, at its own expense, pay all compensation of
Trustees, officers, and employees of the Fund who are affiliated
persons of the Manager.
The Fund bears the costs of preparing and setting in type
its prospectuses, statements of additional information and reports
to its shareholders, and the costs of printing or otherwise
producing and distributing those copies of such prospectuses,
statements of additional information and reports as are sent to its
shareholders. All costs and expenses not expressly assumed by the
Manager under this sub-section or otherwise by the Manager,
administrator or principal underwriter or by any Sub-Adviser shall
be paid by the Fund, including, but not limited to (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Trustees other than those
affiliated with the Manager or such adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi) custodian
and transfer agent, or shareholder servicing agent, fees and
expenses; (vii) expenses incident to the issuance of its shares
(including issuance on the payment of, or reinvestment of,
dividends); (viii) fees and expenses incident to the registration
under Federal or State securities laws of the Fund or its shares;
(ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x) all
other expenses incidental to holding meetings of the Fund's
shareholders; and (xi) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations
for which the Fund may have to indemnify its officers and
Trustees.
The Advisory and Administration Agreement provides that the
Fund agrees to pay the Manager, and the Manager agrees to accept as
full compensation for all services rendered by the Manager as such,
an annual fee payable monthly and computed on the net asset value
of the Fund as of the close of business each business day at the
annual rate of 0.50 of 1% of such net asset value.
The Advisory and Administration Agreement provides that the
Sub-Advisory Agreement may provide for its termination by the
Manager upon reasonable notice, provided, however, that the Manager
agrees not to terminate the Sub-Advisory Agreement except in
accordance with such authorization and direction of the Board of
Trustees, if any, as may be in effect from time to time. The
Advisory and Administration Agreement provides that it may be
terminated by the Manager at any time without penalty upon giving
the Fund sixty days' written notice (which notice may be waived by
the Fund) and may be terminated by the Fund at any time without
penalty upon giving the Manager sixty days' written notice (which
notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by a vote of
a majority of its Trustees in office at the time or by a vote of
the holders of a majority (as defined in the Act) of the voting
securities of the Fund outstanding and entitled to vote. The
specific portions of the Advisory Agreement which relate to
providing investment advisory services will automatically terminate
in the event of the assignment (as defined in the Act) of the
Advisory Agreement, but all other provisions relating to providing
services other than investment advisory services will not
terminate, provided however, that upon such an assignment the
annual fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day shall be
reduced to the annual rate of 0.27 of 1% of such net asset
value.
The Sub-Advisory Agreement
The services of the Sub-Adviser are rendered under the
Sub-Advisory Agreement between the Manager and the Sub-Adviser;
which provides, subject to the control of the Board of Trustees,
for investment supervision and at the Sub-Adviser's expense for
pricing of the Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees, for pricing of
the Fund's portfolio at least quarterly using another such source
satisfactory to the Fund. The Sub-Advisory Agreement states that
the Sub-Adviser shall, at its expense, provide to the Fund all
office space and facilities, equipment and clerical personnel
necessary for the carrying out of the Sub-Adviser's duties under
the Sub-Advisory Agreement.
Under the Sub-Advisory Agreement, the Sub-Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Sub-Adviser.
The Sub-Advisory Agreement provides that the Manager agrees to pay
the Sub-Adviser, and the Sub-Adviser agrees to accept as full
compensation for all services rendered by the Sub-Adviser as such,
a management fee payable monthly and computed on the net asset
value of the Fund as of the close of business each business day at
the annual rates of 0.23 of 1% of such net asset value. The
Sub-Adviser and/or the Manager may, in order to attempt to achieve
a competitive yield on the shares of the Fund, each waive all or
part of their respective fees.
The Sub-Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. Under these provisions, the Sub-Adviser is
authorized to consider sales of shares of the Fund or of any other
investment company or companies having the same investment adviser,
sub-adviser, administrator or principal underwriter as the
Fund.
Information about the Manager, the Sub-Adviser
and the Distributor
The Sub-Adviser, First Security Investment Management,
Inc., was incorporated in August 1984 and is a subsidiary of First
Security Investment Services, Inc., which in turn is a wholly-owned
subsidiary of First Security Corporation, a Utah-headquartered
financial services organization with consolidated assets of $13.1
billion as of August 31, 1997. In addition to advising the Fund,
the Sub-Adviser's advisory experience includes the management of
The Achievement Family of Funds, funds unrelated to the Fund and
the provision of investment management services to banks and thrift
institutions, corporate and profit-sharing trusts, Taft-Hartley,
municipal and state retirement funds, charitable foundations,
endowments and individual investors throughout the United States.
The Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. The Sub-Adviser has
offices at 61 South Main Street, Salt Lake City, Utah 84111, 119
North 9th Street, Boise, Idaho 83730, 219 Central Avenue, N.W.,
Albuquerque, New Mexico 87102 and 530 Las Vegas Boulevard, Las
Vegas Nevada 89101.
First Security Bank of Utah, N.A., an affiliate of the Sub-
Adviser, is the largest bank in the State of Utah and one of the
largest banks in the Rocky Mountain region. The Sub-Adviser is not
permitted to purchase the securities of or enter into principal
transactions with any of its affiliates, including First Security
Bank of Utah, when acting on behalf of the Fund. The above
restriction does not apply, however, to securities issued or
underwritten by banks or other financial institutions which are not
themselves affiliates of the Sub-Adviser, although they may have a
correspondent banking or other business relationship with one or
more of the First Security banks. (See below and in the Additional
Statement as to the legality, under the Glass-Steagall Act, of the
Sub-Adviser's acting as the Fund's investment adviser.) In general,
under that Act, the Sub-Adviser will not, among other things, be
involved in the promotion or distribution of shares of the
Fund.
Sterling K. Jenson has managed the Fund's portfolio since
commencement of the Fund's operations in July, 1992. Mr. Jenson is
President, Chief Executive Officer and Senior Portfolio Manager
with the Sub-Adviser and has been employed in the investment
management business for over 19 years. He is a member of the
Association for Investment Management and Research (AIMR) and has
earned the professional designations Chartered Financial Analyst
(CFA) and Chartered Investment Counselor (CIC). He received his
B.S. degree (Economics) and M.B.A. degree from Brigham Young
University.
The Fund's Manager is founder of and administrator to the
Aquilasm Group of Funds, which consists of tax-free municipal bond
funds, money market funds and two equity funds. As of June 30,
1997, these funds had aggregate assets of approximately $2.8
billion, of which approximately $1.9 billion consisted of assets of
the tax-free municipal bond funds. The Manager, which was founded
in 1984, is controlled by Mr. Lacy B. Herrmann (directly, through
a trust and through share ownership by his wife). (See the
Additional Statement for information on Mr. Herrmann.)
During the fiscal year ended June 30, 1997, fees of
$67,588 and $79,323, respectively, were accrued to the Sub-Adviser
and Manager under the former advisory and administration agreements
then in effect. Of these amounts, the Sub-Adviser and Manager
waived $55,749 and $72,207, respectively. In addition, during that
period the Manager agreed to reimburse the Fund for other expenses
during this period in the amount of $199,119 of which $66,512 was
paid prior to June 30, 1997 and the balance of $132,607 was paid in
July and early August of 1997.
The Distributor currently handles the distribution of the
shares of fourteen funds (seven tax-free municipal bond funds, five
money market funds and two equity funds), including the Fund. Under
the Distribution Agreement, the Distributor is responsible for the
payment of certain printing and distribution costs relating to
prospectuses and reports as well as the costs of supplemental sales
literature, advertising and other promotional activities.
At the date of the Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned 75% by Mr. Herrmann and 25% by Diana P. Herrmann,
will be owned by certain directors and/or officers of the Manager
and/or the Distributor, including Mr. Herrmann and Ms.
Herrmann.
Authority to Act as Investment Sub-Adviser
Banking laws and regulations, including the Glass-Steagall
Act as currently interpreted by the Board of Governors of the
Federal Reserve System, prohibit a bank holding company registered
under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling or distributing the shares
of a registered, open-end investment company continuously engaged
in the issuance of its shares, and prohibit banks generally from
issuing, underwriting, selling or distributing securities, but do
not prohibit such a bank holding company or affiliate from acting
as investment adviser, transfer agent or custodian to such an
investment adviser, or from purchasing shares of such a company as
agent for and upon the order of a customer. The Sub-Adviser and the
Fund believe that the Sub-Adviser may perform the advisory services
for the Fund described in the Prospectus. However, future changes
in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of
present requirements, could prevent the Sub-Adviser from continuing
to perform investment advisory services for the Fund.
If the Sub-Adviser were prohibited from performing
investment advisory services for the Fund, it is expected that the
Board of Trustees of the Fund would recommend to the Fund's
shareholders that they approve new agreements with another entity
or entities qualified to perform such services and selected by the
Board.
DIVIDEND AND TAX INFORMATION
Dividends and Distributions
The Fund will declare all of its net income, as defined
below, as dividends on every day, including weekends and holidays,
on those shares outstanding for which payment was received by the
close of business on the preceding business day. Net income for
dividend purposes includes all interest income accrued by the Fund
since the previous dividend declaration, including accretion of any
original issue discount, less expenses paid or accrued. As such net
income will vary, the Fund's dividends will also vary. The
per-share dividends of Class C Shares will be lower than the per
share dividends on the Class A Shares as a result of the higher
service and distribution fees applicable to those shares. In
addition, the dividends of each class can vary because each class
will bear certain class-specific charges. Dividends and other
distributions paid by the Fund with respect to each class of its
shares are calculated at the same time and in the same manner.
It is the Fund's present policy to pay dividends so that
they will be received or credited by approximately the first day of
each month. On the Application or by completing a Ready Access
Features form, you may elect to have dividends deposited without
charge by electronic funds transfers into your account at a
Financial Institution if it is a member of the Automated Clearing
House.
Redeemed shares continue to earn dividends through and
including the earlier of (i) the day before the day on which the
redemption proceeds are mailed, wired or transferred by the
facilities of the Automated Clearing House by the Agent or paid by
the Agent to a selected dealer; or (ii) the third day on which the
New York Stock Exchange is open after the day on which the net
asset value of the redeemed shares has been determined (see "How To
Redeem Your Investment").
Net investment income includes amounts of income from the
Utah Double-Exempt Obligations in the Fund's portfolio which are
allocated as "exempt-interest dividends." "Exempt-interest
dividends" are exempt from regular Federal income tax. The
allocation of "exempt-interest dividends" will be made by the use
of one designated percentage applied uniformly to all income
dividends declared during the Fund's tax year. Such designation
will normally be made in the first month after the end of each of
the Fund's fiscal years as to income dividends paid in the prior
year. It is possible that in certain circumstances, a small portion
of the dividends paid by the Fund will be subject to income taxes.
During the Fund's fiscal year ended June 30, 1997, 97.89% of the
Fund's dividends were "exempt-interest dividends." For the calendar
year 1996, 1.88% of the total dividends paid were taxable as
ordinary income. The percentage of income designated as tax-exempt
for any particular dividend may be different from the percentage of
the Fund's income that was tax-exempt during the period covered by
the dividend.
Distributions ("short-term gains distributions") from net
realized short-term gains, if any, and distributions ("long-term
gains distributions"), if any, from the excess of net long-term
capital gains over net short-term capital losses realized through
October 31st of each year and not previously paid out will be paid
out after that date; the Fund may also pay supplemental
distributions after the end of its fiscal year. If net capital
losses are realized in any year, they are charged against capital
and not against net investment income which is distributed
regardless of gains or losses. The Fund may be required to impose
backup withholding at a rate of 31% upon payment of redemptions to
shareholders, and from short- and long-term gains distributions (if
any) and any other distributions that do not qualify as
"exempt-interest dividends," if shareholders do not comply with
provisions of the law relating to the furnishing of taxpayer
identification numbers and reporting of dividends.
Unless you request otherwise by letter addressed to the Agent
or by filing an appropriate Application prior to a given
ex-dividend date, dividends and distributions will be automatically
reinvested in full and fractional shares of the Fund at net asset
value on the record date for the dividend or distribution or other
date fixed by the Board of Trustees. An election to receive cash
will continue in effect until written notification of a change is
received by the Agent. All shareholders, whether their dividends
are received in cash or are being reinvested, will receive a
monthly account summary indicating the current status of their
investment. There is no fixed dividend rate. Corporate shareholders
of the Fund are not entitled to any deduction for dividends
received from the Fund.
Tax Information
The Fund has qualified during its last fiscal year as a
"regulated investment company" under the Code, and intends to
continue to so qualify. If it does so qualify, it will not be
liable for Federal income taxes on amounts paid by it as dividends
and distributions. However, the Code contains a number of complex
tests relating to such qualification and it is possible although
not likely that the Fund might not meet one or more of these tests
in any particular year. If it does not so qualify, it would be
treated for tax purposes as an ordinary corporation, would receive
no tax deduction for payments made to shareholders and would be
unable to pay dividends or distributions which would qualify as
"exempt-interest dividends" or "capital gains dividends," as
discussed below.
The Fund intends to qualify during each fiscal year under the
Code to pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends which are derived from net income earned
by the Fund on Utah Double-Exempt Obligations will be excludable
from gross income of the shareholders for regular Federal income
tax purposes. Capital gains dividends are not included in
exempt-interest dividends. Although "exempt-interest dividends" are
not taxed, each taxpayer must report the total amount of tax-exempt
interest (including exempt-interest dividends from the Fund)
received or acquired during the year.
The Code requires that either gains realized by the Fund on
the sale of municipal obligations acquired after April 30, 1993 at
a price which is less than face or redemption value be included as
ordinary income to the extent such gains do not exceed such
discount or that the discount be amortized and included ratably in
taxable income. There is an exception to the foregoing treatment if
the amount of the discount is less than 0.25% of face or redemption
value multiplied by the number of years from acquisition to
maturity. The Fund will report such ordinary income in the years of
sale or redemption rather than amortize the discount and report it
ratably. To the extent the resultant ordinary taxable income is
distributed to shareholders, it will be taxable to them as ordinary
income.
Capital gains dividends (net long-term gains over net
short-term losses which the Fund distributes and so designates) are
reportable by shareholders as gain from the sale or exchange of a
capital asset held for more than one year. This is the case whether
the shareholder takes the distribution in cash or elects to have
the distribution reinvested in Fund shares and regardless of the
length of time the shareholder has held his or her shares.
Short-term gains, when distributed, are taxed to shareholders
as ordinary income. Capital losses of the Fund are not distributed
but carried forward by the Fund to offset gains in later years and
thereby lessen the later-year capital gains dividends and amounts
taxed to shareholders.
The Fund's gains or losses on sales of Utah Double-Exempt
Obligations will be long-term or short-term depending upon the
length of time the Fund has held such obligations.
Information as to the tax status of the Fund's dividends and
distributions will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders to
enable them to purchase or carry shares of the Fund may not be
deducted for regular Federal tax purposes. In addition, under rules
used by the Internal Revenue Service for determining when borrowed
funds are deemed used for the purpose of purchasing or carrying
particular assets, the purchase of shares of the Fund may be
considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of
shares. The receipt of exempt-interest dividends from the Fund by
an individual shareholder may result in some portion of any social
security payments or railroad retirement benefits received by the
shareholder or the shareholder's spouse being included in taxable
income.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds or
private activity bonds should consult their own tax advisers before
purchasing shares.
While interest from all Utah Double-Exempt Obligations is
tax-exempt for purposes of computing the shareholder's regular tax,
interest from so-called private activity bonds issued after August
7, 1986, constitutes a tax preference for both individuals and
corporations and thus will enter into a computation of the
alternative minimum tax. Whether or not that computation will
result in a tax will depend on the entire content of the taxpayer's
return. The Fund will not invest in the types of Utah Double-Exempt
Obligations which would give rise to interest that would be subject
to alternative minimum taxation if more than 20% of its net assets
would be so invested, and may refrain from investing in that type
of bond completely. The 20% limit is a fundamental policy of the
Fund.
Corporate shareholders must add to or subtract from
alternative minimum taxable income, as calculated before taking
into consideration this adjustment, 75% of the difference between
what is called adjusted current earnings (essentially current
earnings and profits) and alternative minimum taxable income, as
previously calculated. Since tax-exempt bond interest is included
in earnings and profits and therefore in adjusted current earnings,
this adjustment will tend to make it more likely that corporate
shareholders will be subject to the alternative minimum tax.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid for
the shares. If you are required to pay a contingent deferred sales
charge at the time of redemption, the amount of that charge will
reduce the amount of your gain or increase the amount of your loss
as the case may be. Your gain or loss will be long-term if you held
the redeemed shares for over 18 months, mid-term if you held the
redeemed shares for over one year but not more than 18 months and
short-term, if for a year or less. Long term capital gains are
currently taxed at a maximum rate of 20%, mid-term capital gains
are currently taxed at a maximum rate of 28%, and short-term gains
are currently taxed at ordinary income tax rates. However, if
shares held for six months or less are redeemed and you have a
loss, two special rules apply: the loss is reduced by the amount of
exempt-interest dividends, if any, which you received on the
redeemed shares, and any loss over and above the amount of such
exempt-interest dividends is treated as a long-term loss to the
extent you have received capital gains dividends on the redeemed
shares.
Tax Effect of Conversion
Class C Shares will automatically convert to Class A Shares
approximately six years after purchase. No gain or loss will be
recognized by the Fund or its shareholders upon such conversions;
each shareholder's adjusted tax basis in the Class A Shares
received upon conversion will equal the shareholder's adjusted tax
basis in the Class C Shares held immediately before the conversion;
and each shareholder's holding period for the Class A Shares
received upon conversion will include the period for which the
shareholder held as capital assets the converted Class C Shares
immediately before conversion.
Utah Tax Information
Distributions of interest income made by the Fund from Utah
Double-Exempt Obligations will generally be treated for purposes of
the Utah Individual Income Tax Act in the same manner as they are
treated under the Internal Revenue Code for Federal income tax
purposes. (See the prior discussion under "Dividend and Tax
Information.") Individual shareholders of the Fund generally will
not be subject to Utah income tax on distributions received from
the Fund to the extent such distributions are attributable to
interest income on Utah Double-Exempt Obligations. Certain
subtractions relating to retirement income received by shareholders
under the age of 65 and the exemption allowed to individuals over
the age of 65 may be reduced because the receipt of exempt-interest
dividends from the Fund will be added to federal adjusted gross
income for purposes of calculating the income of individuals for
Utah income tax purposes. Other distributions from the Fund,
including capital gains dividends, will generally not be exempt
from Utah income tax.
For corporate investors, distributions of interest income from
Utah Double-Exempt Obligations are not exempt from the Utah
corporate franchise and income tax, although a credit against the
corporate franchise and income tax is available with respect to a
portion of the interest income from obligations issued by the State
of Utah, its agencies and instrumentalities and its political
subdivisions. Prior to January 1, 1993 the credit is generally
equal to 2.5% of the gross interest income from such Utah
obligations. From and after January 1, 1993, the credit is
generally equal to 1% of the gross interest income from such Utah
obligations. The Utah corporate franchise or income tax applies to
every state or national bank or corporation, with certain
exceptions specifically enumerated by Utah law.
Shares of the Fund will not be subject to the Utah property
tax.
You should consult your tax advisor concerning the specific
state and local tax consequences from your investment in the Fund.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Fund and certain tax-free municipal bond funds and equity
funds (the "Bond or Equity Funds") and certain money market funds
(the "Money-Market Funds"), all of which are sponsored by Aquila
Management Corporation and Aquila Distributors, Inc., and have the
same Administrator and Distributor as the Fund. All exchanges are
subject to certain conditions described below. As of the date of
the Prospectus, the Aquila-sponsored Bond and Equity Funds are this
Fund, Aquila Rocky Mountain Equity Fund, Aquila Cascadia Equity
Fund, Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free
Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund
of Kentucky, and Narragansett Insured Tax-Free Income Fund; the
Aquila Money-Market Funds are Capital Cash Management Trust,
Pacific Capital Cash Assets Trust (Original Shares), Pacific
Capital Tax-Free Cash Assets Trust (Original Shares), Pacific
Capital U.S. Treasuries Cash Assets Trust (Original Shares) and
Churchill Cash Reserves Trust.
Generally, you can exchange shares of a given class of a
Bond or Equity Fund including the Fund for shares of the same class
of any other Bond or Equity Fund, or for shares of any Money Market
Fund, without the payment of a sales charge or any other fee, and
there is no limit on the number of exchanges you can make from fund
to fund. However, the following important information should be
noted:
(1) CDSCs upon redemptions of shares acquired through
exchanges. If you exchange shares of the following categories, no
CDSC will be imposed at the time of exchange, but the shares you
receive in exchange for them will be subject to the applicable CDSC
if you redeem them before the requisite holding period (extended,
if required) has expired:
- CDSC Class A Shares (See "Purchase of $1 Million or
More");
- Class C Shares: and
- Shares of a Money Market Fund that were received in
exchange for CDSC Class A Shares or Class C Shares.
If the shares you redeem would have incurred a CDSC if you
had not made any exchanges, then the same CDSC will be imposed upon
the redemption regardless the exchanges that have taken place since
the original purchase.
(2) Extension of Holding Periods by owning Money-Market
Funds Any period of 30 days or more during which Money-Market
shares received on an exchange of CDSC Class A Shares or Class C
Shares are held is not counted in computing the applicable holding
period for CDSC Class A Shares or Class C Shares.
(3) Originally purchased Money Market Fund shares. Shares
of a Money Market Fund (and any shares acquired as a result of
reinvestment of dividends and/or distributions on these shares)
acquired directly in a purchase (or in exchange for Money Market
Fund Shares that were themselves directly purchased), rather than
in exchange for shares of a Bond or Equity Fund, may be exchanged
for shares of any class of any Bond or Equity Fund that the
investor is otherwise qualified to purchase, but the shares
received in such an exchange will be subject to the same sales
charge, if any, that they would have been subject to had they been
purchased rather than acquired in exchange for Money Market Fund
shares. If the shares received in exchange are shares that would be
subject to a CDSC if purchased directly, the holding period
governing the CDSC will run from the date of the exchange, not from
the date of the purchase of Money Market Shares.
This Fund, as well as the Money-Market Funds and other Bond or
Equity Funds, reserves the right to reject any exchange into its
shares, if shares of the fund into which exchange is desired are
not available for sale in your state of residence. The Fund may
also modify or terminate this exchange privilege at any time. In
the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange is at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-446-8824 toll free
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
Exchanges will be effected at the relative exchange prices of
the shares being exchanged next determined after receipt by the
Agent of your exchange request. The exchange prices will be the
respective net asset values of the shares, unless a sales charge is
to be deducted in connection with an exchange of shares, in which
case the exchange price of shares of a Bond or Equity Fund will be
their public offering price. Prices for exchanges are determined in
the same manner as for purchases of the Fund's shares. (See "How to
Invest in the Fund.")
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see "Tax Effects of
Redemptions" and the Additional Statement); no representation is
made as to the deductibility of any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable,
except to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free
money-market fund) are exempt from regular Federal income tax, and
to the extent that a portion or all of the dividends paid by
Pacific Capital U.S. Treasuries Cash Assets Trust (which invests in
U.S. Treasury obligations) are exempt from state income taxes.
Dividends paid by Aquila Rocky Mountain Equity Fund and Aquila
Cascadia Equity Fund are taxable. If your state of residence is not
the same as that of the issuers of obligations in which a tax-free
municipal bond fund or a tax-free money-market fund invests, the
dividends from that fund may be subject to income tax of the state
in which you reside. Accordingly, you should consult your tax
adviser before acquiring shares of such a bond fund or a tax-free
money-market fund under the exchange privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's performance
including current yield, taxable equivalent yield, various
expressions of total return, current distribution rate and taxable
equivalent distribution rate.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase, at
the maximum public offering price (offering price includes any
applicable sales charge) for 1- and 5-year periods and for a period
since the inception of the Fund, to the extent applicable, through
the end of such periods, assuming reinvestment (without sales
charge) of all distributions. The Fund may also furnish total
return quotations for other periods or based on investments at
various applicable sales charge levels or at net asset value. For
such purposes total return equals the total of all income and
capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the
original investment, expressed as a percentage of the purchase
price. (See the Additional Statement.)
Current yield reflects the income per share earned by each
of the Fund's portfolio investments; it is calculated by (i)
dividing the Fund's net investment income per share during a recent
30-day period by (ii) the maximum public offering price on the last
day of that period and by (iii) annualizing the result. Taxable
equivalent yield shows the yield from a taxable investment that
would be required to produce an after-tax yield equivalent to that
of the Fund, which invests in tax-exempt obligations. It is
computed by dividing the tax-exempt portion of the Fund's yield
(calculated as indicated) by one minus a stated income tax rate and
by adding the product to the taxable portion (if any) of the Fund's
yield. (See the Additional Statement.)
Current yield and taxable equivalent yield, which are
calculated according to a formula prescribed by the Securities and
Exchange Commission (see the Additional Statement), are not
indicative of the dividends or distributions which were or will be
paid to the Fund's shareholders. Dividends or distributions paid to
shareholders are reflected in the current distribution rate or
taxable equivalent distribution rate which may be quoted to
shareholders. The current distribution rate is computed by (i)
dividing the total amount of dividends per share paid by the Fund
during a recent 30-day period by (ii) the current maximum offering
price and by (iii) annualizing the result. A taxable equivalent
distribution rate shows the taxable distribution rate that would be
required to produce an after-tax distribution rate equivalent to
the Fund's distribution rate (calculated as indicated above). The
current distribution rate differs from the current yield
computation because it could include distributions to shareholders
from sources, if any, other than dividends and interest, such as
short-term capital gains or return of capital. If distribution
rates are quoted in advertising, they will be accompanied by
calculations of current yield in accordance with the formula of the
Securities and Exchange Commission.
In each case performance figures are based upon past
performance, reflect as appropriate all recurring charges against
the Fund's income net of fee waivers and reimbursement of expenses,
if any, and will assume the payment of the maximum sales charge ,if
any, on the purchase of shares, but not on reinvestment of income
dividends. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's yield, tax equivalent
yield, distribution rate, taxable equivalent distribution rate or
total return may be in any future period. The annual report of the
Fund contains additional performance information that will be made
available upon request and without charge.
Description of the Fund and Its Shares
The Fund is an open-end, non-diversified management investment
company organized in December, 1990 as a Massachusetts business
trust. (See the sixth paragraph under "Investment of the Fund's
Assets" for further information about the Fund's status as
"non-diversified.") The Fund began operations in July, 1992.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares and to divide or
combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in
the Fund. Each share represents an equal proportionate interest in
the Fund with each other share of its class; shares of the
respective classes represent proportionate interests in the Fund in
accordance with their respective net asset values. Income, direct
liabilities and direct operating expenses of each series will be
allocated directly to each series, and general liabilities and
expenses, if any, of the Fund will be allocated among the series in
a manner acceptable to the Board of Trustees. Upon liquidation of
a series, shareholders of the series are entitled to share pro-rata
in the net assets of that series available for distribution to
shareholders and upon liquidation of the Fund, the respective
series are entitled to share proportionately in the assets
available to the Fund after allocation to the various series.
Shareholders of each series or class are entitled to share pro-rata
in the net assets of the Fund available for distribution to
shareholders, in accordance with the respective net asset values of
the shares of that series or class at that time. The Fund currently
has only one series of shares. Upon liquidation of the Fund,
shareholders are entitled to share pro-rata in the net assets of
the Fund available for distribution to shareholders, in accordance
with the respective net asset values of the shares of each of the
Fund's classes at that time. All shares are presently divided into
four classes; however, if they deem it advisable and in the best
interests of shareholders, the Board of Trustees of the Fund may
create additional classes of shares, which may differ from each
other as provided in rules and regulations of the Securities and
Exchange Commission or by exemptive order. The Board of Trustees
may, at its own discretion, create additional series of shares,
each of which may have separate assets and liabilities (in which
case any such series will have a designation including the word
"Series"). (See the Additional Statement for further information
about possible additional series.) Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
In addition to Class A Shares and Class C Shares, which are
offered by this Prospectus, the Fund also has (i) Institutional
Class Shares ("Class Y Shares"), which are offered only to
institutions acting for investors in a fiduciary, advisory, agency,
custodial or similar capacity and are not offered directly to
retail customers and (ii) Financial Intermediary Class Shares
("Class I Shares"), which are offered and sold only through certain
financial intermediaries. Class Y Shares and Class I Shares are
offered by a separate prospectus, which can be obtained by calling
the Fund at 800-872-5859.
The primary distinction among the Fund's classes of shares
lies in their different sales charge structures and ongoing
expenses, which are likely to be reflected in differing yields and
other measures of investment performance. All three classes
represent interests in the same portfolio of Utah Obligations and
have the same rights, except that each class bears the separate
expenses, if any, of its participation in the Distribution Plan and
Shareholder Services Plan and has exclusive voting rights with
respect to such participation.
See the notes to the Statement of Assets and Liabilities in
the annual report for information as to the amortization of the
Fund's organizational and start-up expenses. A copy of the
financial statements contained in the annual report is incorporated
by reference into the Additional Statement.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) per share held (and proportionate
fractional votes for fractional dollar amounts). Shareholders will
vote on the election of Trustees and on other matters submitted to
the vote of shareholders. Shares vote by classes on any matter
specifically affecting one or more classes, such as an amendment of
an applicable part of the Distribution Plan. No amendment may be
made to the Declaration of Trust without the affirmative vote of
the holders of a majority of the outstanding shares of the Fund,
except that the Fund's Board of Trustees may change the name of the
Fund. The Fund may be terminated (i) upon the sale of its assets to
another issuer, or (ii) upon liquidation and distribution of the
assets of the Fund, in either case if such action is approved by
the vote of the holders of a majority of the outstanding shares of
the Fund. If not so terminated, the Fund will continue
indefinitely.
<PAGE>
APPLICATION FOR TAX-FREE FUND FOR UTAH
FOR CLASS A OR CLASS C SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
After November 8, 1997: PFPC Inc., ATTN: Aquilasm Group of Funds
400 Bellevue Parkway, Wilmington, DE 19809
Before November 8, 1997: ADM, ATTN: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198 Tel.# 1-800-446-8824
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.______________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for __________________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** ___________________________________________
Name of State Minor's Social Security Number
4. _____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or Partnership. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)_______________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
Employer's Address:_____________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you are a
non-U.S. Citizen or resident and not subject to back-up withholding (See
certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
______________________________ ____________________________________
Dealer Name Branch Number
______________________________ ____________________________________
Street Address Rep. Number/Name
______________________________ (_________)_________________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
(Indicate Class of Shares)
__ Class A Shares (Front-Payment Class)
__ Class C Shares (Level-Payment Class)
Indicate Method of Payment (For either method, make check payment to
TAX-FREE FUND FOR UTAH)
__ Initial Investment $______________ (Minimum $1,000)
__ Automatic Investment $______________ (Minimum $50)
For Automatic Investments of at least $50 per month, you must complete
Step 3, Section A, Step 4, Sections A & B and attached a PRE-PRINTED
DEPOSIT SLIP OR VOIDED CHECK.
IF NO SHARE CLASS IS MARKED, INVESTMENT WILL AUTOMATICALLY BE MADE IN
CLASS A SHARES.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be: ___ Reinvested ___ Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like you to
deposit the dividend. (A Financial Institution is a commercial bank,
savings bank or credit union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Tax-Free Fund For Utah Account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or
on the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply calling
the Fund toll-free at 1-800-446-8824. To establish this program, please
complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. LETTER OF INTENT
APPLICABLE TO CLASS A SHARES ONLY.
See Terms of Letter of Intent and Escrow at the end of this application.
___ Yes ___ No
I/We intend to invest in Class A Shares of the Fund during the
13-month period from the date of my/our first purchase pursuant to
this Letter (which purchase cannot be more than 90 days prior to the
date of this Letter), an aggregate amount (excluding any reinvestment
of dividends or distributions) of at least $25,000 which, together with
my/our present holdings of Fund shares (at public offering price on date
of this Letter), will equal or exceed the minimum amount checked below:
___ $25,000 ___ $50,000 ___ $100,000 ___ $250,000
___ $500,000 ___ $1,000,000 ___ $2,500,000 ___ $5,000,000
D. AUTOMATIC WITHDRAWAL PLAN
APPLICABLE TO CLASS A SHARES ONLY.
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to
1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, the Fund's Shareholder
Servicing Agent (the "Agent") is authorized to redeem sufficient shares
from this account at the then current Net Asset Value, in accordance
with the terms below:
Dollar Amount of each withdrawal $ ______________beginning______________
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is payable
to a Financial Institution for your account, indicate Financial
Institution name, address and your account number.
________________________________________ ___________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ____________________________________
Street Financial Institution Street Address
_______________________________ ____________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
E. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your name
within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorney's fees, resulting
from acceptance of, or acting or failure to act upon, this Authorization.
F. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution account listed.
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Fund
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ _____________________________________
Account Registration Financial Institution Account Number
_______________________________ _____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ _____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITOR'S AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to my/our
account any drafts or debits drawn on my/our account initiated by the
Agent, and to pay such sums in accordance therewith, provided my/our account
has sufficient funds to cover such drafts or debits. I/We further agree that
your treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number __________________________________
Name and Address where my/our account is maintained
Name of Financial Institution__________________________________________
Street Address_________________________________________________________
City_______________________________State _________________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant
to the above authorization shall be subject to the provisions of the
Operating Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit
in the normal course of business initiated by the Agent (except any
loss due to your payment of any amount drawn against insufficient or
uncollected funds), provided that you promptly notify us in writing
of any claim against you with respect to the same, and further
provided that you will not settle or pay or agree to settle or pay
any such claim without the written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any
such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of
legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Fund and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Fund account to make up any
deficiency resulting from any decline in the net asset value of shares
so purchased and any dividends paid on those shares. I/We authorize the
Fund and its agents to correct any transfer error by a debit or credit
to my/our Financial Institution account and/or Fund account and to
charge the account for any related charges. I/We acknowledge that
shares purchased either through Automatic Investment or Telephone
Investment are subject to applicable sales charges.
- - The Fund, the Agent and the Distributor and their Trustees,
directors, employees and agents will not be liable for acting upon
instructions believed to be genuine, and will not be responsible for
any losses resulting from unauthorized telephone transactions if the
Agent follows reasonable procedures designed to verify the identity of
the caller. The Agent will request some or all of the following
information: account name and number; name(s) and social security
number registered to the account and personal identification; the
Agent may also record calls. Shareholders should verify the accuracy
of confirmation statements immediately upon receipt. Under penalties
of perjury, the undersigned whose Social Security (Tax I.D.) Number is
shown above certifies (i) that Number is my correct taxpayer
identification number and (ii) currently I am not under IRS
notification that I am subject to backup withholding (line out (ii) if
under notification). If no such Number is shown, the undersigned
further certifies, under penalties of perjury, that either (a) no such
Number has been issued, and a Number has been or will soon be applied
for; if a Number is not provided to you within sixty days, the
undersigned understands that all payments (including liquidations) are
subject to 31% withholding under federal tax law, until a Number is
provided and the undersigned may be subject to a $50 I.R.S. penalty; or
(b) that the undersigned is not a citizen or resident of the U.S.; and
either does not expect to be in the U.S. for 183 days during each
calendar year and does not conduct a business in the U.S. which would
receive any gain from the Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST,
ALL TRUSTEES MUST SIGN.*
__________________________ __________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ __________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after the
Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access features form which may be obtained from Aquila
Distributors at 1-800-882-4937 and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Fund's Agent.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 3c and signing the Application, the investor is
entitled to make each purchase at the public offering price applicable
to a single transaction of the dollar amount checked above, and agrees
to be bound by the terms and conditions applicable to Letters of Intent
appearing below.
The investor is making no commitment to purchase shares, but if the
investor's purchases within thirteen months from the date of the
investor's first purchase do not aggregate $25,000, or, if such purchases
added to the investor's present holdings do not aggregate the minimum
amount specified above, the investor will pay the increased amount of
sales charge prescribed in the terms of escrow below.
The commission to the dealer or broker, if any, named herein shall be
at the rate applicable to the minimum amount of the investor's specified
intended purchases checked above. If the investor's actual purchases do
not reach this minimum amount, the commissions previously paid to the
dealer will be adjusted to the rate applicable to the investor's total
purchases. If the investor's purchases exceed the dollar amount of the
investor's intended purchases and pass the next commission break-point,
the investor shall receive the lower sales charge, provided that the
dealer returns to the Distributor the excess of commissions previously
allowed or paid to him over that which would be applicable to the amount
of the investor's total purchases.
The investor's dealer or broker shall refer to this Letter of Intent
in placing any future purchase orders for the investor while this Letter
is in effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary), 3%
of the dollar amount specified in the Letter of Intent (computed to the
nearest full share) shall be held in escrow in shares of the Fund by
the Agent. All dividends and any capital distributions on the escrowed
shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within a thirteen-month period, the escrowed shares will be promptly
released to the investor. However, shares disposed of prior to
completion of the purchase requirement under the Letter will be
deducted from the amount required to complete the investment commitment.
3. If the total purchases pursuant to the Letter are less than the amount
specified in the Letter as the intended aggregate purchases, the
investor must remit to the Distributor an amount equal to the difference
between the dollar amount of sales charges actually paid and the amount
of sales charges which would have been paid if the total amount
purchased had been made at a single time. If such difference in sales
charges is not paid within twenty days after receipt of a request from
the Distributor or the dealer, the Distributor will, within sixty days
after the expiration of the Letter, redeem the number of escrowed
shares necessary to realize such difference in sales charges. Full
shares and any cash proceeds for a fractional share remaining after
such redemption will be released to the investor. The escrow of shares
will not be released until any additional sales charge due has been
paid as stated in this section.
4. By checking Box 3c and signing the Application, the investor
irrevocably constitutes and appoints the Agent or the Distributor as
his attorney to surrender for redemption any or all escrowed shares
on the books of the Fund.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees
to the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Agent will credit all such shares to
the Planholder on the records of the Fund. Any share certificates now
held by the Planholder may be surrendered unendorsed to the Agent with
the application so that the shares represented by the certificate may
be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the Fund
at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of
business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with
the Fund's usual redemption procedures and will mail a check for the
proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Fund. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the
Fund, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and until
proper instructions are received from the Planholder, his executor or
guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Fund, the Planholder will be deemed to have appointed any
successor transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while simultaneously
making regular purchases. While an occasional lump sum investment may
be made, such investment should normally be an amount equivalent to
three times the annual withdrawal or $5,000, whichever is less.
<PAGE>
INVESTMENT SUB-ADVISER
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
INVESTMENT ADVISER, ADMINISTRATOR and FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Philip E. Albrecht
Gary C. Cornia
William L. Ensign
D. George Harris
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Vice President
Kimball L. Young, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
After November 8, 1997:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Before November 8, 1997:
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................2
Table of Expenses................................5
Financial Highlights.............................7
Introduction.....................................8
Investment Of The Fund's Assets..................8
Investment Restrictions.........................13
Net Asset Value Per Share.......................13
Alternative Purchase Plans......................14
How To Invest In The Fund.......................16
How To Redeem Your Investment...................23
Automatic Withdrawal Plan.......................27
Management Arrangements.........................27
Dividend And Tax Information....................30
Exchange Privilege..............................34
General Information.............................37
Application and Letter of Intent
AQUILA
TAX-FREE FUND FOR
[LOGO]
UTAH
PROSPECTUS
A tax-free
income investment
One Of The
Aquilasm Group Of Funds
<PAGE>
TAX-FREE FUND FOR UTAH
380 Madison Avenue
Suite 2300
New York, NY 10017
800-UTAH-YES
(800-882-4937)
212-697-6666
Prospectus
Class Y Shares
Class I Shares
October 31, 1997
The Fund is a mutual fund whose objective is to seek to
provide as high a level of current income exempt from Utah and
regular Federal income taxes as is consistent with preservation of
capital by investing principally in municipal obligations of Utah
issuers which pay interest exempt from Utah State and Federal
income taxes. These municipal obligations must, at the time of
purchase, either be rated within the four highest credit ratings
(considered as investment grade) assigned by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, or, if unrated, be
determined to be of comparable quality to municipal obligations so
rated by the Fund's Sub-Adviser, First Security Investment
Management, Inc.
The Fund is intended as an investment through which Utah
investors can participate in the financing of various Utah-oriented
public purpose projects which assist in the economic development of
the State and the quality of life of its residents. While the Fund
will seek to have 100% of its assets invested in tax-free municipal
obligations of Utah issuers, it may invest up to 35% of the Fund's
assets in tax-free municipal obligations of issuers of other
states.
The Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information about the Fund dated October 31, 1997 (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request to
the Fund's Shareholder Servicing Agent, at the address given below,
or by calling the telephone number(s) given below. The Additional
Statement contains information about the Fund and its management
not included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus. Only
when you have read both the Prospectus and the Additional Statement
are all material facts about the Fund available to you.
SHARES OF THE FUND ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY FIRST SECURITY INVESTMENT MANAGEMENT,
INC., FIRST SECURITY BANK OF UTAH, N.A., OR ITS BANK OR NON-BANK
AFFILIATES OR BY ANY OTHER BANK. SHARES OF THE FUND ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY OR
GOVERNMENT SPONSORED AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact the
Fund's Shareholder Servicing Agent: after November 8, 1997:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Call 800-446-8824 toll free
Before November 8, 1997:
Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-446-8824 toll free or 732-855-5731
For General Inquiries & Yield Information,
Call 800-882-4937 toll free or 212-697-6666
The Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
Tax-Free Fund For Utah (the "Fund"), founded by Aquila
Management Corporation (the "Manager") in 1992 and one of the
Aquilasm Group of Funds, is an open-end, non-diversified management
investment company (a "mutual fund") which invests in tax-free
municipal bonds, principally obligations issued by the State of
Utah, its counties and various other local authorities to finance
such long-term projects as schools, roads, hospitals and water
facilities throughout Utah or to finance short-term needs. (See
"Introduction.")
Tax-Free Income - The municipal obligations in which the Fund
invests pay interest which is exempt from both regular Federal
income taxes and State of Utah income taxes (except Utah income tax
on corporations). Dividends paid by the Fund from this income are
likewise free of both such taxes. It is, however, possible that in
certain circumstances a small portion of the dividends paid by the
Fund will be subject to income taxes. The Federal alternative
minimum tax may apply to some investors, but its impact will be
limited since not more than 20% of the Fund's net assets can be
invested in obligations paying interest which is subject to this
tax. The receipt of exempt-interest dividends from the Fund may
result in some portion of social security payments or railroad
retirement benefits being included in taxable income. Capital gains
distributions, if any, are taxable. (See "Dividend and Tax
Information.")
Investment Grade - The Fund will acquire only those
municipal obligations which, at the time of purchase, are within
the four highest credit ratings assigned by Moody's Investors
Service, Inc. or Standard & Poor's Corporation, or are determined
to be of comparable quality by the Fund's Sub-Adviser, First
Security Investment Management, Inc. In general, there are nine
separate credit ratings, ranging from the highest to the lowest
credit ratings for municipal obligations. Obligations within the
top four ratings are considered "investment grade," but those in
the fourth rating may have speculative characteristics as well.
(See "Investment of the Fund's Assets.")
Alternative Purchase Plans - The Fund provides alternative
ways to invest. (See "Description of the Fund and Its Shares.") For
this purpose the Fund offers classes of shares, which differ in
their expense levels and sales charges. This Prospectus offers:
Institutional Class Shares ("Class Y Shares") are offered only
to institutions acting for investors in a fiduciary, advisory,
agency, custodial or similar capacity, and are not offered
directly to retail customers. Class Y Shares are offered at
net asset value with no sales charge, no redemption fee, no
contingent deferred sales charge and no distribution fee. (See
"How to Purchase Class Y Shares.")
Financial Intermediary Class Shares ("Class I Shares") are
offered and sold only through financial intermediaries with
which the Aquila Distributors, Inc. (the "Distributor") has
entered into sales agreements, and are not offered directly to
retail customers. Class I Shares are offered at net asset
value with no sales charge and no redemption fee or contingent
deferred sales charge, although a financial intermediary may
charge a fee for effecting a purchase or other transaction on
behalf of its customers. Class I Shares may carry a
distribution fee of up to 0.25 of 1% of average annual net
assets allocable to Class I Shares, currently 0.10 of 1% of
such net assets, and a services fee of 0.25 of 1% of such
assets. (See "How to Purchase Class I Shares.")
The other classes, Front-Payment Class Shares ("Class A
Shares") and Level-Payment Class Shares ("Class C Shares") are not
offered by this Prospectus. (See "Description of the Fund and Its
Shares.")
At the date of the Prospectus, Class Y Shares and Class I
Shares are registered for sale only in certain states. (See "How to
Invest in the Fund.") If Class Y Shares or Class I Shares of the
Fund are sold outside those states, except to certain institutional
investors, the Fund can redeem them. If your state of residence is
not Utah, dividends from the Fund may be subject to income taxes of
the state in which you reside. Accordingly, you should consult your
tax adviser before acquiring shares of the Fund.
Initial Investment - - You may open your account for Class
Y Shares with any purchase of $100,000 or more for fiduciary
accounts and $250,000 for all other eligible purchasers. These
minimums do not apply to shareholders with accounts open on October
31, 1997. (See the Application, which is in the back of the
Prospectus.) Class I Shares are sold only through financial
intermediaries, which may have their own minimum investment
requirement. (See "How to Invest in the Fund.")
Additional Investments - - You may make additional
investments in Class Y Shares at any time and in any amount,
directly or, if in an amount of $50 or more, through the
convenience of having your investment electronically transferred
from your financial institution account into the Fund by Automatic
Investment or Telephone Investment. Additional investments in Class
I Shares can be made only through financial intermediaries, which
may have their own requirements for subsequent investments. (See
"How to Invest in the Fund.")
Monthly Income - Dividends are declared daily and paid
monthly. At your choice, dividends on Class Y Shares are paid by
check mailed to you, directly deposited into your financial
institution account or automatically reinvested without sales
charge in additional Class Y Shares at the then-current net asset
value. All arrangements for the payment of dividends with respect
to Class I Shares, including reinvestment of dividends, must be
made through financial intermediaries. (See "Dividend and Tax
Information.")
Many Different Issues - You have the advantages of a portfolio
which consists of over 70 issues with different maturities. (See
"Investment of the Fund's Assets.")
Local Portfolio Management - Fee Arrangements - First
Security Investment Management, Inc. of Salt Lake City, Utah,
serves as the Fund's Investment Sub-Adviser, providing experienced
local professional management. The Sub-Adviser was incorporated in
1984 and is a subsidiary of First Security Investment Services,
Inc., which in turn is a wholly-owned subsidiary of First Security
Corporation, a Utah-headquartered financial services organization
with consolidated assets of $13.1 billion as of August 31, 1997. In
addition to advising the Fund, First Security's advisory experience
includes the management of The Achievement Family of Funds, funds
unrelated to the Fund, and the provision of investment management
services to banks and thrift institutions, corporate and
profit-sharing trusts, Taft-Hartley, municipal and state retirement
funds, charitable foundations, endowments and individual investors
throughout the United States. First Security is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended. It has offices at 61 South Main Street, Salt Lake City,
Utah 84111, 119 North 9th Street, Boise, Idaho 83730, 219 Central
Avenue, N.W., Albuquerque, New Mexico 87102 and 530 Las Vegas
Boulevard, Las Vegas Nevada 89101. First Security Bank of Utah,
N.A., an affiliate of First Security, is the largest bank in the
State of Utah and one of the largest banks in the Rocky Mountain
region. The Fund pays fees at a rate of up to 0.50 of 1% of average
annual net assets to its Manager which in turn pays and up to 0.23
of 1% of average annual net assets to its Sub-Adviser (for total
fees at a rate of up to 0.50 of 1% of average annual net assets),
although some or all of these fees may be waived temporarily.
Redemptions - Liquidity - You may redeem any amount of your
Class Y Shares account on any business day at the next determined
net asset value by telephone, FAX or mail request, with proceeds
being sent to a predesignated financial institution, if you have
elected Expedited Redemption. Proceeds will be wired or transferred
through the facilities of the Automated Clearing House, wherever
possible, upon request, if in an amount of $1,000 or more, or will
be mailed. For these and other redemption procedures see "How to
Redeem Your Investment." All arrangements for redemptions of Class
I Shares must be made through financial intermediaries. The Fund
does not impose redemption fees for redemption of Class Y Shares or
Class I Shares. However, financial intermediaries may charge a fee
for effecting redemptions.
Certain Stabilizing Measures - The Fund will employ such
traditional measures as varying maturities, upgrading credit
standards for portfolio purchases, broadening diversification and
increasing its position in cash, in an attempt to protect against
declines in the value of its investments and other market risks.
(See "Certain Stabilizing Measures.")
Exchanges - You may exchange Class Y Shares of the Fund
into Class Y Shares of other Aquila-sponsored tax-free municipal
bond mutual funds, or two Aquila sponsored equity funds. You may
also exchange them into shares of the Aquila-sponsored money market
funds. Similar exchangability is available to Class I Shares to the
extent that other Aquila-sponsored funds are made available to its
customers by a financial intermediary. The exchange prices will be
the respective net asset values of the shares. (See "Exchange
Privilege.")
Risks and Special Considerations - The share price, determined
on each business day, varies with the market prices of the Fund's
portfolio securities, which fluctuate with market conditions,
including prevailing interest rates. Accordingly, the proceeds of
redemptions may be more or less than your original cost. (See
"Factors Which May Affect the Value of the Fund's Investments and
Their Yields.") The Fund's assets, being primarily or entirely Utah
issues, are subject to economic and other conditions affecting
Utah. (See "Risk Factors and Special Considerations Regarding
Investment in Utah Double-Exempt Obligations.") Moreover, the Fund
is classified as a "non-diversified" investment company, because it
may choose to invest in the obligations of a relatively limited
number of issuers. (See "Investment of the Fund's Assets.")
Statements and Reports - You will receive statements of
your Class Y Shares account monthly as well as each time you add to
your account or take money out. Financial intermediaries provide
their own statements of Class I Shares accounts. Additionally, you
will receive a Semi-Annual Report and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
TABLE OF EXPENSES
Class I Class Y
Shareholder Transaction Expenses Shares Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases.............. None None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends .. None None
Maximum Deferred Sales Charge ......................... None None
Redemption Fees ....................................... None None
Exchange Fee .......................................... None None
Annual Fund Operating Expenses (1)(2)
(as a percentage of average net assets)
Management Fee After Waiver (3)........................ 0.06% 0.06%
12b-1 Fee ............................................. 0.10% None
All Other Expenses After Expense Reimbursement ........ 0.55% 0.30%
Total Fund Operating Expenses After Expense
Reimbursement and Fee Waivers .................... 0.71% 0.36%
Example (4)
You would pay the following expenses on a $1,000 investment, assuming
a 5% annual return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
Class I Shares..... $7 $23 $40 $88
Class Y Shares..... $4 $12 $20 $46
<FN>
(1) Estimated based upon amounts incurred by the Fund's Class Y Shares
during its most recent fiscal year; restated to reflect current arrangements.
</FN>
<FN>
(2) Fees are being waived by the Manager and Sub-Adviser and it is
anticipated that once the asset size of the Fund reaches approximately $60
million these waivers will be increasingly reduced as the asset size of
the Fund increases, so that when assets exceed approximately $100 million
a substantial portion or all of these fees will be paid. Also, operating
expenses are being subsidized through reimbursement by the Administrator.
This subsidy is being phased out progressively so that the Fund will bear
its own expenses, other than advisory and administration fees, once its
asset size reaches approximately $60 million. The undertakings of the
Adviser and the Administrator as to fee waivers and practices of the
Administrator as to expense reimbursement may operate to reduce the fees
and expenses of the Fund during the development stage of the Fund (see
"Management Arrangements"). Other expenses do not reflect a 0.01% expense
offset in custodian fees received for uninvested cash balances. Without
fee waivers and expense reimbursement and including the offset in
custodian fees, expenses would have been incurred at the following annual
rates; for Class I Shares, management fee, 0.50%; 12b-1 fee, 0.10% (up to
0.25% can be authorized. See "Distribution Plan"); other expenses, 0.88%,
for total operating expenses of 1.48%; for Class Y Shares, management fee,
0.50%; other expenses 0.63%, for total operating expenses of 1.13%.
</FN>
<FN>
(3) The Fund pays the Manager an advisory fee at the annual rate of 0.50
of 1% of average annual net assets of which 0.44 of 1% is currently being
waived; the Manager pays the Sub-Advisor a sub-advisory fee at the annual
rate of 0.23 of 1% of average annual net assets of which 0.17 of 1% is
currently being waived. (See "Management Arrangements.")
</FN>
<FN>
(4) The expense example is based upon the annual Fund operating expenses.
It is also based upon amounts at the beginning of each year which includes
the prior year's assumed results. A year's results consist of an assumed
5% annual return less total annual operating expenses; the expense ratio
was applied to an assumed average balance (the year's starting investment
plus one-half the year's results). Each figure represents the cumulative
expenses so determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT
ALL MUTUAL FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF
PREPARING THE ABOVE EXAMPLE. THE ASSUMED 5% ANNUAL RETURN SHOULD
NOT BE INTERPRETED AS A PREDICTION OF AN ACTUAL RETURN, WHICH MAY BE
HIGHER OR LOWER.
The purpose of the above table is to assist the investor in
understanding the various costs that an investor in the Fund will bear
directly or indirectly. The above table should not be considered as a
commitment or prediction that any fees, or that any particular portion
of fees, will be waived, or that any particular expenses will be
reimbursed. (See "Management Arrangements" for a more complete
description of the various investment advisory and administration fees.)
<PAGE>
<TABLE>
<CAPTION>
The Table shown below for Class A Shares is for information purposes only.
Class A Shares are not offered by this Prospectus. No historical information
exists for Class I Shares which were established on October 31, 1997.
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights has been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon is included
in the Fund's June 30, 1997 financial statements contained in its Annual
Report, which are incorporated by reference into the Additional Statement.
The information provided in the table should be read in conjunction with
the financial statements and related notes. A copy of these financial
statements can be obtained without charge by calling or writing the
Shareholder Servicing Agent at the address and telephone numbers on the
cover of the Prospectus.
Class A(1) Class Y Shares(2)
Year ended Year Period(4)
June 30, Ended Ended
June 30, June 30,
1997 1996 1995 1994 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year... ................ $9.74 $9.59 $9.32 $10.00 $9.74 $9.77
Income from Investment
Operations:
Net investment income .... 0.52 0.54 0.55 0.55 0.61 0.06
Net gain (loss) on
securities (both realized
and unrealized) ........ 0.21 0.15 0.27 (0.65) 0.21 (0.03)
Total from Investment
Operations ............. 0.73 0.69 0.82 (0.10) 0.82 0.03
Less Distributions:
Dividends from net
investment income ...... (0.53) (0.54) (0.55) (0.58) (0.62) (0.06)
Distributions from
capital gains .......... - - - (0.03) - -
Total Distributions ...... (0.53) (0.54) (0.55) (0.58) (0.62) (0.06)
Net Asset Value, End of
Year...................... $9.94 $9.74 $9.59 $9.32 $9.94 $9.74
Total Return (not reflecting
sales charge) (%) ......... 7.72 7.17 9.09 (1.09) 9.67+ 0.29+
Ratios/Supplemental Data
Net Assets, End of Year
($ in thousands) ........ 29.071 28,881 27,536 26,116 41 0.1
Ratio of Expenses to
Average Net Assets (%)... 0.27 0.19 0.08 0.03 0.07 0.03+
Ratio of Net Investment
Income to Average Net
Assets (%)............... 5.45 5.49 5.85 5.58 5.65 0.61+
Portfolio Turnover Rate(%). 5.09 11.15 22.92 27.53 5.09 11.15
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and
the expense offset in custodian fees for uninvested cash balances
would have been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income($)... 0.42 0.43 0.43 0.40 0.50 0.05
Ratio of Expenses to
Average Net Assets(%).... 1.33 1.30 1.30 1.60 1.13 0.11+
Ratio of Net Investment
Income to Average Net
Assets(%)................ 4.39 4.37 4.63 2.97 4.59 0.53+
<CAPTION>
Class A(1)
Period (3)
ended
June 30, 1993
<C>
9.60
0.50
0.40
0.90
(0.50)
-
(0.50)
10.00
9.67+
12,938
0*
5.64*
36.52+
0.27
2.67*
2.97*
<FN>
(1) Designated as Class A Shares on May 21, 1996.
</FN>
<FN>
(2) New Class of Shares established on May 21, 1996.
</FN>
<FN>
(3) From July 24, 1992 (commencement of operations) to June 30, 1993.
</FN>
<FN>
(4) From May 21, 1996 through June 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
<PAGE>
INTRODUCTION
The Fund's shares are designed to be a suitable investment for
investors (other than corporations) who seek income exempt from
State of Utah and regular Federal income taxes.
You may invest in shares of the Fund as an alternative to
direct investments in Utah Double-Exempt Obligations, as defined
below, which may include obligations of certain non-Utah issuers.
The Fund offers you the opportunity to keep assets fully invested
in a vehicle that provides a professionally managed portfolio of
Utah Double-Exempt Obligations which may, but not necessarily will,
be more diversified, higher yielding or more stable and more liquid
than you might be able to obtain on an individual basis by direct
purchase of Utah Double-Exempt Obligations.
Through the convenience of a single security consisting of
shares of the Fund, you are also relieved of the inconvenience
associated with direct investments of fixed denominations,
including the selecting, purchasing, handling, monitoring call
provisions and safekeeping of Utah Double-Exempt Obligations.
Utah Double-Exempt Obligations are a type of municipal
obligation. Municipal obligations are issued by or on behalf of
states, territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities to obtain
funds for various public purposes. The two principal
classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less
while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government
guarantee; tax anticipation notes; revenue anticipation notes; bond
anticipation notes; construction loan notes; and floating and
variable rate demand notes. Municipal obligations include municipal
lease/purchase agreements which are similar to installment purchase
contracts for property or equipment. The purposes for which
municipal obligations such as bonds are issued include the
construction of a wide range of public facilities such as highways,
bridges, schools, hospitals, housing, mass transportation, streets
and water and sewer works. Other public purposes for which
municipal obligations may be issued include the refunding of
outstanding obligations, the obtaining of funds for general
operating expenses and the obtaining of funds to lend to other
public institutions and facilities.
INVESTMENT OF THE FUND'S ASSETS
In seeking its objective of providing as high a level of
current income which is exempt from both State of Utah and regular
Federal income taxes as is consistent with the preservation of
capital, the Fund will invest in Utah Double-Exempt Obligations (as
defined below). There is no assurance that the Fund will achieve
its objective, which is a fundamental policy of the Fund. (See
"Investment Restrictions.")
As used in the Prospectus and the Additional Statement, the
term "Utah Double-Exempt Obligations" means obligations, including
those of non-Utah issuers, of any maturity which pay interest
which, in the opinion of bond counsel or other appropriate counsel,
is exempt from regular Federal income taxes and from Utah income
taxes other than taxes on corporations. Although exempt from
regular Federal income tax, interest paid on certain types of Utah
Double-Exempt Obligations, and dividends which the Fund might pay
from this interest, are preference items as to the Federal
alternative minimum tax; for further information, see "Dividend and
Tax Information." As a fundamental policy, at least 80% of the
Fund's net assets will be invested in Utah Double-Exempt
Obligations the income from which will not be subject to the
alternative minimum tax; accordingly, the Fund can invest up to 20%
of its net assets in obligations the income paid upon which is
subject to the Federal alternative minimum tax. The Fund may
refrain entirely from purchasing these types of Utah Double-Exempt
Obligations. While non-taxable to individuals and other taxpayers,
interest received from Utah and other municipal issuers is subject
to State of Utah taxes on corporations. (See "Utah Tax Information"
under "Dividend and Tax Information" below.)
Interest on bonds or other obligations issued by or under
the authority of states other than Utah and their agencies and
instrumentalities, Puerto Rico, Guam, the Northern Mariana Islands,
and the Virgin Islands are exempt from Utah income taxes (other
than certain taxes on corporations), as well as Federal income
taxes. The Fund will not purchase obligations of non-Utah issuers
unless Utah Double-Exempt Obligations of Utah issuers of the
desired quality, maturity and interest rate are not available. In
selecting Utah Double-Exempt Obligations of non-Utah issuers, the
Fund will choose obligations which in the judgement of First
Security Investment Management, Inc., the Fund's investment adviser
(the "Sub-Adviser"), are most appropriate to achieve the objectives
of the Fund.
As a Utah-oriented fund, under normal circumstances at least
65% of the Fund's total assets will be invested in Utah
Double-Exempt Obligations of Utah issuers. The Fund invests only in
Utah Double-Exempt Obligations.
In general, there are nine separate credit ratings ranging
from the highest to the lowest quality standards for municipal
obligations. So that the Fund will have a portfolio of
quality-oriented (investment grade) securities, the Utah
Double-Exempt Obligations which the Fund will purchase must, at the
time of purchase, either (i) be rated within the four highest
credit ratings assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"); or (ii) if
unrated, be determined to be of comparable quality to municipal
obligations so rated by the Sub-Adviser, subject to the direction
and control of the Fund's Board of Trustees. Municipal obligations
rated in the fourth highest credit rating are considered by such
rating agencies to be of medium quality and thus may present
investment risks not present in more highly rated obligations. Such
bonds lack outstanding investment characteristics and may in fact
have speculative characteristics as well; changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is
the case for higher grade bonds. If after purchase the rating of
any rated Utah Double-Exempt Obligation is downgraded such that it
could not then be purchased by the Fund, or, in the case of an
unrated Utah Double-Exempt Obligation, if the Sub-Adviser
determines that the unrated obligation is no longer of comparable
quality to those rated obligations which the Fund may purchase, it
is the current policy of the Fund to cause any such obligation to
be sold as promptly thereafter as the Sub-Adviser in its discretion
determines to be consistent with the Fund's objectives; such
obligation remains in the Fund's portfolio until it is sold. In
addition, because a downgrade often results in a reduction in the
market price of a downgraded obligation, sale of such an obligation
may result in a loss. (See Appendix A to the Additional Statement
for further information as to these ratings.) The Fund can purchase
industrial development bonds only if they meet the definition of
Utah Double-Exempt Obligations, i.e., the interest on them is
exempt from State of Utah and regular Federal income taxes other
than Utah income taxes on corporations.
The Fund is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940 Act").
The Fund also intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code (the "Code").
One of the tests for such qualification under the Code is, in
general, that at the end of each fiscal quarter of the Fund, at
least 50% of its assets must consist of (i) cash; and (ii)
securities which, as to any one issuer, do not exceed 5% of the
value of the Fund's assets. If the Fund had elected to register
under the 1940 Act as a "diversified" investment company, it would
have to meet the same test as to 75% of its assets. The Fund may
therefore not have as much diversification among securities, and
thus diversification of risk, as if it had made this election under
the 1940 Act. In general, the more the Fund invests in the
securities of specific issuers, the more the Fund is exposed to
risks associated with investments in those issuers. The Fund's
assets, being primarily or entirely Utah issues, are accordingly
subject to economic and other conditions affecting Utah. (See "Risk
Factors and Special Considerations Regarding Investment in Utah
Double-Exempt Obligations.")
Certain Stabilizing Measures
The Fund will employ such traditional measures as varying
maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash and
cash equivalents in attempting to protect against declines in the
value of its investments and other market risks. There can,
however, be no assurance that these will be successful.
Floating and Variable Rate Demand Notes
Floating and variable rate demand notes are tax-exempt
obligations which may have a stated maturity in excess of one year,
but permit the holder to demand payment of principal at any time,
or at specified intervals not exceeding one year, in each case upon
not more than 30 days' notice. The issuer of such notes normally
has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the note plus
accrued interest upon a specified number of days' notice to the
noteholders. The interest rate on a floating rate demand note is
based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand note is adjusted
automatically at specified intervals.
Participation Interests
The Fund may purchase from financial institutions
participation interests in Utah Double-Exempt Obligations (such as
industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund an undivided
interest in the underlying Utah Double-Exempt Obligations in the
proportion that the Fund's participation interest bears to the
total amount of the underlying Utah Double-Exempt Obligations. All
such participation interests must meet the Fund's credit
requirements. (See "Limitation to 10% as to Certain Investments.")
When-Issued and Delayed Delivery Purchases
The Fund may buy Utah Double-Exempt Obligations on a
when-issued or delayed delivery basis when it has the intention of
acquiring them. The Utah Double-Exempt Obligations so purchased are
subject to market fluctuation and no interest accrues to the Fund
until delivery and payment take place; their value at the delivery
date may be less than the purchase price. The Fund cannot enter
into when-issued commitments exceeding in the aggregate 15% of the
market value of the Fund's total assets, less liabilities other
than the obligations created by when-issued commitments. If the
Fund chooses to dispose of the right to acquire a when-issued
obligation prior to its acquisition, it could, as with the
disposition of any other portfolio holding, incur a gain or loss
due to market fluctuation; any such gain would be a taxable
short-term gain. The Fund places an amount of assets equal in value
to the amount due on the settlement date for the when-issued or
delayed delivery securities being purchased in a segregated account
with the Custodian, which is marked to market every business day.
(See the Additional Statement for further information.)
Limitation to 10% as to Certain Investments
The Fund cannot purchase Utah Double-Exempt Obligations that
are not readily marketable if thereafter more than 10% of its net
assets would consist of such investments. However, this 10% limit
does not include any Utah Double-Exempt Obligations as to which the
Fund can exercise the right to demand payment in full within three
days and as to which there is a secondary market. Floating and
variable rate demand notes and participation interests (including
municipal lease/purchase obligations) are considered illiquid
unless determined by the Board of Trustees to be readily
marketable. (See the Additional Statement.)
Current Policy as to Certain Obligations
The Fund will not invest more than 25% of its total assets in
(i) Utah Double-Exempt Obligations the interest on which is paid
from revenues of similar type projects or (ii) industrial
development bonds, unless the Prospectus and/or the Additional
Statement are supplemented to reflect the change and to give
additional information.
Factors Which May Affect the Value
of the Fund's Investments and Their Yields
The value of the Utah Double-Exempt Obligations in which the
Fund invests will fluctuate depending in large part on changes in
prevailing interest rates, and may be subject to other market,
credit and economic factors as well. If the prevailing interest
rates go up after the Fund buys Utah Double-Exempt Obligations, the
value of these obligations will normally go down; if these rates go
down, the value of these obligations will normally go up. Changes
in value and yield based on changes in prevailing interest rates
may have different effects on short-term Utah Double-Exempt
Obligations than on long-term obligations. Long-term obligations
(which often have higher yields) may fluctuate in value more than
short-term ones. The Fund's portfolio will represent a blend of
short-term and long-term obligations designed to reduce
fluctuations in the net asset value of the shares of the Fund.
Risk Factors and Special Considerations as to Investment in Utah
Double-Exempt Obligations of Utah Issuers
The Fund provides Utah residents with the benefits of
investing primarily in obligations of issuers of the State of Utah,
thereby participating in the financing of various Utah-oriented
public purpose projects which assist in the economic development of
the State and the quality of life of its residents. However, since
the Fund invests primarily in obligations of Utah issuers, there is
less diversification of the portfolio of the Fund and there may be
less breadth to the market for its portfolio securities than is
available for obligations of non-Utah issuers. In addition, the
yield of obligations of Utah issuers in which the Fund invests may
not be as high as that available from obligations of issuers of
other states, for various reasons, including favorable evaluation
in credit markets of the credit quality of Utah issuers as compared
to other issuers. The following is a discussion of various factors
that might influence the ability of Utah issuers to pay principal
and interest when due on the Utah Double-Exempt Obligations
contained in the portfolio of the Fund. Such information is derived
from sources that are generally available to investors and is
believed by the Fund to be accurate but has not been independently
verified and may not be complete.
Utah's economy is dominated by service industries, trade,
government and various manufacturing sectors. While Utah's economy
has significantly outperformed the national economy for several
years, and its overall employment growth rate in recent years has
ranked among the highest in the nation, there can be no assurance
that such conditions will continue in the future.
The population of the State has increased in recent years,
with the increase being attributable to both natural population
increase and net in-migration. From fiscal years 1984 through 1989
the State experienced out-migration because of an economy outpaced
by the growth of its labor force and a decline in the State's
energy producing industries. In fiscal year 1996, Utah's population
rose 2.2% to 2,000,100, including 13,400 in-migrants. It is not
known at the present time whether current trends will continue.
Utah has more school-age children and fewer working adults, as a
percentage of its population, than any other state; hence, to pay
the State's education costs, Utah households pay more in state and
local taxes per household than the national average. This current
relatively high level of taxation could adversely affect the
ability of Utah issuers to raise taxes substantially or at all.
A large percentage of the land in Utah is owned by the
Federal Government or included in Indian reservations, thereby
reducing the tax base of the State and its political subdivisions.
Since 1991, defense-related employment has lost 15,000 jobs.
However, the conversion of one large military facility to
manufacturing will soon be completed. Some communities in the State
contain major industries heavily dependent on defense-related
government contracts for their revenues. The termination of such
government contracts could increase unemployment and reduce taxes
paid by such industries.
The ability of Utah and its political subdivisions to
borrow money and to levy and collect taxes is limited by
constitutional and statutory restrictions such as debt limitations
and limitations on revenue increases. In recent years attempts have
been made by popular initiative to further restrict the borrowing
and taxing capacity of the State and its political subdivisions. It
is not possible to predict whether any such proposals will be
enacted in the future or their possible impact on State or local
government financing.
The State receives revenues from three principal sources;
(a) taxes and licenses; (b) Federal grants-in-aid; and (c) fees,
the State's share of mineral royalties, bonuses on Federal land and
other miscellaneous charges and receipts. In the 1996 fiscal year,
24.8% of those revenues came from sales taxes. The State collects
an individual income tax and a corporate franchise tax, but all net
revenues from such taxes are distributed to local school
districts.
Local governments are heavily dependent on ad valorem property
tax revenues, but also can receive revenues from other local taxes
and fees. There can be no assurance that a material downturn in the
State's economy, with the resulting impact on State and local
finances, will not adversely affect the market value of the Utah
Double-Exempt Obligations held in the Fund or the ability of the
respective obligors to make debt service payments on such Utah
Double-Exempt Obligations.
The availability of water is a significant concern in Utah.
During the past decade the State has experienced periods of both
flooding and drought. Water issues will likely affect the growth
and prosperity of the State in the future.
The Utah Double-Exempt Obligations in which the Fund may
invest from time to time include general obligation bonds, revenue
bonds, industrial revenue bonds and special tax assessment bonds,
and the sensitivity of each of these types of investments to the
general and economic factors discussed above may vary
significantly. No assurance can be given as to the effect, if any,
that these factors, individually or in the aggregate, may have on
any individual Utah Double-Exempt Obligations or on the Fund as a
whole.
Obligations of non-Utah issuers are subject to the risks of
general economic and other factors affecting those issuers.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and cannot
do. Certain of these policies, identified in the Prospectus and the
Additional Statement as "fundamental policies," cannot be changed
unless the holders of a "majority," as defined in the 1940 Act, of
the Fund's outstanding shares vote to change them. (See the
Additional Statement for a definition of such a majority.) All
other policies can be changed from time to time by the Board of
Trustees without shareholder approval. Some of the more important
of the Fund's fundamental policies, not otherwise identified in the
Prospectus, are set forth below; others are listed in the
Additional Statement.
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than Utah
Double-Exempt Obligations meeting the standards stated under
"Investment of the Fund's Assets."
2. The Fund has industry investment requirements.
The Fund cannot buy the obligations 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; the Fund will
consider that a non-governmental user of facilities financed by
industrial development bonds is an issuer in an industry.
3. The Fund cannot make loans.
The Fund can buy those Utah Double-Exempt Obligations which it
is permitted to buy (see "Investment of the Fund's Assets"); this
is investing, not making a loan. The Fund cannot lend its portfolio
securities.
4. The Fund can borrow only in limited amounts for special
purposes.
The Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage or
pledge its assets only in connection with such borrowing and only
up to the lesser of the amounts borrowed or 5% of the value of its
total assets. Interest on borrowings would reduce the Fund's
income. Except in connection with borrowings, the Fund will not
issue senior securities. The Fund will not purchase any Utah
Double-Exempt Obligations while it has any outstanding borrowings
which exceed 5% of the value of its total assets.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Fund's
classes of shares and offering price per share of each class is
determined as of 4:00 p.m., New York time, on each day that the New
York Stock Exchange is open (a "business day"), by dividing the
value of the Fund's net assets (i.e., the value of the assets less
liabilities) allocable to each class by the total number of shares
of such class then outstanding. Determination of the value of the
Fund's assets is subject to the direction and control of the Fund's
Board of Trustees. In general, it is based on market value, except
that Utah Obligations maturing in 60 days or less are generally
valued at amortized cost; see the Additional Statement for further
information.
HOW TO INVEST IN THE FUND
This Prospectus offers two separate classes of shares. All
classes represent interests in the same portfolio of Utah
Double-Exempt Obligations.
Institutional Class Shares ("Class Y Shares") are offered
only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity, and are not
offered directly to retail customers. Class Y Shares are
offered at net asset value with no sales charge, no redemption
fee, no contingent deferred sales charge and no distribution
fee.
Financial Intermediary Class Shares ("Class I Shares") are
offered and sold only through financial intermediaries with
which the Aquila Distributors, Inc. (the "Distributor") has
entered into sales agreements, and are not offered directly to
retail customers. Class I Shares are offered at net asset
value with no sales charge and no redemption fee or contingent
deferred sales charge, although a financial intermediary may
charge a fee for effecting a purchase or other transaction on
behalf of its customers. Class I Shares may carry a
distribution fee of up to 0.25 of 1% of average annual net
assets allocable to Class I Shares, currently 0.10 of 1% of
such net assets, and a services fee of 0.25 of 1% of such
assets. (See "Distribution Plan" and Shareholder Services
Plan.")
The Fund's other classes of shares, Front-Payment Class
Shares ("Class A Shares") and Level-Payment Class Shares, ("Class
C Shares"), are not offered by this Prospectus. (See "General
Information - Description of the Fund and Its Shares.")
At the date of the Prospectus, Class Y Shares of the Fund
are registered for sale only in Colorado, District of Columbia,
Florida, Hawaii, New Jersey, New York and Utah.
At the date of the Prospectus, Class I Shares of the Fund
are registered for sale only in Utah and New York.
If you do not reside in one of those states you should not
purchase shares of the Fund. If shares are sold outside of those
states except to certain institutional investors, the Fund can
redeem them. Such a redemption may result in a loss to you and may
have tax consequences. In addition, if your state of residence is
not Utah, the dividends from the Fund may not be exempt from income
tax of the state in which you reside. Accordingly, you should
consult your tax adviser before acquiring shares of the Fund.
How to Purchase Class Y Shares
Institutional Class Shares ("Class Y Shares") are offered
only to institutional investors for investments held in a
fiduciary, advisory, agency, custodial or similar capacity, or
through them to their clients, and are not offered directly to
retail customers. Class Y Shares are offered at net asset value
with no sales charge, no redemption fee, no contingent deferred
sales charge and no distribution fee.
Class Y Shares of the Fund may be purchased through any
investment broker or dealer (a "selected dealer") which has a sales
agreement with Aquila Distributors, Inc. (the "Distributor") or
through the Distributor. There are two ways to make an initial
investment: (i) order the shares through your investment broker or
dealer, if it is a selected dealer; or (ii) mail the Application
with payment to the Fund's Shareholder Servicing Agent (the
"Agent") at the address on the Application. There is no sales
charge on initial or subsequent investments. You are urged to
complete an Application and send it to the Agent so that expedited
shareholder services can be established at the time of your
investment.
The minimum initial investment for Class Y Shares is
$100,000 for fiduciaries and $250,000 for all other eligible
purchasers, except that this limitation does not apply to
shareholders with accounts open on October 31, 1997, or as
otherwise stated in the Prospectus or the Additional Statement.
Such investment must be drawn in United States dollars on a United
States commercial or savings bank, credit union or a United States
branch of a foreign commercial bank (each of which is a "Financial
Institution"). You may make subsequent investments in Class Y
Shares in any amount (unless you have an Automatic Withdrawal
Plan). Your subsequent investment may be made through a selected
dealer or by forwarding payment to the Agent, with the name(s) of
account owner(s), the account number, the name of the Fund. With
subsequent investments, please send the pre-printed stub attached
to the Fund's confirmations.
Subsequent investments of $50 or more in Class Y Shares can be
made by electronic funds transfer from your demand account at a
Financial Institution. To use electronic funds transfer for your
purchases, your Financial Institution must be a member of the
Automated Clearing House and the Agent must have received your
completed Application designating this feature, or, after your
account has been opened, a Ready Access Features form available
from the Distributor or the Agent. A pre-determined amount can be
regularly transferred for investment ("Automatic Investment"), or
single investments can be made upon receipt by the Agent of
telephone instructions from anyone ("Telephone Investment"). The
maximum amount of each Telephone Investment is $50,000. Upon 30
days' written notice to shareholders, the Fund may modify or
terminate these investment methods at any time or charge a service
fee, although no such fee is currently contemplated.
The offering price for Class Y Shares is the net asset value
per share. The offering price determined on any day applies to all
purchase orders received by the Agent from selected dealers that
day, except that orders received by it after 4:00 p.m. New York
time will receive that day's offering price only if such orders
were received by selected dealers from customers prior to such time
and transmitted to the Distributor prior to its close of business
that day (normally 5:00 p.m. New York time); if not so transmitted,
such orders will be filled at the next determined offering price.
Selected dealers are required to transmit orders promptly.
Investments by mail are made at the offering price next determined
after receipt of the purchase order by the Agent. Purchase orders
received on other than a business day will be executed on the next
succeeding business day. Purchases by Automatic Investment and
Telephone Investment will be executed on the first business day
occurring on or after the date an order is considered received by
the Agent at the price determined on that day. In the case of
Automatic Investment your order will be executed on the date you
specified for investment at the price determined on that day. If
that day is not a business day your order will be executed at the
price determined on the next business day. In the case of Telephone
Investment your order will be filled at the next determined
offering price. If your order is placed after the time for
determining the net asset value of the Fund shares for any day it
will be executed at the price determined on the following business
day. The sale of shares will be suspended during any period when
the determination of net asset value is suspended and may be
suspended by the Distributor when the Distributor judges it in the
Fund's best interest to do so.
How to Purchase Class I Shares
Initial and subsequent investments in Class I Shares must
be made through financial intermediaries and cannot be made
directly. Financial intermediaries may set minimum amounts for
initial purchase and subsequent investments in Class I Shares and
may charge a fee for effecting a purchase or other transaction on
behalf of customers. Financial intermediaries that make Class I
Shares of the Fund and other mutual funds available to their
customers may offer distinct services, may have their own charges
for services and may impose their own minimum requirements for
initial and subsequent investments. Customers of financial
intermediaries should read the Prospectus in light of the terms of
their accounts with financial intermediaries. Financial
intermediaries that have entered into specific agreements with the
Fund may enter confirmed purchase orders on behalf of clients and
customers, with payment to follow not later than the Fund's pricing
of Class I Shares on the following business day. If payment is not
received by that time the financial intermediary could be held
liable for resulting fees or losses.
Offering Price
The offering price for Class Y Shares is the net asset
value per share. The offering price determined on any day applies
to all purchase orders received by the Agent from selected dealers
that day, except that orders received by it after 4:00 p.m. New
York time will receive that day's offering price only if such
orders were received by selected dealers from customers prior to
such time and transmitted to the Distributor prior to its close of
business that day (normally 5:00 p.m. New York time); if not so
transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next business
day. In the case of Telephone Investment your order will be filled
at the next determined offering price. If your order is placed
after the time for determining the net asset value of the Fund
shares for any day, it will be executed at the price determined on
the following business day. The sale of shares will be suspended
during any period when the determination of net asset value is
suspended and may be suspended by the Distributor when the
Distributor judges it in the Fund's best interest to do so.
The offering price for Class I Shares is the net asset
value per share. The offering price determined on any day applies
to all purchases received by each financial intermediary prior to
4:00 p.m. New York time on any business day. Purchase orders
received by financial intermediaries after that time will be filled
at the next determined offering price.
Possible Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of any
class of shares of the Fund. Additional compensation may include
payment or partial payment for advertising of the Fund's shares,
payment of travel expenses, including lodging, incurred in
connection with attendance at sales seminars taken by qualifying
registered representatives to locations within or outside of the
United States, other prizes or financial assistance to securities
dealers in offering their own seminars or conferences. In some
instances, such compensation may be made available only to certain
dealers whose representatives have sold or are expected to sell
significant amounts of such shares. Dealers may not use sales of
the Fund's shares to qualify for the incentives to the extent such
may be prohibited by the laws of any state or any self-regulatory
agency, such as the National Association of Securities Dealers,
Inc. The cost to the Distributor of such promotional activities and
such payments to participating dealers will not exceed the amount
of the sales charges in respect of sales of all classes of shares
of the Fund effected through such participating dealers, whether
retained by the Distributor or reallowed to participating dealers.
No such additional compensation to dealers in connection with sales
of shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and dealers may receive different levels of
compensation for selling different classes of shares.
Confirmations and Share Certificates
All purchases of Class Y Shares will be confirmed and
credited to you in an account maintained for you at the Agent in
full and fractional shares of the Fund (rounded to the nearest
1/1000th of a share). Purchases of Class I Shares will be confirmed
by financial intermediaries. No share certificates will be issued
for Class Y Shares or Class I Shares.
The Fund and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
Distribution Plan
The Fund has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule provides in
substance that an investment company may not engage directly or
indirectly in financing any activity which is primarily intended to
result in the sale of its shares except pursuant to a written plan
adopted under the Rule. No payments under the Plan from assets
represented by Class Y Shares are authorized.
Under a part of the Plan, the Fund is authorized to make
payments with respect to Class I Shares ("Class I Permitted
Payments") to Qualified Recipients. Class I Permitted Payments
shall be made through the Distributor or shareholder servicing
agent as disbursing agent, and may not exceed, for any fiscal year
of the Fund (as adjusted for any part or parts of a fiscal year
during which payments under the Plan are not accruable or for any
fiscal year which is not a full fiscal year), at a rate set from
time to time by the Board of Trustees (currently 0.10 of 1%) but
not more than 0.25 of 1% of the average annual net assets
represented by the Class I Shares of the Fund. Such payments shall
be made only out of the Fund's assets allocable to the Class I
Shares. "Qualified Recipients" means financial intermediaries
selected by the Distributor with which the Fund or the Distributor
has entered into written agreements to act in such capacity.
The Plan contains provisions designed to protect against
any claim against or involving the Fund that some of the expenses
which might be considered to be sales-related which the Fund pays
or may pay come within the purview of the Rule. The Fund believes
that except for payments made with respect to Class A Shares and
Class C Shares it is not financing any such activity and does not
consider any payment enumerated in such provisions as so financing
any such activity. If and to the extent that any payment as
specifically listed in the Plan (see the Additional Statement) is
considered to be primarily intended to result in or as indirect
financing of any activity which is primarily intended to result in
the sale of Fund shares, these payments are authorized under the
Plan. In addition, if the Administrator, out of its own funds,
makes payment for distribution expenses such payments are
authorized. (See the Additional Statement.)
Shareholder Services Plan for Class I Shares
Under a Shareholder Services Plan, (the "Plan") the Fund is
authorized to make payments with respect to Class I Shares
("Service Payments") to Qualified Recipients. Fees paid under the
Plan are subject to such limits as may be necessary for Class I
Shares to qualify as a "no-load" class for purposes of the Conduct
Rules of the National Association of Securities Dealers, Inc.
("NASD"). The current limitation is as follows: fees paid under the
Plan that satisfy the definition of "service fees" in Rule 2830(d)
of the Conduct Rules of the National Association of Securities
Dealers, Inc. may not exceed an amount equal to the difference
between (i) 0.25 of 1% of the average annual net assets of the Fund
represented by Class I Shares and (ii) the amount paid under the
Fund's Distribution Plan with respect to the assets represented by
the Class I Shares. That is, the total payments under both plans
will be less than 0.25 of 1% of such net assets. Where necessary or
appropriate, the Independent Trustees, or such appropriate officer
or officers of the Fund as they may designate, shall, with the
advice of counsel, determine what fees paid under this Plan are to
be deemed "service fees." The Fund's management believes that, in
general, fees allocable to activities such as sub-accounting and
record-keeping are not "service fees," while fees allocable to
activities such as account service are "service fees." In like
manner, allocation of payments among activities is also determined
by the Independent Trustees or their delegates. Subject to the
foregoing, Service Payments may not exceed, for any fiscal year of
the Fund (as adjusted for any part or parts of a fiscal year during
which payments under the Plan are not accruable or for any fiscal
year which is not a full fiscal year), 0.25 of 1% of the average
annual net assets represented by the Class I Shares of the Fund.
Such payments shall be made only out of the Fund's assets
represented by the Class I Shares.
"Qualified Recipients" means broker-dealers or others
selected by the Distributor, including but not limited to any
principal underwriter of the Fund, with which the Fund or the
Distributor has entered into written agreements to provide personal
services to Class I Shares shareholders, maintenance of Class I
Shares shareholder accounts and/or pursuant to specific agreements
entering of confirmed purchase orders on behalf of customers or
clients and which have provided services to holders of Class I
Shares and/or maintenance of Class I Shares shareholder
accounts.
The Distributor is authorized, but not directed, to take
into account, in addition to any other factors deemed relevant by
it, the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient and (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Class I Shares, including
without limitation, (i) activities relating to sub-accounting and
record-keeping, including the providing of necessary personnel and
facilities to establish and maintain shareholder accounts and
records, and (ii) activities relating to account service, such as
assisting shareholders in designating and changing dividend
options, account designations and addresses; answering customer
inquiries regarding account status and history and the manner in
which purchases and redemptions of shares of the Fund may be
effected; transmitting and receiving funds in connection with
customer orders to purchase or redeem shares, including, where
appropriate, arranging for the wiring of funds; assisting in
processing purchase and redemption transactions; and verifying and
guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder designated
accounts. A majority of the Independent Trustees (as defined in the
Plan) may remove any person as a Qualified Recipient and no fees
shall be paid pursuant to the Plan for activities primarily
intended to result in the sale of shares of the Fund or to finance
sales or sales promotion expenses. No fees shall be paid, or be
deemed to have been paid, for any of the listed activities to the
extent that such payments are deemed by the Independent Trustees to
be intended for distribution. Service Payments shall be paid
through the Distributor or shareholder servicing agent as
disbursing agent. (See the Additional Statement.)
HOW TO REDEEM YOUR INVESTMENT
Redemption of Class Y Shares
You may redeem all or any part of your Class Y Shares at the
net asset value next determined after acceptance of your redemption
request at the Agent. Redemptions can be made by the various
methods described below. There is no minimum period for any
investment in the Fund, except for shares recently purchased by
check, Automatic Investment or Telephone Investment as discussed
below. There are no redemption fees or penalties on redemption of
Class Y Shares. A redemption may result in a transaction taxable to
you.
For your convenience the Fund offers expedited redemption for
Class Y Shares to provide you with a high level of liquidity for
your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions of Class Y Shares.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed to
you, if your shares are registered in your name at the
Fund and the check is sent to your address of record,
provided that there has not been a change of your address
of record during the 30 days preceding your redemption
request. You can make only one request for telephone
redemption by check in any 7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
800-446-8824 toll free
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
2. By FAX or Mail. You may also request redemption
payments to a predesignated Financial Institution account
by a letter of instruction sent after November 8, 1997
to: PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809. Before November 8, 1997 send your letter of
instructions to Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 732-855-5730 or
by mail at 581 Main Street, Woodbridge, NJ 07095-1198.
The letter must provide account name(s), account number,
amount to be redeemed, and any payment directions and be
signed by the registered holder(s). Signature guarantees
are not required. See "Redemption Payments", below for
payment methods.
If you wish to have redemption proceeds sent directly to a
Financial Institution Account you should so elect on the Expedited
Redemption section of the Application or the Ready Access Features
form and provide the required information concerning your Financial
Institution account number. The Financial Institution account must
be in the exclusive name(s) of the shareholder(s) as registered
with the Fund. You may change the designated Financial Institution
account at any time by completing and returning a Ready Access
Features form. For protection of your assets, this form requires
signature guarantees and possible additional documentation.
Regular Redemption Method
If you own Class Y Shares and you have not elected
Expedited Redemption to a predesignated Financial Institution
account, you must use the Regular Redemption Method. Under
this redemption method you should send a letter of instruction
(after November 8, 1997) to: to the Fund's Shareholder
Servicing Agent: PFPC Inc., 400 Bellevue Parkway, Wilmington,
DE 19809. Before November 8, 1997 send your letter to
Administrative Data Management Corp., Attn: Aquilasm Group of
Funds, 581 Main Street, Woodbridge, NJ 07095-1198. The letter
must contain:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated below.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration of
the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required if
sufficient documentation is not on file with the Agent. Additional
documentation may be required where shares are held by certain
types of shareholders such as corporations, partnerships, trustees
or executors, or if redemption is requested by other than the
shareholder of record. If redemption proceeds of $50,000 or less
are payable to the record holder and are to be sent to the record
address, no signature guarantee is required, except as noted above.
In all other cases, signatures must be guaranteed by a member of a
national securities exchange, a U.S. bank or trust company, a
state-chartered savings bank, a federally chartered savings and
loan association, a foreign bank having a U.S. correspondent bank,
a participant in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or
the New York Stock Exchange, Inc. Medallion Signature Program
(MSP). A notary public is not an acceptable signature
guarantor.
Redemption of Class I Shares
You may redeem all or any part of your Class I Shares at
the net asset value next determined after acceptance of your
redemption request by your financial intermediary. Redemption
requests for Class I Shares must be made through a financial
intermediary and cannot to be made directly. Financial
intermediaries may charge a fee for effecting redemptions. There is
no minimum period for any investment in the Fund. The Fund does not
impose redemption fees or penalties on redemption of Class I
Shares. A redemption may result in a transaction taxable to
you.
Redemption Payments
Redemption payments with respect to Class Y Shares will
ordinarily be mailed to you at your address of record. If you so
request and the amount of your redemption proceeds is $1,000 or
more, the proceeds will, wherever possible, be wired or transferred
through the facilities of the Automated Clearing House to the
Financial Institution account specified in the Expedited Redemption
section of your Application or Ready Access Features form. The Fund
may impose a charge, not exceeding $5.00 per wire redemption, after
written notice to shareholders who have elected this redemption
procedure. The Fund has no present intention of making this charge.
Upon 30 days' written notice to shareholders, the Fund may modify
or terminate the use of the Automated Clearing House to make
redemption payments at any time or charge a service fee, although
no such fee is presently contemplated. If any such changes are
made, the Prospectus will be supplemented to reflect them. If you
use a broker or dealer to arrange for a redemption, you may be
charged a fee for this service. Redemption Payments for Class I
Shares are made to financial intermediaries.
The Fund will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven days
after acceptance of such a redemption request. However, the right
of redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is
restricted as determined by the Securities and Exchange Commission
by rule or regulation; (ii) during periods in which an emergency,
as determined by the Securities and Exchange Commission, exists
which causes disposal of, or determination of the net asset value
of, the portfolio securities to be unreasonable or impracticable;
or (iii) for such other periods as the Securities and Exchange
Commission may permit. Payment for redemption of Class Y Shares
recently purchased by check (irrespective of whether the check is
a regular check or a certified, cashier's or official bank check)
or by Automatic Investment or Telephone Investment may be delayed
up to 15 days or until (i) the purchase check or Automatic
Investment or Telephone Investment has been honored or (ii) the
Agent has received assurances by telephone or in writing from the
Financial Institution on which the purchase check was drawn, or
from which the funds for Automatic Investment or Telephone
Investment were transferred, satisfactory to the Agent and the
Fund, that the purchase check or Automatic Investment or Telephone
Investment will be honored. Possible delays in payment of
redemption proceeds for Class Y Shares can be eliminated by using
wire payments or Federal Reserve drafts to pay for purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by the distribution in kind of
securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. (See the Additional Statement for details.)
The Fund has the right to compel the redemption of shares held
in any account if the aggregate net asset value of such shares is
less than $500 as a result of shareholder redemptions or failure to
meet the minimum investment level under an Automatic Purchase
Program. If the Board elects to do this, shareholders who are
affected will receive prior written notice and will be permitted 60
days to bring their accounts up to the minimum before this
redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
If you had a Class Y Shares account before October 31, 1997,
you may establish an Automatic Withdrawal Plan if you own or
purchase Class Y Shares of the Fund having a net asset value of at
least $5,000.
Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions must
be reinvested in your shareholder account. Redemption of Class Y
Shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. (See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.)
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
Change in Management Arrangements
On October 24, 1997, the management arrangements described
below were approved by the Fund's shareholders and went into
effect. The new arrangements are designed to change the form of the
Fund's investment advisory and administration arrangements to a new
structure involving an adviser and a sub-adviser. The proposed
arrangements do not result in any change in overall management fees
paid by the Fund, nor any change in the parties providing these
services. Marketing efforts and positioning of the Fund will remain
the same with a strong local niche orientation.
Under the new arrangements, Aquila Management Corporation
("Aquila"), which since inception of the Fund has served as the
Fund's administrator, in addition became investment adviser under
a new agreement (the "Advisory and Administration Agreement") under
which it also continues to provide the Fund with all administrative
services. Also, by adoption of a Sub-Advisory Agreement between
Aquila and First Security Investment Management, Inc. (the
"Sub-Adviser"), the former investment advisory agreement was
replaced by one under which Aquila appointed the Sub-Adviser as
Sub-Adviser to the Fund. Under the Sub-Advisory Agreement, the
Sub-Adviser will continue to provide the Fund with advisory
services of the kind which it formerly provided as adviser. The
duties of the administrator, previously performed under an
administration agreement, are now performed by Aquila under the
Advisory and Administration Agreement where Aquila is referred to
as the "Manager." The former administration agreement terminated
upon approval of the new agreements.
The Advisory and Administration Agreement
The Advisory and Administration Agreement between the Fund
and Aquila Management Corporation (the "Manager") has several
parts, most of which are substantially identical to corresponding
provisions in the Fund's former advisory agreements and
administration agreement. The Advisory and Administration Agreement
contains provisions relating to investment advice for the Fund and
management of its portfolio that are substantially identical to
prior advisory agreements, except that the Manager has the power to
delegate its advisory functions to a sub-adviser, which it will
employ at its own expense. It has delegated these duties to the
Sub-Adviser. The Advisory and Administration Agreement contains
provisions relating to administrative services that are
substantially identical to those contained in the Fund's current
administration agreement.
The Advisory and Administration Agreement provides that
subject to the direction and control of the Board of Trustees of
the Fund, the Manager shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold
by the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund; and
(iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of
pricing information satisfactory to the Fund and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund.
The Advisory and Administration Agreement provides that,
subject to the termination provisions described below, the Manager
may at its own expense delegate to a qualified organization (the
"Sub-Adviser"), affiliated or not affiliated with the Manager, any
or all of the above duties. Any such delegation of the duties set
forth in (i), (ii) or (iii) above shall be by a written agreement
(the "Sub-Advisory Agreement") approved as provided in Section 15
of the Investment Company Act of 1940. The Manager has delegated
all of such functions to the Sub-Adviser in the Sub-Advisory
Agreement.
The Advisory and Administration Agreement provides that
subject to the direction and control of the Board of Trustees of
the Fund, the Manager shall provide all administrative services to
the Fund other than those relating to its investment portfolio
which have been delegated to a Sub-Adviser of the Fund under the
Sub-Advisory Agreement; as part of such administrative duties, the
Manager shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Fund;
(ii) oversee all relationships between the Fund and any
sub-adviser, transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of agreements in
relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for the
effective operation of the Fund and for the sale, servicing or
redemption of the Fund's shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share and the
dividends (provided that if there is a Sub-Adviser, daily pricing
of the Fund's portfolio shall be the responsibility of the
Sub-Adviser under the Sub-Advisory Agreement) or, at its expense
and responsibility, delegate such duties in whole or in part to a
company satisfactory to the Fund;
(iv) maintain the Fund's books and records, and prepare (or
assist counsel and auditors in the preparation of) all required
proxy statements, reports to the Fund's shareholders and Trustees,
reports to and other filings with the Securities and Exchange
Commission and any other governmental agencies, and tax returns,
and oversee the insurance relationships of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be necessary to
register or maintain the registration of the Fund and/or its shares
under the securities or "Blue-Sky" laws of all such jurisdictions
as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such inquiry
or communication is more properly to be responded to by the Fund's
shareholder servicing and transfer agent or distributor, oversee
such shareholder servicing and transfer agent's or distributor's
response thereto.
The Advisory and Administration Agreement contains
provisions relating to compliance of the investment program,
responsibility of the Manager for any investment program managed by
it, allocation of brokerage, and responsibility for errors that are
substantially the same as the corresponding provisions in the
Sub-Advisory Agreement. (See the Additional Statement.)
The Advisory and Administration Agreement provides that the
Manager shall, at its own expense, pay all compensation of
Trustees, officers, and employees of the Fund who are affiliated
persons of the Manager.
The Fund bears the costs of preparing and setting in type
its prospectuses, statements of additional information and reports
to its shareholders, and the costs of printing or otherwise
producing and distributing those copies of such prospectuses,
statements of additional information and reports as are sent to its
shareholders. All costs and expenses not expressly assumed by the
Manager under this sub-section or otherwise by the Manager,
administrator or principal underwriter or by any Sub-Adviser shall
be paid by the Fund, including, but not limited to (i) interest and
taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Trustees other than those
affiliated with the Manager or such adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi) custodian
and transfer agent, or shareholder servicing agent, fees and
expenses; (vii) expenses incident to the issuance of its shares
(including issuance on the payment of, or reinvestment of,
dividends); (viii) fees and expenses incident to the registration
under Federal or State securities laws of the Fund or its shares;
(ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x) all
other expenses incidental to holding meetings of the Fund's
shareholders; and (xi) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations
for which the Fund may have to indemnify its officers and
Trustees.
The Advisory and Administration Agreement provides that the
Fund agrees to pay the Manager, and the Manager agrees to accept as
full compensation for all services rendered by the Manager as such,
an annual fee payable monthly and computed on the net asset value
of the Fund as of the close of business each business day at the
annual rate of 0.50 of 1% of such net asset value.
The Advisory and Administration Agreement provides that the
Sub-Advisory Agreement may provide for its termination by the
Manager upon reasonable notice, provided, however, that the Manager
agrees not to terminate the Sub-Advisory Agreement except in
accordance with such authorization and direction of the Board of
Trustees, if any, as may be in effect from time to time. The
Advisory and Administration Agreement provides that it may be
terminated by the Manager at any time without penalty upon giving
the Fund sixty days' written notice (which notice may be waived by
the Fund) and may be terminated by the Fund at any time without
penalty upon giving the Manager sixty days' written notice (which
notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by a vote of
a majority of its Trustees in office at the time or by a vote of
the holders of a majority (as defined in the Act) of the voting
securities of the Fund outstanding and entitled to vote. The
specific portions of the Advisory Agreement which relate to
providing investment advisory services will automatically terminate
in the event of the assignment (as defined in the Act) of the
Advisory Agreement, but all other provisions relating to providing
services other than investment advisory services will not
terminate, provided however, that upon such an assignment the
annual fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day shall be
reduced to the annual rate of 0.27 of 1% of such net asset
value.
The Sub-Advisory Agreement
The services of the Sub-Adviser are rendered under the
Sub-Advisory Agreement between the Manager and the Sub-Adviser;
which provides, subject to the control of the Board of Trustees,
for investment supervision and at the Sub-Adviser's expense for
pricing of the Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees, for pricing of
the Fund's portfolio at least quarterly using another such source
satisfactory to the Fund. The Sub-Advisory Agreement states that
the Sub-Adviser shall, at its expense, provide to the Fund all
office space and facilities, equipment and clerical personnel
necessary for the carrying out of the Sub-Adviser's duties under
the Sub-Advisory Agreement.
Under the Sub-Advisory Agreement, the Sub-Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Sub-Adviser.
The Sub-Advisory Agreement provides that the Manager agrees to pay
the Sub-Adviser, and the Sub-Adviser agrees to accept as full
compensation for all services rendered by the Sub-Adviser as such,
a management fee payable monthly and computed on the net asset
value of the Fund as of the close of business each business day at
the annual rates of 0.23 of 1% of such net asset value. The
Sub-Adviser and/or the Manager may, in order to attempt to achieve
a competitive yield on the shares of the Fund, each waive all or
part of their respective fees.
The Sub-Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. Under these provisions, the Sub-Adviser is
authorized to consider sales of shares of the Fund or of any other
investment company or companies having the same investment adviser,
sub-adviser, administrator or principal underwriter as the
Fund.
Information about the Manager, the Sub-Adviser
and the Distributor
The Sub-Adviser, First Security Investment Management,
Inc., was incorporated in August 1984 and is a subsidiary of First
Security Investment Services, Inc., which in turn is a wholly-owned
subsidiary of First Security Corporation, a Utah-headquartered
financial services organization with consolidated assets of $13.1
billion as of August 31, 1997. In addition to advising the Fund,
the Sub-Adviser's advisory experience includes the management of
The Achievement Family of Funds, funds unrelated to the Fund and
the provision of investment management services to banks and thrift
institutions, corporate and profit-sharing trusts, Taft-Hartley,
municipal and state retirement funds, charitable foundations,
endowments and individual investors throughout the United States.
The Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. The Sub-Adviser has
offices at 61 South Main Street, Salt Lake City, Utah 84111, 119
North 9th Street, Boise, Idaho 83730, 219 Central Avenue, N.W.,
Albuquerque, New Mexico 87102 and 530 Las Vegas Boulevard, Las
Vegas Nevada 89101.
First Security Bank of Utah, N.A., an affiliate of the Sub-
Adviser, is the largest bank in the State of Utah and one of the
largest banks in the Rocky Mountain region. The Sub-Adviser is not
permitted to purchase the securities of or enter into principal
transactions with any of its affiliates, including First Security
Bank of Utah, when acting on behalf of the Fund. The above
restriction does not apply, however, to securities issued or
underwritten by banks or other financial institutions which are not
themselves affiliates of the Sub-Adviser, although they may have a
correspondent banking or other business relationship with one or
more of the First Security banks. (See below and in the Additional
Statement as to the legality, under the Glass-Steagall Act, of the
Sub-Adviser's acting as the Fund's investment adviser.) In general,
under that Act, the Sub-Adviser will not, among other things, be
involved in the promotion or distribution of shares of the
Fund.
Sterling K. Jenson has managed the Fund's portfolio since
commencement of the Fund's operations in July, 1992. Mr. Jenson is
President, Chief Executive Officer and Senior Portfolio Manager
with the Sub-Adviser and has been employed in the investment
management business for over 19 years. He is a member of the
Association for Investment Management and Research (AIMR) and has
earned the professional designations Chartered Financial Analyst
(CFA) and Chartered Investment Counselor (CIC). He received his
B.S. degree (Economics) and M.B.A. degree from Brigham Young
University.
The Fund's Manager is founder of and administrator to the
Aquilasm Group of Funds, which consists of tax-free municipal bond
funds, money market funds and two equity funds. As of June 30,
1997, these funds had aggregate assets of approximately $2.8
billion, of which approximately $1.9 billion consisted of assets of
the tax-free municipal bond funds. The Manager, which was founded
in 1984, is controlled by Mr. Lacy B. Herrmann (directly, through
a trust and through share ownership by his wife). (See the
Additional Statement for information on Mr. Herrmann.)
During the fiscal year ended June 30, 1997, fees of
$67,588 and $79,323, respectively, were accrued to the Sub-Adviser
and Manager under the former advisory and administration agreements
then in effect. Of these amounts, the Sub-Adviser and Manager
waived $55,749 and $72,207, respectively. In addition, during that
period the Manager agreed to reimburse the Fund for other expenses
during this period in the amount of $199,119 of which $66,512 was
paid prior to June 30, 1997 and the balance of $132,607 was paid in
July and early August of 1997.
The Distributor currently handles the distribution of the
shares of fourteen funds (seven tax-free municipal bond funds, five
money market funds and two equity funds), including the Fund. Under
the Distribution Agreement, the Distributor is responsible for the
payment of certain printing and distribution costs relating to
prospectuses and reports as well as the costs of supplemental sales
literature, advertising and other promotional activities.
At the date of the Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned 75% by Mr. Herrmann and 25% by Diana P. Herrmann,
will be owned by certain directors and/or officers of the Manager
and/or the Distributor, including Mr. Herrmann and Ms.
Herrmann.
Authority to Act as Investment Sub-Adviser
Banking laws and regulations, including the Glass-Steagall
Act as currently interpreted by the Board of Governors of the
Federal Reserve System, prohibit a bank holding company registered
under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling or distributing the shares
of a registered, open-end investment company continuously engaged
in the issuance of its shares, and prohibit banks generally from
issuing, underwriting, selling or distributing securities, but do
not prohibit such a bank holding company or affiliate from acting
as investment adviser, transfer agent or custodian to such an
investment adviser, or from purchasing shares of such a company as
agent for and upon the order of a customer. The Sub-Adviser and the
Fund believe that the Sub-Adviser may perform the advisory services
for the Fund described in the Prospectus. However, future changes
in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of
present requirements, could prevent the Sub-Adviser from continuing
to perform investment advisory services for the Fund.
If the Sub-Adviser were prohibited from performing
investment advisory services for the Fund, it is expected that the
Board of Trustees of the Fund would recommend to the Fund's
shareholders that they approve new agreements with another entity
or entities qualified to perform such services and selected by the
Board.
DIVIDEND AND TAX INFORMATION
Dividends and Distributions
The Fund will declare all of its net income, as defined
below, as dividends on every day, including weekends and holidays,
on those shares outstanding for which payment was received by the
close of business on the preceding business day. Net income for
dividend purposes includes all interest income accrued by the Fund
since the previous dividend declaration, including accretion of any
original issue discount, less expenses paid or accrued. As such net
income will vary, the Fund's dividends will also vary. Dividends
and other distributions paid by the Fund with respect to each class
of its shares are calculated at the same time and in the same
manner. In addition, the dividends of each class can vary because
each class will bear certain class-specific charges.
It is the Fund's present policy to pay dividends so that
they will be received or credited by approximately the first day of
each month. On the Application or by completing a Ready Access
Features form, holders of Class Y Shares may elect to have
dividends deposited without charge by electronic funds transfers
into an account at a Financial Institution if it is a member of the
Automated Clearing House. All arrangements for the payment of
dividends with respect to Class I Shares, including reinvestment of
dividends, must be made through financial intermediaries.
Redeemed shares continue to earn dividends through and
including the earlier of (i) the day before the day on which the
redemption proceeds are mailed, wired or transferred by the
facilities of the Automated Clearing House by the Agent or paid by
the Agent to a selected dealer; or (ii) the third day on which the
New York Stock Exchange is open after the day on which the net
asset value of the redeemed shares has been determined. (See "How
To Redeem Your Investment.")
Net investment income includes amounts of income from the
Utah Double-Exempt Obligations in the Fund's portfolio which are
allocated as "exempt-interest dividends." "Exempt-interest
dividends" are exempt from regular Federal income tax. The
allocation of "exempt-interest dividends" will be made by the use
of one designated percentage applied uniformly to all income
dividends declared during the Fund's tax year. Such designation
will normally be made in the first month after the end of each of
the Fund's fiscal years as to income dividends paid in the prior
year. It is possible that in certain circumstances, a small portion
of the dividends paid by the Fund will be subject to income taxes.
During the Fund's fiscal year ended June 30, 1997, 97.89% of the
Fund's dividends were "exempt-interest dividends." For the calendar
year 1996, 1.88% of the total dividends paid were taxable as
ordinary income. The percentage of income designated as tax-exempt
for any particular dividend may be different from the percentage of
the Fund's income that was tax-exempt during the period covered by
the dividend.
Distributions ("short-term gains distributions") from net
realized short-term gains, if any, and distributions ("long-term
gains distributions"), if any, from the excess of net long-term
capital gains over net short-term capital losses realized through
October 31st of each year and not previously paid out will be paid
out after that date; the Fund may also pay supplemental
distributions after the end of its fiscal year. If net capital
losses are realized in any year, they are charged against capital
and not against net investment income which is distributed
regardless of gains or losses. The Fund may be required to impose
backup withholding at a rate of 31% upon payment of redemptions to
shareholders, and from short- and long-term gains distributions (if
any) and any other distributions that do not qualify as
"exempt-interest dividends," if shareholders do not comply with
provisions of the law relating to the furnishing of taxpayer
identification numbers and reporting of dividends.
Unless you request otherwise by letter addressed to the Agent
or by filing an appropriate Application prior to a given
ex-dividend date, dividends and distributions will be automatically
reinvested in full and fractional shares of the Fund at net asset
value on the record date for the dividend or distribution or other
date fixed by the Board of Trustees. An election to receive cash
will continue in effect until written notification of a change is
received by the Agent. All shareholders, whether their dividends
are received in cash or are being reinvested, will receive a
monthly account summary indicating the current status of their
investment. There is no fixed dividend rate. Corporate shareholders
of the Fund are not entitled to any deduction for dividends
received from the Fund.
Tax Information
The Fund qualified during its last fiscal year as a "regulated
investment company" under the Code, and intends to continue to so
qualify. If it does so qualify, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
However, the Code contains a number of complex tests relating to
such qualification and it is possible although not likely that the
Fund might not meet one or more of these tests in any particular
year. If it does not so qualify, it would be treated for tax
purposes as an ordinary corporation, would receive no tax deduction
for payments made to shareholders and would be unable to pay
dividends or distributions which would qualify as "exempt-interest
dividends" or "capital gains dividends," as discussed below.
The Fund intends to qualify during each fiscal year under the
Code to pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends which are derived from net income earned
by the Fund on Utah Double-Exempt Obligations will be excludable
from gross income of the shareholders for regular Federal income
tax purposes. Capital gains dividends are not included in
exempt-interest dividends. Although "exempt-interest dividends" are
not taxed, each taxpayer must report the total amount of tax-exempt
interest (including exempt-interest dividends from the Fund)
received or acquired during the year.
The Code requires that either gains realized by the Fund on
the sale of municipal obligations acquired after April 30, 1993 at
a price which is less than face or redemption value be included as
ordinary income to the extent such gains do not exceed such
discount or that the discount be amortized and included ratably in
taxable income. There is an exception to the foregoing treatment if
the amount of the discount is less than 0.25% of face or redemption
value multiplied by the number of years from acquisition to
maturity. The Fund will report such ordinary income in the years of
sale or redemption rather than amortize the discount and report it
ratably. To the extent the resultant ordinary taxable income is
distributed to shareholders, it will be taxable to them as ordinary
income.
Capital gains dividends (net long-term gains over net
short-term losses which the Fund distributes and so designates) are
reportable by shareholders as gain from the sale or exchange of a
capital asset held for more than one year. This is the case whether
the shareholder takes the distribution in cash or elects to have
the distribution reinvested in Fund shares and regardless of the
length of time the shareholder has held his or her shares.
Short-term gains, when distributed, are taxed to shareholders
as ordinary income. Capital losses of the Fund are not distributed
but carried forward by the Fund to offset gains in later years and
thereby lessen the later-year capital gains dividends and amounts
taxed to shareholders.
The Fund's gains or losses on sales of Utah Double-Exempt
Obligations will be long-term or short-term depending upon the
length of time the Fund has held such obligations.
Information as to the tax status of the Fund's dividends and
distributions will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders to
enable them to purchase or carry shares of the Fund may not be
deducted for regular Federal tax purposes. In addition, under rules
used by the Internal Revenue Service for determining when borrowed
funds are deemed used for the purpose of purchasing or carrying
particular assets, the purchase of shares of the Fund may be
considered to have been made with borrowed funds even though the
borrowed funds are not directly traceable to the purchase of
shares. The receipt of exempt-interest dividends from the Fund by
an individual shareholder may result in some portion of any social
security payments or railroad retirement benefits received by the
shareholder or the shareholder's spouse being included in taxable
income.
Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds or
private activity bonds should consult their own tax advisers before
purchasing shares.
While interest from all Utah Double-Exempt Obligations is
tax-exempt for purposes of computing the shareholder's regular tax,
interest from so-called private activity bonds issued after August
7, 1986, constitutes a tax preference for both individuals and
corporations and thus will enter into a computation of the
alternative minimum tax. Whether or not that computation will
result in a tax will depend on the entire content of the taxpayer's
return. The Fund will not invest in the types of Utah Double-Exempt
Obligations which would give rise to interest that would be subject
to alternative minimum taxation if more than 20% of its net assets
would be so invested, and may refrain from investing in that type
of bond completely. The 20% limit is a fundamental policy of the
Fund.
Corporate shareholders must add to or subtract from
alternative minimum taxable income, as calculated before taking
into consideration this adjustment, 75% of the difference between
what is called adjusted current earnings (essentially current
earnings and profits) and alternative minimum taxable income, as
previously calculated. Since tax-exempt bond interest is included
in earnings and profits and therefore in adjusted current earnings,
this adjustment will tend to make it more likely that corporate
shareholders will be subject to the alternative minimum tax.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid for
the shares. If you are required to pay a contingent deferred sales
charge at the time of redemption, the amount of that charge will
reduce the amount of your gain or increase the amount of your loss
as the case may be. Your gain or loss will be long-term if you held
the redeemed shares for over 18 months, mid-term if you held the
redeemed shares for over one year but not more than 18 months and
short-term, if for a year or less. Long term capital gains are
currently taxed at a maximum rate of 20%, mid-term capital gains
are currently taxed at a maximum rate of 28%, and short-term gains
are currently taxed at ordinary income tax rates. However, if
shares held for six months or less are redeemed and you have a
loss, two special rules apply: the loss is reduced by the amount of
exempt-interest dividends, if any, which you received on the
redeemed shares, and any loss over and above the amount of such
exempt-interest dividends is treated as a long-term loss to the
extent you have received capital gains dividends on the redeemed
shares.
Utah Tax Information
Distributions of interest income made by the Fund from Utah
Double-Exempt Obligations will generally be treated for purposes of
the Utah Individual Income Tax Act in the same manner as they are
treated under the Internal Revenue Code for Federal income tax
purposes. (See the prior discussion under "Dividend and Tax
Information.") Individual shareholders of the Fund generally will
not be subject to Utah income tax on distributions received from
the Fund to the extent such distributions are attributable to
interest income on Utah Double-Exempt Obligations. Certain
subtractions relating to retirement income received by shareholders
under the age of 65 and the exemption allowed to individuals over
the age of 65 may be reduced because the receipt of exempt-interest
dividends from the Fund will be added to federal adjusted gross
income for purposes of calculating the income of individuals for
Utah income tax purposes. Other distributions from the Fund,
including capital gains dividends, will generally not be exempt
from Utah income tax.
For corporate investors, distributions of interest income from
Utah Double-Exempt Obligations are not exempt from the Utah
corporate franchise and income tax, although a credit against the
corporate franchise and income tax is available with respect to a
portion of the interest income from obligations issued by the State
of Utah, its agencies and instrumentalities and its political
subdivisions. Prior to January 1, 1993 the credit is generally
equal to 2.5% of the gross interest income from such Utah
obligations. From and after January 1, 1993, the credit is
generally equal to 1% of the gross interest income from such Utah
obligations. The Utah corporate franchise or income tax applies to
every state or national bank or corporation, with certain
exceptions specifically enumerated by Utah law.
Shares of the Fund will not be subject to the Utah property
tax.
You should consult your tax advisor concerning the specific
state and local tax consequences from your investment in the Fund.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Fund and certain tax-free municipal bond funds and equity
funds (the "Bond or Equity Funds") and certain money market funds
(the "Money-Market Funds"), all of which are sponsored by Aquila
Management Corporation and Aquila Distributors, Inc., and have the
same Administrator and Distributor as the Fund. All exchanges are
subject to certain conditions described below. As of the date of
the Prospectus, the Aquila-sponsored Bond and Equity Funds are this
Fund, Aquila Rocky Mountain Equity Fund, Aquila Cascadia Equity
Fund, Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free
Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund
of Kentucky, and Narragansett Insured Tax-Free Income Fund; the
Aquila Money-Market Funds are Capital Cash Management Trust,
Pacific Capital Cash Assets Trust (Original Shares), Pacific
Capital Tax-Free Cash Assets Trust (Original Shares), Pacific
Capital U.S. Treasuries Cash Assets Trust (Original Shares) and
Churchill Cash Reserves Trust.
Class Y Shares of the Fund may be exchanged only for Class
Y Shares of the Bond or Equity Funds or for shares of a
Money-Market Fund. Similar exchangability is available to Class I
Shares to the extent that other Aquila-sponsored funds are made
available to its customers by a financial intermediary. All
exchanges of Class I Shares must be made through your financial
intermediary.
Under the Class Y exchange privilege, once Class Y Shares of
any Bond or Equity Fund have been purchased, those shares (and any
shares acquired as a result of reinvestment of dividends and/or
distributions) may be exchanged any number of times between
Money-Market Funds and Class Y Shares of the Bond or Equity Funds
without the payment of any sales charge.
The "Class Y Eligible Shares" of any Bond or Equity Fund are
those shares which were (a) acquired by direct purchase including
by exchange by an institutional investor from a Money-Market Fund,
or which were received in exchange for Class Y Shares of another
Bond or Equity Fund; or (b) acquired as a result of reinvestment of
dividends and/or distributions on otherwise Class Y Eligible
Shares. Shares of a Money-Market Fund not acquired in exchange for
Class Y Eligible Shares of a Bond or Equity Fund can be exchanged
for Class Y Shares of a Bond or Equity Fund only by persons
eligible to make an initial purchase of Class Y Shares.
This Fund, as well as the Money-Market Funds and other Bond or
Equity Funds, reserves the right to reject any exchange into its
shares, if shares of the fund into which exchange is desired are
not available for sale in your state of residence. The Fund may
also modify or terminate this exchange privilege at any time. In
the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-446-8824 toll free
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
Exchanges of Class Y Shares will be effected at the
relative net asset values of the Class Y Shares being exchanged
next determined after receipt by the Agent of your exchange
request. Prices for exchanges are determined in the same manner as
for purchases of the Fund's shares. Exchanges of Class I Shares
will be effected at the relative net asset values of the Class I
Shares being exchanged next determined after receipt by the
financial intermediary of your exchange request. (See "How to
Invest in the Fund.")
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see "Tax Effects of
Redemptions" and the Additional Statement); no representation is
made as to the deductibility of any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable,
except to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free money-market
fund) are exempt from regular Federal income tax, and to the extent
that a portion or all of the dividends paid by Pacific Capital U.S.
Treasuries Cash Assets Trust (which invests in U.S. Treasury
obligations) are exempt from state income taxes. Dividends paid by
Aquila Rocky Mountain Equity Fund and Aquila Cascadia Equity Fund
are taxable. If your state of residence is not the same as that of
the issuers of obligations in which a tax-free municipal bond fund
or a tax-free money-market fund invests, the dividends from that
fund may be subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a bond fund or a tax-free money-market fund under
the exchange privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's performance
including current yield, taxable equivalent yield, various
expressions of total return, current distribution rate and taxable
equivalent distribution rate.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase, at
the maximum public offering price (offering price includes any
applicable sales charge) for 1- and 5-year periods and for a period
since the inception of the Fund, to the extent applicable, through
the end of such periods, assuming reinvestment (without sales
charge) of all distributions. The Fund may also furnish total
return quotations for other periods or based on investments at
various applicable sales charge levels or at net asset value. For
such purposes total return equals the total of all income and
capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the
original investment, expressed as a percentage of the purchase
price. (See the Additional Statement.)
Current yield reflects the income per share earned by each
of the Fund's portfolio investments; it is calculated by (i)
dividing the Fund's net investment income per share during a recent
30-day period by (ii) the maximum public offering price on the last
day of that period and by (iii) annualizing the result. Taxable
equivalent yield shows the yield from a taxable investment that
would be required to produce an after-tax yield equivalent to that
of the Fund, which invests in tax-exempt obligations. It is
computed by dividing the tax-exempt portion of the Fund's yield
(calculated as indicated) by one minus a stated income tax rate and
by adding the product to the taxable portion (if any) of the Fund's
yield. (See the Additional Statement.)
Current yield and taxable equivalent yield, which are
calculated according to a formula prescribed by the Securities and
Exchange Commission (see the Additional Statement), are not
indicative of the dividends or distributions which were or will be
paid to the Fund's shareholders. Dividends or distributions paid to
shareholders are reflected in the current distribution rate or
taxable equivalent distribution rate which may be quoted to
shareholders. The current distribution rate is computed by (i)
dividing the total amount of dividends per share paid by the Fund
during a recent 30-day period by (ii) the current maximum offering
price and by (iii) annualizing the result. A taxable equivalent
distribution rate shows the taxable distribution rate that would be
required to produce an after-tax distribution rate equivalent to
the Fund's distribution rate (calculated as indicated above). The
current distribution rate differs from the current yield
computation because it could include distributions to shareholders
from sources, if any, other than dividends and interest, such as
short-term capital gains or return of capital. If distribution
rates are quoted in advertising, they will be accompanied by
calculations of current yield in accordance with the formula of the
Securities and Exchange Commission.
In each case performance figures are based upon past
performance, reflect as appropriate all recurring charges against
the Fund's income net of fee waivers and reimbursement of expenses,
if any, and will assume the payment of the maximum sales charge, if
any, on the purchase of shares, but not on reinvestment of income
dividends. The investment results of the Fund, like all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's yield, tax equivalent
yield, distribution rate, taxable equivalent distribution rate or
total return may be in any future period. The annual report of the
Fund contains additional performance information that will be made
available upon request and without charge.
Description of the Fund and Its Shares
The Fund is an open-end, non-diversified management investment
company organized in December, 1990 as a Massachusetts business
trust. (See the sixth paragraph under "Investment of the Fund's
Assets" for further information about the Fund's status as
"non-diversified.") The Fund began operations in July, 1992.
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares and to divide or
combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in
the Fund. Each share represents an equal proportionate interest in
the Fund with each other share of its class; shares of the
respective classes represent proportionate interests in the Fund in
accordance with their respective net asset values. Income, direct
liabilities and direct operating expenses of each series will be
allocated directly to each series, and general liabilities and
expenses, if any, of the Fund will be allocated among the series in
a manner acceptable to the Board of Trustees. Upon liquidation of
a series, shareholders of the series are entitled to share pro-rata
in the net assets of that series available for distribution to
shareholders and upon liquidation of the Fund, the respective
series are entitled to share proportionately in the assets
available to the Fund after allocation to the various series.
Shareholders of each series or class are entitled to share pro-rata
in the net assets of the Fund available for distribution to
shareholders, in accordance with the respective net asset values of
the shares of that series or class at that time. The Fund currently
has only one series of shares. Upon liquidation of the Fund,
shareholders are entitled to share pro-rata in the net assets of
the Fund available for distribution to shareholders, in accordance
with the respective net asset values of the shares of each of the
Fund's classes at that time. All shares are presently divided into
four classes; however, if they deem it advisable and in the best
interests of shareholders, the Board of Trustees of the Fund may
create additional classes of shares (subject to rules and
regulations of the Securities and Exchange Commission or by
exemptive order) or the Board of Trustees may, at its own
discretion, create additional series of shares, each of which may
have separate assets and liabilities (in which case any such series
will have a designation including the word "Series"). (See the
Additional Statement for further information about possible
additional series.) Shares are fully paid and non-assessable,
except as set forth under the caption "General Information" in the
Additional Statement; the holders of shares have no pre-emptive or
conversion rights.
The other two classes of shares of the Fund are Front-Payment
Class Shares ("Class A Shares") and Level-Payment Class Shares
("Class C Shares"), which are fully described in a separate
prospectus that can be obtained by calling the Fund at
800-882-4937.
The primary distinction among the Fund's classes of shares
lies in their different sales charge structures and ongoing
expenses, which are likely to be reflected in differing yields and
other measures of investment performance. All classes represent
interests in the same portfolio of Utah Double-Exempt Obligations
and have the same rights, except that each class bears the separate
expenses, if any, of its Distribution Plan and has exclusive voting
rights with respect to its Plan. There are no distribution fees
with respect to Class Y Shares.
The Fund's Distribution Plan has four parts. In addition to
the provisions relating to Class I Shares and the defensive
provisions described above, Parts I and II of the Plan authorize
payments, to certain "Qualified Recipients," out of the Fund assets
allocable to the Class A Shares and Class C Shares, respectively.
(See the Additional Statement.) The Fund has also adopted a
Shareholder Services Plan under which the Fund is authorized to
make certain payments out of the Fund assets allocable to the Class
C Shares. (See the Additional Statement.)
See the notes to the Statement of Assets and Liabilities in
the annual report for information as to the amortization of the
Fund's organizational and start-up expenses. A copy of the
financial statements contained in the annual report is incorporated
by reference into the Additional Statement.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) per share held (and proportionate
fractional votes for fractional dollar amounts). Shareholders will
vote on the election of Trustees and on other matters submitted to
the vote of shareholders. Shares vote by classes on any matter
specifically affecting one or more classes, such as an amendment of
an applicable part of the Distribution Plan. No amendment may be
made to the Declaration of Trust without the affirmative vote of
the holders of a majority of the outstanding shares of the Fund,
except that the Fund's Board of Trustees may change the name of the
Fund. The Fund may be terminated (i) upon the sale of its assets to
another issuer, or (ii) upon liquidation and distribution of the
assets of the Fund, in either case if such action is approved by
the vote of the holders of a majority of the outstanding shares of
the Fund. If not so terminated, the Fund will continue
indefinitely.
<PAGE>
APPLICATION FOR TAX-FREE FUND FOR UTAH
FOR CLASS Y SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
After November 8, 1997: PFPC Inc., ATTN: Aquilasm Group of Funds
400 Bellevue Parkway, Wilmington, DE 19809
Before November 8, 1997: ADM, ATTN: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198 Tel.# 1-800-446-8824
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.______________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for __________________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** ___________________________________________
Name of State Minor's Social Security Number
4. _____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or Partnership. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)_______________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
Employer's Address:_____________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you are a
non-U.S. Citizen or resident and not subject to back-up withholding (See
certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
______________________________ ____________________________________
Dealer Name Branch Number
______________________________ ____________________________________
Street Address Rep. Number/Name
______________________________ (_________)_________________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
(Make check payment to TAX-FREE FUND FOR UTAH)
__ Initial Investment $______________ (Minimum $1,000 for shareholders
with Class Y Shares accounts before October 31, 1997)
(After October 31, 1997:
Minimum $100,000 for fiduciaries and $250,000 for all other
eligible purchasers)
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be: ___ Reinvested ___ Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like you to
deposit the dividend. (A Financial Institution is a commercial bank,
savings bank or credit union.)
___ Mail check to my/our address listed in Step 1.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Tax-Free Fund For Utah Account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or
on the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply calling
the Fund toll-free at 1-800-446-8824. To establish this program, please
complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Available only to shareholders who had Class Y Shares accounts before
October 31, 1997)
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to
1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, the Fund's Shareholder
Servicing Agent (the "Agent") is authorized to redeem sufficient shares
from this account at the then current Net Asset Value, in accordance
with the terms below:
Dollar Amount of each withdrawal $ ______________beginning______________
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is payable
to a Financial Institution for your account, indicate Financial
Institution name, address and your account number.
________________________________________ ___________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ____________________________________
Street Financial Institution Street Address
_______________________________ ____________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your name
within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorney's fees, resulting
from acceptance of, or acting or failure to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution account listed.
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Fund
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ _____________________________________
Account Registration Financial Institution Account Number
_______________________________ _____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ _____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITOR'S AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to my/our
account any drafts or debits drawn on my/our account initiated by the
Agent, and to pay such sums in accordance therewith, provided my/our account
has sufficient funds to cover such drafts or debits. I/We further agree that
your treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number __________________________________
Name and Address where my/our account is maintained
Name of Financial Institution__________________________________________
Street Address_________________________________________________________
City_______________________________State _________________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant
to the above authorization shall be subject to the provisions of the
Operating Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit
in the normal course of business initiated by the Agent (except any
loss due to your payment of any amount drawn against insufficient or
uncollected funds), provided that you promptly notify us in writing
of any claim against you with respect to the same, and further
provided that you will not settle or pay or agree to settle or pay
any such claim without the written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any
such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of
legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Fund and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Fund account to make up any
deficiency resulting from any decline in the net asset value of shares
so purchased and any dividends paid on those shares. I/We authorize the
Fund and its agents to correct any transfer error by a debit or credit
to my/our Financial Institution account and/or Fund account and to
charge the account for any related charges. I/We acknowledge that
shares purchased either through Automatic Investment or Telephone
Investment are subject to applicable sales charges.
- - The Fund, the Agent and the Distributor and their Trustees,
directors, employees and agents will not be liable for acting upon
instructions believed to be genuine, and will not be responsible for
any losses resulting from unauthorized telephone transactions if the
Agent follows reasonable procedures designed to verify the identity of
the caller. The Agent will request some or all of the following
information: account name and number; name(s) and social security
number registered to the account and personal identification; the
Agent may also record calls. Shareholders should verify the accuracy
of confirmation statements immediately upon receipt. Under penalties
of perjury, the undersigned whose Social Security (Tax I.D.) Number is
shown above certifies (i) that Number is my correct taxpayer
identification number and (ii) currently I am not under IRS
notification that I am subject to backup withholding (line out (ii) if
under notification). If no such Number is shown, the undersigned
further certifies, under penalties of perjury, that either (a) no such
Number has been issued, and a Number has been or will soon be applied
for; if a Number is not provided to you within sixty days, the
undersigned understands that all payments (including liquidations) are
subject to 31% withholding under federal tax law, until a Number is
provided and the undersigned may be subject to a $50 I.R.S. penalty; or
(b) that the undersigned is not a citizen or resident of the U.S.; and
either does not expect to be in the U.S. for 183 days during each
calendar year and does not conduct a business in the U.S. which would
receive any gain from the Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST,
ALL TRUSTEES MUST SIGN.*
__________________________ __________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ __________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after the
Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access features form which may be obtained from Aquila
Distributors at 1-800-882-4937 and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Fund's Agent.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees
to the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Agent will credit all such shares to
the Planholder on the records of the Fund. Any share certificates now
held by the Planholder may be surrendered unendorsed to the Agent with
the application so that the shares represented by the certificate may
be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the Fund
at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of
business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with
the Fund's usual redemption procedures and will mail a check for the
proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Fund. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the
Fund, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and until
proper instructions are received from the Planholder, his executor or
guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Fund, the Planholder will be deemed to have appointed any
successor transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while simultaneously
making regular purchases. While an occasional lump sum investment may
be made, such investment should normally be an amount equivalent to
three times the annual withdrawal or $5,000, whichever is less.
<PAGE>
INVESTMENT SUB-ADVISER
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
INVESTMENT ADVISER, ADMINISTRATOR and FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Philip E. Albrecht
Gary C. Cornia
William L. Ensign
D. George Harris
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Vice President
Kimball L. Young, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
After November 8, 1997:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Before November 8, 1997:
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................2
Table of Expenses................................4
Financial Highlights.............................5
Introduction.....................................6
Investment Of The Fund's Assets..................6
Investment Restrictions.........................11
Net Asset Value Per Share.......................11
How To Invest In The Fund.......................12
How To Redeem Your Investment...................14
Automatic Withdrawal Plan.......................16
Management Arrangements.........................16
Dividend And Tax Information....................20
Exchange Privilege..............................23
General Information.............................25
Application
AQUILA
TAX-FREE FUND FOR
[LOGO]
UTAH
PROSPECTUS
A tax-free
income investment
One Of The
Aquilasm Group Of Funds
<PAGE>
Aquila
TAX-FREE FUND FOR UTAH
380 Madison Avenue
Suite 2300
New York, NY 10017
800-UTAH-YES
(800-882-4937)
212-697-6666
Statement
of Additional Information
October 31, 1997
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. There are two Prospectuses for the
Fund dated October 31, 1997: one Prospectus describes Front-
Payment Class Shares ("Class A Shares") and Level-Payment Class
Shares ("Class C Shares") of the Fund and the other describes
Institutional Class ("Class Y Shares") and Financial Intermediary
Class Shares ("Class I Shares") of the Fund. References in the
Additional Statement to "the Prospectus" refer to either of these
Prospectuses. The Additional Statement should be read in
conjunction with the Prospectus for the class of shares in which
you are considering investing. Either or both Prospectuses may be
obtained from the Fund's Shareholder Servicing Agent, (after
November 8, 1997) PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19809 or (before November 8, 1997) Administrative Data Management
Corp., 581 Main Street, Woodbridge, NJ 07095-1198, or by calling
the following number:
800-446-8824 toll free
or from Aquila Distributors, Inc., the Fund's Distributor, by
writing to 380 Madison Avenue, Suite 2300, New York, New York
10017; or by calling: 800-882-4937 toll free or 212-697-6666.
The Annual Report of the Fund for the fiscal year ended
June 30, 1997 will be delivered with the Additional Statement.
TABLE OF CONTENTS
Investment of the Fund's Assets. . . . . . . . . . . . . . . . .2
Municipal Bonds. . . . . . . . . . . . . . . . . . . . . . . . .3
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Investment Restrictions. . . . . . . . . . . . . . . . . . . . .9
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . 10
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . 16
Limitation of Redemptions in Kind. . . . . . . . . . . . . . . 18
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . 18
Additional Information as to Management Arrangements . . . . . 23
Computation of Net Asset Value . . . . . . . . . . . . . . . . 27
Automatic Withdrawal Plan. . . . . . . . . . . . . . . . . . . 28
Additional Tax Information . . . . . . . . . . . . . . . . . . 28
Conversion of Class Shares . . . . . . . . . . . . . . . . . . 29
General Information. . . . . . . . . . . . . . . . . . . . . . 29
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
INVESTMENT OF THE FUND'S ASSETS
The investment objective and policies of the Fund are
described in the Prospectus, which refers to the matters described
below. See the Prospectus for the definition of "Utah Double-Exempt
Obligations."
Ratings
The ratings assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") represent
their respective opinions of the quality of the municipal bonds and
notes which they undertake to rate. It should be emphasized,
however, that ratings are general and not absolute standards of
quality. Consequently, obligations with the same maturity, stated
interest rate and rating may have different yields, while
obligations of the same maturity and stated interest rate with
different ratings may have the same yield. See Appendix A to this
Additional Statement for further information about the ratings of
Moody's and S&P as to the various rated Utah Double-Exempt
Obligations which the Fund may purchase.
The table below gives information as to the percentage of
the Fund's net assets invested, as of June 30, 1997, in Utah Double
Tax-Exempt Obligations in the various rating categories:
Highest rating (1). . . . . . . . . . . . . . . . . . 66.6%
Second highest rating (2) . . . . . . . . . . . . . . 17.4%
Third highest rating (3). . . . . . . . . . . . . . . 16.6%
Fourth highest rating (4) . . . . . . . . . . . . . . . 1.0%
Unrated Obligations. . . . . . . . . . . . . . . . . . 1.4%
100.0%
(1) Aaa of Moody's or AAA of S&P.
(2) Aa of Moody's or AA of S&P.
(3) A of Moody's or A of S&P.
(4) Baa of Moody's or BBB of S&P.
When-Issued and Delayed Delivery Obligations
The Fund may purchase Utah Double-Exempt Obligations on a
when-issued or delayed delivery basis. The purchase price and the
interest rate payable on the Utah Double-Exempt Obligations are
fixed on the transaction date. At the time the Fund makes the
commitment to purchase Utah Double-Exempt Obligations on a
when-issued or delayed delivery basis, it will record the
transaction and thereafter reflect the value each day of such Utah
Double-Exempt Obligations in determining its net asset value. The
Fund will make commitments for such when-issued transactions only
when it has the intention of actually acquiring the Utah
Obligations. The Fund will maintain with the Custodian a separate
account with portfolio Utah Obligations in an amount at least equal
to such commitments, which will be marked to market every business
day. On delivery dates for such transactions, the Fund will meet
its commitments by selling the Utah Double-Exempt Obligations held
in the separate account and/or from cash flow.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage
computed by taking the lesser of purchases or sales of portfolio
securities for a year and dividing it by the monthly average value
of such securities during the year, excluding certain short-term
securities. Since the turnover rate of the Fund will be affected by
a number of factors, the Fund is unable to predict what rate the
Fund will have in any particular period or periods, although such
rate is not expected to exceed 100%. However, the rate could be
substantially higher or lower in any particular period.
MUNICIPAL BONDS
The two principal classifications of municipal bonds are
"general obligation" bonds and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit
and unlimited taxing power for the payment of principal and
interest. Revenue or special tax bonds are payable only from the
revenues derived from a particular facility or class of facilities
or projects or, in a few cases, from the proceeds of a special
excise or other tax, but are not supported by the issuer's power to
levy unlimited general taxes. There are, of course, variations in
the security of municipal bonds, both within a particular
classification and between classifications, depending on numerous
factors. The yields of municipal bonds depend on, among other
things, general financial conditions, general conditions of the
municipal bond market, size of a particular offering, the maturity
of the obligation and rating of the issue.
Since the Fund may invest in industrial development bonds or
private activity bonds, the Fund may not be an appropriate
investment for entities which are "substantial users" of facilities
financed by those bonds or for investors who are "related persons"
of such users. Generally, an individual will not be a "related
person" under the Internal Revenue Code unless such investor or his
or her immediate family (spouse, brothers, sisters and lineal
descendants) own directly or indirectly in the aggregate more than
50 percent of the equity of a corporation or is a partner of a
partnership which is a "substantial user" of a facility financed
from the proceeds of those bonds. A "substantial user" of such
facilities is defined generally as a "non-exempt person who
regularly uses a part of [a] facility" financed from the proceeds
of industrial development or private activity bonds.
As indicated in the Prospectus, there are certain Utah
Double-Exempt Obligations the interest on which is subject to the
Federal alternative minimum tax on individuals. While the Fund may
purchase these obligations, it may, on the other hand, refrain from
purchasing particular Utah Double-Exempt Obligations due to this
tax consequence. Also, as indicated in the Prospectus, the Fund
will not purchase obligations of issuers the interest on which is
subject to regular Federal income tax. The foregoing may reduce the
number of issuers of obligations which are available to the Fund.
As stated in the Prospectus, floating and variable rate
demand notes and participation interests (including municipal
lease/purchase obligations) are considered illiquid unless
determined by the Board of Trustees to be readily marketable. In
determining marketability of any such securities, the Board of
Trustees will consider the following factors, not all of which may
be applicable to any particular issue: the quality, maturity and
coupon rate of the issue, ratings received from the nationally
recognized statistical rating organizations and any changes or
prospective changes in such ratings, the likelihood that the issuer
will continue to appropriate the required payments for the issue,
recent purchases and sales of the same or similar issues, the
general market for municipal securities of the same or similar
quality, the Sub-Adviser's opinion as to marketability of the issue
and other factors that may be applicable to any particular
issue.
PERFORMANCE
As noted in the Prospectus, the Fund may from time to time
quote various performance figures to illustrate its past
performance.
Performance quotations by investment companies are subject
to rules of the Securities and Exchange Commission ("SEC"). These
rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation
furnished by the Fund be accompanied by certain standardized
performance information computed as required by the SEC. Current
yield and average annual compounded total return quotations used by
the Fund are based on these standardized methods and are computed
separately for each of the Fund's three classes of shares. Prior to
May 21, 1996, the Fund had outstanding only one class of shares
which are currently designated "Class A Shares." During most of the
historical periods listed below, there were no Class C Shares or
Class Y Shares outstanding and the information below relates solely
to Class A Shares unless otherwise indicated. Class I Shares were
first offered on November 8, 1997 and none were outstanding during
the periods indicated. Each of these and other methods that may be
used by the Fund are described in the following material.
Total Return
Average annual total return is determined by finding the
average annual compounded rates of return over a 1-year period and
a period since the inception of the operations of the Fund (on July
24, 1992) that would equate an initial hypothetical $1,000
investment in shares of each of the Fund's three classes to the
value such an investment would have if it were completely redeemed
at the end of each such period.
In the case of Class A Shares, the calculation assumes the
maximum sales charge is deducted from the hypothetical initial
$1,000 purchase. In the case of Class C Shares, the calculation
assumes the applicable Contingent Deferred Sales Charge ("CDSC")
imposed on a redemption of Class C Shares held for the period is
deducted. In the case of Class Y Shares, the calculation assumes
that no sales charge is deducted and no CDSC is imposed. For all
three classes, it is assumed that on each reinvestment date during
each such period any capital gains are reinvested at net asset
value, and all income dividends are reinvested at net asset value,
without sales charge (because the Fund does not impose any sales
charge on reinvestment of dividends for any class). The computation
further assumes that the entire hypothetical account was completely
redeemed at the end of each such period.
Investors should note that the maximum sales charge (4%)
reflected in the following quotations for Class A Shares is a one
time charge, paid at the time of initial investment. The greatest
impact of this charge is during the early stages of an investment
in the Fund. Actual performance will be affected less by this one
time charge the longer an investment remains in the Fund.
Average Annual Compounded Rates of Return:
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
One Year 3.37% 5.76% 8.80%
Since
inception on
July 22, 1992 5.66% 7.02%(1) 8.80%(1)
<FN>
(1) Period from May 21, 1996 (inception of class) through June 30, 1997.
</FN>
</TABLE>
These figures were calculated according to the following SEC
formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-year period
or the period since inception, at the end of each
such period.
As discussed in the Prospectus, the Fund may quote total rates
of return in addition to its average annual total return for each
of its three classes of shares. Such quotations are computed in the
same manner as the Fund's average annual compounded rate, except
that such quotations will be based on the Fund's actual return for
a specified period as opposed to its average return over the
periods described above.
Total Return
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
One Year 3.37% 5.76% 8.80%
Since
inception on
July 22, 1992 31.26% 7.81%(1) 9.78%(1)
<FN>
(1) Period from May 21, 1996 (inception of class) through June 30, 1997.
</FN>
</TABLE>
In general, actual total rate of return will be lower than
average annual rate of return because the average annual rate of
return reflects the effect of compounding. See discussion of the
impact of the sales charge on quotations of rates of return, above.
Yield
Current yield reflects the income per share earned by the
Fund's portfolio investments. Current yield is determined by
dividing the net investment income per share earned for each of the
Fund's three classes during a 30-day base period by the maximum
offering price per share on the last day of the period and
annualizing the result. Expenses accrued for the period include any
fees charged to all shareholders of each class during the base
period net of fee waivers and reimbursements of expenses, if
any.
The Fund may also quote a taxable equivalent yield for each of
its three classes of shares which shows the taxable yield that
would be required to produce an after-tax yield equivalent to that
of a fund which invests in tax-exempt obligations. Such yield is
computed by dividing that portion of the yield of the Fund
(computed as indicated above) which is tax-exempt by one minus the
highest applicable combined federal and Utah income tax rate (and
adding the result to that portion of the yield of the Fund that is
not tax-exempt, if any).
The Utah and the combined Utah and federal income tax rates
upon which the Fund's tax equivalent yield quotations are based are
7.0% and 43.28%, respectively. The latter rate reflects
currently-enacted Federal income tax law. From time to time, as any
changes to such rates become effective, tax equivalent yield
quotations advertised by the Fund will be updated to reflect such
changes. Any tax rate increases will tend to make a tax-free
investment, such as the Fund, relatively more attractive than
taxable investments. Therefore, the details of specific tax
increases may be used in Fund sales material.
Yield for the 30-day period ended June 30, 1997 (the date of the
Fund's most recent audited financial statements:
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class Y Shares
<S> <C> <C> <C>
Yield 4.91% 4.10% 5.11%
Taxable
Equivalent
Yield 8.64% 7.23% 9.01%
</TABLE>
These figures were obtained using the Securities and Exchange
Commission formula:
6
Yield = 2 [(a-b + 1) -1]
----
cd
Where:
a = interest earned during the period
b = expenses accrued for the period (net of waivers and
reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
Current Distribution Rate
Current yield and tax equivalent yield, which are calculated
according to a formula prescribed by the SEC, are not indicative of
the amounts which were or will be paid to the Fund's shareholders.
Amounts paid to shareholders are reflected in the quoted current
distribution rate or taxable equivalent distribution rate. The
current distribution rate is computed by (i) dividing the total
amount of dividends per share paid by the Fund during a recent
30-day period by (ii) the current maximum offering price and by
(iii) annualizing the result. A taxable equivalent distribution
rate shows the taxable distribution rate that would be required to
produce an after-tax distribution rate equivalent to the Fund's
current distribution rate (calculated as indicated above). The
current distribution rate can differ from the current yield
computation because it could include distributions to shareholders
from additional sources (i.e., sources other than dividends and
interest), such as short-term capital gains.
Other Performance Quotations
With respect to those categories of investors who are
permitted to purchase Class A Shares of the Fund at net asset
value, the Fund may quote a "Current Distribution for Net Asset
Value Investments." This rate is computed by (i) dividing the total
amount of dividends per share paid by the Fund during a recent
30-day period by (ii) the current net asset value of the Fund and
by (iii) annualizing the result. Figures for yield, total return
and other measures of performance for Net Asset Value Investments
may also be quoted. These will be derived as described above with
the substitution of net asset value for public offering price.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used. If distribution rates are published, they will be accompanied
by calculations of current yield in accordance with the formula of
the Securities and Exchange Commission.
The Fund may include in advertisements and sales literature,
information, examples and statistics that illustrate the effect of
taxable versus tax-free compounding income at a fixed rate of
return to demonstrate the growth of an investment over a stated
period of time resulting from the payment of dividends and capital
gains distributions in additional shares. The examples used will be
for illustrative purposes only and are not representations by the
Fund of past or future yield or return.
From time to time, in reports and promotional literature, the
Fund may compare its performance to, or cite the historical
performance of, U.S. Treasury bills, notes and bonds, or indices of
broad groups of unmanaged securities considered to be
representative of, or similar to, the Fund's portfolio holdings,
such as:
Lipper Analytical Services, Inc. ("Lipper") is a
widely-recognized independent service that monitors and ranks the
performance of regulated investment companies. The Lipper
performance analysis includes the reinvestment of capital gain
distributions and income dividends but does not take sales charges
into consideration. The method of calculating total return data on
indices utilizes actual dividends on ex-dividend dates accumulated
for the quarter and reinvested at quarter end.
Morningstar Mutual Funds ("Morningstar"), a semi-monthly
publication of Morningstar, Inc. Morningstar proprietary ratings
reflect historical risk-adjusted performance and are subject to
change every month. Funds with at least three years of performance
history are assigned ratings from one star (lowest) to five stars
(highest). Morningstar ratings are calculated from the funds'
three-, five-, and ten-year average annual returns (when available)
and a risk factor that reflects fund performance relative to
three-month Treasury bill monthly returns. Fund's returns are
adjusted for fees and sales loads. Ten percent of the funds in an
investment category receive five stars, 22.5% receive four stars,
35% receive three stars, 22.5% receive two stars, and the bottom
10% receive one star.
Salomon Brothers Inc., "Market Performance," a monthly
publication which tracks principal return, total return and yield
on the Salomon Brothers Broad Investment-Grade Bond Index and the
components of the Index.
Merrill Lynch, Pierce, Fenner & Smith, Inc., "Taxable Bond
Indices," a monthly corporate government index publication which
lists principal, coupon and total return on over 100 different
taxable bond indices which Merrill Lynch tracks. They also list the
par weighted characteristics of each Index.
Lehman Brothers, Inc., "The Bond Market Report," a monthly
publication which tracks principal, coupon and total return on the
Lehman Govt./Corp. Index and Lehman Aggregate Bond Index, as well
as all the components of these Indices.
The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of inflation. The Index
shows changes in the cost of selected consumer goods and does not
represent a return on an investment vehicle.
From time to time, in reports and promotional literature,
performance rankings and ratings reported periodically in national
financial publications such as MONEY, FORBES, BUSINESS WEEK,
BARRON'S, FINANCIAL TIMES and FORTUNE may also be used. In
addition, quotations from articles and performance ratings and
ratings appearing in daily newspaper publications such as THE WALL
STREET JOURNAL, THE NEW YORK TIMES and NEW YORK DAILY NEWS may be
cited.
INVESTMENT RESTRICTIONS
The Fund has a number of policies concerning what it can and
cannot do. Those that are called fundamental policies cannot be
changed unless the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding shares vote to change them. Under
that Act, the vote of the holders of a "majority" of the Fund's
outstanding shares means the vote of the holders of the lesser of
(a) 67% or more of the Fund's shares present at a meeting or
represented by proxy if the holders of more than 50% of its shares
are so present or represented; or (b) more than 50% of the Fund's
outstanding shares. Those fundamental policies not set forth in the
Prospectus are set forth below:
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than Utah
Double-Exempt Obligations (discussed under "Investment of the
Fund's Assets" in the Prospectus); therefore the Fund 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 Fund cannot buy real estate or any non-liquid interests in
real estate investment trusts; however, it can buy any securities
which it can otherwise buy even though the issuer invests in real
estate or has interests in real estate.
2. The Fund does not buy for control.
The Fund cannot invest for the purpose of exercising control
or management of other companies.
3. The Fund does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin.
4. The Fund is not an underwriter.
The Fund cannot engage in the underwriting of securities, that
is, the selling of securities for others. Also, it cannot invest in
restricted securities. Restricted securities are securities which
cannot freely be sold for legal reasons.
DISTRIBUTION PLAN
The Fund's Distribution Plan has four parts, relating
respectively to distribution payments with respect to Class A
Shares (Part I), to distribution payments relating to Class C
Shares (Part II), to distribution payments relating to Class I
Shares (Part III) and to certain defensive provisions (Part
IV).
Provisions Relating to Class A Shares (Part I)
At the date of the Additional Statement, most of the
outstanding shares of the Fund would be considered Qualified
Holdings of various broker-dealers unaffiliated with the Manager,
Sub-Adviser or the Distributor. The Distributor will consider
shares which are not Qualified Holdings of such unrelated
broker-dealers to be Qualified Holdings of the Distributor and will
authorize Permitted Payments to the Distributor with respect to
such shares whenever Permitted Payments are being made under the
Plan.
Part I of the Plan applies only to the Front-Payment Class
Shares ("Class A Shares") of the Fund (regardless of whether such
class is so designated or is redesignated by some other name).
As used in Part I of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to any principal
underwriter of the Fund, with which the Fund or the Distributor has
entered into written agreements in connection with Part I ("Class
A Plan Agreements") and which have rendered assistance (whether
direct, administrative, or both) in the distribution and/or
retention of the Fund's Front-Payment Class Shares or servicing of
shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all
Front-Payment Class Shares beneficially owned by such Qualified
Recipient, or beneficially owned by its brokerage customers, other
customers, other contacts, investment advisory clients, or other
clients, if the Qualified Recipient was, in the sole judgment of
the Distributor, instrumental in the purchase and/or retention of
such shares and/or in providing administrative assistance or other
services in relation thereto.
Subject to the direction and control of the Board of Trustees
of the Fund, the Fund may make payments ("Class A Permitted
Payments") to Qualified Recipients, which Class A Permitted
Payments may be made directly, or through the Distributor or
shareholder servicing agent as disbursing agent, which may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under the Plan are
not accruable or for any fiscal year which is not a full fiscal
year), 0.20 of 1% of the average annual net assets of the Fund
represented by the Front-Payment Class Shares. Such payments shall
be made only out of the Fund's assets allocable to the
Front-Payment Class Shares.
The Distributor shall have sole authority (i) as to the
selection of any Qualified Recipient or Recipients; (ii) not to
select any Qualified Recipient; and (iii) the amount of Class A
Permitted Payments, if any, to each Qualified Recipient provided
that the total Class A Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Distributor is authorized, but not directed, to take into account,
in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Front-Payment Class
Shares, including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations and
addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting
in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection
with customer orders to purchase or redeem shares; verifying and
guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder designated
accounts; furnishing (either alone or together with other reports
sent to a shareholder by such person) monthly and year-end
statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the
Fund to its shareholders; receiving, tabulating and transmitting to
the Fund proxies executed by shareholders with respect to meetings
of shareholders of the Fund; and providing such other related
services as the Distributor or a shareholder may request from time
to time; and (c) the possibility that the Qualified Holdings of the
Qualified Recipient would be redeemed in the absence of its
selection or continuance as a Qualified Recipient. Notwithstanding
the foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years.
While Part I is in effect, the Fund's Distributor shall
report at least quarterly to the Fund's Trustees in writing for
their review on the following matters: (i) all Class A Permitted
Payments made under Section 9 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which the
amounts were expended; and (ii) all fees of the Fund to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the Fund,
the Manager, Sub-Adviser, or the Distributor, such person shall
agree to furnish to the Distributor for transmission to the Board
of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part I originally went into effect when it was approved (i) by
a vote of the Trustees, including the Independent Trustees, with
votes cast in person at a meeting called for the purpose of voting
on Part I of the Plan; and (ii) by a vote of holders of at least a
"majority" (as so defined) of the outstanding voting securities of
the Front-Payment Class Shares class (or of any predecessor class
or category of shares, whether or not designated as a class) and a
vote of holders of at least a "majority" (as so defined) of the
outstanding voting securities of the Level-Payment Class Shares
and/or of any other class whose shares are convertible into
Front-Payment Class Shares. Part I has continued, and will, unless
terminated as hereinafter provided, continue in effect, until the
December 31 next succeeding such effectiveness, and from year to
year thereafter only so long as such continuance is specifically
approved at least annually by the Fund's Trustees and its
Independent Trustees with votes cast in person at a meeting called
for the purpose of voting on such continuance. Part I may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the outstanding voting securities of the Fund
to which Part I applies. Part I may not be amended to increase
materially the amount of payments to be made without shareholder
approval of the class or classes of shares affected by Part I as
set forth in (ii) above, and all amendments must be approved in the
manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class A Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each
such agreement must be approved in accordance with, and contain the
provisions required by, the Rule. In the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Class A Plan Agreements with them shall be (i) their agreements
with the Distributor with respect to payments under the Fund's
Distribution Plan in effect prior to May 21, 1996 or (ii) Class A
Plan Agreements entered into thereafter.
Provisions relating to Class C Shares (Part II)
Part II of the Plan applies only to the Level-Payment Shares
Class ("Class C Shares") of the Fund (regardless of whether such
class is so designated or is redesignated by some other name).
As used in Part II of the Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to any principal
underwriter of the Fund, with which the Fund or the Distributor has
entered into written agreements in connection with Part II ("Class
C Plan Agreements") and which have rendered assistance (whether
direct, administrative, or both) in the distribution and/or
retention of the Fund's Level-Payment Class Shares or servicing of
shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all
Level-Payment Class Shares beneficially owned by such Qualified
Recipient, or beneficially owned by its brokerage customers, other
customers, other contacts, investment advisory clients, or other
clients, if the Qualified Recipient was, in the sole judgment of
the Distributor, instrumental in the purchase and/or retention of
such shares and/or in providing administrative assistance or other
services in relation thereto.
Subject to the direction and control of the Fund's Board of
Trustees, the Fund may make payments ("Class C Permitted Payments")
to Qualified Recipients, which Class C Permitted Payments may be
made directly, or through the Distributor or shareholder servicing
agent as disbursing agent, which may not exceed, for any fiscal
year of the Fund (as adjusted for any part or parts of a fiscal
year during which payments under the Plan are not accruable or for
any fiscal year which is not a full fiscal year), 0.75 of 1% of the
average annual net assets of the Fund represented by the
Level-Payment Class Shares. Such payments shall be made only out of
the Fund's assets allocable to the Level-Payment Class Shares. The
Distributor shall have sole authority (i) as to the selection of
any Qualified Recipient or Recipients; (ii) not to select any
Qualified Recipient; and (iii) the amount of Class C Permitted
Payments, if any, to each Qualified Recipient provided that the
total Class C Permitted Payments to all Qualified Recipients do not
exceed the amount set forth above. The Distributor is authorized,
but not directed, to take into account, in addition to any other
factors deemed relevant by it, the following: (a) the amount of
the Qualified Holdings of the Qualified Recipient; (b) the extent
to which the Qualified Recipient has, at its expense, taken steps
in the shareholder servicing area with respect to holders of
Level-Payment Shares, including without limitation, any or all of
the following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Fund may be effected; assisting
shareholders in designating and changing dividend options, account
designations and addresses; providing necessary personnel and
facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year-end statements and confirmations of purchases and
redemptions; transmitting, on behalf of the Fund, proxy statements,
annual reports, updating prospectuses and other communications from
the Fund to its shareholders; receiving, tabulating and
transmitting to the Fund proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and providing such
other related services as the Distributor or a shareholder may
request from time to time; and (c) the possibility that the
Qualified Holdings of the Qualified Recipient would be redeemed in
the absence of its selection or continuance as a Qualified
Recipient. Notwithstanding the foregoing two sentences, a majority
of the Independent Trustees (as defined below) may remove any
person as a Qualified Recipient. Amounts within the above limits
accrued to a Qualified Recipient but not paid during a fiscal year
may be paid thereafter; if less than the full amount is accrued to
all Qualified Recipients, the difference will not be carried over
to subsequent years.
While Part II is in effect, the Fund's Distributor shall
report at least quarterly to the Fund's Trustees in writing for
their review on the following matters: (i) all Class C Permitted
Payments made under Section 15 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which the
amounts were expended; and (ii) all fees of the Fund to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the Fund,
the Adviser, the Administrator or the Distributor, such person
shall agree to furnish to the Distributor for transmission to the
Board of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part II originally went into effect when it was approved
(i) by a vote of the Trustees, including the Independent Trustees,
with votes cast in person at a meeting called for the purpose of
voting on Part II of the Plan; and (ii) by a vote of holders of at
least a "majority" (as so defined) of the outstanding voting
securities of the Level-Payment Class Shares. Part II has
continued, and will, unless terminated as thereinafter provided,
continue in effect, until the December 31 next succeeding such
effectiveness, and from year to year thereafter only so long as
such continuance is specifically approved at least annually by the
Fund's Trustees and its Independent Trustees with votes cast in
person at a meeting called for the purpose of voting on such
continuance. Part II may be terminated at any time by the vote of
a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund to which Part II applies.
Part II may not be amended to increase materially the amount of
payments to be made without shareholder approval of the class or
classes of shares affected by Part II as set forth in (ii) above,
and all amendments must be approved in the manner set forth in (i)
above.
In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class C Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each
such agreement must be approved in accordance with, and contain the
provisions required by, the Rule. In the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Class C Plan Agreements with them shall be (i) their agreements
with the Distributor with respect to payments under the Fund's
Distribution Plan in effect prior to May 21, 1996 or (ii) Class C
Plan Agreements entered into thereafter.
Provisions relating to Class I Shares (Part III)
Part III of the Plan applies only to the Financial
Intermediary Class Shares ("Class I Shares") of the Fund
(regardless of whether such class is so designated or is
redesignated by some other name).
As used in Part III of the Plan, "Qualified Recipients"
shall mean broker-dealers or others selected by Aquila
Distributors, Inc. (the "Distributor"), including but not limited
to any principal underwriter of the Fund, with which the Fund or
the Distributor has entered into written agreements in connection
with Part III ("Class I Plan Agreements") and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Fund's Class I Shares or
servicing of shareholder accounts with respect to such shares.
"Qualified Holdings" shall mean, as to any Qualified Recipient, all
Class I Shares beneficially owned by such Qualified Recipient, or
beneficially owned by its brokerage customers, other customers,
other contacts, investment advisory clients, or other clients, if
the Qualified Recipient was, in the sole judgment of the
Distributor, instrumental in the purchase and/or retention of such
shares and/or in providing administrative assistance or other
services in relation thereto.
Subject to the direction and control of the Fund's Board of
Trustees, the Fund may make payments ("Class I Permitted Payments")
to Qualified Recipients, which Class I Permitted Payments may be
made directly, or through the Distributor or shareholder servicing
agent as disbursing agent, which may not exceed, for any fiscal
year of the Fund (as adjusted for any part or parts of a fiscal
year during which payments under the Plan are not accruable or for
any fiscal year which is not a full fiscal year), at a rate fixed
for time to time by the Board of Trustees, initially 0.10 of 1% of
the average annual net assets of the Fund represented by the Class
I Shares, but not more than 0.25 of 1% of such assets. Such
payments shall be made only out of the Fund's assets allocable to
Class I Shares. The Distributor shall have sole authority (i) as to
the selection of any Qualified Recipient or Recipients; (ii) not to
select any Qualified Recipient; and (iii) the amount of Class C
Permitted Payments, if any, to each Qualified Recipient provided
that the total Class I Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The
Distributor is authorized, but not directed, to take into account,
in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Class I Shares, including
without limitation, any or all of the following activities:
answering customer inquiries regarding account status and history,
and the manner in which purchases and redemptions of shares of the
Fund may be effected; assisting shareholders in designating and
changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; assisting in processing
purchase and redemption transactions; arranging for the wiring of
funds; transmitting and receiving funds in connection with customer
orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts;
furnishing (either alone or together with other reports sent to a
shareholder by such person) monthly and year-end statements and
confirmations of purchases and redemptions; transmitting, on behalf
of the Fund, proxy statements, annual reports, updating
prospectuses and other communications from the Fund to its
shareholders; receiving, tabulating and transmitting to the Fund
proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and providing such other related services
as the Distributor or a shareholder may request from time to time;
and (c) the possibility that the Qualified Holdings of the
Qualified Recipient would be redeemed in the absence of its
selection or continuance as a Qualified Recipient. Notwithstanding
the foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years.
While Part III is in effect, the Fund's Distributor shall
report at least quarterly to the Fund's Trustees in writing for
their review on the following matters: (i) all Class I Permitted
Payments made under Section 15 of the Plan, the identity of the
Qualified Recipient of each payment, and the purposes for which the
amounts were expended; and (ii) all fees of the Fund to the
Distributor, sub-adviser or Administrator paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the Fund,
the Adviser, the Administrator or the Distributor, such person
shall agree to furnish to the Distributor for transmission to the
Board of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
Part III originally went into effect when it was approved
(i) by a vote of the Trustees, including the Independent Trustees,
with votes cast in person at a meeting called for the purpose of
voting on Part III of the Plan; and (ii) by a vote of holders of at
least a "majority" (as so defined) of the outstanding voting
securities of the Class I Shares Class. Part III has continued, and
will, unless terminated as thereinafter provided, continue in
effect, until the December 31 next succeeding such effectiveness,
and from year to year thereafter only so long as such continuance
is specifically approved at least annually by the Fund's Trustees
and its Independent Trustees with votes cast in person at a meeting
called for the purpose of voting on such continuance. Part II may
be terminated at any time by the vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority"
(as defined in the 1940 Act) of the outstanding voting securities
of the Fund to which Part III applies. Part III may not be amended
to increase materially the amount of payments to be made without
shareholder approval of the class or classes of shares affected by
Part III as set forth in (ii) above, and all amendments must be
approved in the manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal
underwriter of the Fund, the Class C Plan Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each
such agreement must be approved in accordance with, and contain the
provisions required by, the Rule. In the case of Qualified
Recipients which are not principal underwriters of the Fund, the
Class I Plan Agreements with them shall be (i) their agreements
with the Distributor with respect to payments under the Fund's
Distribution Plan in effect prior to May 1, 1996 or (ii) Class I
Plan Agreements entered into thereafter.
Payments Under the Plan
During the fiscal years ended June 30, 1997, 1996 and 1995,
$58,706, $57,015, and $52,964, respectively, were paid under the
Plan with respect to Class A Shares to Qualified Recipients. Of
those amounts, $1,749, $1,624 and $1,424, respectively, were paid
to the Distributor. All of such payments were for compensation.
During the fiscal year ended June 30, 1997, $119 was paid with
respect to Class C Shares all of which was retained by the
Distributor. All of such payments were for compensation. No
payments were made with respect to Class C Shares for the fiscal
year ended June 30, 1996; no Class C Shares were outstanding before
that time.
Defensive Provisions (Part IV)
Another part of the Plan (Part IV) states that if and to
the extent that any of the payments listed below are considered to
be "primarily intended to result in the sale of" shares issued by
the Fund within the meaning of Rule 12b-1, such payments are
authorized under the Plan: (i) the costs of the preparation of all
reports and notices to shareholders and the costs of printing and
mailing such reports and notices to existing shareholders,
irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of shares of
the Fund or other funds or other investments; (ii) the costs of the
preparation and setting in type of all prospectuses and statements
of additional information and the costs of printing and mailing all
prospectuses and statements of additional information to existing
shareholders; (iii) the costs of preparation, printing and mailing
of any proxy statements and proxies, irrespective of whether any
such proxy statement includes any item relating to, or directed
toward, the sale of the Fund's shares; (iv) all legal and
accounting fees relating to the preparation of any such reports,
prospectuses, statements of additional information, proxies and
proxy statements; (v) all fees and expenses relating to the
registration or qualification of the Fund and/or its shares under
the securities or "Blue-Sky" laws of any jurisdiction; (vi) all
fees under the Securities Act of 1933 and the 1940 Act, including
fees in connection with any application for exemption relating to
or directed toward the sale of the Fund's shares; (vii) all fees
and assessments of the Investment Company Institute or any
successor organization, irrespective of whether some of its
activities are designed to provide sales assistance; (viii) all
costs of the preparation and mailing of confirmations of shares
sold or redeemed or share certificates, and reports of share
balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of such
disinterested Trustees but that nothing in the Plan shall prevent
the involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved by
a majority of such disinterested Trustees.
The Plan states that while it is in effect, the Fund's
Administrator and Distributor shall report at least quarterly to
the Fund's Board of Trustees in writing for their review on the
following matters: (i) all Permitted Payments made under this Plan,
the identity of the Qualified Recipient of each Payment, and the
purposes for which the amounts were expended; (ii) all costs of
each item of cost specified in the Plan (making estimates of such
costs where necessary or desirable) during the preceding calendar
or fiscal quarter; and (iii) all fees of the Fund to the
distributor, sub-adviser or administrator paid or accrued during
such quarter. In addition if any such Qualified Recipient is an
affiliate, as that term is defined in the Act, of the Fund, the
Adviser, the Administrator or the Distributor, such person shall
agree to furnish to the Distributor for transmission to the Board
of Trustees of the Fund an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
The Plan defines as the Fund's Independent Trustees those
Trustees who are not "interested persons" of the Fund as defined in
the 1940 Act and who have no direct or indirect financial interest
in the operation of the Plan or in any agreements related to the
Plan. The Plan, unless terminated as thereinafter provided,
continues in effect from year to year only so long as such
continuance is specifically approved at least annually by the
Fund's Board of Trustees and its Independent Trustees with votes
cast in person at a meeting called for the purpose of voting on
such continuance. In voting on the implementation or continuance of
the Plan, those Trustees who vote to approve such implementation or
continuance must conclude that there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders. The Plan
may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority"
(as defined in the 1940 Act) of the outstanding voting securities
of the Fund. The Plan may not be amended to increase materially the
amount of payments to be made without shareholder approval and all
amendments must be approved in the manner set forth above as to
continuance of the Plan.
The Plan and each Part of it shall also be subject to all
applicable terms and conditions of Rule 18f-3 under the 1940 Act as
now in force or hereafter amended. Specifically, but without
limitation, the provisions of Part IV shall be deemed to be
severable, within the meaning of and to the extent required by Rule
18f-3, with respect to each outstanding class of shares of the
Fund.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the
"Services Plan") to provide for the payment with respect to Class
C Shares and Class I Shares of the Fund of "Service Fees" within
the meaning of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. The Services Plan applies
only to the Class C Shares and Class I Shares of the Fund
(regardless of whether such class is so designated or is
redesignated by some other name). The Services Plan has two
parts.
Provisions for Level-Payment Class Shares (Part I)
As used in the Services Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc.
(the "Distributor"), including but not limited to the Distributor
and any other principal underwriter of the Fund, who have, pursuant
to written agreements with the Fund or the Distributor, agreed to
provide personal services to shareholders of Level-Payment Class
Shares and/or maintenance of Level-Payment Class Shares shareholder
accounts. "Qualified Holdings" shall mean, as to any Qualified
Recipient, all Level-Payment Class Shares beneficially owned by
such Qualified Recipient's customers, clients or other contacts.
"Administrator" shall mean Aquila Management Corporation or any
successor serving as sub-adviser or administrator of the Fund.
Subject to the direction and control of the Fund's Board of
Trustees, the Fund may make payments ("Service Fees") to Qualified
Recipients, which Service Fees (i) may be paid directly or through
the Distributor or shareholder servicing agent as disbursing agent
and (ii) may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under the Services Plan are not accruable or for any
fiscal year which is not a full fiscal year), 0.25 of 1% of the
average annual net assets of the Fund represented by the
Level-Payment Class Shares. Such payments shall be made only out of
the Fund's assets allocable to the Level-Payment Class Shares. The
Distributor shall have sole authority with respect to the selection
of any Qualified Recipient or Recipients and the amount of Service
Fees, if any, paid to each Qualified Recipient, provided that the
total Service Fees paid to all Qualified Recipients may not exceed
the amount set forth above and provided, further, that no Qualified
Recipient may receive more than 0.25 of 1% of the average annual
net asset value of shares sold by such Recipient. The Distributor
is authorized, but not directed, to take into account, in addition
to any other factors deemed relevant by it, the following: (a) the
amount of the Qualified Holdings of the Qualified Recipient and (b)
the extent to which the Qualified Recipient has, at its expense,
taken steps in the shareholder servicing area with respect to
holders of Level-Payment Class Shares, including without
limitation, any or all of the following activities: answering
customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Fund may
be effected; assisting shareholders in designating and changing
dividend options, account designations and addresses; providing
necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting in processing purchase
and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; and
providing such other related services as the Distributor or a
shareholder may request from time to time. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees (as
defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient
but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the
difference will not be carried over to subsequent years. During the
fiscal year ended June 30, 1997, $40 was paid under the Services
Plan with respect to Class C Shares, of which the Distributor
received all.
Provisions for Financial Intermediary Class Shares (Part II)
As used in Part II of the Services Plan, "Qualified
Recipients" shall mean broker-dealers or others selected by Aquila
Distributors, Inc. (the "Distributor"), including but not limited
to the Distributor and any other principal underwriter of the Fund,
who have, pursuant to written agreements with the Fund or the
Distributor, agreed to provide personal services to shareholders of
Financial Intermediary Class Shares, maintenance of Financial
Intermediary Class Shares shareholder accounts and/or pursuant to
specific agreements entering confirmed purchase orders on behalf of
customers or clients. "Qualified Holdings" shall mean, as to any
Qualified Recipient, all Financial Intermediary Class Shares
beneficially owned by such Qualified Recipient's customers, clients
or other contacts. "Administrator" shall mean Aquila Management
Corporation or any successor serving as sub-adviser or
administrator of the Fund.
Subject to the direction and control of the Fund's Board of
Trustees, the Fund may make payments ("Service Fees") to Qualified
Recipients, which Service Fees (i) may be paid directly or through
the Distributor or shareholder servicing agent as disbursing agent
and (ii) may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under the Services Plan are not accruable or for any
fiscal year which is not a full fiscal year), 0.25 of 1% of the
average annual net assets of the Fund represented by the Financial
Intermediary Class Shares. Such payments shall be made only out of
the Fund's assets allocable to the Financial Intermediary Class
Shares. The Distributor shall have sole authority with respect to
the selection of any Qualified Recipient or Recipients and the
amount of Service Fees, if any, paid to each Qualified Recipient,
provided that the total Service Fees paid to all Qualified
Recipients may not exceed the amount set forth above and provided,
further, that no Qualified Recipient may receive more than 0.25 of
1% of the average annual net asset value of shares sold by such
Recipient. The Distributor is authorized, but not directed, to take
into account, in addition to any other factors deemed relevant by
it, the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient and (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Financial Intermediary
Class Shares, including without limitation, any or all of the
following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Fund may be effected; assisting
shareholders in designating and changing dividend options, account
designations and addresses; providing necessary personnel and
facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; and providing such other related
services as the Distributor or a shareholder may request from time
to time. Notwithstanding the foregoing two sentences, a majority of
the Independent Trustees (as defined below) may remove any person
as a Qualified Recipient. Amounts within the above limits accrued
to a Qualified Recipient but not paid during a fiscal year may be
paid thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
While the Services Plan is in effect, the Fund's Distributor
shall report at least quarterly to the Fund's Trustees in writing
for their review on the following matters: (i) all Service Fees
paid under the Services Plan, the identity of the Qualified
Recipient of each payment, and the purposes for which the amounts
were expended; and (ii) all fees of the Fund to the Distributor
paid or accrued during such quarter. In addition, if any Qualified
Recipient is an "affiliated person," as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the
Fund, the Adviser, the Administrator or the Distributor, such
person shall agree to furnish to the Distributor for transmission
to the Board of Trustees of the Fund an accounting, in form and
detail satisfactory to the Board of Trustees, to enable the Board
of Trustees to make the determinations of the fairness of the
compensation paid to such affiliated person, not less often than
annually.
The Services Plan has been approved by a vote of the Trustees,
including those Trustees who, at the time of such vote, were not
"interested persons" (as defined in the 1940 Act) of the Fund and
had no direct or indirect financial interest in the operation of
the Services Plan or in any agreements related to the Services Plan
(the "Independent Trustees"), with votes cast in person at a
meeting called for the purpose of voting on the Services Plan. It
will continue in effect for a period of more than one year from its
original effective date only so long as such continuance is
specifically approved at least annually as set forth in the
preceding sentence. It may be amended in like manner and may be
terminated at any time by vote of the Independent Trustees.
The Services Plan shall also be subject to all applicable
terms and conditions of Rule 18f-3 under the Act as now in force or
hereafter amended.
While the Services Plan is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested
persons" of the Fund, as that term is defined in the 1940 Act,
shall be committed to the discretion of such disinterested
Trustees. Nothing therein shall prevent the involvement of others
in such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
LIMITATION OF REDEMPTIONS IN KIND
The Fund has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1 percent of the net
asset value of the Fund during any 90-day period for any one
shareholder. Should redemptions by any shareholder exceed such
limitation, the Fund will have the option of redeeming the excess
in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets
into cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "Net Asset Value Per Share" in
the Prospectus, and such valuation will be made as of the same time
the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Fund, their affiliations,
if any, with the Administrator or the Distributor and the principal
occupations of such persons during at least the past five years are
set forth below. Mr. Herrmann is an "interested person" of the Fund
as that term is defined in the 1940 Act as an officer of the Fund
and a Director, officer and shareholder of the Distributor. Ms.
Herrmann is an interested person as a member of his immediate
family and as a shareholder of the Distributor. Mr. Cornia is an
interested person of the Fund as a shareholder of the Sub-Adviser's
corporate parent. They are so designated by an asterisk. As of
October 1, 1997, the Trustees and officers as a group owned less
than 1% of the Fund's outstanding shares.
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
Manager, 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: 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; 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, together with this Fund are called the Aquila
Bond and Equity Funds; and Pacific Capital Cash Assets Trust since
1984; Churchill Cash Reserves Trust since 1985; Pacific Capital
U.S. Treasuries Cash Assets Trust since 1988; Pacific Capital
Tax-Free Cash Assets Trust since 1988; each of which is a money
market fund, and together with Capital Cash Management Trust
("CCMT") are called the Aquila Money-Market Funds; Vice President,
Director, Secretary and formerly Treasurer of Aquila Distributors,
Inc. since 1981, distributor of the above funds; President and
Chairman of the Board of Trustees of CCMT, a money market fund
since 1981, and an Officer and Trustee/Director of its predecessors
since 1974; 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.
Philip E. Albrecht, C.F.A., Trustee, 1485 Gulf of Mexico Drive,
Longboat Key, Florida, 34228
Retired; Senior Vice President, Investments of National Securities
& Research Corporation, 1973-1984; Vice President of Research of
Merrill Lynch, Pierce, Fenner & Smith, 1949-1973; past President of
The New York Society of Security Analysts; former officer and
Director of The Financial Analysts Federation; former officer and
Trustee of the Institute of Chartered Financial Analysts; active in
a similar capacity with various other professional organizations;
Trustee of Tax-Free Trust of Arizona since 1987.
Gary C. Cornia*, Trustee, 577 East 1090 North, Orem, Utah 84057
Professor and Associate Dean of the Marriott School of Management,
Brigham Young University, since 1991; Associate Professor,
1985-1991; Assistant Professor, 1980-1985; Commissioner of the Utah
Tax Commission, 1983-1986; Director of the National Tax
Association, 1990-1993; Chair of the Governor's Tax Review
Committee since 1993; Faculty Associate of the Land Reform Training
Institute, Taipei, Taiwan and The Lincoln Institute of Land Policy
Cambridge, Massachusetts.
William L. Ensign, Trustee, 2928 Cortland Place N.W., Washington,
D.C. 20008
Assistant Architect of the United States Capital, Washington, D.C.
since 1980; formerly President and Chief Executive Officer of
McLeod Ferrara Ensign, a planning, architectural, and interior
design firm, in Washington D.C. and Maryland; a Fellow and former
member of the Board of Directors of the American Institute of
Architects and past President of the Washington-Metropolitan
Chapter of the A.I.A.; active in the National Trust for Historic
Preservation; designee to the Advisory Council on Historic
Preservation; designee to the Zoning Commission of the District of
Columbia since 1989; Trustee of Tax-Free Trust of Arizona since
1986; Trustee of Oxford Cash Management Fund, 1983-1989.
George Harris, Trustee, 280 Nettleton Hollow Road, P.O. Box 1500,
Washington, Connecticut 06793
Chairman and Chief Executive Officer of Harris Chemical Group,
Inc., a producer and marketer of inorganic chemical and extractive
mineral products, including salt, soda ash and sulfate of potash,
since 1993; Chairman and CEO of Harris Specialty Chemicals, Inc.,
a manufacturer of specialty formulated chemicals for the
construction industry and specialty fluorine and silane chemicals
for the pharmaceutical and silicone industries, since 1994;
Chairman and CEO of D. George Harris & Associates, an investment
management and advisory firm, since 1987; Chairman (non-executive)
of McWhorter, Inc., a resin products company, since 1994; Senior
Investment Banking Advisor to Eberstadt Fleming Inc., an investment
banking firm, 1987-1988; President of SCM Corporation, a
manufacturing company, 1985-1986; President of its Chemical
Division, 1981-1985; formerly President of Rhone Poulenc, Inc., a
subsidiary of Rhone-Poulenc S.A., a chemical manufacturer; Trustee
of Trinity Liquid Assets Trust, 1985-1990; Trustee of Prime Cash
Fund, 1986-1992, of Churchill Tax-Free Fund of Kentucky, 1987-1993
and of Churchill Cash Reserves Trust, 1985-1993; Director of
Valspar Corporation, a manufacturer of paints and resins,
1987-1994; Director of Rexene Corporation, a manufacturer of
thermoplastic resins and petrochemical products, 1992-1994. Member
of the President's Advisory Committee on Trade Policy and
Negotiations since 1990.
Diana P. Herrmann*, Trustee and Vice President, 380 Madison
Avenue, New York, New York 10017
Trustee of Tax-Free Trust of Arizona and Tax-Free Trust of
Oregon since 1994, of Churchill Tax-Free Fund of Kentucky and
Churchill Cash Reserves Trust since 1995, of Aquila Cascadia Equity
Fund since 1996 and of Aquila Rocky Mountain Equity Fund since
1997; President and Chief Operating Officer of the Administrator
since 1997; Senior Vice President and Secretary, formerly Vice
President of the Administrator since 1986 and Director since 1984;
Senior Vice President or Vice President and formerly Assistant Vice
President of the Aquila Money-Market Funds since 1986; Vice
President of the Aquila Bond and Equity Funds since 1997; Vice
President of InCap Management Corporation since 1986 and Director
since 1983; Assistant Vice President of Oxford Cash Management
Fund, 1986-1988; Assistant Vice President and formerly Loan Officer
of European American Bank, 1981-1986; daughter of the Fund's
President; Trustee of the Leopold Schepp Foundation (academic
scholarships) since 1995; actively involved in mutual fund and
trade associations and in college and other volunteer
organizations.
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 and of Churchill Tax-Free Fund of Kentucky,
Tax-Free Fund of Colorado and Capital Cash Management Trust since
1987.
R. Thayne Robson, Trustee, 3548 Westwood Drive, Salt Lake City,
Utah 84109
Director of the Bureau of Economic and Business Research, Professor
of Management, and Research Professor of Economics at the
University of Utah since 1978; Trustee of Aquila Rocky Mountain
Equity Fund since 1993; Director of the Alliance of Universities
for Democracy since 1990; Trustee of the Salt Lake Convention and
Visitors Bureau since 1984; Member of Utah Governor's Economic
Coordinating Committee since 1982; Member of the Association for
University Business and Economic Research since 1985; Director of
ARUP (a medical test laboratory) since 1988; Director of Western
Mortgage since 1989; Director of the Utah Economic Development
Corporation since 1985; Director of the Salt Lake Downtown Alliance
since 1991; Trustee of Crossroads Research Institute since 1986.
Jerry G. McGrew, Vice President, P.O. Box 662, Radcliff, Kentucky
40159
Senior Vice President of Aquila Rocky Mountain Equity Fund since
1997; Senior Vice President of Churchill Tax-Free Fund of Kentucky
since 1994, Vice President since 1987; Vice President of Churchill
Cash Reserves Trust since 1995; Registered Principal since 1993;
Vice President of Aquila Distributors, Inc. since 1993; Registered
Representative of J.J.B. Hilliard, W.L. Lyons Inc., 1983-1987;
Account Manager with IBM Corporation, 1967-1981; Gubernatorial
appointee, Kentucky Financial Institutions Board, since 1993;
Chairman, Total Quality Management for Small Business, 1990-1994;
President of Elizabethtown/Hardin County, Kentucky, Chamber of
Commerce, 1989-1991; President of Elizabethtown Country Club,
1983-1985.
Kimball L. Young, Vice President, 2049 Herbert Avenue, Salt Lake
City, Utah 84108
Utah Public Finance Manager and Senior Vice President of Boettcher
Division, Kemper Securities Group, Inc., with responsibilities for
financing capital improvement needs in numerous Utah cities, towns
and special districts, 1980-1992; formerly state assistant to U.S.
Senator Jake Garn.
Stephen J. Caridi, Vice President, 380 Madison Avenue, New York
10017
Vice President of the Distributor since 1995, Assistant Vice
President, 1988-1995, Marketing Associate, 1986-1988; Vice
President of Narragansett Insured Tax-Free Income Fund since 1996;
Mutual Funds coordinator of Prudential Bache Securities, 1984-1986;
Account Representative of Astoria Federal Savings and Loan
Association, 1979-1984.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Aquila Money-Market Funds and the
Aquila Bond and Equity Funds since 1991 and Treasurer, 1981-1991;
formerly Treasurer of the predecessor of CCMT; Treasurer and
Director of STCM Management Company, Inc., since 1974; Treasurer of
Trinity Liquid Assets Trust, 1982-1986 and of Oxford Cash
Management Fund, 1982-1988; Treasurer of InCap Management
Corporation since 1982, of the Administrator since 1984 and of the
Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New York
10017
Treasurer of the Aquila Money-Market Funds and the Aquila Bond and
Equity Funds and of Aquila Distributors, Inc. since 1992; Associate
Director of Furman Selz Incorporated, 1991-1992; Vice President of
Scudder, Stevens & Clark, Inc. and Treasurer of Scudder
Institutional Funds, 1989-1991; Vice President of Lazard Freres
Institutional Funds Group, Treasurer of Lazard Freres Group of
Investment Companies and HT Insight Funds, Inc., 1986-1988; Vice
President of Lehman Management Co., Inc. and Assistant Treasurer of
Lehman Money Market Funds, 1981-1985; Controller of Seligman Group
of Investment Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New
York 10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Aquila Money-Market Funds and the Aquila Bond and Equity
Funds since 1982; Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-1986; Secretary of Oxford
Cash Management Fund, 1982-1988.
John M. Herndon, Assistant Secretary, 380 Madison Avenue, New
York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds since 1995 and Vice President of the Aquila
Money-Market Funds since 1990; Vice President of the Administrator
since 1990; Investment Services Consultant and Bank Services
Executive of Wright Investors' Service, a registered investment
adviser, 1983-1989; Member of the American Finance Association, the
Western Finance Association and the Society of Quantitative
Analysts.
Patricia A. Craven, Assistant Secretary & Compliance Officer, 380
Madison Avenue, New York, New York 10017
Assistant Secretary of the Aquila Money-Market Funds and the Aquila
Bond and Equity Funds since 1995; Counsel to the Administrator and
the Distributor since 1995; formerly a Legal Associate for
Oppenheimer Management Corporation, 1993-1995.
Compensation of Trustees
The Fund does not pay fees to Trustees affiliated with the
Administrator or to any of the Fund's officers. During the fiscal
year ended June 30, 1997, the Fund paid $25,293 in fees and
reimbursement of expenses to its other Trustees. The Fund 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 Fund and the compensation they
received during the Fund's fiscal year from other funds in the
Aquilasm Group of Funds. None of such Trustees has any pension or
retirement benefits from the Fund or any of the other funds in the
Aquila group.
<TABLE>
<CAPTION>
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Fund Group now serves
<S> <C> <C> <C>
Philip E.
Albrecht $2,271 $13,236 2
Gary C.
Cornia $3,528 $3,528 1
William L.
Ensign $700 $4,500 2
D. George
Harris $250 $250 1
Anne J.
Mills $1,923 $36,526 6
R. Thayne
Robson $2,377 $4,965 2
</TABLE>
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Investment Advisory and
Administration Agreement
The Advisory and Administration Agreement provides that it
will become effective on the date of its approval by the
shareholders of the Fund and will, unless terminated as
thereinafter provided, continue in effect until the December 31
next preceding the first anniversary of the effective date of the
Advisory and Administration Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Fund's Board of
Trustees, including a vote of a majority of the Trustees who are
not parties to the Advisory and Administration Agreement or
"interested persons" (as defined in the Act) of any such party,
with votes cast in person at a meeting called for the purpose of
voting on such approval, or (2) by a vote of the holders of a
"majority" (as so defined) of the outstanding voting securities of
the Fund and by such a vote of the Trustees.
During the fiscal years ended June 30, 1997, 1996 and 1995,
the Fund accrued in fees to the Manager under the administration
agreement then in effect, respectively, of $79,323, of which
$58,760 was waived, $76,955 of which $72,207 was waived, and
$71,539, all of which was waived. In addition, during the fiscal
year ended June 30, 1997, the Manager agreed to reimburse the Fund
for other expenses in the amount of $199,119 of which $66,512 was
paid prior to June 30, 1997 and the balance of $132,607 was paid in
July and early August of 1997. During the fiscal year ended June
30, 1996, the Manager reimbursed the Fund $187,859 in expenses.
Additional Information as to the Sub-Advisory Agreement
The Sub-Advisory Agreement provides that any investment
program furnished by the Sub-Adviser shall at all times conform to,
and be in accordance with, any requirements imposed by: (1) the
Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws of
the Fund as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its registration
statement under the Act or as amended by the shareholders of the
Fund.
The Sub-Advisory Agreement provides that the Sub-Adviser
shall give to the Manager, as defined therein, and to the Fund the
benefit of its best judgment and effort in rendering services
hereunder, but the Sub-Adviser shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and research made
by any other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other individual,
firm or corporation shall have been selected in good faith by the
Sub-Adviser. Nothing therein contained shall, however, be construed
to protect the Sub-Adviser against any liability to the Fund or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under the
Agreement.
The Sub-Advisory Agreement provides that nothing in it
shall prevent the Sub-Adviser or any affiliated person (as defined
in the Act) of the Sub-Adviser from acting as investment adviser or
manager for any other person, firm or corporation and shall not in
any way limit or restrict the Sub-Adviser or any such affiliated
person from buying, selling or trading any securities for its own
or their own accounts or for the accounts of others for whom it or
they may be acting, provided, however, that the Sub-Adviser
expressly represents that, while acting as Sub-Adviser, it will
undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Fund under the
Agreement. It is agreed that the Sub-Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Fund's Registration Statement under the Act and the Securities Act
of 1933, except for information supplied by the Sub-Adviser for
inclusion therein. The Sub-Adviser shall promptly inform the Fund
as to any information concerning the Sub-Adviser appropriate for
inclusion in such Registration Statement, or as to any transaction
or proposed transaction which might result in an assignment (as
defined in the Act) of the Agreement. To the extent that the
Manager is indemnified under the Fund's Declaration of Trust with
respect to the services provided hereunder by the Sub-Adviser, the
Manager agrees to provide the Sub-Adviser the benefits of such
indemnification.
The Sub-Advisory Agreement provides that in connection with
its duties to arrange for the purchase and sale of the Fund's
portfolio securities, the Sub-Adviser shall select such
broker-dealers ("dealers") as shall, in the Sub-Adviser's judgment,
implement the policy of the Fund to achieve "best execution," i.e.,
prompt, efficient, and reliable execution of orders at the most
favorable net price. The Sub-Adviser shall cause the Fund to deal
directly with the selling or purchasing principal or market maker
without incurring brokerage commissions unless the Sub-Adviser
determines that better price or execution may be obtained by paying
such commissions; the Fund expects that most transactions will be
principal transactions at net prices and that the Fund will incur
little or no brokerage costs. The Fund understands that purchases
from underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions placed
through dealers include a spread between the bid and asked prices.
In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer
will provide best execution, the dealer's reliability, integrity,
financial condition and risk in positioning the securities
involved, as well as the difficulty of the transaction in question,
and thus need not pay the lowest spread or commission available if
the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the brokerage
and research services provided by the dealer, viewed either in
terms of the particular transaction or the Sub-Adviser's overall
responsibilities. If, on the foregoing basis, the transaction in
question could be allocated to two or more dealers, the Sub-Adviser
is authorized, in making such allocation, to consider (i) whether
a dealer has provided research services, as further discussed
below; and (ii) whether a dealer has sold shares of the Fund. Such
research may be in written form or through direct contact with
individuals and may include quotations on portfolio securities and
information on particular issuers and industries, as well as on
market, economic, or institutional activities. The Fund recognizes
that no dollar value can be placed on such research services or on
execution services and that such research services may or may not
be useful to the Fund and may be used for the benefit of the
Sub-Adviser or its other clients.
During the fiscal years ended June 30, 1997, 1996 and 1995,
all of the Fund's transactions were principal transactions and no
brokerage commissions were paid.
The Sub-Advisory Agreement provides that the Sub-Adviser
agrees to maintain, and to preserve for the periods prescribed,
such books and records with respect to the portfolio transactions
of the Fund as are required by applicable law and regulation, and
agrees that all records which it maintains for the Fund on behalf
of the Manager shall be the property of the Fund and shall be
surrendered promptly to the Fund or the Manager upon request. The
Sub-Adviser agrees to furnish to the Manager and to the Board of
Trustees of the Fund such periodic and special reports as each may
reasonably request.
The Sub-Advisory Agreement provides that the Sub-Adviser
shall bear all of the expenses it incurs in fulfilling its
obligations under the Agreement. In particular, but without
limiting the generality of the foregoing: the Sub-Adviser shall
furnish the Fund, at the Sub-Adviser's expense, all office space,
facilities, equipment and clerical personnel necessary for carrying
out its duties under the Agreement. The Sub-Adviser shall supply,
or cause to be supplied, to any investment adviser, administrator
or principal underwriter of the Fund all necessary financial
information in connection with such adviser's, administrator's or
principal underwriter's duties under any agreement between such
adviser, administrator or principal underwriter and the Fund. The
Sub-Adviser will also pay all compensation of the Fund's officers,
employees, and Trustees, if any, who are affiliated persons of the
Sub-Adviser.
The Sub-Advisory Agreement provides that it will become
effective on the day it is approved by the shareholders of the Fund
(the "Effective Date") and shall, unless terminated as thereinafter
provided, continue in effect until the December 31 next preceding
the first anniversary of the effective date of the Agreement, and
from year to year thereafter, but only so long as such continuance
is specifically approved at least annually (1) by a vote of the
Fund's Board of Trustees, including a vote of a majority of the
Trustees who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party, with votes cast
in person at a meeting called for the purpose of voting on such
approval, or (2) by a vote of the holders of a "majority" (as so
defined) of the outstanding voting securities of the Fund and by
such a vote of the Trustees.
The Sub-Advisory Agreement provides that it may be
terminated by the Sub-Adviser at any time without penalty upon
giving the Manager and the Fund sixty days' written notice (which
notice may be waived). It may be terminated by the Manager or the
Fund at any time without penalty upon giving the Sub-Adviser sixty
days' written notice (which notice may be waived by the
Sub-Adviser), provided that such termination by the Fund shall be
directed or approved by a vote of a majority of its Trustees in
office at the time or by a vote of the holders of a majority (as
defined in the Act) of the voting securities of the Fund
outstanding and entitled to vote. The Sub-Advisory Agreement will
automatically terminate in the event of its assignment (as defined
in the Act) or the termination of the Investment Advisory
Agreement. The Sub-Adviser agrees that it will not exercise its
termination rights for at least three years from the effective date
of the Agreement, except for regulatory reasons.
During the fiscal years ended June 30, 1997, 1996 and 1995,
the Fund accrued in fees to the Sub-Adviser under the advisory
agreement then in effect of $67,588, $65,552 and $60,941,
respectively, of which $49,962, $55,749 and $47,747, respectively,
was waived.
Glass-Steagall Act and Certain Other Banking Laws
The United States Supreme Court has held that the federal
statute commonly referred to as the Glass-Steagall Act prohibits a
national bank or its affiliates from operating a fund for the
collective investment of managed agency accounts. Subsequently, the
Board of Governors of the Federal Reserve System (the "Board")
issued a regulation and interpretation to the effect that the
Glass-Steagall Act and the Supreme Court's Decision: (a) prohibit
an affiliate of a bank holding company registered under the Federal
Bank Holding Company Act of 1956 (the "Holding Company Act"), like
the Sub-Adviser, from sponsoring, organizing, or controlling a
registered, open-end investment company (mutual fund); but (b) do
not prohibit such an affiliate from acting as investment adviser,
transfer agent or custodian to such an investment company. Later,
the United States Supreme Court held that the Board did not exceed
its authority under the Holding Company Act when it adopted its
regulation and interpretation authorizing bank holding company
affiliates to act as investment advisers to registered investment
companies.
The Sub-Adviser been advised that the Sub-Adviser may
perform the services for the Fund contemplated by the Prospectus,
the Additional Statement, and the Investment Advisory Agreement
without thereby violating applicable statutes and regulations,
provided that the Sub-Adviser adheres to the limitations imposed by
the Board in its Regulation Y and other applicable regulatory
pronouncements.
Future changes in either federal or state statutes and
regulations relating to permissible activities of banks or bank
holding companies and the subsidiaries or affiliates of those
entities, as well as further judicial or administrative decisions
or interpretations of present and future statutes and regulations,
could prevent or restrict the Sub-Adviser from continuing to
perform such services for the Fund. Depending on the nature of any
changes in the services which could be provided by the Sub-Adviser,
the Board of Trustees of the Fund would review the Fund's
relationship with the Sub-Adviser and consider taking all action
necessary in the circumstances.
COMPUTATION OF NET ASSET VALUE
The net asset value of the shares of each of the Fund's
classes of shares is determined as of 4:00 p.m., New York time, on
each day that the New York Stock Exchange is open, by dividing the
value of the Fund's net assets allocable to each class by the total
number of shares of such class then outstanding. Securities having
a remaining maturity of less than sixty days when purchased and
securities originally purchased with maturities in excess of sixty
days but which currently have maturities of sixty days or less are
valued at cost adjusted for amortization of premiums and accretion
of discounts, so long as the Board of Trustees has determined that
amortized cost represents fair value for these securities. All
other portfolio securities are valued at the mean between bid and
asked quotations which, for Utah Double-Exempt Obligations, may be
obtained from a reputable pricing service or from one or more
broker-dealers dealing in Utah Double-Exempt Obligations, either of
which may, in turn, obtain quotations from broker-dealers or banks
which deal in specific issues. However, since Utah Double-Exempt
Obligations are ordinarily purchased and sold on a "yield" basis by
banks or dealers which act for their own account and do not
ordinarily make continuous offerings, quotations obtained from such
sources may be subject to greater fluctuations than is warranted by
prevailing market conditions. Accordingly, some or all of the Utah
Double-Exempt Obligations in the Fund's portfolio may be priced,
with the approval of the Fund's Board of Trustees, by differential
comparisons to the market in other municipal bonds under methods
which include consideration of the current market value of tax-free
debt instruments having varying characteristics of quality, yield
and maturity. Any securities or assets for which market quotations
are not readily available are valued at their fair value as
determined in good faith under procedures established by and under
the general supervision and responsibility of the Fund's Board of
Trustees. In the case of Utah Double-Exempt Obligations, such
procedures may include "matrix" comparisons to the prices for other
tax-free debt instruments on the basis of the comparability of
their quality, yield, maturity and other special factors, if any,
involved. With the approval of the Fund's Board of Trustees, the
Sub-Adviser may at its own expense and without reimbursement from
the Fund employ a pricing service, bank or broker-dealer
experienced in such matters to perform any of the above described
functions.
As indicated above, the net asset value per share of the
Fund's shares will be determined on each day that the New York
Stock Exchange is open. That Exchange annually announces the days
on which it will not be open. The most recent announcement
indicates that it will not be open on the following days: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. However, that Exchange may close on days not
included in that announcement.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a number
of instances in which the Fund's shares are sold or issued on a
basis other than the maximum public offering price, that is, the
net asset value plus the highest sales charge. Some of these relate
to lower or eliminated sales charges for larger purchases, whether
made at one time or over a period of time as under a Letter of
Intent or right of accumulation. (See the table of sales charges in
the Prospectus.) The reasons for these quantity discounts are, in
general, that (i) they are traditional and have long been permitted
in the industry and are therefore necessary to meet competition as
to sales of shares of other funds having such discounts; and (ii)
they are designed to avoid an unduly large dollar amount of sales
charge on substantial purchases in view of reduced selling
expenses. Quantity discounts are made available to certain related
persons ("single purchasers") for reasons of family unity and to
provide a benefit to tax-exempt plans and organizations.
The reasons for the other instances in which there are
reduced or eliminated sales charges for Class A Shares are as
follows. Exchanges at net asset value are permitted because a sales
charge has already been paid on the shares exchanged. Sales without
sales charge are permitted to Trustees, officers and certain others
due to reduced or eliminated selling expenses and/or since such
sales may encourage incentive, responsibility and interest and an
identification with the aims and policies of the Fund. Limited
reinvestments of redemptions of Class A Shares and Class C Shares
at no sales charge are permitted to attempt to protect against
mistaken or incompletely informed redemption decisions. Shares may
be issued at no sales charge in plans of reorganization due to
reduced or eliminated sales expenses and since, in some cases, such
issuance is exempted in the 1940 Act from the otherwise applicable
restrictions as to what sales charge must be imposed. In no case in
which there is a reduced or eliminated sales charge are the
interests of existing shareholders adversely affected since, in
each case, the Fund receives the net asset value per share of all
shares sold or issued.
AUTOMATIC WITHDRAWAL PLAN
If you own or purchase Class A Shares or Class Y Shares of
the Fund having a net asset value of at least $5,000 you may
establish an Automatic Withdrawal Plan under which you will receive
a monthly or quarterly check in a stated amount, not less than $50.
Stock certificates will not be issued for shares held under an
Automatic Withdrawal Plan. All dividends and distributions must be
reinvested. Shares will be redeemed on the last business day of the
month or quarter as may be necessary to meet withdrawal
payments.
Redemption of shares for withdrawal purposes may reduce or
even liquidate your account. The monthly or quarterly payments paid
to you may not be considered as a yield or income on
investment.
ADDITIONAL TAX INFORMATION
If you incur a sales commission on a purchase of shares of
one mutual fund (the original fund) and sell or exchange them for
shares of a different mutual fund without having held them at least
91 days, you must reduce the tax basis for the shares sold or
exchanged to the extent that the standard sales commission charged
for acquiring shares in the exchange or later acquiring shares of
the original fund or another fund is reduced because of the
shareholder's having owned the original fund shares. The effect of
the rule is to increase your gain or reduce your loss on the
original fund shares. The amount of the basis reduction on the
original fund shares, however, is added on the investor's basis for
the fund shares acquired in the exchange or later acquired. The
provision applies to commissions charged after October 3, 1989.
CONVERSION OF CLASS C SHARES
Level-Payment Class Shares ("Class C Shares") of the Fund,
which you hold will automatically convert to Front-Payment Class
Shares ("Class A Shares") of the Fund based on the relative net
asset values per share of the two classes as of the close of
business on the first business day of the month in which the sixth
anniversary of the your initial purchase of such Class C Shares
occurs. For these purposes, the date of your initial purchase shall
mean (1) the first business day of the month in which such Class
C Shares were issued to you, or (2) for Class C Shares of the Fund
you have obtained through an exchange or series of exchanges under
the Exchange Privilege (see "Exchange Privilege" in the
Prospectus), the first business day of the month in which you made
the original purchase of Class C Shares so exchanged. For
conversion purposes, Class C Shares purchased through reinvestment
of dividends or other distributions paid in respect of Class C
Shares will be held in a separate sub-account. Each time any Class
C Shares in your regular account (other than those in the
sub-account) convert to Class A Shares, a pro-rata portion of the
Class C Shares in the sub-account will also convert to Class A
Shares. The portion will be determined by the ratio that your Class
C Shares then converting to Class A Shares bears to the total of
your Class C Shares not acquired through reinvestment of dividends
and distributions.
The availability of the conversion feature is subject to the
continuing applicability of a ruling of the Internal Revenue
Service ("IRS"), or an opinion of counsel, that: (1) the dividends
and other distributions paid on Class A Shares and Class C Shares
will not result in "preferential dividends" under the Code; and (2)
the conversion of shares does not constitute a taxable event. If
the conversion feature ceased to be available, the Class C Shares
of the Fund would not be converted and would continue to be subject
to the higher ongoing expenses of the Class C Shares beyond six
years from the date of purchase. The Fund has no reason to believe
that these conditions for the availability of the conversion
feature will not continue to be met.
If the Fund implements any amendments to its Distribution Plan
that would increase materially the costs that may be borne under
such Distribution Plan by Class A Shares shareholders, Class C
Shares will stop converting into Class A Shares unless a majority
of Class C Shares shareholders, voting separately as a class,
approve the proposal.
GENERAL INFORMATION
Possible Additional Series
If additional Series (as discussed in the Prospectus) were
created by the Board of Trustees, shares of each such Series would
be entitled to vote as a Series only to the extent permitted by the
1940 Act (see below) or as permitted by the Board of Trustees.
Income and operating expenses would be allocated among two or more
series in a manner acceptable to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, any matter required to be
submitted to shareholder vote is not deemed to have been
effectively acted upon unless approved by the holders of a
"majority" (as defined in that Rule) of the voting securities of
each Series affected by the matter. Such separate voting
requirements do not apply to the election of trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, Series. A change in
investment policy may go into effect as to one or more Series whose
holders so approve the change, even though the required vote is not
obtained as to the holders of other affected Series.
Ownership of Securities
Of the shares of the Fund outstanding on September 30,
1997, Merrill, Lynch, Pierce, Fenner & Smith, Inc., P.O. Box 30561
New Brunswick, NJ held of record 484,960 Class A Shares (16.8% of
the class) and 3,581 Class C Shares (19.2% of the class); BHC
Securities Inc., 2005 Market Street, Philadelphia, PA held of
record 493,382 Class A Shares (17.1% of the class). Dean Witter,
New York, NY held of record 12,988 Class C Shares (69.6% of the
class); and Dain Bosworth Inc. held of record 977 Class C Shares
(5.2% of the class). On the basis of information received from
those holders, the Fund's management believes that all of such
shares are held for the benefit of brokerage clients. Aquila
Management Corporation held of record 11.2 Class Y Shares (100% of
the class).
The Fund's management is not aware of any other person owning
of record or beneficially 5% or more of the shares of any class of
Fund's outstanding shares as of that date.
Indemnification of Shareholders and Trustees
Under Massachusetts law, shareholders of a trust such as the
Fund may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. For shareholder
protection, however, an express disclaimer of shareholder liability
for acts or obligations of the Fund is contained in the Declaration
of Trust which requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed
by the Fund or the Trustees. The Declaration of Trust provides for
indemnification out of the Fund's property of any shareholder held
personally liable for the obligations of the Fund. The Declaration
of Trust also provides that the Fund shall, upon request, assume
the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund itself would be unable to meet its
obligations. In the event the Fund had two or more Series, and if
any such Series were to be unable to meet the Fund's obligations
attributable to it (which, as is the case with the Fund, is
relatively remote), the other Series would be subject to such
obligations, with a corresponding increase in the risk of the
shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees of
the Fund out of the property of the Fund and provides that they
will not be liable for errors of judgment or mistakes of fact or
law; but nothing in the Declaration of Trust protects a Trustee
against any liability to which he or she would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of the
office of Trustee.
Underwriting Commissions
During the year ended June 30, 1997, the aggregate dollar
amount of sales charges on sales of shares in the Fund was $121,809
and the amount retained by the Distributor was $1,637.
Custodian and Auditors
The Fund's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Fund's assets.
The Fund's auditors, KPMG Peat Marwick LLP, perform an annual
audit of the Fund's financial statements.
The financial statements for the Fund for the year ended
June 30, 1997, which are contained in the Annual Report for that
fiscal year, are hereby incorporated by reference into the
Additional Statement. Those financial statements have been audited
by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is incorporated herein by reference.
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL BOND RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers or
lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit in
connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or
other arrangement under the laws of bankruptcy and other
laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful
completion of the project being financed by the debt being rated
and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of
the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Standard & Poor's ratings for municipal note issues are
designated SP in order to help investors distinguish more clearly
the credit quality of notes as compared to bonds. Notes bearing the
designation SP-1 are deemed very strong or to have strong capacity
to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+)
designation. Notes bearing the designation SP-2 are deemed to have
a satisfactory capacity to pay principal and interest.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in
Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some
time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated
by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's Investment
Grade as MIG 1 through MIG 4. In the case of variable rate demand
obligations (VRDOs), two ratings are assigned; one representing an
evaluation of the degree of risk associated with scheduled
principal and interest payments, and the other representing an
evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of
VRDOs is designated as VMIG. When no rating is applied to the long
or short-term aspect of a VRDO, it will be designated NR. Issues or
the features associated with MIG or VMIG ratings are identified by
date of issue, date of maturity or maturities or rating expiration
date and description to distinguish each rating from other ratings.
Each rating designation is unique with no implication as to any
other similar issue of the same obligor. MIG ratings terminate at
the retirement of the obligation while VMIG rating expiration will
be a function of each issuer's specific structural or credit
features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality. Margins
of protection are ample although not so large
as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access for
refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of an
investment security is present and although
not distinctly or predominantly speculative,
there is specific risk.
<PAGE>
INVESTMENT SUB-ADVISER
First Security Investment Management, Inc.
61 South Main Street
Salt Lake City, Utah 84111
INVESTMENT ADVISER, ADMINISTRATOR and FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Philip E. Albrecht
Gary C. Cornia
William L. Ensign
D. George Harris
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Vice President
Kimball L. Young, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
After November 8, 1997:
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Before November 8, 1997:
Administrative Data Management Corp.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
AQUILA
TAX-FREE FUND FOR
[LOGO]
UTAH
Statement of
Additional
Information
A tax-free
income investment
One Of The
Aquilasm Group Of Funds
<PAGE>
TAX-FREE FUND FOR UTAH
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights
Incorporated by reference into Part B:
Report of Independent Auditors
Statement of Investments as of June 30, 1997
Statement of Assets and Liabilities as of
June 30, 1997
Statement of Operations for the period ended
June 30, 1997
Statement of Changes in Net Assets for the
periods ended June 30, 1997 and 1996
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors
(b) Exhibits:
(1) Declaration of Trust (i)
(2) By-laws (i)
(3) Not applicable
(4) Specimen share certificate (iii)
(5) Investment Advisory Agreement (iii)
(5) (a) Advisory and Administration Agreement (iii)
(5) (b) Sub-Advisory Agreement (iii)
(6) (a) Distribution Agreement (iii)
(6) (b) Sales Agreement for Brokerage Firms (iii)
(6) (c) Sales Agreement for Financial
Institutions (iii)
(6) (d) Sales Agreement for Investment
Advisers (iii)
(6) (e) Shareholder Services Agreement (i)
(7) Not applicable
(8) Custody Agreement (iii)
(9) (a) Transfer Agency Agreement (iii)
(9) (b) Administration Agreement (iii)
(10) Opinion & consent of Fund's counsel (iii)
(11) Not Applicable
(12) Not applicable
(13) Not Applicable
(14) Not applicable
(15) (a) Distribution Plan (iii)
(15) (b) Shareholder Services Plan (iii)
(16) Schedule for computation of performance
quotations (iii)
(17) Financial Data Schedules (iii)
(18) Plan Pursuant to Rule 18f-3 (iii)
(i) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 6 dated May 21, 1996, and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 7 dated October 29, 1996 and
incorporated herein by reference.
(iii) Filed herewith.
ITEM 25. Persons Controlled By Or Under Common Control With
Registrant
None
ITEM 26. Number of Holders of Securities
As of October 22, 1997 Registrant had 666 holders of
record of its Class A Shares, 6 of its Class C Shares
and 1 of its Class Y Shares.
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Declaration of Trust, filed as Exhibit
1 to Registrant's Initial Registration Statement
dated January 30, 1991, is incorporated herein by
reference.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to Trustees, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable.
In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant
of expenses incurred or paid by a Trustee, officer, or
controlling person of Registrant in the successful
defense of any action, suit, or proceeding) is asserted
by such Trustee, officer, or controlling person in
connection with the securities being registered,
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is
against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment Adviser
First Security Investment Management, Inc.,
Registrant's investment adviser, performs
investment advisory services for mutual fund and
other clients. For information as to the business,
profession, vocation, or employment of a
substantial nature of its Directors and officers,
reference is made to the Form ADV filed by it under
the Investment Advisers Act of 1940.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal
underwriter to Aquila Rocky Mountain Equity Fund,
Capital Cash Management Trust, Churchill Cash
Reserves Trust, Churchill Tax-Free Fund of
Kentucky, Hawaiian Tax-Free Trust, Narragansett
Insured Tax-Free Income Fund, Pacific Capital Cash
Assets Trust, Pacific Capital Tax-Free Cash Assets
Trust, Pacific Capital U.S. Treasuries Cash Assets
Trust, Tax-Free Fund of Colorado, Tax-Free Trust of
Arizona, and Tax-Free Trust of Oregon, in addition
to serving as Registrant's principal underwriter.
(b) For information about the Directors and officers of
Aquila Distributors, Inc., reference is made to the
Form BD filed by it under the Securities Exchange
Act of 1934.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectus
and Statement of Additional Information.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) If the information called for by Item 5A is contained
in the Registrant's latest annual report to
shareholders, the Registrant undertakes to furnish each
person to whom a prospectus is delivered with a copy of
the Registrant's latest Annual Report to Shareholders,
upon request and without charge.
(d) Registrant undertakes that so long as its By-Laws
do not provide for regular annual meetings of the
shareholders of Registrant, the shareholders of
Registrant shall have such rights, and Registrant,
its Board of Trustees, and its Trustees shall have
such obligations as would exist if Registrant were
a common law trust covered by Section 16(c) of the
Investment Company Act of 1940. In the event that
the Registrant has outstanding two or more Series,
each such Series shall be considered as if it were
a separate common law trust covered by said Section
16(c). However, Registrant may at any time or from
time to time apply to the Commission for one or
more exemptions from all or part of said Section
16(c) and, if an exemptive order or orders are
issued by the Commission, such order or orders
shall be deemed part of said Section 16(c) for the
purpose of this undertaking.
<PAGE>
Consent of the Independent Auditors
To The Shareholders and Board of Trustees
Tax-Free Fund For Utah:
We consent to the use of our report, dated August 8, 1997
incorporated herein by reference, and to the reference to our firm
under the headings "Financial Highlights" in the Prospectus and
"Custodian and Auditors" and "Financial Statements" in the
Statement of Additional Information.
New York, New York KPMG Peat Marwick LLP
October 21, 1997 /s/KPMG Peat Marwick LLP
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all the requirements for effectiveness of this Amendment
to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and has caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and
State of New York, on the 29th day of October, 1997.
TAX-FREE FUND FOR UTAH
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 10/29/97
______________________ President, Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Phillip E. Albrecht 10/29/97
______________________ Trustee ___________
Phillip E. Albrecht
/s/Gary C. Cornia 10/29/97
______________________ Trustee ___________
Gary C. Cornia
/s/William L. Ensign 10/29/97
______________________ Trustee ___________
William L. Ensign
______________________ Trustee ___________
D. George Harris
/s/Anne J. Mills 10/29/97
______________________ Trustee ___________
Anne J. Mills
/s/R. Thayne Robson 10/29/97
______________________ Trustee ___________
R. Thayne Robson
/s/Rose F. Marotta 10/29/97
______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
TAX-FREE FUND FOR UTAH
EXHIBIT INDEX
Exhibit Exhibit Page
Number Name Number
(4) Specimen share certificate
(5) Investment Advisory Agreement
(5) (a) Advisory and Administration Agreement
(5) (b) Sub-Advisory Agreement
(6) (a) Distribution Agreement
(6) (b) Sales Agreement for Brokerage Firms
(6) (c) Sales Agreement for Financial Institutions
(6) (d) Sales Agreement for Investment Advisers
(8) Custody Agreement
(9) (a) Transfer Agency Agreement
(9) (b) Administration Agreement
(10) Opinion & consent of Fund's counsel
(15) (a) Distribution Plan
(15) (b) Shareholder Services Plan
(16) Schedule for computation of performance
quotations
(17) Financial Data Schedules
(18) Plan Pursuant to Rule 18f-3
Correspondence
TAX-FREE FUND FOR UTAH
A MASSACHUSETTS BUSINESS TRUST
I. FRONT OF CERTIFICATE (all text and other matter lies within 7-1/2" x
11-1/2" decorative border, 1/2" wide)
(upper right) oval with heading: SHARES
(upper left) oval with heading: NUMBER TFU
(below right oval) SEE REVERSE FOR CERTAIN DEFINITIONS
(at left) THIS CERTIFIES THAT (at right) CUSIP 87675C 10 4
(at left) is the owner of
Shares having a par value of one cent per Share of Tax-Free Fund For Utah
(hereinafter called the "Fund"), transferable on the books of the Fund by
the holder hereof in person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all of the
provisions of the Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
Witness the seal of the Fund and the signatures of its duly authorized
officers or facsimiles thereof.
Dated:
(at left of seal) (at right of seal)
/s/ Edward M. W. Hines /s/ Lacy B. Herrmann
______________________ _____________________
Secretary President
(bottom center in middle of signatures)
1-3/4" diameter facsimile
seal with legend
TAX-FREE FUND FOR UTAH
1990
A MASSACHUSETTS BUSINESS TRUST
(at lower right, printed vertically)
Countersigned:
ADMINISTRATIVE DATA MANAGEMENT CORP.
(Woodbridge, New Jersey) Transfer Agent
____________________________
Authorized Signature.
II. BACK OF CERTIFICATE (text reads from top to bottom of 11-1/2"
dimension)
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - ..............Custodian................
(Cust) (Minor)
under Uniform Gifts to Minors
Act.....................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFYING NUMBER
OF ASSIGNEE
_______________
[ (box for SS#) ]
[_______________]____________________________________________________
(Please print or typewrite name and address
of assignee)
_____________________________________________________________________
_____________________________________________________________________
______________________________________________________________ SHARES
OF THE SHARES REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
___________________________________________ ATTORNEY TO TRANSFER THE
SAID STOCK ON THE BOOKS OF THE WITHIN NAMED TRUST WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
Dated_________________
Signed____________________________
__________________________________
(Both must sign if joint tenancy)
Signature(s)
guaranteed________________________
Firm or Bank
by
__________________________________
Officer
(text printed in Signatures must be guaranteed by a
box to left of commercial bank or a member firm of a
signature(s)) domestic stock exchange.
(text printed NOTICE: The signature to this assignment
vertically to right) must correspond with the name as written
upon the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
TAX-FREE FUND FOR UTAH
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of July 22, 1992, by and between
TAX-FREE FUND FOR UTAH (the "Fund"), a Massachusetts business
trust, 380 Madison Avenue, Suite 2300, New York, New York 10017,
and FIRST SECURITY INVESTMENT MANAGEMENT, INC., 61 South Main
Street, Salt Lake City, Utah 84111.
W I T N E S S E T H :
WHEREAS, the Fund and the Adviser wish to enter into an
investment advisory agreement, referred to hereafter as "this
Agreement";
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to
act as managerial investment adviser to the Fund with respect to
the investment of the Fund's assets, and to supervise and arrange
the purchase of securities for and the sale of securities held in
the portfolio of the Fund.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Fund
(a) Subject to the succeeding provisions of this
section and subject to the direction and control of the Board of
Trustees of the Fund, the Adviser shall:
(i) Supervise continuously the investment program of
the Fund and the composition of its portfolio;
(ii) Determine what securities shall be purchased or
sold by the Fund;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Fund; and
(iv) At its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source
of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees,
provide for pricing of the Fund's portfolio at least
quarterly using another such source satisfactory to the
Fund.
(b) Any investment program furnished by the Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment
Company Act of l940 (the "Act") and any rules or regulations in
force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (4) any policies and determinations
of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its registration statement
under the Act or as amended by the shareholders of the Fund.
(c) The Adviser shall give the Fund the benefit of its
best judgment and effort in rendering services hereunder, but the
Adviser shall not be liable for any loss sustained by reason of
the adoption of any investment policy or the purchase, sale or
retention of any security, whether or not such purchase, sale or
retention shall have been based upon (i) its own investigation
and research or (ii) investigation and research made by any other
individual, firm or corporation, if such purchase, sale or
retention shall have been made and such other individual, firm or
corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed
to protect the Adviser against any liability to the Fund or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason
of its reckless disregard of its obligations and duties under
this Agreement.
(d) Nothing in this Agreement shall prevent the Adviser
or any affiliated person (as defined in the Act) of the Adviser
from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own
accounts or for the accounts of others for whom it or they may be
acting, provided, however, that the Adviser expressly represents
that it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Fund
under this Agreement. It is agreed that the Adviser shall have
no responsibility or liability for the accuracy or completeness
of the Fund's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Fund as to any information concerning the Adviser appropriate
for inclusion in such Registration Statement, or as to any
transaction or proposed transaction which might result in an
assignment of the Agreement. The Fund agrees to indemnify the
Adviser to the full extent permitted by the Fund's Declaration of
Trust.
(e) In connection with its duties to arrange for the
purchase and sale of the Fund's portfolio securities, the Adviser
shall select such broker-dealers ("dealers") as shall, in the
Adviser's judgment, implement the policy of the Fund to achieve
"best execution," i.e., prompt, efficient, and reliable execution
of orders at the most favorable net price. The Adviser shall
cause the Fund 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 Fund expects that
most transactions will be principal transactions at net prices
and that the Fund will incur little or no brokerage costs. The
Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter
and that principal transactions placed through dealers include a
spread between the bid and asked prices. In allocating
transactions to dealers, the Adviser is authorized to consider,
in determining whether a particular dealer will provide best
execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as
well as the difficulty of the transaction in question, and thus
need not pay the lowest spread or commission available if the
Adviser determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities
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 Fund 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 Fund. Such
research may be in written form or through direct contact with
individuals and may include quotations on portfolio securities
and information on particular issuers and industries, as well as
on market, economic, or institutional activities. The Fund
recognizes that no dollar value can be placed on such research
services or on execution services, that such research services
may or may not be useful to the Fund and/or other accounts of the
Adviser, and that research received by such other accounts may or
may not be useful to the Fund.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Fund, at the
Adviser's expense, all office space, facilities, equipment and
clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser will also pay all compensation of the
Fund's officers, employees, and Trustees, if any, who are
affiliated persons of the Adviser. The Fund agrees to bear the
costs of preparing and setting in type its prospectuses,
statements of additional information and reports to its
shareholders, and the costs of printing or otherwise producing
and distributing those copies of such prospectuses, statements of
additional information and reports as are sent to its
shareholders. All costs and expenses not expressly assumed by
the Adviser under this Agreement or by such sub-adviser,
administrator or principal underwriter shall be paid by the Fund,
including, but not limited to (i) interest and taxes; (ii)
brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Trustees other than those
affiliated with the Adviser or such sub-adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi)
custodian and transfer agent, or shareholder servicing agent,
fees and expenses; (vii) expenses incident to the issuance of its
shares (including issuance on the payment of, or reinvestment of,
dividends); (viii) fees and expenses incident to the registration
under Federal or State securities laws of the Fund or its shares;
(ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Fund; (x) all
other expenses incidental to holding meetings of the Fund's
shareholders; and (xi) such non-recurring expenses as may arise,
including litigation affecting the Fund and the legal obligations
for which the Fund may have to indemnify its officers and
Trustees.
4. Compensation of the Adviser
(a) The Fund agrees to pay the Adviser, and the Adviser
agrees to accept as full compensation for all services rendered
by the Adviser as such, a management fee payable monthly and
computed on the net asset value of the Fund as of the close of
business each business day at the annual rate of .23 of 1% of
such net asset value.
(b) The Adviser agrees that the above fee shall be
reduced, but not below zero, by an amount equal to its pro-rata
portion (based upon the aggregate fees of the Adviser and the
Administrator) of the amount, if any, by which the total expenses
of the Fund in any fiscal year, exclusive of taxes, interest, and
brokerage fees, shall exceed the lesser of (i) 2.5% of the first
$30 million of average annual net assets of the Fund plus 2.0% of
its average annual net assets in excess of $30 million up to $100
million, plus 1.5% of its average annual net assets in excess of
$100 million, or (ii) 25% of the Fund's total annual investment
income. The payment of the above fee at the end of any month
will be reduced or postponed so that at no time will there be any
accrued but unpaid liability under this expense limitation,
subject to readjustment during the year.
5. Duration and Termination
(a) This Agreement shall become effective on the
effective date of the Registration Statement containing the
initial registration of shares of the Fund and shall, unless
terminated as hereinafter provided, continue in effect until the
first meeting of the Fund's shareholders and if approved at that
meeting, shall continue in effect until the December 31 next
preceding the second anniversary of the effective date of this
Agreement, and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually (1)
by a vote of the Fund's Board of Trustees, including a vote of a
majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party,
with votes cast in person at a meeting called for the purpose of
voting on such approval, or (2) by a vote of the holders of a
"majority" (as so defined) of the outstanding voting securities
of the Fund and by such a vote of the Trustees. If the Fund's
shareholders fail to approve this Agreement, the Adviser may
continue to serve and act in that capacity pending further action
by the Business Trust's Board of Trustees or the Fund's
shareholders, provided that the compensation received by the
Adviser during such period is equal to no more than its actual
costs incurred in furnishing such services to the Fund or the
amount it would have received under this Agreement, whichever is
less.
(b) This Agreement may be terminated by the Adviser at
any time without penalty upon giving the Fund sixty days' written
notice (which notice may be waived by the Fund) and may be
terminated by the Fund at any time without penalty upon giving
the Adviser sixty days' written notice (which notice may be
waived by the Adviser), provided that such termination by the
Fund shall be directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders of a
majority (as defined in the Act) of the voting securities of the
Fund outstanding and entitled to vote. This Agreement shall
automatically terminate in the event of its assignment (as
defined in the Act). However, the Adviser agrees that it will
not exercise its termination rights for at least two years from
the effective date of this Agreement except for regulatory
reasons.
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Adviser
represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Fund.
7. Notices of Meetings
The Fund agrees that notice of each meeting of the
Board of Trustees of the Fund will be sent to the Adviser and
that the Fund will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or
persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of the
day and year first above written.
ATTEST: TAX-FREE FUND FOR UTAH
/s/Kenneth L. MacRitchie /s/Lacy B. Herrmann
________________________ By:___________________________________
Kenneth L. MacRitchie Lacy B. Herrmann
Assistant Secretary President and Chairman
ATTEST: FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
/s/Sterling K. Jenson
________________________ By:___________________________________
TAX-FREE FUND FOR UTAH
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of October 31, 1997 by and between
TAX-FREE FUND FOR UTAH (the "Fund"), a Massachusetts business
trust, 380 Madison Avenue, Suite 2300, New York, New York 10017
and AQUILA MANAGEMENT CORPORATION (the "Manager"), a New York
corporation, 380 Madison Avenue, Suite 2300, New York, New York
10017
W I T N E S S E T H:
WHEREAS, the Fund and the Manager wish to enter into an
Advisory and Administration Agreement referred to hereafter as
"this Agreement," with respect to the Fund;
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Manager shall perform (at its own expense) the functions
set forth more fully herein for the Fund.
2. Duties and Obligations of the Manager
(a) Investment Advisory Services Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Manager shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund;
(iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of
pricing information satisfactory to the Fund and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund; and
Subject to the provisions of Section 5 hereof, the Manager may at
its own expense delegate to a qualified organization ("Sub-
Adviser"), affiliated or not affiliated with the Manager, any or
all of the above duties. Any such delegation of the duties set
forth in (i), (ii) or (iii) above shall be by a written agreement
(the "Sub-Advisory Agreement") approved as provided in Section 15
of the Investment Company Act of 1940.
(b) Administration. Subject to the succeeding provisions of
this section and subject to the direction and control of the
Board of Trustees of the Fund, the Manager shall provide all
administrative services to the Fund other than those relating to
its investment portfolio delegated to a Sub-Adviser of the Fund
under a Sub-Advisory Agreement; as part of such administrative
duties, the Manager shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Fund;
(ii) oversee all relationships between the Fund and any
sub-adviser, transfer agent, custodian, legal counsel,
auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the
supervision and coordination of the performance of such
agreements, and the overseeing of all administrative matters
which are necessary or desirable for the effective operation
of the Fund and for the sale, servicing or redemption of the
Fund's shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share and
the dividends (provided that if there is a Sub-Adviser,
daily pricing of the Fund's portfolio shall be the
responsibility of the Sub-Adviser under the Sub-Advisory
Agreement) or, at its expense and responsibility, delegate
such duties in whole or in part to a company satisfactory to
the Fund;
(iv) maintain the Fund's books and records, and prepare (or
assist counsel and auditors in the preparation of) all
required proxy statements, reports to the Fund's
shareholders and Trustees, reports to and other filings with
the Securities and Exchange Commission and any other
governmental agencies, and tax returns, and oversee the
insurance relationships of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Fund and/or
its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Fund's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(c) Compliance with Requirements. Any investment program
furnished, and any activities performed, by the Manager or by a
Sub-Adviser under this section shall at all times conform to, and
be in accordance with, any requirements imposed by: (1) the
Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws
of the Fund as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its
registration statement under the Act or as amended by the
shareholders of the Fund.
(d) Best Efforts; Responsibility. The Manager shall give
the Fund the benefit of its best judgment and effort in rendering
services hereunder, but the Manager shall not be liable for any
loss sustained by reason of the adoption of any investment policy
or the purchase, sale or retention of any security, whether or
not such purchase, sale or retention shall have been based upon
(i) its own investigation and research or (ii) investigation and
research made by any other individual, firm or corporation, if
such purchase, sale or retention shall have been made and such
other individual, firm or corporation shall have been selected in
good faith by the Manager or a Sub-Adviser.
(e) Other Customers. Nothing in this Agreement shall
prevent the Manager or any officer thereof from acting as
investment adviser, sub-adviser, administrator or manager for any
other person, firm, or corporation, and shall not in any way
limit or restrict the Manager or any of its officers,
stockholders or employees from buying, selling or trading any
securities for its own or their own accounts or for the accounts
of others for whom it or they may be acting, provided, however,
that the Manager expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
(f) Order Allocation. In connection with any duties for
which it may become responsible to arrange for the purchase and
sale of the Fund's portfolio securities, the Manager shall
select, and shall cause any Sub-Adviser to select, such broker-
dealers ("dealers") as shall, in the Manager's judgment,
implement the policy of the Fund to achieve "best execution,"
i.e., prompt, efficient, and reliable execution of orders at the
most favorable net price. The Manager shall cause the Fund to
deal directly with the selling or purchasing principal or market
maker without incurring brokerage commissions unless the Manager
determines that better price or execution may be obtained by
paying such commissions; the Fund expects that most transactions
will be principal transactions at net prices and that the Fund
will incur little or no brokerage costs. The Fund understands
that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread
between the bid and asked prices. In allocating transactions to
dealers, the Manager is authorized and shall authorize any Sub-
Adviser, 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 Manager 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 Manager's
overall responsibilities. If, on the foregoing basis, the
transaction in question could be allocated to two or more
dealers, the Manager is authorized, in making such allocation, to
consider (i) whether a dealer has provided research services, as
further discussed below; and (ii) whether a dealer has sold
shares of the Fund. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic, or
institutional activities. The Fund recognizes that no dollar
value can be placed on such research services or on execution
services and that such research services may or may not be useful
to the Fund and may be used for the benefit of the Manager or its
other clients. The Manager shall cause the foregoing provisions,
in substantially the same form, to be included in any Sub-
Advisory Agreement.
(g) Registration Statement; Information. It is agreed that
the Manager shall have no responsibility or liability for the
accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933, except for
information supplied by the Manager for inclusion therein. The
Manager shall promptly inform the Fund as to any information
concerning the Manager appropriate for inclusion in such
Registration Statement, or as to any transaction or proposed
transaction which might result in an assignment of the Agreement.
(h) Liability for Error. The Manager shall not be liable
for any error in judgment or for any loss suffered by the Fund or
its security holders in connection with the matters to which this
Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Nothing in this
Agreement shall, or shall be construed to, waive or limit any
rights which the Fund may have under federal and state securities
laws which may impose liability under certain circumstances on
persons who act in good faith.
(j) Indemnification. The Fund shall indemnify the Manager
to the full extent permitted by the Fund's Declaration of Trust.
3. Allocation of Expenses
The Manager shall, at its own expense, provide office space,
facilities, equipment, and personnel for the performance of its
functions hereunder and shall pay all compensation of Trustees,
officers, and employees of the Fund who are affiliated persons of
the Manager.
The Fund agrees to bear the costs of preparing and setting
in type its prospectuses, statements of additional information
and reports to its shareholders, and the costs of printing or
otherwise producing and distributing those copies of such
prospectuses, statements of additional information and reports as
are sent to its shareholders. All costs and expenses not
expressly assumed by the Manager under this sub-section or
otherwise by the Manager, administrator or principal underwriter
or by any Sub-Adviser shall be paid by the Fund, including, but
not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and
expenses of its Trustees other than those affiliated with the
Manager or such adviser, administrator or principal underwriter;
(v) legal and audit expenses; (vi) custodian and transfer agent,
or shareholder servicing agent, fees and expenses; (vii) expenses
incident to the issuance of its shares (including issuance on the
payment of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or State
securities laws of the Fund or its shares; (ix) expenses of
preparing, printing and mailing reports and notices and proxy
material to shareholders of the Fund; (x) all other expenses
incidental to holding meetings of the Fund's shareholders; and
(xi) such non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligations for which
the Fund may have to indemnify its officers and Trustees.
4. Compensation of the Manager The Fund agrees to pay the
Manager, and the Manager agrees to accept as full compensation
for all services rendered by the Manager as such, an annual fee
payable monthly and computed on the net asset value of the Fund
as of the close of business each business day at the annual rate
of 0.50 of 1% of such net asset value provided, however, that for
any day that the Fund pays or accrues a fee under the
Distribution Plan of the Fund based upon the assets of the Fund,
the annual fee shall be payable at the annual rate of 0.40 of 1%
of such assets.
5. Termination of Sub-Advisory Agreement
The Sub-Advisory Agreement may provide for its termination
by the Manager upon reasonable notice, provided, however, that
the Manager agrees not to terminate the Sub-Advisory Agreement
except in accordance with such authorization and direction of the
Board of Trustees, if any, as may be in effect from time to time.
6. Duration and Termination of this Agreement
(a) Duration. This Agreement shall become effective on the
day it is approved by the shareholders of the Fund and shall,
unless terminated as hereinafter provided, continue in effect
until the December 31 next preceding the first anniversary of the
effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically
approved at least annually (1) by a vote of the Fund's Board of
Trustees, including a vote of a majority of the Trustees who are
not parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, with votes cast in person at a
meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote of
the Trustees.
(b) Termination. This Agreement may be terminated by the
Manager at any time without penalty upon giving the Fund sixty
days' written notice (which notice may be waived by the Fund) and
may be terminated by the Fund at any time without penalty upon
giving the Manager sixty days' written notice (which notice may
be waived by the Manager), provided that such termination by the
Fund shall be directed or approved by a vote of a majority of its
Trustees in office at the time or by a vote of the holders of a
majority (as defined in the Act) of the voting securities of the
Fund outstanding and entitled to vote. The portions of this
Agreement which relate to providing investment advisory services
(Sections 2(a), (c), (d) and (e)) shall automatically terminate
in the event of the assignment (as defined in the Act) of this
Agreement, but all other provisions relating to providing
services other than investment advisory services shall not
terminate, provided however, that upon such an assignment the
annual fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day shall be
reduced to the annual rate of 0.27 of 1% of such net asset value.
7. Disclaimer of Shareholder Liability
The Manager understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Manager
represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Fund.
8. Notices of Meetings
The Fund agrees that notice of each meeting of the
Board of Trustees of the Fund will be sent to the Manager and
that the Fund will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or
persons as the Manager may designate.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers and
their seals to be hereunto affixed, all as of the day and year
first above written.
ATTEST: TAX-FREE FUND FOR UTAH
________________________ By:___________________________________
ATTEST: AQUILA MANAGEMENT CORPORATION
_______________________ By:___________________________________
TAX-FREE FUND FOR UTAH
SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of October 31, 1997 by and between
AQUILA MANAGEMENT CORPORATION, a New York Corporation (the
"Manager"), 380 Madison Avenue, Suite 2300, New York, New York
10017 and FIRST SECURITY INVESTMENT MANAGEMENT, INC. (the "Sub-
Adviser"), 61 South Main Street - Fifth Floor, Salt Lake City,
Utah 84111
W I T N E S S E T H :
WHEREAS, Tax-Free Fund For Utah (the "Fund") is a
Massachusetts business trust which is registered under the
Investment Company Act of 1940 (the "Act") as an open-end, non-
diversified management investment company;
WHEREAS, the Manager has entered into an Advisory and
Administration Agreement as of the date hereof with the Fund (the
"Advisory and Administration Agreement") pursuant to which the
Manager shall act as investment adviser with respect to the Fund;
and
WHEREAS, pursuant to paragraph 2 of the Advisory and
Administration Agreement, the Manager wishes to retain the Sub-
Adviser for purposes of rendering investment advisory services to
the Manager in connection with the Fund upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Manager hereby appoints the Sub-Adviser to render, to
the Manager and to the Fund, investment research and advisory
services as set forth below under the supervision of the Manager
and subject to the approval and direction of the Board of
Trustees of the Fund. The Sub-Adviser shall, all as more fully
set forth herein, act as managerial investment adviser to the
Fund with respect to the investment of the Fund's assets, and
supervise and arrange the purchase of securities for and the sale
of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Sub-Adviser With Respect To
Investment of the Assets of the Fund
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Manager and the Board
of Trustees of the Fund, the Sub-Adviser shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund;
(iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of
pricing information satisfactory to the Fund and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund; and
(v) consult with the Manager in connection with its duties
hereunder.
(b) Any investment program furnished by the Sub-Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment
Company Act of 1940 (the "Act") and any rules or regulations in
force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (4) any policies and determinations
of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its registration statement
under the Act or as amended by the shareholders of the Fund.
(c) The Sub-Adviser shall give to the Manager and to the
Fund the benefit of its best judgment and effort in rendering
services hereunder, but the Sub-Adviser shall not be liable for
any loss sustained by reason of the adoption of any investment
policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been
based upon (i) its own investigation and research or (ii)
investigation and research made by any other individual, firm or
corporation, if such purchase, sale or retention shall have been
made and such other individual, firm or corporation shall have
been selected in good faith by the Sub-Adviser.
(d) Nothing in this Agreement shall prevent the Sub-Adviser
or any affiliated person (as defined in the Act) of the Sub-
Adviser from acting as investment adviser or manager for any
other person, firm or corporation and shall not in any way limit
or restrict the Sub-Adviser or any such affiliated person from
buying, selling or trading any securities for its own or their
own accounts or for the accounts of others for whom it or they
may be acting, provided, however, that the Sub-Adviser expressly
represents that, while acting as Sub-Adviser, it will undertake
no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(e) In connection with its duties to arrange for the
purchase and sale of the Fund's portfolio securities, the Sub-
Adviser shall select such broker-dealers ("dealers") as shall, in
the Sub-Adviser's judgment, implement the policy of the Fund to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Sub-
Adviser shall cause the Fund to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Sub-Adviser determines that better price
or execution may be obtained by paying such commissions; the Fund
expects that most transactions will be principal transactions at
net prices and that the Fund will incur little or no brokerage
costs. The Fund understands that purchases from underwriters
include a commission or concession paid by the issuer to the
underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Sub-Adviser is authorized
to consider, in determining whether a particular dealer will
provide best execution, the dealer's reliability, integrity,
financial condition and risk in positioning the securities
involved, as well as the difficulty of the transaction in
question, and thus need not pay the lowest spread or commission
available if the Sub-Adviser determines in good faith that the
amount of commission is reasonable in relation to the value of
the brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the Sub-
Adviser's overall responsibilities. If, on the foregoing basis,
the transaction in question could be allocated to two or more
dealers, the Sub-Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of the Fund. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes that
no dollar value can be placed on such research services or on
execution services and that such research services may or may not
be useful to the Fund and may be used for the benefit of the Sub-
Adviser or its other clients.
(f) The Sub-Adviser agrees to maintain, and to preserve for
the periods prescribed, such books and records with respect to
the portfolio transactions of the Fund as are required by
applicable law and regulation, and agrees that all records which
it maintains for the Fund on behalf of the Manager shall be the
property of the Fund and shall be surrendered promptly to the
Fund or the Manager upon request.
(g) The Sub-Adviser agrees to furnish to the Manager and to
the Board of Trustees of the Fund such periodic and special
reports as each may reasonably request.
(h) It is agreed that the Sub-Adviser shall have no
responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Sub-Adviser for inclusion therein. The Sub-Adviser shall
promptly inform the Fund as to any information concerning the
Sub-Adviser appropriate for inclusion in such Registration
Statement, or as to any transaction or proposed transaction which
might result in an assignment (as defined in the Act) of this
Agreement.
(i) The Sub-Adviser shall not be liable for any error in
judgment or for any loss suffered by the Fund or its security
holders in connection with the matters to which this Agreement
relates, except a loss resulting from wilful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Nothing in this Agreement shall, or
shall be construed to, waive or limit any rights which the Fund
may have under federal and state securities laws which may impose
liability under certain circumstances on persons who act in good
faith.
(j) To the extent that the Manager is indemnified under the
Fund's Declaration of Trust with respect to the services provided
hereunder by the Sub-Adviser, the Manager agrees to provide the
Sub-Adviser the benefits of such indemnification.
3. Allocation of Expenses
The Sub-Adviser shall bear all of the expenses it incurs in
fulfilling its obligations under this Agreement. In particular,
but without limiting the generality of the foregoing: the Sub-
Adviser shall furnish, at the Sub-Adviser's expense, all office
space, facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser,
administrator or principal underwriter of the Fund all necessary
financial information in connection with such adviser's,
administrator's or principal underwriter's duties under any
agreement between such adviser, administrator or principal
underwriter and the Fund. The Sub-Adviser will also pay all
compensation of the Fund's officers, employees, and Trustees, if
any, who are affiliated persons of the Sub-Adviser.
4. Compensation of the Sub-Adviser
The Manager agrees to pay the Sub-Adviser, and the Sub-
Adviser agrees to accept as full compensation for all services
rendered by the Sub-Adviser as such, a management fee payable
monthly and computed on the net asset value of the Fund as of the
close of business each business day at the annual rate of 0.23 of
1% of such net asset value.
5. Duration and Termination
(a) This Agreement shall become effective on the day it is
approved by the shareholders of the Fund and shall, unless
terminated as hereinafter provided, continue in effect until the
December 31 next preceding the first anniversary of the effective
date of this Agreement, and from year to year thereafter, but
only so long as such continuance is specifically approved at
least annually (1) by a vote of the Fund's Board of Trustees,
including a vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined in
the Act) of any such party, with votes cast in person at a
meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote of
the Trustees.
(b) This Agreement may be terminated by the Sub-Adviser at
any time without penalty upon giving the Manager and the Fund
sixty days' written notice (which notice may be waived). This
Agreement may be terminated by the Manager or the Fund at any
time without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-Adviser),
provided that such termination by the Fund shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Fund outstanding and
entitled to vote. This Agreement shall automatically terminate in
the event of its assignment (as defined in the Act) or the
termination of the Advisory and Administration Agreement.
6. Notices of Meetings
The Manager agrees that notice of each meeting of the Board
of Trustees of the Fund will be sent to the Sub-Adviser and that
Sub-Adviser will make appropriate arrangements for the attendance
(as persons present by invitation) of such person or persons as
the Sub-Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of the
day and year first above written.
ATTEST: AQUILA MANAGEMENT CORPORATION
___________________ By:______________________________
ATTEST: FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
___________________ By:_______________________________
DISTRIBUTION AGREEMENT
AGREEMENT, made as of the 22nd day of July, 1992,
by and between TAX-FREE FUND FOR UTAH (hereinafter called
the "Fund"), and AQUILA DISTRIBUTORS, INC. (hereinafter
called the "Distributor").
W I T N E S S E T H :
In consideration of the mutual covenants herein
contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and
between the parties hereto as follows:
1. The Distributor agrees to act as principal
underwriter and exclusive distributor of the shares of the
Fund. The price at which shares of the Fund are issued to
the public by the Distributor shall be as computed and
effective as set forth in the Prospectus and Statement of
Additional Information of the Fund current as of the time of
such sale (collectively, the "Current Prospectus"). The
Distributor is authorized to determine from time to time (i)
the sales charges forming part of the public offering price
and any dealer discount paid to dealers and any agency
commissions paid to brokers; (ii) the terms of any privilege
reducing or eliminating such sales charges; and (iii) the
terms of any sales agreement entered into by the Distributor
relating to the sale of the Fund's shares and the identity
of any broker or dealer with which such agreements are
entered into. The Fund agrees that it will promptly amend
or supplement the Current Prospectus in connection with any
change in any of the foregoing. The Distributor agrees to
bear the costs of printing and distributing all copies of
the Fund's prospectuses, statements of additional
information and reports to shareholders which are not sent
to the Fund's shareholders, as well as the costs of
supplemental sales literature, advertising and other
promotional activities.
2. The Fund agrees to issue shares of the Fund,
subject to the provisions of its Declaration of Trust and
By-Laws, to the Distributor as ordered by the Distributor,
but only to the extent that the Distributor shall have
received purchase orders therefor at the times and subject
to the conditions set forth in the Current Prospectus.
Certificates for shares need not be created or delivered by
the Fund in any case in which the purchase is made under
terms not calling for such certificates. Shares issued by
the Fund shall be registered in such name or names and
amounts as the Distributor may request from time to time and
all shares when so paid for and issued shall be fully paid
and non-assessable to the extent set forth in the Current
Prospectus.
3. The Distributor shall act as principal in all
matters relating to promotion of the growth of the Fund and
shall enter into all of its engagements, agreements and
contracts as principal on its own account. The title to
shares of the Fund issued and sold through the Distributor
shall pass directly from the Fund to the dealer or investor,
or shall, if the Distributor so consents, first pass to the
Distributor, as may from time to time be determined by the
Board of Trustees of the Fund.
4. The Fund hereby consents to any arrangements
whereby the Distributor may act as principal underwriter for
other investment companies or as principal underwriter,
sponsor or depositor for unit investment trusts and periodic
payment plan certificates issued thereby, or as investment
adviser, sub-adviser or administrator to the Fund or other
investment companies or persons. The Fund also consents to
the Distributor carrying on a business as a broker, dealer
and underwriter in securities and to carrying on any other
lawful business.
5. The Fund covenants and agrees that it will
not during the term of this Agreement, without the consent
of the Distributor, offer any shares of the Fund for sale
directly or through any person or corporation other than the
Distributor excepting only (a) the reinvestment of dividends
and/or distributions, or their declaration in shares of the
Fund, in optional form or otherwise; (b) the issuance of
additional shares through stock splits or stock dividends;
(c) sales of shares to another investment or securities
holding company in the process of purchasing all or a
portion of its assets; or (d) in connection with an exchange
of the Fund's shares for shares of another investment
company or securities holding company.
6. The Fund agrees to use its best efforts to
register from time to time under the Securities Act of 1933
adequate amounts of shares of the Fund for sale by the
Distributor to the public and to register or qualify, or to
permit the Distributor to register or qualify, such shares
for offering to the public in such States or other
jurisdictions as may be designated by the Distributor.
7. The Fund agrees to advise the Distributor of
the net asset value of the Fund's shares as often as
computed. The Fund will also furnish to the Distributor, as
soon as practicable, such information as may reasonably be
requested by the Distributor in order that it may know all
of the facts necessary to sell shares of the Fund.
8. The Distributor is familiar with the
Declaration of Trust and By-Laws of the Fund, each as
presently in effect. Insofar as they are applicable to the
Distributor as principal underwriter of the Fund, it will
comply with the provisions of the Declaration of Trust and
By-Laws of the Fund and with the provisions of all acts
administered by the Securities and Exchange Commission (the
"Commission") and rules thereunder.
9. This amended and restated Agreement shall go
into effect on the date first above written, and shall,
unless terminated as hereinafter provided, continue in
effect until the December 31 which next precedes the second
anniversary of the effective date of this Agreement, and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually as
provided in the Investment Company Act of 1940 (the "Act").
This Agreement shall automatically terminate in the event of
its assignment (as defined in the Act) and may be terminated
by either party on sixty days written notice to the other
party.
10. The Fund agrees with the Distributor, for the
benefit of the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of
the Securities Act of 1933 (the "Securities Act") and each
and all and any of them, to indemnify and hold harmless the
Distributor and any such controlling person from and against
any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject
under the Securities Act, under any other statute, at common
law or otherwise, and to reimburse the Distributor and such
controlling persons, if any, for any legal or other expenses
(including the cost of any investigation and preparation)
reasonably incurred by them or any of them in connection
with any litigation whether or not resulting in any
liability, insofar as such losses, claims, damages,
liabilities or litigation arise out of, or are based upon,
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, filed with the Commission, or any amendment
thereof or supplement thereto, or which arise out of, or are
based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided,
however, that this indemnity agreement shall not apply to
amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Fund or to
any such losses, claims, damages, liabilities or litigation
arising out of, or based upon, any untrue statement or
alleged untrue statement of a material fact contained in any
such Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, or arising out of, or based
upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, which statement
or omission was made in reliance upon information furnished
in writing to the Fund by the Distributor for inclusion in
any such Registration Statement or Prospectus or any
amendment thereof or supplement thereto. The Distributor
and each such controlling person shall, promptly after the
complaint shall have been served upon the Distributor or
such controlling person in respect of which indemnity may be
sought from the Fund on account of its agreement contained
in this paragraph, notify the Fund in writing of the
commencement thereof. The omission of the Distributor or
such controlling person so to notify the Fund of any such
litigation shall relieve the Fund from any liability which
it may have to the Distributor or such controlling person on
account of the indemnity agreement contained in this
paragraph, but shall not relieve the Fund from any liability
which it may have to the Distributor or controlling person
otherwise than on account of the indemnity agreement
contained in the paragraph. In case any such litigation
shall be brought against the Distributor or any such
controlling person and notice of the commencement thereof
shall have been given to the Fund, the Fund shall be
entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but
such defense shall be conducted by counsel of good standing
and satisfactory to the Distributor or such controlling
person or persons, defendant or defendants in the
litigation. The indemnity agreement of the Fund contained
in this paragraph shall remain operative and in full force
and effect regardless of any investigation made by or on
behalf of the Distributor or any such controlling person,
and shall survive any delivery of shares of the Fund. The
Fund agrees to notify the Distributor promptly of the
commencement of any litigation or proceeding against it or
any of its officers or directors of which it may be advised
in connection with the issue and sale of shares of the Fund.
11. Anything herein to the contrary
notwithstanding, the agreement in paragraph 10, insofar as
it constitutes a basis for reimbursement by the Fund for
liabilities (other than payment by the Fund of expenses
incurred or paid in the successful defense of any action,
suit or proceeding) arising under the Securities Act, shall
not extend to the extent of any interest therein of any
person who is an underwriter or a partner or controlling
person of an underwriter within the meaning of Section 15 of
the Securities Act or who, at the date of this Agreement, is
a Trustee of the Fund, except to the extent that an interest
of such character shall have been determined by a court of
appropriate jurisdiction as not against public policy as
expressed in the Securities Act. Unless in the opinion of
counsel for the Fund the matter has been adjudicated by
controlling precedent, the Fund, will, if a claim for such
reimbursement is asserted, submit to a court of appropriate
jurisdiction the question of whether or not such interest is
against the public policy as expressed in the Securities
Act.
12. The Distributor agrees to indemnify and hold
harmless the Fund and its Trustees and such officers as
shall have signed any Registration Statement filed with the
Commission from and against any and all losses, claims,
damages or liabilities, joint or several, to which the Fund
or such Trustees or officers may become subject under the
Securities Act, under any other statute, at common law or
otherwise, and will reimburse the Fund or such Trustees or
officers for any legal or other expenses (including the cost
of any investigation and preparation) reasonably incurred by
it or them or any of them in connection with any litigation,
whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out
of, or are based upon, any untrue statement or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, which statement or omission was made in
reliance upon information furnished in writing to the Fund
by the Distributor for inclusion in any Registration
Statement or any Prospectus, or any amendment thereof or
supplement thereto. The Distributor shall not be liable for
amounts paid in settlement of any such litigation if such
settlement was effected without its consent. The Fund and
its Trustees and such officers, defendant or defendants, in
any such litigation shall, promptly after the complaint
shall have been served upon the Fund or any such Trustee or
officer in respect of which indemnity may be sought from the
Distributor on account of its agreement contained in this
paragraph, notify the Distributor in writing of the
commencement thereof. The omission of the Fund or such
Trustee or officer so to notify the Distributor of any such
litigation shall relieve the Distributor from any liability
which it may have to the Fund or such Trustee or officer on
account of the indemnity agreement contained in this
paragraph, but shall not relieve the Distributor from any
liability which it may have to the Fund or such Trustee or
officer otherwise than on account of the indemnity agreement
contained in this paragraph. In case any such litigation
shall be brought against the Fund or any such Trustee or
officer and notice of the commencement thereof shall have
been so given to the Distributor, the Distributor shall be
entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but
such defense shall be conducted by counsel of good standing
and satisfactory to the Fund. The indemnity agreement of
the Distributor contained in this paragraph shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of the Trust and shall
survive any delivery of shares of the Fund. The Distributor
agrees to notify the Fund promptly of the commencement of
any litigation or proceeding against it or any of its
officers or directors or against any such controlling person
of which it may be advised, in connection with the issue and
sale of the Fund's shares.
13. Notwithstanding any provision contained in
this Agreement, no party hereto and no person or persons in
control of any party hereto shall be protected against any
liability to the Fund or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence, in the performance of their
duties, or by reason of their reckless disregard of their
obligations and duties under this Agreement.
14. The Fund shall immediately advise the
Distributor (a) when any post-effective amendment to its
Registration Statement or any further amendment or
supplement thereto or any further Registration Statement or
amendment or supplement thereto becomes effective, (b) of
any request by the Commission for amendments to the
Registration Statement or the then effective Prospectus or
for additional information, (c) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement, or the initiation of any
proceedings for that purpose, and (d) of the happening of
any event which makes untrue any material statement made in
the Registration Statement or the Current Prospectus or
which in the opinion of counsel for the Fund requires the
making of a change in the Registration Statement or the
Current Prospectus in order to make the statements therein
not misleading. In case of the happening at any time of any
event which materially affects the Fund or its securities
and which should be set forth in a supplement to or an
amendment of the then effective Prospectus in order to make
the statements therein not misleading the Fund shall prepare
and furnish to the Distributor such amendment or amendments
to the then effective Prospectus as will correct the
Prospectus so that as corrected it will not contain, or such
supplement or supplements to the then effective Prospectus
which when read in conjunction with the then effective
Prospectus will make the combined information not contain,
any untrue statement of a material fact or any omission to
state any material fact necessary in order to make the
statements in the then effective Prospectus not misleading.
The Fund shall, if at any time the Commission shall issue
any stop order suspending the effectiveness of the
Registration Statement, make every reasonable effort to
obtain the prompt lifting of such order.
15. Except as expressly provided in paragraphs 10
and 12 hereof, the agreements herein set forth have been
made and are made solely for the benefit of the Fund, the
Distributor, and the persons expressly provided for in
paragraphs 10 and 12, their respective heirs, successors,
personal representatives and assigns, and except as so
provided, nothing expressed or mentioned herein is intended
or shall be construed to give any person, firm or
corporation, other than the Fund, the Distributor, and the
persons expressly provided for in paragraphs 10 and 12, any
legal or equitable right, remedy or claim under or in
respect of this Agreement or any representation, warranty or
agreement herein contained. Except as so provided, the term
"heirs, successors, personal representatives and assigns"
shall not include any purchaser of shares merely because of
such purchase.
16. The Distributor understands that the
obligations of this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund's
property; the Distributor represents that it has notice of
the provisions of the Fund's Declaration of Trust
disclaiming shareholder liability for acts or obligations of
the Fund.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly
authorized officers and their seals to be affixed as of the
day and year first above written.
TAX-FREE FUND FOR UTAH
/s/Lacy B. Herrmann
By:________________________________
President
ATTEST:
Rose F. Marotta
__________________________
AQUILA DISTRIBUTORS, INC.
/s/Kenneth L. MacRitchie
By:________________________________
Kenneth L. MacRitchie
Asst. Secy.
ATTEST:
__________________________
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with brokerage firms)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
200 Park Avenue, Suite 4515
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you for sale and
distribution of the shares of any of the mutual funds of
which you are, or may become, Distributor (hereinafter
collectively referred to as the "Funds" and individually as
the "Fund"). Upon acceptance of this Agreement by you, we
understand that we may offer and sell shares of the Funds,
subject to all terms and conditions hereof and to your right
without notice to suspend or terminate the sale of shares of
any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold at the current offering price in effect as set
forth in each Fund's then current Prospectus (which term as
used herein includes any related Statement of Additional
Information). All purchase requests and applications
submitted by us are subject to acceptance or rejection as
set forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are a
foreign firm not eligible for membership in the NASD. In
any case, we and you agree to abide by all the rules and
regulations of the NASD concerning distribution of the
securities of open-end investment companies, including
without limitation, Section 26 of Article III of the NASD
Rules of Fair Practice, all of which are incorporated herein
as if set forth in full. We and you further agree to comply
with all applicable State and Federal laws and regulations.
We and you agree that we and you will sell or offer for sale
shares of the Funds only in those states or jurisdictions
whose laws permit the offers or sales in question, whether
or not such permission is dependent on registration or
qualification of the Funds or their shares under such laws.
3. We shall offer and sell shares of the Funds only in
accordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no
representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We agree
to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that such
shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws and
regulations. We agree to hold you and the Funds harmless
and to indemnify you and the Funds in the event that we, or
any of our sales representatives, violate any law or
regulation, or any provisions of this Agreement, which
violation may result in liability to you and/or any Fund;
and in the event you and/or such Fund determine to refund
any amounts paid by any investor by reason of any such
violation on our part, we shall return to you and/or such
Fund any commissions previously paid or discounts allowed by
you to us with respect to the transaction for which the
refund is made. All expenses which we incur in connection
with our activities under this Agreement will be borne by
us.
4. We understand and agree that the sales charge and dealer
commission relative to sales of shares of any Fund made by
us will be in an amount as set forth in the then current
Prospectus of such Fund or in separate written notice to us.
5. Payment for purchases of shares of any Fund made by wire
order from us will be received by you or such Fund within
five business days after the acceptance of our order or such
shorter time as may be required by law. If such payment is
not so received, we understand that you reserve the right,
without notice, forthwith to cancel the sale, or, at your
option, to sell the shares ordered by us back to such Fund,
in which latter case we may be held responsible for any
loss, including loss of profit, suffered by you and/or such
Fund resulting from our failure to make the aforesaid
payment. Where sales of shares of any Fund are contingent
upon such Fund's receipt of Federal funds in payment
therefor, we shall forward promptly to you any purchase
orders and payments received by us from investors.
6. We agree to purchase shares only from you or from our
customers. If we purchase shares from you, we agree that
all such purchases shall be made only to cover orders
received by us from our customers, or for our own bona fide
investment. If we purchase shares from our customers, we
agree to pay such customers not less than the applicable
redemption price as established by the then current
Prospectus.
7. Unless at the time of transmitting an order we advise
you to the contrary, you may consider the order to be the
total holding of the investor and assume that the investor
is not entitled to any reduction in sales price beyond that
accorded to the amount of the purchase as determined by the
schedule set forth in the then current Prospectus.
8. We understand and agree that if shares of any Fund sold
by us under the terms of this Agreement are redeemed by such
Fund (including redemptions resulting from an exchange for
shares of another investment company) or are repurchased by
you as agent for such Fund or are tendered to such Fund for
redemption within seven business days after the confirmation
to us of our original purchase order for such shares, we
shall pay forthwith to you the full amount of the commission
allowed to us on the original sale, provided you notify us
of such repurchase or redemption within ten days of the date
upon which written redemption requests (and, if applicable,
share certificates) are delivered to you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in
performing our services covered by this Agreement we are
acting as principal, and you are in no way responsible for
the manner of our performance or for any of our acts or
omissions in connection therewith. Nothing in this
Agreement shall be construed to constitute us or any of our
agents, employees or representatives as your agent, partner
or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. We agree that
you have and reserve the right, in your sole discretion
without notice, to suspend sales of shares of any one or
more of the Funds, or to withdraw entirely the offering of
shares of any one or more of the Funds, or, in your sole
discretion, to modify, amend, or cancel this Agreement upon
written notice to us of such modification, amendment, or
cancellation, which shall become effective on the date
stated in such notice. Without limiting the foregoing, you
may terminate this Agreement for cause on violation by us of
any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. Without limiting the foregoing, any provision
hereof to the contrary notwithstanding, our expulsion from
the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of
applicable State or Federal laws or regulations will
terminate this Agreement effective upon the date of your
mailing notice to us of such termination. Your failure to
terminate for any cause will not constitute a waiver of your
right to terminate at a later date for any such cause. All
notices hereunder will be to the respective parties at the
addresses listed hereon, unless changed by notice given in
accordance with this Agreement.
11. This Agreement will become effective when it is
executed and dated by you, and will be in substitution of
any prior agreement between you and us covering shares of
the Funds. This Agreement is not assignable or
transferable, except that you may assign or transfer this
Agreement to any successor firm or corporation which becomes
a principal underwriter of the Funds.
_________________________________
(name of brokerage firm)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19___
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with financial institutions)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
200 Park Avenue, Suite 4515
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you to make
available to our customers the shares of any of the funds of
which you are, or may become, Distributor (hereinafter
collectively referred to as the "Funds" or individually as
the "Fund") on a fully disclosed basis wherein you would
confirm transactions of our customers in such shares
directly to them. Upon acceptance of this Agreement by you,
we understand that we may make shares of the Funds available
to our customers, subject to all terms and conditions hereof
and to your right without notice to suspend or terminate the
sale of shares of any one or more of the Funds.
1. We understand that shares of the Funds will be offered
and sold by you at the current offering price in effect as
set forth in each Fund's then current Prospectus (which term
as used herein includes any related Statement of Additional
Information). All purchase requests and applications
submitted by us are subject to acceptance or rejection as
set forth in each Fund's then current Prospectus.
2. Each of us certifies (a) that the party in question is a
member of the National Association of Securities Dealers,
Inc. ("NASD") and agrees to maintain membership in the NASD,
or (b) in the alternative, in our case, that we are either
(i) a foreign firm not eligible for membership in the NASD,
or (ii) a bank, as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934. In any case, we and you
agree to abide by all applicable rules and regulations of
the NASD, including without limitation, Section 26 of
Article III of the NASD Rules of Fair Practice, all of which
are incorporated herein as if set forth in full. We and you
further agree to comply with all applicable State and
Federal laws and regulations. We and you agree that we and
you will make available for sale shares of the Funds only in
those states or jurisdictions whose laws so permit, whether
or not such permission is dependent on registration or
qualification of the Funds or their shares under such laws.
3. We shall make shares of the Funds available only in
accordance with the terms and conditions of the then current
Prospectus of each Fund, and we shall make no
representations not included in said Prospectus or in any
authorized supplemental material supplied by you. In no
transaction where we make shares of the Funds available to
our customers shall we have any authority to act as agent
for the Funds. The customers in question are for all
purposes our customers and not your customers. However, you
will be responsible for mailing each Fund's then current
Prospectus (not including the related Statement of
Additional Information) with the confirmations. You will
clear transactions for each of our customers only upon our
authorization, it being understood in all cases that (i) we
are acting as agent for the customer, (ii) the transactions
are without recourse against us by the customer except to
the extent that our failure to transmit orders in a timely
fashion results in a loss to our customer, (iii) our
customer will have full beneficial ownership of the shares,
(iv) each transaction is initiated solely upon the order of
the customer, and (v) each transaction is for the account of
the customer and not for our account. We agree to be
responsible for the proper instruction and training of all
personnel employed by us in this area, in order that such
shares will be offered in accordance with the terms and
conditions of this Agreement and all applicable laws and
regulations. We agree to hold you and the Funds harmless
and to indemnify you and the Funds in the event that we, or
any of such personnel, violate any law or regulation, or any
provisions of this Agreement, which violation may result in
liability to you and/or any Fund; and in the event you
and/or such Fund determine to refund any amounts paid by any
investor by reason of any such violation on our part, we
shall return to you and/or such Fund any agency commissions
previously paid to us with respect to the transaction for
which the refund is made. All expenses which we incur in
connection with our activities under this Agreement will be
borne by us.
4. We understand and agree that the sales charge to the
customer and the agency commission payable to us relative to
sales of shares of any Fund made by us will be in an amount
as set forth in the then current Prospectus of such Fund or
in separate written notice to us.
5. Payment for purchases by our customers of shares of any
Fund made by wire order from us will be received by you or
such Fund within five business days after the acceptance of
our order or such shorter time as may be required by law.
If such payment is not so received, we understand that you
reserve the right, without notice, forthwith to cancel the
sale, or, at your option, to sell the shares ordered by us
back to such Fund, in which latter case we may be held
responsible for any loss, including loss of profit, suffered
by you and/or such Fund resulting from our failure to make
the aforesaid payment. Where sales of shares of any Fund
are contingent upon such Fund's receipt of Federal funds in
payment therefor, we shall forward promptly to you any
purchase orders and payments received by us from our
customers.
6. We agree to make shares available to our customers only
(a) at the public offering price (except as provided in
Paragraph 12 hereunder), (b) from you, and (c) to cover
orders already received from our customers. We shall not
withhold placing with you orders received from our customers
so as to profit ourselves as a result of such withholding;
e.g., by a change in the net asset value from that used in
determining the public offering price to our customers.
7. Unless at the time of transmitting an order we advise you
to the contrary, you may consider the order to be the total
holding of the investor and assume that the investor is not
entitled to any reduction in sales price beyond that
accorded to the amount of the purchase as determined by the
schedule set forth in the then current Prospectus. If we
make shares available to our customers as provided in
Paragraph 12 hereunder, we shall so indicate to you at the
time of transmitting such order.
8. We understand and agree that if any shares sold to our
customers under the terms of this Agreement are redeemed by
any Fund (including redemptions resulting from an exchange
for shares of another investment company) or are repurchased
by you as agent for such Fund or are tendered to such Fund
for redemption within seven business days after the
confirmation to our customers of our original purchase order
for such shares, we shall pay forthwith to you the full
amount of the commission allowed to us on the original sale,
provided you notify us of such repurchase or redemption
within ten days of the date upon which written redemption
requests (and, if applicable, share certificates) are
delivered to you or to such Fund.
9. Your obligations to us under this Agreement are subject
to all the provisions of any agreements entered into between
you and the Funds. We understand and agree that in
performing our services covered by this Agreement we are
acting as agent for our customers, and you are in no way
responsible for the manner of our performance or for any of
our acts or omissions in connection therewith. Nothing in
this Agreement shall be construed to constitute us or any of
our agents, employees or representatives as your agent,
partner or employee, or as the Funds' agent or employee.
10. We may terminate this Agreement by notice in writing to
you, which termination shall become effective thirty days
after the date of mailing such notice to you. However, our
termination of this Agreement will not terminate our
responsibilities under sections (iv) and (v) of Paragraph 12
hereunder. We agree that you have and reserve the right, in
your sole discretion without notice, to suspend sales of
shares of any one or more of the Funds, or to withdraw
entirely the offering of shares of any one or more of the
Funds, or, in your sole discretion, to modify, amend, or
cancel this Agreement upon written notice to us of such
modification, amendment, or cancellation, which shall become
effective on the date stated in such notice. Without
limiting the foregoing, you may terminate this Agreement for
cause on violation by us of any of the provisions of this
Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Without
limiting the foregoing, any provision hereof to the contrary
notwithstanding, our expulsion from the NASD, if we are a
member of the NASD, will automatically terminate this
Agreement without notice; our suspension from the NASD, if
we are a member of the NASD, or violation of applicable
State or Federal laws or regulations (whether or not we are
a member of the NASD) will terminate this Agreement
effective upon the date of your mailing notice to us of such
termination. Your failure to terminate for any cause will
not constitute a waiver of your right to terminate at a
later date for any such cause. All notices hereunder will
be to the respective parties at the addresses listed hereon,
unless changed by notice given in accordance with this
Agreement.
11. This Agreement will become effective when it is executed
and dated by you, and will be in substitution of any prior
agreement between you and us covering shares of the Funds.
This Agreement is not assignable or transferable, except
that you may assign or transfer this Agreement to any
successor firm or corporation which becomes a principal
underwriter of the Funds.
12. We may make shares of the Funds available to our
customers at the next determined net asset value of such
shares under the following circumstances: (i) each such
purchase order is on behalf of a trust, agency, or custodial
client, (ii) we have, as to each such purchase order,
discretionary investment responsibility over the assets in
question, (iii) the relationship between the us and the
client was not formed solely for the purpose of purchasing
shares of any Fund at net asset value, (iv) the shares
purchased pursuant to such purchase order will not be resold
except by redemption, (v) there is no charge relating to
such purchase other than our normal service charge, and (vi)
we may disclose the name of any Fund to the client without
your consent.
_________________________________
(name of financial institution)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19__
Revised 2/94
AQUILA DISTRIBUTORS, INC.
SALES AGREEMENT
(for use with investment advisers)
From:
____________________________
____________________________
____________________________
To:
Aquila Distributors, Inc.
380 Madison Avenue, Suite 2300
New York, N.Y. 10017
Gentlemen:
We desire to enter into an agreement with you to make available
to our clients the shares of any of the funds of which you are,
or may become, Distributor (hereinafter collectively referred to
as the "Funds" or individually as the "Fund") on a fully
disclosed basis wherein you would confirm transactions of our
clients in such shares directly to them. Upon acceptance of this
Agreement by you, we understand that we may make shares of the
Funds available to our clients, subject to all terms and
conditions hereof and to your right without notice to suspend or
terminate the sale of shares of any one or more of the Funds.
1. We understand that shares of the Funds will be offered and
sold by you at the current net asset value in effect as set forth
in each Fund's then current Prospectus (which term as used herein
includes any related Statement of Additional Information). All
purchase requests and applications submitted by us are subject to
acceptance or rejection as set forth in each Fund's then current
Prospectus.
2. We certify that we are an investment adviser, registered with
the Securities and Exchange Commission under the Investment
Advisers Act of 1940 and registered under relevant state
statutes; we furthermore undertake to maintain such
registrations. You certify that you are a broker-dealer,
registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, registered with the National
Association of Securities Dealers, Inc., and registered under
relevant state statutes; you furthermore undertake to maintain
such registrations. We and you further agree to comply with all
applicable statutes and regulations. We and you agree that we
and you will make available for sale shares of the Funds only in
those states or jurisdictions whose laws so permit, whether or
not such permission is dependent on registration or qualification
of the Funds or their shares under such laws.
3. We shall make shares of the Funds available only in accordance
with the terms and conditions of the then current Prospectus of
each Fund, and we shall make no representations not included in
said Prospectus or in any authorized supplemental material
supplied by you. In no transaction where we make shares of the
Funds available to our clients shall we have any authority to act
as agent for the Funds. The clients in question are for all
purposes our clients and not your clients. However, you will be
responsible for mailing each Fund's then current Prospectus (not
including the related Statement of Additional Information) with
the confirmations. You will clear transactions for each of our
clients only upon our authorization, it being understood in all
cases that (i) we are acting as agent for the client, (ii) the
transactions are without recourse against us by the client, (iii)
our client will have full beneficial ownership of the shares, and
(iv) each transaction is for the account of the client and not
for our account. We agree to be responsible for the proper
instruction and training of all personnel employed by us in this
area, in order that such shares will be offered in accordance
with the terms and conditions of this Agreement and all
applicable laws and regulations. We agree to hold you and the
Funds harmless and to indemnify you and the Funds in the event
that we, or any of such personnel, violate any law or regulation,
or any provisions of this Agreement, which violation may result
in liability to you and/or any Fund. All expenses which we incur
in connection with our activities under this Agreement will be
borne by us.
4. Payment for purchases by our clients of shares of any Fund
made by wire order from us will be received by you or such Fund
within five business days after the acceptance of our order or
such shorter time as may be required by law. If such payment is
not so received, we understand that you reserve the right,
without notice, forthwith to cancel the sale, or, at your option,
to sell the shares ordered by us back to such Fund, in which
latter case we may be held responsible for any loss, including
loss of profit, suffered by you and/or such Fund resulting from
our failure to make the aforesaid payment. Where sales of shares
of any Fund are contingent upon such Fund's receipt of Federal
funds in payment therefor, we shall forward promptly to you any
purchase orders and payments received by us from our clients.
5. We agree to make shares available to our clients only (a) at
the net asset value, (b) from you, and (c) to cover orders
already received from our clients. We shall not withhold placing
with you orders received from our clients so as to profit
ourselves as a result of such withholding; e.g., by a change in
the net asset value from that used in determining the net asset
value to our clients.
6. Your obligations to us under this Agreement are subject to all
the provisions of any agreements entered into between you and the
Funds. We understand and agree that in performing our services
covered by this Agreement we are acting as agent for our clients,
and you are in no way responsible for the manner of our
performance or for any of our acts or omissions in connection
therewith. Nothing in this Agreement shall be construed to
constitute us or any of our agents, employees or representatives
as your agent, partner or employee, or as the Funds' agent or
employee.
7. We may terminate this Agreement by notice in writing to you,
which termination shall become effective thirty days after the
date of mailing such notice to you. However, our termination of
this Agreement will not terminate our responsibilities under
sections (iv) and (v) of Paragraph 9 hereunder. We agree that
you have and reserve the right, in your sole discretion without
notice, to suspend sales of shares of any one or more of the
Funds, or to withdraw entirely the offering of shares of any one
or more of the Funds, or, in your sole discretion, to modify,
amend, or cancel this Agreement upon written notice to us of such
modification, amendment, or cancellation, which shall become
effective on the date stated in such notice. Without limiting
the foregoing, you may terminate this Agreement for cause on
violation by us of any of the provisions of this Agreement, said
termination to become effective on the date of mailing notice to
us of such termination. Your failure to terminate for any cause
will not constitute a waiver of your right to terminate at a
later date for any such cause. All notices hereunder will be to
the respective parties at the addresses listed hereon, unless
changed by notice given in accordance with this Agreement.
8. This Agreement will become effective when it is executed and
dated by you, and will be in substitution of any prior agreement
between you and us covering shares of the Funds. This Agreement
is not assignable or transferable, except that you may assign or
transfer this Agreement to any successor firm or corporation
which becomes a principal underwriter of the Funds.
9. We agree that (i) each purchase order is on behalf of an
investment advisory client, (ii) the relationship between us and
the client was not formed solely for the purpose of purchasing
shares of any Fund at net asset value, (iii) the shares purchased
pursuant to such purchase order will not be resold except by
redemption, (iv) there is no charge relating to such purchase
other than our normal service charge, and (v) we may disclose the
name of any Fund to the client without your consent.
_________________________________
(name of investment adviser)
By:______________________________
(signature of officer)
_________________________________
(name and title of officer)
_________________________________
(telephone number)
Accepted:
Aquila Distributors, Inc.
By:________________________
(signature of officer)
___________________________
(name and title of officer)
Dated:______________, 19__
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of March 30, 1995, by and between
TAX-FREE FUND FOR UTAH, a business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust"), and BANK ONE
TRUST COMPANY, N.A., a banking company organized under the laws of
the United States (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that Securities and cash of the
Trust be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to
time serving under the Trust's Declaration of Trust, dated December
12, 1990, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form of
such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Fund computes the net asset value of the Fund.
1.5 "Fund" shall mean any of the individual investment
portfolios of the Trust, including any additional portfolios
hereafter created, as each are or will be identified in Exhibit A
hereto; provided, however, that in the event that the Trust
consists of only one such portfolio, "Fund" shall refer to the
Trust.
1.6 "NASD" shall mean The National Association of Securities
Dealers, Inc.
1.7 "Officer" shall mean the President, any Senior Vice
President, Vice President or Assistant Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer,
the Treasurer, or any Assistant Treasurer of the Trust.
1.8 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to have
been given by an Authorized Person, (ii) recorded and kept among
the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to
confirm them, the Custodian shall notify the Trust of such variance
but such Oral Instructions will govern unless the Custodian has not
yet acted.
1.9 "Custody Account" shall mean any account in the name of
a Fund, which is provided for in Section 3.2 below, or of the
Trust.
1.10 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.11 "Securities Depository" shall mean The Participants Trust
Company or The Depository Trust Company and (provided that the
Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the
use of such clearing agency as a depository for the Trust) any
other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of
1934 (the "1934 Act"), which acts as a system for the central
handling of Securities where all Securities of any particular class
or series of an issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.12 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options, debentures,
notes, bank certificates of deposit, bankers' acceptances,
mortgage-backed securities, other money market instruments or other
obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that
the Custodian has the facilities to clear and to service.
1.13 "Shares" shall mean the units of beneficial interest
issued by the Trust.
1.14 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by one
or more persons as the Board of Trustees shall have from time to
time authorized, or (ii) communications by telex or any other such
system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to the
Custodian and approved by resolutions of the Board of Trustees, a
copy of which, certified by an Officer, shall have been delivered
to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or
in the possession of the Trust at any time during the period of
this Agreement, provided that such Securities or cash at all times
shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund, except Securities
maintained in a Securities Depository or Book-Entry System, shall
be physically segregated from other Securities and non-cash
property in the possession of the Custodian and shall be identified
as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain
in its trust department a custody account in the name of each Fund,
subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other
assets of the Fund which are delivered to it.
3.3 Appointment of Agents. Subject to the continuing
approval of the Board of Trustees, the Custodian may appoint, and
at any time remove, any domestic bank or trust company, and is
qualified to act as a custodian under the 1940 Act, as sub-
custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such
a bank or trust company (any such accounts to be in the name of the
Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent shall not relieve
the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver,
or cause to be delivered, to the Custodian all of the Fund's
Securities, cash and other assets, including (a) all payments of
income, payments of principal and capital distributions received by
the Fund with respect to such Securities, cash or other assets
owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until
actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit
in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use
of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and
returns of collateral consisting of Securities.
(b) Securities of a Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes only
assets held by the Custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian and the Custodian's account
on the books of the Book-Entry System and Securities
Depository as the case may be, with respect to Securities
of a Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry or otherwise, identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice
from the Book-Entry System or Securities Depository that
such Securities have been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund
are held in a Book-Entry System or Securities Depository,
the Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities
has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Fund.
(e) Upon request, the Custodian shall provide the Fund with
copies of any report (obtained by the Custodian from a
Book-Entry System or Securities Depository in which
Securities of the Fund is kept) on the internal
accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of the
Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-
Entry System or Securities Depository. At its election,
the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry
System or Securities Depository or any other person for
any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and
to the extent that the Custodian has been made whole for
any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from a Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or any
sub-custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9
below in proper form for transfer, or if the purchase of
such Securities is effected through a Book-Entry System
or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and
options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title
thereto in favor of the Trust or any nominee referred to
in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the
Trust and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System
or Securities Depository for the account of the Fund with
such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned
by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Trust, including but not limited to the following
payments for the account of a Fund: interest; taxes;
administration, investment management, investment
advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating
expenses of a Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from a Custody Account but only in the following
cases:
(a) Upon the sale of Securities for the account of a Fund but
only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with
tender or other similar offers for Securities of a Fund;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to
the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by a Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of a Fund, but only against receipt of such collateral as
the Trust shall have specified to the Custodian in Proper
Instructions;
(j) For delivery as security in connection with any
borrowings by the Trust on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt
by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Trust
on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits
in connection with transactions by the Trust on behalf of
a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of
a resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with respect
to all Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Trust is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.9 Registration and Transfer of Securities. All Securities
held for a Fund that are issued or issuable only in bearer form
shall be held by the Custodian in that form, provided that any such
Securities shall be held in a Book-Entry System for the account of
the Trust on behalf of a Fund, if eligible therefor. All other
Securities held for a Fund may be registered in the name of the
Trust on behalf of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided,
however, that such Securities are held specifically for the account
of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name
of any of the nominees hereinabove referred to or in the name of a
Book-Entry System or Securities Depository, any Securities
registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund,
complete and accurate records with respect to Securities, cash or
other property held for the Trust, including (i) journals or other
records of original entry containing an itemized daily record in
detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and
Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of
the Trust as the Trust shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 31
and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be
maintained by Rule 31a-1 under the 1940 Act, be preserved for the
periods prescribed in Rule 31a-2 under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement by Fund and a summary of
all transfers to or from the Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement, by
Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide
the Trust with such reports, as the Trust may reasonably request
from time to time, on the internal accounting controls and
procedures for safeguarding Securities, which are employed by the
Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies, if any, relating to Securities which are not
registered in the name of a Fund, to be promptly executed by the
registered holder of such Securities, without indication of the
manner in which such proxies are to be voted, and shall include all
other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, and all notices to the
holders of such Securities.
3.14 Information on Corporate Actions. The Custodian will
promptly notify the Trust of corporate actions, limited to those
Securities registered in nominee name and to those Securities held
at a Depository or sub-Custodian acting as agent for the Custodian.
The Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Card Service, J.J.
Kenny's Munibase System, Depository Trust Reorganization Notices,
Xcitek Inc., Standard & Poor's Called Bond Listing or The Wall
Street Journal or received by first class mail from the agent. For
market announcements not yet received and distributed by the
Custodian's services, the Trust will inform its custody
representative with appropriate instructions. The Custodian will,
upon receipt of the Trusts's response within the required deadline,
effect such action for receipt or payment for the Trust. For those
responses received after the deadline, the Custodian will effect
such action for receipt or payment, subject to the limitations of
the agent(s) effecting such actions. The Custodian will promptly
notify the Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide or cause
to be provided to the Custodian with all relevant information
contained in the prospectus for any security which has unique
put/option provisions and provide the Custodian with specific
tender instructions at least ten business days prior to the
beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Trust, Written Instructions shall be delivered
to the Custodian, specifying (a) the Fund making the purchase, (b)
the name of the issuer or writer of such Securities, and the title
or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any) or other units purchased, (d)
the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the
name of the person to whom such amount is payable. The Custodian
shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein.
The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Fund, if in the
relevant Custody Account there is insufficient cash available to
the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of
Securities for a Fund is made by the Custodian in advance of
receipt for the account of the Fund of the Securities purchased but
in the absence of specific Written or Oral Instructions to so pay
in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by a Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the Fund making the purchase, (b) the
name of the issuer or writer of such Securities, and the title or
other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the
date of sale and settlement (e) the sale price per unit, (f) the
total amount payable upon such sale, and (g) the person to whom
such Securities are to be delivered. Upon receipt of the total
amount payable to the Trust as specified in such Written
Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall
be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3
above or any other provision of this Agreement, the Custodian, when
instructed to deliver Securities against payment, shall be
entitled, if so directed in Written Instructions and if in
accordance with generally accepted market practice, to deliver such
Securities prior to actual receipt of final payment therefor. In
any such case, the Trust shall bear the risk that final payment for
such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person
to whom they were delivered, and the Custodian shall have no
liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion
and from time to time, the Custodian may credit the relevant
Custody Account, prior to actual receipt of final payment thereof,
with (i) proceeds from the sale of Securities which it has been
instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii)
income from cash, Securities or other assets of the Trust. Any
such credit shall be conditional upon actual receipt by the
Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt
of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual
receipt of all final payments in anticipation of which funds were
credited to the Custody Account.
4.6 Advances by Custodian for Settlement. If the Custodian
should, in its sole discretion, advance funds to the Trust to
facilitate the settlement of transactions on behalf of a Fund in
its Custody Account, then such advance shall be repayable
immediately upon demand made by the Custodian and shall bear
interest from the date incurred at a rate per annum (based on a
360-day year from the actual number of days involved) equal to 1%
over the Federal Funds rate in effect from time to time as
announced by The Wall Street Journal under the section entitled
Money Rates, or any successor title, such rate to be adjusted on
the effective date of any changes in such rate.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the relevant Custody Account, and upon receipt
of Proper Instructions specifying that the funds are required to
redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not
be under any obligation to effect payment or distribution by any
bank designated in Proper Instructions given pursuant to Section
5.1 above of any amount paid by the Custodian to such bank in
accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of and in conformity with Proper Instructions,
the Custodian shall establish and maintain a segregated account or
accounts for and on behalf of each Fund, into and from which
account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Trust,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities made
by a Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees,
certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust for any
loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages, cost,
expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not
be under any obligation at any time to ascertain whether the Trust
is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be custodian of, any cash belonging to
the Trust or any money represented by a check, draft or other
instrument for the payment of money, until the Custodian or its
agents actually receive such cash or collect on such instrument.
7.3 No Responsibility for title, etc. So long as and to the
extent that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received or delivered by
it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. The Custodian shall not
be required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Trust if such Securities are in default or payment is
not made after due demand or presentation. The Custodian shall
inform the Trust promptly of any such default or failure to make
payment.
7.5 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
Oral Instructions and/or any Written Instructions actually received
by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties
or obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
7.7 Cooperation. The Custodian shall cooperate with and
supply necessary information to the entity or entities appointed by
the Trust to keep the books of account of the Trust and/or compute
the value of the assets of the Trust. The Custodian shall take all
such reasonable actions as the Trust may from time to time request
to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to
the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's filings on Form N-1A and Form N-SAR and
any other reports required by the Securities and Exchange
Commission, and (b) the fulfillment by the Trust of any other
requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant to
Section 3.3 above, and any nominee of the Custodian or of such sub-
custodian from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
or foreign securities and/or banking laws) or claim arising
directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any action
or inaction by the Custodian or such sub-custodian (i) at the
request or direction of or in reliance on the advice of the Trust,
or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-
custody agreement with a sub-custodian appointed pursuant to
Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement,
provided that neither the Custodian nor any such sub-custodian
shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the
Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which may,
in the opinion of the Custodian, result in the Custodian or its
nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any
failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its
reasonable control as may cause interruption, loss or malfunction
of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes, acts of
civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay
shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective
as of the date first set forth above and shall continue in full
force and effect until terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of the giving of such notice.
If a successor custodian shall have been appointed by the Board of
Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Trust and held by
the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or
for the benefit of the Trust at the successor custodian, provided
that the Trust shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall
then be entitled. Upon such delivery and transfer, the Custodian
shall be relieved of all obligations under this Agreement. The
Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
Custodian by regulatory authorities in the State of Ohio or upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, and (c) is doing business in New York, New
York, all Securities, cash and other property held by the Custodian
under this Agreement and to transfer to an account of or for the
Trust at such bank or trust company all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall be
relieved of all obligations under this Agreement. If, after
reasonable inquiry, the Custodian cannot find a successor custodian
as contemplated in this Section 10.3, then the Custodian shall have
the right to deliver to the Trust all Securities and cash then
owned by the Trust and to transfer any Securities held in a Book-
Entry System or Securities Depository to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own
custodian with respect to the Trust and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon
from time to time by the Trust and the Custodian. The fees and
other charges in effect on the date hereof and applicable to the
Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts and under a Declaration of Trust, to
which reference is hereby made a copy of which is on file at the
office of the Secretary of State of Massachusetts as required by
law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of the Trust entered into in the name of
the Trust or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons
dealing with any of the Funds of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given to a party
hereunder shall be in writing and shall be sent or delivered to the
party at the address set forth after its name herein below:
To the Trust:
TAX-FREE FUND FOR UTAH
380 Madison Avenue
New York, NY 10017
Attn: Mr. Richard F. West, Treasurer and Mr.
William Killeen, Senior Operations
Officer
Telephone: (212)-697-6666
Facsimile: (212)-687-5373
To the Custodian:
BANK ONE TRUST COMPANY, N.A.,
100 East Broad Street
Columbus, OH 43271-0187
Attention: Mr. Robert F. Schultz, Senior Trust
Officer
Telephone: (614)-248-5445
Facsimile: (614)-248-2554
or at such other address as either party shall have provided to the
other by notice given in accordance with this Article XIII.
Writing shall include transmission by or through teletype,
facsimile, central processing unit connection, on-line terminal and
magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 No Waiver. No failure by either party hereto to exercise
and no delay by such party in exercising, any right hereunder shall
operate as a waiver thereof. The exercise by either party hereto
of any right hereunder shall not preclude the exercise of any other
right, and the remedies provided herein are cumulative and not
exclusive of any remedies provided at law or in equity.
14.3 Amendments. This Agreement cannot be changed orally and
no amendment to this Agreement shall be effective unless evidenced
by an instrument in writing executed by the parties hereto.
14.4 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.5 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.6 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without
the written consent of the other party hereto.
14.7 Headings. The headings of sections in this Agreement are
for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its
behalf by its representatives thereunto duly authorized, all as of
the day and year first above written.
ATTEST: TAX-FREE FUND FOR UTAH
/s/Patricia A. Craven /s/Lacy B. Herrmann
_____________________ By: ______________________
Assistant Secretary President
ATTEST: BANK ONE TRUST COMPANY, N.A.
/s/Beth Hayes /s/Robert F. Schultz
______________________ By: _______________________
Senior Trust Officer
<PAGE>
EXHIBIT A
Name of Fund Date Added (if
(if different from different from
the Trust date of original
Custody Agreement
<PAGE>
EXHIBIT B
I, Richard F. West, Treasurer, and I, Patricia Craven, Assistant
Secretary, of TAX-FREE FUND FOR UTAH, a Massachusetts business
trust (the "Fund"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Fund in conformity with the Fund's Declaration of
Trust and By-Laws to give Oral Instructions and Certificate on
behalf of the Fund, and the signatures set forth opposite their
respective names are their true and correct signatures:
NAME SIGNATURE
/s/Lacy B. Herrmann
Lacy B. Herrmann _____________________________
Rose F. Marotta _____________________________
/s/Richard F. West
Richard F. West _____________________________
/s/William C. Wallace
William C. Wallace _____________________________
/s/Diana P. Herrmann
Diana P. Herrmann _____________________________
/s/Charles E. Childs III
Charles E. Childs III _____________________________
/s/John M. Herndon
John M. Herndon _____________________________
/s/William Killeen
William Killeen _____________________________
/s/Patricia A. Craven
Patricia A. Craven _____________________________
/s/Richard F. West /s/Patricia A. Craven
________________________ _____________________________
Richard F. West, Patricia A. Craven,
Treasurer Assistant Secretary
<PAGE>
EXHIBIT C
Compensation of Custodian - Bond Funds
Whereas Article XI of the Custody Agreement between Tax-Free Fund
For Utah and Bank One Trust Company, N.A. stipulates that the
compensation of Custodian shall be agreed upon by the Trust and
Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to
the following schedule:
I. Annual Holding Fee:
.00006 times the market value of assets held
II. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction "
includes, but is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit,
withdrawal, and collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement,
overdraft charges will be at 100 basis points above the
Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate
applied to 90% of each day's positive collected balance will reduce
custody, FDIC and other fees as allowed by law. For each month
that the charges exceed the earnings credit, the deficiency shall
be paid to Custodian. For each month that the earnings credit
exceeds the charges, the Custodian shall carry such surplus credits
forward to subsequent month(s) and calendar year(s) until utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to
be exceptional.
The above fee schedule will remain in effect until March 31, 1998
and thereafter unless changed.
As stated by the Custodian in bidding to provide custody services
to the Fund, if at any time the Fund is not completely satisfied
with the Custodian's service levels, the Custodian will cease to
charge custody fees until its responsiveness and accuracy meet the
requirements of the Fund.
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 22nd day of July, 1992, by
and between TAX-FREE FUND FOR UTAH, an unincorporated business
trust organized under the laws of Massachusetts (the "Fund"), and
ADMINISTRATIVE DATA MANAGEMENT CORP., a corporation organized and
existing under the laws of the State of New York ("ADM").
R E C I T A L S
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act") currently offering one class of
shares (the "Shares"); and
WHEREAS, the Fund desires to retain ADM to serve as the
Fund's transfer agent, registrar and dividend disbursing agent,
and ADM is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints ADM to serve as
transfer agent, registrar and dividend disbursing agent for the
Fund, for the period and on the terms set forth in this
Agreement. ADM accepts such appointment and agrees to furnish
the services herein set forth in return for the compensation as
provided for in Paragraph 15 of this Agreement.
2. Delivery of Documents. (a) The Fund has furnished ADM
with copies properly certified or authenticated of each of the
following:
(i) Resolutions of the Fund's Board of Trustees
authorizing the execution of this Agreement;
(ii) Appendix B identifying and containing the
signatures of the Fund's officers and other persons authorized to
sign Written Instructions and give Oral Instructions, each as
hereinafter defined, on behalf of the Fund;
(iii) The Fund's Declaration of Trust filed with the
Secretary of State of the Commonwealth of Massachusetts and all
amendments thereto (such Declaration of Trust, as presently in
effect and as it shall from time to time be amended, is herein
called the "Declaration");
(iv) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time
to time be amended, are herein called the "By-Laws");
(v) The Fund's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended (the "1933 Act") and
under the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
(vi) The Fund's most recent prospectus and statement
of additional information (such prospectus and statement of
additional information, as from time to time in effect and all
amendments and supplements thereto are herein called the
"Prospectus").
(b) ADM has furnished the Fund with copies properly
certified or authenticated its Registration Statement on Form TA-
1 under the Securities Exchange Act of 1934, as amended and all
annual or other public reports filed with the SEC as may be
requested by the Fund.
(c) Each party from time to time will furnish the
other with copies, properly certified or authenticated, of all
amendments or supplements to the foregoing, if any. Neither
party is obligated hereby to provide the other with otherwise
confidential information.
3. Definitions.
(a) "Authorized Person". As used in this Agreement,
the term "Authorized Person" means the Fund's officers and other
persons duly authorized by the Board of Trustees of the Fund to
give Oral and Written Instructions on behalf of the Fund and
listed on the Certificate annexed hereto as Appendix B or any
amendment thereto as may be received by ADM from time to time.
(b) "Oral Instructions". As used in this Agreement,
the term "Oral Instructions" means verbal instructions actually
received by ADM from an Authorized Person or from a person
reasonably believed by ADM to be an Authorized Person. The Fund
agrees to deliver to ADM Written Instructions confirming Oral
Instructions.
(c) "Written Instructions". As used in this
Agreement, the term "Written Instructions" means written
instructions delivered by mail, telegram, cable, telex or
facsimile sending device, and received by ADM and signed by an
Authorized Person or reasonably believed by ADM to have been
signed by or authorized by an Authorized Person unless otherwise
required by a resolution of the Board of Trustees furnished to
ADM pursuant to Section 2(a) hereof.
4. Instructions Consistent with Declaration, etc.
(a) Unless otherwise provided in this Agreement, ADM
shall act only upon Oral or Written Instructions. Although ADM
may take cognizance of the provisions of the Declaration and By-
Laws of the Fund, the Fund's Prospectus and the laws, rules and
regulations applicable to the Fund, ADM may assume that any Oral
or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Declaration or By-Laws,
the Fund's Prospectus or with any laws, rules or regulations
applicable to the Fund or any vote, resolution or proceeding of
the Shareholders, or of the Board of Trustees, or of any
committee thereof.
(b) ADM shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually received by
ADM pursuant to this Agreement and shall have no liability for
any action which it takes or omits in accordance with such Oral
Instructions or Written Instructions, whether received from
personnel of the Fund, its investment adviser, its administrator,
or otherwise. The Fund agrees to forward to ADM Written
Instructions confirming Oral Instructions in such manner that the
Written Instructions are received by ADM, whether by hand
delivery, telex, facsimile sending device or otherwise, as
promptly as practicable after Oral Instructions are given to ADM.
The Fund agrees that the fact that such confirming Written
Instructions are not received by ADM shall in no way affect the
validity of the actions or transactions or enforceability of the
actions or transactions authorized by the Fund by giving Oral
Instructions.
5. Transactions Not Requiring Instructions.
(a) In the absence of contrary Written Instructions,
ADM is authorized to take and to the extent set forth in the
Activities List shall take the following actions:
(i) issuance, transfer and redemption of Shares;
(ii) opening, maintenance, servicing and closing
of accounts of Shareholders or prospective Shareholders;
(iii) acting as agent of the Fund, in connection
with plan accounts, upon the terms and subject to the conditions
contained in the application relating to the plan account in
question;
(iv) causing the reinvestment in Shareholders'
accounts of dividends and distributions declared upon shares;
(v) transferring the investment of an investor
into, or from, the shares of other open-end investment companies,
if and to the extent permitted by the Prospectus;
(vi) processing redemptions;
(vii) examining and approving legal transfers;
(viii) furnishing to Shareholders confirmations of
transactions relating to their Shares;
(ix) preparing and mailing to the Internal Revenue
Service and all payees all information returns and payee
statements required under the Internal Revenue Code in respect to
the Fund's dividends and distributions and taking all other
necessary actions in connection with the dividend and other
withholding requirements of that Code;
(x) mailing to Shareholders annual and semi-annual
reports prepared by or on behalf of the Fund, and mailing new
Prospectuses upon their issue to shareholders.
(xi) preparation and sending such other
information from the Fund records held by ADM as may be
reasonably requested by the Fund;
(xii) preparation and sending to the Fund such
affidavits of mailing and certifications as are reasonably
requested by an officer of the Fund;
(xiii) transferring stock certificates
representing shares for other stock certificates representing
such shares;
(xiv) replacing allegedly lost, stolen or
destroyed stock certificates with or without surety bonds; and
(xv) maintaining such books and records relating
to transactions effected by ADM as are required by the 1940 Act,
or by any other applicable provisions of law, to be maintained by
the Fund or its transfer agent with respect to such transactions,
and preserving, or causing to be preserved, any such books and
records for such periods as may be required by any such law, rule
or regulation.
(b) ADM agrees to act as Proxy Agent in connection
with the holding of annual or special meetings of Shareholders,
mailing to Shareholders notices, proxies and proxy statements in
connection with the holding of such meetings, receiving and
tabulating votes cast by proxy and communicating to the Fund the
results of such tabulation accompanied by appropriate
certificates, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, and in such form and
containing such information as may be required by the Fund to
comply with any applicable provisions of law or its Declaration
and/or By-Laws relating to such meetings. ADM shall be
reimbursed for out-of-pocket expenses in performing such
services, such as the costs of forms, envelopes and postage. ADM
at its cost with the consent of the Fund may employ another firm
to perform all or some of the functions required by this
subsection. The Fund shall pay such additional charges as the
parties may agree upon for the services of the Transfer Agent in
connection with special meetings of shareholders of the Fund in
excess of one such meeting held in any fiscal year of the Fund.
(c) ADM shall furnish to the Fund such information and
at such intervals as the Fund may reasonably request for the Fund
to comply with the normal registration and/or the normal
reporting requirements of the SEC, Blue Sky authorities or other
regulatory agencies. All such information shall be materially
correct and complete based upon information supplied to ADM.
(d) ADM shall, in addition to the services herein
itemized, if so requested by the Fund and for such additional
fees as the Fund and ADM may from time to time agree, perform and
do all other acts and services that are customarily performed and
done by transfer agents, dividend disbursing agents and
shareholder servicing agents of open-end mutual funds such as the
Fund, provided that normally occurring improvements in the
services of such agents will be provided without initial capital
cost to the Fund and at service fees which are competitive with
those prevailing in the industry.
(e) The parties hereto agree that without prejudice
to any other provisions of this Agreement, the functions of ADM
and the Fund under this Agreement will be substantially performed
in accordance with the Activities List set out in Appendix A to
this Agreement. Such activities List as amended from time to
time is an integral part of this Agreement. In the event that
the provisions of this Agreement are in conflict with or are
inconsistent with those set forth in such Activity List the
provisions of the Activities List shall govern.
(f) ADM agrees to provide to the Fund upon request
such information as may reasonably be required to enable the Fund
to reconcile the number of outstanding shares of the Fund between
ADM's records and the account books of the Fund.
6. Authorized Shares. The Fund hereby represents that the
Declaration authorizes the Board of Trustees to issue an
unlimited number of shares.
7. Dividends and Distributions. The Fund shall furnish
ADM with the amount of each daily dividend and with appropriate
evidence of action by the Fund's Board of Trustees authorizing
the daily declaration of dividends and distributions in respect
of Shares as described in the then current Prospectus. Upon
declaration of each dividend other than daily dividends, each
capital gain distribution or other distribution by the Board of
Trustees of the Fund, the Fund shall promptly notify ADM of the
date of such declaration, the amount payable per share, the
record date for determining the shareholders entitled to payment,
the payment date, and the reinvestment date and price which is to
be used to purchase shares for reinvestment, all sufficiently in
advance to permit ADM to process properly such dividend or
capital gain distribution or other distribution in a timely and
orderly manner.
Sufficiently in advance of each payment date to permit ADM
to have federal funds available to it for the payment thereof,
the Fund will transfer, or cause the Custodian to transfer, to
ADM in its capacity as dividend disbursing agent, at First
Financial Savings Bank, S.L.A. or at such bank or other financial
institution as ADM with the consent of the Fund shall select,
which may but need not be an affiliate of ADM, the total amount
of the dividend or distribution currently payable. After
deducting any amount reasonably believed by ADM to be required to
be withheld by any applicable tax laws, rules and regulations or
other applicable laws, rules and regulations, based upon
information available to it, ADM shall, as agent for each
Shareholder and in accordance with the provisions of the Fund's
Declaration and then current Prospectus, invest dividends in
Shares in the manner described in the Prospectus or pay them in
cash.
ADM shall prepare, file with the Internal Revenue Service,
and address and mail to shareholders such returns and information
relating to dividends and distributions paid by the Fund as are
required to be so prepared, filed and mailed by applicable laws,
rules and regulations, or such substitute form of notice as may
from time to time be permitted or required by the Internal
Revenue Service. The Fund shall promptly provide ADM with the
information necessary to prepare such returns and information,
all sufficiently in advance to permit ADM to prepare properly and
mail such returns and information in a timely and orderly manner.
On behalf of the Fund, ADM shall pay on a timely basis to the
appropriate Federal authorities any taxes withheld on dividends
and distributions paid by the Fund.
8. Notification of ADM: The Fund shall promptly notify
ADM of the closing net asset value per share and the offering
price per share each day there are any transaction in shares of
the Fund, but in any event not later than sixty (60) minutes
after the closing of the New York Stock Exchange (if the Fund is
not a money market Fund) or before 1:00 p.m. New York Time (if
the Fund is a money market Fund.) In the event ADM is not so
notified, it may assume that the price is unchanged from the
prior price.
9. Communications with Shareholders.
(a) Communications to Shareholders. The Fund shall
prepare, print and provide ADM with sufficient quantities of all
communications by the Fund to its shareholders all sufficiently
in advance to permit ADM to properly address and mail in a timely
and orderly manner all communications by the Fund to its
Shareholders, including reports to Shareholders, dividend and
distribution notices and proxy material for its meetings of
Shareholders. ADM agrees to mail all such material to
shareholders of the Fund in a timely manner. ADM or a firm
employed by ADM will at ADM'S cost and expense receive and
tabulate the proxy cards for the meetings of the Fund's
Shareholders.
(b) Correspondence. ADM will answer such
correspondence from Shareholders, securities brokers and others
relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between ADM and the
Fund.
10. Records. ADM shall keep the records described on the
Activities List, including but not limited to the following:
(a) accounts for each Shareholder showing the
following information:
(i) name, address and United States Tax
Identification or Social Security number;
(ii) number of Shares held and number of Shares
for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) historical information regarding the account
of each Shareholder, including dividends and distributions paid
and the date and the price, if applicable, for all transactions
in a Shareholder's account;
(iv) any stop or restraining order placed against
a Shareholder's account;
(v) any correspondence relating to the current
maintenance of a Shareholder's account;
(vi) information with respect to withholdings in
the case of a foreign account; and
(vii) information with respect to withholding in
the case of an account subject to backup withholding;
(ix) any information required in order for ADM to
perform any calculations contemplated or required by this
Agreement.
(b) If agreed between the Fund and ADM, subaccounts
may be maintained for each Shareholder requesting such services
in connection with shares held by such Shareholder for separate
accounts containing the same information for each subaccount as
required by subparagraph (a) above.
The books and records pertaining to the Fund which
are in the possession of ADM shall be the property of the Fund.
Such books and records shall be prepared and maintained as
required by the 1940 Act and other applicable securities laws and
rules and regulations in effect from time to time. ADM will, if
so requested by the counsel to the Fund, modify the manner in
which such books and records are prepared and maintained so as to
comply with the reasonable opinion of such counsel as to such
laws and rules. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at
all times during ADM's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and
records shall be provided by ADM to the Fund or the Fund's
authorized representative at the Fund's expense.
11. Reports and Other Information.
Upon reasonable request of the Fund, provided that the
cost or effort required therefor are, singly or in the aggregate,
not unduly burdensome or expensive to it, ADM will promptly
transmit to the Fund, at no additional cost to the Fund, (a)
documents and information in the possession of ADM and not
otherwise available necessary to enable it and its affiliates to
comply with the requirements of the Internal Revenue Service, the
SEC, the National Association of Securities Dealers, Inc., state
blue sky authorities, and any other regulatory bodies having
jurisdiction; (b) documents and information in the possession of
ADM necessary to enable the Fund to conduct annual and special
meetings of its shareholder; and (c) such other information,
including shareholder lists and statistical information
concerning accounts as may be agreed upon from time to time
between the Fund and ADM.
12. Cooperation with Accountants. ADM shall cooperate with
the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made
available on a timely basis to such accountants for the
expression of their unqualified opinion, including but not
limited to the opinion included in the Fund's annual report to
Shareholders and on Form N-SAR, or similar form.
13. Confidentiality. ADM agrees on behalf of itself and
its employees to treat confidentially all confidential records
and other confidential information relative to the Fund and its
prior, present or potential shareholders and relative to the
Fund's Distributor and its prior, present or potential customers.
ADM will under normal circumstances not divulge any such
confidential records or information to anyone other than the
shareholder, dealer, Fund or other person, firm, corporation or
other entity which ADM reasonably believes is entitled to such
records or information except, after prior notification to and
approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where ADM may be
exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
ADM shall not be considered to have breached this provision
if it, in good faith, has provided information or documents to an
individual, firm, corporation or other entity (governmental or
otherwise) which it reasonably believes is entitled to such
information or documents; provided that it shall, with respect to
any non-routine governmental investigation or inquiry, first
provide notice thereof to the Fund.
14. Equipment Failures. ADM shall maintain adequate and
reliable computer and other equipment necessary or appropriate to
carry out its obligations under this Agreement. In the event of
computer or other equipment failures at its own facilities beyond
ADM's reasonable control, ADM shall, at its expense, take
reasonable steps to minimize service interruptions. The
foregoing obligation of ADM shall not extend to computer
terminals owned or maintained by others, located outside of
premises maintained by ADM. ADM represents that it has presently
in effect backup and emergency systems described on Appendix C
hereto. ADM will maintain such arrangements or equivalent while
this Agreement is in force unless ADM notifies the Fund to the
contrary and establishes to the satisfaction of the Fund that
industry standards no longer require such arrangements.
15. Compensation. As compensation for the services
rendered by ADM during the term of this Agreement, ADM shall be
entitled to receive such reimbursement for out-of-pocket expenses
and such compensation is specified on Appendix D attached hereto
or as may from time to time be otherwise agreed on in writing
between the parties.
16. Responsibility of ADM. In the performance of its
duties hereunder, ADM shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts
within reasonable limits to insure the accuracy and completeness
of all services performed under this Agreement.
ADM and the affiliates and agents of ADM shall not be
responsible for or liable for any taxes, assessments, penalties,
fines or other governmental charges of whatever description which
may be levied or assessed on any basis whatsoever in connection
with withholding of amounts, verifying or providing taxpayer
identification numbers or otherwise under applicable tax laws and
preparing and filing of tax forms, excepting only for taxes
assessed on the basis of its compensation hereunder, provided
that ADM exercises the care and diligence required by this
Agreement, and in the case of its responsibilities for backup
withholding, verifying or providing taxpayer identification
numbers or otherwise, as to any shareholder from whom such
withholding is required, it withholds the necessary amount and
attempts with reasonable frequency, but no less often than once a
calendar quarter, to obtain the necessary information from the
shareholder until withholding is no longer required.
ADM and the affiliates and agents of ADM shall not be
responsible or liable for the actions, inactions, or any losses
or damages caused by any such actions or inactions of any agents,
brokers or others who are specifically selected by the Fund in
writing.
17. Release. ADM understands that the obligations of this
Agreement are not binding upon any Shareholder of the Fund
personally, but bind only the Fund's property; ADM represents
that it has notice of the provisions of the Fund's Declaration
disclaiming Shareholder liability for acts or obligations of the
Fund.
The Fund understands that the obligations of this
Agreement are not binding upon the parent corporation of ADM or
any affiliates or subsidiaries of ADM and that the Fund, its
Directors, Trustees, Officers, Shareholders and others shall look
only to the separate assets of ADM.
18. Right to Receive Advice. (a) Advice of Fund. If ADM
shall be in doubt as to any action to be taken or omitted by it,
it may request, and shall receive, from the Fund directions or
advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If ADM shall be in doubt as to
any question of law involved in any action to be taken or omitted
by ADM, it may request advice without cost to itself from counsel
of its own choosing (who may be counsel for the Adviser, the Fund
or ADM, at the option of ADM).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by
ADM pursuant to subparagraph (a) of this paragraph and advice
received by ADM pursuant to subparagraph (b) of this paragraph,
ADM shall be entitled to rely on and follow the advice received
pursuant to the latter provision alone.
(d) Protection of ADM. ADM shall be fully protected
in any action or inaction which it takes in reliance on the
provisions of the Fund's Prospectus, procedures established
between ADM and the Fund, or in reliance on any directions,
advice or Oral or Written Instructions received pursuant to
subparagraph (a) or (b) of this paragraph which ADM, after
receipt of any such directions, advice or Oral or Written
Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case
may be. However, nothing in this paragraph shall be construed as
imposing upon ADM any obligation (i) to seek such directions,
advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another
provision of this Agreement, the same is a condition to ADM's
properly taking or omitting to take such action.
19. Compliance with Governmental Rules and Regulations.
ADM shall have no responsibility for insuring that the
contents of each Prospectus of the Fund complies with all
applicable requirements of the 1933 Act, the 1940 Act, and any
laws, rules and regulations of governmental authorities having
jurisdiction, except that ADM shall cause a senior officer of
ADM, who shall be its General Counsel unless otherwise agreed
upon, or his designee to provide such information and represents
and warrants that all information so furnished by it for specific
use in any such Prospectus will be correct and complete in all
material respects.
20. Records From Others: ADM, its affiliates and agents
shall have no responsibility or liability for the accuracy or
completeness of any documents, records, or information maintained
or provided by or reasonably believed by ADM to have been
maintained or provided by any prior transfer agent, any
shareholder or dealer, or by the Fund or anyone on behalf of the
Fund and the Fund hereby specifically agrees that ADM, its
affiliates and agents may rely on and will be fully protected in
so relying on the completeness and accuracy of all such
documents, records and information; provided, that ADM will
inform the Fund of material errors coming to its attention in the
course of the performance of its duties hereunder.
ADM, its affiliates and agents may conclusively rely on, and
will be fully protected in relying on, the authenticity and
accuracy of any documents or communications, whether oral,
written or facsimile, it receives from the Fund or which ADM, its
affiliates or agents reasonably believes are from the Fund,
provided these are received from Authorized Persons in accordance
with this Agreement. This provision will apply to, among other
things, the daily public offering and net asset value prices for
Fund shares; instructions from the Fund concerning dividends and
other distributions; and other matters relating to the Fund and
its shareholders.
21. Responsibilities of the Fund: The Fund and the Agents
of the Fund hereby acknowledge and agree that ADM, its affiliates
and its agents are responsible only for those functions and
duties set forth in this Agreement and unless so set forth are
not responsible for any of the following which are to be handled
by the Fund:
(a) creating or maintaining any records on behalf of the
Fund or others required by any federal or state law, or
regulation or rule of any agency thereof or any self-
regulatory authority except (i) those relating to
shareholder account information set forth in Rule 31a-
1(b)(2)(iv) promulgated under the 1940 Act or
equivalent regulation applicable from time to time; and
(ii) such additional records as may reasonably be
requested from time to time by the Fund which are
customarily maintained by transfer agents to mutual
funds, and which ADM by use of its best efforts may
provide at minimal cost and inconvenience to it; with
respect to these records ADM agrees that they: (i) are
the property of the Fund; (ii) will be maintained by
ADM for the period prescribed in Rule 31a-2 or
equivalent regulation; (iii) will be made available,
upon request to the Fund and the SEC; and (iv) will be
surrendered promptly upon the request of the Fund;
(b) determining the legality of any sale, exchange,
issuance or redemption of any shares of the Fund;
(c) determining the legality of any communications, oral or
written, which is sent or provided by ADM, its
affiliates or its agents on behalf of the Fund;
(d) complying with any federal or state laws or the
regulations or rules of any agency thereof or of any
self-regulatory authority except those specifically
applicable to ADM as a transfer agent;
(e) filing any documents on behalf of the Fund or any one
else with any federal or state government or with any
agency thereof or of any self-regulatory authority
except ADM will file with the Internal Revenue Service
copies of 1099 Div, 1099R and 1099B Forms sent to
shareholders of the Fund and forms relating to
withholding and non-resident alien withholding;
(f) monitoring the activities of the Fund or any one else
or their compliance with applicable law, rules and
regulations or with the provisions of the Fund's
Prospectus, of Trust, By-Laws or other governing
instruments; or
(g) compliance of the Fund or others with applicable
federal and state laws, regulations and rules of any
agency thereof, or of any self-regulatory authority
pertaining to the registration of the Fund or of shares
of the Fund or the legality of their sale although ADM
will, in order to provide the Fund with assistance in
complying with normal Blue Sky requirements, upon the
reasonable request of the Fund provide the Fund with a
report generated from the information readily available
to ADM detailing the amount of shares of the Fund
purchased and redeemed and the states of residence of
the shareholders purchasing or redeeming such shares.
22. Information and Documents: (a) The Fund shall promptly
provide ADM with the current Prospectus for the Fund, the Annual
and Semi-Annual Reports to shareholders of the Fund, Proxy
Statement and other Fund material, all in sufficient quantities
and sufficiently in advance to permit ADM to provide them to
shareholders of the Fund in a timely and orderly fashion.
(b) To the extent necessary or appropriate to enable ADM to
carry out its responsibilities under this Agreement, the Fund
shall
(i) promptly notify ADM of all material events which
affect the Fund or any affiliate of the Fund;
(ii) promptly notify ADM of any suits or other
proceedings threatened or actually instituted
against the Fund or any affiliate of the Fund by
the federal government, any state government, or
any agency thereof (including but not limited to
the SEC, the Securities Commission of any state)
or by the National Association of Securities
Dealers, Inc., or any other self-regulatory
authority;
(iii) promptly notify ADM of any consent order, stop
orders or similar orders affecting the Fund or any
affiliate of the Fund issued by the federal
government, any state government, or any agency
thereof (including but not limited to the SEC, the
Securities Commission of any state) or by the
National Association of Securities Dealers, Inc.
or any other self-regulatory authority;
(iv) promptly provide ADM, with copies of the audited
Annual Financial Statements for each affiliate of
the Fund which is an Investment Advisor,
Investment Sub-Advisor, Distributor or
Administrator of the Fund;
(v) promptly provide ADM, upon request, with copies of
any filings made by the Fund or any affiliate of
the Fund which is an Investment Advisor,
Investment Sub-Advisor, Distributor or
Administrator of the Fund with the federal
government or any state government or any agency
thereof or with any self-regulatory authority; and
(vi) promptly provide ADM, upon request, with copies of
any documents relating to items (ii) and (iii)
above.
(vii) discuss with ADM changes in the description of ADM
and the services which ADM provides to
shareholders contained in the Prospectus of the
Fund at the time of filing any amendments to the
registration statement of the Fund involving any
such change. ADM shall use its best efforts to
assure the accuracy and completeness of all
material information furnished by it for inclusion
in any such document.
23. Indemnification. Neither party nor any of its
nominees shall be indemnified against any liability to the other
party (or any expenses incident to such liability) arising solely
out of (a) such party's or such nominee's own willful
misfeasance, bad faith or gross negligence or reckless disregard
of its duties in connection with the performance of any duties,
obligations or responsibilities provided for in this Agreement or
(b) such party's or such nominee's own negligent failure to
perform its duties expressly provided for in this Agreement or
otherwise agreed to in writing.
24. Liability. (a) ADM shall be responsible for the
performance of its obligations under this Agreement
notwithstanding the delegation of some or all of such obligations
to others in accordance with the terms of this Agreement.
(b) ADM shall not be responsible for loss, liability
cost or expense arising out of occurrences beyond its control
caused by fire, flood, power failure, unanticipated equipment
failure, acts of God, or war or civil insurrection; provided,
however, that it shall have contingency planning for equipment or
electrical failure and such other contingencies as provided in
this Agreement.
25. Insurance. ADM shall maintain fidelity, errors
and omissions and other insurance coverage in amounts and on
terms and conditions as set forth in information provided to the
Fund from time to time.
26. Advancement of Monies: Nothing in this Agreement
shall require ADM or any affiliate or agent of ADM to pay any
monies prior to its receipt of federal funds for such payment or
for ADM or any of its affiliates or agents to incur or assume any
liability for the payment of any such monies prior to its receipt
of federal funds for such payment.
27. Exclusivity. It is expressly understood and
agreed that the services to be rendered by ADM to the Fund under
the provisions of this Transfer Agency Agreement are not deemed
to be exclusive and ADM shall be free to render similar or
different services to others.
28. Further Actions. Each party agrees to perform
such further acts and execute such further documents as are
reasonably necessary to effectuate the purposes hereof.
29. Amendments. This Agreement or any part hereof may
be changed or waived only by an instrument in writing signed by
the party against which enforcement of such change or waiver is
sought.
30. Assignment. This Agreement and the performance
hereunder may not be assigned by ADM without the Fund's written
consent. Not withstanding the previous sentence, ADM may,
without the Fund's consent, assign the performance of all or a
portion of its responsibilities and duties hereunder to an
affiliate of ADM, provided that the Fund shall incur no
additional cost or expense in connection therewith.
31. Declaration and Termination. This Agreement shall
continue until termination by the Fund on sixty (60) days'
written notice or by ADM on ninety (90) days' written notice.
32. Notices. All notices and other communications,
including Written Instructions (collectively referred to as
"Notice" or "Notices" in this paragraph), hereunder shall be in
writing or by confirming telegram, cable, telex or facsimile
sending device. Notices shall be addressed;
(a) if to ADM at:
Administrative Data Management Corp.
10 Woodbridge Center Drive
Woodbridge, New Jersey 07095
Attn: Ms. Anne Condon, Vice President
or to such other address as ADM shall instruct the Fund, in
writing, from time to time;
(b) if to the Fund at:
380 Madison Avenue, Suite 2300
New York, New York 10017
Attention: President
or to such other address as the Fund shall instruct ADM, in
writing, from time to time; or
(c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or
other communication.
33. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and
supersedes all prior agreements and understandings relating to
the subject matter hereof, provided that the parties hereto may
embody in one or more separate documents their agreement, if any,
with respect to Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement
shall be deemed to be a contract made in New York and governed by
New York law. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
None of the provisions contained in this Agreement shall be
deemed waived or modified because of a previous failure of a
party to insist upon strict performance thereof. This Agreement
shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below
on the day and year first above written.
TAX-FREE FUND FOR
UTAH
/s/Kenneth L. MacRitchie /s/Lacy B. Herrmann
Attest: ______________________ By:______________________
Kenneth L. MacRitchie, Lacy B. Herrmann,
Assistant Secretary President
ADMINISTRATIVE DATA
MANAGEMENT CORP.
/s/Glenn O. Head
Attest: ______________________ By:_______________________
[ ] Glenn O. Head
Secretary Chairman
<PAGE>
APPENDIX A
ACTIVITIES LIST
It is understood that the Fund, its Custodian, and other
persons, firms, corporations or other entities performing
services for or on behalf of the Fund shall provide ADM and the
Fund with such services, information, or other assistance as may
be necessary or appropriate to permit the Transfer Agent to
properly perform the services hereunder.
A. SHAREHOLDER ACCOUNTING SERVICES
1. General Scope
All terms used herein shall be as defined in the
attached Agreement (the "Agreement") except that ADM is
referred to as the "Transfer Agent." In accordance
with the terms of the Agreement the Transfer Agent will
provide a comprehensive Shareholder accounting service
generally consistent with that provided to other
investment companies, including:
a. dividend accounting;
b. arrangement for wire receipt and payout of
Shareholder funds;
c. to the extent that it is reasonably within the
control of, or can be reasonably arranged without
additional cost by, the Transfer Agent, the rapid
and efficient transfer of investment monies
between various accounts;
d. to the extent that it is reasonably within the
control of, or can reasonably be arranged without
additional cost by, the Transfer Agent, the
effective and controlled processing of expedited
redemptions and exchanges by telegraphic and
telephonic means.
2. Computer Accounting and Record Keeping
The Transfer Agent will perform daily maintenance and
routine file update.
The Transfer Agent will perform a dividend credit run
as required in order to credit all existing Shareholder
accounts with each daily dividend, monthly dividend,
capital gain distribution or other distribution. The
Transfer Agent will establish new and adjust or close
existing Shareholder accounts if necessary on or as of
each business day.
The Transfer Agent will take reasonable precautions for
safeguarding of all Shareholder accounts during these
computer runs.
The Transfer Agent will provide continuous proof to the
outstanding Shares maintained by the Fund on a daily
basis, and off-line availability of all file data
pertaining to Shareholder accounts.
The Transfer Agent will to the extent technically
feasible create and maintain the ability to liquidate
and back out dividends reinvested in accounts which are
subsequently liquidated by or on behalf of the Fund due
to nonreceipt of funds, improper registration, or other
sufficient reason.
3. Establishing and Servicing Accounts
The Transfer agent will, as set forth in the Fund's
Prospectus, or substantially in conformity with
procedures established by or on behalf of the Fund,
accept instructions from investors to open new accounts
and perform such functions consistent with opening a
new account:
a. Accept applications in proper form sent directly
to the Fund or its Custodian when they are
properly delivered to the Transfer Agent;
b. Accept applications in proper form sent directly
to it when they are received by the Transfer
Agent;
c. Transfer Shares accompanied by apparent proper
instructions;
d. Audit and verify payment items for apparent
compliance with the requirements established by
the Fund, e.g. minimum investment amount, apparent
proper endorsements on third party checks or
drafts if the Fund elects to accept such third
party checks or drafts, and other particulars as
prescribed in the prospectus. The Fund will
provide the Transfer Agent, from time to time,
with names and taxpayer identification numbers of
individuals entitled to purchase shares at a
reduced offering price as described in the
prospectus;
e. Review existing accounts to determine whether
there are any other existing accounts with the
same registration; process W-9 or similar forms
received by the Transfer Agent; and compare upon
receipt of a computer tape from the Internal
Revenue Service taxpayer identification numbers
contained in such tape against those maintained by
the Transfer Agent for the Fund.
f. Assign account numbers as necessary and, where
appropriate, indicate the account number on
applications;
g. Review payment items to determine whether the
payee, original or by endorsement, on such payment
items corresponds to the registration of the
account to which it is to be credited (permitted
exceptions include ADM or the Fund specified as
the payee when accompanied by a valid account
number or all necessary documents to establish a
new account or such other exceptions as the
Transfer Agent and the Fund shall agree);
h. Upon opening incoming mail, record the date and
approximate time of day all checks were received;
i. Produce microfilm record of all incoming checks
and other documentation on filmstrips or other
microfilm retrieval method so as to be retrievable
and reproducible upon request;
j. Process address changes and acknowledge such
changes to previous address of record;
k. Answer inquiries from Shareholders or other
individuals, corporations, or other entity who
appear to be the Shareholder, dealer or otherwise
entitled to receive information as to account
information;
l. Open new accounts per telephone instructions
received from a prospective Shareholder, his
dealer or his fiduciary pending receipt of funds
transmitted by bank wire or other means; forward a
new account application to the prospective
investor; and issue a confirmation, including
duplicates where requested, when funds are
received by the Transfer Agent or the Fund's
Custodian; under normal circumstances the new
account application bearing the Shareholder
account number assigned must be completed by or
appear to have been completed by the Shareholder
and received by the Transfer Agent before any
redemption orders are accepted and processed for
that account.
m. Prepare confirmations in such form as may be
agreed between the Fund and the Transfer Agent
from time to time for all "Open Accounts" after
each non-dividend transaction in a Shareholder's
account which affects the share balance; mailing
confirmations to the Shareholder as such changes
occur;
n. Process on a daily basis if necessary or
appropriate routine transactions such as:
(1) Deposit or withdrawal of Shares from
Shareholders' accounts;
(2) Changes of address;
(3) Miscellaneous changes;
(4) Stop-transfers;
(5) Instructions relating to the remittance or
reinstatement of Dividends and other
distributions;
o. Incorporate in the Shareholder accounting software
and procedures the necessary flags, audits, and
tests reasonably designed to assure that the
various provisions and requirements specified
elsewhere in this Agreement to be performed by the
Transfer Agent will be substantially satisfied.
B. TRANSFER AGENT SERVICES
In accordance with the Agreement, and in particular Section
5(d) thereof, the Transfer Agent will perform the functions
normally performed by the Transfer Agent for other
investment companies of a similar type. Such functions
shall include but not necessarily be limited to:
1. Processing
a. Keep such records in the form and manner as the
Transfer Agent may deem advisable but not
inconsistent with the rules and regulations of
appropriate governmental authorities applicable to
the Transfer Agent or as may otherwise be agreed
from time to time in writing between the Fund and
the Transfer Agent;
b. Process transfers as requested by Shareholders or
persons, firms, corporations or other entities the
Transfer Agent reasonably believes to be the
Shareholder or authorized to act on behalf of the
Shareholder including obtaining and reviewing
papers and all other documents necessary to
satisfy transfer requirements; the Fund will, upon
request of the Transfer Agent, advise the Transfer
Agent of the transfer requirements of the Fund,
and the Transfer Agent will be fully protected by
the Fund if it is following such transfer
requirements;
c. Process initial and subsequent investments from
Shareholders;
d. On a semi-monthly or other basis acceptable to the
Transfer Agent and the Fund initiate, accept and
process pre-authorized checks or, when available,
electronic funds transfers drawn against
Shareholders' checking accounts;
e. Process and record redemption of Shares to satisfy
ordinary redemptions and Plan account;
f. Proportionally allocate dividends, which are
provided to the Transfer Agent by the Fund in
gross dollar amount, to the benefit of the Fund
Shareholders entitled to receive them. The
procedure used must show that the amounts
allocated daily substantially balance to the gross
dollar amount provided by the Fund to the Transfer
Agent. Until otherwise specified by the Fund,
dividends shall be in accordance with the
following: Three-day accrual on Monday for the
previous weekend; Two-day accrual on the first
business day following a holiday or Four-day
accrual if the holiday immediately precedes or
follows a weekend; compatibility with the Merrill
Lynch Automatic Investment of Dividends System,
and the issuance of all reports incidental thereto
provided the Fund's method of operation is so
compatible.
2. Custody and Control of Shares and Certificates:
Certificates will not be issued except on Shareholder
request but shares will be credited to the
Shareholder's account in non-certificate form. The
Transfer Agent will examine certificates surrendered
for transfer or redemption, or requests for transfer or
redemption of shares not represented by certificates,
for apparent genuineness or alterations; pass upon the
apparent validity thereof including endorsements,
signature guarantees and (if applicable) tax stamps or
waivers, provided that the Transfer Agent shall not be
required to compare any such endorsements against other
records it maintains except in accordance with written
procedures agreed upon between it and the Fund. The
Transfer Agent will also:
a. Countersign all certificates;
b. Prepare, mail, or deliver certificates for
original issue, subsequent investments, exchanges,
or transfers upon request from the Shareholder or
one reasonably believed to be the Shareholder;
c. Prepare, mail, or deliver certificates for Shares
previously held in non-certificate form;
d. Deposit certificate Shares;
e. Cancel surrendered certificates;
f. Establish and maintain safeguards for cancelled
and uncancelled certificates;
g. Establish and maintain a system to monitor stop-
transfers;
h. Replace lost certificates.
C. SUBSCRIPTION AGENT SERVICES:
The Transfer Agent will act as Subscription Agent for the
Fund. In addition to subscription functions described
elsewhere in this Agreement, the Transfer Agent will:
1. Maintain a Subscription Account for the Fund. This
account shall be established and operated so as to
satisfy the following criteria:
a. The account shall be established by the Transfer
Agent for the benefit of the Fund in accordance
with the terms of the Agreement;
b. The account shall be provided at no additional
cost except as may otherwise be stated in Appendix
D of the Agreement;
c. The account shall serve as the sole depository for
subscription monies intended for the purchase of
Fund Shares until such funds are transferred to
the Custody Account;
d. The Transfer Agent shall be prepared to receive
and efficiently process incoming cash, checks,
Federal Reserve Drafts and bank wire transfers of
funds;
e. Withdrawals from the account shall be for the
purpose of transferring funds into the Custody
Account or, where appropriate, the crediting or
payment of commission or dealer's commissions;
withdrawals are also permitted to accommodate net
settlements with the Custodian;
f. No dividend or redemption or any other payments
shall be made to Fund Shareholders from the
Subscription Account;
g. The Transfer Agent will cashier all items
presented in payment as expeditiously as possible.
2. In connection with managing the Subscription Account,
the Transfer Agent will exercise all possible care in
satisfying operational requirements in each of the
following critical areas:
a. Validation Receipt of Good Subscription Funds
Procedures and criteria are to be established by
the Transfer Agent and approved by the Fund for
the purpose of providing assurance that good
(collected) funds were received from Shareholders
prior to paying out any redemption proceeds (under
a Plan account or as a result of one or more
specific redemption requests). Such procedures
are to deal with:
(1) Screening subscriptions to prevent:
-forgery, fraud, improper endorsement or other
unauthorized use particularly when accepting third
party funds;
-maintenance of accounts in names other than
proper form; funds received where the legal
existence or legal capacity of the subscriber is
in doubt shall be employed in a temporary
investment status until a proper account is
established to which prior income will be
credited, or until the funds are returned upon
determination that no subscriber of legal
existence and capacity exits.
(2) Establishing and maintaining procedures
reasonably designed to assure the clearance and
collection of checks which are otherwise properly
drawn.
In this regard, the Transfer Agent with the
approval of the Fund will:
-Establish for all parts of the United States the
normal number of days required for check clearance
and return notice of uncollectability;
-Establish redemption amount and clearing time
criteria which together place an automatic stop on
issuance of certificates, if any, and upon
redemption payments until the Transfer Agent
reasonably believes that good subscription funds
were received.
In general, the redemption of a subscription
payment received in the form of a check, draft or
similar instrument shall not be made until the
Transfer Agent has determined, by telephone call
to the drawee bank or otherwise, that the deposit
has cleared the drawee bank or until fifteen (15)
calendar days after the receipt of such
subscription payment, in order to permit the
orderly clearing thereof.
-Provide a means to record and promptly retrieve
the status of a subscription received (which may
include days remaining before redemptions
permitted, name of bank, or other similar
information as may be agreed upon.)
Shareholder checks returned for insufficient funds or
other reasons will be promptly processed for
liquidation on or after the date of receipt or
notification to the effect that a check is being
returned. Returned checks will be cleared promptly and
processed through a Returned Check Account in
conjunction with the following actions:
(1) Place a freeze on the account to prevent
redemption of the amount of such returned check or
such lesser amount as is in the affected account;
(2) Determine how many shares are to be liquidated due
to the investment attributable to such returned
check;
(3) Calculate and back out accrued dividends, if any,
attributable to such investment;
(4) Process the liquidation for the appropriate
amount;
(5) Mail the Shareholder confirmation of the
liquidation and the check with a letter of
explanation;
(6) Allocate the accrued dividends, if any, which were
attributable to such investment, as the Fund shall
direct which will normally be to the remaining
Shareholder accounts as of the next month-end
dividend run;
(7) Take reasonable steps to recover commissions or
dealer concessions applicable to such returned
check, although the Distributor shall be
ultimately responsible therefor.
b. Establish Procedures to Process Effectively Bank
Wire Transfers
Establish and maintain procedures reasonably
designed by the Transfer Agent and approved by the
Fund to maintain positive control over movements
of incoming money by bank wire so as to:
(1) Accept requests (WATS and local calls) for bank
wire instructions, record account information and
client telephone number, assign as appropriate a
wire control number, establish Shareholder pending
file, and if appropriate alert the bank wire
department;
(2) Advise the Fund of pending bank wire receipts at
selected cutoff times during the course of each
business day so as to facilitate full investment
of Fund assets;
(3) Confirm to the Fund actual bank wire receipts at
selected cutoff times during the course of each
business day;
(4) Close out pending Shareholder files if bank wire
receipts are not received as of the date agreed
upon;
(5) Open new or credit existing Shareholder account in
accordance with the provisions of the current
prospectus upon receipt of bank wire funds;
(6) Take appropriate action to secure from
Shareholders who invest by bank wire the necessary
written applications and redemption
authorizations.
D. DIVIDEND DISBURSING AND REDEMPTION AGENT SERVICES
In performance of the Dividend Disbursing and Redemption
Agent functions, the Transfer Agent will provide the Fund
with regular checks (or electronic funds transfer if
available, at the Shareholder's option) and carry out the
following functional activities:
1. Dividends
a. The Fund shall advise the Transfer Agent of
dividend amounts which shall then be applied as
described in the Prospectus or as directed by the
Fund, or its officers or Trustees;
b. Confirmation of dividend reinvestments shall be
mailed to Shareholders after each reinvestment.
c. Additional dividend information, if provided by
the Fund to the Transfer Agent shall then be
provided to Shareholders upon written request.
2. Redemption Procedures
The Transfer Agent with the approval of the Fund shall
establish procedures reasonably designed to insure that
redemption requirements established by the Transfer
Agent and agreed to by the Fund have been met,
including the receipt and examination of stock
certificates, endorsements, signature guarantees and
obtaining any needed papers or documents, including
properly completed Application, where lacking. More
specifically:
a. The Transfer Agent will accept redemption requests
in written, telegraphic or telephonic form
provided the necessary instructions and
authorizations are reasonably believed by the
Transfer Agent to be in good form. Generally,
telephonic redemption requests will be repeated
for confirmation to the person making the request,
and upon voice confirmation by such person, will
be recorded in a log kept for that purpose.
b. Requests for the redemption of shares not
represented by certificates received and without
signature guarantees will be honored only if:
(1) the applicable portion of the Application has been
completed and the proceeds are forwarded to the
previously designated bank account, address, or
other destination identified on the Application;
(2) Expedited Redemption Authorization instructions
filed at any time other than upon the original
opening of a Shareholder's account are filed on an
appropriate form and bear or reasonably appear to
bear a signature guarantee;
(3) Shareholder accounts in the name of joint tenants
shall generally be handled on the basis of jointly
signed instructions and signature guarantees
(where applicable) for any payments.
c. The Transfer Agent will provide a means to record,
call up, and display on Cathode Ray tube or
otherwise an appropriate symbol or other
indication that redemption authorization
instructions are on file and appear to be in
proper form.
d. All redemption requests will be promptly reviewed
to insure:
(1) that there are sufficient shares available in the
Shareholder's account;
(2) the applicable subscription check has not been
returned to ADM or its agent and the applicable
period of days has expired before using the funds
for redemption (see above);
(3) that no redemptions in accounts represented in
whole or in part by certificates are effected
without cancellation of an adequate number of
certificate shares, if necessary.
(4) that no signature guarantees shall be acceptable
unless they reasonably appear to have been
provided by a commercial bank or by a brokerage
firm which is a member of the New York, American,
Midwest, or Pacific Stock Exchanges, except as
otherwise stated in the Prospectus or in
instructions received from the Fund.
e. Certificate acceptance and replacement:
(1) Accept for redemption, certificates received for
redemptions accompanied by what reasonably appears
to be Shareholder's instructions.
(2) Furnish to the Shareholder, after with the
policies and procedures established by the Fund
and the Transfer Agent proper investigation and
receipt of necessary documentation for protection
of the Fund, replacement certificates and dividend
and redemption checks alleged to have been lost,
stolen, destroyed, or not received.
3. Dividend Account
The Transfer Agent will maintain a Dividend Account for
the Fund. This account shall be established and operated so as
to satisfy the following criteria:
1. This account shall be used to disburse cash in
payment of dividends, capital gain distributions and
returns of capital.
2. This account shall be operated in the same manner
as the Redemption Account (see below) except as
otherwise required by the purpose for which it shall be
used; it may, at the election of the Transfer Agent, be
operated as a combined account with the Redemption
Account (see below).
4. Redemption Account
The Transfer Agent will maintain a Redemption Account
for the Fund. This account shall generally be
established and operated so as to satisfy the following
criteria.
1. All withdrawals from the account shall be for the
exclusive purpose of making payments to Fund
Shareholders. These payments are to be made only
to satisfy automatic or other account liquidation
payment requirements.
2. No deposits or subscription receipts shall be made
directly in the Redemption Account.
3. The Transfer Agent will advise the Fund at various
mutually established times during each business
day as to the total demand for valid payments to
be honored that day or the following day. Valid
payments consist of liquidations of shares for
which funds are payable in cash or check to
shareholders, whether initiated by check, wire,
letter, automatic distribution plan, determination
of the Fund or otherwise. The notification of
demand for payments shall only include valid
demands for payment which are actually in hand,
such that the Fund need not fund the Redemption
Account with any more funds than are actually
required. The Fund agrees to fund, or cause the
Custodian to fund, the Redemption Account
sufficiently to cover all demands for payment
which are currently valid or will become valid the
following business day. The Fund and the Transfer
Agent agree that a goal of this procedure is to
allow for the maximum employment of Fund Assets
while still adequately funding the Redemption
Account. The Transfer Agent and its affiliates
shall not be required to honor any demand for
payment for which previously collected funds have
not been received from the Custodian or other
Agent of the Fund.
4. The Transfer Agent with the approval of the Fund
will develop specific procedures reasonably
designed to protect against:
(a) raising of dollar amounts or any other alteration
of instruments representing redemption payments;
(b) fraudulent or forged endorsements;
(c) other improper use of a redemption item which
could result in the Fund or its Shareholders being
defrauded.
Such procedures shall take into account the type
of accounts involved, the sums involved and the
cost effectiveness of such procedures.
5. Employ due diligence in servicing redemption requests
as promptly as possible.
E. EXCHANGE AGENT SERVICES
The Transfer Agent will provide services as required to
implement the exchange privileges described from time to
time in the prospectus of the Fund. The Transfer Agent will
install and utilize a telephonic system that is designed to
afford the Shareholder the opportunity to exchange Shares
among eligible Funds and that will record the telephone
request for such exchange. It is understood that the
Transfer Agent is only able to effect exchanges among funds
for which the Transfer Agent has entered into an agreement
similar to this Agreement for provision of Transfer Agency
services.
F. PROXY AGENT SERVICES
The Transfer Agent agrees to act as Proxy Agent in
connection with the holding of annual or special meetings of
Shareholders, mailing to Shareholders notice, proxies and
proxy statements in connection with the holding of such
meetings, receiving and tabulating votes cast by proxy and
communicating to the Fund the results of such tabulation
accompanied by appropriate certificates, and preparing and
communicating to the Fund certified lists of Shareholders as
of such date, and in such form and containing such
information as may be required by the Fund to comply with
any applicable provisions relating to such meetings. The
Transfer Agent may at its expense employ another firm to
provide all or a portion of such services.
I. Reports to be provided by Transfer Agent:
A. Daily
1. Payment Journals
2. Transfers
3. Non-Certificate Redemption Journal
4. Original Issue Non-Certificate Shares
5. Clerical Journal
6. New Account Journal
7. Closed Account Journal
B. Monthly
1. Sales By State and Dividends Reinvested
2. Withdrawals and Dividends Paid in Cash List
3. Record of Out-of-Pocket Costs Incurred
C. Annual Reports
Provide Fund Management upon request with all
reports reasonably required to conduct an annual
review of Transfer Agency functions relating to
the Fund, including but not limited to
performance, volume, error ratios, costs and other
matters relating to the Fund. The Transfer Agent
shall also provide to the Fund general information
concerning its operations which might be believed
to affect adversely the future services to the
Fund.
D. Periodic Marketing Reports - Provided these
reports are readily available from existing
information and can be produced without
unreasonable effort or expense by the Transfer
Agent, including, e.g.,
1. Geographic Distribution Data
2. Size of Holdings Data
II. Other Services
The Transfer Agent will provide the following
additional services:
A. Security
1. Design and maintain security procedures reasonably
designed to guard against the possible theft
and/or use by others of the names and addresses of
Fund Shareholders.
2. Periodic duplication of all records
(computer/microfilm/hardcopy/copy) at a frequency
and in a detail reasonably designed to assure
protection of Shareholder record information in
the event of a disaster to the Transfer Agent's
facilities, including:
(a) significant voltage drop;
(b) power blackout;
(c) major destruction of the Transfer Agent's
central facilities.
3. The Transfer Agent will maintain equipment
reasonably designed or represented to assure an
uninterrupted power supply of at least 10 minutes
at the offices of the Transfer Agent to allow for
orderly shut down of hardware in the event of a
power outage; periodic back-up of tapes to be
stored at an offsite facility of the Transfer
Agent's choosing; and will provide redundancy
capacity in accordance with the Agreement.
B. Statements
1. Provide for up to two extra lines of print on
Shareholder statements which may be employed by
the Fund to advise Shareholders of such
information as yield or other explanatory account
information. The Fund will advise the Transfer
Agent of such information sufficiently in advance
to permit it to properly insert such information
in a timely and orderly manner.
2. Provide a combined dividend check and statement to
Shareholders electing cash distributions.
C. Processing Routine Shareholder Inquiries
1. Receive, control, research, and promptly reply to
all routine Shareholder and other inquiries
whether received by written or telephonic means
which pertain to a Shareholder's account.
2. Exercise due care to protect confidential
information in responding to inquiries.
3. Request ATT or such other telephone company as may
be appropriate to provide, at the Distributor's
expense, for a dedicated transmission line between
Aquila Distributors, 200 Park Avenue, New York and
Transfer Agent, Woodbridge, N.J. for inquiry via a
dedicated or P.C. terminal.
4. Provide if possible for continuity of present 800
telephone numbers for existing funds and adequate
personnel for live telephone response generally
until 7:00 PM, New York time on normal business
days. It is mutually understood that continuity
of the 800 numbers is dependant on cooperation
from the prior transfer agent and appropriate
telephone companies.
5. Provide for the automated tracking of all
Shareholder/Dealer telephone inquiries with on
line update status.
D. Other Mailings
1. Mailing services include addressing, enclosing,
and mailing quarterly reports, semi-annual
reports, annual reports, prospectuses and notices
to all accounts will be provided. To the extent
the Transfer Agent utilizes the services of
another firm to accomplish this for any First
Investors Fund, it shall be permitted to do so for
the Fund, at the Transfer Agent's expense.
2. All routine mailings to Shareholder/Dealers will,
where appropriate, utilize pre-sorted zip codes.
3. All month-end reinvestment statements, with any
month-end dividend check attached, will generally
be mailed to Shareholders, with duplicates to
dealer and representative, by the fourth business
day of the next month.
4. Commission checks and statements will generally be
mailed to brokerage firms on at least a weekly
basis for direct investments of prior weeks.
E. Other Services
1. Refer all Shareholder, dealer or governmental
inquiries of a policy or non-routine nature to the
Fund.
2. Provide an Account Officer to serve as the primary
point of contact between the Fund and the Transfer
Agent. The Transfer Agent will exercise due care
in assigning an individual who is both conversant
with standard investment company practices and of
sufficient stature to deal quickly and efficiently
with problems peculiar to placing a new investment
company on line.
F. Messenger Service
Provide messenger pick-up and delivery as necessary but
no less frequently than once daily between the Fund's
offices provided they are located within the borough of
Manhattan and the offices of the Transfer Agent.
<PAGE>
Exhibit 1
The Fund and the Transfer Agent anticipate that the
following activities should be incorporated into and become
a part of Appendix A as they become effective:
1. Installation of the National Security Clearing
Corporation, Fund/SERV system which shall be
operational no later than June 30, 1989.
2. The Transfer Agent will make a best effort to
provide networking capabilities with tape
transmission to dealers when and as required by
market competitiveness.
3. The Transfer Agent will work with the Distributor
to define criteria for an Audio Response system
and arrange for the implementation of such a
system on a timely basis.
<PAGE>
TAX-FREE FUND FOR UTAH
APPENDIX B
Signatures
On the date of the Agreement and thereafter until further
notice, the following persons shall be Authorized Persons as
defined therein:
Lacy B Herrmann _____________________
Chairman of the Board of Trustees Lacy B. Herrmann
William C. Wallace _____________________
Senior Vice President William C. Wallace
Robert P. Sanchez _____________________
Vice President Robert P. Sanchez
Rose F. Marotta _____________________
Chief Financial Officer Rose F. Marotta
Kenneth L. MacRitchie _____________________
Assistant Secretary Kenneth L. MacRitchie
William K. Killeen _____________________
William K. Killeen
Diana P. Herrmann _____________________
Diana P. Herrmann
Charles E. Childs III _____________________
Charles E. Childs III
Stephen J. Caridi _____________________
Stephen J. Caridi
Brian R. Katzman _____________________
Brian R. Katzman
Sandra J. Hermida _____________________
Sandra J. Hermida
<PAGE>
APPENDIX C
Backup Arrangement
ADM currently has in effect a redundancy arrangement with
Comdisco Disaster Recovery Services, Inc. The agreement with
Comdisco provides that in the event of a data processing systems
disaster at ADM's facilities in Woodbridge, New Jersey, ADM may
use equipment available at Comdisco's facilities for routine and
other processing. The agreement with Comdisco also provides for
dedicated time on Comdisco's data processing equipment each year
to allow ADM to test the redundancy system.
<PAGE>
APPENDIX D
Compensation
The Fund shall pay ADM the following amounts:
1. Set-up Charge: One time set-up charge of $3,000.00.
2. Account Maintenance Charges: $1.40 per account.
3. Account Opening Charge/Account Closing Charge: one-time
charge of $1.50 per account to open or close an account.
4. Telephone Investment Charge: $15.00 per transaction.
5. Minimum Monthly Charges: $500.00
6. Disbursements: All reasonable disbursements, including,
without limitation, messenger charges.
7. Late Pricing Charges:
a. $25 on each day the Fund fails to notify ADM of the
Fund's closing net asset value and offering price by
5:15 p.m.
b. $50 on each day the Fund fails to notify ADM of the
Fund's closing net asset value and offering price after
5:15 p.m. and before 6:00 p.m.
c. In the event of a subsequent price adjustment, (i) $50
per hour for actual time spent on manual corrections
and (ii) $300 per hour for actual time spent for
adjustments requiring computer processing.
8. Demand Deposit Account Fees: Fees payable to First Financial
Savings Bank, S.L.A. in the amounts set forth on Appendix D-
1.
The Fund shall not be obligated to pay any charge enumerated
in paragraphs 2 through 5 above until the earlier of (a) six
months following the last day of the month in which this
Agreement was executed, or (b) the month during which the Fund
has established an aggregate of 2,000 accounts (including
accounts that were established and subsequently liquidated).
<PAGE>
APPENDIX D-1
FIRST FINANCIAL SAVINGS BANK, S.L.A.
LIST OF SERVICE CHARGES FOR BUSINESS ACCOUNTS
ACCOUNT MAINTENANCE $ 5.00 PER MONTH
CHECKS CLEARED $ .05 PER ITEM
CHECK SORTING $ .02 PER CHECK
DEPOSITS $ .50 PER DEPOSIT
DEPOSITED ITEMS $ .07 PER ITEM
RETURNED DEPOSITED ITEMS $ 7.50 PER ITEM
INCOMING AND OUTGOING WIRES $10.00 PER WIRE
STOP PAYMENTS $10.00 PER MONTH
TAX DEPOSITS $10.00 PER DEPOSIT
CURRENCY SHIPMENT $ 1.50 PER ORDER
CURRENCY SHIPMENT (PER $1000) $ .20 PER ORDER
COIN ORDERS $ 2.00 PER ORDER
BOND REDEMPTION $ 1.00 PER BOND
BOND REDEMPTION (PER BATCH) $ 5.00 PER BATCH
PHOTOCOPIES $ 3.00 PER ITEM
INTERNAL TRANSFERS $ 3.00 PER TRANS
RETURNED CHECK - NSF $15.00 PER CHECK
RETURNED CHECK - NCF $10.00 PER CHECK
ACH FILES (SUBJECT TO MONTHLY MINIMUM) $ 5.00 PER FILE
ACH ITEM (SUBJECT TO MONTHLY MINIMUM) $ .20 PER ITEM
ACH MONTHLY MINIMUM $50.00 PER MONTH
ACH RETURNED ITEMS $10.00 PER ITEM
MILITARY ALLOTMENTS (MONTHLY) $ 1.25 PER ACCOUNT
October 17, 1997
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of_________________,_1997 by and
between PFPC INC., a Delaware corporation ("PFPC"), and Tax-Free
Fund for Utah, a Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder
servicing agent to its investment portfolios listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A may be
amended from time to time (each a "Portfolio"), and PFPC wishes to
furnish such services, on the terms and for the considerations set
forth in this agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Definitions. As used in this Agreement:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of
1934, as amended.
(c) "Authorized Person" means any officer of the Fund
and any other person duly authorized by the Fund's Board of
Trustees to give Oral Instructions and Written Instructions on
behalf of the Fund and listed on the Authorized Persons Appendix
attached hereto and made a part hereof or any amendment thereto as
may be received by PFPC. An Authorized Person's scope of authority
may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as
amended.
(e) "Oral Instructions" mean oral instructions received
by PFPC from an Authorized Person or from a person reasonably
believed by PFPC to be an Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" mean the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(h) "Shares" mean the shares of beneficial interest of
any series or class of the Fund.
(i) "Written Instructions" mean written instructions
signed by an Authorized Person and received by PFPC. The instruc-
tions may be delivered by hand, mail, tested telegram, cable, telex
or facsimile sending device.
2. Appointment. The Fund hereby appoints PFPC to serve as
transfer agent, registrar, dividend disbursing agent and
shareholder servicing agent to the Fund in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment
and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or, where
applicable, will provide PFPC with the following:
(a) Certified or authenticated copies of the
resolutions of the Fund's Board of Trustees,
approving the appointment of PFPC or its affiliates
to provide services to the Fund and approving this
Agreement;
(b) A copy, and all amendments thereto, of the Fund's
most recent effective registration statement;
(c) A copy of the applicable administration, advisory
and/or sub-advisory agreements, and all amendments
thereto, with respect to each Portfolio;
(d) A copy of the distribution agreement, and all
amendments thereto, with respect to each class of
Shares;
(e) Copies of any shareholder servicing agreements, and
all amendments thereto, made in respect of the Fund
or a Portfolio;
(f) The Fund's Declaration of Trust filed with the
Secretary of State of the Commonwealth of
Massachusetts and all amendments thereto (such
Declaration of Trust, as presently in effect and as
it shall from time to time be amended, is herein
called the "Declaration of Trust"); and
(g) The Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall
from time to time be amended, are hereinafter
called the "By-Laws").
PFPC has furnished the Fund with copies properly
certified or authenticated of its Registration Statement on Form
TA-1 under the Securities and Exchange Act of 1934, as amended and
all other public reports filed with the SEC related to the services
provided to the Fund as may be requested from time to time by the
Fund.
4. Compliance with Rules and Regulations. PFPC undertakes
to comply with all applicable requirements of the Securities Laws
and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by
PFPC hereunder. Except as specifically set forth herein, PFPC
assumes no responsibility for such compliance by the Fund or any of
its investment portfolios.
5. Instructions.
(a) Unless otherwise provided in this Agreement, PFPC
shall act only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral
Instructions and Written Instructions it receives from an
Authorized Person (or from a person reasonably believed by PFPC to
be an Authorized Person) pursuant to this Agreement. PFPC may
assume that any Oral Instruction or Written Instruction received
hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote,
resolution or proceeding of the Fund's Board of Trustees or of the
Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written
Instructions confirming Oral Instructions so that PFPC receives the
Written Instructions by the close of business on the same day that
such Oral Instructions are received. The fact that such confirming
Written Instructions are not received by PFPC shall in no way
invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from
an Authorized Person, PFPC shall incur no liability to the Fund in
acting upon such Oral Instructions or Written Instructions provided
that PFPC's actions comply with the other provisions of this
Agreement.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any
action it should or should not take, PFPC may request directions or
advice, including Oral Instructions or Written Instructions, from
the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to
any question of law pertaining to any action it should or should
not take, PFPC may request advice at its own cost from such counsel
of its own choosing (who may be counsel for the Fund, the Fund's
investment adviser or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral Instructions or Written
Instructions PFPC receives from the Fund, and the advice it
receives from counsel, PFPC may rely upon and follow the advice of
counsel. In the event PFPC so relies on the advice of counsel,
PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or
reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any
action it takes or does not take in reliance upon directions,
advice or Oral Instructions or Written Instructions it receives
from the Fund or from counsel and which PFPC believes, in good
faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PFPC (i) to
seek such directions, advice or Oral Instructions or Written
Instructions, or (ii) to act in accordance with such directions,
advice or Oral Instructions or Written Instructions unless, under
the terms of other provisions of this Agreement, the same is a
condition of PFPC's properly taking or not taking such action.
Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad
faith, negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
7. Records; Visits. The books and records pertaining to the
Fund which are in the possession or under the control of PFPC shall
be the property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. PFPC will, if
so requested by counsel to the Fund, work with such counsel to
develop an acceptable modification to the manner in which such
books and records are prepared and maintained so as to comply with
the reasonable opinion of such counsel as to such laws and rules.
Such modification will be subject to additional mutually-agreed
upon pricing, if any. The Fund and Authorized Persons shall have
access to such books and records at all times during PFPC's normal
business hours. Copies of any such books and records shall be
provided by PFPC to the Fund or to an Authorized Person at the
Fund's expense. Prior to any destruction of any books or records,
PFPC will advise the Fund of the proposed destruction and in
accordance with instructions of the Fund, the records will be
destroyed or, at the expense of the Fund, delivered to the Fund or
as it may otherwise direct.
8. Confidentiality. PFPC agrees to keep confidential all
records of the Fund and information relating to the Fund and its
shareholders, unless the release of such records or information is
otherwise consented to, in writing, by the Fund, and shall maintain
procedures reasonably designed to protect such confidentiality.
The Fund agrees that its consent shall not be unreasonably withheld
and may not be withheld where PFPC may be exposed to civil or
criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities, and that
such consent shall not be required where consent or notice to the
Fund is not permitted by law or regulation.
9. Cooperation with Accountants. PFPC shall cooperate with
the Fund's independent public accountants and shall take all
reasonable actions in the performance of its obligations under this
Agreement to ensure that the necessary information is made
available on a timely basis to such accountants for the expression
of their opinion, as required by the Fund.
10. Adequate Facilities; Disaster Recovery. PFPC shall
maintain adequate personnel and facilities, as well as adequate and
reliable computer and other equipment, necessary and appropriate to
carry out its obligations under this Agreement, including
appropriate duplicate files (which shall be readable by computer or
otherwise or maintained in hard copy form, and shall be maintained
at a frequency and in a detail reasonably designed pursuant to
industry standards to provide for protection of such files in the
event of a disaster to PFPC's facilities). PFPC shall enter into
and shall maintain in effect with appropriate parties one or more
agreements making adequate and reliable provisions for emergency
use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of equipment
failures, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC shall
periodically back up data (including all predecessor transfer agent
data delivered to PFPC by the Fund's prior transfer agent in a
machine readable format and converted by PFPC) on appropriate media
to be stored at an offsite facility of PFPC's choosing. PFPC shall
have no liability with respect to the loss of data or service
interruptions caused by equipment failure or otherwise, provided
such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its
duties or obligations under this Agreement.
11. Insurance. PFPC shall maintain adequate fidelity, error
and omissions and other insurance coverage in connection with its
transfer agent services throughout the duration of this Agreement.
12. Compensation. As compensation for services rendered by
PFPC during the term of this Agreement, for the period commencing
on the date upon which PFPC becomes transfer agent for the Fund,
the Fund will pay to PFPC a fee or fees as agreed to from time to
time in writing by the Fund and PFPC. All services detailed in
this Agreement and expenses incurred in the performance of these
services will be provided by PFPC without cost to the Fund except
as otherwise stated in this Agreement or otherwise agreed to in
writing.
13. Indemnification. The Fund agrees to indemnify and hold
harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state and
foreign securities and blue sky laws, and amendments thereto), and
expenses, including (without limitation) attorneys' fees and
disbursements, arising directly or indirectly from (i) any action
or omission to act which PFPC takes (a) at the request or on the
direction of or in reliance on the advice of the Fund or (b) upon
Oral Instructions or Written Instructions or (ii) the acceptance,
processing and/or negotiation of checks or other methods utilized
for the purchase of Shares. Neither PFPC nor any of its affiliates
shall be indemnified against any liability (or any expenses
incident to such liability) arising out of PFPC's or its
affiliates' own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under this
Agreement.
14. Release. PFPC understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; PFPC represents that
it has notice of the provision in the Fund's Declaration of Trust
disclaiming shareholder liability for acts or obligations of the
Fund.
15. Responsibility of PFPC.
(a) PFPC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be
obligated to exercise care and diligence in the performance of its
duties hereunder, to act in good faith and to use its best efforts,
within reasonable limits, to ensure the accuracy and completeness
of all services performed under this Agreement. PFPC shall be
liable for any damages arising out of PFPC's failure to perform its
duties under this Agreement to the extent such damages arise out of
PFPC's willful misfeasance, bad faith, negligence or reckless
disregard of such duties.
(b) Without limiting the generality of the foregoing or
of any other provision of this Agreement, (i) PFPC shall not be
liable for losses beyond its control, provided that PFPC has acted
in accordance with the standard of care set forth above; and (ii)
PFPC shall not be under any duty or obligation to inquire into and
shall not be liable for (A) the validity or invalidity or authority
or lack thereof of any Oral Instruction or Written Instruction,
notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes
to be genuine; or (B) subject to Section 10, delays or errors or
loss of data occurring by reason of circumstances beyond PFPC's
control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood, catastrophe, acts of
God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the
Fund for any consequential, special or indirect losses or damages
which the Fund may incur or suffer by or as a consequence of PFPC's
or its affiliates' performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known
by PFPC or its affiliates.
16. Description of Services.
(a) Itemized Services. PFPC shall:
(i) Calculate 12b-1 payments and payments under
any Shareholder Services Plan of the Fund,
produce and mail statements and checks where
applicable or generate payments through the
National Securities Clearing Corp. (the
"NSCC") to all eligible dealers, and forward
ineligible checks and statements to Aquila
Distributors, Inc. (the "Distributor");
(ii) Make weekly payment of direct commissions,
including settlement through NSCC;
(iii) Establish and maintain proper shareholder
registrations;
(iv) Review new applications for required
information and correspond with shareholders
to complete or correct information;
(v) Provide payment processing of checks or wires;
(vi) Prepare and certify stockholder lists in
conjunction with proxy solicitations;
(vii) Issue and countersign share certificates (when
requested in writing by a shareholder) and
cancel share certificates;
(viii) Prepare and mail to shareholders confirmation
of activity;
(ix) Provide toll-free lines and voice response
unit for direct shareholder use, plus customer
liaison staff for on-line inquiry response
(generally until 6 p.m., New York time, on
days on which the New York Stock Exchange is
open), including the ability to receive
redirected toll-free calls from the
Distributor on an as-needed basis;
(x) On a monthly basis, mail duplicate statements
to: (1) broker-dealers of their clients'
activity, whether executed through the
broker-dealer or directly with PFPC, and (2)
other parties (e.g., lawyers and accountants)
as requested by the shareholders;
(xi) Provide periodic shareholder lists and
statistics to the Fund;
(xii) Provide detailed data for underwriter/broker
confirmations, including daily outstanding
confirmed purchases, redemptions, and paid not
issued shares;
(xiii) Prepare periodic mailing of year-end tax and
statement information;
(xiv) Provide reports, notification, and where
applicable reconciliation on a timely basis to
the investment adviser, sub-adviser,
administrator, accounting agent, and custodian
of fund activity;
(xv) Perform other participating broker-dealer
shareholder services, including Fund/Serv,
Automated Customer Account Transfer System
("ACATS"), Networking and terminal access for
selected dealers, and such other services as
may be agreed upon from time to time;
(xvi) Promptly transmit to the Fund all reports,
documents and information as are requested by
the Fund and agreed to by PFPC, which
agreement shall not be unreasonably withheld,
that are necessary to enable the Fund and its
service providers to comply with the
requirements of the Internal Revenue Service,
the SEC, the National Association of
Securities Dealers, Inc, the National
Securities Clearing Corp., the state blue sky
authorities and any other regulatory bodies
having jurisdiction over the Fund, it being
understood and agreed that such reports shall
include those on the list contained in Exhibit
__ hereto, as such list may be amended from
time to time by agreement between the parties;
(xvii) Process all clerical transactions;
(xviii) Screen and maintain Transfer on Death
registrations according to Fund guidelines
(except those guidelines hereafter adopted by
the Fund which are considered in PFPC's sole
good-faith discretion to be more burdensome
than the guidelines in effect on the date of
this Agreement);
(xix) Provide electronic imaging and time-stamping
of all incoming mail;
(xx) Compute and track all front-end and contingent
deferred sales charges imposed upon the
purchase and redemption of Shares;
(xxi) Track and convert Shares in accordance with
the share conversion features described in the
prospectus of the Fund;
(xxii) Answer written or telephonic correspondence
relating to its duties hereunder (including
providing written acknowledgement of address
changes to previous addresses of record) and
such other correspondence as may from time to
time be mutually agreed upon between PFPC and
the Fund; inquiries of a non-routine nature
shall be referred to the Fund;
(xxiii) Remit supporting detail of underwriter fees to
the Distributor on a semi-monthly basis;
(xxiv) Until such time as Fund management and legal
counsel to the Fund determine otherwise and so
inform PFPC in Written Instructions,
establish, maintain for the benefit of the
Fund and control the flow of funds through
separate subscription, redemption and dividend
disbursement accounts (each an "Operational
Account") provided by PNC Bank, N.A. or by
such other financial institution as may be
agreed upon by the Fund and PFPC;
(xxv) To the extent reasonably feasible, reverse
trades (including backing out dividends) due
to nonreceipt of funds, improper registration,
or other sufficient reason;
(xxvi) Compute and track all letters of intent;
(xxvii) Screen all transactions with respect to the
Fund's Blue Sky requirements of which PFPC is
informed by the Fund by Written Instructions,
and comply with the Written Instructions of
the Fund in effect from time to time limiting
issuance of Shares to specified states (based
on address of registration), including
screening for Shares sold in states other than
those so specified (but relating only to those
Shares sold after PFPC commences its duties as
transfer agent hereunder);
(xxviii) Provide abandoned property reporting and
filing to meet the escheat requirements of
each of the states named by the Fund in
Written Instructions;
(xxix) Maintain a record of all incoming checks, new
account applications and documentation set
forth in Section 16(g), on filmstrips, another
microfilm retrieval method or otherwise so as
to be retrievable and reproducible, upon
reasonable request, within time frames that
meet reasonable industry standards;
(xxx) Process W-9 or similar forms received by PFPC
and review taxpayer identification numbers for
all same number (e.g., 888 88 8888),
sequential numbering (e.g., 123 45 6789) and
non-numeric numbers (e.g., 128 4A 3927) and
other conditions of obvious irregularity in
accordance with PFPC's normal operating
procedures;
(xxxi) On a semi-monthly or other basis acceptable to
PFPC and the Fund (but in no event more
frequently than once per month per shareholder
account) initiate, accept and process pre-
authorized checks or, when available,
electronic funds transfers drawn against
shareholders' checking accounts;
(xxxii) In accordance with policies and procedures
established by the Fund and PFPC, furnish to
shareholders dividend and redemption checks
alleged to have been lost, stolen, destroyed
or not received; and
(xxxiii) Record all incoming telephone conversations
and telephonic transactions that are received
via the Fund's published customer service
numbers and retain such recordings for a
minimum of six months.
(xxxiv) Post and perform shareholder transfers and
post and perform exchanges for shares of other
funds with which the Fund has exchange
privileges, pursuant to shareholder
instructions; and
(xxxv) Reconcile to Fund accounting records and pay
dividends and other distributions, including
direct deposit credits through the Automatic
Clearing House ("ACH") upon proper written
shareholder authorization.
(b) Purchase of Shares. PFPC shall issue Shares and
credit an account of an investor, in the manner described in the
Fund's prospectus, once it has screened for blue sky compliance
pursuant to Section 16(a)(xxvii) and Transfer on Death registration
compliance pursuant to Section 16(a)(xviii) and receives:
(i) A purchase order or application, either
directly from an investor or otherwise,
complying with requirements for purchases
prescribed by the prospectus;
(ii) Proper information to establish a shareholder
account; and
(iii) A purchase check or confirmation of receipt or
crediting of available funds for such order to
the Fund's custodian.
In opening new shareholder accounts, PFPC will assign account
numbers. PFPC shall assign Aquila Distributors, Inc. as broker of
record whenever dealer information is omitted and send a copy of
any related application to Aquila Distributors, Inc.
PFPC must receive a completed application before any
redemption orders are accepted and processed for an account opened
directly by an investor.
(c) Redemption of Shares. PFPC shall redeem Shares only
if that function is properly authorized by the Declaration of Trust
or resolution of the Fund's Board of Trustees. If the Fund is a
money-market fund, PFPC shall arrange, in accordance with the
Fund's prospectus, for a shareholder's redemption of shares from a
shareholder's account with a checkwriting privilege. Shares shall
be redeemed and payment therefor shall be made in accordance with
the Fund's prospectus, including provisions set forth therein for
automatic redemption, telephone redemption requests and check-
writing privileges, when the recordholder tenders Shares in proper
form and amount and properly directs the method of redemption. If
Shares are received in proper form, Shares shall be redeemed before
the funds are provided to PFPC from the Fund's custodian. If the
recordholder has not directed that redemption proceeds be wired,
when the custodian provides PFPC with funds, a redemption check
shall be sent to and made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the
order of an assignee or holder and transfer
authorization is signed by the recordholder;
(ii) Transfer authorizations are signed by the
recordholder when Shares are held in
book-entry form;
(iii) Such redemption is through money market fund
check-writing capabilities; or
(iv) such redemption is in settlement of dealer
confirmed redemptions via Fund/Serv.
Consistent with provisions set forth in the prospectus, redemption
proceeds shall be wired upon request. When a broker-dealer
notifies PFPC of a redemption desired by a customer, and the Fund's
custodian provides PFPC with funds, PFPC shall prepare and send the
redemption check to the broker-dealer, made payable to the broker-
dealer on behalf of its customer.
PFPC shall establish procedures reasonably designed to ensure
that redemption requirements established by PFPC and agreed to by
the Fund have been met, including the receipt and examination of
stock certificates and related endorsements, signature guarantees
and obtaining any needed papers or documents, including a properly
completed application, where required. No redemptions in accounts
represented in whole or in part by certificates shall be effected
without cancellation of an adequate number of certificate Shares,
if necessary. No signature guarantees shall be acceptable if
received by facsimile and signature guarantees must reasonably
appear to have been provided by an eligible guarantor institution
of a type described as such in the prospectus which is a
participant in a medallion program recognized by the Securities
Transfer Association or in instructions received from the Fund;
provided, however, that PFPC may accept a signature guarantee
received by facsimile if so instructed by Oral or Written
Instructions.
(d) Dividends and Distributions. Upon receipt of a
resolution of the Fund's Board of Trustees authorizing the
declaration and payment of dividends and distributions, PFPC shall
issue dividends and distributions declared by the Fund in Shares,
or, upon shareholder election, pay such dividends and distributions
in cash, if and as provided for in the Fund's prospectus. Such
issuance or payment, as well as payments upon redemption as
described above, shall be made after deduction and payment of the
required amount of funds to be withheld in accordance with any
applicable tax laws or other laws, rules or regulations. PFPC
shall timely mail to the Fund's shareholders and appropriate taxing
authorities such tax forms and other information, or permissible
substitute notice, relating to dividends and distributions paid by
the Fund as are required to be filed and mailed by applicable law,
rule or regulation. PFPC shall prepare, maintain and file with the
IRS and other appropriate taxing authorities reports relating to
all dividends paid by the Fund to its shareholders as required by
tax or other law, rule or regulation.
(e) Communications to Shareholders. PFPC shall address,
enclose and mail all communications by the Fund to its shareholders
(pre-sorting where reasonably practicable), including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of
Shares;
(iii) Monthly or quarterly statements (with extra
print lines for additional information, such
as additional dividend information, to
shareholders), generally by the fifth business
day after the dividend payable date, providing
a combined check and statement to shareholders
electing cash distributions;
(iv) Dividend and distribution notices (at year-
end, such notices will be upon Written
Instructions);
(v) Tax form information (upon Written
Instructions);
(vi) Forms W-9 or W-8 as appropriate;
(vii) Prospectuses;
(viii) Account-related shareholder correspondence
that is considered in PFPC's sole discretion
to be routine; and
(ix) Any other routine shareholder communications
as agreed to between the Fund and PFPC.
(f) Third Party Proxy Provider. PFPC shall assist the
Fund in obtaining competitive bids for proxy services. Proxy
services shall be provided by a third party. The Fund understands
and agrees that PFPC bears no responsibility for the provision of
any proxy services or the manner in which any proxy services are
provided, that PFPC will not be considered the Fund's agent in
connection with the provision of any proxy services, and that any
party providing proxy services to the Fund shall not be considered
to be the agent of PFPC or to have any other relationship with PFPC
with respect to such services. Such proxy services, which will be
decided upon solely between the Fund and the third party provider,
shall include proxy mailing, receiving and tabulating proxy cards
for the meetings of the Fund's shareholders, communicating to the
Fund daily and final results of such tabulation accompanied by
appropriate certificates, and preparing and furnishing to the Fund
certified lists of shareholders as of such date, and in such form
and containing such information as may be required by the Fund to
comply with any applicable provisions of law or its Declaration of
Trust and/or By-Laws relating to such meetings. Notwithstanding
the foregoing provisions of this Subsection (f), PFPC shall furnish
to the third-party proxy provider such information as is reasonably
requested by such provider pertaining to shareholder registration
information and record-date share positions to permit the Fund to
obtain the benefits of the services necessary for conduct of its
shareholder meetings.
(g) Records. PFPC shall maintain records of the
accounts for each shareholder showing the following information:
(i) Name, address, United States Tax
Identification or Social Security number, and
any pertinent beneficiary information;
(ii) Number and class of Shares held and number and
class of Shares for which certificates, if
any, have been issued, including certificate
numbers and denominations;
(iii) Historical information regarding the account
of each shareholder, including dividends and
distributions paid and the date and price for
all transactions in a shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings,
including withholdings in the case of a
foreign account and accounts subject to backup
withholding; and
(vii) Any information required in order for the
transfer agent to perform any calculations
contemplated or required by this Agreement.
PFPC shall use its best efforts to convert for use in its
system such data of the predecessor transfer agent that has been
provided to PFPC as shall permit PFPC to maintain on its system
such converted data covering a minimum of 18 months prior to
commencement of its services as transfer agent of the Fund. PFPC
is not responsible for errors or omissions in or caused by the
records of any predecessor transfer agent. PFPC shall inform the
Fund of material errors coming to its attention in the course of
performance of its duties hereunder. PFPC shall maintain on its
system in a readily viewable form pertinent account information
(i.e., the information listed in this Section 16(g)) relating to
shareholders of the Fund (including all predecessor transfer agent
data delivered to PFPC by the Fund's prior transfer agent in a
machine readable format and converted by PFPC) for a minimum of 13
months after the date of the transaction or other matter to which
the information relates and shall thereafter maintain such
information in a readily accessible format to the extent required
by the 1940 Act and other applicable securities laws, rules and
regulations.
(h) Lost or Stolen Certificates. PFPC shall place a
stop notice against any certificate reported to be lost, stolen,
destroyed or not received and comply with all applicable federal
regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued
only upon:
(i) The shareholder's pledge of a lost instrument
bond or such other appropriate indemnity bond
issued by a surety company approved by PFPC;
and
(ii) Completion of a release and indemnification
agreement signed by the shareholder to protect
PFPC and its affiliates.
(i) Shareholder Inspection of Fund Records. Upon a
request from any Fund shareholder to inspect Fund records, PFPC
will notify the Fund and the Fund will issue instructions granting
or denying each such request. Unless PFPC has acted contrary to
the Fund's instructions, the Fund agrees and does hereby release
PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's records.
(j) Withdrawal of Shares and Cancellation of
Certificates. Upon receipt of Written Instructions, PFPC shall
cancel outstanding certificates surrendered by the Fund to reduce
the total amount of outstanding Shares by the number of Shares
surrendered by the Fund.
(k) Fraud Detection Procedures. PFPC shall establish
procedures that are reasonably designed to detect fraudulent
purchase, redemption and distribution checks (including fraudulent
or forged endorsements and altered payment amounts); however, PFPC
shall have no liability for loss resulting from any fraud
perpetrated or attempted to be perpetrated on the Fund, unless PFPC
has acted with willful misfeasance, bad faith, negligence or
reckless disregard of its duties hereunder. Such procedures shall
take into account the type of accounts involved, the sums involved
and cost/benefit considerations.
(l) Third Party Checks. PFPC shall not accept any third
party check (i.e., an investment check whose payee is other than
the Fund or PFPC) except pursuant to Written Instructions.
(m) Relationship Officer. PFPC agrees to provide a
Relationship Officer to serve as the primary point of contact
between the Fund and PFPC. PFPC will exercise due care in
assigning an individual who is conversant with standard investment
company practices.
(n) Additional Services.
(i) PFPC shall, in addition to the services herein
itemized, if so requested by the Fund and
agreed to by PFPC, which shall bargain in good
faith regarding such requests and the fees and
charges to be paid therefor, for such
additional fees and charges as the Fund and
PFPC may from time to time agree, perform and
do all other acts and services as required by
the Fund's prospectus or the law or that are
customarily performed and done by transfer
agents, dividend disbursing agents, and
shareholder servicing agents of open-end
mutual funds such as the Fund.
(ii) PFPC shall, in addition to the services herein
itemized, provide such additional services to
the Fund and in such manner as are normally
provided by PFPC to its mutual fund transfer
agency customers in the normal course of
business, subject to additional mutually-
agreed upon pricing, if any.
(o) Procedures. In order to facilitate the carrying out
of the services set forth in this Agreement, PFPC shall follow the
procedures attached hereto as Exhibit _______ and PFPC and the Fund
may from time to time mutually agree to changes thereto.
17. Duration and Termination. This Agreement shall continue
until terminated by the Fund on sixty (60) days' prior written
notice or by PFPC on one-hundred-twenty (120) days' prior written
notice to the other party, provided, however, that without the
Fund's consent PFPC shall not for a period of three years after the
date of this Agreement terminate this Agreement with the intent to
enter into a new agreement with the Fund that provides for higher
fees.
18. Notices. All notices and other communications, including
Written Instructions, shall be in writing or by confirming
telegram, cable, telex or facsimile sending device. Notices shall
be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington,
Delaware 19809; (b) if to the Fund, at 380 Madison Avenue, Suite
2300, New York, NY 10017, Attn: President or (c) if to neither of
the foregoing, at such other address as shall have been given by
like notice to the sender of any such notice or other communication
by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to
have been given immediately. If notice is sent by first-class
mail, it shall be deemed to have been given three days after it has
been mailed. If notice is sent by messenger, it shall be deemed to
have been given on the day it is delivered.
19. Amendments. This Agreement, or any term thereof, may be
changed or waived only by a written amendment, signed by the party
against whom enforcement of such change or waiver is sought.
20. Delegation; Assignment. PFPC may assign its rights and
delegate its duties hereunder only to any wholly-owned direct or
indirect subsidiary of PNC Bank, National Association or PNC Bank
Corp., provided that (i) PFPC gives the Fund thirty (30) days'
prior written notice; (ii) the delegate (or assignee) agrees with
PFPC and the Fund to comply with all relevant provisions of the
1940 Act; and (iii) PFPC and such delegate (or assignee) promptly
provide such information as the Fund may request, and respond to
such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the
delegate (or assignee).
21. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
22. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
23. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the
entire agreement and understanding between the parties and
supersedes all prior agreements and understandings relating to the
subject matter hereof, provided that the parties may embody in one
or more separate documents their agreement, if any, with respect to
delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their
construction or effect.
(c) Governing Law. This Agreement shall be deemed to
be a contract made in Delaware and governed by Delaware law,
without regard to principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of
any party to this Agreement shall constitute the valid and binding
execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
PFPC INC.
By:_________________________________
Title:______________________________
Tax-Free Fund for Utah
By:_________________________________
Title:______________________________
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ___________________, 1997, is
Exhibit A to that certain Transfer Agency Services Agreement dated
as of ____________________, 1997 between PFPC Inc. and
________________________.
PORTFOLIOS
[List all Portfolios here]
<PAGE>
AUTHORIZED PERSONS APPENDIX
On the date of the Agreement and thereafter until further
notice, the following persons shall be Authorized Persons as
defined therein:
Name (Type) Signature
Lacy B. Herrmann ______________________________________
Lacy B. Herrmann
William C. Wallace ______________________________________
William C. Wallace
Diana P. Herrmann ______________________________________
Diana P. Herrmann
Charles E. Childs, III ______________________________________
Charles E. Childs, III
John M. Herndon ______________________________________
John M. Herndon
Rose F. Marotta ______________________________________
Rose F. Marotta
Richard F. West ______________________________________
Richard F. West
Patricia A. Craven ______________________________________
Patricia A. Craven
Stephen J. Caridi ______________________________________
Stephen J. Caridi
William Killeen _____________________________________
William Killeen
<PAGE>
[Report List for Aquila Group of Funds
12b-1 Report
5 Percent or More Shareholder Listing
5 Percent or More Shareholder Listing - sorted by ssn
Account Analysis by Type
Asset Report by Dealer for Management Company
Asset Report by Fund and Dealer
Blue Sky Sales Report
Capital Stock Reporting
Daily Transaction Journal
Dealer Commission Check Register/Dealer Commission Statement
DTS Activity Summary
DTS Liquidation Placements
DTS Outstanding Trades by Fund
DTS Posted Transactions
DTS Purchase Placement
Matrix Summary by Fund With Dealer Name
Matrix Summary by Management Company With Dealer Name
Month to Sales (Demographics by Account Group)
Monthly Statistical Report
Monthly Wire Order (Purchases/Redemptions)
New Account Journal
Next Day NSCC Settlement Detail
NSAR Based on trade date
Transactions at a Glance]
TAX-FREE FUND FOR UTAH
ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of the 16th day of December, 1992,
by and between TAX-FREE FUND FOR UTAH (the "Fund"), a
Massachusetts business Trust, 380 Madison Avenue, Suite 2300, New
York, New York 10017 and AQUILA MANAGEMENT CORPORATION (the
"Administrator"), a New York corporation, 380 Madison Avenue,
Suite 2300, New York, New York 10017
W I T N E S S E T H
WHEREAS, the Fund and the Administrator wish to enter into
an Administration Agreement as herein set forth (referred to
hereafter as "this Agreement");
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General.
The Administrator shall perform (at its own expense) the
functions set forth more fully herein for the Fund and for the
investment adviser for the Fund (the "Adviser").
2. Duties and Obligations of the Adviser and Administrator to
the Fund and to Each Other.
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of
the Fund, the Administrator shall provide all administrative
services to the Fund other than those services relating to the
investment portfolio of the Fund and the maintenance of its
accounting books and records; as part of such duties, the
Administrator shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Fund;
(ii) oversee all relationships between the Fund and its
transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of
agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary
or desirable for the effective operation of the Fund and for
the sale, servicing or redemption of the Fund's shares;
(iii) provide to the Adviser and the Fund statistical and
other factual information and advice regarding economic
factors and trends, but shall not generally furnish advice
or make recommendations regarding the purchase or sale of
securities;
(iv) Either keep the accounting records of the Fund,
including the computation of net asset value per share and
the dividends or, at its expense and responsibility,
delegate such duties in whole or in part to a company
satisfactory to the Fund;
(v) maintain the Fund's books and records (other than
accounting books and records), and prepare (or assist
counsel and auditors in the preparation of) all required
proxy statements, reports to the Fund's shareholders and
Trustees, reports to and other filings with the Securities
and Exchange Commission and any other governmental agencies,
and tax returns, and oversee the insurance relationships of
the Fund;
(vi) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Fund and/or
its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time;
(vii) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Fund's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(b) Any activities performed by the Administrator under this
section shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the Investment Company Act of
1940 (the "Act") and any rules or regulations in force
thereunder; (2) any other applicable laws, rules and regulations;
(3) the Declaration of Trust and By-Laws of the Fund as amended
and restated from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the
fundamental policies of the Fund, as reflected in its
registration statement under the Act, or as amended by the
shareholders of the Fund.
(c) The Administrator assumes no responsibility under this
agreement other than to render the services called for hereunder,
and specifically assumes no responsibilities for investment
advice or the investment or reinvestment of the Fund's assets.
(d) The Administrator shall not be liable for any error in
judgment or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Agreement.
(e) Nothing in this Agreement shall prevent the
Administrator or any officer thereof from acting as investment
adviser, sub-adviser, administrator or manager for any other
person, firm, or corporation, and shall not in any way limit or
restrict the Administrator or any of its officers, stockholders
or employees from buying, selling or trading any securities for
its own or their own accounts or for the accounts of others for
whom it or they may be acting, provided, however, that the
Administrator expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations to the Adviser or the Fund under
this Agreement. The Fund shall indemnify the Administrator to
the full extent permitted by the Fund's Declaration of Trust.
3. Allocation of Expenses.
The Administrator shall, at its own expense, provide office
space, facilities, equipment, and personnel for the performance
of its functions hereunder and shall pay all compensation of
Trustees, officers, and employees of the Fund who are affiliated
persons of the Administrator.
4. Compensation of the Administrator.
(a) The Fund shall pay the Administrator, and the
Administrator shall accept as full compensation for all services
rendered hereunder, a fee payable monthly and computed on the net
asset value of the Fund at the end of each business day at the
annual rate of .27 of 1% of such net asset value.
(b) The above fee shall be reduced, but not below zero, by
an amount equal to its pro-rata portion (based upon the aggregate
fees of the Adviser and the Administrator) of the amount, if any,
by which the total expenses of the Fund in any fiscal year,
exclusive of taxes, interest, and brokerage fees, shall exceed
the lesser of (i) 2.5% of the first $30 million of average annual
net assets of the Fund plus 2.0% of its average annual net assets
in excess of $30 million up to $100 million, plus 1.5% of its
average annual net assets in excess of $100 million, or (ii) 25%
of the Fund's total annual investment income. The payment of the
above fee at the end of any month will be reduced or postponed so
that at no time will there be any accrued but unpaid liability
under this expense limitation, subject to readjustment during the
year.
5. Duration and Termination.
(a) This Agreement shall become effective as of the date
first written above, after approval by a vote of a majority of
the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, with votes
cast in person at a meeting called for the purpose of voting on
such approval and shall, unless terminated as hereinafter
provided, continue in effect until the December 31 next preceding
the first anniversary of the effective date of this Agreement,
and from year to year thereafter.
(b) This Agreement may be terminated by the Administrator at
any time without penalty upon giving the Adviser and the Fund
sixty days' written notice (which notice may be waived by them)
and may be terminated by the Fund at any time without penalty
upon giving the Administrator sixty days' written notice (which
notice may be waived by the Administrator) provided that such
termination by the Fund shall be directed or approved by a vote
of a majority of its Trustees in office at the time, including a
majority of the Trustees who are not interested persons (as
defined in the Act) of the Fund. However, the Administrator
agrees that it will not exercise its termination rights for at
least two years from the effective date of this Agreement except
for regulatory reasons.
6. Disclaimer of Shareholder Liability
The Administrator understands that the obligations of this
Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Administrator
represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for acts
or obligations of the Fund.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers and
their seals to be hereunto affixed, all as of the day and year
first above written.
ATTEST: TAX-FREE FUND FOR UTAH
/s/Kenneth L. MacRitchie /s/Stephen J. Caridi
________________________ By:___________________________________
Assistant Secretary Assistant Vice President
ATTEST: AQUILA MANAGEMENT CORPORATION
/s/Rose F. Marotta /s/Lacy B. Herrmann
_______________________ By:___________________________________
C.F.O. President and Chairman
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
551 Fifth Avenue
New York, NY 10176
Tel: (212) 818-1110
FAX: (212) 818-0494
e-mail: [email protected]
October 28, 1997
Tax-Free Fund For Utah
380 Madison Avenue, Suite 2300
New York, New York 10017
Ladies and Gentlemen:
You have requested that we render an opinion to Tax-Free
Fund For Utah (the "Fund") with respect to Post-Effective
Amendment No. 8 (the "Amendment") to the Registration Statement
of the Fund under the Securities Act of 1933 (the "1933 Act") and
No. 9 under the Investment Company Act of 1940 (the "1940 Act")
which you propose to file with the Securities and Exchange
Commission (the "Commission"). The purpose of the Amendment is to
add a new class of shares, Financial Intermediary Class Shares
("Class I Shares"), as well as other changes. The Fund already
has outstanding Class A Shares, Class C Shares and Class Y
Shares.
We have examined originals or copies, identified to our
satisfaction as being true copies, of those corporate records of
the Fund, certificates of public officials, and other documents
and matters as we have deemed necessary for the purpose of this
opinion. We have assumed without independent verification the
authenticity of the documents submitted to us as originals and
the conformity to the original documents of all documents
submitted to us as copies.
Upon the basis of the foregoing and in reliance upon such
other matters as we deem relevant under the circumstances, it is
our opinion that the Class A Shares, Class C Shares, Class Y
Shares and Class I Shares of the Fund as described in the
Amendment, when issued and paid for in accordance with the terms
set forth in the prospectus and statement of additional
information of the Fund forming a part of its then effective
Registration Statement as heretofore, herewith and hereafter
amended, will be duly issued, fully-paid and non-assessable to
the extent set forth therein.
This letter is furnished to you pursuant to your request and
to the requirements imposed upon you under the 1933 Act and 1940
Act and is intended solely for your use for the purpose of
completing the filing of the Amendment with the Commission. This
letter may not be used for any other purpose or furnished to or
relied upon by any other persons, or included in any filing made
with any other regulatory authority, without our prior written
consent.
We hereby consent to the filing of this opinion with the
Amendment.
Very truly yours,
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
/s/ W.L.D. Barrett
By:_________________________________
W. L. D. Barrett
Dated: October 31, 1997
TAX-FREE FUND FOR UTAH
DISTRIBUTION PLAN
1. The Plan. This amended and restated Plan (the "Plan") is
the written plan, contemplated by Rule 12b-1 (the "Rule") under
the Investment Company Act of 1940 (the "1940 Act"), of Tax-Free
Fund For Utah (the "Fund"). Part I of the Plan applies solely to
the Front-Payment Class ("Class A") of shares of the Fund, Part
II solely to the Level-Payment Class ("Class C"), Part III solely
to the Financial Intermediary Class ("Class I Shares") and Part
IV to all classes.
2. Disinterested Trustees. While any Part of this Plan is in
effect, the selection and nomination of those Trustees of the
Fund who are not "interested persons" of the Fund shall be
committed to the discretion of such disinterested Trustees.
Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
Part I
Payments Involving Fund Assets Allocated to Front-Payment Shares
3. Applicability. This Part I of the Plan applies only to the
Front-Payment Class ("Class A") of shares of the Fund (regardless
of whether such class is so designated or is redesignated by some
other name).
4. Definitions for Part I. As used in this Part I of the Plan,
"Qualified Recipients" shall mean broker-dealers or others
selected by Aquila Distributors, Inc. (the "Distributor"),
including but not limited to any principal underwriter of the
Fund, with which the Fund or the Distributor has entered into
written agreements in connection with this Part I ("Class A Plan
Agreements") and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Fund's Front-Payment Shares or servicing of shareholder
accounts with respect to such shares. "Qualified Holdings" shall
mean, as to any Qualified Recipient, all Front-Payment Shares
beneficially owned by such Qualified Recipient, or beneficially
owned by its brokerage customers, other customers, other
contacts, investment advisory clients, or other clients, if the
Qualified Recipient was, in the sole judgment of the Distributor,
instrumental in the purchase and/or retention of such shares
and/or in providing administrative assistance or other services
in relation thereto. "Administrator" shall mean Aquila
Management Corporation, or any successor serving as administrator
of the Fund.
5. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Class A Permitted Payments") to Qualified Recipients,
which Class A Permitted Payments may be made directly, or through
the Distributor or shareholder servicing agent as disbursing
agent, which may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under this Part I of the Plan are not accruable or for
any fiscal year which is not a full fiscal year) 0.20 of 1% of
the average annual net assets of the Fund represented by the
Front-Payment Class of shares. Such payments shall be made only
out of the Fund assets allocable to the Front-Payment Shares.
The Distributor shall have sole authority (i) as to the selection
of any Qualified Recipient or Recipients; (ii) not to select any
Qualified Recipient; and (iii) the amount of Class A Permitted
Payments, if any, to each Qualified Recipient provided that the
total Class A Permitted Payments to all Qualified Recipients do
not exceed the amount set forth above. The Distributor is
authorized, but not directed, to take into account, in addition
to any other factors deemed relevant by it, the following: (a)
the amount of the Qualified Holdings of the Qualified Recipient;
(b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area with
respect to holders of Front-Payment Shares, including without
limitation, any or all of the following activities: answering
customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Fund
may be effected; assisting shareholders in designating and
changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; assisting in
processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in
connection with customer orders to purchase or redeem shares;
verifying and guaranteeing shareholder signatures in connection
with redemption orders and transfers and changes in shareholder
designated accounts; furnishing (either alone or together with
other reports sent to a shareholder by such person) monthly and
year end statements and confirmations of purchases and
redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving,
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; and
(c) the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
6. Reports. While this Part I is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Class A Permitted Payments made under Section 5 of the
Plan, the identity of the Qualified Recipient of each payment,
and the purposes for which the amounts were expended; and (ii)
all fees of the Fund to the Distributor paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Fund, the Adviser, the Administrator, the Distributor or the
Fund's sub-adviser, such person shall agree to furnish to the
Distributor for transmission to the Board of Trustees of the Fund
an accounting, in form and detail satisfactory to the Board of
Trustees, to enable the Board of Trustees to make the
determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
7. Effectiveness, Continuation, Termination and Amendment. To
the extent required under the 1940 Act, this Part I of the Plan
has been approved (i) by a vote of the Trustees, including those
Trustees (the "Independent Trustees") who, at the time of such
vote, were not "interested persons" (as defined in the 1940 Act)
of the Fund and had no direct or indirect financial interest in
the operation of this Plan or in any agreements related to this
Plan, with votes cast in person at a meeting called for the
purpose of voting on Part I of the Plan; and (ii) by a vote of
holders of at least a "majority" (as defined in the 1940 Act) of
the outstanding voting securities of the Front-Payment Class (or
of any predecessor class or category of shares, whether or not
designated as a class) and a vote of holders of at least a
"majority" (as so defined) of the outstanding voting securities
of the Level-Payment Class and/or of any other class whose shares
are convertible into Front-Payment Shares. This Part I is
effective as of the date first above written and will, unless
terminated as hereinafter provided, continue in effect until
December 31 of each year only so long as such continuance is
specifically approved at least annually by the Fund's Trustees
and its Independent Trustees with votes cast in person at a
meeting called for the purpose of voting on such continuance.
This Part I may be terminated at any time by the vote of a
majority of the Independent Trustees or by shareholder approval
of the class or classes of shares affected by this Part I as set
forth in (ii) above. This Part I may not be amended to increase
materially the amount of payments to be made without shareholder
approval of the class or classes of shares affected by this Part
I as set forth in (ii) above, and all amendments must be approved
in the manner set forth in (i) above.
8. Class A Plan Agreements. In the case of a Qualified
Recipient which is a principal underwriter of the Fund, the Class
A Plan Agreement shall be the agreement contemplated by Section
15(b) of the 1940 Act since each such agreement must be approved
in accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Class A Plan Agreements
with them shall be their agreements with the Distributor with
respect to payments under this Part I, provided, however, that
"Related Agreements" entered into under the distribution plan of
the Fund in effect prior to the Fund's initial adoption of a
multiple-class arrangement and not terminated at or prior to such
date are deemed to be "Class A Plan Agreements" for purposes of
this Part I and that, as and to the extent necessary to give
effect to this proviso, defined terms used in such agreements
shall be deemed to have the meanings assigned to their
appropriate counterparts in this Part I and the provisions of
such agreements, which shall otherwise remain in full force and
effect, are deemed to be appropriately modified.
Part II
Payments Involving Fund Assets Allocated to Level-Payment Shares
9. Applicability. This Part II of the Plan applies only to the
Level-Payment Class ("Class C") of shares of the Fund (regardless
of whether such class is so designated or is redesignated by some
other name).
10. Definitions for Part II. As used in this Part II of the
Plan, "Qualified Recipients" shall mean broker-dealers or others
selected by Aquila Distributors, Inc. (the "Distributor"),
including but not limited to any principal underwriter of the
Fund, with which the Fund or the Distributor has entered into
written agreements in connection with this Part II ("Class C Plan
Agreements") and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Fund's Level-Payment Shares or servicing of shareholder
accounts with respect to such shares. "Qualified Holdings" shall
mean, as to any Qualified Recipient, all Level-Payment Shares
beneficially owned by such Qualified Recipient, or beneficially
owned by its brokerage customers, other customers, other
contacts, investment advisory clients, or other clients, if the
Qualified Recipient was, in the sole judgment of the Distributor,
instrumental in the purchase and/or retention of such shares
and/or in providing administrative assistance or other services
in relation thereto. "Administrator" shall mean Aquila
Management Corporation or any successor serving as administrator
of the Fund.
11. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Class C Permitted Payments") to Qualified Recipients,
which Class C Permitted Payments may be made directly, or through
the Distributor or shareholder servicing agent as disbursing
agent, which may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under this Part II of the Plan are not accruable or for
any fiscal year which is not a full fiscal year) 0.75 of 1% of
the average annual net assets of the Fund represented by the
Level-Payment Class of shares. Such payments shall be made only
out of the Fund assets allocable to the Level-Payment Shares.
The Distributor shall have sole authority (i) as to the selection
of any Qualified Recipient or Recipients; (ii) not to select any
Qualified Recipient; and (iii) the amount of Class C Permitted
Payments, if any, to each Qualified Recipient provided that the
total Class C Permitted Payments to all Qualified Recipients do
not exceed the amount set forth above. The Distributor is
authorized, but not directed, to take into account, in addition
to any other factors deemed relevant by it, the following: (a)
the amount of the Qualified Holdings of the Qualified Recipient;
(b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area with
respect to holders of Level-Payment Shares, including without
limitation, any or all of the following activities: answering
customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Fund
may be effected; assisting shareholders in designating and
changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; assisting in
processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in
connection with customer orders to purchase or redeem shares;
verifying and guaranteeing shareholder signatures in connection
with redemption orders and transfers and changes in shareholder
designated accounts; furnishing (either alone or together with
other reports sent to a shareholder by such person) monthly and
year end statements and confirmations of purchases and
redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving,
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; and
(c) the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
12. Reports. While this Part II is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Class C Permitted Payments made under Section 11 of the
Plan, the identity of the Qualified Recipient of each payment,
and the purposes for which the amounts were expended; and (ii)
all fees of the Fund to the Distributor paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Fund, the Adviser, the Administrator, the Distributor or the
Fund's sub-adviser, such person shall agree to furnish to the
Distributor for transmission to the Board of Trustees of the Fund
an accounting, in form and detail satisfactory to the Board of
Trustees, to enable the Board of Trustees to make the
determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
13. Effectiveness, Continuation, Termination and Amendment. To
the extent required under the 1940 Act, this Part II has been
approved (i) by a vote of the Trustees, including the Independent
Trustees, with votes cast in person at a meeting called for the
purpose of voting on Part II of the Plan; and (ii) by a vote of
holders of at least a "majority" (as defined in the 1940 Act) of
the outstanding voting securities of the Level-Payment Class.
This Part II is effective as of the date first above written and
will, unless terminated as hereinafter provided, continue in
effect until December 31 of each year only so long as such
continuance is specifically approved at least annually by the
Fund's Trustees and its Independent Trustees with votes cast in
person at a meeting called for the purpose of voting on such
continuance. This Part II may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of
the holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Level-Payment Class. This
Part II may not be amended to increase materially the amount of
payments to be made without shareholder approval of the class or
classes of shares affected by this Part II as set forth in (ii)
above, and all amendments must be approved in the manner set
forth in (i) above.
14. Class C Plan Agreements. In the case of a Qualified
Recipient which is a principal underwriter of the Fund, the Class
C Plan Agreement shall be the agreement contemplated by Section
15(b) of the 1940 Act since each such agreement must be approved
in accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Class C Plan Agreements
with them shall be their agreements with the Distributor with
respect to payments under this Part II, provided, however, that
"Related Agreements" entered into under the distribution plan of
the Fund in effect prior to the Fund's initial adoption of a
multiple-class arrangement and not terminated at or prior to such
date are deemed to be "Class C Plan Agreements" for purposes of
this Part II and that, as and to the extent necessary to give
effect to this proviso, defined terms used in such agreements
shall be deemed to have the meanings assigned to their
appropriate counterparts in this Part II and the provisions of
such agreements, which shall otherwise remain in full force and
effect, are deemed to be appropriately modified.
Part III
Payments Involving Fund Assets Allocated to Financial
Intermediary Shares
15. Applicability. This Part III of the Plan applies only to
the Financial Intermediary Class ("Class I") of shares of the
Fund (regardless of whether such class is so designated or is
redesignated by some other name).
16. Definitions for Part III. As used in this Part III of the
Plan, "Qualified Recipients" shall mean broker-dealers or others
selected by Aquila Distributors, Inc. (the "Distributor"),
including but not limited to any principal underwriter of the
Fund, with which the Fund or the Distributor has entered into
written agreements in connection with this Part III ("Class I
Plan Agreements") and which have rendered assistance (whether
direct, administrative, or both) in the distribution and/or
retention of the Fund's Financial Intermediary Shares or
servicing of shareholder accounts with respect to such shares.
"Qualified Holdings" shall mean, as to any Qualified Recipient,
all Financial Intermediary Shares beneficially owned by such
Qualified Recipient, or beneficially owned by its brokerage
customers, other customers, other contacts, investment advisory
clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase
and/or retention of such shares and/or in providing
administrative assistance or other services in relation thereto.
"Administrator" shall mean Aquila Management Corporation, or any
successor serving as administrator of the Fund.
17. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Class I Permitted Payments") to Qualified Recipients,
which Class I Permitted Payments may be made directly, or through
the Distributor or shareholder servicing agent as disbursing
agent, which may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under this Part III of the Plan are not accruable or for
any fiscal year which is not a full fiscal year) a rate fixed
from time to time by the Board of Trustees, but not in excess of
0.25% of 1% of the average annual net assets of the Fund
represented by the Class I Shares. Such payments shall be made
only out of the Fund assets allocable to the Financial
Intermediary Shares. The Distributor shall have sole authority
(i) as to the selection of any Qualified Recipient or Recipients;
(ii) not to select any Qualified Recipient; and (iii) the amount
of Class I Permitted Payments, if any, to each Qualified
Recipient provided that the total Class I Permitted Payments to
all Qualified Recipients do not exceed the amount set forth above
or such lesser amount as the Board of Trustees may determine.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Financial Intermediary
Shares, including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving,
funds in connection with customer orders to purchase or redeem
shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Fund, proxy
statements, annual reports, updating prospectuses and other
communications from the Fund to its shareholders; receiving,
tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the
Fund; and providing such other related services as the
Distributor or a shareholder may request from time to time; and
(c) the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
18. Reports. While this Part III is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Class I Permitted Payments made under Section 17 of the
Plan, the identity of the Qualified Recipient of each payment,
and the purposes for which the amounts were expended; and (ii)
all fees of the Fund to the Distributor paid or accrued during
such quarter. In addition, if any such Qualified Recipient is an
affiliated person, as that term is defined in the Act, of the
Fund, the Adviser, the Administrator, the Distributor or the
Fund's sub-adviser, such person shall agree to furnish to the
Distributor for transmission to the Board of Trustees of the Fund
an accounting, in form and detail satisfactory to the Board of
Trustees, to enable the Board of Trustees to make the
determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
19. Effectiveness, Continuation, Termination and Amendment.
To the extent required under the 1940 Act, this Part III has been
approved (i) by a vote of the Trustees, including the Independent
Trustees, with votes cast in person at a meeting called for the
purpose of voting on Part III of the Plan; and (ii) by a vote of
holders of at least a "majority" (as defined in the 1940 Act) of
the outstanding voting securities of the Financial Intermediary
Class. This Part III is effective as of the date first above
written and will, unless terminated as hereinafter provided,
continue in effect until December 31 of each year only so long as
such continuance is specifically approved at least annually by
the Fund's Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. This Part III may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of
the holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Financial Intermediary
Class. This Part III may not be amended to increase materially
the amount of payments to be made without shareholder approval of
the class or classes of shares affected by this Part III as set
forth in (ii) above, and all amendments must be approved in the
manner set forth in (i) above.
20. Class I Plan Agreements. In the case of a Qualified
Recipient which is a principal underwriter of the Fund, the Class
I Plan Agreement shall be the agreement contemplated by Section
15(b) of the 1940 Act since each such agreement must be approved
in accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Class I Plan Agreements
with them shall be their agreements with the Distributor with
respect to payments under this Part III, provided, however, that
"Related Agreements" entered into under the distribution plan of
the Fund in effect prior to the effective date of this Part III
and not terminated at or prior to such effective date may, at the
Distributor's discretion, be deemed to be "Class I Plan
Agreements" for purposes of this Part III and that, as and to the
extent necessary to give effect to this proviso, defined terms
used in such agreements shall be deemed to have the meanings
assigned to their appropriate counterparts in this Part III and
the provisions of such agreements, which shall otherwise remain
in full force and effect, are deemed to be appropriately
modified.
Part IV
Defensive Provisions
21. Certain Payments Permitted. Whenever the Administrator of
the Fund (i) makes any payment directly or through the Fund's
Distributor for additional compensation to dealers in connection
with sales of shares of the Fund, which additional compensation
may include payment or partial payment for advertising of the
Fund's shares, payment of travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to locations within
or outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences, or other items described in the Fund's
prospectus, in amounts that will not exceed the amount of the
sales charges in respect of sales of shares of the Fund effected
through such participating dealers whether retained by the
Distributor or reallowed to participating dealers, or (ii) bears
the costs, not borne by the Distributor, of printing and
distributing all copies of the Fund's prospectuses, statements of
additional information and reports to shareholders which are not
sent to the Fund's shareholders, or the costs of supplemental
sales literature and advertising, such payments are authorized.
It is recognized that, in view of the bearing by the
Administrator of certain distribution expenses, the profits, if
any, of the Administrator are dependent primarily on the
administration fees paid by the Fund to the Administrator and
that its profits, if any, would be less, or losses, if any, would
be increased due to the bearing by it of such expenses. If and to
the extent that any such administration fees paid by the Fund
might, in view of the foregoing, be considered as indirectly
financing any activity which is primarily intended to result in
the sale of shares issued by the Fund, the payment of such fees
is authorized by the Plan.
22. Certain Fund Payments Authorized. If and to the extent that
any of the payments listed below are considered to be "primarily
intended to result in the sale of" shares issued by the Fund
within the meaning of the Rule, such payments are authorized
under this Plan: (i) the costs of the preparation of all reports
and notices to shareholders and the costs of printing and mailing
such reports and notices to existing shareholders, irrespective
of whether such reports or notices contain or are accompanied by
material intended to result in the sale of shares of the Fund or
other funds or other investments; (ii) the costs of the
preparation and setting in type of all prospectuses and
statements of additional information, and the costs of printing
and mailing of all prospectuses and statements of additional
information to existing shareholders; (iii) the costs of the
preparation, printing and mailing of all proxy statements and
proxies, irrespective of whether any such proxy statement
includes any item relating to, or directed toward, the sale of
the Fund's shares; (iv) all legal and accounting fees relating to
the preparation of any such reports, prospectuses, statements of
additional information, proxies and proxy statements; (v) all
fees and expenses relating to the registration or qualification
of the Fund and/or its shares under the securities or "Blue-Sky"
laws of any jurisdiction; (vi) all fees under the Securities Act
of 1933 and the 1940 Act, including fees in connection with any
application for exemption relating to or directed toward the sale
of the Fund's shares; (vii) all fees and assessments of the
Investment Company Institute or any successor organization,
irrespective of whether some of its activities are designed to
provide sales assistance; (viii) all costs of the preparation and
mailing of confirmations of shares sold or redeemed or share
certificates, and reports of share balances; (ix) all costs of
responding to telephone or mail inquiries of investors; and (x)
payments to financial intermediaries for shareholder and
shareholder account services.
23. Reports. While Part IV of this Plan is in effect, the
Fund's sub-adviser, Administrator or Distributor shall report at
least quarterly to the Fund's Trustees in writing for their
review on the following matters: (i) all payments made under
Section 21 of this Plan; (ii) all costs of each item specified in
Section 22 of this Plan (making estimates of such costs where
necessary or desirable) during the preceding calendar or fiscal
quarter; and (iii) all fees of the Fund to the Distributor, sub-
adviser or Administrator paid or accrued during such quarter.
24. Effectiveness, Continuation, Termination and Amendment. To
the extent required under the 1940 Act, this Part IV of the Plan
has, with respect to each class of shares outstanding, been
approved (i) by a vote of the Trustees of the Fund and of the
Independent Trustees, with votes cast in person at a meeting
called for the purpose of voting on this Plan; and (ii) by a vote
of holders of at least a "majority" (as defined in the 1940 Act)
of the outstanding voting securities of such class and a vote of
holders of at least a "majority" (as so defined) of the
outstanding voting securities of any class whose shares are
convertible into shares of such class. This Part IV is effective
as of the date first above written and will, unless terminated as
hereinafter provided, continue in effect with respect to each
class of shares to which it applies until December 31 of each
year only so long as such continuance is specifically approved
with respect to that class at least annually by the Fund's
Trustees and its Independent Trustees with votes cast in person
at a meeting called for the purpose of voting on such
continuance. This Part IV of the Plan may be terminated at any
time with respect to a given class by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the outstanding voting
securities of that class. This Part IV may not be amended to
increase materially the amount of payments to be made without
shareholder approval as set forth in (ii) above, and all
amendments must be approved in the manner set forth in (i) above.
--------------------------
25. Additional Terms and Conditions. This Plan and each Part of
it shall also be subject to all applicable terms and conditions
of Rule 18f-3 under the Act as now in force or hereafter amended.
Specifically, but without limitation, the provisions of Part IV
shall be deemed to be severable, within the meaning of and to the
extent required by Rule 18f-3, with respect to each outstanding
class of shares of the Fund.
Dated: October 31, 1997
TAX-FREE FUND FOR UTAH
SHAREHOLDER SERVICES PLAN
1. The Plan. This Shareholder Services Plan (the "Plan") is the
written plan of TAX-FREE FUND FOR UTAH (the "Fund") adopted to
provide for the payment by the Level-Payment Class and the
Financial Intermediary Class shares of the Fund of "service fees"
within the meaning of Rule 2830 of the Conduct Rules of the
National Association of Securities Dealers, Inc. This Plan
applies only to the Level-Payment Class ("Class C") and the
Financial Intermediary Class ("Class I") of shares of the Fund
(regardless of whether such class is so designated or is
redesignated by some other name).
Provisions for Level-Payment Class Shares (Part I)
2. Definitions. As used in Part I of this Plan, "Qualified
Recipients" shall mean broker-dealers or others selected by
Aquila Distributors, Inc. (the "Distributor"), including but not
limited to the Distributor and any other principal underwriter of
the Fund, who have, pursuant to written agreements with the Fund
or the Distributor, agreed to provide personal services to Level-
Payment shareholders and/or maintenance of Level-Payment
shareholder accounts. "Qualified Holdings" shall mean, as to any
Qualified Recipient, all Level-Payment Shares beneficially owned
by such Qualified Recipient's customers, clients or other
contacts. "Administrator" shall mean Aquila Management
Corporation, or any successor serving as administrator of the
Fund.
3. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Service Fees") to Qualified Recipients, which Service
Fees (i) may be paid directly or through the Distributor or
shareholder servicing agent as disbursing agent and (ii) may not
exceed, for any fiscal year of the Fund (as adjusted for any part
or parts of a fiscal year during which payments under this Part I
of the Plan are not accruable or for any fiscal year which is not
a full fiscal year) 0.25 of 1% of the average annual net assets
of the Fund represented by the Level-Payment Class of shares.
Such payments shall be made only out of the Fund assets allocable
to the Level-Payment Shares. The Distributor shall have sole
authority with respect to the selection of any Qualified
Recipient or Recipients and the amount of Service Fees, if any,
paid to each Qualified Recipient, provided that the total such
Service Fees paid to all Qualified Recipients may not exceed the
amount set forth above and provided, further, that no Qualified
Recipient may receive more than 0.25 of 1% of the average annual
net asset value of Level-Payment Shares sold by such Recipient.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient and (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Level-Payment Shares,
including without limitation, any or all of the following
activities: answering customer inquiries regarding account status
and history, and the manner in which purchases and redemptions of
shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving
funds in connection with customer orders to purchase or redeem
shares; verifying and guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder designated accounts; and providing such other related
services as the Distributor or a shareholder may request from
time to time. Notwithstanding the foregoing two sentences, a
majority of the Independent Trustees (as defined below) may
remove any person as a Qualified Recipient. Amounts within the
above limits accrued to a Qualified Recipient but not paid during
a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference
will not be carried over to subsequent years.
Provisions for Financial Intermediary Class Shares (Part II)
4. Definitions. As used in Part II of this Plan, "Qualified
Recipients" shall mean broker-dealers or others selected by
Aquila Distributors, Inc. (the "Distributor"), including but not
limited to the Distributor and any other principal underwriter of
the Fund, who have, pursuant to written agreements with the Fund
or the Distributor, agreed to provide personal services to
Financial Intermediary shareholders, maintenance of Financial
Intermediary shareholder accounts and/or pursuant to specific
agreements entering of confirmed purchase orders on behalf of
customers or clients. "Qualified Holdings" shall mean, as to any
Qualified Recipient, all Financial Intermediary Shares
beneficially owned by such Qualified Recipient's customers,
clients or other contacts. "Administrator" shall mean Aquila
Management Corporation, or any successor serving as administrator
of the Fund.
5. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Fund, the Fund may make
payments ("Service Payments") to Qualified Recipients, which
Service Payments (i) may be paid directly or through the
Distributor or shareholder servicing agent as disbursing agent
and (ii) may not exceed, for any fiscal year of the Fund (as
adjusted for any part or parts of a fiscal year during which
payments under this Part II of the Plan are not accruable or for
any fiscal year which is not a full fiscal year) 0.25 of 1% of
the average annual net assets of the Fund represented by the
Financial Intermediary Class of shares. Such payments shall be
made only out of the Fund assets allocable to the Financial
Intermediary Shares. The Distributor shall have sole authority
with respect to the selection of any Qualified Recipient or
Recipients and the amount of Service Payments, if any, paid to
each Qualified Recipient, provided that the total such Service
Payments paid to all Qualified Recipients may not exceed the
amount set forth above and provided, further, that no Qualified
Recipient may receive more than 0.25 of 1% of the average annual
net asset value of such Recipient's Qualified Holdings. The
Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient and (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Financial Intermediary
Shares, including without limitation, (i) activities relating to
sub-accounting and record-keeping, including the providing of
necessary personnel and facilities to establish and maintain
shareholder accounts and records, and (ii) activities relating to
account service, such as assisting shareholders in designating
and changing dividend options, account designations and
addresses; answering customer inquiries regarding account status
and history and the manner in which purchases and redemptions of
shares of the Fund may be effected; transmitting and receiving
funds in connection with customer orders to purchase or redeem
shares, including, where appropriate, arranging for the wiring of
funds; assisting in processing purchase and redemption
transactions; and verifying and guaranteeing shareholder
signatures in connection with redemption orders and transfers and
changes in shareholder designated accounts. Notwithstanding the
foregoing two sentences, (a) a majority of the Independent
Trustees (as defined below) may remove any person as a Qualified
Recipient and (b) no fees shall be paid pursuant to this Plan for
activities primarily intended to result in the sale of shares of
the Fund or to finance sales or sales promotion expenses.* In
addition, fees paid under this Plan shall be subject to such
further limits as may be necessary for the Financial Intermediary
Class of shares to qualify as a "no-load" class for purposes of
the Conduct Rules of the National Association of Securities
Dealers, Inc.** Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
* In particular, no fees shall be paid, or be deemed to have
been paid, for any of the listed actvities to the extent
that such payments are deemed by the Independent Trustees to
be so intended.
** On the effective date of this Plan, such limitation is as
follows: fees paid under the Plan that satisfy the
definition of "service fees" in Rule 2830(d) of the Conduct
Rules of the National Association of Securities Dealers,
Inc. may not exceed an amount equal to the difference
between (i) 0.25 of 1% of the average annual net assets of
the Fund represented by the Financial Intermediary Class of
shares and (ii) the amount paid from the assets of the
Financial Intermediary Class under the Distribution Plan of
the Fund. Where necessary or appropriate, the Independent
Trustees, or such appropriate officer or officers of the
Fund as they may designate, shall, with the advice of
counsel, determine what fees paid under this Plan are to be
deemed "service fees." Nevertheless, it is understood
that, as a general matter, fees allocable to activities in
category (i) above -- sub-accounting and record-keeping --
are not "service fees," while fees allocable to activities
in category (ii) -- account service -- are "service fees."
In like manner, allocation of payments among activities
shall also be determined by the Independent Trustees or
their delegates.
General Provisions (Part III)
6. Reports. While this Plan is in effect, the Fund's
Distributor shall report at least quarterly to the Fund's
Trustees in writing for their review on the following matters:
(i) all Service Fees and Service Payments paid under the Plan,
the identity of the Qualified Recipient of each payment, and the
purposes for which the amounts were expended; and (ii) all fees
of the Fund to the Distributor paid or accrued during such
quarter. In addition, if any Qualified Recipient is an
"affiliated person," as that term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), of the Fund,
the Administrator, the Distributor, or the investment adviser or
sub-adviser of the Fund, such person shall agree to furnish to
the Distributor for transmission to the Board of Trustees of the
Fund an accounting, in form and detail satisfactory to the Board
of Trustees, to enable the Board of Trustees to make the
determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
7. Effectiveness, Continuation, Termination and Amendment. This
Plan has been approved by a vote of the Trustees, including those
Trustees who, at the time of such vote, were not "interested
persons" (as defined in the 1940 Act) of the Fund and had no
direct or indirect financial interest in the operation of this
Plan or in any agreements related to this Plan (the "Independent
Trustees"), with votes cast in person at a meeting called for the
purpose of voting on this Plan. It is effective as of the date
first above written and will continue in effect for a period of
more than one year from such date only so long as such
continuance is specifically approved at least annually as set
forth in the preceding sentence. It may be amended in like
manner and may be terminated at any time by vote of the
Independent Trustees.
8. Additional Terms and Conditions. (a) This Plan shall also be
subject to all applicable terms and conditions of Rule 18f-3
under the 1940 Act as now in force or hereafter amended.
(b) While this Plan is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of
the Fund, as that term is defined in the 1940 Act, shall be
committed to the discretion of such disinterested Trustees.
Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
<TABLE>
<CAPTION>
1 - Y E A R T O T A L R E T U R N B A S E D O N P O P
Tax-Free Fund For Utah (Class A Shares)
AVG. ANNUAL TOTAL RETURN AS OF 6/30/97 3.37%
CUMULATIVE TOTAL RETURN AS OF 6/30/97 3.37%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.74 As of 6/30/96
Public Offering Price Per Share (POP) $10.15 As of 6/30/96
Number of Shares Purchased 98.522 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
JULY 1996 1,000.00 98.522 0.04037983* 3.98 9.76
AUGUST 1996 965.55 98.930 0.04473692 4.43 9.79
SEPTEMBER 1996 972.95 99.382 0.04480733 4.45 9.81
OCTOBER 1996 979.39 99.836 0.04636181 4.63 9.82
NOVEMBER 1996 985.02 100.307 0.04340809 4.35 9.98
DECEMBER 1996 1,005.42 100.743 0.04351539 4.38 9.94
JANUARY 1997 1,005.77 101.184 0.04531410 4.59 9.84
FEBRUARY 1997 1,000.24 101.650 0.04259915 4.33 9.99
MARCH 1997 1,019.82 102.084 0.04402468 4.49 9.78
APRIL 1997 1,002.87 102.543 0.04687021 4.81 9.75
MAY 1997 1,004.60 103.036 0.04375222 4.51 9.86
JUNE 26, 1997** 1,020.45 103.494 0.04370798 4.52 9.97
JUNE 30, 1997 1,036.35 103.947 0.00439640 0.46 9.94
<CAPTION>
ENDING
OFFERING INVESTMENT CUMULATIVE
PRICE PER DIVIDEND @ END TOTAL
SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C>
JULY 1996 10.83 0.408 965.55 -3.44%
AUGUST 1996 10.84 0.452 972.95 -2.71%
SEPTEMBER 1996 10.83 0.454 979.39 -2.06%
OCTOBER 1996 10.98 0.471 985.02 -1.50%
NOVEMBER 1996 11.06 0.436 1,005.42 0.54%
DECEMBER 1996 11.16 0.441 1,005.77 0.58%
JANUARY 1997 11.15 0.466 1,000.24 0.02%
FEBRUARY 1997 11.08 0.433 1,019.82 1.98%
MARCH 1997 10.89 0.460 1,002.87 0.29%
APRIL 1997 10.82 0.493 1,004.60 0.46%
MAY 1997 10.83 0.457 1,020.45 2.04%
JUNE 26, 1997** 10.74 0.454 1,036.35 3.64%
JUNE 30, 1997 10.81 0.046 1,033.69 3.37%
<FN>
* For the period 7/1/96-7/26/96
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1 - Y E A R T O T A L R E T U R N B A S E D O N N A V
Tax-Free Fund For Utah (Class C Shares)
AVG. ANNUAL TOTAL RETURN AS OF 6/30/97 5.76%
CUMULATIVE TOTAL RETURN AS OF 6/30/97 5.76%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.74 As of 6/30/96
Number of Shares Purchased 102.669 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
JULY 1996 1,000.00 102.669 0.05090163* 5.23 9.76
AUGUST 1996 1,007.28 103.205 0.03312170 3.42 9.79
SEPTEMBER 1996 1,013.79 103.554 0.03784280 3.92 9.81
OCTOBER 1996 1,019.78 103.953 0.03949784 4.11 9.82
NOVEMBER 1996 1,024.93 104.372 0.03587339 3.74 9.98
DECEMBER 1996 1,045.37 104.747 0.03433294 3.60 9.94
JANUARY 1997 1,044.78 105.109 0.03499410 3.68 9.84
FEBRUARY 1997 1,037.95 105.482 0.03458855 3.65 9.99
MARCH 1997 1,057.42 105.848 0.03561413 3.77 9.78
APRIL 1997 1,038.96 106.233 0.03743373 3.98 9.75
MAY 1997 1,039.75 106.641 0.03562732 3.80 9.85
JUNE 26, 1997** 1,054.21 107.027 0.03551436 3.80 9.97
JUNE 30, 1997 1,070.86 107.408 0.00357603 0.38 9.84
<CAPTION>
ENDING
OFFERING INVESTMENT CUMULATIVE
PRICE PER DIVIDEND @ END TOTAL
SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C>
JULY 1996 10.83 0.535 1,007.28 0.73%
AUGUST 1996 10.84 0.349 1,013.79 1.38%
SEPTEMBER 1996 10.83 0.399 1,019.78 1.98%
OCTOBER 1996 10.98 0.418 1,024.93 2.49%
NOVEMBER 1996 11.06 0.375 1,045.37 4.54%
DECEMBER 1996 11.16 0.362 1,044.78 4.48%
JANUARY 1997 11.15 0.374 1,037.95 3.79%
FEBRUARY 1997 11.08 0.365 1,057.42 5.74%
MARCH 1997 10.89 0.385 1,038.96 3.90%
APRIL 1997 10.82 0.408 1,039.75 3.97%
MAY 1997 10.83 0.386 1,054.21 5.42%
JUNE 26, 1997** 10.74 0.381 1,070.86 7.09%
JUNE 30, 1997 10.81 0.039 1,057.56 5.76%
<FN>
* For the period 7/1/96-7/26/96
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1 - Y E A R T O T A L R E T U R N B A S E D O N N A V
Tax-Free Fund For Utah (Class Y Shares)
AVG. ANNUAL TOTAL RETURN AS OF 6/30/97 8.80%
CUMULATIVE TOTAL RETURN AS OF 6/30/97 8.80%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.74 As of 6/30/96
Number of Shares Purchased 102.669 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
JULY 1996 1,000.00 102.669 0.05758710 5.91 9.76
AUGUST 1996 1,007.97 103.275 0.06681613 6.90 9.73
SEPTEMBER 1996 1,011.77 103.984 0.05879576 6.11 9.81
OCTOBER 1996 1,026.20 104.608 0.05840799 6.11 9.87
NOVEMBER 1996 1,038.59 105.227 0.05338079 5.62 10.00
DECEMBER 1996 1,057.88 105.788 0.04937109 5.22 9.92
JANUARY 1997 1,054.64 106.315 0.04912866 5.22 9.91
FEBRUARY 1997 1,058.80 106.842 0.04519879 4.83 9.94
MARCH 1997 1,066.84 107.328 0.04866853 5.22 9.78
APRIL 1997 1,054.89 107.862 0.04606616 4.97 9.82
MAY 1997 1,064.17 108.368 0.04523815 4.90 9.89
JUNE 30, 1997** 1,076.66 108.864 0.04374440 4.76 9.95
<CAPTION>
ENDING
OFFERING INVESTMENT CUMULATIVE
PRICE PER DIVIDEND @ END TOTAL
SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C>
JULY 1996 10.83 0.606 1,007.97 0.80%
AUGUST 1996 10.84 0.709 1,011.77 1.18%
SEPTEMBER 1996 10.83 0.623 1,026.20 2.62%
OCTOBER 1996 10.98 0.619 1,038.59 3.86%
NOVEMBER 1996 11.06 0.562 1,057.88 5.79%
DECEMBER 1996 11.16 0.527 1,054.64 5.46%
JANUARY 1997 11.15 0.527 1,058.80 5.88%
FEBRUARY 1997 11.08 0.486 1,066.84 6.68%
MARCH 1997 10.89 0.534 1,054.89 5.49%
APRIL 1997 10.82 0.506 1,064.17 6.42%
MAY 1997 10.83 0.496 1,076.66 7.67%
JUNE 30, 1997** 10.74 0.479 1,087.95 8.80%
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N P O P
Tax-Free Fund For Utah (Class A Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 6/30/97 5.66%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 6/30/97 31.26%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.60 As of 7/24/92
Public Offering Price Per Share (POP) $10.00 As of 7/24/92
Number of Shares Purchased 100.000 Based on POP
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
SEPTEMBER 1992 1,000.00 100.000 0.05980100 5.98 9.47
OCTOBER 1992 952.98 100.631 0.04435900 4.46 9.29
NOVEMBER 1992 939.33 101.112 0.05070900 5.13 9.51
DECEMBER 1992 966.70 101.651 0.05287300 5.37 9.55
JANUARY 1993 976.14 102.214 0.04784700 4.89 9.60
FEBRUARY 1993 986.14 102.723 0.04863800 5.00 9.98
MARCH 1993 1,030.18 103.224 0.04908500 5.07 9.79
APRIL 1993 1,015.63 103.742 0.04759600 4.94 9.85
MAY 1993 1,026.79 104.243 0.04704000 4.90 9.89
JUNE 1993 1,035.87 104.739 0.04873100 5.10 9.99
JULY 1993 1,051.44 105.250 0.04691300 4.94 9.93
AUGUST 1993 1,050.07 105.747 0.04707500 4.98 10.12
SEPTEMBER 1993 1,075.14 106.239 0.04823800 5.12 10.19
OCTOBER 1993 1,087.70 106.742 0.04614800 4.93 10.14
NOVEMBER 1993 1,087.29 107.227 0.04559900 4.89 9.99
DECEMBER 1993 1,076.09 107.717 0.07916200 8.53 10.13
JANUARY 1994 1,099.70 108.559 0.04419200 4.80 10.14
FEBRUARY 1994 1,105.58 109.032 0.04544600 4.96 9.88
MARCH 1994 1,082.19 109.533 0.04413800 4.83 9.61
APRIL 1994 1,057.45 110.036 0.04622200 5.09 9.45
MAY 1994 1,044.93 110.575 0.04480500 4.95 9.42
JUNE 1994 1,046.57 111.100 0.04465800 4.96 9.37
JULY 1994 1,045.97 111.630 0.04637800 5.18 9.40
AUGUST 1994 1,054.50 112.181 0.04641800 5.21 9.42
SEPTEMBER 1994 1,061.95 112.734 0.04779600 5.39 9.28
OCTOBER 1994 1,051.56 113.314 0.04340300 4.92 9.02
NOVEMBER 1994 1,027.01 113.859 0.04594900 5.23 8.71
DECEMBER 1994 996.95 114.460 0.04868800 5.57 8.96
JANUARY 1995 1,031.13 115.082 0.04523400 5.21 9.09
FEBRUARY 1995 1,051.30 115.655 0.04339500 5.02 9.42
MARCH 1995 1,094.49 116.187 0.04670300 5.43 9.56
APRIL 1995 1,116.18 116.755 0.04494300 5.25 9.58
MAY 1995 1,123.76 117.303 0.04487000 5.26 9.72
JUNE 1995 1,145.45 117.844 0.04589300 5.41 9.72
JULY 1995 1,150.85 118.401 0.04602600 5.45 9.65
AUGUST 1995 1,148.02 118.965 0.04778800 5.69 9.68
SEPTEMBER 1995 1,157.27 119.553 0.04458900 5.33 9.70
OCTOBER 1995 1,164.99 120.102 0.04447000 5.34 9.88
NOVEMBER 1995 1,191.95 120.643 0.04574100 5.52 9.94
DECEMBER 1995 1,204.71 121.198 0.04409000 5.34 10.03
JANUARY 1996 1,220.96 121.731 0.04416200 5.38 10.04
FEBRUARY 1996 1,227.55 122.266 0.04592700 5.62 9.99
MARCH 1996 1,227.06 122.828 0.04425800 5.44 9.82
APRIL 1996 1,211.61 123.382 0.04366400 5.39 9.76
MAY 1996 1,209.59 123.934 0.04685000 5.81 9.77
JUNE 1996 1,216.64 124.528 0.04215200 5.25 9.67
JULY 1996 1,209.44 125.071 0.04328403 5.41 9.76
AUGUST 1996 1,226.11 125.626 0.04473692 5.62 9.79
SEPTEMBER 1996 1,235.50 126.200 0.04480733 5.65 9.81
OCTOBER 1996 1,243.67 126.776 0.04636181 5.88 9.82
NOVEMBER 1996 1,250.82 127.375 0.04340809 5.53 9.98
DECEMBER 1996 1,276.73 127.929 0.04351539 5.57 9.94
JANUARY 1997 1,277.18 128.489 0.04531410 5.82 9.84
FEBRUARY 1997 1,270.15 129.080 0.04259915 5.50 9.99
MARCH 1997 1,295.01 129.631 0.04402468 5.71 9.78
APRIL 1997 1,273.50 130.214 0.04687021 6.10 9.75
MAY 1997 1,275.69 130.840 0.04375222 5.72 9.86
JUNE 27, 1997* 1,295.81 131.421 0.04370798 5.74 9.97
JUNE 30, 1997 1,316.01 131.997 0.00439640 0.58 9.94
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
SEPTEMBER 1992 0.631 952.98 -4.70%
OCTOBER 1992 0.481 939.33 -6.07%
NOVEMBER 1992 0.539 966.70 -3.33%
DECEMBER 1992 0.563 976.14 -2.39%
JANUARY 1993 0.509 986.14 -1.39%
FEBRUARY 1993 0.501 1,030.18 3.02%
MARCH 1993 0.518 1,015.63 1.56%
APRIL 1993 0.501 1,026.79 2.68%
MAY 1993 0.496 1,035.87 3.59%
JUNE 1993 0.511 1,051.44 5.14%
JULY 1993 0.497 1,050.07 5.01%
AUGUST 1993 0.492 1,075.14 7.51%
SEPTEMBER 1993 0.503 1,087.70 8.77%
OCTOBER 1993 0.486 1,087.29 8.73%
NOVEMBER 1993 0.489 1,076.09 7.61%
DECEMBER 1993 0.842 1,099.70 9.97%
JANUARY 1994 0.473 1,105.58 10.56%
FEBRUARY 1994 0.502 1,082.19 8.22%
MARCH 1994 0.503 1,057.45 5.74%
APRIL 1994 0.538 1,044.93 4.49%
MAY 1994 0.526 1,046.57 4.66%
JUNE 1994 0.530 1,045.97 4.60%
JULY 1994 0.551 1,054.50 5.45%
AUGUST 1994 0.553 1,061.95 6.19%
SEPTEMBER 1994 0.581 1,051.56 5.16%
OCTOBER 1994 0.545 1,027.01 2.70%
NOVEMBER 1994 0.601 996.95 -0.31%
DECEMBER 1994 0.622 1,031.13 3.11%
JANUARY 1995 0.573 1,051.30 5.13%
FEBRUARY 1995 0.533 1,094.49 9.45%
MARCH 1995 0.568 1,116.18 11.62%
APRIL 1995 0.548 1,123.76 12.38%
MAY 1995 0.541 1,145.45 14.54%
JUNE 1995 0.556 1,150.85 15.09%
JULY 1995 0.565 1,148.02 14.80%
AUGUST 1995 0.587 1,157.27 15.73%
SEPTEMBER 1995 0.550 1,164.99 16.50%
OCTOBER 1995 0.541 1,191.95 19.20%
NOVEMBER 1995 0.555 1,204.71 20.47%
DECEMBER 1995 0.533 1,220.96 22.10%
JANUARY 1996 0.535 1,227.55 22.76%
FEBRUARY 1996 0.562 1,227.06 22.71%
MARCH 1996 0.554 1,211.61 21.16%
APRIL 1996 0.552 1,209.59 20.96%
MAY 1996 0.594 1,216.64 21.66%
JUNE 1996 0.543 1,209.44 20.94%
JULY 1996 0.555 1,226.11 22.61%
AUGUST 1996 0.574 1,235.50 23.55%
SEPTEMBER 1996 0.576 1,243.67 24.37%
OCTOBER 1996 0.599 1,250.82 25.08%
NOVEMBER 1996 0.554 1,276.73 27.67%
DECEMBER 1996 0.560 1,277.18 27.72%
JANUARY 1997 0.592 1,270.15 27.02%
FEBRUARY 1997 0.550 1,295.01 29.50%
MARCH 1997 0.584 1,273.50 27.35%
APRIL 1997 0.626 1,275.69 27.57%
MAY 1997 0.581 1,295.81 29.58%
JUNE 27, 1997* 0.576 1,316.01 31.60%
JUNE 30, 1997 0.058 1,312.63 31.26%
<FN>
* Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Tax-Free Fund For Utah (Class C Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 6/30/97 7.02%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 6/30/97 7.81%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.77 As of 5/21/96
Number of Shares Purchased 102.354 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
MAY 1996 1,000.00 102.354 0.06216700 6.36 9.77
JUNE 1996 1,006.36 103.005 0.05597200 5.77 9.67
JULY 1996 1,001.83 103.602 0.05474077 5.67 9.76
AUGUST 1996 1,016.82 104.183 0.03312170 3.45 9.79
SEPTEMBER 1996 1,023.40 104.535 0.03784280 3.96 9.81
OCTOBER 1996 1,029.45 104.938 0.03949784 4.14 9.82
NOVEMBER 1996 1,034.64 105.361 0.03587339 3.78 9.98
DECEMBER 1996 1,055.28 105.739 0.03433294 3.63 9.94
JANUARY 1997 1,054.68 106.104 0.03499410 3.71 9.84
FEBRUARY 1997 1,047.78 106.482 0.03458855 3.68 9.99
MARCH 1997 1,067.44 106.850 0.03561413 3.81 9.78
APRIL 1997 1,048.80 107.240 0.03743373 4.01 9.75
MAY 1997 1,049.60 107.651 0.03562732 3.84 9.85
JUNE 27, 1997* 1,064.20 108.041 0.03551436 3.84 9.97
JUNE 30, 1997 1,081.00 108.426 0.00357603 0.39 9.94
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
MAY 1996 0.651 1,006.36 0.64%
JUNE 1996 0.596 1,001.83 0.18%
JULY 1996 0.581 1,016.82 1.68%
AUGUST 1996 0.352 1,023.40 2.34%
SEPTEMBER 1996 0.403 1,029.45 2.94%
OCTOBER 1996 0.422 1,034.64 3.46%
NOVEMBER 1996 0.379 1,055.28 5.53%
DECEMBER 1996 0.365 1,054.68 5.47%
JANUARY 1997 0.377 1,047.78 4.78%
FEBRUARY 1997 0.369 1,067.44 6.74%
MARCH 1997 0.389 1,048.80 4.88%
APRIL 1997 0.412 1,049.60 4.96%
MAY 1997 0.389 1,064.20 6.42%
JUNE 27, 1997* 0.385 1,081.00 8.10%
JUNE 30, 1997 0.039 1,078.14 7.81%
<FN>
* Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T O T A L R E T U R N B A S E D O N N A V
Tax-Free Fund For Utah (Class Y Shares)
AVG. ANNUAL TOTAL RETURN FROM INCEPTION TO 6/30/97 8.78%
CUMULATIVE TOTAL RETURN FROM INCEPTION TO 6/30/97 9.78%
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.77 As of 5/21/96
Number of Shares Purchased 102.354 Based on NAV
ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET
@ BEGINNING OF DIVIDEND $ VALUE PER
OF PERIOD SHARES FACTOR DIVIDEND SHARE
<S> <C> <C> <C> <C> <C>
MAY 1996 1,000.00 102.354 0.06216700 6.36 9.77
JUNE 1996 1,006.36 103.005 0.05597200 5.77 9.67
JULY 1996 1,001.83 103.602 0.05758710 5.97 9.76
AUGUST 1996 1,017.12 104.213 0.06681613 6.96 9.73
SEPTEMBER 1996 1,020.95 104.929 0.05879576 6.17 9.81
OCTOBER 1996 1,035.52 105.557 0.05840799 6.17 9.87
NOVEMBER 1996 1,048.02 106.182 0.05338079 5.67 10.00
DECEMBER 1996 1,067.49 106.749 0.04937109 5.27 9.92
JANUARY 1997 1,064.22 107.280 0.04912866 5.27 9.91
FEBRUARY 1997 1,068.42 107.812 0.04519879 4.87 9.94
MARCH 1997 1,076.52 108.302 0.04866853 5.27 9.78
APRIL 1997 1,064.47 108.841 0.04606616 5.01 9.82
MAY 1997 1,073.83 109.352 0.04523815 4.95 9.89
JUNE 30, 1997* 1,086.44 109.852 0.04374440 4.81 9.95
<CAPTION>
INVESTMENT CUMULATIVE
DIVIDEND @ END TOTAL
SHARES OF PERIOD RETURN
<S> <C> <C> <C>
MAY 1996 0.651 1,006.36 0.64%
JUNE 1996 0.596 1,001.83 0.18%
JULY 1996 0.611 1,017.12 1.71%
AUGUST 1996 0.716 1,020.95 2.10%
SEPTEMBER 1996 0.629 1,035.52 3.55%
OCTOBER 1996 0.625 1,048.02 4.80%
NOVEMBER 1996 0.567 1,067.49 6.75%
DECEMBER 1996 0.531 1,064.22 6.42%
JANUARY 1997 0.532 1,068.42 6.84%
FEBRUARY 1997 0.490 1,076.52 7.65%
MARCH 1997 0.539 1,064.47 6.45%
APRIL 1997 0.511 1,073.83 7.38%
MAY 1997 0.500 1,086.44 8.64%
JUNE 30, 1997* 0.483 1,097.83 9.78%
<FN>
* Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Taxable Equivalent Yield
Tax-Free Fund For Utah
Class A 6/30/97
---------
<S> <C>
y Yield (Pre-tax) 0.049
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.07
Y Taxable Equivalent Yield 0.0864
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
<CAPTION>
Taxable Equivalent Yield
Tax-Free Fund For Utah
Class C 6/30/97
---------
<S> <C>
y Yield (Pre-tax) 0.041
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.07
Y Taxable Equivalent Yield 0.0723
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
<CAPTION>
Taxable Equivalent Yield
Tax-Free Fund For Utah
Class Y 6/30/97
---------
<S> <C>
y Yield (Pre-tax) 0.0511
Fe Percent Exempt From Federal Tax 0.9789
F Federal Tax Rate 0.396
S State Tax Rate 0.07
Y Taxable Equivalent Yield 0.0901
Formula Y = ((y*Fe)/(1-(F+S*(1-F))))+(y*(1-Fe))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Fund for Utah
Class A
SEC Yield
6/30/97
<S> <C>
Dividend and Interest Income 130,040.07
Long Term Securities 130,040.07
Short Term Securities 0.00
Foreign Securities 0.00
Other Securities 0.00
Expenses Accrued for Period 6,517.30
Common Expenses 6,517.30
Specific Expenses 0.00
Avg. Daily Shares Outstanding 2,948,215.155
Maximum Offering Price 10.35
Yield 4.91
-------------------------------------------------------------
<CAPTION>
Tax-Free Fund for Utah
Class C
SEC Yield
6/30/97
<S> <C>
Dividend and Interest Income 181.23
Long Term Securities 181.23
Short Term Securities 0.00
Foreign Securities 0.00
Other Securities 0.00
Expenses Accrued for Period 42.68
Common Expenses 9.08
Specific Expenses 33.60
Avg. Daily Shares Outstanding 4,109.726
Maximum Offering Price 9.94
Yield 4.10
-------------------------------------------------------------
<CAPTION>
Tax-Free Fund for Utah
Class Y
SEC Yield
6/30/97
<S> <C>
Dividend and Interest Income 181.16
Long Term Securities 181.16
Short Term Securities 0.00
Foreign Securities 0.00
Other Securities 0.00
Expenses Accrued for Period 9.08
Common Expenses 9.08
Specific Expenses 0.00
Avg. Daily Shares Outstanding 4,105.212
Maximum Offering Price 9.94
Yield 5.11
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's annual report dated June 30, 1997 and is qualified in its entirety
to such financial statements.
</LEGEND>
<CIK> 0000872032
<NAME> TAX-FREE FUND FOR UTAH, CLASS A SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 28,050,077
<INVESTMENTS-AT-VALUE> 28,895,968
<RECEIVABLES> 489,270
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,385,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,894
<TOTAL-LIABILITIES> 232,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,828,337
<SHARES-COMMON-STOCK> 2,923,377
<SHARES-COMMON-PRIOR> 2,966,578
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (521,884)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 845,891
<NET-ASSETS> 29,070,500
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,643,817
<OTHER-INCOME> 0
<EXPENSES-NET> 79,477
<NET-INVESTMENT-INCOME> 1,564,340
<REALIZED-GAINS-CURRENT> 870
<APPREC-INCREASE-CURRENT> 636,155
<NET-CHANGE-FROM-OPS> 2,201,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,580,556
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 346,477
<NUMBER-OF-SHARES-REDEEMED> 483,708
<SHARES-REINVESTED> 94,031
<NET-CHANGE-IN-ASSETS> 2,201,365
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 390,629
<AVERAGE-NET-ASSETS> 29,356,950
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> .44
<PER-SHARE-GAIN-APPREC> .21
<PER-SHARE-DIVIDEND> .45
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's annual report dated June 30, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000872032
<NAME> TAX-FREE FUND FOR UTAH, CLASS C SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 28,050,077
<INVESTMENTS-AT-VALUE> 28,895,968
<RECEIVABLES> 489,270
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,385,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,894
<TOTAL-LIABILITIES> 232,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,828,337
<SHARES-COMMON-STOCK> 4,123
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (521,884)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 845,891
<NET-ASSETS> 40,997
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,643,817
<OTHER-INCOME> 0
<EXPENSES-NET> 79,477
<NET-INVESTMENT-INCOME> 1,564,340
<REALIZED-GAINS-CURRENT> 870
<APPREC-INCREASE-CURRENT> 636,155
<NET-CHANGE-FROM-OPS> 2,201,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 670
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,061
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 52
<NET-CHANGE-IN-ASSETS> 2,201,365
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 390,629
<AVERAGE-NET-ASSETS> 15,789
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> .21
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> .27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's annual report dated June 30, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000872032
<NAME> TAX-FREE FUND FOR UTAH, CLASS Y SHARES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 28,050,077
<INVESTMENTS-AT-VALUE> 28,895,968
<RECEIVABLES> 489,270
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,385,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,894
<TOTAL-LIABILITIES> 232,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,828,337
<SHARES-COMMON-STOCK> 4,105
<SHARES-COMMON-PRIOR> 10
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (521,884)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 845,891
<NET-ASSETS> 40,847
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,643,817
<OTHER-INCOME> 0
<EXPENSES-NET> 79,477
<NET-INVESTMENT-INCOME> 1,564,340
<REALIZED-GAINS-CURRENT> 870
<APPREC-INCREASE-CURRENT> 636,155
<NET-CHANGE-FROM-OPS> 2,201,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 425
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,094
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2,201,365
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67,588
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 390,629
<AVERAGE-NET-ASSETS> 7,765
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> .21
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> .07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
October 31, 1997
TAX-FREE FUND FOR UTAH
Rule 18f-3
Multiple Class Plan
TAX-FREE FUND FOR UTAH (the "Fund") has elected to rely
on Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), in offering multiple classes of shares
with differing distribution arrangements, voting rights and
expense allocations.
Pursuant to Rule 18f-3, the Board of Trustees of the
Fund has approved and adopted this written plan (the "Plan")
specifying all of the differences among the classes of shares to
be offered by the Fund. Prior to such offering, the Plan will be
filed as an exhibit to the Fund's registration statement. The
Plan sets forth the differences among the classes, including
shareholder services, distribution arrangements, expense
allocations, and conversion or exchange options.
I. Attributes of Share Classes
This section discusses the attributes of the various classes
of shares. Each share of the Fund represents an equal pro rata
interest in the Fund and has identical voting rights, powers,
qualifications, terms and conditions and, in proportion to each
share's net asset value, liquidation rights and preferences.
Each class differs in that: (a) each class has a different class
designation; (b) only the Front-Payment Shares are subject to a
front-end sales charge ("FESC"); (c) only the Level-Payment and
certain Front-Payment Shares are subject to a contingent deferred
sales charge ("CDSC"); (d) only the Front-Payment Shares, Level-
Payment Shares and Financial Intermediary Shares (as described
below) are subject to distribution fees under a plan adopted
pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan"),
the distribution fees for the Level-Payment Class and Financial
Intermediary Class being higher than that for the Front-Payment
Class; (e) only the Level-Payment Shares and Financial
Intermediary Shares are subject to a shareholder servicing fee
under a non-Rule 12b-1 shareholder services plan (a "Shareholder
Services Plan"); (f) to the extent that one class alone is
affected by a matter submitted to a vote of the shareholders,
then only that class has voting power on the matter, provided,
however, that any class whose shares convert automatically to
shares of another class also votes separately with respect to
class-specific Rule 12b-1 matters applying to the latter class;
(g) the expenses attributable to a specific class ("Class
Expenses")* are borne only by shares of that class on a pro-rata
basis; and (h) exchange privileges and conversion features may
vary among the classes.
*Class Expenses are limited to (i) transfer agency fees; (ii)
preparation and mailing expenses for shareholder communications
required by law, sent to current shareholders of a class; (iii)
state Blue Sky registration fees; (iv) Securities and Exchange
Commission ("SEC") registration fees; (v) trustees' fees; (vi)
expenses incurred for periodic meetings of trustees or
shareholders; and (vii) legal and accounting fees, other than
fees for income tax return preparation or income tax advice.
A. Front-Payment Shares
Front-Payment Shares are sold to (1) retail customers and
(2) persons entitled to exchange into Front-Payment Shares under
the exchange privileges of the Fund. Shares of the Fund
outstanding on the date that the different classes of shares were
first made available were be redesignated Front-Payment Shares.
Front-Payment Shares will also be issued upon automatic
conversion of Level-Payment Shares, as described below.
1. Sales Loads. Front-Payment Shares are sold subject to
the current maximum FESC (with scheduled variations or
eliminations of the sales charge, as permitted by the 1940
Act). Certain Front-Payment Shares sold without a FESC are
subject to a CDSC.
2. Distribution and Service Fees. Front-Payment Shares
are subject to a distribution fee pursuant to Part I of the
Fund's Rule 12b-1 Plan. They are not subject to charges
applicable to a Shareholder Services Plan.
3. Class Expenses. Class Expenses that are attributable
to the Front-Payment Class are allocated to that particular
class.
4. Exchange Privileges and Conversion Features. Front-
Payment Shares are exchangeable for Front-Payment Shares
issued by other funds sponsored by Aquila Management
Corporation and as may additionally be set forth in the then
current prospectus of the Fund. Front-Payment Shares have
no conversion features.
B. Level-Payment Shares
Level-Payment Shares are sold to (1) retail customers and
(2) persons entitled to exchange into Level-Payment Shares under
the exchange privileges of the Fund.
1. Sales Loads. Level-Payment Shares are sold without the
imposition of any FESC, but are subject to a CDSC (with
scheduled variations or eliminations of the sales charge, as
permitted by the 1940 Act).
2. Distribution and Service Fees. Level-Payment Shares
are subject to a distribution fee pursuant to Part II of
the Fund's Rule 12b-1 Plan and to a shareholder servicing
fee under a Shareholder Services Plan not to exceed .25% of
the average daily net assets of the Level-Payment Class.
3. Class Expenses. Class Expenses that are attributable
to the Level-Payment Class are allocated to that particular
class.
4. Exchange Privileges and Conversion Features. Level-
Payment Shares are exchangeable for Level-Payment Shares
issued by other funds sponsored by Aquila Management
Corporation and as may additionally be set forth in the then
current prospectus of the Fund. After a period of no greater
than six years, Level-Payment Shares automatically convert
to Front-Payment Shares on the basis of the relative net
asset values of the two classes without the imposition of
any sales charge, fee, or other charge, provided, however,
that the expenses, including distribution fees, for Front-
Payment Shares are not higher than the expenses, including
distribution fees, for Level-Payment Shares. If the amount
of expenses, including distribution fees, for the Front-
Payment Class is increased materially without approval of
the shareholders of the Level-Payment Class, a new class
will be established -- on the same terms as apply to the
Front-Payment Class prior to such increase -- as the class
into which Level-Payment Shares automatically convert.
C. Institutional Shares
Institutional Shares are not offered to retail customers but
are sold only to (1) institutional investors investing funds held
in a fiduciary, advisory, agency, custodial or other similar
capacity and (2) persons entitled to exchange into Institutional
Shares under the exchange privileges of the Fund.
1. Sales Loads. Institutional Shares are sold without the
imposition of any FESC, CDSC or any other sales charge.
2. Distribution and Service Fees. Institutional Shares
are not subject to any distribution fee or shareholder
servicing fee.
3. Class Expenses. Class Expenses that are attributable
to the Institutional Class are allocated to that particular
class.
4. Exchange Privileges and Conversion Features.
Institutional Shares are exchangeable for Institutional
Shares issued by other funds sponsored by Aquila Management
Corporation and as may additionally be set forth in the then
current prospectus of the Fund. Institutional Shares have no
conversion features.
Financial Intermediary Shares are sold (1) only through
financial intermediaries with which Aquila Distributors, Inc.
has entered into sales agreements, and are not offered directly
to retail customers and (2) persons entitled to exchange into
Financial Intermediary Shares under the exchange privileges of
the Fund.
1. Sales Loads. Financial Intermediary Shares are sold
without the imposition of any FESC, CDSC or any other sales
charge.
2. Distribution and Service Fees. Financial Intermediary
Shares are subject to a distribution fee pursuant to Part
III of the Fund's Rule 12b-1 Plan and to a shareholder
servicing fee under a Shareholder Services Plan not to
exceed 0.25% of the average daily net assets of the
Financial Intermediary Class.
3. Class Expenses. Class Expenses that are attributable
to the Financial Intermediary Class are allocated to that
particular class.
4. Exchange Privileges . Financial Intermediary Shares
are exchangeable for Financial Intermediary Shares issued by
other funds sponsored by Aquila Management Corporation to
the extent that shares of such funds are sold by the
respective financial intermediaries, and as may additionally
be set forth in the then current prospectus of the Fund.
E. Additional Classes
In the future, the Fund may offer additional classes of
shares which differ from the classes discussed above. However,
any additional classes of shares must be approved by the Board,
and the Plan must be amended to describe those classes.
II. Approval of Multiple Class Plan
The Board of the Fund, including a majority of the
independent Trustees, must approve the Plan initially. In
addition, the Board must approve any material changes to the
classes and the Plan prior to their implementation. The Board
must find that the Plan is in the best interests of each class
individually and the Fund as a whole. In making its findings,
the Board should focus on, among other things, the relationships
among the classes and examine potential conflicts of interest
among classes regarding the allocation of fees, services, waivers
and reimbursements of expenses, and voting rights. Most
significantly, the Board should evaluate the level of services
provided to each class and the cost of those services to ensure
that the services are appropriate and that the allocation of
expenses is reasonable. In accordance with the foregoing
provisions of this Section II, the Board of the Fund has approved
and adopted this Plan as of the date written above.
III. Dividends and Distributions
Because of the differences in fees paid under a Rule
12b-1 Plan and Shareholder Services Plan and the special
allocation of Class Expenses among the classes of shares of the
Fund, the dividends payable to shareholders of a class will
differ from the dividends payable to shareholders of one or more
of the other classes. Dividends paid to each class of shares in
the Fund will, however, be declared and paid at the same time
and, except for the differences in expenses listed above, will be
determined in the same manner and paid in the same amounts per
outstanding shares.
IV. Expense Allocations
The methodology and procedures for calculating the net
asset value and dividends and distributions of the various
classes of shares and the proper allocation of income and
expenses among the various classes of shares are set forth in the
Memorandum (together with exhibits) of Richard F. West,
Treasurer, dated November 24, 1995, revised August 27, 1997 and
entitled "Methodologies Used In Accounting For Multiple Class
Shares."
Dated October 31, 1997
