TAX-FREE FUND OF COLORADO
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of August 28, 2000 by and between
TAX-FREE FUND OF COLORADO (the "Fund"), 000 Xxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and AQUILA MANAGEMENT
CORPORATION (the "Manager"), a New York corporation, 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 10017
W I T N E S S E T H:
WHEREAS, 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 Fund and the Manager wish to enter into an
amended Advisory and Administration Agreement, referred to
hereafter as "this Agreement," with respect to the Fund;
WHEREAS, this Agreement replaces a prior agreement, setting
forth a different fee arrangement; and
WHEREAS, the shareholders of the Fund have approved this
Agreement on August 28, 2000 at a reconvened meeting of share
holders originally held on June 22, 2000;
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. In General
The Manager shall perform (at its own expense) the functions
set forth more fully herein for the Fund.
2. Duties and Obligations of the Manager
(a) Investment Advisory Services Subject to the succeeding
provisions of this section and subject to the direction and
control of the Board of Trustees of the Fund, the Manager
shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund;
(iv) at its expense provide for pricing of the Fund's port
folio daily using a pricing service or other source of
pricing information satisfactory to the Fund and, unless
otherwise directed by the Board of Trustees, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund; and
Subject to the provisions of Section 5 hereof, the Manager may at
its own expense delegate to a qualified organization ("Sub-
Adviser"), affiliated or not affiliated with the Manager, any
or all of the above duties. Any such delegation of the duties
set forth in (i), (ii) or (iii) above shall be by a written
agreement (the "Sub-Advisory Agreement") approved as provided
in Section 15 of the Investment Company Act of 1940.
(b) Administration. Subject to the succeeding provisions of
this section and subject to the direction and control of the
Board of Trustees of the Fund, the Manager shall provide all
administrative services to the Fund other than those relating
to its investment portfolio delegated to a Sub-Adviser of the
Fund under a Sub-Advisory Agreement; as part of such
administrative duties, the Manager shall:
(i) provide office space, personnel, facilities and equip
ment 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 negotia
tion 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, in
cluding 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 sharehold
ers and Trustees, reports to and other filings with the
Securities and Exchange Commission and any other governmen
tal agencies, and tax returns, and oversee the insurance
relationships of the Fund;
(v) prepare, on behalf of the Fund and at the Fund's ex
pense, such applications and reports as may be necessary to
register or maintain the registration of the Fund and/or its
shares under the securities or "Blue-Sky" laws of all such
jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Fund's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(c) Compliance with Requirements. Any investment program
furnished, and any activities performed, by the Manager or by
a Sub-Adviser under this section shall at all times conform
to, and be in accordance with, any requirements imposed by:
(1) the Investment Company Act of 1940 (the "Act") and any
rules or regulations in force thereunder; (2) any other
applicable laws, rules and regulations; (3) the Declaration of
Trust and By-Laws of the Fund as amended from time to time;
(4) any policies and determinations of the Board of Trustees
of the Fund; and (5) the fundamental policies of the Fund, as
reflected in its registration statement under the Act or as
amended by the shareholders of the Fund.
(d) Best Efforts; Responsibility. The Manager shall give
the Fund the benefit of its best judgment and effort in
rendering services hereunder, but the Manager shall not be
liable for any loss sustained by reason of the adoption of any
investment policy or the purchase, sale or retention of any
security, whether or not such purchase, sale or retention
shall have been based upon (i) its own investigation and
research or (ii) investigation and research made by any other
individual, firm or corporation, if such purchase, sale or
retention shall have been made and such other individual, firm
or corporation shall have been selected in good faith by the
Manager or a Sub-Adviser.
(e) Other Customers. Nothing in this Agreement shall
prevent the Manager or any officer thereof from acting as
investment adviser, sub-adviser, administrator or manager for
any other person, firm, or corporation, and shall not in any
way limit or restrict the Manager or any of its officers,
stockholders or employees from buying, selling or trading any
securities for its own or their own accounts or for the
accounts of others for whom it or they may be acting,
provided, however, that the Manager expressly represents that
it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations under this
Agreement.
(f) Order Allocation. In connection with any duties for
which it may become responsible to arrange for the purchase
and sale of the Fund's portfolio securities, the Manager shall
select, and shall cause any Sub-Adviser to select, such broker-
dealers ("dealers") as shall, in the Manager's judgment, imple
ment the policy of the Fund to achieve "best execution," i.e.,
prompt, efficient, and reliable execution of orders at the
most favorable net price. The Manager shall cause the Fund to
deal directly with the selling or purchasing principal or
market maker without incurring brokerage commissions unless
the Manager determines that better price or execution may be
obtained by paying such commissions; the Fund expects that
most transactions will be principal transactions at net prices
and that the Fund will incur little or no brokerage costs. The
Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter
and that principal transactions placed through dealers include
a spread between the bid and asked prices. In allocating
transactions to dealers, the Manager is authorized and shall
authorize any Sub-Adviser, to consider, in determining whether
a particular dealer will provide best execution, the dealer's
reliability, integrity, financial condition and risk in
positioning the securities involved, as well as the difficulty
of the transaction in question, and thus need not pay the
lowest spread or commission available if the Manager
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and
research services provided by the dealer, viewed either in
terms of the particular transaction or the Manager's overall
responsibilities. If, on the foregoing basis, the transaction
in question could be allocated to two or more dealers, the
Manager is authorized, in making such allocation, to consider
(i) whether a dealer has provided research services, as
further discussed below; and (ii) whether a dealer has sold
shares of the Fund. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on
particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes
that no dollar value can be placed on such research services
or on execution services and that such research services may
or may not be useful to the Fund and may be used for the
benefit of the Manager or its other clients. The Manager shall
cause the foregoing provisions, in substantially the same
form, to be included in any Sub-Advisory Agreement.
(g) Registration Statement; Information. It is agreed that
the Manager shall have no responsibility or liability for the
accuracy or completeness of the Fund's Registration Statement
under the Act and the Securities Act of 1933, except for
information supplied by the Manager for inclusion therein.
The Manager shall promptly inform the Fund as to any
information concerning the Manager appropriate for inclusion
in such Registration Statement, or as to any transaction or
proposed transaction which might result in an assignment of
the Agreement.
(h) Liability for Error. The Manager shall not be liable
for any error in judgment or for any loss suffered by the Fund
or its security holders in connection with the matters to
which this Agreement relates, except a loss resulting from
wilful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by
it of its obligations and duties under this Agreement.
Nothing in this Agreement shall, or shall be construed to,
waive or limit any rights which the Fund may have under
federal and state securities laws which may impose liability
under certain circumstances on persons who act in good faith.
(i) Indemnification. The Fund shall indemnify the Manager
to the full extent permitted by the Fund's Declaration of
Trust.
3. Allocation of Expenses
The Manager shall, at its own expense, provide office space,
facilities, equipment, and personnel for the performance of
its functions hereunder and shall pay all compensation of
Trustees, officers, and employees of the Fund who are
affiliated persons of the Manager.
The Fund agrees to bear the costs of preparing and setting
in type its prospectuses, statements of additional information
and reports to its shareholders, and the costs of printing or
otherwise producing and distributing those copies of such pro
spectuses, statements of additional information and reports as
are sent to its shareholders. All costs and expenses not ex
pressly assumed by the Manager under this sub-section or other
wise by the Manager, administrator or principal underwriter or
by any Sub-Adviser shall be paid by the Fund, including, but
not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and
expenses of its Trustees other than those affiliated with the
Manager or such adviser, administrator or principal
underwriter; (v) legal and audit expenses; (vi) custodian and
transfer agent, or shareholder servicing agent, fees and
expenses; (vii) expenses incident to the issuance of its
shares (including issuance on the payment of, or reinvestment
of, dividends); (viii) fees and expenses incident to the
registration under Federal or State securities laws of the
Fund or its shares; (ix) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders
of the Fund; (x) all other expenses incidental to holding
meetings of the Fund's shareholders; and (xi) such non-
recurring expenses as may arise, including litigation
affecting the Fund and the legal obligations for which the
Fund may have to indemnify its officers and Trustees.
4. Compensation of the Manager
The Fund agrees to pay the Manager, and the Manager agrees
to accept as full compensation for all services rendered by
the Manager as such, an annual fee payable monthly and
computed on the net asset value of the Fund as of the close of
business each business day at the annual rate of 0.50 of 1% of
such net asset value.
5. Termination of Sub-Advisory Agreement
The Sub-Advisory Agreement may provide for its termination
by the Manager upon reasonable notice, provided, however, that
the Manager agrees not to terminate the Sub-Advisory Agreement
except in accordance with such authorization and direction of
the Board of Trustees, if any, as may be in effect from time
to time.
6. Duration and Termination of this Agreement
(a) Duration. This Agreement shall become effective 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 April 30
next preceding the second anniversary of the effective date of
this Agreement, and from year to year thereafter, but only so
long as such continuance is specifically approved at least
annually (1) by a vote of the Fund's Board of Trustees,
including a vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined
in the Act) of any such party, with votes cast in person at a
meeting called for the purpose of voting on such approval, or
(2) by a vote of the holders of a "majority" (as so defined)
of the outstanding voting securities of the Fund and by such a
vote of the Trustees.
(b) Termination. This Agreement may be terminated by the
Manager at any time without penalty upon giving the Fund sixty
days' written notice (which notice may be waived by the Fund)
and may be terminated by the Fund at any time without penalty
upon giving the Manager sixty days' written notice (which
notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by a
vote of a majority of its Trustees in office at the time or by
a vote of the holders of a majority (as defined in the Act) of
the voting securities of the Fund outstanding and entitled to
vote. The portions of this Agreement which relate to
providing investment advisory services (Sections 2(a), (c),
(d) and (e)) shall automatically terminate in the event of the
assignment (as defined in the Act) of this Agreement, but all
other provisions relating to providing services other than
investment advisory services shall not terminate, provided
however, that upon such an assignment the annual fee payable
monthly and computed on the net asset value of the Fund as of
the close of business each business day shall be reduced to
the annual rate of .30 of 1% of such net asset value.
7. Disclaimer of Shareholder Liability
The Manager understands that the obligations of this Agree
ment are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property; the Manager
represents that it has notice of the provisions of the Fund's
Declaration of Trust disclaiming shareholder liability for
acts or obligations of the Fund.
8. Notices of Meetings
The Fund agrees that notice of each meeting of the
Board of Trustees of the Fund will be sent to the Manager and
that the Fund will make appropriate arrangements for the atten-
dance (as persons present by invitation) of such person or
persons as the Manager may designate.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers
and their seals to be hereunto affixed, all as of the day and year
first above written.
ATTEST: TAX-FREE FUND OF COLORADO
/s/Xxxxxxxxx Xxxxx
By:/s/ Xxxxx X. Xxxxxxxx
_________________
ATTEST: AQUILA MANAGEMENT CORPORATION
/s/ X.Xxxx
By:/s/ Xxxx X. Xxxxxxx
_________________________________
