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. 11 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 10 [ 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 November 1, 1999 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.
TAX-FREE FUND FOR UTAH
380 Madison Avenue, Suite 2300
New York, New York 10017
800-UTAH-YES (800-882-4937)
212-697-6666
Prospectus
Class A Shares November 1, 1999
Class C Shares
Tax-Free Fund For Utah is a mutual fund that seeks to provide
you 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. The Fund invests in municipal obligations
which pay interest exempt from Utah state and Federal income
taxes and are 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,
are determined to be of comparable quality by the Fund's
Sub-Adviser, Zions First National Bank.
For purchase, redemption or account inquiries contact the Fund's
Shareholder Servicing Agent:
PFPC Inc.* 400 Bellevue Parkway * Wilmington, DE 19809
Call 800 446-8824 toll free
For general inquiries & yield information
Call 800-882-4937 toll free or 212-697-6666
The Securities and Exchange Commission has not approved or
disapproved the Fund's securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
THE FUND'S OBJECTIVE, INVESTMENT STRATEGIES AND MAIN RISKS
"What is the Fund's objective?"
The Fund's objective is to provide you as high a level of
current income exempt from Utah state and regular Federal income
taxes as is consistent with preservation of capital.
"What is the Fund's investment strategy?"
The Fund invests in tax-free municipal obligations which
pay interest exempt from Utah state and Federal income taxes. We
call these "Utah Double-Exempt Obligations." At least 65% of the
portfolio will always consist of obligations issued by the State
of Utah, its counties and various other local authorities. These
obligations can be of any maturity but the Fund's average
portfolio maturity has traditionally been between 10 and 20
years. At the time of purchase, an obligation must be considered
"investment grade."
The Sub-Adviser selects obligations for the Fund's portfolio
to best achieve the Fund's objectives. The Sub-Adviser evaluates
specific obligations for purchase by various characteristics
including quality, maturity and coupon rate.
The interest paid on certain types of Utah Double-Exempt
Obligations may be subject to the Federal alternative minimum tax
("AMT"). At least 80% of the Fund's net assets must be invested
in tax-exempt Utah Double-Exempt Obligations whose interest is
not subject to AMT.
"What are the main risks of investing in the Fund?"
Among the risks of investing in shares of the Fund and its
portfolio of securities are the following:
Loss of money is a risk of investing in the Fund.
The Fund's assets, being primarily or entirely Utah issues,
are subject to economic and other conditions affecting Utah.
Adverse local events, such as a downturn in the Utah economy,
could affect the value of the Fund's portfolio.
There are two types of risk associated with any fixed-income
debt securities such as Utah Double-Exempt Obligations: interest
rate risk and credit risk.
* Interest rate risk relates to fluctuations in market value
arising from changes in interest rates. If interest rates
rise, the value of debt securities, including Utah
Double-Exempt Obligations, will normally decline. All
fixed-rate debt securities, even the most highly rated Utah
Double-Exempt Obligations, are subject to interest rate
risk. Utah Double-Exempt Obligations with longer maturities
generally have a more pronounced reaction to interest rate
changes than shorter-term securities.
* Credit risk relates to the ability of the particular issuers
of the Utah Double-Exempt Obligations the Fund owns to make
periodic interest payments as scheduled and ultimately repay
principal at maturity.
Investment in the Fund is not a deposit in Zions First
National Bank, Zions Bancorporation or its bank or non-bank
affiliates or any other bank, and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government
agency.
The Fund is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940
Act"). Thus, compared with "diversified" funds, it may invest a
greater percentage of its assets in obligations of a particular
issuer and may therefore not have as much diversification among
securities, and thus diversification of risk. 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.
<PAGE>
TAX-FREE FUND FOR UTAH
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in Tax-Free Fund For Utah by showing changes
in performance of the Fund's Class A Shares from year to year
over a six year period and by showing how the Fund's average
annual returns for one and five years compare to a broad measure
of market performance. How the Fund has performed in the past is
not necessarily an
indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1993-1998
<S> <C> <C> <C> <C> <C> <C>
20%
18% 18.79
16% XXXX
14% 12.54 XXXX
12% XXXX XXXX
10% XXXX XXXX 8.62%
8% XXXX 6.45% XXXX XXXX
6% XXXX XXXX XXXX XXXX 5.71
4% XXXX XXXX XXXX 4.21% XXXX XXXX
2% XXXX XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX XXXX
- -2% XXXX XXXX XXXX XXXX XXXX XXXX
- -4% XXXX XXXX XXXX XXXX XXXX XXXX
- -6% XXXX XXXX XXXX XXXX XXXX XXXX
1993 1994 1995 1996 1997 1998
Calendar Years
During the period shown in the bar chart, the highest return for
a quarter was 9.61% (quarter ended March 31, 1995) and the lowest
return for a quarter was -6.40% (quarter ended March 31, 1994).
The year-to-date (from January 1, 1999 to September 30, 1999)
total return was -3.39% for Class A Shares and -4.11% for Class C
Shares.
Note: The Fund's Class A Shares are sold subject to a maximum 4%
sales load which is not reflected in the bar chart. If the sales
load were reflected, returns would be less than those shown
above.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
For the period 1-Year 5-Year inception*
ended December 31, 1998
<S> <C> <C> <C>
Tax-Free Fund For Utah
Class A Shares (1) 1.47% 5.00% 6.10%
Tax-Free Fund For Utah
Class C Shares 3.52%*** N/A 6.65%**
Lehman Brothers
Municipal Bond Index**** 6.47% 6.23% 7.12%
<FN>
(1) The average annual total returns shown for Class A shares
reflect the maximum 4% sales load.
</FN>
<FN>
*From commencement of operations on July 24, 1992.
</FN>
<FN>
**From commencement of new class of shares on May 21, 1996.
</FN>
<FN>
*** The average annual total return for Class C shares for one
year assumes redemption at the end of the year and payment of 1%
CDSC.
<FN>
****The Lehman Brothers Municipal Bond Index is nationally
oriented and consists of an unmanaged mix of investment-grade
long-term municipal securities of issuers throughout the United
States. At December 31, 1998, there were approximately 48,000
securities in the Index.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
Class A Class C
Shares Shares
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.....
(as a percentage of offering price) 4.00% None
Maximum Deferred Sales Charge (Load).....None(1) 1.00%(2)
(as a percentage of the lesser of
redemption value or purchase price)
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends or
Distributions
(as a percentage of offering price).....None None
Redemption Fees..........................None None
Exchange Fee.............................None None
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Management Fee(3)...................... 0.50% 0.50%
Distribution
and /or Service (12b-1) Fee.............0.20% 0.75%
All Other Expenses(4)
Service Fee........................None 0.25%
Other Expenses (4).................0.42% 0.42%
Total All Other Expenses (4)..............0.42% 0.67%
Total Annual Fund
Operating Expenses (4)....................1.12% 1.92%
<FN>
(1) If you buy Class A Shares in transactions of $1 million or
more there is no sales charge but you will be subject to a
contingent deferred sales charge of up to 1% if you redeem your
shares during the first two years after purchase and 0.50 of 1%
during the third and fourth years after purchase.
</FN>
<FN>
(2) A contingent deferred sales charge of 1% is imposed on the
redemption proceeds of the shares if redeemed during the first 12
months after purchase.
</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 0.40 of 1%
was 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 0.13 of 1% was waived.
</FN>
<FN>
(4) At present, fees are being partially waived by the Manager
and the Sub-Adviser. It is anticipated that once the asset size
of the Fund reaches approximately $100 million, these waivers may
no longer be necessary. Also, operating expenses are being
subsidized through reimbursement by the Manager. This subsidy is
being phased out progressively so that the Fund will bear its
own expenses, other than management fees, once its asset size
reaches approximately $100 million. The undertakings of the
Manager and the Sub-Adviser as to fee waivers and the practices
of the Manager as to expense reimbursement may operate to reduce
the fees and expenses of the Fund in order for the Fund to
maintain a competitive yield.The expense ratios for the fiscal
year ended June 30, 1999 after giving effect to the waivers and
the 0.08% expense offset for uninvested cash balances were
incurred at the following annual rates: for Class A Shares,
management fee, 0.10%; 12b-1 fee, 0.00%; other expenses, 0.28%,
for total operating expenses of 0.38%; for Class C Shares,
management fee, 0.10%; 12b-1 fee, 0.75%; service fee, 0.25%;
other expenses, 0.27%, for total operating expenses of 1.37%.
</FN>
</TABLE>
Example
This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual
funds.
The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your
investment has a 5% return each year, you reinvest all dividends
and distributions, and that the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A Shares............$510 $742 $992 $1,709
Class C Shares............$295 $603 $1,037 $1,856(5)
You would pay the following expenses if you did not redeem your Class C
Shares:
Class C Shares............$195 $603 $1,037 $1,856(5)
<FN>
(4) Six years after the date of purchase, Class C Shares are
automatically converted to Class A Shares. Over time, long-term Class C
Shareholders could pay the economic equivalent of an amount that is more
than the maximum front-end sales charge allowed under applicable
regulations because of the 12b-1 fee and Service fee. Because these fees
are paid out of the Fund's assets on an on-going basis, over time these
fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
</FN>
</TABLE>
<PAGE>
INVESTMENT OF THE FUND'S ASSETS
"Is the Fund right for me?"
The shares of the Fund are designed to be a suitable
investment for individuals, corporations, institutions and
fiduciaries who seek income exempt from Utah state and regular
Federal income taxes.
Utah Double-Exempt Obligations
The Fund invests in Utah Double-Exempt Obligations, which
are a type of municipal obligation. They pay interest which bond
counsel or other appropriate counsel deems to be exempt from
regular Federal and State of Utah income taxes other than taxes
on corporations. They include obligations of Utah issuers and
certain non-Utah issuers, of any maturity.
To be considered investment grade an obligation must either
* be rated within the four highest credit ratings assigned by
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or,
* if unrated, be determined to be of comparable quality by the
Fund's Sub-Adviser, Zions First National Bank.
The obligations of non-Utah issuers that the Fund can
purchase are those issued by or under the authority of states
other than Utah, Guam, the Northern Mariana Islands, Puerto Rico
and the Virgin Islands. Interest paid on these obligations is
currently exempt from regular Federal and Utah income taxes
other than taxes on corporations.
Municipal Obligations
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 public purposes.
There are two principal classifications of municipal
obligations: "notes" and "bonds." Notes generally have
maturities of one year or less, while bonds are paid back over
longer periods.
The various public purposes for which municipal obligations
are issued include:
* obtaining funds for general operating expenses,
* refunding outstanding obligations,
* obtaining funds for loans to other public institutions
and facilities, and
* funding the construction of highways, bridges, schools,
hospitals, housing, mass transportation, streets and
water and sewer works.
Municipal obligations include:
* tax, revenue or bond anticipation notes,
* construction loan notes,
* project notes, which sometimes carry a U.S. government
guarantee,
* municipal lease/purchase agreements, which are similar
to installment purchase contracts for property or
equipment, and
* floating and variable rate demand notes.
<PAGE>
[PICTURE PAGE]
[PICTURE]
South Davis Community Hospital
[PICTURE]
Granger-Hunter Water and Sewer District
[PICTURE]
Dixie Center
[PICTURE]
Single Family Mortgage Bonds for Utah Housing
[LOGO]
TAX-FREE FUND FOR UTAH
[PICTURE]
University of Utah
[PICTURE]
Salt Lake City International Airport
[PICTURE]
Utah Transit Authority, Light Rail
[PICTURE]
IHC Instacare
[PICTURE]
Clearfield City Building
[PICTURE]
Park City High 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 in
general to finance construction of long-term municipal projects;
examples are pictured above. The municipal obligations which
financed these particular projects were included in the Fund's
portfolio as of October 7, 1999 and together represented 41.5% 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>
"What factors may affect the value of the Fund's investments and
their yields?"
Change in prevailing interest rates is the most common
factor that affects the value of the obligations in the Fund's
portfolio. Any such change may have different effects on
short-term and long-term Utah Double-Exempt Obligations.
Long-term obligations (which usually have higher yields) may
fluctuate in value more than short-term ones. Thus, the Fund may
shorten the average maturity of its portfolio when it believes
that prevailing interest rates may rise. While this strategy may
promote one part of the Fund's objective, preservation of
capital, it may also result in a lower level of income.
"What are the main risk factors and special considerations
regarding investment in Utah Double-Exempt Obligations?"
The following is a discussion of the general factors that
might influence the ability of Utah issuers to repay principal
and interest when due on Utah Double-Exempt Obligations that the
Fund owns. The Fund has derived this information from sources
that are generally available to investors and believes it to be
accurate, but it has not been independently verified and it 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 1998, Utah's
population rose 1.8.% to 2,081,000. 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
jobs. 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. A substantial
portion of revenues come 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.
In addition to considerations specifically affecting Utah,
other risk factors include the following.
Year 2000. Like other financial and business organizations,
the Fund could be adversely affected if computer systems the Fund
relies on do not properly process date-related information and
data involving the year 2000 and after. The Manager is taking
steps that it believes are reasonable to address this problem in
its own computer systems and to obtain assurances that steps are
being taken by the other major service providers to the Fund to
achieve comparable results. Certain vendors have advised the
Manager that they are currently compliant. The Fund's mission
critical vendors -- the shareholder servicing agent, the
custodian and the fund accounting agent -- as well as other
support organizations have advised the Manager that they are
actively working on necessary changes. These three vendors have
advised the Manager that they expect to be ready and will
additionally be prepared to implement contingency plans if
necessary. All such expenses are being borne, and are expected to
continue to be borne, by the respective service providers. The
Fund has not incurred, nor is it anticipated to incur, any costs
related to these matters. The Manager has also requested the
Fund's portfolio manager to attempt to evaluate the potential
impact of this problem on the issuers of securities in which the
Fund invests. At this time there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Fund.
FUND MANAGEMENT
"How is the Fund managed?"
Aquila Management Corporation, 380 Madison Avenue, Suite
2300, New York, NY 10017, the Manager, is the Fund's investment
adviser under an Advisory and Administration Agreement. It has
delegated its investment advisory duties, including portfolio
management, to Zions First National Bank, the Sub-Adviser, under
a sub-advisory agreement described below. The Manager is also
responsible for administrative services, including providing for
the maintenance of the headquarters of the Fund, overseeing
relationships between the Fund and the service providers to the
Fund, either keeping the accounting records of the Fund, or, at
its expense and responsibility, delegating such duties in whole
or in part to a company satisfactory to the Fund, maintaining the
Fund's books and records and providing other administrative
services.
The Sub-Adviser provides the Fund with local advisory
services.
Under the Sub-Advisory Agreement, the Sub-Adviser provides
for investment supervision, including supervising continuously
the investment program of the Fund and the composition of its
portfolio, determining what securities will be purchased or sold
by the Fund, and arranging for the purchase and the sale of
securities held in the portfolio of the Fund; and, at the
Sub-Adviser's expense, for pricing of the Fund's portfolio daily.
During the fiscal year ended June 30, 1999, the Fund accrued
management fees to the Manager at the annual rate of 0.50 of 1%
of its average annual net assets.
Information about the Manager and the Sub-Adviser
The Fund's Manager is founder and Manager and/or
administrator to the Aquilasm Group of Funds, which consists of
tax-free municipal bond funds, money market funds and equity
funds. As of June 30, 1999, these funds had aggregate assets of
approximately $3.2 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.
On June 7, 1999 Zions Bancorporation, parent corporation
of the Fund's Sub-Adviser, announced that it would merge with
First Security Corporation in a transaction expected to take
place in the 4th quarter of 1999. The transaction is subject to
regulatory approval.
The Sub-Adviser, Zions First National Bank ("Zions" or the
"Sub-Adviser"), was founded in 1873 and is a wholly-owned
subsidiary of Zions Bancorporation, a Utah-headquartered
financial services company . In addition to advising the Fund,
Zions' advisory experience includes investment management
services to affiliate banks, corporate foundations and
profit-sharing trusts, retirement funds, charitable foundations,
endowments and individual investors throughout the United States.
Zions and its parent, Zions Bancorporation, have offices at One
South Main Street, Salt Lake City, Utah 84111. Zions is the
second largest bank in the state of Utah and one of the largest
banks in the intermountain 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 the Sub-Adviser, although some or all of these fees may be
waived temporarily.
Mr. Richard K. Baird, CFA, is the portfolio manager of the
Fund. He is a Vice President and Senior Portfolio Manager of the
Sub-Adviser and has been employed by the Sub-Adviser since
February 1999. From 1996-1999 he was employed by First Security
Investment Management as a Senior Portfolio Manager and manager
of the Achievement Municipal Bond Fund. From 1987-1996 he was a
portfolio manager for Seafirst Bank in Seattle, Washington. He
has earned the professional designation of Chartered Financial
Analyst (CFA) from the Association for Investment Management and
Research and has 17 years of discretionary investment management
experience. He received his B.S. degree in Finance from Brigham
Young University and took post-graduate business courses at the
University of Colorado.
NET ASSET VALUE PER SHARE
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 (a "business
day"), by dividing the value of the Fund's net assets (which
means the value of the assets less liabilities) allocable to each
class by the total number of shares of such class outstanding at
that time. In general, net asset value of the Fund's shares is
based on portfolio market value, except that Utah Double-Exempt
Obligations maturing in 60 days or less are generally valued at
amortized cost. The price at which a purchase or redemption of
shares is effected is based on the next calculated net asset
value after your purchase or redemption order is received in
proper form. The New York Stock 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, the Exchange may close on days not
included in that announcement.
PURCHASES
"Are there alternate purchase plans?"
The Fund provides individuals with alternate ways to
purchase shares through two separate classes of shares (Class A
and Class C). Although the classes have different sales charge
structures and ongoing expenses, they both represent interests in
the same portfolio of Utah Double-Exempt Obligations. You should
choose the class that best suits your own circumstances and
needs.
"Can I purchase shares of the Fund?"
You can purchase shares of the Fund if you live in Utah or
in one of the other states listed below. You should not purchase
shares of the Fund if you do not reside in one of the following
states. Otherwise, the Fund can redeem the shares you purchased.
This may cause you to suffer a loss and may have tax
consequences.
Also, if you do not reside in Utah, dividends from the Fund
may be subject to state income taxes of the state in which you do
reside. Therefore, you should consult your tax adviser before
buying shares of the Fund.
On the date of this Prospectus, Class A and C Shares are
available only in:
*Utah * Arizona * Colorado * District of Columbia *Florida *
Hawaii * New Jersey * New York
The Fund and the Distributor may reject any order for the
purchase of shares.
"How much money do I need to invest?"
Option I
* Initially, $1,000.
* Subsequently, any amount (for investments in shares of the
same class).
Option II
* $50 or more if an Automatic Investment Program is
established. (See "Automatic Investment Program" in the
Application.)
* Subsequently, in any amount you specify ($50 or more).
* You are not permitted to maintain both an Automatic
Investment Program and an Automatic Withdrawal Plan
simultaneously. (See "Automatic Withdrawal Plan.")
Your investment must be drawn in United States dollars on a
United States commercial bank, savings bank, credit union or
United States branch of a foreign commercial bank (each of which
is a "Financial Institution").
"How do I purchase shares?"
You may purchase the Fund's shares:
* through an investment broker or dealer, or a bank or
financial intermediary, which has a sales agreement with the
Distributor, Aquila Distributors, Inc., in which case that
institution will take action on your behalf, and you will
not personally perform the steps indicated below; or
* directly through the Distributor, by mailing payment to the
Fund's Agent, PFPC Inc.
* The price you will pay is net asset value plus a sales
charge for Class A Shares and net asset value for Class C
Shares. ( See "What price will I pay for the Fund's
shares?")
In either instance, all purchases of Class A Shares are subject
to the applicable sales charge.
Opening an Account Adding to An Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to"Tax-Free Fund payable to "Tax-Free Fund
For Utah" For Utah"
* Complete the Application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to the Fund's
you wish to authorize confirmations or supply the
name(s) of account owner(s),
the account number, and
the name of the Fund
* Send your check and * Send your check and
completed Application account information
to your dealer or to your dealer or
to the Fund's to the Fund's
Agent, PFPC Inc. Agent, PFPC Inc.
Unless you indicate otherwise, your investment will be made
in Class A Shares.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of
$50 or more, from your Financial Institution if it is a member of
the Automated Clearing House. You may make investments through
two electronic transfer features, "Automatic Investment" and
"Telephone Investment."
* Automatic Investment: You can authorize a pre-determined
amount to be regularly transferred from your account.
* Telephone Investment: You can make single investments of up
to $50,000 by telephone instructions to the Agent.
Before you can transfer funds electronically, the Fund's
Agent must have your completed Application authorizing these
features. Or, if you initially decide not to choose these
conveniences and then later wish to do so, you must complete a
Ready Access Features Form which is available from the
Distributor or Agent, or if your account is set up so that your
broker or dealer makes these sorts of changes, request your
broker or dealer to make them. The Fund may modify or terminate
these investment methods or charge a service fee, upon 30 days'
written notice to shareholders.
REDEEMING YOUR INVESTMENT
You may redeem some or all of your shares by a request to
the Agent. Shares will be redeemed at the next net asset value
determined after your request has been received in proper form.
There is no minimum period for investment in the Fund,
except for shares recently purchased by check or by Automatic or
Telephone Investment as discussed below.
If you own both Class A and C Shares and do not specify
which Class you wish to redeem, we will redeem your Class A
Shares.
Certain shares are subject to a contingent deferred sales charge,
or CDSC. These are:
- Class C Shares held for less than 12 months (from the
date of purchase).
- CDSC Class A Shares.
Upon redemption, enough additional shares will be redeemed
to pay for any applicable CDSC.
A redemption may result in a tax liability for you.
"How can I redeem my investment?"
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-446-8824
By FAX, send
instructions to:
302-791-3055
For liquidity and convenience, the Fund offers expedited
redemption.
Expedited Redemption Methods
(Non-Certificate Shares Only)
You may request expedited redemption for any shares not
issued in certificate form in two ways:
1 By Telephone. The Agent will take instructions from anyone
by telephone to redeem shares and make payments:
a) to a Financial Institution account you have previously
specified;
b) by check in the amount of $50,000 or less, mailed to the
same name and address (which has been unchanged for the past
30 days) as the account from which you are redeeming. You
may only redeem by check via telephone request once in any
7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to
supply:
account name(s) and number
name of the caller
the social security number registered to the account
personal identification
Note: Check the accuracy of your confirmation statements
immediately. The Fund, the Agent, and the Distributor are
not responsible for losses resulting from unauthorized
telephone transactions if the Agent follows reasonable
procedures designed to verify a caller's identity. The Agent
may record calls.
2 By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of
instruction sent to the Agent: PFPC Inc., by FAX at 302-791-3055
or by mail to 400 Bellevue Parkway, Wilmington, DE 19809. The
letter, signed by the registered shareholder(s) (no signature
guarantee is required), must indicate:
account name(s)
account number
amount to be redeemed
any payment directions.
To have redemption proceeds sent directly to a Financial
Institution account, you must complete the Expedited
Redemption section of the Application or a Ready Access
Features Form. You will be required to provide (1) details
about your Financial Institution account, (2) signature
guarantees and (3) possible additional documentation.
The name(s) of the shareholder(s) on the Financial
Institution account must be identical to those on the Fund's
records of your account.
You may change your designated Financial Institution account
at any time by completing and returning a revised Ready
Access Features Form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
Certificate Shares. Mail to the Fund's Agent: (1) blank
(unsigned) certificates for Class A Shares to be redeemed, (2)
redemption instructions, and (3) a stock assignment form.
To be in "proper form," items (2) and (3) above must be
signed by the registered shareholder(s) exactly as the
account is registered. For a joint account, both shareholder
signatures are necessary.
For your protection, mail certificates separately from
signed redemption instructions. We recommend that
certificates be sent by registered mail, return receipt
requested.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or
executors, or if redemption is requested by someone other
than the shareholder of record. The Agent may require
signature guarantees if insufficient documentation is on
file.
We do not require a signature guarantee for redemptions up
to $50,000, payable to the record holder, and sent to the
address of record, except as noted above. In all other
cases, signatures must be guaranteed.
Your signature may be guaranteed by any:
member of a national securities exchange
U.S. bank or trust company
state-chartered savings bank
federally chartered savings and loan association
foreign bank having a U.S. correspondent bank; or
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.
Non-Certificate Shares. You must use the Regular Redemption
Method if you have not chosen Expedited Redemption to a
predesignated Financial Institution account. To redeem by this
method, send a letter of instruction to the Fund's Agent, which
includes:
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 (we normally mail redemption proceeds
to your address as registered with the Fund)
signature(s) of the registered shareholder(s) and
signature guarantee(s), if required, as indicated above.
"When will I receive the proceeds of my redemption?"
Redemption proceeds are normally sent on the next business
day following acceptance of your redemption request. Except as
described below, payments will normally be sent to your address
of record within 7 days after acceptance of your redemption
request.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and None
as you requested on your
Application or Ready
Access Features Form,
wired or transferred
through the Automated
Clearing House to your
Financial Institution
Account
Through a broker
/dealer Check or wire, to your None;
broker/dealer however, your
broker/dealer may
charge a fee
Although the Fund does not currently intend to, it can
charge up to $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. 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.
The Fund may delay payment for redemption of shares recently
purchased by check (including certified, cashier's or official
bank check) or by Automatic Investment or Telephone Investment up
to 15 days after purchase; however, redemption will not be
delayed after (i) the check or transfer of funds has been
honored, or (ii) the Agent receives satisfactory assurance that
your Financial Institution will honor the check or transfer of
funds. You can eliminate possible delays by paying for purchased
shares with wired funds or Federal Reserve drafts.
The Fund has the right to postpone payment or suspend
redemption rights during certain periods. These periods may occur
(i) when the New York Stock Exchange is closed for other than
weekends and holidays, (ii) when the Securities and Exchange
Commission (the "SEC") restricts trading on the New York Stock
Exchange, (iii) when the SEC determines an emergency exists which
causes disposal of, or determination of the value of, the
portfolio securities to be unreasonable or impracticable, and
(iv) during such other periods as the SEC may permit.
The Fund can redeem your shares if their value totals less
than $500 as a result of redemptions or failure to meet and
maintain the minimum investment level under an Automatic
Investment program. Before such a redemption is made, we will
send you a notice giving you 60 days to make additional
investments to bring your account up to the minimum.
Redemption proceeds may be paid in whole or in part by
distribution of the Fund's portfolio securities ("redemption in
kind") in conformity with SEC rules. This method will only be
used if the Board of Trustees determines that partial or whole
cash payments would be detrimental to the best interests of the
remaining shareholders.
"Are there any reinvestment privileges?"
If you reinvest proceeds of redemption within 120 days of a
redemption you will not have to pay any additional sales charge
on the reinvestment. You must reinvest in the same class as the
shares redeemed. You may exercise this privilege only once a
year, unless otherwise approved by the Distributor.
The Distributor will refund to you any CDSC deducted at the
time of redemption by adding it to the amount of your
reinvestment.
Reinvestment will not alter the tax consequences of your
original redemption.
"Is there an Automatic Withdrawal Plan?"
Yes, but it is only available for Class A Shares. Under an
Automatic Withdrawal Plan you can arrange to receive a monthly or
quarterly check in a stated amount, not less than $50.
ALTERNATE PURCHASE PLANS
"How do the different arrangements for Class A Shares and Class C
Shares affect the cost of buying, holding and redeeming Shares,
and what else should I know about the two classes?"
In this Prospectus the Fund provides you with 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 classes of
shares offered to individuals differ in their sales charge
structures and ongoing expenses, as described below. You should
choose the class that best suits your own circumstances and
needs.
Class A Shares Class C Shares
"Front-Payment Shares" "Level-Payment Shares"
Initial Sales Class A Shares are None. Class C
Charge offered at net asset Shares are offered
value plus a maximum at net asset value
sales charge of 4%, with no sales charge
paid at the time of payable at the time
purchase. Thus, of purchase.
your investment is
reduced by the
applicable sales
charge.
Contingent None (except for A maximum CDSC of
Deferred Sales certain purchases of 1% is imposed upon
Charge ("CDSC") $1 Million or more). the redemption of
Class C Shares held
for less than 12
months. No CDSC
applies to Class C
shares acquired
through the
reinvestment of
dividends or
distributions.
Distribution and An asset retention Level charge for
Service Fees service fee of 0.20 distribution and
of 1% is imposed on service fees for 6
the average annual years after the date
net assets of purchase at the
represented by the aggregate annual
Class A Shares. rate of 1% of the
average net assets
represented by the
Class C Shares.
Other Information The initial sales Class C Shares,
charge is waived or together with a pro-
reduced in some rata portion of all
cases. Larger Class C Shares
purchases qualify acquired through
for lower sales reinvestment of
charges. dividends and other
distributions paid
in additional Class
C Shares,
automatically
convert to Class A
Shares after 6
years.
Factors to Consider in Choosing Classes of Shares
Class A Shares or Class C shares are intended to be suitable
for long-term investment. 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. Consult "Fees and Expenses of the Fund" to see the
effect of Fund expenses for both classes if a hypothetical
investment is held for 1, 3, 5, and 10 years. You should consider
the total cost of an investment in Class A Shares as compared
with a similar investment in Class C Shares if you expect to
redeem your shares within a reasonably short time after purchase.
Systematic Payroll Investments
You can make systematic investments into either Class A
Shares or Class C Shares each pay period if your employer has
established a Systematic Payroll Investment Plan with the Fund.
To participate in the Payroll Plan, you must make your own
arrangements with your employer's payroll department, which may
include completing special forms. Additionally, the Fund requires
that you complete the Application included with this Prospectus.
Once your application is received by the Fund and a new account
is opened, under the Payroll Plan your employer will deduct a
preauthorized amount from each payroll check. This amount will
then be sent directly to the Fund for purchase of shares at the
then current offering price, which includes applicable sales
charge. You will receive a confirmation from the Fund for each
transaction. Should you wish to change the dollar amount or end
future systematic payroll investments, you must notify your
employer directly. Changes may take up to ten days.
"What price will I pay for the Fund's shares?"
Class A Shares Offering Price Class C Shares Offering Price
Net asset value per share Net asset value per share
plus the applicable sales charge
You will receive that day's offering price on purchase
orders, including Telephone Investments and investments by mail,
received in proper form prior to 4:00 p.m. New York time. Dealers
have the added flexibility of transmitting orders received prior
to 4:00 p.m. New York time to the Distributor or Agent before the
Distributor's close of business that day (normally 5:00 p.m. New
York time) and still receiving that day's offering price.
Otherwise, orders will be filled at the next determined offering
price. Dealers are required to submit orders promptly. Purchase
orders received on a non-business day, including those for
Automatic Investment, will be executed on the next succeeding
business day. The sale of shares will be suspended (1) during any
period when net asset value determination is suspended, or (2)
when the Distributor judges it is in the Fund's best interest to
do so.
"What are the sales charges for purchases of Class A Shares?"
The following table shows the amount of sales charge incurred
by a "single purchaser" of Class A Shares. A "single purchaser"
is:
* an individual;
* an individual, together with his or her spouse, and/or
any children under 21 years of age purchasing shares
for their account;
* a trustee or other fiduciary purchasing shares for a
single trust estate or fiduciary account; or
* a tax-exempt organization as detailed in Section
501(c)(3) or (13) of the Internal Revenue Code.
II III
Sales Charge as Sales Charge as
Percentage of Approximate
I Public Percentage of
Amount of Purchase Offering Price Amount Invested
Less than $25,000 4.00% 4.17%
$25,000 but less
than $50,000 3.75% 3.90%
$50,000 but less
than $100,000 3.50% 3.63%
$100,000 but less
than $250,000 3.25% 3.36%
$250,000 but less
than $500,000 3.00% 3.09%
$500,000 but less
than $1,000,000 2.50% 2.56%
For purchases of $1 Million or more see "Sales Charges for
Purchases of $1 Million or More."
For example:
If you pay $10,000 (Column I), your sales charge would be 4.00%
or $400 (Column II). ($10,000 x .04 = $400)
The value of your account, after deducting the sales charge from
your payment, would increase by $9,600. (This would be the
initial value of your account if you opened it with the $10,000
purchase). ($10,000 - $400 = $9,600)
The sales charge as a percentage of the increase in the value of
your account would be 4.17% (Column III). ($400 / $9,600 =
.0416666 or 4.17%)
Sales Charges for Purchases of $1 Million or More
You will not pay a sales charge at the time of purchase when
you purchase "CDSC Class A Shares." CDSC Class A Shares are Class
A Shares issued under the following circumstances:
(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 to a single purchaser in
a single purchase when the value of the purchase,
together with the value of the purchaser's other CDSC
Class A Shares and Class A Shares on which a sales
charge has been paid, equals or exceeds $1 million.
If you redeem all or part of your CDSC Class A Shares during
the four years after you purchase them, you must pay a special
contingent deferred sales charge upon redemption.
You will pay 1% of the Redemption Value if you redeem within
the first two years after purchase, and 0.50 of 1% of the
Redemption Value if you redeem within the third or fourth year.
The "Redemption Value" of your shares is the lesser of: (i)
the net asset value when you purchased the CDSC Class A Shares
you are redeeming; or (ii) the net asset value at the time of
your redemption.
This special charge also applies to CDSC Class A Shares
purchased without a sales charge pursuant to a Letter of Intent.
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation
"Single purchasers" may qualify for a reduced sales charge
in accordance with the above schedule when making subsequent
purchases of Class A Shares.
Letters of Intent
"Single purchasers" may also qualify for reduced sales
charges, in accordance with the above schedule, after a written
Letter of Intent (included in the Application) is received by the
Distributor.
General
Class A Shares may be purchased without a sales charge by
certain classes of purchasers.
Certain Investment Companies
If you redeem shares of an investment company (not a member
of the Aquilasm Group of Funds) on which you have paid a sales
charge, you can invest the proceeds within 120 days in Class A
Shares of the Fund without paying a sales charge. You can get
additional information from the Distributor.
"What are the sales, service and distribution charges for Class C
Shares?"
* No sales charge at time of purchase.
* Annual fees for service and distribution at a combined
annual rate of 1% of average annual net assets of the Fund
represented by Class C shares.
* After six years, Class C Shares automatically convert to
Class A Shares, which bear lower service and distribution
fees.
Redemption of Class C Shares
* 1% charge if redeemed within the first 12 months after
purchase. This contingent deferred sales charge, or CDSC, is
calculated based on the lesser of the net asset value at the
time of purchase or at the time of redemption.
* No CDSC applies if Class C Shares are held for 12 months
after purchase.
* Shares acquired by reinvestment of dividends or
distributions are not subject to any CDSC.
Broker/Dealer Compensation - Class C Shares
The Distributor will pay any broker/dealer executing a Class
C share purchase 1% of the sales price.
"What about confirmations?"
A statement will be mailed to you confirming each purchase
of shares in the Fund. Additionally, your account at the Agent
will be credited in full and fractional shares (rounded to the
nearest 1/1000th of a share).
"Is there a Distribution Plan or a Services Plan?"
The Fund has adopted a Distribution Plan (the "Plan") under
the Investment Company Act of 1940's Rule 12b-1 in order to:
(i) permit the Fund to finance activities primarily
intended to result in the sale of its shares;
(ii) permit the Manager, out of its own funds, to make
payment for distribution expenses; and
(iii) protect the Fund against any claim that some of the
expenses which it pays or may pay might be considered
to be sales-related and therefore come within the
purview of the Rule.
Pursuant to the Plan, the Fund makes payments with respect
to both Class A and C Shares under agreements to certain
broker/dealers, or others who have (i) rendered assistance
(whether direct, administrative, or both) in the distribution
and/or retention of the Fund's shares or (ii) assisted in the
servicing of shareholder accounts.
For any fiscal year, these payments may not exceed 0.20 of
1% for Class A Shares, and 0.75 of 1% for Class C Shares, of the
average annual net assets represented by each class. Because
these distribution fees are paid out of assets on an ongoing
basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales
charges.
For any class, these payments are made only from the assets
allocable to that class.
Shareholder Services Plan for Class C Shares
The Fund's Shareholder Services Plan authorizes it to pay a
service fee under agreements to certain qualified recipients who
have agreed to provide personal services to Class C shareholders
and/or maintain their accounts. For any fiscal year, such fees
may not exceed 0.25 of 1% of the average annual net assets
represented by Class C Shares. Payment is be made only out of the
Fund's assets represented by Class C Shares.
Service Fees with respect to Class C Shares will be paid to
the Distributor during the first year after purchase and
thereafter to other qualified recipients.
"Transfer on Death" Registration (Both classes)
The Fund generally permits "transfer on death" ("TOD")
registration of shares, so that on the death of the shareholder
the shares are transferred to a designated beneficiary or
beneficiaries. Ask the Agent or your broker-dealer for the
Transfer on Death Registration Request Form. With it you will
receive a copy of the TOD Rules of the Aquilasm Group of Funds,
which specify how the registration becomes effective and
operates. By opening a TOD Account, you agree to be bound by the
TOD Rules.
DIVIDENDS AND DISTRIBUTIONS
"How are dividends and distributions determined?"
The Fund pays dividends and other distributions with respect
to each class of shares. The Fund calculates its dividends and
other distributions with respect to each class at the same time
and in the same manner. Net income for dividend purposes includes
all interest income accrued by the Fund since the previous
dividend declaration less expenses paid or accrued. Net income
also includes any original issue discount, which occurs if the
Fund purchases an obligation for less than its face amount. The
discount from the face amount is treated as additional income
earned over the life of the obligation. Because the Fund's income
varies, so will the Fund's dividends. There is no fixed dividend
rate. It is expected that most of the Fund's dividends will be
comprised of interest income. The dividends and distributions of
each class can vary due to certain class-specific charges. The
Fund will declare all of its net income 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.
Redeemed shares continue to earn dividends through and
including the earlier of:
1. the day prior to the day when redemption
proceeds are mailed, wired or transferred by
the Automated Clearing House or the Agent or
paid by the Agent to a selected dealer; or
2. the third day the New York Stock Exchange
is open after the day the net asset value of
the redeemed shares was determined.
The Fund's present policy is to pay dividends so they will
be received or credited by approximately the first day of each
month.
"How are dividends and distributions paid?"
Dividends and distributions will automatically be reinvested
in full and fractional shares of the Fund of the same class at
net asset value on the record date for the dividend or
distribution, unless you elect otherwise.
You may choose to have all or any part of the payments for
dividends or distributions paid in cash. You can elect to have
the cash portion of your dividends or distributions deposited,
without charge, by electronic funds transfers into your account
at a financial institution, if it is a member of the Automated
Clearing House.
You can make any of these elections on the Application, by a
Ready Access Features Form or by a letter to the Agent. Your
election to receive some or all of your dividends and
distributions in cash will be effective as of the next payment of
dividends after it has been received in proper form by the Agent.
It will continue in effect until the Agent receives written
notification of a change.
All shareholders, whether their dividends and distributions
are received in cash or reinvested, will receive a monthly
statement indicating the current status of their investment
account with the Fund.
If you do not comply with laws requiring you to furnish
taxpayer identification numbers and report dividends, the Fund
may be required to impose backup withholding at a rate of 31%
upon payment of redemptions to shareholders and on capital gains
distributions (if any) and any other distributions that do not
qualify as "exempt-interest dividends."
TAX INFORMATION
Net investment income includes income from Utah
Double-Exempt Obligations in the portfolio which the Fund
allocates as "exempt-interest dividends." Such dividends are
exempt from regular Federal income tax. The Fund will allocate
"exempt-interest dividends" by applying one designated percentage
to all income dividends it declares during its tax year. It will
normally make this designation in the first month following its
fiscal year end for dividends paid in the prior year.
It is possible that, under certain circumstances, a small
portion of dividends paid by the Fund will be subject to income
taxes. During the Fund's fiscal year ended June 30, 1999, 98.19%
of the Fund's dividends were exempt-interest dividends. For the
calendar year 1998, 0.55% of total dividends paid were taxable.
The percentage of tax-exempt income from any particular dividend
may differ from the percentage of the Fund's tax-exempt income
during the dividend period.
Net capital gains of the Fund, if any, 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 intends to qualify during each fiscal year under
the Internal Revenue Code to pay "exempt-interest dividends" to
its shareholders. "Exempt-interest dividends" 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 Fund will treat as ordinary income in the year received
certain gains on Utah Double-Exempt Obligations it acquired after
April 30, 1993 and sells for less than face or redemption value.
Those gains will be taxable to you as ordinary income, if
distributed.
Capital gains dividends (net long-term gains over net
short-term losses which the Fund distributes and so designates)
are reportable by shareholders as gains from the sale or exchange
of a capital asset held for more than a year. This is the case
whether the shareholder reinvests the distribution in shares of
the Fund or receives it in cash, regardless of the length of time
the investment is held.
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 reduce future capital gains dividends and
amounts taxed to shareholders.
The Fund's gains or losses on sales of Utah Double-Exempt
Obligations will be deemed long- or short-term, depending upon
the length of time the Fund holds these obligations.
You will receive information on the tax status of the Fund's
dividends and distributions annually.
Special Tax Matters
Under the Internal Revenue 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.
If you or your spouse are receiving Social Security or
railroad retirement benefits, a portion of these benefits may
become taxable, if you receive exempt-interest dividends from the
Fund.
If you, or someone related to you, is a "substantial user"
of facilities financed by industrial development or private
activity bonds, you should consult your own tax adviser before
purchasing shares of the Fund.
Interest from all Utah Double-Exempt Obligations is
tax-exempt for purposes of computing the shareholder's regular
tax. However, 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 ("AMT"). Whether or
not that computation will result in a tax will depend on the
entire content of your return. The Fund will not invest more than
20% of its assets in the types of Utah Double-Exempt Obligations
that pay interest subject to AMT. An adjustment required by the
Internal Revenue Code will tend to make it more likely that
corporate shareholders will be subject to AMT. They should
consult their tax advisers.
"What should I know about Utah taxes?"
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.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.
Shareholders of the Fund should consult their tax advisers
about other state and local tax consequences of their investment
in the Fund.
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The financial highlights table is intended to help you understand the
Fund's financial performance for the designated periods of the Fund's
operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by KPMG LLP, whose report, along with the Fund's financial
statements, is included in the annual report, is incorporated by reference
into the SAI and is available upon request.
Class C(2)
Class A(1) Year Year Year
Year Ended June 30, Ended Ended Ended
1999 1998 1997 6/30/99 6/30/98 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year..... $10.24 $9.94 $9.74 $10.23 $9.94 $9.74
Income from Investment
Operations:
Net investment
income............. 0.49 0.52 0.52 0.38 0.41 0.44
Net gain (loss) on
securities (both
realized and
unrealized)......... (0.36) 0.30 0.21 0.35 0.29 0.21
Total from Investment
Operations.......... 0.13 0.82 0.73 0.03 0.70 0.65
Less Distributions:
Dividends from net
investment income... (0.49) (0.52) (0.53) (0.39) (0.41) (0.45)
Total Distributions... (0.49) (0.52) (0.53) (0.39) (0.41) (0.45)
Net Asset Value, End
of Year............... $9.88 $10.24 $9.94 $9.87 $10.23 $9.94
Total Return (not
reflecting sales
charge)(%)............ 1.19 8.41 7.72 0.18 7.20 6.80
Ratios/Supplemental Data
Net Assets, End of Year
($ thousands)........ 47,251 29,013 29,071 1,667 1,476 41
Ratio of Expenses to
Average Net
Assets (%).......... 0.45 0.34 0.28 1.45 1.36 1.08
Ratio of Net Investment
Income to Average Net
Assets (%).......... 4.57 5.06 5.44 3.57 3.94 4.64
Portfolio Turnover
Rate (%).............. 87.49 11.31 5.09 87.49 11.31 5.09
The expense and net investment income ratios without the effect of the
voluntary waiver of a portion of the management fee and the voluntary
expense reimbursement were:
Ratio of Expenses
to Average Net Assets(%)
1.04 1.30 1.32 1.85 2.08 0.23+
Ratio of Net Investment
Income to
Average Net
Assets(%) 3.98 4.10 4.40 3.17 3.22 3.60
The expense ratios after giving effect to the waivers, expense
reimbursement and expense offset for uninvested cash balances were:
Ratio of Expenses to
Average Net Assets(%) 0.38 0.33 0.27 1.37 1.35 1.07
<CAPTION>
Class A(1) Class C(2)
Year Ended June 30, Period Ended June 30,
1996 1995 1996(3)
<C> <C> <C>
$ 9.59 $ 9.32 $ 9.77
0.54 0.55 0.05
0.15 0.27 (0.03)
0.69 0.82 0.02
(0.54) (0.55) (0.05)
(0.54) (0.55) (0.05)
$ 9.74 $ 9.59 $ 9.74
7.17 9.09 0.20+
28,881 27,536 0.10
0.20 0.09 0.14+
5.48 5.84 0.50+
11.15 22.92 11.15
1.29 1.29 0.23+
4.39 4.64 0.41+
0.19 0.08 0.14+
<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 May 21, 1996 through June 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
Note: Effective July 16, 1998, Zions First National Bank became the
Fund's Investment Sub-Adviser, replacing First Security Investment
Management, Inc.
</TABLE>
<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:
PFPC Inc.
400 Bellevue Parkway, Wilmington, DE 19809
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(s) 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 Organization. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)_______________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
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
Income dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless otherwise
indicated below.
You can have any portion of either type reinvested, with the balance paid
in cash, by indicating a percent below:
Income 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 1B.
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
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, PFPC Inc.
(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, PFPC Inc., 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 Trusts, 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>
MANAGER AND FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
Zions First National Bank
One South Main Street
Salt Lake City, Utah 84111
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Gary C. Cornia
William L. Ensign
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Diana P. Herrmann, President
Jerry G. McGrew, Senior Vice President
Kimball L. Young, Senior 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
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG 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
<PAGE>
Back Cover
This Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information about the Fund dated November 1, 1999 (the "SAI") has
been filed with the Securities and Exchange Commission. The SAI
contains information about the Fund and its management not
included in this Prospectus. The SAI is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
this Prospectus and the SAI are all material facts about the Fund
available to you.
You can get additional information about the Fund's
investments in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can get the SAI and the Fund's annual and
semi-annual reports without charge, upon request by calling
1-800-446-8824 (toll-free).
In addition, you can review and copy information about the
Fund (including the SAI) at the Public Reference Room of the SEC
in Washington, D.C. You can get information on the operation of
the SEC's public reference room by calling the SEC at
1-800-SEC-0330. You can get other information about the Fund at
the SEC's Internet site at http://www.sec.gov. You can get copies
of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
+ ++This Prospectus should be read and retained for future
reference
The file number under which the Fund is registered
with the SEC under the
Investment Company Act of 1940 is 811-6239
TABLE OF CONTENTS
The Fund's Objective, Investment Strategies
and Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Fund...................
Investment of the Fund's Assets.................
Fund Management.................................
Net Asset Value Per Share........................
Purchases .......................................
Redeeming Your Investment........................
Alternate Purchase Plans.........................
Dividends and Distributions......................
Tax Information..................................
Financial Highlights.............................
Application and Letter of Intent.................
TAX-FREE FUND FOR UTAH
[LOGO]
One of The
Aquilasm Group of Funds
A tax-free income investment
PROSPECTUS
To receive a free copy of the Fund's SAI, annual or semi-annual
report, or other information about the fund, or to make
shareholder inquiries call:
the Fund's Shareholder Servicing Agent at
800-446-8824 toll free
or you can write to:
PFPC Inc
400 Bellevue Parkway
Wilmington, DE 19809
For general inquiries and yield information, call 800-882-4937 or
212-697-6666
This Prospectus should be read and retained for future reference
<PAGE>
Tax-Free Fund For Utah
380 Madison Avenue, Suite 2300
New York, New York 10017
800-882-4937
212-697-6666
Prospectus
November 1, 1999
Class Y Shares
Class I Shares
Tax-Free Fund For Utah is a mutual fund that seeks to provide you
as high a level of current income exempt from Utah state and
Federal income taxes as is consistent with preservation of
capital. The Fund invests in municipal obligations which pay
interest exempt from Utah state and Federal income taxes that are
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, are determined to
be of comparable quality by the Fund's Sub-Adviser, Zions First
National Bank.
For purchase, redemption or account inquiries contact the Fund's
Shareholder Servicing Agent:
PFPC Inc. * 400 Bellevue Parkway * Wilmington, DE 19809
Call 800-446-8824 toll free
For general inquiries & yield information
Call 800-882-4937 toll free or 212-697-6666
The Securities and Exchange Commission has not approved or
disapproved the Fund's securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
THE FUND'S OBJECTIVE, INVESTMENT STRATEGIES AND MAIN RISKS
"What is the Fund's objective?"
The Fund's objective is to provide you as high a level of
current income exempt from Utah state and regular Federal income
taxes as is consistent with preservation of capital.
"What is the Fund's investment strategy?"
The Fund invests in tax-free municipal obligations which
pay interest exempt from Utah state and Federal income taxes. We
call these "Utah Double-Exempt Obligations." At least 65% of the
portfolio will always consist of obligations of obligations
issued by the State of Utah, its counties and various other local
authorities These obligations can be of any maturity but the
Fund's average portfolio maturity has traditionally been between
10 and 20 years. At the time of purchase, an obligation must be
considered "investment grade."
The Sub-Adviser selects obligations for the Fund's portfolio
to best achieve the Fund's objectives. The Adviser evaluates
specific obligations for purchase by various characteristics
including quality, maturity and coupon rate.
The interest paid on certain types of Utah Double-Exempt
Obligations may be subject to the Federal alternative minimum tax
("AMT"). At least 80% of the Fund's net assets must be invested
in tax-exempt Utah Double-Exempt Obligations whose interest is
not subject to AMT.
"What are the main risks of investing in the Fund?"
Among the risks of investing in shares of the Fund and its
portfolio of securities are the following:
Loss of money is a risk of investing in the Fund.
The Fund's assets, being primarily or entirely Utah issues,
are subject to economic and other conditions affecting Utah.
Adverse local events, such as a downturn in the Utah economy,
could affect the value of the Fund's portfolio.
There are two types of risk associated with any fixed-income debt
securities such as Utah Double-Exempt Obligations: interest rate
risk and credit risk.
* Interest rate risk relates to fluctuations in market value
arising from changes in interest rates. If interest rates
rise, the value of debt securities, including Utah
Double-Exempt Obligations, will normally decline. All
fixed-rate debt securities, even the most highly rated Utah
Double-Exempt Obligations, are subject to interest rate
risk. Utah Double-Exempt Obligations with longer maturities
generally have a more pronounced reaction to interest rate
changes than shorter-term securities.
* Credit risk relates to the ability of the particular issuers
of the Utah Double-Exempt Obligations the Fund owns to make
periodic interest payments as scheduled and ultimately repay
principal at maturity.
Investment in the Fund is not a deposit in Zions First
National Bank, Zions Bancorporation or its bank or non-bank
affiliates or any other bank, and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government
agency.
The Fund is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940
Act"). Thus, compared with "diversified" funds, it may invest a
greater percentage of its assets in obligations of a particular
issuer and may therefore not have as much diversification among
securities, and thus diversification of risk. 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.
<PAGE>
TAX-FREE FUND FOR UTAH
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in Tax-Free Fund For Utah by showing changes
in the performance of the Fund's Class Y Shares from year to year
over a two year period and by showing how the Fund's average
annual returns for one year and since inception compare to a
broad measure of market performance. How the Fund has performed
in the past is not necessarily an indication of how the Fund will
perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1997-1998
<S> <C> <C>
10%
8.87
8% XXXX
XXXX
6% XXXX
XXXX 5.60%
4% XXXX XXXX
XXXX XXXX
2% XXXX XXXX
XXXX XXXX
0% XXXX XXXX
1997 1998
Calendar Years
During the period shown in the bar chart, the highest return for
a quarter was 3.13% (quarter ended June 30, 1997) and the lowest
return for a quarter was 0.07% (quarter ended December 31, 1998).
The year-to-date (from January 1, 1999 to September 30, 1999)
total return was -3.38% for Class Y Shares.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
For the period 1-Year inception*
ended December 31, 1998
<S> <C> <C>
Tax-Free Fund For Utah
Class Y Shares 5.60% 8.06%
Tax-Free Fund For Utah
Class I Shares ** N/A N/A
Lehman Brothers
Municipal Bond Index *** 6.47% 7.12%
<FN>
*From commencement of class on May 21, 1996.
</FN>
<FN>
**Commencement of Class I Shares was on January 31, 1998. To date
no Class I Shares have been sold.
</FN>
<FN>
***The Lehman Brothers Municipal Bond Index is nationally
oriented and consists of an unmanaged mix of investment-grade
long-term municipal securities of issuers throughout the United
States. At December 31, 1998, there were approximately 48,000
securities in the Index.
</FN>
</TABLE>
<PAGE>
TAX-FREE FUND FOR UTAH
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund. No Class I Shares are
currently outstanding.
<TABLE>
<CAPTION>
Class I Class Y
Shares Shares
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................None None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load).........None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends or Distributions
(as a percentage of offering price)........None None
Redemption Fees..............................None None
Exchange Fee.................................None None
Annual Fund Operating Expenses (expenses that are
deducted from the Fund's assets)
Management Fee(1)........................... 0.50% 0.50%
Distribution
and/or Service (12b-1)Fee....................0.10%(2) None
All Other Expenses (2).......................0.76% 0.55%
Total Annual Fund Operating Expenses (3)....1.36% 1.05%
<FN>
(1) The Fund pays the Manager an advisory fee at the annual rate
of 0.50% of 1% of average annual net assets of which 0.40 of 1%
was 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 0.13 of 1% was waived.
</FN>
<FN>
(2) Current rate; up to 0.25% can be authorized.
</FN>
<FN>
(3) At present, fees are being partially waived by the Manager
and the Sub-Adviser. It is anticipated that once the asset size
of the Fund reaches approximately $100 million, these waivers may
no longer be necessary. Also, operating expenses are being
subsidized through reimbursement by the Manager. This subsidy is
being phased out progressively so that the Fund will bear its
own expenses, other than management fees, once its asset size
reaches approximately $100 million. The undertakings of the
Manager and the Sub-Adviser as to fee waivers and the practices
of the Manager as to expense reimbursement may operate to reduce
the fees and expenses of the Fund in order for the Fund to
maintain a competitive yield. (See "Management Arrangements.")
The expense ratios for the fiscal year ended June 30, 1999 after
giving effect to the waivers, expense reimbursement and the
expense offset for uninvested cash balances were incurred at the
following annual rates: management fees, all other expenses, and
total Fund operating expenses for Class I Shares would have been
0.10%, 0.45% and 0.65% respectively: for Class Y, these expenses
would have been 0.10%, 0.24%, and 0.34%, respectively. Other
expenses for the two classes differ because Class I Shares bear
program costs for financial intermediaries of 0.25%, which
includes transfer agent services, and charges common to both
classes of 0.30%; Class Y Shares bear only the common charges of
0.30% and an allocation for transfer agent services of 0.04%.
</TABLE>
Example
This Example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual
funds.
The Example assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your
investment has a 5% return each year, you reinvest all dividends
and distributions, and that the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class I Shares.......... $138 $431 $745 $1,635
Class Y Shares...........$107 $334 $579 $1,283
</TABLE>
<PAGE>
"Is the Fund right for me?"
The shares of the Fund are designed to be a suitable
investment for individuals, corporations, institutions and
fiduciaries who seek income exempt from Utah state and regular
Federal income taxes.
Institutional Class Shares ("Class Y Shares") are offered
only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity. Financial
Intermediary Class Shares ("Class I Shares") are offered and sold
only through financial intermediaries with which Aquila
Distributors, Inc. (the "Distributor") has entered into sales
agreements. The Fund does not sell the shares of either class
directly to retail customers.
Utah Double-Exempt Obligations
The Fund invests in Utah Double-Exempt Obligations, which
are a type of municipal obligation. These obligations pay
interest which bond counsel or other appropriate counsel deems to
be exempt from regular Federal and State of Utah income taxes
other than taxes on corporations. They include obligations of
Utah issuers and certain non-Utah issuers, of any maturity.
To be considered investment grade an obligation must
either
* be rated within the four highest credit ratings assigned by
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or,
* if unrated, be determined to be of comparable quality by the
Fund's Sub-Adviser, Zions First National Bank.
The obligations of non-Utah issuers that the Fund can
purchase are those issued by or under the authority of states
other than Utah, Guam, the Northern Mariana Islands, Puerto Rico
and the Virgin Islands. Interest paid on these obligations is
currently exempt from regular Federal and Utah income taxes
other than taxes on corporations.
Municipal Obligations
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 public purposes.
There are two principal classifications of municipal
obligations: "notes" and "bonds." Notes generally have
maturities of one year or less, while bonds are paid back over
longer periods.
The various public purposes for which municipal obligations
are issued include:
* obtaining funds for general operating expenses,
* refunding outstanding obligations,
* obtaining funds for loans to other public institutions
and facilities, and
* funding the construction of highways, bridges, schools,
hospitals, housing, mass transportation, streets and
water and sewer works.
Municipal obligations include:
* tax, revenue or bond anticipation notes,
* construction loan notes,
* project notes, which sometimes carry a U.S. government
guarantee,
* municipal lease/purchase agreements, which are similar
to installment purchase contracts for property or
equipment, and
* floating and variable rate demand notes.
"What factors may affect the value of the Fund's investments and
their yields?"
Change in prevailing interest rates is the most common
factor that affects the value of the obligations in the Fund's
portfolio. Any such change may have different effects on
short-term and long-term Utah Double-Exempt Obligations.
Long-term obligations (which usually have higher yields) may
fluctuate in value more than short-term ones. Thus, the Fund may
shorten the average maturity of its portfolio when it believes
that prevailing interest rates may rise. While this strategy may
promote one part of the Fund's objective, preservation of
capital, it may also result in a lower level of income.
"What are the main risk factors and special considerations
regarding investment in Utah Double-Exempt Obligations?"
The following is a discussion of the general factors that
might influence the ability of Utah issuers to repay principal
and interest when due on Utah Double-Exempt Obligations that the
Fund owns. The Fund has derived this information from sources
that are generally available to investors and believes it to be
accurate, but it has not been independently verified and it 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 1998, Utah's
population rose 1.8.% to 2,081,000. 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
jobs. 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. A substantial
portion of revenues come 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.
In addition to considerations specifically affecting Utah,
other risk factors include the following.
Year 2000. Like other financial and business organizations,
the Fund could be adversely affected if computer systems the Fund
relies on do not properly process date-related information and
data involving the year 2000 and after. The Administrator is
taking steps that it believes are reasonable to address this
problem in its own computer systems and to obtain assurances that
steps are being taken by the other major service providers to the
Fund to achieve comparable results. Certain vendors have advised
the Administrator that they are currently compliant. The Fund's
mission critical vendors -- the shareholder servicing agent, the
custodian and the fund accounting agent -- as well as other
support organizations have advised the Administrator that they
are actively working on necessary changes. These three vendors
have advised the Administrator that they expect to be ready and
will additionally be prepared to implement contingency plans if
necessary. All such expenses are being borne, and are expected to
continue to be borne, by the respective service providers. The
Fund has not incurred, nor is it anticipated to incur, any costs
related to these matters. The Administrator has also requested
the Fund's portfolio manager to attempt to evaluate the potential
impact of this problem on the issuers of securities in which the
Fund invests. At this time there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Fund.
FUND MANAGEMENT
"How is the Fund managed?"
Aquila Management Corporation, 380 Madison Avenue, Suite
2300, New York, NY 10017, the Manager, is the Fund's investment
adviser under an Advisory and Administration Agreement. It has
delegated its investment advisory duties, including portfolio
management, to Zions First National Bank, the Sub-Adviser, under
a sub-advisory agreement described below. The Manager is also
responsible for administrative services, including providing for
the maintenance of the headquarters of the Fund, overseeing
relationships between the Fund and the service providers to the
Fund, either keeping the accounting records of the Fund, or, at
its expense and responsibility, delegating such duties in whole
or in part to a company satisfactory to the Fund, maintaining the
Fund's books and records and providing other administrative
services.
The Sub-Adviser provides the Fund with local advisory
services.
Under the Sub-Advisory Agreement, the Sub-Adviser provides
for investment supervision, including supervising continuously
the investment program of the Fund and the composition of its
portfolio, determining what securities will be purchased or sold
by the Fund, and arranging for the purchase and the sale of
securities held in the portfolio of the Fund; and, at the
Sub-Adviser's expense, for pricing of the Fund's portfolio daily.
Under the Advisory and Administration Agreement, the Fund
pays the Manager a 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.
Information about the Manager and the Sub-Adviser
On June 7, 1999 Zions Bancorporation, parent corporation
of the Fund's Sub-Adviser, announced that it would merge with
First Security Corporation in a transaction expected to take
place in the 4th quarter of 1999. The transaction is subject to
regulatory approval.
The Sub-Adviser, Zions First National Bank ("Zions" or the
"Sub-Adviser"), was founded in 1873 and is a wholly-owned
subsidiary of Zions Bancorporation, a Utah-headquartered
financial services company . In addition to advising the Fund,
Zions' advisory experience includes investment management
services to affiliate banks, corporate foundations and
profit-sharing trusts, retirement funds, charitable foundations,
endowments and individual investors throughout the United States.
Zions and its parent, Zions Bancorporation, have offices at One
South Main Street, Salt Lake City, Utah 84111. Zions is the
second largest bank in the state of Utah and one of the largest
banks in the intermountain 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 the Sub-Adviser, although some or all of these fees may be
waived temporarily.
Mr. Richard K. Baird, CFA, is the portfolio manager of the
Fund. He is a Vice President and Senior Portfolio Manager of the
Sub-Adviser and has been employed by the Sub-Adviser since
February 1999. From 1996-1999 he was employed by First Security
Investment Management as a Senior Portfolio Manager and manager
of the Achievement Municipal Bond Fund. From 1987-1996 he was a
portfolio manager for Seafirst Bank in Seattle, Washington. He
has earned the professional designation of Chartered Financial
Analyst (CFA) from the Association for Investment Management and
Research and has 17 years of discretionary investment management
experience. He received his B.S. degree in Finance from Brigham
Young University and took post-graduate business courses at the
University of Colorado.
The Fund's Manager is founder and Manager and/or
administrator to the Aquilasm Group of Funds, which consists of
tax-free municipal bond funds, money market funds and equity
funds. As of June 30, 1999, these funds had aggregate assets of
approximately $3.2 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.
NET ASSET VALUE PER SHARE
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 (a "business
day"), by dividing the value of the Fund's net assets (which
means the value of the assets less liabilities) allocable to each
class by the total number of shares of such class outstanding at
that time. In general, net asset value of the Fund's shares is
based on portfolio market value, except that Utah Double-Exempt
Obligations maturing in 60 days or less are generally valued at
amortized cost. The price at which a purchase or redemption of
shares is effected is based on the next calculated net asset
value after your purchase or redemption order is received in
proper form. (See "What price will I pay for the Fund's
shares?")The New York Stock 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, the Exchange may close on days not
included in that announcement.
PURCHASES
"Are there alternate purchase plans?"
This Prospectus offers two separate classes of shares. All
classes represent interests in the same portfolio of Utah
Double-Exempt Obligations.
"Can I purchase shares of the Fund?"
You can purchase shares of the Fund if you live in Utah or
in one of the other states listed below. You should not purchase
shares of the Fund if you do not reside in one of the following
states. Otherwise, the Fund can redeem the shares you purchased.
This may cause you to suffer a loss and may have tax
consequences.
Also, if you do not reside in Utah, dividends from the Fund
may be subject to state income taxes of the state in which you do
reside. Therefore, you should consult your tax adviser before
buying shares of the Fund.
On the date of this Prospectus, Class Y Shares are available
only in:
*Utah * California * Colorado * Connecticut * District of
Columbia *Florida * Hawaii * Idaho * Illinois * Missouri * Nevada
* New Jersey * New York * Pennsylvania
Class I Shares are available only in:
* Utah * District of Columbia * Missouri * New Jersey * New York
The Fund and the Distributor may reject any order for the
purchase of shares.
"How much money do I need to invest?"
For Class Y Shares:
$1,000. Subsequent investments can be in any amount.
Class I Shares:
Financial intermediaries can set their own requirements for
initial and subsequent investments.
Your investment must be drawn in United States dollars on a
United States commercial bank, savings bank, credit union or
United States branch of a foreign commercial bank (each of which
is a "Financial Institution").
"How do I purchase shares?"
You may purchase Class Y Shares:
* through an investment broker or dealer, or a bank or
financial intermediary, which has a sales agreement with the
Distributor, Aquila Distributors, Inc., in which case that
institution will take action on your behalf, and you will
not personally perform the steps indicated below; or
* directly through the Distributor, by mailing payment to the
Fund's Agent, PFPC Inc.
* The price you will pay is net asset value for both Class Y
Shares and Class I Shares. (See "What price will I pay for
the Fund's shares?")
You may purchase Class I Shares only through a financial
intermediary.
Opening a Class Y Shares Account Adding to a Class Y Shares
Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to payable to
"Tax-Free Fund For Utah" "Tax-Free Fund For Utah"
* Complete the Application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to the Fund's
you wish to authorize confirmations or supply
the name(s) of account
owner(s), the account number,
and the name of the Fund
* Send your check and * Send your check and
completed application account information
to your dealer or to your dealer or
to the Fund's to the Fund's
Agent, PFPC Inc. Agent, PFPC Inc.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of
$50 or more, from your Financial Institution if it is a member of
the Automated Clearing House. You may make investments through
two electronic transfer features, "Automatic Investment" and
"Telephone Investment."
* Automatic Investment: You can authorize a pre-determined
amount to be regularly transferred from your account.
* Telephone Investment: You can make single investments of
up to $50,000 by telephone instructions to the Agent.
Before you can transfer funds electronically, the Fund's
Agent must have your completed Application authorizing these
features. Or, if you initially decide not to choose these
conveniences and then later wish to do so, you must complete a
Ready Access Features Form which is available from the
Distributor or Agent, or if your account is set up so that your
broker or dealer makes these sorts of changes, request your
broker or dealer to make them. The Fund may modify or terminate
these investment methods or charge a service fee, upon 30 days'
written notice to shareholders.
REDEEMING YOUR INVESTMENT
Redeeming Class Y Shares
You may redeem some or all of your shares by a request to
the Agent. Shares will be redeemed at the next net asset value
determined after your request has been received in proper form.
There is no minimum period for investment in the Fund,
except for shares recently purchased by check, Automatic or by
Telephone Investment as discussed below.
A redemption may result in a tax liability for you.
"How can I redeem my investment?"
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-446-8824
By FAX, send
instructions to:
302-791-3055
For liquidity and convenience, the Fund offers expedited
redemption for Class Y Shares.
Expedited Redemption Methods
You may request expedited redemption in two ways:
1. By Telephone. The Agent will take instructions from
anyone by telephone to redeem shares and make payments:
a) to a Financial Institution account you have previously
specified;
b) by check in the amount of $50,000 or less, mailed to the
same name and address (which has been unchanged for the past
30 days) as the account from which you are redeeming. You
may only redeem by check via telephone request once in any
7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to
supply:
account name(s) and number
name of the caller
the social security number registered to the account
personal identification
Note: Check the accuracy of your confirmation statements
immediately. The Fund, the Agent, and the Distributor are not
responsible for losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify a caller's identity. The Agent may record calls.
2 By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of
instruction sent to the Agent: PFPC Inc., by FAX at
302-791-3055 or by mail to 400 Bellevue Parkway, Wilmington,
DE 19809. The letter, signed by the registered
shareholder(s) (no signature guarantee is required), must
indicate:
account name(s)
account number
amount to be redeemed
any payment directions.
To have redemption proceeds sent directly to a Financial
Institution account, you must complete the Expedited Redemption
section of the Application or a Ready Access Features Form. You
will be required to provide (1) details about your Financial
Institution account, (2) signature guarantees and (3) possible
additional documentation.
The name(s) of the shareholder(s) on the Financial Institution
account must be identical to those on the Fund's records of your
account.
You may change your designated Financial Institution account at
any time by completing and returning a revised Ready Access
Features Form.
Regular Redemption Method
To redeem by the regular redemption method, send a letter of
instruction to the Fund's Agent, which includes:
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 (we normally mail redemption proceeds
to your address as registered with the Fund)
signature(s) of the registered shareholder(s) and
signature guarantee(s), if required, as indicated below.To
be in "proper form," your letter must be signed by the
registered shareholder(s) exactly as the account is
registered. For a joint account, both shareholder signatures
are necessary.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or
executors, or if redemption is requested by someone other
than the shareholder of record. The Agent may require
signature guarantees if insufficient documentation is on
file.
We do not require a signature guarantee for redemptions up
to $50,000, payable to the record holder, and sent to the
address of record, except as noted above. In all other
cases, signatures must be guaranteed.
Your signature may be guaranteed by any:
member of a national securities exchange
U.S. bank or trust company
state-chartered savings bank
federally chartered savings and loan association
foreign bank having a U.S. correspondent bank; or
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 receipt in proper form of
your redemption request by your financial intermediary.
Redemption requests for Class I Shares must be made through a
financial intermediary and cannot 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.
"When will I receive the proceeds of my redemption?"
Redemption proceeds for Class Y Shares are normally sent on
the next business day following receipt of your redemption
request in proper form. Except as described below, payments will
normally be sent to your address of record within 7 days after
acceptance of your redemption request.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and None
as you requested
on your Application
or Ready Access Features
Form, wired or
transferred through
the Automated Clearing
House to your Financial
Institution account
Through a broker/ Check or wire, to None; however,
dealer your broker/dealer your broker/dealer
may charge a fee
Although the Fund does not currently intend to, it can
charge up to $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. 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.
Redemption payments for Class I Shares are made to financial
intermediaries.
The Fund may delay payment for redemption of shares recently
purchased by check (including certified, cashier's or official
bank check) or by Automatic Investment or Telephone Investment up
to 15 days after purchase; however, payment for redemption will
not be delayed after (i) the check or transfer of funds has been
honored, or (ii) the Agent receives satisfactory assurance that
your Financial Institution will honor the check or transfer of
funds. You can eliminate possible delays by paying for purchased
shares with wired funds or Federal Reserve drafts.
The Fund has the right to postpone payment or suspend
redemption rights during certain periods. These periods may occur
(i) when the New York Stock Exchange is closed for other than
weekends and holidays, (ii) when the Securities and Exchange
Commission (the "SEC") restricts trading on the New York Stock
Exchange, (iii) when the SEC determines an emergency exists which
causes disposal of, or determination of the value of, the
portfolio securities to be unreasonable or impracticable, and
(iv) during such other periods as the SEC may permit.
The Fund can redeem your shares if their value totals less
than $500 as a result of redemptions or failure to meet and
maintain the minimum investment level under an Automatic
Investment program. Before such a redemption is made, we will
send you a notice giving you 60 days to make additional
investments to bring your account up to the minimum.
Redemption proceeds may be paid in whole or in part by
distribution of the Fund's portfolio securities ("redemption in
kind") in conformity with SEC rules. This method will only be
used if the Board of Trustees determines that partial or whole
cash payments would be detrimental to the best interests of the
remaining shareholders.
"Is there an Automatic Withdrawal Plan?"
Yes, but it is only available for Class Y Shares. Under an
Automatic Withdrawal Plan you can arrange to receive a monthly or
quarterly check in a stated amount, not less than $50.
ALTERNATE PURCHASE PLANS
Distribution Arrangements
In this Prospectus the Fund provides you with 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.
Class Y Shares Class I Shares
"Institutional Class" "Financial Intermediary
Class"
Initial Sales None None. Financial
Charge Intermediaries may
charge a fee for
purchase of shares.
Contingent None None
Deferred Sales
Charge ("CDSC")
Distribution and None Distribution fee of
Service Fees 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 service fee
of 0.25 of 1% of
such assets.
"What Price Will I Pay For the Fund's Shares?"
The offering price for Class Y Shares is the net asset value
per share. You will receive that day's offering price on purchase
orders received in proper form, including Telephone Investments
and investments by mail, received prior to 4:00 p.m. New York
time. Dealers have the added flexibility of transmitting orders
received prior to 4:00 p.m. New York time to the Distributor or
Agent before the Distributor's close of business that day
(normally 5:00 p.m. New York time) and still receiving that day's
offering price. Otherwise, orders will be filled at the next
determined offering price. Dealers are required to submit orders
promptly. Purchase orders received on a non-business day,
including those for Automatic Investment, will be executed on the
next succeeding business day. The sale of shares will be
suspended (1) during any period when net asset value
determination is suspended, or (2) when the Distributor judges it
is 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.
"What about confirmations and share certificates?"
A statement will be mailed to you confirming each purchase
of Class Y Shares in the Fund. Additionally, your account at the
Agent will be credited in full and fractional shares (rounded to
the nearest 1/1000th of a share). Purchases of Class I Shares
will be confirmed by financial intermediaries. The Fund will not
issue certificates for Class Y Shares or Class I Shares.
"Is there a Distribution Plan or a Services Plan?"
The Fund has adopted a Distribution Plan (the "Plan") under
the Investment Company Act of 1940's Rule 12b-1 in order to:
(i) permit the Fund to finance activities primarily
intended to result in the sale of its shares;
(ii) permit the Manager, out of its own funds, to make
payment for distribution expenses; and
(iii) protect the Fund against any claim that some of the
expenses which it pays or may pay might be considered
to be sales-related and therefore come within the
purview of the Rule.
No payments are made with respect to assets represented by
Class Y Shares.
Under the Plan, the Fund makes payments with respect to
Class I Shares under agreements to certain broker/dealers, or
others who have (i) rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Fund's shares or (ii) assisted in the servicing of
shareholder accounts.
For any fiscal year, payments with respect to Class I Shares
are made 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 can be made only out of the Fund's assets
allocable to the Class I Shares. Because these distribution fees
are paid out of assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more
than paying other types of sales charges.
Shareholder Services Plan for Class I Shares
The Fund's Shareholder Services Plan authorizes it to pay a
service fee under agreements to certain qualified recipients who
have agreed to provide personal services to Class I shareholders
and/or maintain their accounts. For any fiscal year, such fees
may not exceed 0.25 of 1% of the average annual net assets
represented by Class I Shares. Payment is be made only out of the
Fund's assets represented by Class I Shares. No payments are made
with respect to assets represented by Class Y Shares.
"Transfer on Death" Registration (Not Available for Class I
Shares)
If you own Class Y Shares, the Fund generally permits
"transfer on death" ("TOD") registration of shares, so that on
the death of the shareholder the shares are transferred to a
designated beneficiary or beneficiaries. Ask the Agent or your
broker-dealer for the Transfer on Death Registration Request
Form. With it you will receive a copy of the TOD Rules of the
Aquilasm Group of Funds, which specify how the registration
becomes effective and operates. By opening a TOD Account, you
agree to be bound by the TOD Rules. This service is not available
for Class I Shares.
DIVIDENDS AND DISTRIBUTIONS
"How are dividends and distributions determined?"
The Fund pays dividends and other distributions with respect
to each class of shares. The Fund calculates its dividends and
other distributions with respect to each class at the same time
and in the same manner. Net income for dividend purposes includes
all interest income accrued by the Fund since the previous
dividend declaration, less expenses paid or accrued. Net income
also includes any original issue discount, which occurs if the
Fund purchases an obligation for less than its face amount. The
discount from the face amount is treated as additional income
earned over the life of the obligation. As this income varies, so
will the Fund's dividends. There is no fixed dividend rate. It is
expected that most of the Fund's dividends will be comprised of
interest income. The dividends and distributions of each class
can vary due to certain class-specific charges. The Fund will
declare all of its net income 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.
Redeemed shares continue to earn dividends through and
including the earlier of:
1. the day prior to the day when redemption
proceeds are mailed, wired or transferred by
the Automated Clearing House or the Agent or
paid by the Agent to a selected dealer; or
2. the third day the New York Stock Exchange
is open after the day the net asset value of
the redeemed shares was determined.
The Fund's present policy is to pay dividends so they will
be received or credited by approximately the first day of each
month.
"How are dividends and distributions paid?"
Dividends and distributions will automatically be reinvested
in full and fractional shares of the Fund of the same class at
net asset value on the record date for the dividend or
distribution.
If you own or purchase Class Y Shares, you may choose to
have all or any part of the payments for dividends or
distributions paid in cash. You can elect to have the cash
portion of dividends or distributions deposited, without charge,
by electronic funds transfers into your account at a financial
institution, if it is a member of the Automated Clearing House.
You can make any of these elections on the Application, by a
Ready Access Features Form or by a letter to the Agent. Your
election to receive some or all of your dividends and
distributions in cash will be effective as of the next payment of
dividends after it has been received in proper form by the Agent.
It will continue in effect until the Agent receives written
notification of a change.
All arrangements for the payment of dividends and
distributions with respect to Class I Shares, including
reinvestment of dividends, must be made through financial
intermediaries.
All Class Y shareholders, whether their dividends or
distributions are received in cash or reinvested, will receive a
monthly statement indicating the current status of their
investment account with the Fund. Financial Intermediaries
provide their own statements of Class I Shares accounts.
If you do not comply with laws requiring you to furnish
taxpayer identification numbers and report dividends, the Fund
may be required to impose backup withholding at a rate of 31%
upon payment of redemptions to shareholders and on capital gains
distributions (if any) and any other distributions that do not
qualify as "exempt-interest dividends."
TAX INFORMATION
Net investment income includes income from Utah
Double-Exempt Obligations in the portfolio which the Fund
allocates as "exempt-interest dividends." Such dividends are
exempt from regular Federal income tax. The Fund will allocate
"exempt-interest dividends" by applying one designated percentage
to all income dividends it declares during its tax year. It will
normally make this designation in the first month following its
fiscal year end for dividends paid in the prior year.
It is possible that, under certain circumstances, a small
portion of dividends paid by the Fund will be subject to income
taxes. During the Fund's fiscal year ended June 30, 1999, 98.19%
of the Fund's dividends were exempt- interest dividends. For the
calendar year 1998, 0.55% of total dividends paid were taxable.
The percentage of tax-exempt income from any particular dividend
may differ from the percentage of the Fund's tax-exempt income
during the dividend period.
Net capital gains of the Fund, if any, 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 intends to qualify during each fiscal year under
the Internal Revenue Code to pay "exempt-interest dividends" to
its shareholders. "Exempt-interest dividends" 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 Fund will treat as ordinary income in the year received
certain gains on Utah Double-Exempt Obligations it acquired after
April 30, 1993 and sells for less than face or redemption value.
Those gains will be taxable to you as ordinary income, if
distributed.
Capital gains dividends (net long-term gains over net
short-term losses which the Fund distributes and so designates)
are reportable by shareholders as gains from the sale or exchange
of a capital asset held for more than a year. This is the case
whether the shareholder reinvests the distribution in shares of
the Fund or receives it in cash, regardless of the length of time
the investment is held.
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 reduce future capital gains dividends and
amounts taxed to shareholders.
The Fund's gains or losses on sales of Utah Double-Exempt
Obligations will be deemed long- or short-term, depending upon
the length of time the Fund holds these obligations.
You will receive information on the tax status of the Fund's
dividends and distributions annually.
Special Tax Matters
Under the Internal Revenue 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.
If you or your spouse are receiving Social Security or
railroad retirement benefits, a portion of these benefits may
become taxable, if you receive exempt-interest dividends from the
Fund.
If you, or someone related to you, is a "substantial user"
of facilities financed by industrial development or private
activity bonds, you should consult your own tax adviser before
purchasing shares of the Fund.
Interest from all Utah Double-Exempt Obligations is
tax-exempt for purposes of computing the shareholder's regular
tax. However, 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 ("AMT"). Whether or
not that computation will result in a tax will depend on the
entire content of your return. The Fund will not invest more than
20% of its assets in the types of Utah Double-Exempt Obligations
that pay interest subject to AMT. An adjustment required by the
Internal Revenue Code will tend to make it more likely that
corporate shareholders will be subject to AMT. They should
consult their tax advisers.
"What should I know about Utah taxes?"
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.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.
Shareholders of the Fund should consult their tax advisers
about other state and local tax consequences of their investment
in the Fund.
<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
Class Y(2)
Class A(1) Year Year Year
Year Ended June 30, Ended Ended Ended
1999 1998 1997 6/30/99 6/30/98 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year..... $10.24 $9.94 $9.74 $10.24 $9.94 $9.74
Income from Investment
Operations:
Net investment
income............. 0.49 0.52 0.52 0.45 0.53 0.61
Net gain (loss) on
securities (both
realized and
unrealized)......... (0.36) 0.30 0.21 0.32 0.30 0.21
Total from Investment
Operations.......... 0.13 0.82 0.73 0.13 0.83 0.82
Less Distributions:
Dividends from net
investment income... (0.49) (0.52) (0.53) (0.49) (0.53) (0.62)
Total Distributions... (0.49) (0.52) (0.53) (0.49) (0.53) (0.62)
Net Asset Value, End
of Year............... $9.88 $10.24 $9.94 $9.88 $10.24 $9.94
Total Return (not
reflecting sales
charge)(%)............ 1.19 8.41 7.72 1.19 8.52 8.69
Ratios/Supplemental Data
Net Assets, End of Year
($ thousands)........ 47,251 29,013 29,071 5 1,988 41
Ratio of Expenses to
Average Net
Assets (%).......... 0.45 0.34 0.28 0.43 0.37 0.08
Ratio of Net Investment
Income to Average Net
Assets (%).......... 4.57 5.06 5.44 4.45 5.02 5.64
Portfolio Turnover
Rate (%).............. 87.49 11.31 5.09 87.49 11.31 5.09
The expense and net investment income ratios without the effect of the
voluntary waiver of a portion of the management fee and the voluntary
expense reimbursement were:
Ratio of Expenses
to Average Net Assets(%)
1.04 1.30 1.32 0.96 1.10 1.12
Ratio of Net Investment
Income to
Average Net
Assets(%) 3.98 4.10 4.40 3.92 4.29 4.60
The expense ratios after giving effect to the waivers, expense
reimbursement and expense offset for uninvested cash balances were:
Ratio of Expenses to
Average Net Assets(%) 0.38 0.33 0.27 0.34 0.36 0.07
<CAPTION>
Class A(1) Class Y(2)
Year Ended June 30, Period Ended June 30,
1996 1995 1996(3)
<C> <C> <C>
$ 9.59 $ 9.32 $ 9.77
0.54 0.55 0.06
0.15 0.27 (0.03)
0.69 0.82 0.03
(0.54) (0.55) (0.06)
- - -
(0.54) (0.55) (0.06)
$ 9.74 $ 9.59 $ 9.74
7.17 9.09 0.29+
28,881 27,536 0.10
0.20 0.09 0.03+
5.48 5.84 0.61+
11.15 22.92 11.15+
1.29 1.29 0.11+
4.39 4.64 0.53+
0.19 0.08 0.03+
<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 May 21, 1996 through June 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
Note: Effective July 16, 1998, Zions First National Bank became the
Fund's Investment Sub-Adviser, replacing First Security Investment
Management, Inc.
</TABLE>
<PAGE>
APPLICATION FOR TAX-FREE FUND FOR UTAH
FOR CLASS I and Y SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
PFPC Inc.
400 Bellevue Parkway, Wilmington, DE 19809
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(s) 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 Organization. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)_______________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
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 I Shares
-- Class Y Shares
Make check payment to TAX-FREE FUND FOR UTAH
__ Initial Investment $______________ (Minimum $1,000)
B. DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless otherwise
indicated below.
You can have any portion of either type reinvested, with the balance paid
in cash, by indicating a percent below:
Income 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 1B.
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 30, 1998)
(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, PFPC Inc.
(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, PFPC Inc., 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 Trusts, 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>
MANAGER AND FOUNDER
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
Zions First National Bank
One South Main Street
Salt Lake City, Utah 84111
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Gary C. Cornia
William L. Ensign
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Diana P. Herrmann, President
Jerry G. McGrew, Senior Vice President
Kimball L. Young, Senior 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
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
Bank One Trust Company, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG 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
<PAGE>
Back Cover
This Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information about the Fund dated November 1, 1999 (the "SAI") has
been filed with the Securities and Exchange Commission. The SAI
contains information about the Fund and its management not
included in this Prospectus. The SAI is incorporated by reference
in its entirety in this Prospectus. Only when you have read both
this Prospectus and the SAI are all material facts about the Fund
available to you.
You can get additional information about the Fund's
investments in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can get the SAI and the Fund's annual and
semi-annual reports without charge, upon request by calling
1-800-446-8824 (toll-free).
In addition, you can review and copy information about the
Fund (including the SAI) at the Public Reference Room of the SEC
in Washington, D.C. You can get information on the operation of
the SEC's public reference room by calling the SEC at
1-800-SEC-0330. You can get other information about the Fund at
the SEC's Internet site at http://www.sec.gov. You can get copies
of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
+ ++This Prospectus should be read and retained for future
reference
The file number under which the Fund is registered
with the SEC under the
Investment Company Act of 1940 is 811-6239
TABLE OF CONTENTS
The Fund's Objective, Investment Strategies
and Main Risks...................................
Risk/Return Bar Chart and Performance Table .....
Fees and Expenses of the Fund...................
Investment of the Fund's Assets.................
Fund Management.................................
Net Asset Value Per Share........................
Purchases .......................................
Redeeming Your Investment........................
Alternate Purchase Plans.........................
Dividends and Distributions......................
Tax Information..................................
Financial Highlights.............................
Application
TAX-FREE FUND FOR UTAH
[LOGO]
One of The
Aquilasm Group of Funds
A tax-free income investment
PROSPECTUS
To receive a free copy of the Fund's SAI, annual or semi-annual
report, or other information about the fund, or to make
shareholder inquiries call:
the Fund's Shareholder Servicing Agent at
800-446-8824 toll free
or you can write to:
PFPC Inc
400 Bellevue Parkway
Wilmington, DE 19809
For general inquiries and yield information, call 800-882-4937 or
212-697-6666
This Prospectus should be read and retained for future reference
<PAGE>
Aquila
Tax-Free Fund For Utah
380 Madison Avenue Suite 2300
New York, NY 10017
800-882-4937
212-697-6666
Statement
of Additional
Information November 1, 1999
This Statement of Additional Information (the "SAI") is not
a Prospectus. There are two Prospectuses for the Fund dated
November 1, 1999: 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 Shares ("Class Y Shares") and Financial Intermediary Class
Shares ("Class I Shares") of the Fund. References in the SAI to
"the Prospectus" refer to either of these Prospectuses. The SAI
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, PFPC Inc., by writing to it at: 400 Bellevue
Parkway, Wilmington, DE 19809 or by calling at the following
number:
800-872-6735 toll free
or from Aquila Distributors, Inc., the Fund's Distributor, by
writing to it at
380 Madison Avenue, Suite 2300, New York, New York 10017;
or by calling: 800-872-6734 toll free
or 212-697-6666
Financial Statements
The financial statements for the Fund for the year ended
June 30, 1999, which are contained in the Annual Report for that
fiscal year, are hereby incorporated by reference into the SAI.
Those financial statements have been audited by KPMG LLP,
independent auditors, whose report thereon is incorporated herein
by reference. The Annual Report of the Fund for the fiscal year
ended June 30, 1999 can be obtained without charge by calling any
of the toll-free numbers listed above. The Annual Report will be
delivered with the SAI.
TABLE OF CONTENTS
Fund History
Investment Strategies and Risks
Fund Policies
Management of the Fund
Ownership of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Capital Stock
Purchase, Redemption, and Pricing of Shares
Additional Tax Information
Underwriters
Performance
Appendix a
<PAGE>
TAX-FREE FUND FOR UTAH
Statement of Additional Information
FUND HISTORY
The Fund is a Massachusetts business trust formed in 1990.
The Fund is an open-end, non-diversified management
investment company.
INVESTMENT STRATEGIES AND RISKS
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.
Rating agencies consider municipal obligations rated in the
fourth highest credit rating to be of medium quality. Thus, they
may present investment risks which do not exist with more highly
rated obligations. Such obligations possess less attractive
investment characteristics. 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.
See Appendix A to this SAI 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, 1999, in Utah
Double-Exempt Obligations in the various rating categories:
Highest rating (1) . . . . . . . . . . . . . . . . . . . . .83.9%
Second highest rating (2). . . . . . . . . . . . . . . . . . 3.0%
Third highest rating (3) . . . . . . . . . . . . . . . . . . 6.4%
Fourth highest rating (4). . . . . . . . . . . . . . . . . . 0.0%
Not rated: . . . . . . . . . . . . . . . . . . . . . . . . . 6.7%
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.
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, the 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) owns 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 Utah
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.
When-Issued and Delayed Delivery Obligations
The Fund may buy 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 Double-Exempt Obligations. 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, which is marked to market
every business day. On delivery dates for such transactions, the
Fund will meet its commitments by selling the assets held in the
separate account and/or from cash flow.
Determination of the Marketability of Certain Securities
In determining marketability of floating and variable rate
demand notes and participation interests (including municipal
lease/purchase obligations) 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.
FUND POLICIES
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 the 1940 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 and in "Investment Strategies
and Risks" in the SAI); 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.
5. 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.
6. 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" in the
Prospectus); this is investing, not making a loan. The Fund cannot
lend its portfolio securities.
7. 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 Obligation while it has any outstanding borrowings
which exceed 5% of the value of its total assets.
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 which are subject to the Federal alternative minimum
tax.
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.
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.
MANAGEMENT OF THE FUND
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Board of
Trustees has authority over every aspect of the Fund's operations,
including approval of the advisory and sub-advisory agreements and
their annual renewal, the contracts with all other service
providers and payments under the Fund's Distribution Plan and
Shareholder Services Plan.
Trustees and Officers
The Trustees and officers of the Fund, their ages, their
affiliations, if any, with the Manager or the Distributor and their
principal occupations during at least the past five years are set
forth below. None of the Trustees or officers of the Fund is
affiliated with the Sub-Adviser. Mr. Herrmann is an interested
person of the Fund as that term is defined in the Investment
Company Act of 1940 (the "1940 Act") as an officer of the Fund and
a director, officer and shareholder of the Manager and the
Distributor. Ms. Herrmann is an interested person of the Fund as an
officer of the Fund and of the Manager and as a shareholder of the
Distributor. Each is also an interested person as a member of the
immediate family of the other. They are so designated by an
asterisk.
Lacy B. Herrmann* Chairman Founder and Chairman of
380 Madison Avenue of the the Board of Aquila
New York, New York Board of Management Corporation,
10017, Trustees the sponsoring
Age: 70 organization and Manager
or Administrator and/or
Adviser or Sub-Adviser to
the Aquila Money Market
Funds, the Aquila Bond
Funds and the Aquila
Equity Funds, and
Founder, Chairman of the
Board of Trustees and
(currently or until 1998)
President of each since
its establishment,
beginning in 1984;
Director of Aquila
Distributors, Inc.,
distributor of the above
funds, since 1981 and
formerly Vice President
or Secretary, 1981-1998;
President and a Director
of STCM Management
Company, Inc., sponsor
and sub-adviser to CCMT;
Founder and Chairman of
several other money
market funds; Director or
Trustee of OCC Cash
Reserves, Inc. and Quest
For Value Accumulation
Trust, and Director or
Trustee of Oppenheimer
Quest Value Fund, Inc.,
Oppenheimer Quest Global
Value Fund, Inc. and
Oppenheimer 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.
Diana P. Herrmann* Trustee, President and Chief
380 Madison Avenue President Operating Officer of the
New York, New York Manager/Administrator
10017 since 1997, a Director
Age: 41 since 1984, Secretary
since 1986 and previously
its Executive Vice
President, Senior Vice
President or Vice
President, 1986-1997;
President of various
Aquila Bond and
Money-Market Funds since
1998; Assistant Vice
President, Vice
President, Senior Vice
President or Executive
Vice President of Aquila
Money-Market, Bond and
Equity Funds since 1986;
Trustee of a number of
Aquila Money-Market, Bond
and Equity Funds since
1995; Trustee of Reserve
Money-Market Funds since
1999 and Reserve Private
Equity Series since 1998;
Assistant Vice President
and formerly Loan Officer
of European American
Bank, 1981-1986; daughter
of the Fund 's Chairman;
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.
Gary C. Cornia Trustee Professor and Associate
577 East 1090 North Dean of the Marriott
Orem, Utah 84057 School of Management,
Age: 51 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 Planning and
2928 Cortland Place N.W. Architectural
Washington, D.C. 20008 Consultant; Acting Age:
70 Architect of the United
States Capital 1995-1997; Assistant
Architect of the United States
Capital 1980-1995; previously
President and CEO, McLeod Ferrara
Ensign, an international planning
and design firm based in Washington
DC; Fellow and former Director of
the American Institute of
Architects; District of Columbia
Zoning Commissioner 1989-1997;
member, U.S. Capitol Police Board
1995-1997, National Advisory Council
on Historic Preservation 1989-1997,
National Capital Memorial Commission
1989-1997; Acting Director of the
U.S. Botanic Garden 1995-1997;
Trustee, National Building Museum
1995-1997; Trustee of Tax-Free Trust
of Arizona since 1986 and of
Tax-Free Fund For Utah since 1991;
Trustee of Oxford Cash Management
Fund, 1983-1989.
Anne J. Mills Trustee Vice President for
167 Glengarry Place Business Affairs of
Castle Pines Village, Ottawa University since
Castle Rock, Colorado 80104 1992; Director of
Age: 60 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,
1994-1997; Director of
the American Baptist
Foundation 1985-1986 and
since 1998; Trustee of
Brown University; Trustee
of Churchill Cash
Reserves Trust since
1985, of Tax-Free Trust
of Arizona since 1986, of
Churchill Tax-Free Fund
of Kentucky, Tax-Free
Fund of Colorado and
Capital Cash Management
Trust since 1987 and of
Tax-Free Fund For Utah
since 1994.
R. Thayne Robson Trustee Director of the Bureau of
3548 Westwood Drive, Economic and Business
Salt Lake City, Utah 84109 Research, Professor of
Age: 70 Management, and
Research Professor of
Economics at the
University of Utah since
1978; Trustee of Tax-Free
Fund for Utah since 1992
and 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 Senior Vice President of Aquila
5331 Fayette Street, President Distributors, Inc. since
Houston, TX 77056 1998, Registered
Age: 55 Principal since 1993,
Senior Vice President,
1997-1998 and Vice
President, 1993-1997;
Senior Vice President of
Aquila Rocky Mountain
Equity Fund since 1996;
Senior Vice President of
Churchill Tax-Free Fund
of Kentucky since 1994,
and of Tax-Free Fund of
Colorado and Tax-Free
Fund For Utah since 1997;
Vice President of
Churchill Cash Reserves
Trust since 1995;
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,
1993-1997; 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;
Director-at Large,
Houston Alliance for the
Mentally Ill (AMI), since
1998.
Kimball L. Young, Senior Senior Vice President of
2049 Herbert Avenue, Vice Co-Founder of Lewis
Salt Lake City, Utah President Young Robertson & 84108
Age: 52 Burningham,Inc., an NASD
licensed broker dealer
providing public finance
services to Utah local
governments 1995-present.
Senior Vice President of
Tax-Free Trust of Arizona
and Tax-Free Fund For
Utah. Formerly Senior
Vice President-Public
Finance, Kemper
Securities Inc., Salt
Lake City, Utah,
1979-1984.
Stephen J. Caridi Assistant Vice Vice President of the
380 Madison Avenue President Distributor since 1995,
New York 10017 Assistant Vice
Age: 38 President, 1988-1995,
Marketing Associate,
1986-1988; Vice President
of Hawaiian Tax-Free
Trust since 1998; Senior
Vice President of
Narragansett Insured
Tax-Free Income Fund
since 1998, Vice
President since 1996;
Assistant Vice President
of Tax-Free Fund For Utah
since 1993; Mutual Funds
Coordinator of Prudential
Bache Securities,
1984-1986; Account
Representative of Astoria
Federal Savings and Loan
Association, 1979-1984.
Rose F. Marotta Chief Chief Financial Officer
380 Madison Avenue, Financial of the Aquila Money-
New York, New York Officer Market, Bond and Equity
10017 Funds since 1991 and
Age: 75 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 Manager since 1984
and of the Distributor
since 1985.
Richard F. West Treasurer Treasurer of the Aquila
380 Madison Avenue Money-Market, Bond
New York, New York 10017 and Equity Funds and
Age: 63 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 Partner of Hollyer Brady
551 Fifth Avenue Smith Troxell Barrett
New York, New York 10176 Rockett Hines & Mone
Age: 59 LLP, attorneys, since
1989 and counsel,
1987-1989; Secretary of
the Aquila Money-Market,
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 Vice Assistant Secretary of
380 Madison Avenue President, the Aquila Money-Market,
New York, New York Assistant Bond and Equity Funds
10017 Secretary since 1995 and Vice
Age: 59 President of the Aquila
Money-Market Funds since
1990; Vice President of
the Manager 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.
The Fund does not currently pay fees to any of the Fund's
officers or to Trustees affiliated with the Manager or the
Sub-Adviser. For its fiscal year ended June 30, 1999 the Fund paid
a total of $20,971 in compensation and reimbursement of expenses to
the Trustees. No other compensation or remuneration of any type,
direct or contingent, was paid by the Fund to its 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 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.
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Fund Group serves
Gary C. Cornia $3,908.00 $ 3,908.00 1
William L. Ensign 2,892.50 13,408.56 2
R. Thayne Robson 3,081.40 6,000.00 2
Anne J. Mills 2,409.97 34,572.69 6
OWNERSHIP OF SECURITIES
Of the shares of the Fund outstanding on July 26, 1999
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Dr.,
Jacksonville, FL held of record 621,406 Class A Shares (12.9% of
the class) and 53,602 Class C Shares (31.8% of the class); BCH
Securities Inc., 2005 Market Street, Philadelphia, PA held of
record 482,666 Class A Shares (10.0% of the class); Zions First
National Bank, P.O. Box 30880, Salt Lake City, UT held of record
1,279,979 Class A Shares in 2 accounts (26.1% of the class);
Donaldson Lufkin Jenrette Securities Corporation, Inc., P.O. Box
2052, Jersey City, NJ held of record 42,516 Class C Shares in 3
accounts (25.2% of the class); and Smith & Co, a nominee for First
Security Bank of Utah held of record 451,494 Class Y Shares (97.4%
of the class). The Fund's management is not aware of any other
person who beneficially owned 5% or more of its outstanding shares
on such date. On the basis of information received from the record
owners listed above, the Fund's management believes that all of the
shares indicated are held for the benefit of clients.
Management Ownership
As of the date of this SAI, all of the Trustees and officers
as a group owned less than 1% of its outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Information about the Sub-Adviser, the Manager and the
Distributor
Management Fees
During the fiscal years ended June 30, 1999, 1998 and 1997
the Fund incurred Management fees as follows. During the periods
indicated, the following management arrangements were in effect:
July 16, 1998 through June 30, 1999: current arrangements.
October 31, 1997 through July 16, 1998: current arrangements,
except former sub-adviser was sub-adviser.
Prior to October 31, 1997, the Manager was the administrator and
the former sub-adviser was the adviser under agreements then in
effect.
Manager Sub-Adviser
1999 $252,515(1)
1998 $26,613(2) $22,670(2)
$105,089(3)
1997 $79,323 (4) $67,588(4)
(1) $200,822 was waived; in addition, the Manager reimbursed
expenses in the amount of $131,525.
(2) Accrued under former administration and advisory agreements
in effect until October 31, 1997, to the manager and former
adviser, of which all and $16,756, respectively, was waived.
(3) Accrued under Advisory and Administration agreement, of which
$92,478 was waived. In addition, the Manager reimbursed expenses
in the amount of $157,610.
(4) Accrued to the Manager and former adviser under
administration and advisory agreements then in effect, of which
$58,716 and $49,962, respectively was waived. In addition the
Manager reimbursed expenses in the amount of $199,119.
Aquila Distributors, Inc. 380 Madison Avenue, Suite 2300,
New York, NY 10017 is the Fund's Distributer. The Distributor
currently handles the distribution of the shares of fourteen
funds (five money market funds, seven tax-free municipal bond
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.
The shares of the Distributor are owned 72% by Mr. Herrmann
and other members of his immediate family, 24% by Diana P.
Herrmann and the balance by an officer of the Distributor.
The Advisory and 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 ("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 also 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.
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 the agreement 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
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.
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 1940 Act) of
the voting securities of the Fund outstanding and entitled to
vote. The specific portions of the Advisory and Administration
Agreement which relate to providing investment advisory services
will automatically terminate in the event of the assignment (as
defined in the 1940 Act) of the Advisory and Administration
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 0.26 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.
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 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, 1999, 1998 and 1997,
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 became effective on May 1, 1998
and provides that it shall, unless terminated as therein
provided, continue in effect until the June 30 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.
Glass-Steagall Act
Federal banking laws and regulations presently prohibit a
national bank or any affiliate thereof from sponsoring,
organizing or controlling a registered, open-end investment
company continuously engaged in the issuance of its shares, and
generally from underwriting, selling or distributing securities,
such as shares of the Fund.
The Sub-Adviser is a national bank and is an affiliate of a
bank holding company. Therefore, it is subject to applicable
federal banking laws and regulations. The Sub-Adviser has been
advised that the Sub-Adviser may perform the advisory services
for the Fund required by the Sub-Advisory Agreement, without
violating federal banking laws and regulations. Moreover, it has
been advised that changes in federal banking laws and regulations
related to the permissible activities of national banks,
subsidiaries of national banks, and national banks and their
subsidiaries that are affiliates of a bank holding company, as
well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations,
could prevent the Sub-Adviser from continuing to serve as
investment sub-adviser to the Fund or could restrict the services
which the Sub-Adviser is permitted to perform for the Fund.
In the event that the Sub-Adviser is prohibited from acting
as the Fund's investment adviser, it is probable that the Board
of Trustees of the Fund would either recommend to the
shareholders the selection of another qualified adviser or, if
that course of action appeared impractical, that the Fund be
liquidated.
Underwriting Commissions
During the fiscal years ended June 30, 1999, 1998 and 1997,
the aggregate dollar amount of sales charges on sales of shares
in the Fund was $134,020, $98,708 and $121,809, respectively, and
the amount retained by the Distributor was $11,063, $6,762 and
$1,637, respectively.
In connection with sales of Class A Shares, the Distributor
pays a portion of the sales charge on such shares to dealers in
the form of discounts and to brokers in the form of agency
commissions (together, "Commissions"), in amounts that vary with
the size of the sales charge as follows:
Sales Charge as
Percentage Commissions
of Public as Percentage
Offering of Offering
Price Price
4.00% 3.00%
3.75% 3.00%
3.50% 2.75%
3.25% 2.75%
3.00% 2.50%
2.50% 2.25%
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 SAI, most of the outstanding shares of
the Fund would be considered Qualified Holdings of various
broker-dealers unaffiliated with the Manager, Sub-Adviser or
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 Fund's Board of
Trustees, 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) as to 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 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 Manager,
Sub-Adviser or 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 1940 Act, of the Fund,
Manager, Sub-Adviser or 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 April 30 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 April 1, 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 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 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 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 Manager,
Sub-Adviser or 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 1940 Act, of the Fund,
Manager, Sub-Adviser or 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 therein provided,
continue in effect, until the April 30 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 April 1, 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 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. 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
Manager, Sub-Adviser or 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, Manager, Sub-Adviser or 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 April 30 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 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 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 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 (i) their
agreements with the Distributor with respect to payments under
the Fund's Distribution Plan in effect prior to April 1, 1996 or
(ii) Class I Plan Agreements entered into thereafter.
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 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 therein
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.
Payments Under the Plan
During the fiscal years ended June 30, 1999, 1998 and 1997
payments were made only under Part I and Part II of the Plan. All
payments were to Qualified Recipients and were made were for
compensation. During those periods, no payments were made under
Part III or Part IV of the Plan.
Payments to Qualified Recipients
During the fiscal years ended June 30, 1999, 1998 and 1997,
$96,628, $58,192 and $58,706, respectively, were paid under Part
I of the Plan to Qualified Recipients. Of those amounts, $2,004,
$1,871 and $1,749, respectively, were paid to the Distributor.
All of such payments were for compensation.
During the Fund's fiscal years ended June 30, 1999, 1998 and
1997, $13,032, $6,167 and $119, respectively, were paid to
Qualified Recipients under Part II of the Plan with respect to
the Fund's Class C Shares, of which $8,116, $1,819 and $119,
respectively, was retained by the Distributor. All of such
payments were for compensation. Payments with respect to Class C
Shares during the first year after purchase are paid to the
Distributor and thereafter to other Qualified Recipients.
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).
Provisions for Level-Payment Class Shares (Part I)
As used in Part I 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 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. "Manager" 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. Service Fees with respect to Class C Shares
will be paid to the Distributor. During the fiscal years ended
June 30, 1999, 1998 and 1997, $4,344, $2,056 and $40,
respectively, of Service Fees were paid to Qualified Recipients
with respect to the Fund's Class C Shares. All of such payments
were for compensation.
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.
"Manager" 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. No Class I Shares
were outstanding during the year ended June 30, 1999.
General Provisions
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 1940 Act, of the Fund, Manager, Sub-Adviser or
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 1940 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.
Transfer Agent, Custodian and Auditors
The Fund's Shareholder Servicing Agent (transfer agent) is
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
The Fund's Custodian, Bank One Trust Company, N.A., 100 East
Broad Street, Columbus, Ohio 43271, is responsible for holding
the Fund's assets.
The Fund's auditor, KPMG LLP, 345 Park Avenue, New York,
New York, 10154, performs an annual audit of the Fund's financial
statements.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokerage allocation and other practices relating to
purchases and sales of the Fund's securities are set forth in the
description of the Sub-Advisory Agreement. It provides that 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.
CAPITAL STOCK
The Fund has four classes of shares.
* 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. 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.
* 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. 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. 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.
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 Aquila Distributors, Inc. 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.
The Fund's four classes of shares differ 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 four 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 participation in the Distribution Plan and
Shareholder Services Plan and has exclusive voting rights with
respect to such participation.
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, whether or not affecting the rights of the
shareholders, 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 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.
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").
Shares are fully paid and non-assessable, except as set forth in
the next paragraph; the holders of shares have no pre-emptive or
conversion rights, except that Class C Shares automatically
convert to Class A Shares after being held for six years.
The Fund is an entity of the type commonly known as a
"Massachusetts business trust." 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 does, however,
contain an express disclaimer of shareholder liability for acts
or obligations of the Fund. 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 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.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
In addition to information about purchase, redemption and
pricing of shares set forth in the Prospectus, the Fund provides
additional services and information.
Sales Charges for Purchases of $1 Million or More of Class A
Shares
You will not pay a sales charge at the time of purchase when
you purchase "CDSC Class A Shares." CDSC Class A Shares are Class
A Shares issued under the following circumstances:
(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 to a single purchaser in
a single purchase when the value of the purchase,
together with the value of the purchaser's other CDSC
Class A Shares and Class A Shares on which a sales
charge has been paid, equals or exceeds $1 million:
See "Special Dealer Arrangements" for other circumstances
under which Class A Shares are considered CDSC Class A Shares.
CDSC Class A Shares do not include: (i)Class A Shares purchased
without a sales charge as described under "General" below and
(ii) Class A Shares purchased in transactions of less than $1
million when certain special dealer arrangements are not in
effect under "Certain Investment Companies" set forth under
"Reduced Sales Charges," below.
Broker/Dealer Compensation - Class A Shares
Upon notice to all selected dealers, the Distributor may
distribute up to the full amount of the applicable sales charge
to broker/dealers. Under the Securities Act of 1933,
broker/dealers may be deemed to be underwriters during periods
when they receive all, or substantially all, of the sales charge.
Redemption of CDSC Class A Shares
If you redeem all or part of your CDSC Class A Shares during
the four years after you purchase them, you must pay a special
contingent deferred sales charge upon redemption.
You will pay 1% of the Redemption Value if you redeem within
the first two years after purchase, and 0.50 of 1% of the
Redemption Value if you redeem within the third or fourth year.
This charge is based on the "Redemption Value" of your
shares which is the lesser of: (i) the net asset value when you
purchased the CDSC Class A Shares you are redeeming; or (ii) the
net asset value at the time of your redemption.
This special charge also applies to CDSC Class A Shares
purchased without a sales charge pursuant to a Letter of Intent
(see "Reduced Sales Charges for Certain Purchases of Class A
Shares"). This special charge will not apply to shares acquired
through the reinvestment of dividends or distributions on CDSC
Class A Shares or to CDSC Class A Shares held for longer than
four years. When redeeming shares, the Agent will redeem the CDSC
Class A Shares held the longest, unless otherwise instructed. If
you own both CDSC and non-CDSC Class A Shares, the latter will be
redeemed first.
The Fund will treat all CDSC Class A Shares purchases made
during a calendar month as if they were made on the first
business day of that month at the average cost of all purchases
made during that month. Therefore, the four-year holding period
will end on the first business day of the 48th calendar month
after the date of those purchases. Accordingly, the holding
period may, in fact, be one month less than the full 48 depending
on when your actual purchase was made. If you exchange your CDSC
Class A Shares for shares of an Aquila money-market fund (see
"Exchange Privilege" in the Additional Statement), running of the
48-month holding period for those exchanged shares will be
suspended.
Broker/Dealer Compensation - CDSC Class A Shares
The Distributor currently intends to pay any dealer executing a
purchase of CDSC Class A Shares as follows:
Amount of Purchase Amount Distributed
to
Broker/Dealer as a %
of Purchase Price
$1 millon but less than $2.5 million 1%
$2.5 million but less than $5 million 0.50 of 1%
$5 million or more 0.25 of 1%
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation
"Single Purchasers" may qualify for a reduced sales charge
in accordance with the above schedule when making subsequent
purchases of Class A Shares. A reduced sales charge applies if
the cumulative value (based on purchase cost or current net asset
value, whichever is higher) of Class A Shares previously
purchased with a sales charge, together with Class A Shares of
your subsequent purchase, also with a sales charge, amounts to
$25,000 or more.
Letters of Intent
"Single Purchasers" may also qualify for reduced sales
charges, in accordance with the above schedule, after a written
Letter of Intent (included in the Application) is received by the
Distributor. The Letter of Intent confirms that you intend to
purchase, within a thirteen month period, Class A Shares of the
Fund through a single selected dealer or the Distributor. Class A
Shares of the Fund which you previously purchased within 90 days
prior to the Distributor's receipt of your Letter of Intent and
which you still own may also be included in determining the
applicable reduction. For more information, including escrow
provisions, see Letter of Intent provisions of the Application.
General
Class A Shares may be purchased without a sales charge by:
* the Fund's Trustees and officers,
* the directors, officers and certain employees, retired
employees and representatives of the Adviser,
Administrator, Distributor and their parents and/or
affiliates,
* selected dealers and brokers and their officers and
employees,
* certain persons connected with firms providing legal,
advertising or public relations assistance,
* certain family members of, and plans for the benefit
of, the foregoing,
* and plans for the benefit of trust or similar clients
of banking institutions over which these institutions
have full investment authority, if the Distributor has
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. Since
there may be tax consequences of these purchases, your tax
advisor should be consulted.
Class A Shares may also be issued without a sales charge 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.
A qualified group is 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
(i) satisfies uniform criteria which enable the Distributor
to realize economies of scale in its costs of
distributing shares;
(ii) 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
(iii) complies with the conditions of purchase that make up
an agreement between the Fund and the group,
representative or broker or dealer.
At the time of purchase, the Distributor must receive
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 without sales
charge from proceeds of a redemption, made within 120 days prior
to such purchase, of shares of an investment company (not a
member of the Aquilasm Group of Funds) on which a sales charge,
including a contingent deferred sales charge, has been paid.
Additional information is available from the Distributor.
To qualify, follow these special procedures:
1. Send a completed Application (included with the
Prospectus) and payment for the shares to be purchased
directly to the Distributor, Aquila Distributors, Inc.,
380 Madison Avenue, Suite 2300, New York, NY
10017-2513. Do not send this material to the address
indicated on the Application.
2. Your completed Application must be accompanied by
evidence satisfactory to the Distributor that you, as
the prospective shareholder, have 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. 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 from the proceeds of a
redemption of the shares of an investment company (not a member
of the Aquilasm Group of Funds), up to 1% of the proceeds. The
shareholder, however, will not be subject to any sales charge.
These arrangements will be in effect through October 31, 1999,
unless extended or earlier terminated by a supplement to the
SAI.
Dealer payments will be made in up to 4 payments of 0.25 of
1% of the proceeds over a four-year period. The first payment
will be made subsequent to receipt of the proper documentation
detailed above. Future payments, over the remaining years, will
be made at the end of the quarter of the anniversary month that
the purchase of Class A Shares took place, with respect to any
part of the investment that remains in the Fund during the entire
time period. No payments will be made with respect to any shares
redeemed during the four-year period.
Additional Compensation for Broker/Dealers
The Distributor may compensate broker/dealers, above the
normal sales commissions, in connection with sales of any class
of shares. However, broker/dealers may receive levels of
compensation which differ as between classes of share sold.
The Distributor, not the Fund, will pay these additional
expenses. Therefore, the price you pay for shares and the amount
that the Fund receives from your payment will not be affected.
Additional compensation may include full or partial payment
for:
* advertising of the Fund's shares;
* payment of travel expenses, including lodging, for
attendance at sales seminars by qualifying registered
representatives; and/or
* other prizes or financial assistance to broker/dealers
conducting their own seminars or conferences.
Such compensation may be limited to broker/dealers whose
representatives have sold or are expected to sell significant
amounts of the Fund's shares. However, broker/dealers may not use
sales of the Fund's shares to qualify for additional compensation
to the extent such may be prohibited by the laws of any state or
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. 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.
Automatic Withdrawal Plan
You may establish an 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. The Automatic Withdrawal Plan
is not available for Class C Shares or Class I 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.
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. 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.
Share Certificates
You may obtain Share certificates for full Class A Shares
only if you make a written request to the Agent. All share
certificates previously issued by the Fund represent Class A
Shares. If you lose the certificates, you may incur delay and
expense when redeeming shares or having the certificates
reissued.
Share certificates will not be issued:
* for fractional Class A Shares;
* if you have selected Automatic Investment or Telephone
Investment for Class A Shares.
* if you have selected Expedited Redemption. However, if
you specifically request, Class A Share certificates
will be issued with a concurrent automatic suspension
of Expedited Redemption on your account.
Share certificates will not be issued for Class C Shares,
Class Y Shares or Class I Shares.
Reinvestment privilege
If you reinvest proceeds of redemption within 120 days of a
redemption you will not have to pay any additional sales charge
on the reinvestment. You must reinvest in the same class as the
shares redeemed. You may exercise this privilege only once a
year, unless otherwise approved by the Distributor.
The Distributor will refund to you any CDSC deducted at the
time of redemption by adding it to the amount of your
reinvestment. The Class C or CDSC Class A Shares purchased upon
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.
Reinvestment will not alter the tax consequences of your
original redemption.
Exchange Privilege
There is an exchange privilege as set forth below among this
Fund, certain tax-free municipal bond funds and equity funds
(together with the Fund, 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 Manager or Administrator
and Distributor as the . All exchanges are subject to certain
conditions described below. As of the date of the Prospectus, the
Aquila-sponsored Bond or Equity Funds are this Fund, Aquila Rocky
Mountain Equity Fund, Aquila Cascadia Equity Fund, Hawaiian
Tax-Free Trust, Tax-Free Trust of Arizona, Churchill Tax-Free
Fund of Kentucky, Tax-Free Fund of Colorado and Narragansett
Insured Tax-Free Income Fund; the Aquila Money-Market Funds are
Capital Cash Management , Pacific Capital Cash Assets Trust
(Original Shares), Pacific Capital Tax-Free Cash Assets Trust
(Original Shares), Pacific Capital U.S. Government Securities
Cash Assets Trust (Original Shares) and Churchill Cash Reserves
Trust.
Generally, you can exchange shares of a given class of a
Bond or Equity Funds 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. 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. However, the following important
information should be noted:
(1) CDSCs Upon Redemptions of Shares Acquired Through
Exchanges. If you exchange shares subject to a CDSC, 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.
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 of 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
Fund 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 Fund 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
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 SAI); 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. Government Securities Cash Assets Trust
(which invests in U.S. Government 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.
Conversion of Class C Shares
Conversion of Class C Shares into Class A Shares 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 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.
"Transfer on Death" Registration (Not Available for Class I
Shares)
Each of the funds in the Aquilasm Group of Funds now permits
registration of its shares in beneficiary form, subject to the
funds' rules governing Transfer on Death ("TOD") registration, if
the investor resides in a state that has adopted the Uniform
Transfer on Death Security Registration Act (a "TOD State"; for
these purposes, Missouri is deemed to be a TOD State). This form
of registration allows you to provide that, on your death, your
shares are to be transferred to the one or more persons (to a
maximum of three) that you specify as beneficiaries. To register
shares of the Fund in TOD form, complete the special TOD
Registration Request Form and review the Rules Governing TOD
Registration; both are available from the Agent. The Rules, which
are subject to amendment upon 60 days' notice to TOD account
owners, contain important information regarding TOD accounts with
the Fund; by opening such an account you agree to be bound by
them, and failure to comply with them may result in your shares'
not being transferred to your designated beneficiaries. If you
open a TOD account with the Fund that is otherwise acceptable
but, for whatever reason, neither the Fund nor the Agent receives
a properly completed TOD Registration Request Form from you prior
to your death, the Fund reserves the right not to honor your TOD
designation, in which case your account will become part of your
estate.
You are eligible for TOD registration only if, and as long
as, you reside in a TOD State. If you open a TOD account and your
account address indicates that you do not reside in a TOD State,
your TOD registration will be ineffective and the Fund may, in
its discretion, either open the account as a regular (non-TOD)
account or redeem your shares. Such a redemption may result in a
loss to you and may have tax consequences. Similarly, if you open
a TOD account while residing in a TOD State and later move to a
non-TOD State, your TOD registration will no longer be effective.
In both cases, should you die while residing in a non-TOD State
the Fund reserves the right not to honor your TOD designation. At
the date of this SAI, most states are TOD States.
Computation of Net Asset Value
The net asset value of the shares of each of the Fund's
classes 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 its 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. 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 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, the 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 Class A 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.
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.
ADDITIONAL TAX INFORMATION
Certain Exchanges
If you incur a sales commission on a purchase of shares of
one mutual fund (the original fund) and then sell such shares 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.
Tax Status of the Fund
During its last fiscal year, the Fund qualified as a
"regulated investment company" under the Internal Revenue Code
(the "Code") and intends to continue such qualification. A
regulated investment company is not liable for federal income
taxes on amounts paid by it as dividends and distributions.
The Code, however, contains a number of complex qualifying
tests. Therefore, it is possible, although not likely, that the
Fund might not meet one or more of these tests in any particular
year. If the Fund fails to qualify, it would be treated for tax
purposes as an ordinary corporation. As a consequence, it would
receive no tax deduction for payments made to shareholders and
would be unable to pay dividends and distributions which would
qualify as "exempt-interest dividends" or "capital gains
dividends."
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. For redemptions made after January
1, 1998, your gain or loss will be long-term if you held the
redeemed shares for over one year and short-term if for a year or
less. Long-term capital gains are currently taxed at a maximum
rate of 20% 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
When Class C Shares automatically convert to Class A Shares,
approximately six years after purchase, you will recognize no
gain or loss. Your adjusted tax basis in the Class A Shares you
receive upon conversion will equal your adjusted tax basis in the
Class C Shares you held immediately before conversion. Your
holding period for the Class A Shares you receive will include
the period you held the converted Class C Shares.
UNDERWRITERS
Aquila Distributors, Inc. acts as the Fund's principal
underwriter in the continuous public offering of all of the
Fund's classes of shares. The Distributor is not obligated to
sell a specific number of shares. 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.
(1) (2) (3) (4) (5)
Name of Net Under- Compensation Brokerage Other
Principal writing on Redemptions Commissions Compen-
Underwriter Discounts and sation
and Repurchases
Commissions
Aquila $156,496 None None None(1)
Distributors
Inc.
(1) Amounts paid to the Distributor under the Fund's Distribution
Plan described in the Prospectus are for compensation.
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 classes of shares.
Each of these and other methods that may be used by the Fund are
described in the following material. Prior to April 6, 1996, the
Fund had outstanding only one class of shares which are currently
designated "Class A Shares." On that date the Fund began to offer
shares of two other classes, Class C Shares and Class Y 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 January 31, 1998
and none were outstanding during the periods indicated.
Total Return
Average annual total return is determined by finding the
average annual compounded rates of return over 1-, 5- and 10 year
periods and a period since the inception of the operations of the
Fund (on July 22, 1992) that would equate an initial hypothetical
$1,000 investment in shares of each of the Fund's 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
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. Sales
charges at the time of purchase are payable only on purchases of
Class A Shares of the Fund.
Average Annual Compounded Rates of Return:
Class A Shares Class C Shares Class Y Shares
One Year -2.88% -0.82% 1.19%
Five Years 5.82% N/A N/A
Since
inception on
July 22, 1992 5.40% 4.83%(1) 6.16%(1)
(1) Period from May 21, 1996 (inception of class) through June
30, 1999.
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-, 5- and
10-year periods 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 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
Class A Shares Class C Shares Class Y Shares
One Year -2.88% -0.82% 1.19%
Five Years 32.72% N/A N/A
Since
inception on
July 22, 1992 44.01% 15.78%(1) 20.43%(1)
(1) Period from May 21, 1996 (inception of class) through June
30, 1999.
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 classes of shares 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 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 9.0% and 46.12%, 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, 1999 (the date of the
Fund's most recent audited financial statements):
Class A Shares Class C Shares Class Y Shares
Yield 4.73% 3.92% 5.01%
Taxable
Equivalent
Yield ****% ****% ****%
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.
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.
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.
TAX-FREE FUND FOR UTAH
PART C: OTHER INFORMATION
(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, 1999
Statement of Assets and Liabilities as of
June 30, 1999
Statement of Operations for the period ended
June 30, 1999
Statement of Changes in Net Assets for the
periods ended June 30, 1999 and 1998
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors
ITEM 23 Exhibits:
(a) Declaration of Trust (i)
(b) By-laws (v)
(c) Instruments defining rights of shareholders
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. 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"). 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, except that Class C Shares automatically
convert to Class A Shares after being held for six
years.
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.
(d) (i) Advisory and Administration Agreement (iii)
(d) (ii) Sub-Advisory Agreement (iv)
(e) (i) Distribution Agreement (v)
(e) (ii) Sales Agreement for Brokerage Firms (iii)
(e) (iii) Sales Agreement for Financial
Institutions (iii)
(e) (iv) Sales Agreement for Investment
Advisers (iii)
(e) (v) Shareholder Services Agreement (iii)
(f) Not applicable
(g) Custody Agreement (iii)
(h) (a) Transfer Agency Agreement (iii)
(i) (i) Opinion of Fund's counsel (iii)
(ii) Consent of Counsel (v)
(j) Not Applicable
(k) Not applicable
(l) Not Applicable
(m) (a) Distribution Plan (iii)
(m) (b) Shareholder Services Plan (iii)
(n) 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 as an exhibit to Registrant's Post-Effective
Amendment No. 8 dated October 29, 1997 and
incorporated herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 9 dated October 28, 1998 and
incorporated herein by reference.
(v) Filed herewith.
ITEM 24. Persons Controlled By Or Under Common Control With
Registrant
None
ITEM 25. 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 Advisers
The business and other connections of Aquila Management
Corporation, the Fund's Investment Adviser and Administrator
is set forth in the prospectus (Part A); the business and
other connections of Mr. Lacy B. Herrmann, its controlling
shareholder are set forth in the Statement of Additional
Information (Part B). 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.
The Fund's Sub-Adviser was founded in 1873 and is a
wholly-owned subsidiary of Zions Bancorporation, a
Utah-headquartered financial services company with
consolidated assets of $10.6 billion as of March 31, 1998.
In addition to advising the Fund, the Sub-Adviser's advisory
experience includes investment management services to
affiliate banks, corporate foundations and profit-sharing
trusts, retirement funds, charitable foundations, endowments
and individual investors throughout the United States. While
the Sub-Adviser is exempt as a national bank from
registration as investment adviser under the Investment
Advisers Act of 1940, as amended, its wholly-owned
subsidiary, Zions Investment Securities, Inc. ("ZISI"), a
member firm of NASD/SIPC, is so registered. The management
of the Sub-Adviser's advisory activities and ZISI are the
same. The Sub-Adviser and its parent, Zions Bancorporation,
have offices at One South Main Street, Salt Lake City, Utah
84111. On June 7, 1999 Zions Bancorp, parent corporation of
the Fund's Sub-Adviser, announced that it would merge with
First Security Corporation in a transaction expected to take
place in the 4th quarter of 1999. The transaction is subject
to regulatory approval.
ITEM 27. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal underwriter to
the following Funds, including the Registrant: 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. Government Securities Cash
Assets Trust, Prime Cash Fund, Tax-Free Fund For Utah,
Tax-Free Fund of Colorado, Tax-Free Trust of Arizona, Aquila
Rocky Mountain Equity Fund, Aquila Cascadia Equity Fund and
Tax-Free Trust of Oregon.
(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 28. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the Manager, the Sub-Adviser, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectus
and Statement of Additional Information.
ITEM 29. Management Services
Not applicable.
ITEM 30. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(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>
Independent Auditors Consent
To the Board of Trustees and Shareholders of
Tax-Free Fund For Utah:
We consent to the use of our report, dated July 27, 1999
incorporated herein by reference, and to the references to our
firm under the headings "Financial Highlights" in the Prospectus
and "Financial Statements" and " Transfer Agent, Custodian and
Auditors" in the Statement of Additional Information.
New York, New York KPMG LLP
October 26, 1999 /s/KPMG 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 28th day of October, 1999.
TAX-FREE FUND FOR UTAH
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann,
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 10/28/99
______________________ Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Diana P. Herrmann 10/28/99
______________________ Trustee ___________
Diana P. Herrmann
/s/Gary C. Cornia 10/28/99
______________________ Trustee ___________
Gary C. Cornia
/s/William L. Ensign 10/28/99
______________________ Trustee ___________
William L. Ensign
/s/Anne J. Mills 10/28/99
______________________ Trustee ___________
Anne J. Mills
/s/R. Thayne Robson 10/28/99
______________________ Trustee ___________
R. Thayne Robson
/s/Rose F. Marotta 10/28/99
______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
TAX-FREE FUND FOR UTAH
EXHIBIT INDEX
Number Name
(b) By-Laws
(e) (i) Distribution Agreement
(i) (ii) Consent of Counsel to the Fund
Correspondence
Dated: October 12, 1998
TAX-FREE FUND FOR UTAH
BY-LAWS
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the
Shareholders (which term as used herein shall, together with all
other terms defined in the Declaration of Trust, have the same
meaning as in the Declaration of Trust) shall be held at the
principal office of the Fund or at such other place as may from
time to time be designated by the Board of Trustees and stated in
the notice of meeting.
Section 1A. Shareholder Voting. At any meeting of
Shareholders, Shareholders are entitled to one (1) vote for each
dollar of net asset value (determined as of the record date for
the meeting) per Share held (and fractional votes for fractional
dollar amounts.)
Section 2. Annual Meeting. The annual meeting of the
Shareholders of the Fund shall be held on such date and at such
time as may be determined by the Board of Trustees and as shall
be designated in the notice of meeting for the purpose of
electing Trustees until the next annual meeting and for the
transaction of such other business as may properly be brought
before the meeting.
Section 3. Special or Extraordinary Meetings. Special or
extraordinary meetings of Shareholders for any purpose or
purposes may be called by the Chairman of the Board of Trustees,
if any, or by the President or by the Board of Trustees and shall
be called by the Secretary upon receipt of the request in writing
signed by holders of Shares representing not less than one third
of the votes eligible to be cast thereat. Such request shall
state the purpose or purposes of the proposed meeting.
Section 4. Notice of Meetings of Shareholders. Not less
than ten days' and not more than ninety days' written or printed
notice of every meeting of Shareholders, stating the time and
place thereof (and the general nature of the business proposed to
be transacted at any special or extraordinary meeting), shall be
given to each Shareholder entitled to vote thereat by leaving the
same with him or at his residence or usual place of business or
by mailing it, postage prepaid and addressed to him at his
address as it appears upon the books of the Fund.
No notice of the time, place or purpose of any meeting of
Shareholders need be given to any Shareholder who attends in
person or by proxy or to any Shareholder who, in writing executed
and filed with the records of the meeting, either before or after
the holding thereof, waives such notice.
Section 5. Record Dates. The Board of Trustees may fix, in
advance, a date, not exceeding ninety days and not less than ten
days preceding the date of any meeting of Shareholders, and not
exceeding ninety days preceding any dividend payment date or any
date for the allotment of rights, as a record date for the
determination of the Shareholders entitled to receive such
dividends or rights, as the case may be; and only Shareholders of
record on such date shall be entitled to notice of and to vote at
such meeting or to receive such dividends or rights, as the case
may be.
Section 6. Quorum, Adjournment of Meetings. The presence
in person or by proxy of the holders of record of outstanding
Shares of the Fund representing at least one-third of the votes
eligible to be cast thereat shall constitute a quorum at all
meetings of Shareholders. If at any meeting of the Shareholders
there shall be less than a quorum present, the Shareholders
present at such meeting may, without further notice, adjourn the
same from time to time until a quorum shall attend, but no
business shall be transacted at any such adjourned meeting except
such as might have been lawfully transacted had the meeting not
been adjourned.
Section 7. Voting and Inspectors. At all meetings of
Shareholders every Shareholder of record entitled to vote thereat
shall be entitled to vote at such meeting either in person or by
proxy appointed by such Shareholder or his duly authorized
attorney-in-fact.
All elections of Trustees shall be had by a plurality of the
votes cast and all questions shall be decided by a majority of
the votes cast, in each case at a duly constituted meeting,
except as otherwise provided in the Declaration of Trust or in
these By-Laws or by specific statutory provision superseding the
restrictions and limitations contained in the Declaration of
Trust or in these By-Laws.
At any election of Trustees, the Board of Trustees prior
thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon the request of the holders of the
outstanding Shares of the Fund representing 10% of its net asset
value entitled to vote at such election shall, appoint two
inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at
such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate
of the result of the vote taken. No candidate for the office of
Trustee shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken
upon the request of the holders of the outstanding Shares of the
Fund representing 10% of its net asset value entitled to vote on
such election or matter.
Section 8. Conduct of Shareholders' Meetings. The meetings
of the Shareholders shall be presided over by the Chairman of the
Board of Trustees, if any, or if he shall not be present, by the
President, or if he shall not be present, by a Vice-President, or
if neither the Chairman of the Board of Trustees, the President
nor any Vice-President is present, by a chairman to be elected
at the meeting. A person who relinguishes the Chair shall not be
considered present for purposes of this Section until such time
as he or she resumes the Chair. The Secretary of the Fund, if
present, shall act as Secretary of such meetings, or if he is not
present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, then the meeting
shall elect its secretary.
Section 9. Concerning Validity of Proxies, Ballots, Etc. At
every meeting of the Shareholders, all proxies shall be received
and taken in charge of and all ballots shall be received and
canvassed by the secretary of the meeting, who shall decide all
questions touching the qualification of voters, the validity of
the proxies, and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed as provided in
Section 7, in which event such inspectors of election shall
decide all such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number and Tenure of Office. The business and
property of the Fund shall be conducted and managed by a Board of
Trustees consisting of the number of initial Trustees, which
number may be increased or decreased as provided in Section 2 of
this Article. Each Trustee shall, except as otherwise provided
herein, hold office until the annual meeting of Shareholders of
the Fund next succeeding his election or until his successor is
duly elected and qualifies. Trustees need not be Shareholders.
Section 2. Increase or Decrease in Number of Trustees;
Removal. The Board of Trustees, by the vote of a majority of the
entire Board, may increase the number of Trustees to a number not
exceeding fifteen, and may elect Trustees to fill the vacancies
created by any such increase in the number of Trustees until the
next annual meeting or until their successors are duly elected
and qualify; the Board of Trustees, by the vote of a majority of
the entire Board, may likewise decrease the number of Trustees to
a number not less than two but the tenure of office of any
Trustee shall not be affected by any such decrease. Vacancies
occurring other than by reason of any such increase shall be
filled as provided for a Massachusetts business corporation. In
the event that after proxy material has been printed for a
meeting of Shareholders at which Trustees are to be elected any
one or more management nominees dies or becomes incapacitated,
the authorized number of Trustees shall be automatically reduced
by the number of such nominees, unless the Board of Trustees
prior to the meeting shall otherwise determine. Any Trustee at
any time may be removed either with or without cause by
resolution duly adopted by the affirmative votes of the holders
of the majority of the Shares of the Fund present in person or by
proxy at any meeting of Shareholders at which such vote may be
taken, provided that a quorum is present, or by such larger vote
as may be required by Massachusetts law. Any Trustee at any time
may be removed for cause by resolution duly adopted at any
meeting of the Board of Trustees provided that notice thereof is
contained in the notice of such meeting and that such resolution
is adopted by the vote of at least two thirds of the Trustees
whose removal is not proposed. As used herein, "for cause" shall
mean any cause which under Massachusetts law would permit the
removal of a Trustee of a business trust.
Section 3. Place of Meeting. The Trustees may hold their
meetings, have one or more offices, and keep the books of the
Fund outside Massachusetts, at any office or offices of the Fund
or at any other place as they may from time to time by resolution
determine, or, in the case of meetings, as they may from time to
time by resolution determine or as shall be specified or fixed
in the respective notices or waivers of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board
of Trustees shall be held at such time and on such notice, if
any, as the Trustees may from time to time determine.
The annual meeting of the Board of Trustees shall be held as
soon as practicable after the annual meeting of the Shareholders
for the election of Trustees.
Section 5. Special Meetings. Special meetings of the Board
of Trustees may be held from time to time upon call of the
Chairman of the Board of Trustees, if any, the President or two
or more of the Trustees, by oral or telegraphic or written notice
duly served on or sent or mailed to each Trustee not less than
one day before such meeting. No notice need be given to any
Trustee who attends in person or to any Trustee who, in writing
executed and filed with the records of the meeting either before
or after the holding thereof, waives such notice. Such notice
or waiver of notice need not state the purpose or purposes of
such meeting.
Section 6. Quorum. One-third of the Trustees then in
office shall constitute a quorum for the transaction of business,
provided that a quorum shall in no case be less than two
Trustees. If at any meeting of the Board there shall be less
than a quorum present (in person or by open telephone line, to
the extent permitted by the 1940 Act), a majority of those
present may adjourn the meeting from time to time until a quorum
shall have been obtained. The act of the majority of the
Trustees present at any meeting at which there is a quorum shall
be the act of the Board, except as may be otherwise specifically
provided by statute, by the Declaration of Trust or by these By-
Laws.
Section 7. Executive Committee. The Board of Trustees may,
by the affirmative vote of a majority of the entire Board, elect
from the Trustees an Executive Committee to consist of such
number of Trustees as the Board may from time to time determine.
The Board of Trustees by such affirmative vote shall have power
at any time to change the members of such Committee and may fill
vacancies in the Committee by election from the Trustees. When
the Board of Trustees is not in session, the Executive Committee
shall have and may exercise any or all of the powers of the Board
of Trustees in the management of the business and affairs of the
Fund (including the power to authorize the seal of the Fund to be
affixed to all papers which may require it) except as provided by
law and except the power to increase or decrease the size of, or
fill vacancies on the Board. The Executive Committee may fix its
own rules of procedure, and may meet, when and as provided by
such rules or by resolution of the Board of Trustees, but in
every case the presence of a majority shall be necessary to
constitute a quorum. In the absence of any member of the
Executive Committee the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a member of
the Board of Trustees to act in the place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the
affirmative vote of a majority of the entire Board, may appoint
other committees which shall in each case consist of such number
of members (not less than two) and shall have and may exercise
such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee
may determine its action, and fix the time and place of its
meetings, unless the Board of Trustees shall otherwise provide.
The Board of Trustees shall have power at any time to change the
members and powers of any such committee, to fill vacancies, and
to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of
Trustees and Committees. Any action required or permitted to be
taken at any meeting of the Board of Trustees or any committee
thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board, or of such
committee, as the case may be. Trustees or members of a
committee of the Board of Trustees may participate in a meeting
by means of a conference telephone or similar communications
equipment; such participation shall, except as otherwise required
by the 1940 Act, have the same effect as presence in person.
Section 10. Compensation of Trustees. Trustees shall be
entitled to receive such compensation from the Fund for their
services as may from time to time be voted by the Board of
Trustees.
Section 11. Dividends. Dividends or distributions payable
on the Shares may, but need not be, declared by specific
resolution of the Board as to each dividend or distribution; in
lieu of such specific resolutions, the Board may, by general
resolution, determine the method of computation thereof, the
method of determining the Shareholders to which they are payable
and the methods of determining whether and to which Shareholders
they are to be paid in cash or in additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of
the Fund shall be chosen by the Board of Trustees as soon as may
be practicable after the annual meeting of the Shareholders.
These may include a Chairman of the Board of Trustees, and shall
include a President, one or more Vice-Presidents (the number
thereof to be determined by the Board of Trustees), a Secretary
and a Treasurer. The Chairman of the Board of Trustees, if any,
and the President may, but need not be, selected from among the
Trustees. The Board of Trustees may also in its discretion
appoint Assistant Secretaries, Assistant Treasurers, and other
officers, agents and employees, who shall have such authority and
perform such duties as the Board or the Executive Committee may
determine. The Board of Trustees may fill any vacancy which may
occur in any office. Any two offices, except those of President
and Vice-President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law or
these By-Laws to be executed, acknowledged or verified by two or
more officers.
Section 2. Term of Office. The term of office of all
officers shall be one year and until their respective successors
are chosen and qualify; however, any officer may be removed from
office at any time with or without cause by the vote of a
majority of the entire Board of Trustees.
Section 3. Powers and Duties. The officers of the Fund
shall have such powers and duties as generally pertain to their
respective offices, as well as such powers and duties as may from
time to time be conferred by the Board of Trustees or the
Executive Committee.
ARTICLE IV
SHARES
Section 1. Certificates of Shares. Each Shareholder of the
Fund may be issued a certificate or certificates for his Shares
in such form as the Board of Trustees may from time to time
prescribe, but only if and to the extent and on the conditions
prescribed by the Board.
Section 2. Transfer of Shares. Shares shall be
transferable on the books of the Fund by the holder thereof in
person or by his duly authorized attorney or legal
representative, upon surrender and cancellation of certificates,
if any, for the same number of Shares, duly endorsed or
accompanied by proper instruments of assignment and transfer,
with such proof of the authenticity of the signature as the Fund
or its agent may reasonably require; in the case of Shares not
represented by certificates, the same or similar requirements may
be imposed by the Board of Trustees.
Section 3. Stock Ledgers. The stock ledgers of the Fund,
containing the name and address of the Shareholders and the
number of Shares held by them respectively, shall be kept at the
principal offices of the Fund or, if the Fund employs a transfer
agent, at the offices of the transfer agent of the Fund.
Section 4. Lost, Stolen or Destroyed Certificates. The
Board of Trustees may determine the conditions upon which a new
certificate may be issued in place of a certificate which is
alleged to have been lost, stolen or destroyed; and may, in their
discretion, require the owner of such certificate or his legal
representative to give bond, with sufficient surety to the Fund
and the transfer agent, if any, to indemnify it and such transfer
agent against any and all loss or claims which may arise by
reason of the issue of a new certificate in the place of the one
so lost, stolen or destroyed.
ARTICLE V
SEAL
The Board of Trustees shall provide a suitable seal of the
Fund, in such form and bearing such inscriptions as it may
determine.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Fund shall be fixed by the Board of
Trustees.
ARTICLE VII
AMENDMENT OF BY-LAWS
The By-Laws of the Fund may be altered, amended, added to or
repealed by the Shareholders or by majority vote of the entire
Board of Trustees, but any such alteration, amendment, addition
or repeal of the By-Laws by action of the Board of Trustees may
be altered or repealed by the Shareholders.
TAX-FREE FUND FOR UTAH
DISTRIBUTION AGREEMENT
AGREEMENT, made as of this 28th day of May, 1999 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:
WHEREAS, the Fund and the Distributor have previously
entered into the Distribution Agreement dated as of February 10,
1999;
WHEREAS, on March 5, 1999 the Board of Trustees of the Fund
approved a new Distribution Agreement, to go into effect upon
anticipated changes in ownership of the Distributor; and
WHEREAS, the transfer of shares of the Distributor effecting
such changes in ownership occurred as of the date hereof; and
WHEREAS, contemporaneously therewith pursuant to an
instrument executed and delivered between the parties, a new
Distribution Agreement went into effect, identical in its
provisions to the Distribution Agreement in effect immediately
prior thereto, except for the date of its effectiveness; and
WHEREAS, this Agreement is a document explicitly containing
all of the provisions of the new Distribution Agreement,
representing in explicit form the new Distribution Agreement
created thereby;
NOW, THEREFORE, 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 a
between the parties hereto as follows:
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
next December 31, 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 Fund
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.
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<PAGE>
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.
ATTEST: TAX-FREE FUND FOR UTAH
_______________________ By:______________________________
ATTEST: AQUILA DISTRIBUTORS, INC.
_______________________ By:______________________________
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
551 Fifth Avenue
New York, NY 10176
Tel: (212) 818-1110
FAX: (212) 818-0494
October 28, 1999
To the Trustees of Tax-Free Fund For Utah
We consent to the incorporation by reference into post-
effective amendment No. 11 under the 1933 Act and No. 12 under
the 1940 Act of our opinion dated October 29, 1997.
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
/s/ W.L.D. Barrett
by__________________________
Partner
