<LOGO>
TAX-FREE FUND FOR UTAH
SEMI-ANNUAL REPORT
"FINANCIALLY REWARDING RESULTS
WHILE
INVESTING WITH PRIDE"
February 12, 1996
Dear Investor:
As I believe we are all aware, the stock market turned in a
spectacular performance in the year 1995. In fact, price appreciation for
many individual stocks and market indexes was of "once in a lifetime"
magnitude.
The period from July 1 through December 31, 1995 - the first half
of the current fiscal year of Tax-Free Fund For Utah - was also a good one
for the Fund's investors.
However, as we know, municipal bonds and common stocks are two
distinctly different kinds of investments. They serve different purposes in
achieving one's investment objectives. Stocks are for capital appreciation,
while bonds are for capital preservation.
Over this report period, shareholders in the Fund continued to
receive strong capital preservation through a high level of credit safety
with the Fund's high quality investments, an attractive level of DOUBLE
TAX-FREE income, and also experienced an upward movement in the share price
- - - all achieved through the Fund's investments in Utah municipal securities.
Indeed, you and all other shareholders in the Fund can take
considerable pride in knowing that there is a direct relationship between the
benefits you receive from your investment in the Fund and the Fund's helping
to finance vital public purpose municipal projects throughout Utah and its
various communities - projects such as schools, roads, hospitals, airports,
etc.
It is important to appreciate that Utah municipal securities in
the Fund's investment portfolio assist both the economic development of Utah
and the quality of life of Utahns.
MID-YEAR STATUS
Tax-Free Fund For Utah has three basic investment goals for you
as an investor in the Fund - all derived through securities issued by Utah
municipalities. Such Utah municipal securities are truly investments which
finance useful and vital facilities which you can reach out and touch.
1
<PAGE>
These goals are:
* a high level of preservation of your capital;
* a high level of stability of the price of the Fund's
shares, over a reasonable and realistic time
frame; and
* a relatively high level of DOUBLE TAX-FREE income.
CAPITAL PRESERVATION
Preserving the value of your capital in the Fund is achieved
primarily through three factors: QUALITY, MATURITY, and DIVERSIFICATION of
investments.
The overall QUALITY of the Fund's investment portfolio remained
very high at the mid-point - December 31, 1995 - of this fiscal year.
Specifically, 96.2% of the composition of the Fund's investments were in the
top three credit ratings - AAA, AA, A or equivalent.
Although there are nine separate credit ratings assignable to
municipal securities, the Fund deliberately limits its investments to only
the top four credit ratings - AAA, AA, A, and Baa, or equivalent - in order
to protect investors' capital.
Credit ratings are assigned based upon many factors. A very key
element, however, is the amount of cash flow of an issuer to make interest
and principal payments in a timely manner when due. The greater the cash
flow coverage of payments, the higher the credit rating. Thus, the Fund is
providing you with high credit safety for your investment through the
top-quality make-up of its portfolio.
The MATURITY of securities in the Fund ranges from very short to
over 20 years. Short maturities experience very little price movement, but
have a low level of yield. Long maturities have a higher return level, but
have much greater price volatility.
In managing the Fund's investment portfolio, the Fund's
Utah-based Investment Adviser, First Security Investment Management, Inc.,
creates a blend and balance to the maturities of the various municipal
securities in the investment portfolio.
In structuring the maturity composition of the portfolio, the
idea is to protect capital through an overall maturity level which moderates
share price fluctuations, yet which produces a highly competitive yield for
shareholders.
In doing so, the Investment Adviser has created an
intermediate-term maturity for the Fund's investment portfolio. The
portfolio's average maturity was 14.6 YEARS at December 31, 1995.
DIVERSIFYING the securities in the Fund's portfolio mitigates
risk and thereby also helps to preserve investors' capital.
Indeed, spreading the Fund's investments out so that no one
investment represents too high a percentage of the Fund's overall assets is
a
tried and true way of protecting capital value. On the report date, the
Fund's assets were diversified over 63 SEPARATE ISSUES, representing a
variety of different type municipal projects, which are geographically
dispersed within the State. At December 31, 1995, no one security in the
portfolio represented more than 3.7% of the Fund's total net assets.
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SHARE PRICE STABILITY
The very same factors which lend themselves to capital
preservation are what help create share price stability.
However, the maturity level of securities in the portfolio is
perhaps the most dominant element in achieving price stability.
As mentioned, a long average maturity will create a high income
return level. However, such return level is accompanied by relatively high
price volatility in view of the uncertainties regarding the number and type
of risks that might arise over the time from date of issue until repayment of
the principal of the security. That is why the Fund has settled upon an
intermediate-term maturity.
The accompanying chart illustrates the pattern of relatively high
stability of share price achieved by the Fund since it commenced operations
on Pioneer Day, July 24, 1992.
<TABLE>
<CAPTION>
NET ASSET VALUE
In Dollars
<C> <C>
7/31/92 $9.60
9/30/92 $9.47
12/31/92 $9.57
3/31/93 $9.81
6/31/93 $10.00
9/30/93 $10.17
12/30/93 $10.14
3/31/94 $9.36
6/31/94 $9.32
9/30/94 $9.26
12/30/94 $8.95
3/31/95 $9.53
6/30/95 $9.59
9/30/95 $9.79
12/31/95 $10.05
</TABLE>
YIELD
The level of DOUBLE TAX-FREE income return generated by the Fund
will vary with market conditions and interest rate levels. This latter
factor is primarily driven by actions of the Federal Reserve Board in
Washington. While we have no control over what happens in Washington, we can
and do structure the Fund's investment portfolio to generate as high a yield
as is realistic, considering our efforts to preserve your capital.
It is always important to remember that it is necessary to
measure the level of DOUBLE TAX-FREE return generated by the Fund against
taxable return levels.
The following chart shows you the level of DOUBLE TAX-FREE return
produced by the Fund during the period from July 1 through December 31, 1995,
on an annualized basis, as measured against the maximum public offering
price.
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It also illustrates the level of return you would have had to
earn over this period from a taxable investment in order to equate to the
DOUBLE TAX-FREE return of the Fund, based upon the various Federal income tax
brackets.
Noteworthy is the fact that such taxable return levels could not
be earned over this report period unless one made an investment having higher
risk and less safety for one's capital than that provided by Tax-Free Fund
For Utah.
<TABLE>
<CAPTION>
TAX-FREE FUND UTAH'S DOUBLE TAX-FREE DISTRIBUTION RATE
AS COMPARED TO THE TAXABLE EQUIVALENT RATE AN INVESTOR
WOULD HAVE TO EARN AT VARIOUS TAX BRACKETS
<S> <C> <C> <C> <C>
TAX BRACKET 28% 31% 36% 39.6%
RATE OF RETURN
TAXABLE EQUIVALENT RATE 7.92% 8.38% 9.06% 9.63%
DOUBLE TAX-FREE DISTRIBUTION RATE 5.29% 5.29% 5.29% 5.29%
</TABLE>
GROWTH OF ASSETS
We are pleased to note that the total size of Tax-Free Fund For
Utah increased to $28,878,411 at December 31, 1995. This compares with total
assets of $27,536,012 on June 30, 1995, at the end of the previous fiscal
year.
YOUR CONFIDENCE APPRECIATED
We thank you for the confidence you have placed in the Tax-Free
Fund For Utah. You can take considerable pride in knowing that your
investment in the Fund is benefitting BOTH YOU AND YOUR UTAH.
Every effort will be expended to merit your continued trust in
Tax-Free Fund For Utah.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
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<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995 (unaudited)
RATING
FACE MOODYS/
AMOUNT GENERAL OBLIGATION BONDS (30.7%) S&P VALUE
<C> <S> <C> <C>
City and County General Obligation
Bonds (4.8%)
$ 125,000 Blanding City, UT, San Juan County,
Natural Gas Project G.O., Series 1994,
5.800%, 07/15/13 Baa/NR $ 126,875
290,000 Central Utah Water Conservancy District,
Limited Tax G.O., Series 1993,
MBIA Insured 5.100%, 04/01/07 Aaa/AAA 293,263
235,000 Salt Lake County, UT Service Area G.O.,
5.350%, 12/15/06 A/NR 239,112
100,000 Salt Lake County, UT G.O., 6.375%,
06/15/11 Aaa/NR 106,625
290,000 Sandy City, UT Refunding Public
Building G.O., 6.700%, 12/15/10 A1/NR 323,713
300,000 Weber County, UT Unlimited Tax G.O.,
FGIC Insured, 5.625%, 1/15/11 Aaa/AAA 309,000
1,398,588
School District General Obligation
Bonds (25.3%)
535,000 Beaver County, UT School District G.O.,
Series 1994, AMBAC Insured,
5.200%, 12/15/12 Aaa/AAA 526,975
510,000 Cache County, UT School District G.O.,
Series A, AMBAC Insured,
5.750%, 06/15/08 Aaa/AAA 534,863
700,000 Cache County, UT School District G.O.,
Series A, AMBAC Insured,
6.090%, 06/15/09 Aaa/AAA 731,500
1,000,000 Cache County, UT School District G.O.,
Series A, AMBAC Insured,
5.900%, 06/15/13 Aaa/AAA 1,043,750
595,000 Carbon County, UT School District G.O.,
Series 1993, MBIA Insured,
5.450%, 06/15/10 Aaa/AAA 605,412
1,000,000 Davis County, UT School District G.O.,
MBIA Insured, 5.850%, 06/01/09 Aaa/AAA 1,058,750
500,000 Jordan, UT School District G.O.,
5.900%, 06/15/04 Aa/NR 543,750
665,000 Jordan, UT School District G.O.,
6.000%, 06/15/05 Aa/NR 722,356
235,000 Jordan, UT School District G.O.,
6.100%, 06/15/07 Aa/NR 254,681
1,000,000 Nebo County, UT School District G.O,
FGIC Insured, 5.750%, 06/15/11 Aaa/AAA 1,038,750
250,000 Washington County, UT School District
G.O, FGIC Insured, 5.000%, 09/01/06 Aaa/AAA 253,125
7,313,912
</TABLE>
5
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<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
RATING
FACE MOODYS/
AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
Recreational Facilities General
Obligation Bonds (.6%)
$ 150,000 West Bountiful City, Utah Golf Course
G.O, 6.350%, 09/01/13 Baa/NR $ 156,375
156,375
Total General Obligation Bonds 8,868,875
REVENUE BONDS (64.6%)
Education Revenue Bonds (6.3%)
190,000 Utah State Board of Regents, Salt
Lake Community College, AMBAC
Insured, 6.000%, 06/01/05 Aaa/AAA 203,537
300,000 Utah State Board of Regents, Student
Loan, Series C, 5.450%, 05/01/05 Aaa/NR 311,250
150,000 Utah State Board of Regents, Utah
State University Revenue Refunding
Student Building Fees, Series 1993A,
AMBAC Insured, 5.800%, 12/01/05 Aaa/AAA 159,000
500,000 Utah State Board of Regents, Utah
State University Revenue Refunding
Student Building Fees, Series 1994B,
MBIA Insured, 5.750%, 12/01/07 Aaa/AAA 525,000
300,000 Utah State University Agricultural
Education Facilities, MBIA
Insured, 6.150%, 12/01/14 Aaa/AAA 317,625
300,000 Weber County, Utah School District,
MBIA Insured, 6.000%, 06/15/07 Aaa/AAA 316,875
1,833,287
Hospital Revenue Bonds (2.2%)
250,000 Murray City, UT Hospital Revenue,
Intermountain Health Care, AMBAC
Insured, 5.200%, 05/15/08 Aaa/AAA 251,250
250,000 Salt Lake City, UT Hospital Revenue,
Intermountain Health Care,
8.000%, 05/15/07 NR+/NR+ 276,875
100,000 Utah State Municipal Finance Corp.,
University of Utah Hospital,
6.750%, 05/15/04 NR/AA- 111,125
639,250
Industrial Development Revenue
Bonds (1.8%)
120,000 Salt Lake County, UT Industrial
Development, 5.900%, 09/01/03 A1/NR 123,450
120,000 Salt Lake County, UT Industrial
Development, Plaza 5400, 6.200%,
09/01/12 NR/AA+ 128,100
250,000 Sandy City, UT Industrial Development,
H Shirl Wright Project, 6.125%,
08/01/16 NR/AAA 256,250
507,800
</TABLE>
6
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<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
RATING
FACE MOODYS/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
Lease Revenue Bonds (19.7%)
$ 600,000 Layton City, UT Municipal Building
Authority, MBIA Insured, 5.700%,
08/15/08 Aaa/AAA $ 621,750
200,000 Ogden City, UT Municipal Building
Authority, Series 1992, 6.800%,
12/15/08 NR/NR* 212,750
200,000 Ogden City, UT Municipal Building
Authority, Series 1992, 7.000%,
12/15/12 NR/NR* 211,250
600,000 Salt Lake City, UT Municipal
Building Authority, Series
1993A, 5.750%, 10/15/08 A1/A+ 626,250
1,000,000 Salt Lake City, UT Municipal
Building Authority, 6.000%,
10/15/14 A1/A+ 1,040,000
1,000,000 Salt Lake County, UT Municipal
Building Authority, Series 1994A,
MBIA Insured, 6.050%, 10/01/08 Aaa/AAA 1,072,500
475,000 Utah Municipal Building Authority,
Logan Municipal Building, Series
1993, 5.900%, 04/01/11 A/NR 488,063
685,000 Utah State Building Ownership
Authority, Series A, 5.750%,
08/15/07 Aa/AA 713,256
350,000 Utah State Building Ownership
Authority, 5.750%, 08/15/08 Aa/AA 362,250
315,000 West Valley City, UT Municipal
Building Authority, Series 1993,
MBIA Insured, 6.000%, 01/15/10 Aaa/AAA 329,962
5,678,031
Mortgage Revenue Bonds (7.3%)
280,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series E-1, 5.850%,
07/01/13 Aa/NR 286,650
240,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series 1994B, 6.200%,
07/01/06 A1/NR 254,400
980,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series E-1, 6.600%,
07/01/11 NR/AA 1,037,575
490,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series 1994C, 6.350%,
07/01/11 Aa/NR 517,563
2,096,188
Pollution Control Revenue Bonds (1.3%)
350,000 Box Elder County Pollution Control
Revenue, Nucor Corporation
Project, 6.900%, 05/15/17 NR/AA- 383,688
383,688
</TABLE>
7
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<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
RATINGS
FACE MOODYS/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
Transportation Revenue Bonds (4.0%)
$ 875,000 Salt Lake City, UT Airport Revenue,
FGIC Insured, Series B,
5.875%, 12/01/12 Aaa/AAA $ 916,562
250,000 Salt Lake City, UT Airport Revenue,
FGIC Insured, Series B,
5.875%, 12/01/18 Aaa/AAA 258,750
1,175,312
Water and Sewer Revenue Bonds (6.1%)
270,000 St. George, UT Sewer Revenue, AMBAC
Insured, 5.500%, 06/15/07 Aaa/AAA 278,438
100,000 St. George, UT Water Revenue, Series
A, FGIC Insured, 7.050%, 06/01/06 Aaa/AAA 104,250
500,000 Salt Lake City, Utah Water And Sewer
Revenue, AMBAC Insured, 5.750%,
02/01/13 Aaa/AAA 515,625
525,000 Salt Lake County, UT Water & Sewer
Revenue, AMBAC Insured, 6.00%,
02/01/10 Aaa/AAA 555,187
300,000 Salt Lake County, Utah Water & Sewer
Revenue, AMBAC Insured, 5.100%,
10/01/08 Aaa/AAA 299,250
1,752,750
Utility Revenue Bonds (15.9%)
170,000 Intermountain Power Authority, Utah
Power Supply Revenue, Series I,
6.000%, 07/01/21 Aa/AA 170,289
465,000 Intermountain Power Authority, Utah
Power Supply Revenue, Series B,
6.000%, 07/01/12 Aa/AA 483,600
350,000 Kanab City, UT, Kane County, Electric
Systems Revenue, Series 1994,
5.400%, 08/15/06 NR/NR* 351,313
400,000 Provo City, UT Energy Systems
Revenue, MBIA Insured, Series A,
5.400%, 11/15/05 Aaa/AAA 416,000
500,000 Provo City, UT Energy Systems Revenue,
MBIA Insured, Series 1993A, 5.600%,
11/15/07 Aaa/AAA 521,250
790,000 Utah Association Municipal Power
Systems Revenue, 5.250%, 12/01/09 NR/A- 782,100
395,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.500%, 07/01/10 Aaa/AAA 405,863
650,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.500%, 07/01/11 Aaa/AAA 665,437
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
RATING
FACE MOODYS/
AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
Utility Revenue Bonds (continued)
$ 800,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.250%, 07/01/18 Aaa/AAA $ 782,000
4,577,852
Total Revenue Bonds 18,644,158
Special Obligation Utility Bonds
(2.1%)
300,000 Intermountain Power Authority,
Power Supply Revenue, First
Crossover Series, 6.000%, 07/01/15 Aa/AA- 300,642
300,000 Intermountain Power Authority, Power
Supply Revenue, 7.200%, 07/01/19 Aa/AA 317,250
Total Special Obligation Utility Bonds 617,892
Total Investments - 97.4%
(Cost $27,052,778**) 28,130,925
Other assets in excess of
liabilities - 2.6% 747,486
Net Assets - 100% $ 28,878,411
<FN>
+ Security has been pre-refunded and is no longer rated.
</FN>
<FN>
* Any security not rated must be determined by the Investment
Adviser to have sufficient quality to be ranked in the top four
credit ratings if a credit rating were to be assigned by a rating service.
</FN>
<FN>
** Cost for Federal income tax purposes is $27,000,727.
See accompanying notes to financial statements.
</FN>
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (unaudited)
<S> <C>
ASSETS
Investments at value (identified cost - $27,052,778) $ 28,130,925
Cash 220,471
Interest receivable 367,700
Receivable for Fund shares sold 121,990
Receivable for securities sold 45,000
Due from Administrator for reimbursement of expenses 38,918
Other assets 12,105
Total assets 28,937,109
LIABILITIES
Dividends payable 16,754
Accrued expenses 16,465
Distribution fees payable 14,194
Payable for Fund shares redeemed 11,285
Total liabilities 58,698
NET ASSETS (equivalent to $10.05 per share
on 2,874,316 shares outstanding) $ 28,878,411
Net Assets consist of:
Capital Stock - Authorized an unlimited number
of shares, par value $.01 per share $ 28,743
Additional paid-in capital 28,309,235
Accumulated net loss on investments (537,714)
Net unrealized appreciation on investments 1,078,147
$ 28,878,411
Net Asset Value, redemption price per share $ 10.05
Offering price per share (100/96 of $10.05
adjusted to nearest cent) $ 10.47
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 (unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 805,819
Expenses:
Investment Adviser fees (note B) $ 32,531
Administrator fees (note B) 38,189
Distribution fees (note B) 28,467
Legal fees 15,000
Transfer and shareholder servicing agent fees 13,500
Shareholders reports and proxy statements 13,000
Trustees fees and expenses 10,500
Audit and accounting fees 9,500
Custodian fees (note F) 3,964
Registration fees and dues 3,000
Insurance 300
Miscellaneous 15,438
183,389
Investment Adviser fees waived (note B) (29,039)
Administrator fees waived (note B) (38,189)
Reimbursement of expenses by Administrator (note B) (92,817)
Expenses paid indirectly (note F) (1,423)
Net expenses 21,921
Net investment income 783,898
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from securities transactions (34,352)
Change in unrealized appreciation on investments 1,351,093
Net realized and unrealized gain on investments 1,316,741
Net increase in net assets resulting from operations $ 2,100,639
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
Six Months
Ended Year Ended
December 31, June 30,
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 783,898 $ 1,551,322
Net realized loss from
securities transactions (34,352) (486,119)
Change in unrealized
appreciation on
investments 1,351,093 1,183,700
Net increase in net
assets resulting from
operations 2,100,639 2,248,903
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
($0.28 and $0.55 per
share, respectively) (783,898) (1,551,322)
Net realized gain on investments _ _
Total distributions (783,898) (1,551,322)
Net increase from
investment activities 1,316,741 697,581
<CAPTION>
FUND SHARE TRANSACTIONS:
SHARES
Six Months
Ended Year Ended
December 31, June 30,
1995 1994
<S> <C> <C> <C> <C>
Shares sold 186,618 697,330 1,821,452 6,518,998
Shares issued through
reinvestment of
dividends 44,161 76,988 433,424 717,544
Shares redeemed (227,042) (707,049) (2,229,218) (6,514,404)
Increase in shares
and net assets
derived from Fund
share transactions 3,737 67,269 25,658 722,138
Total increase in
net assets 1,342,399 1,419,719
NET ASSETS:
Beginning of period 27,536,012 26,116,293
End of period $ 28,878,411 $ 27,536,012
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Tax-Free Fund For Utah (the "Fund"), a non-diversified, open-end
investment company, was organized on December 12, 1990 as a Massachusetts
business trust and is authorized to issue an unlimited number of shares.
The Fund commenced operations on July 24, 1992.
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles for investment
companies.
(1) Portfolio valuation: Municipal securities which have remaining maturities
of more than 60 days are valued each business day based upon information
provided by a nationally prominent independent pricing service and
periodically verified through other pricing services; in the case of
securities for which market quotations are readily available, securities
are valued at the mean of bid and asked quotations and, in the case of
other securities, at fair value determined under procedures established
by and under the general supervision of the Board of Trustees.
Securities which mature in 60 days or less are valued at amortized cost
if their term to maturity at purchase was 60 days or less, or by
amortizing their unrealized appreciation or depreciation on the 61st day
prior to maturity, if their term to maturity at purchase exceeded 60 days.
(2) Securities transactions and related investment income: Securities
transactions are recorded on the trade date. Realized gains and losses
from securities transactions are reported on the identified cost basis.
Interest income is recorded daily on the accrual basis and is adjusted
for amortization of premiums and accretion of discounts of securities
purchased at other than par with less than 60 days to maturity.
(3) Federal income taxes: It is the policy of the Fund to qualify as a
regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies.
The Fund intends to make distributions of income and securities
profits sufficient to relieve it from all, or substantially all, Federal
income and excise taxes.
NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:
Management affairs of the Fund are conducted through two separate
management arrangements.
First Security Investment Management, Inc. (the "Adviser"), serves as
Investment Adviser to the Fund. In this role, under an Investment Advisory
Agreement, the Adviser supervises the Fund's investments and provides various
services to the Fund for which it is entitled to receive a fee which is
payable monthly and computed as of the close of business each day at the
annual rate of 0.23 of 1% of the net assets of the Fund.
13
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
The Fund also has an Administration Agreement with Aquila Management
Corporation (the "Administrator"), the Fund's founder and sponsor. Under this
Agreement, the Administrator provides all administrative services, other than
those relating to the management of the Fund's investments. This includes
providing the office of the Fund and all related services as well as
overseeing the activities of all the various support organizations to the
Fund such as the shareholder servicing agent, custodian, legal counsel,
auditors and distributor and additionally maintaining the Fund's accounting
books and records. For its services, the Administrator is entitled to receive
a fee which is payable monthly and computed as of the close of business each
day at the annual rate of 0.27 of 1% of the net assets of the Fund.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
The Adviser and the Administrator each agrees that the above fees shall
be reduced, but not below zero, by an amount equal to its pro-rata portion
(determined on the basis of the respective fees computed as described above)
of the amount, if any, by which the total expenses of the Fund in any fiscal
year, exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net assets of
the Fund plus 2% of the next $70 million of such assets and 1.5% of its
average annual net assets in excess of $100 million, or (ii) 25% of the
Fund's total annual investment income. No such reduction in fees was
required during the six months ended December 31, 1995.
For the six months ended December 31, 1995, the Fund incurred fees under
the Advisory Agreement and Administration Agreement of $32,531 and $38,189,
respectively, of which amounts the Adviser and Administrator waived $29,039
and $38,189, respectively. Additionally, the Administrator voluntarily agreed
to reimburse the Fund for other expenses during this period in the amount of
$92,817.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Fund's shares.
Through agreements between the Distributor and various broker-dealer firms
("dealers"), the Fund's shares are sold primarily through the facilities of
these dealers having offices within Utah, with the bulk of sales commissions
inuring to such dealers. However, during the six months ended December 31,
1995, the Distributor received sales commissions in the amount of $951.
The Fund adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
(the "Rule") under the Investment Company Act of 1940. The Plan authorizes the
Fund to make service fee payments at the annual rate of 0.20% of the average
net assets of the Fund to broker-dealers or others selected by the
Distributor, including, but not limited to, any principal underwriter of the
Fund, with which the Distributor has entered into written agreements
contemplated by the Rule and which have rendered assistance in the
distribution and/or retention of the Fund's shares or servicing of
shareholder accounts. For the six months ended December 31, 1995, service
fees totaled $28,467, of which the Distributor received $805. Specific
details about the Plan are more fully defined in the Fund's Prospectus and
Statement of Additional Information.
14
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the six months ended December 31, 1995, purchases of securities
and proceeds from the sales of securities aggregated $1,347,992 and
$1,645,717, respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $1,140,032 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to $9,834,
for a net unrealized appreciation of $1,130,198. At December 31, 1995, for
Federal income tax purposes, the Fund had a net capital loss of $339,165
which will be carried forward to offset future realized capital gains through
2003. To the extent that this loss is used to offset future realized capital
gains, it is probable the gains so offset will not be distributed.
NOTE D - PORTFOLIO ORIENTATION:
Since the Fund invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Utah, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Utah and whatever
effects these may have upon Utah issuer's ability to meet their obligations.
NOTE E - DISTRIBUTIONS:
The Fund declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share or in
cash, at the shareholder's option. Net realized capital gains, if any, are
distributed annually.
The Fund intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net
investment income to be exempt from regular Federal and State of Utah income
taxes. However, due to differences between financial reporting and Federal
income tax reporting requirements, distributions made by the Fund may not be
the same as the Fund's net investment income, and/or net realized securities
gains. Further, a small portion of the dividends may, under some
circumstances, be subject to ordinary income taxes. Also, annual capital
gains distributions, if any, are taxable.
NOTE F - CUSTODIAN FEES:
The Fund has negotiated an expense offset agreement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the six months ended December 31,
1995, the Fund's custodian fees amounted to $3,964, of which $1,423 was
offset by such credits. The Fund could have invested its cash balances in an
income-producing asset if it had not agreed to a reduction in fees under the
expense offset arrangement with the custodian.
15
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
(unaudited)
For a share outstanding throughout each period
Six Months Period
Ended Ended
December Year Ended June 30, June 30,
31, 1995 1995 1994 1993**
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.59 $9.32 $10.00 $9.60
Income from Investment
Operations:
Net investment income 0.28 0.55 0.55 0.50
Net gain (loss) on
securities (both
realized and unrealized) 0.46 0.27 (0.65) 0.40
Total from Investment
Operations 0.74 0.82 (0.10) 0.90
Less Distributions:
Dividends from net
investment income (0.28) (0.55) (0.55) (0.50)
Distributions from
capital gains _ _ (0.03) _
Total Distributions (0.28) (0.55) (0.58) (0.50)
Net Asset Value, End of
Period $10.05 $9.59 $9.32 $10.00
Total Return (not reflecting
sales load) 7.63%# 9.09% (1.09)% 9.67%#
Ratios/Supplemental Data
Net Assets, End of Period
(in thousands) $28,878 $27,536 $26,116 $12,938
Ratio of Expenses to
Average Net Assets 0.15%* 0.08% 0.03% 0%*
Ratio of Net Investment
Income to Average Net
Assets 5.51%* 5.85% 5.58% 5.64%*
Portfolio Turnover Rate 4.83%# 22.92% 27.53% 36.52%#
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and
the expense offset in custodian fees for uninvested cash balances would
have been:
<S> <C> <C> <C> <C>
Net Investment Income $0. 22 $0.43 $0.40 $0.27
Ratio of Expenses to Average
Net Assets 1.29%* 1.30% 1.60% 2.67%*
Ratio of Net Investment Income
to Average Net Assets 4.37%* 4.63% 4.00% 2.97%*
<FN>
**For the Period from July 24, 1992 (commencement of operations) to June 30,
1993.
</FN>
<FN>
#Not annualized
</FN>
<FN>
*Annualized
</FN>
</TABLE>
16
<PAGE>
REPORT ON THE ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of the Fund was held on September
29, 1995. At the meeting, the following matters were submitted to a
shareholder vote* and approved:
(i) the election of Lacy B. Herrmann, Philip E. Albrecht, Gary C. Cornia,
William L. Ensign, D. George Harris, Anne J. Mills, and R. Thayne
Robson as Trustees to hold office until the next annual meeting of the
Fund's shareholders or until his or her successor is duly elected
(each Trustee received at least 1,985,821 affirmative votes (98.4%);
no more than 31,583 votes (1.6%) were withheld for any Trustee),
(ii) the ratification of the selection of KPMG Peat Marwick LLP as the
Fund's independent auditors for the fiscal year ending June 30, 1996
(votes for: 1,958,134 (97.0%); votes against: 5,512 (0.3%);
abstentions: 53,758 (2.7%); broker non-votes: 0),
(iii) the approval of an amendment to the Fund's Declaration of Trust
to authorize the creation of additional classes of shares (votes for:
1,451,844 (62.4%); votes against: 134,235 (5.8%); abstentions: 135,495
(5.8%); broker non-votes: 605,937 (26.0%)), and
(iv) the approval of an amendment to the Fund's Declaration of Trust to
authorize voting by net asset value of shares (votes for: 1,507,555
(64.8%); votes against: 93,893 (4.0%); abstentions: 120,127 (5.2%);
broker non-votes: 605,937 (26.0%)).
___________
* On the record date for this meeting, 2,870,560 shares of the
Fund were outstanding and entitled to vote. The holders of 2,017,404 shares
(70.3%) entitled to vote were present in person or by proxy at the initial
session of the meeting held on September 29, 1995 and the holders of
2,327,512 shares (81.1%) entitled to voted were present in person or by proxy
at the adjourned session of the meeting held on November 10, 1995.
17
<PAGE>
INVESTMENT ADVISER
FIRST SECURITY INVESTMENT
MANAGEMENT, INC.
61 South Main Street
Salt Lake City, Utah 84111
ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Philip E. Albrecht
Gary C. Cornia
William L. Ensign
D. George Harris
Anne J. Mills
R. Thayne Robson
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Vice President
Kimball L. Young, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
ADMINISTRATIVE DATA
MANAGEMENT CORP.
581 Main Street
Woodbridge, New Jersey 07095-1198
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
AQUILA
(picture of eagle)
TAX-FREE FUND FOR UTAH
A TAX-FREE INCOME INVESTMENT
(logo)
One of the
AQUILA(SM) Group of Fund's
