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. 12 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 11 [ 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 & Hines LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[_X_] on October 31, 2000 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.
<PAGE>
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 October 31, 2000
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 state and regular
Federal income taxes as is consistent with preservation of capital.
The Fund invests in municipal obligations that pay interest exempt
from Utah state and regular Federal income taxes that are of
investment grade quality.
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 regular 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 considering
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.
An 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 seven-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
1993-1999
<S> <C> <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 XXXX XXXX
6% XXXX XXXX 4.21 XXXX 5.71
4% XXXX XXXX XXXX XXXX XXXX
2% XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX
-2% XXXX XXXX
-4% XXXX XXXX
-6% XXXX -5.20
-6.45
1993 1994 1995 1996 1997 1998 1999
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, 2000 to September 30, 2000)
total return was 6.81% for Class A Shares and 6.02% 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, 1999
<S> <C> <C> <C>
Tax-Free Fund For Utah
Class A Shares(1) -9.01% 5.28% 4.51%
Tax-Free Fund For Utah
Class C Shares -7.09%*** N/A 2.94%**
Lehman Brothers
Municipal Bond Index**** -2.10% 6.90% 5.71%
5.40%**
<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>
<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.
</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)................ 0.44% 0.44%
Total All Other Expenses (4).......... 0.44% 0.69%
Total Annual Fund
Operating Expenses (4)................ 1.14% 1.94%
<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 0.41 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 0.14 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. These waivers and reimbursements
can be discontinued at any time. The expense ratios for the
fiscal year ended June 30, 2000 after giving effect to the
waivers and the 0.03% expense offset for uninvested cash balances
were incurred at the following annual rates: for Class A Shares,
management fee, 0.09%; 12b-1 fee, 0.00%; other expenses, 0.30%,
for total operating expenses of 0.392%; for Class C Shares,
management fee, 0.09%; 12b-1 fee, 0.75%; service fee, 0.25%;
other expenses, 0.30%, for total operating expenses of 1.39%.
</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............$512 $748 $1,003 $1,731
Class C Shares............$297 $609 $1,047 $1,866(5)
You would pay the following expenses if you did not redeem your Class C
Shares:
Class C Shares............$197 $609 $1,047 $1,866(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.
At the time of purchase, the Fund's Utah Double-Exempt
Obligations must be of investment grade quality. This means that
they must either
* be rated within the four highest credit ratings
assigned by nationally recognized statistical rating
organizations 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]
Granger-Hunter Water and Sewer District
[PICTURE]
Dixie Center, Washington County
[PICTURE]
Utah Transit Authority, Light Rail
[LOGO]
TAX-FREE FUND FOR UTAH
[PICTURE]
University of Utah
[PICTURE]
Salt Lake City International Airport
[PICTURE]
Clearfield City Building
[PICTURE]
Single Family Mortgage Bonds for Utah Housing
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 September 15, 2000 and together
represented 22.3% 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. 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. 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.
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 the Sub-Adviser, Zions First National Bank, 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, 2000, 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 August 31, 2000, these funds had aggregate assets of
approximately $3.1 billion, of which approximately $1.7 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.
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 to 1999 he was employed by First
Security Investment Management as a Senior Portfolio Manager and
manager of the Achievement Municipal Bond Fund. From 1987 to 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 18 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 net asset value next
calculated 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, Jr. 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.
* Subsequently any amount you specify ($50 or more).
* You are not permitted to maintain both an Automatic
Investment Program and an Automatic Withdrawal Plan
simultaneously.
Your investment must be drawn in United States dollars on a
United States commercial bank, savings bank or credit union or a
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; or
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 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.
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, 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 payments partially
or wholly in cash 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.
Systematic Payroll Investments
You can make systematic investments in 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 any 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.
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 shares' redemption or purchase
value, whichever is less, if you redeem within the first two
years after purchase, and 0.50 of 1% of that value if you redeem
within the third or fourth year.
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 1% of the sales price to any
broker/dealer executing a Class C Share purchase.
"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 Class 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 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" ("TOD") 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 that 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 a portion of the distributions paid
by the Fund in excess of its net tax-exempt income will be
subject to federal and Utah income taxes. During the Fund's
fiscal year ended June 30, 2000, 93.27% of the Fund's dividends
were exempt-interest dividends. For the calendar year 1999, of
total dividends paid on Class A Shares, 4.01% was taxable as
ordinary income, 1.65% was taxable as long-term capital gains and
the balance was exempt-interest dividends. For Class C Shares the
corresponding percentages were 5.37% and 2.22%. 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 A(1) Class C(2)
Year Ended June 30, Year Ended June 30,
2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $9.88 $10.24 $9.94 $9.87 $10.23 $9.94
Income from Investment
Operations:
Net investment
income............. 0.48 0.49 0.52 0.38 0.38 0.41
Net gain (loss) on
securities (both
realized and
unrealized)......... (0.44) (0.36) 0.30 (0.42) (0.35) 0.29
Total from Investment
Operations.......... 0.04 0.13 0.82 (0.04) 0.03 0.70
Less Distributions:
Dividends from net
investment income... (0.51) (0.49) (0.52) (0.42) (0.39) (0.41)
Distributions from
Capital Gains (0.06) - - (0.06) - -
Total Distributions... (0.57) (0.49) (0.52) (0.48) (0.39) (0.41)
Net Asset Value, End
of Period............... $9.35 $9.88 $10.24 $9.35 $9.87 $10.23
Total Return (not
reflecting sales
charge)(%)............ 0.57 1.19 8.41 (0.33) 0.18 7.20
Ratios/Supplemental Data
Net Assets, End of Year
($ thousands)........ 34,171 47,251 29,013 0.1 1,667 1,476
Ratio of Expenses to
Average Net
Assets (%).......... 0.42 0.45 0.34 1.43 1.45 1.36
Ratio of Net Investment
Income to Average Net
Assets (%).......... 5.06 4.57 5.06 4.07 3.57 3.94
Portfolio Turnover
Rate (%).............. 48.99 87.49 11.31 48.99 87.49 11.31
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(%)
1.11 1.04 1.30 1.91 1.85 2.08
Ratio of Net Investment
Income to
Average Net
Assets(%) 4.37 3.98 4.10 3.58 3.17 3.22
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(%) 0.39 0.38 0.33 1.39 1.37 1.35
Class A(1) Class C(2)
Year Ended Period Ended
Year Ended June 30, June 30, June 30,
1997 1996 1997 1996(3)
<C> <C> <C> <C>
$ 9.74 $ 9.59 $9.74 $ 9.77
0.52 0.54 0.44 0.05
0.21 0.15 0.21 (0.03)
0.73 0.69 0.65 0.02
(0.53) (0.54) (0.45) (0.05)
- - - -
(0.53) (0.54) (0.45) (0.05)
$ 9.94 $ 9.74 $ 9.94 $ 9.74
7.72 7.17 6.80 0.20+
29,071 28,881 41 0.10
0.28 0.20 1.08 0.14+
5.44 5.48 4.64 0.50+
5.09 11.15 5.09 11.15
1.32 1.29 2.12 0.23+
4.40 4.39 3.60 0.41+
0.27 0.19 1.07 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
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. An 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 ___$1,000,000 ___ $2,500,000
___ $5,000,000
D. AUTOMATIC WITHDRAWAL PLAN
APPLICABLE TO CLASS A SHARES ONLY.
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to
first 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, 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
757 Third Avenue
New York, New York 10017
COUNSEL
Hollyer Brady Smith & Hines 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 (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. Information on the operation of the
Public Reference Room is available by calling 1-202-942-8090.
Reports and other information about the Fund are also available
on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. Copies of this information can be obtained,
for a duplicating fee, by E-mail request to [email protected] or
by writing to the SEC's Public Reference Section, Washington,
D.C. 20549-0102.
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-UTAH-YES (800-882-4937)
212-697-6666
Prospectus
October 31, 2000
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 regular
Federal income taxes as is consistent with preservation of capital.
The Fund invests in municipal obligations that pay interest exempt
from Utah state and regular Federal income taxes that are of
investment grade quality.
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 regular 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 considering
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.
An 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 three-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
1997-1999
<S> <C> <C> <C>
20%
18%
16%
14%
12%
10% 8.87
8% XXXX
6% XXXX 5.60
4% XXXX XXXX
2% XXXX XXXX
0% XXXX XXXX
-2% XXXX
-4% XXXX
-6% -5.10
1997 1998 1999
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 -2.31% (quarter ended June 30, 1999).
The year-to-date (from January 1, 2000 to September 30, 2000)
total return was 7.11% for Class Y Shares.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
For the period 1-Year inception*
ended December 31, 1999
<S> <C> <C>
Tax-Free Fund For Utah
Class Y Shares -5.10% 4.25%
Tax-Free Fund For Utah
Class I Shares** N/A N/A
Lehman Brothers
Municipal Bond Index*** -2.10% 5.71%
<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.
</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)...................... 0.60% 0.40%
Total Annual Fund Operating Expenses (3)... 1.20% 0.90%
<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 0.41 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 0.14 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. These waivers and reimbursements
can be discontinued at any time. The expense ratios for the
fiscal year ended June 30, 2000 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 0.09%,
0.50% and 0.59% respectively: for Class Y, these expenses would
have been 0.09%, 0.30%, and 0.39%, 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
0.35%; Class Y Shares bear only the common charges of 0.35% and
an allocation for transfer agent services of 0.05%.
</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.......... $122 $381 $660 $1,455
Class Y Shares.......... $ 92 $287 $498 $1,108
</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.
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. 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.
At the time of purchase, the Fund's Utah Double-Exempt
Obligations must be of investment grade quality. This means that
they must either
* be rated within the four highest credit ratings assigned by
nationally recognized statistical rating organizations 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. 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. 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.
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 the Sub-Adviser, Zions First National Bank, 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, 2000, 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 August 31, 2000, these funds had aggregate assets of
approximately $3.1 billion, of which approximately $1.7 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.
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 18 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 net asset value next
calculated 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, Jr. 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?"
Yes. 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 and Class
I Shares are available only in:
*Utah * 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?"
For Class Y Shares:
$1,000. Subsequent investments can be in any amount.
For 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 or credit union or a
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 Adding to a Class Y Shares
Account 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, or by Automatic or
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.
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 payments partially
or wholly in cash 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
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, 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.
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). Financial
intermediaries will confirm purchases of Class I Shares. 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 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" ("TOD") 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. 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.
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 that 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 a portion of the distributions paid
by the Fund in excess of its net tax-exempt income will be
subject to federal and Utah income taxes. During the Fund's
fiscal year ended June 30, 2000, 93.27% of the Fund's dividends
were exempt- interest dividends. For the calendar year 1999, of
total dividends paid on Class Y Shares, 0.05% was taxable as
ordinary income, 1.69% was taxable as long-term capital gains and
the balance was exempt- interest dividends. No Class I Shares
were outstanding during the period. 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 A(1) Class Y(2)
Year Ended June 30, Year Ended June 30,
2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $9.88 $10.24 $9.94 $9.88 $10.24 $9.94
Income from Investment
Operations:
Net investment
income............. 0.48 0.49 0.52 0.45 0.45 0.53
Net gain (loss) on
securities (both
realized and
unrealized)......... (0.44) (0.36) 0.30 (0.38) (0.32) 0.30
Total from Investment
Operations.......... 0.04 0.13 0.82 (0.07) 0.13 0.83
Less Distributions:
Dividends from net
investment income... (0.51) (0.49) (0.52) (0.53) (0.49) (0.53)
Distributions from
Capital Gains (0.06) - - (0.06) - -
Total Distributions... (0.57) (0.49) (0.52) (0.59) (0.49) (0.53)
Net Asset Value, End
of Period............... $9.35 $9.88 $10.24 $9.36 $9.88 $10.24
Total Return (not
reflecting sales
charge)(%)............ 0.57 1.19 8.41 0.86 1.19 8.52
Ratios/Supplemental Data
Net Assets, End of Year
($ thousands)........ 34,171 47,251 29,013 0.1 5 1,988
Ratio of Expenses to
Average Net
Assets (%).......... 0.42 0.45 0.34 0.42 0.43 0.37
Ratio of Net Investment
Income to Average Net
Assets (%).......... 5.06 4.57 5.06 4.88 4.45 5.02
Portfolio Turnover
Rate (%).............. 48.99 87.49 11.31 48.99 87.49 11.31
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(%)
1.11 1.04 1.30 0.86 0.96 1.10
Ratio of Net Investment
Income to
Average Net
Assets(%) 4.37 3.98 4.10 4.43 3.92 4.29
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(%) 0.39 0.38 0.33 0.39 0.34 0.36
Class A(1) Class Y(2)
Year Ended Period Ended
Year Ended June 30, June 30, June 30,
1997 1996 1997 1996(3)
<C> <C> <C> <C>
$ 9.74 $ 9.59 $9.74 $ 9.77
0.52 0.54 0.61 0.06
0.21 0.15 0.21 (0.03)
0.73 0.69 0.82 0.03
(0.53) (0.54) (0.62) (0.06)
- - - -
(0.53) (0.54) (0.62) (0.06)
$ 9.94 $ 9.74 $ 9.94 $ 9.74
7.72 7.17 8.69 0.29+
29,071 28,881 41 0.10
0.28 0.20 0.08 0.03+
5.44 5.48 5.64 0.61+
5.09 11.15 5.09 11.15+
1.32 1.29 1.12 0.11+
4.40 4.39 4.60 0.53+
0.27 0.19 0.07 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
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. An 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
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to first
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, 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
757 Third Avenue
New York, New York 10017
COUNSEL
Hollyer Brady Smith & Hines 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 (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. Information on the operation of the Public
Reference Room is available by calling 1-202-942-8090. Reports
and other information about the Fund are also available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov.
Copies of this information can be obtained, for a duplicating
fee, by E-mail request to [email protected] or by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
+++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 October 31, 2000
This Statement of Additional Information (the "SAI") is
not a Prospectus. There are two Prospectuses for the Fund dated
October 31, 2000: 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 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, 2000, 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 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 the nationally recognized
statistical rating organizations, currently Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P")
and Fitch Investors Service ("Fitch"), 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 these organizations 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, 2000, in Utah
Double-Exempt Obligations in the various rating categories:
Highest rating (1) 62.12%
Second highest rating (2) 16.75%
Third highest rating (3) 5.01%
Fourth highest rating (4) 8.04%
Not rated: 8.08%
100.O0%
(1) Aaa of Moody's or AAA of S&P or Fitch.
(2) Aa of Moody's or AA of S&P or Fitch.
(3) A of Moody's or A of S&P or Fitch.
(4) Baa of Moody's or BBB of S&P or Fitch.
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 that 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.
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
Investment Company Act of 1940 (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 Obligations 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 that are subject to the Federal
alternative minimum tax.
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 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.
In the following material Pacific Capital Cash Assets
Trust, Churchill Cash Reserves Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust, Pacific Capital Tax-Free
Cash Assets Trust, Capital Cash Management Trust and Capital Cash
U.S. Government Securities Trust, each of which is a money-market
fund, are called the "Aquila Money-Market Funds"; Hawaiian Tax-
Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon,
Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky,
Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For
Utah, each of which is a tax-free municipal bond fund, are called
the "Aquila Bond Funds"; and Aquila Cascadia Equity Fund and
Aquila Rocky Mountain Equity Fund are called the "Aquila Equity
Funds."
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Position Business Experience
with the Trust,
Address, Age
Lacy B. Herrmann* Founder and Chairman of the Board of Aquila
Chairman of the Management Corporation, the sponsoring
Board of Trustees organization and Manager or Administrator
380 Madison Avenue and/or Adviser or Sub-Adviser to the
New York, NY Aquila Money-Market Funds, the Aquila Bond
10017 Funds and the Aquila Equity Funds,
Age: 71 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 Capital
Cash Management Trust and Capital Cash
U.S. Government Securities Trust;
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.
Gary C. Cornia Professor and Associate Dean of the
Trustee Marriott School of Management, Brigham Young
577 East 1090 North University, since 1991; Associate Professor,
Orem, UT 84057 1985-1991; Assistant Professor, 1980-1985;
Age: 52 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. Trustee of
Tax-Free Fund For Utah (this Fund)
since 1993 and of Tax-Free Fund of
Colorado since 2000.
William L. Ensign Planning and Architectural Consultant;
Trustee Acting Architect of the United States Capitol
766 Holly 1995-1997; Assistant Architect of the United
Drive North, States Capitol 1980-1995; previously President
Annapolis, and CEO, McLeod Ferrara Ensign, an international
MD 20401 planning and design firm based in Washington DC;
Age: 71 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 (this Fund)since
1991; Trustee of Oxford Cash Management
Fund, 1983-1989.
Diana P. Herrmann* President and Chief Operating Officer of
Trustee the Manager/Administrator since 1997, a
and President Director since 1984, Secretary since 1986
380 Madison Avenue and previously its Executive Vice
New York, President, Senior Vice President
NY 10017 or Vice President, 1986-1997;
Age: 42 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, 1999-2000
and of Reserve Private Equity Series,
1998-2000; 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.
Anne J. Mills Vice President for Business Affairs
Trustee of Ottawa University since 1992;
167 Glengarry Place IBM Corporation, 1965-1991; Budget
Castle Rock, Review Officer of the American
Colorado 80104 Baptist Churches/USA, 1994-1997; Director
Age: 61 of the American Baptist Foundation,
1985-1996 and since 1998; Trustee of
Brown University, 1992-1999; 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(this
Fund)since 1994.
R. Thayne Robson Director of the Bureau of Economic
Trustee and Business Research, Professor
3548 Westwood Drive, of Management, and Research Professor
Salt Lake City, UT of Economics at the University
84109 of Utah since 1978; Trustee of Tax-Free
Age: 71 Fund for Utah(this Fund)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 President of Aquila Distributors,
Senior Vice President Inc. since 1998, Registered Principal
5331 Fayette Street since 1993, Senior Vice President, 1997-1998
Houston, TX 77056 and Vice President, 1993-1997; Senior Vice
Age: 56 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(this Fund)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 Co-Founder of Lewis Young Robertson &
Senior Vice Burningham, Inc., an NASD licensed
President broker/dealer providing public
2049 Herbert finance services to Utah local
Avenue governments, 1995-present; Senior Vice
Salt Lake City, President of Tax-Free Trust of Arizona,
UT 84108 Tax-Free Fund For Utah(this Fund),Aquila
Age: 54 Cascadia Equity Fund and Aquila Rocky Mountain
Equity Fund. Formerly Senior Vice President-
Public Finance, Kemper Securities Inc.,
Salt Lake City, Utah.
Stephen J. Caridi Vice President of the Distributor since
Assistant 1995, Assistant Vice President 1988-1995,
Vice President Marketing Associate, 1986-1988; Vice
380 Madison President of Hawaiian Tax-Free Trust since
Avenue 1998; Senior Vice President of Narragansett
New York, Insured Tax-Free Income Fund since
NY 10017 1998, Vice President since 1996; Assistant Vice
Age: 39 President of Tax-Free Fund For Utah(this Fund)
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 Financial Officer of the Aquila
Chief Financial Officer Money-Market, Bond and Equity Funds
380 Madison Avenue since 1991 and Treasurer, 1981-1991;
New York, NY formerly Treasurer of the predecessor of
10017 Capital Cash Management Trust; Treasurer
Age: 76 and Director of STCM Management Company,
Inc., since 1974; Treasurer of InCap
Management Corporation since 1982, of
the Manager since 1984 and of the
Distributor, 1985-2000.
Richard F. West Treasurer of the Aquila Money-Market,
Treasurer Bond and Equity Funds and of Aquila
380 Madison Avenue Distributors, Inc. since 1992;
New York, NY Associate Director of Furman Selz
10017 Incorporated, 1991-1992; Vice
Age: 64 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.
Lori A Vindigni Assistant Vice President of Aquila Management
Assistant Treasurer Corporation since 1998, formerly Fund Accountant
380 Madison Avenue for the Aquila Group of Investment Companies
New York, NY since 1995; Staff Officer and Fund Accountant of
10017 Citibank Global Asset Management Group of
Age: 33 Investment Companies, 1994-1995; Fund Accounting
Supervisor of Dean Witter Group of
Investment Companies, 1990-1994; BS Kean
College of New Jersey, 1990.
Edward M. W. Hines Partner of Hollyer Brady Smith & Hines
Secretary LLP, attorneys, since 1989
551 Fifth Avenue and counsel, 1987-1989; Secretary of the
New York, NY Aquila Money-Market, Bond and Equity Funds
10176 since 1982; Secretary of Trinity Liquid Assets
Age: 60 Trust, 1982-1985 and Trustee of that Trust,
1985-1986; Secretary of Oxford Cash
Management Fund, 1982-1988.
Robert W. Anderson Compliance Officer since 1998 and Assistant
Assistant Secretary and Secretary of the Aquila Money-Market Funds
Compliance Officer and the Aquila Bond and Equity Funds;
380 Madison Avenue, Consultant, The Wadsworth Group, 1995-1998;
New York, Executive Vice President of Sheffield
NY 10017 Management Company (investment adviser and
Age: 60 distributor of a mutual fund group),1986-1995.
John M. Herndon Assistant Secretary of the Aquila Money-
Assistant Secretary Market, Bond and Equity Funds since 1995
380 Madison Avenue and Vice President of the Aquila Money-
New York, NY Market Funds since 1990; Vice President of
10017 the Manager since 1990; Investment
Age: 60 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.
</TABLE>
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, 2000 the Fund
paid a total of $17,000 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 15 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 which the
from the in the Trustee
Fund Aquilasm serves
Name Group of
Funds
Gary C. Cornia $5,450 $ 6,150 2
William L. Ensign $3,850 $13,500 2
R. Thayne Robson $3,850 $6,950 2
Anne J. Mills $3,850 $39,550 6
Ownership of Securities
On October 4, 2000, the following institutional holders
held 5% or more of the Fund's outstanding shares. On the basis of
information received from the holders the Fund's management
believes that all of the shares indicated are held for the
benefit of clients.
Name and address Number of shares Percent of
of the holder of class
record
Merrill Lynch Pierce 539,655 Class A Shares (15.0%)
Fenner & Smith 23,787 Class C Shares (21.4%)
4800 Deer Lake Dr.,
Jacksonville, FL
Fiserv Securities Inc. 413,557 Class A Shares (11.5%)
2005 Market Street,
Philadelphia, PA
Zions First National 772,994 Class A Shares (21.5%)
Bank, (held in 2 accounts)
P.O. Box 30880
Salt Lake City, UT
Donaldson Lufkin 31,936 Class C Shares (29%)
Jenrette Securities (held in 2 accounts)
Corporation, Inc.
P.O. Box 2052,
Jersey City, NJ
Aquila Management Corp 13 Class Y Shares (100%)
380 Madison Ave.
New York, NY
Additional 5% shareholders
T H P K Morris, TTEES 6,192 Class C Shares (5.6%)
P.O. Box 1177
Orem, UT
The Fund's management is not aware of any other person
beneficially owning more than 5% of any class of its outstanding
shares as of such date.
Management Ownership
As of the date of this SAI, 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 periods indicated, the following management
arrangements were in effect:
July 16, 1998 through June 30, 2000: 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.
During the fiscal years ended June 30, 2000, 1999 and
1998 the Fund incurred management fees as follows.
Manager Sub-Adviser
2000 $204,781(1)
1999 $252,515(2)
1998 $26,613(3) $22,670(3)
$105,089(4)
(1) $166,101 was waived; in addition the Manager reimbursed
expenses in the amount of $126,313
(2) $200,822 was waived; in addition, the Manager reimbursed
expenses in the amount of $131,525.
(3) 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.
(4) Accrued under Advisory and Administration agreement, of which
$92,478 was waived. In addition, the Manager reimbursed expenses
in the amount of $157,610.
Aquila Distributors, Inc. 380 Madison Avenue, Suite 2300,
New York, NY 10017 is the Fund's Distributor. The Distributor
currently handles the distribution of the shares of fifteen funds
(six 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 a former 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 1940 Act. 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 1940 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 1940
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 1940 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 1940 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 1940 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 contains provisions regarding
brokerage described below under "Brokerage Allocation and Other
Practices."
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 1940 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 1940 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 1940 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.
Underwriting Commissions
During the fiscal years ended June 30, 2000, 1999 and
1998, the aggregate dollar amount of sales charges on sales of
Class A Shares of the Fund was $53,367, $134,020 and $98,708,
respectively, and the amount retained by the Distributor was
$8,298, $11,063 and $6,762, 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).
In administering Parts I, II and III, the Distributor
will consider shares which are not Qualified Holdings of
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.
Provisions Relating to Class A Shares (Part I)
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), a rate fixed from 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 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 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, 2000, 1999 and
1998 payments were made only under Part I and Part II of the
Plan. All payments were to Qualified Recipients and were for
compensation. During those periods, no payments were made under
Part III of the Plan.
Payments to Qualified Recipients
During the fiscal years ended June 30, 2000, 1999 and
1998, $79,463, $96,628 and $58,192, respectively, were paid under
Part I of the Plan to Qualified Recipients. Of those amounts,
$2,003 $2,004 and $1,871, respectively, were paid to the
Distributor.
During the Fund's fiscal years ended June 30, 2000, 1999
and 1998, $9,165 $13,032 and $6,167, respectively, were paid to
Qualified Recipients under Part II of the Plan with respect to
the Fund's Class C Shares and $3,055, $4,344 and $2,056
respectively, were paid under the Shareholder Services Plan. Of
these total payments of $12,220, $17,376 and $8,223, the
Distributor received $6,364, $12,460 and $6,404 respectively.
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 Conduct Rules 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 either 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, 2000, 1999 and
1998, $3,055, $4,344 and $2,056, respectively, were paid under
Part I of the Plan with respect to the Fund's Class C Shares all
of which was paid to the Distributor. 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 years ended June 30, 2000, 1999 or
1998.
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.
Codes of Ethics
The Fund, the Manager the Sub-Adviser and the
Distributor have adopted codes of ethics pursuant to Rule
17j-1 under the 1940 Act. The codes permit personnel of
these organizations who are subject to the codes to purchase
securities, including the types of securities in which the
Fund invests, but only in compliance with the provisions of
the codes.
Transfer Agent, Custodian and Auditors
The Fund's Shareholder Servicing Agent (transfer agent)
is PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 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 auditors, KPMG LLP, 757 Third Avenue, New
York, New York, 10017, perform an annual audit of the Fund's
financial statements.
Brokerage Allocation and Other Practices
During the fiscal years ended June 30, 2000, 1999
and 1998, all of the Fund's transactions were principal
transactions and no brokerage commissions were paid.
The following provisions regarding brokerage allocation
and other practices relating to purchases and sales of the Fund's
securities are contained in 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
The following supplements the information about purchase,
redemption and pricing of shares set forth in the Prospectus.
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 shares' redemption or purchase
value, whichever is less, if you redeem within the first two
years after purchase, and 0.50 of 1% of that value if you redeem
within the third or fourth year.
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, 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 million 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
and 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, including a registered
broker-dealer that is acting as a registered investment adviser
or certified financial planner for investors participating in
comprehensive fee programs (but not any other 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 qualifying
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
The Distributor (not the Fund) will pay to any dealer
with which it has made prior arrangements and which effects a
purchase of Class A Shares of the Fund from the proceeds of a
qualifying redemption of the shares of an investment company (not
a member of the Aquilasm Group of Funds) up to 1% of the
purchase. The shareholder, however, will not be subject to any
sales charge.
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 Manager 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
with 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; or
* 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 SAI, 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, Tax-Free Trust of
Oregon, 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 Trust,
Capital Cash U.S. Government Securities Trust, 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 Fund including the Fund for shares of the same
class of any other Bond or Equity Fund, or for shares of any
Money-Market Fund, without the payment of a sales charge or any
other fee, and there is no limit on the number of exchanges you
can make from fund to fund. Similar exchangeability 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.
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;
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 and
Capital Cash U.S. Government Securities Trust (both of which
invest 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" ("TOD") 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 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.
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.
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. 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 $53,367 None None None*
Distributors
Inc.
* Amounts paid to the Distributor under the Fund's Distribution
Plan 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 listed.
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 -3.44% -1.32% 0.86%
Five Years 4.10% N/A N/A
Since
inception on
July 22, 1992 4.77% 3.54%(1) 4.84%(1)
(1) Period from May 21, 1996 (inception of class) through June
30, 2000.
These figures were calculated according to the following SEC
formula:
P(1+T)n = 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.
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 -3.44% -1.32% 0.86%
Five Years 22.24% N/A N/A
Since
inception on
July 22, 1992 44.82% 15.40%(1) 21.47%(1)
(1) Period from May 21, 1996 (inception of class) through June
30, 2000.
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 7.0% and 44.93%, 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, 2000 (the date of the
Fund's most recent audited financial statements):
Class A Shares Class C Shares Class Y Shares
Yield 5.21% 4.43% 6.00%
Taxable
Equivalent
Yield 9.18% 7.80% 10.57%
These figures were obtained using the Securities and
Exchange Commission formula:
Yield = 2 [(a-b + 1)6 -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.
Fitch Investors Service. A brief description of the applicable
Fitch Investors Service rating symbols and their meanings
follows:
AAA
Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.
AA
Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A
High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.
BBB
Good credit quality. `BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.
Notes to Long-term and Short-term ratings:
"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to
the `AAA' Long-term rating category, to categories below `CCC',
or to Short-term ratings other than `F1'.
`NR' indicates that Fitch does not rate the issuer or issue in
question.
`Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or
when an obligation matures, is called, or refinanced.
Rating Watch: Ratings are placed on Rating Watch to notify
investors that there is a reasonable probability of a rating
change and the likely direction of such change. These are
designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings
may be raised, lowered or maintained. Rating Watch is typically
resolved over a relatively short period.
A Rating Outlook indicates the direction a rating is likely to
move over a one to two-year period. Outlooks may be positive,
stable or negative. A positive or negative Rating Outlook does
not imply a rating change is inevitable. Similarly, companies
whose outlooks are `stable` could be upgraded or downgraded
before an outlook moves to positive or negative if circumstances
warrant such an action. Occasionally, Fitch may be unable to
identify the fundamental trend. In these cases, the Rating
Outlook may be described as evolving.
Short-Term Obligations
The following ratings scale applies to foreign currency and local
currency ratings. A Short-term rating has a time horizon of less
than 12 months for most obligations, or up to three years for US
public finance securities, and thus places greater emphasis on
the liquidity necessary to meet financial commitments in a timely
manner.
F1
Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.
F2
Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as
great as in the case of the higher ratings.
F3
Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.
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, 2000
Statement of Assets and Liabilities as of
June 30, 2000
Statement of Operations for the period ended
June 30, 2000
Statement of Changes in Net Assets for the
periods ended June 30, 2000 and 1999
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 (vi)
(j) Consent of independent auditors
(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)
(o) Reserved
(p) Codes of Ethics
(i) The Trust (vi)
(ii) The Manager and Distributor(vi)
(iii) The Sub-Adviser (vi)
(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 as an exhibit to Registrant's Post-Effective
Amendment No. 10 dated October 28, 1999 and
incorporated herein by reference.
(vi) 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, Capital Cash U.S. Government Securities
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>
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 27th day of October, 2000.
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 10/27/2000
______________________ Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Diana P. Herrmann 10/27/2000
______________________ Trustee ___________
Diana P. Herrmann
/s/Gary C. Cornia 10/27/2000
______________________ Trustee ___________
Gary C. Cornia
/s/William L. Ensign 10/27/2000
______________________ Trustee ___________
William L. Ensign
/s/Anne J. Mills 10/27/2000
______________________ Trustee ___________
Anne J. Mills
/s/R. Thayne Robson 10/27/2000
______________________ Trustee ___________
R. Thayne Robson
/s/Rose F. Marotta 10/27/2000
______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
TAX-FREE FUND FOR UTAH
EXHIBIT INDEX
Number Name
(i) (ii) Consent of Counsel to the Fund
(j) Consent of independent auditors
(p) Codes of Ethics
(i) The Trust
(ii) The Manager and Distributor
(iii) The Sub-Adviser
Correspondence
