TAX-FREE FUND FOR UTAH
SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of July 16, 1998 by and between
AQUILA MANAGEMENT CORPORATION, a New York Corporation (the
"Manager"), ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ and ZIONS FIRST NATIONAL BANK (the "Sub-Adviser"), ▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H :
WHEREAS, Tax-Free Fund For Utah (the "Fund") is a
Massachusetts business trust which is registered under the
Investment Company Act of 1940 (the "Act") as an open-end, non-
diversified management investment company;
WHEREAS, the Manager has entered into an Advisory and
Administration Agreement as of October 31, 1997 with the Fund
(the "Advisory and Administration Agreement") pursuant to which
the Manager acts as investment adviser with respect to the Fund;
and
WHEREAS, pursuant to paragraph 2 of the Advisory and
Administration Agreement, the Manager wishes to retain the Sub-
Adviser for purposes of rendering investment advisory services to
the Manager in connection with the Fund upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General
The Manager hereby appoints the Sub-Adviser to render, to
the Manager and to the Fund, investment research and advisory
services as set forth below under the supervision of the Manager
and subject to the approval and direction of the Board of
Trustees of the Fund. The Sub-Adviser shall, all as more fully
set forth herein, act as managerial investment adviser to the
Fund with respect to the investment of the Fund's assets, and
supervise and arrange the purchase of securities for and the sale
of securities held in the portfolio of the Fund.
2. Duties and Obligations of the Sub-Adviser With Respect To
Investment of the Assets of the Fund
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Manager and the Board
of Trustees of the Fund, the Sub-Adviser shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund;
(iv) at its expense provide for pricing of the Fund's
portfolio daily using a pricing service or other source of
pricing information satisfactory to the Fund and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund; and
(v) consult with the Manager in connection with its duties
hereunder.
(b) Any investment program furnished by the Sub-Adviser
under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment
Company Act of 1940 (the "Act") and any rules or regulations in
force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Fund
as amended from time to time; (4) any policies and determinations
of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its registration statement
under the Act or as amended by the shareholders of the Fund.
(c) The Sub-Adviser shall give to the Manager and to the
Fund the benefit of its best judgment and effort in rendering
services hereunder, but the Sub-Adviser shall not be liable for
any loss sustained by reason of the adoption of any investment
policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been
based upon (i) its own investigation and research or (ii)
investigation and research made by any other individual, firm or
corporation, if such purchase, sale or retention shall have been
made and such other individual, firm or corporation shall have
been selected in good faith by the Sub-Adviser.
(d) Nothing in this Agreement shall prevent the Sub-Adviser
or any affiliated person (as defined in the Act) of the Sub-
Adviser from acting as investment adviser or manager for any
other person, firm or corporation and shall not in any way limit
or restrict the Sub-Adviser or any such affiliated person from
buying, selling or trading any securities for its own or their
own accounts or for the accounts of others for whom it or they
may be acting, provided, however, that the Sub-Adviser expressly
represents that, while acting as Sub-Adviser, it will undertake
no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(e) In connection with its duties to arrange for the
purchase and sale of the Fund's portfolio securities, the Sub-
Adviser shall select such broker-dealers ("dealers") as shall, in
the Sub-Adviser's judgment, implement the policy of the Fund to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Sub-
Adviser shall cause the Fund to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Sub-Adviser determines that better price
or execution may be obtained by paying such commissions; the Fund
expects that most transactions will be principal transactions at
net prices and that the Fund will incur little or no brokerage
costs. The Fund understands that purchases from underwriters
include a commission or concession paid by the issuer to the
underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Sub-Adviser is authorized
to consider, in determining whether a particular dealer will
provide best execution, the dealer's reliability, integrity,
financial condition and risk in positioning the securities
involved, as well as the difficulty of the transaction in
question, and thus need not pay the lowest spread or commission
available if the Sub-Adviser determines in good faith that the
amount of commission is reasonable in relation to the value of
the brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the Sub-
Adviser's overall responsibilities. If, on the foregoing basis,
the transaction in question could be allocated to two or more
dealers, the Sub-Adviser is authorized, in making such
allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a
dealer has sold shares of the Fund. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes that
no dollar value can be placed on such research services or on
execution services and that such research services may or may not
be useful to the Fund and may be used for the benefit of the Sub-
Adviser or its other clients.
(f) The Sub-Adviser agrees to maintain, and to preserve for
the periods prescribed, such books and records with respect to
the portfolio transactions of the Fund as are required by
applicable law and regulation, and agrees that all records which
it maintains for the Fund on behalf of the Manager shall be the
property of the Fund and shall be surrendered promptly to the
Fund or the Manager upon request.
(g) The Sub-Adviser agrees to furnish to the Manager and to
the Board of Trustees of the Fund such periodic and special
reports as each may reasonably request.
(h) It is agreed that the Sub-Adviser shall have no
responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Sub-Adviser for inclusion therein. The Sub-Adviser shall
promptly inform the Fund as to any information concerning the
Sub-Adviser appropriate for inclusion in such Registration
Statement, or as to any transaction or proposed transaction which
might result in an assignment (as defined in the Act) of this
Agreement.
(i) The Sub-Adviser shall not be liable for any error in
judgment or for any loss suffered by the Fund or its security
holders in connection with the matters to which this Agreement
relates, except a loss resulting from wilful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. Nothing in this Agreement shall, or
shall be construed to, waive or limit any rights which the Fund
may have under federal and state securities laws which may impose
liability under certain circumstances on persons who act in good
faith.
(j) To the extent that the Manager is indemnified under the
Fund's Declaration of Trust with respect to the services provided
hereunder by the Sub-Adviser, the Manager agrees to provide the
Sub-Adviser the benefits of such indemnification.
3. Allocation of Expenses
The Sub-Adviser shall bear all of the expenses it incurs in
fulfilling its obligations under this Agreement. In particular,
but without limiting the generality of the foregoing: the Sub-
Adviser shall furnish, at the Sub-Adviser's expense, all office
space, facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser,
administrator or principal underwriter of the Fund all necessary
financial information in connection with such adviser's,
administrator's or principal underwriter's duties under any
agreement between such adviser, administrator or principal
underwriter and the Fund. The Sub-Adviser will also pay all
compensation of the Fund's officers, employees, and Trustees, if
any, who are affiliated persons of the Sub-Adviser.
4. Compensation of the Sub-Adviser; Fee Waivers and Reimbursement
of Fund Expenses
(a) The Manager agrees to pay the Sub-Adviser, and the Sub-
Adviser agrees to accept as full compensation for all services
rendered by the Sub-Adviser as such, a management fee payable
monthly and computed on the net asset value of the Fund as of the
close of business each business day at the annual rate of 0.23 of
1% of such net asset value.
(b) Notwithstanding the foregoing paragraph 4(a), the Sub-
Adviser acknowledges that the Manager intends from time to time
to waive some or all of the fee payable under the Advisory and
Administration Agreement as the Manager deems necessary to
maintain a competitive yield for the Fund; in connection
therewith, the Sub-Adviser agrees to waive all or part of its fee
under this Agreement on the following terms and conditions: The
Manager shall from time to time determine, in its sole
discretion, how much, if any, of the fee payable by the Fund
under the Advisory and Administration Agreement shall be waived
and how much of such waiver shall be borne by the Sub-Adviser,
provided, however, that
1. In no period (each a "Cumulative Period") measured from
the effective date of this Agreement shall the waiver borne
by the Sub-Adviser constitute more than 46% of the total fee
payable under the Administration and Advisory Agreement that
is waived by the Manager during such Cumulative Period (46%
being the proportion, expressed as a percent, of the annual
fee rate payable to the Sub-Adviser to that payable to the
Manager); and
2. In no event shall the compensation actually paid to the
Sub-Adviser, net of such waivers and stated as an annual
percentage of the average net assets of the Fund during the
relevant period, be less than
(i) 0.13 of 1% for any period in which the net assets
of the Fund equal or exceed $58 million; or
(ii) 0.06 of 1% for any period during the first 365
days following the effectiveness of this Agreement in
which the minimum net compensation provision 4(b)(i) is
inapplicable.
(c) The Sub-Adviser further acknowledges that the Manager
may from time to time determine that, in addition to the fee
waivers discussed in section (4)(b), reimbursement of some of the
Fund's expenses, including expenses attributable to Sub-Advisory
fees, is necessary in order to maintain a competitive yield for
the Fund. The Sub-Adviser agrees to share the costs of such
reimbursements, as allocated in the Manager's discretion between
the Manager and the Sub-Adviser, during any period in which the
minimum net compensation provisions of subsections 4(b)(i) and
(ii) do not apply, provided, however, that in no event shall the
Sub-Adviser's share of such reimbursements in any Cumulative
Period exceed 46% of the total expense reimbursements for that
Cumulative Period.
(d) The Sub-Adviser further acknowledges that in addition
to the waivers and reimbursements contemplated by the above
provisions of this section 4, there may be such additional and
voluntary waivers and reimbursements by the Sub-Adviser as it
may, in consultation with the Manager, determine to be
appropriate from time to time.
5. Duration and Termination
(a) This Agreement shall become effective as of the date
first written above following approval by the shareholders of the
Fund and shall, unless terminated as hereinafter provided,
continue in effect until the December 31 next preceding the first
anniversary of the effective date of this Agreement, and from
year to year thereafter, but only so long as such continuance is
specifically approved at least annually (1) by a vote of the
Fund's Board of Trustees, including a vote of a majority of the
Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, with votes
cast in person at a meeting called for the purpose of voting on
such approval, or (2) by a vote of the holders of a "majority"
(as so defined) of the outstanding voting securities of the Fund
and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Sub-Adviser at
any time without penalty upon giving the Manager and the Fund
sixty days' written notice (which notice may be waived). This
Agreement may be terminated by the Manager or the Fund at any
time without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-Adviser),
provided that such termination by the Fund shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Fund outstanding and
entitled to vote. This Agreement shall automatically terminate in
the event of its assignment (as defined in the Act) or the
termination of the Advisory and Administration Agreement.
However, the Sub-Adviser agrees that it will not exercise its
termination rights for at least three years from the effective
date of this Agreement, except for regulatory reasons.
6. Notices of Meetings
The Manager agrees that notice of each meeting of the Board
of Trustees of the Fund will be sent to the Sub-Adviser and that
Sub-Adviser will make appropriate arrangements for the attendance
(as persons present by invitation) of such person or persons as
the Sub-Adviser may designate.
7. Special Provisions
(a) For so long as the Sub-Adviser provides investment services
to the Fund, neither the Sub-Adviser nor any subsidiary, parent
or affiliated company of the Sub-Adviser (a "Sub-Advisory
Affiliate") will develop or market a proprietary or other tax-
exempt municipal bond fund which is competitive with the Fund.
However, the Sub-Adviser or a Sub-Advisory Affiliate may became a
provider of services to such a municipal bond fund upon and
solely by reason of the fact that a person, firm, or corporation
that provides such investment company services has been directly
or indirectly acquired by, or merged with, the Sub-Adviser or
Sub-Advisory Affiliate, as long as such investment company does
not operate in a manner that permits ready exchange with an
investment company the investment adviser of which is the Sub-
Adviser or Sub-Advisory Affiliate.
(b) The Sub-Adviser, under the supervision of the Manager,
shall provide at its expense portfolio management particularly
qualified to manage investments in
which the Fund primarily invests, and such portfolio management
shall be located in the state of issuers of such investments.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized
officers and their seals to be hereunto affixed, all as of the
day and year first above written.
ATTEST: AQUILA MANAGEMENT CORPORATION
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
___________________ By:______________________________
ATTEST: ZIONS FIRST NATIONAL BANK
/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________ By ______________________________
