ANNUAL
REPORT
JUNE 30, 1996
AQUILA
TAX-FREE FUND FOR
UTAH
A TAX-FREE INCOME INVESTMENT
[Logo of Tax-Free Fund For Utah: Utah boulders in front of rising sun]
ONE OF THE
AQUILASM GROUP OF FUNDS
[Logo of Tax-Free Fund For Utah: Utah boulders in front of rising sun]
TAX-FREE FUND FOR UTAH
ANNUAL REPORT
"WHILE THE FUND BENEFITS YOU, IT ALSO HELPS UTAH"
August 20, 1996
Dear Investor:
We have found that Utahns take great pride in Utah and the
dynamism that the State possesses. New enterprises are being created,
businesses are expanding, the Winter Olympics in 2002 are coming, and the
general economic climate for Utah looks bright for many years ahead.
Accommodating Utah's growth plans will require expanded
municipal projects and services. Utahns have consistently expressed their
State pride by buying the municipal securities that help finance the State's
internal health. We fully expect this will continue over the future.
But, as you may know, acquiring individual municipal securities
directly, whether those of Utah issuers or otherwise, often requires minimum
investments of $10,000 to $25,000. By contrast, an investment in Tax-Free
Fund For Utah takes a minimum initial investment of only $1,000, with no
minimum for subsequent investments. And, purchase of Utah municipal
securities through an investment in the Fund provides the same kind of DOUBLE
TAX-FREE income benefits as any direct investment, plus a lot of other
beneficial features to investors.
Thus, what better way than the Fund do Utahns have in
benefiting themselves, with nearly any size investment, and also helping to
finance Utah's future growth and prosperity.
OUR CHANGING WORLD
Management of Tax-Free Fund For Utah strives very hard to make
sure that shareholders in the Fund achieve an attractive and advantageous
investment for themselves. Anyone investing in the Fund should, however,
always consider such investment as long-term in nature - that is because
securities markets do fluctuate.
Indeed, we live in a world that is ever changing. And, as
various of these changes occur, interest rates and municipal bond prices will
also change.
<TABLE>
<CAPTION>
6/30/96 12/31/95 6/30/95
<S> <C> <C> <C>
SHARE NET ASSET VALUE $ 9.74 $10.05 $ 9.59
DISTRIBUTION YIELD 5.27*% 5.43*% 5.63*%
</TABLE>
As the above table illustrates, the price of the Fund's shares
can and does move up and down over time. Also, the rate of DOUBLE TAX-FREE
income return distributed to shareholders can and will change. Movements in
these two key areas reflect the changes in market conditions which occurred
over the time period of this past fiscal year.
*Indicates trailing 12-month yield distributed to shareholders as
measured against share maximum public offering price.
<PAGE>
It is worth noting, however, that while changes have occurred,
looking at these numbers in a broader perspective, there has tended to be a
RELATIVELY HIGH LEVEL OF STABILITY to the Fund's performance results. Indeed,
these results compare favorably to what occurred in the municipal securities
market itself over this period.
MARKET FORCES
As an investor in Tax-Free Fund For Utah, you should be aware
that the changes in share price and income return of the Fund are primarily
influenced by market forces. Market forces are governed by several main
factors in the area of fixed-income securities, which area includes the
tax-free municipal securities in which the Fund invests.
Key among these factors is action taken by the Federal Reserve
Board. This Federal government organization has the power to raise and lower
interest rates in key areas which, in turn, can have an effect on all types
of fixed-income securities. The Fed can also control the supply of money in
our financial system - increasing or decreasing the amount of dollars in
circulation. This, in turn, can affect the market.
The other key factor influencing market action is the
psychology of investors. By psychology of investors, we mean the level of
confidence that investors as a whole have toward what is happening in our
country's overall financial affairs. We now live in a world that is not only
ever changing, but also one that is very global in nature. Consequently, the
psychology factor within market activity is influenced not only by the
confidence level, or lack thereof, which investors in the United States have,
but also by the confidence level that investors all around the world have
toward the handling of major financial affairs in our country.
Altogether, then, what happens to the share price and
distribution return of the Fund is very much driven by market forces. This is
an important factor which shareholders in the Fund must appreciate and come
to understand. And, this is the case whether investors own municipal
securities individually, or whether they do so through the portfolio of such
municipal securities as the Fund provides to shareholders.
THE VALUE THE FUND PROVIDES
While accepting the fact that market forces can and do have an
effect upon the Fund's performance, it must also be recognized that Tax-Free
Fund For Utah brings to bear very specific factors to dampen the extremes of
such market forces.
Most significant of these factors is the professional
investment management team of the Fund's Investment Adviser, First Security
Investment Management, Inc. Under the guidance of the Fund's management and
the Trustees, the Investment Adviser oversees, on a continuing basis, the
investments of the Fund. And, in doing so, they moderate forces that can or
might cause anxieties with investors. A very special element that the
professional investment management team brings to bear is the implementation
of the Fund's investment approach.
QUALITY FACTOR
A key moderation factor in containing damage from market forces
is quality - quality of the municipal issues within the Fund's investment
portfolio. Quality of issues is a very protective factor when it comes to
capital preservation.
That is why the Fund has chosen to invest in only those
municipal securities within the TOP FOUR CREDIT RATINGS, or equivalent.
It is noteworthy that at the end of the June 30, 1996 report
period, 96.3% of the Fund's holdings carried a credit rating of A OR BETTER -
the top three ratings.
<PAGE>
Moreover, at this report date, 84.9% of the Fund's investments
were rated AA OR AAA.
DIVERSIFICATION FACTOR
Another very important factor in moderating market forces is
diversification among portfolio holdings.
At June 30, 1996, the Fund had 64 SEPARATE ISSUES within the
investment portfolio, representing many different municipal projects within
numerous communities throughout Utah.
MATURITY FACTOR
Through having a variety of different maturities among the
securities in the Fund's portfolio, it is possible to avoid extremes in
volatility that can come about with market fluctuations. As you are aware,
short maturity securities possess little fluctuation in price, but pay low
yields. On the other hand, long maturity securities give higher yields, but
possess considerable price volatility due to the uncertainties involved over
the time between the present and the specified maturity date. The Fund seeks
an average intermediate maturity within the investment portfolio. Currently,
at June 30, 1996, the average maturity was 14.36 YEARS, so as to provide an
adequate income return, yet only moderate volatility in share price.
INCOME RETURN
As the table on page one illustrates, the trailing 12-month
yield distributed to shareholders, as measured against average maximum public
offering price, was running at the rate of 5.27% at June 30, 1996.
This is somewhat lower than it was six months and a year
earlier. However, it reflects the declining level of general market return of
municipal securities over this period.
Despite the modest decline in yield to shareholders, it must be
remembered that this income amount is the DOUBLE TAX-FREE return that
shareholders received from the Fund.
It is worth noting from the below graph that one would have had
to earn a substantially higher income return from a TAXABLE investment in
order to match the DOUBLE TAX-FREE amount distributed by the Fund.
[Graphic of Bar Chart with the following information:]
TAX-FREE FUND FOR UTAH'S DOUBLE TAX-FREE DISTRIBUTION RATE
AS COMPARED TO THE TAXABLE EQUIVALENT RATE AN INVESTOR
WOULD HAVE TO EARN AT VARIOUS TAX BRACKETS
<TABLE>
<CAPTION>
Tax Bracket Taxable Equivalent Rate Double Tax-Free Distribution Rate
<C> <C> <C>
28% 7.89% 5.27%
31% 8.23% 5.27%
36% 8.87% 5.27%
39.6% 9.40% 5.27%
</TABLE>
<PAGE>
And you will note, if one were in the 28% Federal income tax
bracket, a TAXABLE return of 7.89% would have to be achieved to match the
5.27% DOUBLE TAX-FREE return of the Fund. In the highest Federal income tax
bracket of 39.6%, the equivalent return would have had to have been 9.40%. In
general, it would not have been possible for an investor to obtain such
levels of taxable return unless additional risk was taken in the form of
lesser quality or longer maturity securities, or both such elements.
COMMITMENT TO CONSISTENCY
Management is committed to providing shareholders with as
consistent results from Tax-Free Fund For Utah as are possible to achieve,
considering prevailing market forces.
You should be aware that we are not able to eliminate
completely the market forces that swirl around us on a continuing basis.
However, as indicated, a number of investment management
techniques are used by the Fund to moderate market forces.
You can be assured that every effort will be made to provide a
continuing high level of benefits to you through your investment in the Fund,
as well as helping in financing the future of Utah and its communities.
YOUR CONFIDENCE APPRECIATED
We again wish to emphasize that your confidence in Tax-Free
Fund For Utah is greatly appreciated. You can be assured that management will
do everything in its power to merit your continued trust.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
The graph below illustrates the value of $10,000 invested in
Class A Shares of Tax-Free Fund For Utah at inception of the Fund in July,
1992 and maintaining this investment through the Fund's latest fiscal year
end, June 30, 1996, as compared with a hypothetical similar size investment
in the Lehman Brothers Municipal Bond Index (the "Index") of municipal
securities and the Consumer Price Index (a cost of living index), over that
same period. The total return of the investment in the Fund is shown after
deduction of the maximum sales charge of 4% at the time of initial
investment. It also reflects deduction of the Fund's annual operating
expenses and reinvestment of monthly dividends and capital gains
distributions without sales charge. On the other hand, the Index does not
reflect any sales charge nor operating expenses but does reflect reinvestment
of interest. The performance of the Fund's other classes, first offered on
May 21, 1996, may be greater or less than the Class A shares performance
indicated on the graph, depending on whether greater or lesser sales charges
and fees were incurred by shareholders investing in the other classes.
It should also be specifically noted that the Index is nationally
oriented and consisted, over the period covered by the graph, of an unmanaged
mix of between 12,000 to 32,000 investment-grade long-term municipal
securities of issuers throughout the United States. However, the Fund's
investment portfolio consisted of a significantly lesser number of
investment-grade tax-free municipal obligations, principally of Utah issuers,
over the same period. The maturities, market prices, and behavior of the
individual securities in the Fund's investment portfolio can be affected by
local and regional factors which might well result in variances from the
market action of the securities in the Index.
Consequently, much of the difference in performance of the Index
versus the Fund can be attributed to the lack of application of annual
operating expenses and initial sales charge to the Index. Additionally, a
portion of the difference in performance can be attributed to the different
characteristics in the single-state market of the securities in the Fund's
portfolio as compared with the national orientation of the securities in the
Index.
Since its inception, the Fund has been managed to provide as
stable a share value as possible consistent with producing a competitive
income return to shareholders. It has not been managed for maximum total
return, since one of the aims of management in structuring the portfolio of
the Fund is to reduce fluctuations in the price of the Fund's shares
resulting from changes in interest rates.
As can be observed, however, the pattern of the Fund's results
and that of the Index over the period since inception of the Fund track quite
similarly, even though they are not entirely comparable in character.
[Graphic of Line Chart with the following information:]
PERFORMANCE COMPARISON
<TABLE>
<CAPTION>
LEHMAN BROTHERS FUND AFTER SALES COST OF
MUNICIPAL BOND INDEX CHARGE AND EXPENSES LIVING INDEX
<C> <C> <C>
10,000 9,600 10,000
10,148 9,782 10,128
10,869 10,525 10,270
11,394 11,008 10,405
10,891 10,404 10,533
10,808 10,300 10,676
11,851 11,355 10,846
12,695 12,234 10,953
12,638 12,189 11,145
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS
[Table with the following information:]
FUND'S AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
For the Period Ended 1 Year Life of Fund
June 30, 1996 Since 7/24/92
<S> <C> <C>
Including Sales 2.88% 5.16%
Charge and Expenses
</TABLE>
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE (CONTINUED)
FISCAL 1996 REVIEW
For the fiscal year (July 1, 1995 through June 30, 1996), the
pattern of interest rates formed nearly a perfect "V" shape, declining over
the first six months then rising over the second six-month period. The
30-year U.S. Treasury bond yield began the period at 6.62%, held that level
for two months, then declined through December, 1995 to close the year at
5.95%. About mid-January rates began to rise as fears of a strengthening
economy and rising inflation level began to spook the bond market. By the
end of June, 1996, the U.S. Treasury bond had risen nearly one percent to a
level of 6.90% from the 1995 year-end low.
A similar "V" shaped pattern occurred over the same period when
comparing yields of municipal securities to U.S. Treasuries. During the
second half of 1995, individual investors, who play a dominant role in the
municipal bond market, tended to shun municipal bonds as a result of
declining yields, a powerful equity market, and fears regarding tax reform.
As a consequence, municipal bond yields in general increased as a percentage
of Treasury bond yields from 90% to nearly 97%. Since the beginning of 1996,
however, municipal bond yields have improved versus Treasury bond yields due
to sparse new supply, heavy cash flow into investor hands as a result of bond
calls, maturities and coupon payments. In addition, potential for a "flat
tax" proposal enactment has declined substantially. Consequently, municipal
bonds yields have resumed a 90% ratio to Treasuries' yields, similar to the
year earlier period.
FISCAL 1997 STRATEGY
Interest rates increased from mid-February through early July,
1996 for two basic reasons. First, the strength of the economy during the
first half of the year has proven to be stronger than consensus estimates
earlier in the year. After growing 2.3% in the first quarter, we are
estimating second quarter growth somewhere above 4.0%. The concerns for the
fixed-income markets inherent in these numbers are that the economy is
operating at very nearly full employment, and continued strength might
inevitably lead to higher labor costs, greater corporate pricing power, and
combining these two factors, stronger underlying inflation.
We anticipate that the second quarter of 1996 will represent the
peak in economic growth for this period. Federal Reserve policy should remain
unchanged although a quarter point hike in the Federal Funds rate in August
is presently built into expectations. With anticipated moderation in economic
growth we expect the yield on the benchmark 30-year U.S. Treasury to move
back to the 6.50% range in late 1996 to early 1997.
Some specific reasons we believe municipal bonds could perform
well include:
A REFOCUS ON ASSET ALLOCATION. Individual investors have allowed
the fixed-income component of their total asset mix to decline, as they
bought equities aggressively and/or allowed cash to build up in an
environment of uncertain interest rates. Recent signs indicate that
this attitude may be changing. Many investors are focusing back on the
merits of having a balance between equity and debt.
SPARSE NEW ISSUE SUPPLY. For a variety of reasons, new issue
volume in the municipal bond market remains light.
HIGHER INTEREST RATES. With the general rise in bond yields
versus yields on short-term cash equivalents, the case for getting out
of cash into bonds has increased significantly since the beginning of
1996.
LARGE BOND REDEMPTIONS. In mid-1996, many municipal bonds are
being called by Issuers who rushed bonds to the market ten years
earlier prior to the 1986 Tax Reform Act. We anticipate that a
significant portion of cash from the redemptions should be reinvested
in municipal bonds.
The Utah economy should continue its ninth straight year of
strong performance. As a result, we fully anticipate that HIGH CREDIT QUALITY
OF UTAH MUNICIPAL ISSUES WILL BE MAINTAINED. With the winning of the 2002
Winter Olympics bid, more infrastructure building over the next several years
should support an adequate supply of bonds for the Fund. In migration and
natural population growth, coupled with the favorable business climate in
Utah, should contribute to steady growth in the State for the next several
years.
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Tax-Free Fund For Utah:
We have audited the accompanying statement of assets and liabilities of
Tax-Free Fund For Utah, including the statement of investments, as of June
30, 1996, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
three-year period then ended and for the period July 24, 1992 (commencement
of operations) to June 30, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used, and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Tax-Free Fund For Utah as of June 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the three-year period then ended and for the period July
24, 1992 (commencement of operations) to June 30, 1993 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
August 16, 1996
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (32.5%) S&P VALUE
<C> <S> <C> <C>
City and County General Obligation
Bonds (4.7%)
$ 125,000 Blanding City, Utah, San Juan
County, Natural Gas Project
G.O., Series 1994, 5.800%,
07/15/13 Baa/NR $ 123,594
290,000 Central Utah Water Conservancy
District, Limited Tax G.O.,
Series 1993, MBIA Insured,
5.100% , 04/01/07 Aaa/AAA 283,475
235,000 Salt Lake County, Utah Service
Area G.O., 5.350%, 12/15/06 A/NR 231,181
100,000 Salt Lake County, Utah G.O.,
6.375%, 06/15/11 Aaa/NR 105,000
290,000 Sandy City, Utah Refunding
Public Building G.O.,
6.700%, 12/15/10 Aa/NR 314,650
300,000 Weber County, Utah Unlimited
Tax G.O., FGIC
Insured, 5.625%, 1/15/11 Aaa/AAA 300,000
1,357,900
School District General Obligation
Bonds (27.3%)
535,000 Beaver County, Utah School
District G.O., Series
1994, AMBAC Insured, 5.200%,
12/15/12 Aaa/AAA 501,563
510,000 Cache County, Utah School District
G.O., Series A, AMBAC Insured,
5.750%, 06/15/08 Aaa/AAA 520,200
700,000 Cache County, Utah School District
G.O., Series A, AMBAC Insured,
5.800%, 06/15/09 Aaa/AAA 711,375
1,000,000 Cache County, Utah School District
G.O., Series A, AMBAC Insured,
5.900%, 06/15/13 Aaa/AAA 1,010,000
595,000 Carbon County, Utah School
District G.O., Series 1993,
MBIA Insured, 5.450%, 06/15/10 Aaa/AAA 589,050
1,000,000 Davis County, Utah School District
G.O., MBIA Insured, 5.850%,
06/01/09 Aaa/AAA 1,028,750
500,000 Jordan, Utah School District G.O.,
5.900%, 06/15/04 Aa/NR 526,875
665,000 Jordan, Utah School District G.O.,
6.000%, 06/15/05 Aa/NR 700,744
235,000 Jordan, Utah School District G.O.,
6.100%, 06/15/07 Aa/NR 246,750
1,000,000 Nebo County, Utah School District
G.O, FGIC Insured, 5.750%,
06/15/11 Aaa/AAA 1,011,250
770,000 Nebo County, Utah School District,
FGIC Insured, 6.00%, 06/15/18 Aaa/AAA 776,737
250,000 Washington County, Utah School
District G.O, FGIC Insured,
5.000%, 09/01/06 Aaa/AAA 243,750
7,867,044
Recreational Facilities General
Obligation Bonds (.5%)
150,000 West Bountiful City, Utah Golf
Course G.O, 6.350%, 09/01/13 Baa/NR 151,313
151,313
Total General Obligation Bonds 9,376,257
REVENUE BONDS (65.4%)
Education Revenue Bonds (6.9%)
200,000 University of Utah Revenue
Refunding, (Biology Research
Facilities), MBIA Insured,
5.500%, 04/01/11 Aaa/AAA 198,500
190,000 Utah State Board of Regents, Salt
Lake Community College, AMBAC
Insured, 6.000%, 06/01/05 Aaa/AAA 198,788
300,000 Utah State Board of Regents,
Student Loan, Series C,
5.450%, 05/01/05 Aaa/NR 302,250
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 155,437
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 509,375
300,000 Utah State University
Agricultural Education
Facilities, MBIA Insured,
6.150%, 12/01/14 Aaa/AAA 306,375
300,000 Weber County, Utah School
District, MBIA Insured,
6.000%, 06/15/07 Aaa/AAA 311,625
1,982,350
Hospital Revenue Bonds (2.2%)
250,000 Murray City, Utah Hospital
Revenue, Intermountain Health
Care, AMBAC Insured,
5.200%, 05/15/08 Aaa/AAA 242,500
250,000 Salt Lake City, Utah Hospital
Revenue, Intermountain Health
Care, 8.000%, 05/15/07 NR/AAA 271,875
100,000 Utah State Municipal Finance
Corp., University of Utah
Hospital, 6.750%, 05/15/04 NR/AA- 107,500
621,875
Industrial Development Revenue
Bonds (1.7%)
120,000 Salt Lake County, Utah Industrial
Development, 5.900%, 09/01/03 A1/NR 122,700
120,000 Salt Lake County, Utah Industrial
Development, Plaza 5400,
6.200%, 09/01/12 NR/AAA 124,650
250,000 Sandy City, Utah Industrial
Development, H Shirl
Wright Project, 6.125%,
08/01/16 NR/AAA 241,875
489,225
Lease Revenue Bonds (19.4%)
600,000 Layton City, Utah Municipal
Building Authority, MBIA
Insured, 5.700%, 08/15/08 Aaa/AAA 605,250
200,000 Ogden City, Utah Municipal
Building Authority, Series
1992, 6.800%, 12/15/08 NR/NR* 204,500
200,000 Ogden City, Utah Municipal
Building Authority, Series
1992, 7.000%, 12/15/12 NR/NR* 204,250
600,000 Salt Lake City, Utah Municipal
Building Authority, Series
1993A, 5.750%, 10/15/08 A1/A+ 607,500
1,000,000 Salt Lake City, Utah Municipal
Building Authority, 6.000%,
10/15/14 A1/A+ 1,001,250
1,000,000 Salt Lake County, Utah Municipal
Building Authority, Series
1994A, MBIA Insured, 6.050%,
10/01/08 Aaa/AAA 1,030,000
475,000 Utah Municipal Building Authority,
Logan Municipal Building,
Series 1993, 5.900%, 04/01/11 A/NR 475,594
685,000 Utah State Building Ownership
Authority, Series A, 5.750%,
08/15/07 Aa/AA 696,987
350,000 Utah State Building Ownership
Authority, 5.750%, 08/15/08 Aa/AA 354,375
315,000 West Valley City, Utah Municipal
Building Authority, Series
1993, MBIA Insured, 6.000%,
01/15/10 Aaa/AAA 321,694
145,000 Weber County, Utah Municipal
Building Authority, 5.000%,
12/15/05 NR/AA 139,925
5,641,325
Mortgage Revenue Bonds (7.0%)
280,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series E-1, 5.850%,
07/01/13 Aa/NR 273,700
240,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series 1994B, 6.200%,
07/01/06 A1/A+ 247,500
980,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series E-1, 6.600%,
07/01/11 NR/AA 1,006,950
490,000 Utah State Housing Finance Agency,
Single Family Housing Mortgage
Revenue, Series 1994C, 6.350%,
07/01/11 Aa/NR 501,025
2,029,175
Pollution Control Revenue Bonds
(1.3%)
350,000 Box Elder County Pollution Control
Revenue, Nucor Corporation
Project, 6.900%, 05/15/17 NR/AA- 373,188
373,188
Transportation Revenue Bonds (3.9%)
875,000 Salt Lake City, Utah Airport
Revenue, FGIC Insured,
Series B, 5.875%, 12/01/12 Aaa/AAA 885,938
250,000 Salt Lake City, Utah Airport
Revenue, FGIC Insured,
Series B, 5.875%, 12/01/18 Aaa/AAA 249,062
1,135,000
Water and Sewer Revenue Bonds
(9.7%)
270,000 St. George, Utah Sewer Revenue,
AMBAC Insured, 5.500%,
06/15/07 Aaa/AAA 271,350
100,000 St. George, Utah Water Revenue,
Series A, FGIC Insured,
7.050%, 06/01/06 Aaa/AAA 102,833
300,000 St. George, Utah Water Revenue,
FGIC Insured,
5.375%, 06/01/16 Aaa/AAA 283,500
500,000 Salt Lake City, Utah Water And
Sewer Revenue, AMBAC Insured,
5.750%, 02/01/13 Aaa/AAA 498,750
525,000 Salt Lake County, Utah Water &
Sewer Revenue AMBAC Insured,
6.000%, 02/01/10 Aaa/AAA 539,437
300,000 Salt Lake County, Utah Water &
Sewer Revenue AMBAC Insured,
5.100%, 10/01/08 Aaa/AAA 288,375
800,000 Timpanagos, Utah Water & Sewer
Revenue Series A AMBAC
Insured, 6.000%, 06/01/16 Aaa/AAA 807,000
2,791,245
Utility Revenue Bonds (13.3%)
350,000 Kanab City, Utah, Kane County,
Electric Systems Revenue,
Series 1994, 5.400%, 08/15/06 NR/NR* 336,875
400,000 Provo City, Utah Energy Systems
Revenue, MBIA Insured, Series
A, 5.400%, 11/15/05 Aaa/AAA 406,000
500,000 Provo City, Utah Energy Systems
Revenue, MBIA Insured, Series
1993A, 5.600%, 11/15/07 Aaa/AAA 505,625
790,000 Utah Association Municipal Power
Systems Revenue, 5.250%,
12/01/09 NR/A- 746,550
395,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.500%, 07/01/10 Aaa/AAA 391,050
650,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.500%, 07/01/11 Aaa/AAA 638,625
875,000 Utah State Municipal Power Agency,
Electric Systems Revenue, FGIC
Insured, 5.250%, 07/01/18 Aaa/AAA 803,905
3,828,630
Total Revenue Bonds 18,892,013
Total Investments - 97.9%
(Cost $28,098,479**) 28,268,270
Other assets in excess of
liabilities - 2.1% 612,585
Net Assets - 100% $ 28,880,855
<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 $28,037,689.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value (identified cost - $28,098,479) $ 28,268,270
Cash 111,973
Interest receivable 348,290
Receivable for Fund shares sold 175,460
Due from Administrator for reimbursement of expenses 35,961
Other assets 116
Total assets 28,940,070
LIABILITIES
Accrued expenses 23,177
Dividends payable 17,035
Distribution fees payable 14,242
Adviser and Administrator fees payable 3,028
Payable for Fund shares redeemed 1,733
Total liabilities 59,215
NET ASSETS $ 28,880,855
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 29,666
Additional paid-in capital 29,183,614
Accumulated net loss on investments (522,754)
Undistributed net investment income 20,538
Net unrealized appreciation on investments 169,791
$ 28,880,855
CLASS A
Net Assets $ 28,880,655
Capital shares outstanding 2,966,578
Net asset value and redemption price per share $ 9.74
Offering price per share (100/96 of $9.74 adjusted to
nearest cent) $ 10.15
CLASS C
Net Assets $ 100
Capital shares outstanding 10
Net asset value and offering price per share $ 9.74
Redemption price per share (* varies by length of time
shares are held) $ *
CLASS Y
Net Assets $ 100
Capital shares outstanding 10
Net asset value, offering and redemption price per share $ 9.74
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,618,963
Expenses:
Investment Adviser fees (note B) $ 65,552
Administrator fees (note B) 76,955
Distribution fees (note B) 57,015
Legal fees 31,346
Shareholders' reports and proxy statements 27,792
Transfer and shareholder servicing agent fees 25,503
Audit and accounting fees 20,694
Trustees' fees and expenses (note G) 19,992
Custodian fees (note F) 6,400
Registration fees and dues 5,012
Insurance 586
Miscellaneous 35,357
372,204
Investment Adviser fees waived (note B) (55,749)
Administrator fees waived (note B) (72,207)
Reimbursement of expenses by Administrator
(note B) (187,859)
Expenses paid indirectly (note F) (3,268)
Net expenses 53,121
Net investment income 1,565,842
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from securities
transactions (46,905)
Change in unrealized appreciation on
investments 442,737
Net realized and unrealized gain on
investments 395,832
Net increase in net assets resulting from
operations $ 1,961,674
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended June 30
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,565,842 $ 1,551,322
Net realized loss from securities transactions (46,905) (486,119)
Change in unrealized appreciation on investments 442,737 1,183,700
Change in net assets from operations 1,961,674 2,248,903
DISTRIBUTIONS TO SHAREHOLDERS (NOTE E):
Class A Shares:
Net investment income (1,565,842) (1,551,322)
Net realized gain on investments - -
Class C Shares:
Net investment income - -
Net realized gain on investments - -
Class Y Shares:
Net investment income - -
Net realized gain on investments - -
Change in net assets from distributions (1,565,842) (1,551,322)
CAPITAL SHARE TRANSACTIONS (NOTE H):
Proceeds from shares sold 3,729,976 6,518,998
Reinvested dividends and distributions 887,407 717,544
Cost of shares redeemed (3,668,372) (6,514,404)
Change in net assets from capital share
transactions 949,011 722,138
Change in net assets 1,344,843 1,419,719
NET ASSETS:
Beginning of period 27,536,012 26,116,293
End of period $ 28,880,855 $ 27,536,012
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
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 commenced operations on July 24, 1992. The Fund is
authorized to issue an unlimited number of shares and, since its inception to
May 21, 1996, offered only one class of shares. On that date, the Fund began
offering two additional classes of shares, Class C and Class Y shares. All
shares outstanding prior to that date were designated as Class A shares and,
as was the case since inception, are sold with a front-payment sales charge
and bear a service fee. Class C shares are sold with no front-payment sales
charge but are assessed a contingent deferred sales charge if redeemed within
one year from the date of purchase and a level-payment charge for service and
distribution fees from date of purchase through six years thereafter. Class Y
shares are offered only to institutions acting for investors in a fiduciary,
advisory, agency, custodial or similar capacity, are not offered directly to
retail customers, and are sold at net asset value with no sales charge, no
redemption fee, no contingent deferred sales charge and no service or
distribution fees. All classes of shares represent interests in the same
portfolio of investments and are identical as to rights and privileges but
differ with respect to the effect of sales charges, the distribution and/or
service fees borne by each class, expenses specific to each class, voting
rights on matters affecting a single class and the exchange privileges of
each class.
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.
<PAGE>
(4) ALLOCATION OF EXPENSES: Expenses, other than class-specific
expenses, are allocated daily to each class of shares based on the
relative net assets of each class. Class-specific expenses, which
include distribution and service fees and any other items that are
specifically attributed to a particular class, are charged directly
to such class.
(5) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
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.
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. These include
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 year ended June 30, 1996.
<PAGE>
For the year ended June 30, 1996, the Fund incurred fees under the
Advisory Agreement and Administration Agreement of $65,552 and $76,955
respectively, of which amounts the Adviser and Administrator waived $55,749
and $72,207, respectively. Additionally, the Administrator voluntarily agreed
to reimburse the Fund for other expenses during this period in the amount of
$187,859.
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. For the year ended June 30, 1996, the Distributor
received sales commissions in the amount of $3,267.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Fund is authorized to make
service fee payments 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 ("Qualified
Recipients"). The Fund makes payment of this service fee at the annual rate
of 0.20% of the Fund's average net assets represented by Class A Shares. For
the year ended June 30, 1996, service fees on Class A Shares amounted to
$57,015, of which the Distributor received $1,624.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares
or servicing of shareholder accounts. These payments are made at the annual
rate of 0.75% of the Fund's net assets represented by Class C Shares. There
were no payments made during the period May 21, 1996 through June 30, 1996.
In addition, under a Shareholder Services Plan, the Fund is authorized to
make service fee payments with respect to Class C Shares to Qualified
Recipients for providing personal services and/or maintenance of shareholder
accounts. These payments are made at the annual rate of 0.25% of the Fund's
net assets represented by Class C Shares. There were no payments made during
the period May 21, 1996 through June 30, 1996.
Specific details about the Plans are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended June 30, 1996, purchases of securities and proceeds
from the sales of securities aggregated $3,923,558 and $3,146,773,
respectively.
At June 30, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $462,317 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $231,735,
for a net unrealized appreciation of $230,582. At June 30, 1996, for Federal
income tax purposes, the Fund had a net capital loss of $508,555 which is
available to offset future gains on securities transactions to the extent
provided for in the Internal Revenue Code. Of this amount, $394,329 expires
at June 30, 2003 and the balance of $114,226 expires at June 30, 2004. 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.
<PAGE>
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 issuers' 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 year ended June 30, 1996, the
Fund's custodian fees amounted to $6,400, of which $3,268 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.
NOTE G - TRUSTEES' FEES AND EXPENSES:
During the fiscal year from July 1, 1995 through June 30, 1996, there
were seven Trustees. Trustees' fees paid during the year were at the annual
rate of $1,000 for carrying out their responsibilities and attendance at
regularly scheduled Board Meetings. If additional or special meetings are
scheduled for the Fund, separate meeting fees are paid for each such meeting
to those Trustees in attendance. The Fund also reimburses Trustees for
expenses such as travel, accomodations, and meals incurred in connection with
attendance at regularly scheduled or special Board Meetings and at the Annual
Meeting and outreach meetings of Shareholders. For the fiscal year ended June
30, 1996, such reimbursements averaged approximately $2,000 per Trustee. One
of the Trustees, who is affiliated with the Administrator, is not paid any
Trustee fees.
<PAGE>
NOTE H - CAPITAL SHARE TRANSACTIONS:
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 379,526 $3,729,776 697,330 $ 6,518,998
Reinvested dividends and
distributions 90,296 887,407 76,988 717,544
Cost of shares redeemed (373,822) (3,668,372) (707,049) (6,514,404)
Net change 96,000 $ 948,811 67,269 $ 722,138
<CAPTION>
Period Ended
June 30, 1996*
Shares Amount
<S> <C> <C>
CLASS C SHARES:
Proceeds from shares sold 10 $ 100
Reinvested dividends and
distributions - -
Cost of shares redeemed - -
Net change 10 $ 100
<CAPTION>
Period Ended
June 30, 1996*
Shares Amount
<S> <C> <C>
CLASS Y SHARES:
Proceeds from shares sold 10 $ 100
Reinvested dividends and
distributions - -
Cost of shares redeemed - -
Net change 10 $ 100
<S> <C> <C> <C> <C>
Total transactions in
Fund shares 96,020 $ 949,011 67,269 $ 722,138
<FN>
* From May 21, 1996 (date of inception) through June 30, 1996.
</FN>
</TABLE>
<PAGE>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class A(1)
Period(3)
Class C(2) Class Y(2) ended
Period ended Year ended June 30 June 30,
June 30, 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.77 $9.77 $9.59 $9.32 $10.00 $9.60
Income from Investment
Operations:
Net investment income 0.05 0.06 0.54 0.55 0.55 0.50
Net gain (loss) on
securities (both
realized and
unrealized) (0.03) (0.03) 0.15 0.27 (0.65) 0.40
Total from
Investment Operations 0.02 0.03 0.69 0.82 (0.10) 0.90
Less Distributions:
Dividends from net
investment income (0.05) (0.06) (0.54) (0.55) (0.55) (0.50)
Distributions from
capital gains - - - - (0.03) -
Total Distributions (0.05) (0.06) (0.54) (0.55) (0.58) (0.50)
Net Asset Value,
End of Period 9.74 $9.74 $9.74 $9.59 $9.32 $10.00
Total Return (not
reflecting sales
charge) (%) 0.20# 0.29# 7.17 9.09 (1.09) 9.67#
Ratios/Supplemental Data
Net Assets, End of
Period ($ thousands) 0.1 0.1 28,881 27,536 26,116 12,938
Ratio of Expenses to
Average Net Assets (%) 0.14# 0.03# 0.19 0.08 0.03 0*
Ratio of Net Investment
Income to Average Net
Assets (%) 0.50# 0.61# 5.49 5.85 5.58 5.64*
Portfolio Turnover Rate
(%) 11.15 11.15 11.15 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> <C> <C>
Net Investment Income
($) 0.04 0.05 0.43 0.43 0.40 0.27
Ratio of Expenses to
Average Net Assets
(%) 0.23# 0.11# 1.30 1.30 1.60 2.67*
Ratio of Net Investment
Income to Average Net
Assets (%) 0.42# 0.53# 4.37* 4.63 4.00 2.97*
<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 July 24, 1992 (commencement of operations) to June 30, 1993.
</FN>
<FN>
# Not annualized
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of Tax-Free Fund For Utah (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 (97.1%); 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%).
Special Meetings of the Fund's Class C and Class Y Shareholders were
held on April 19, 1996.** At the Special Meeting of Class C Shareholders of
the Fund, the Class C Shareholders voted on and unanimously approved
amendments to the Fund's Distribution Plan affecting the interests of the
Class C Shareholders of the Fund. At the Special Meeting of Class Y
Shareholders of the Fund, the Class Y Shareholders voted on and unanimously
approved amendments to the Fund's Distribution Plan affecting the interests
of the Class Y Shareholders of the Fund.
- - -----------
* 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.
** On the record dates for the Special Meetings, the total net asset values
of the Class C and Class Y Shares of the Fund outstanding and entitled to
vote were $100 and $100, respectively. The holders of all Class C and Class
Y Shares entitled to vote were present in person at the meetings.
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement of
the Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF SHAREHOLDERS
IS REQUIRED.
For the fiscal year ended June 30, 1996, of the total amount of dividends
paid by Tax-Free Fund For Utah, 97.77% was "exempt-interest dividends" and
the balance was ordinary dividend income.
Prior to January 31, 1996, shareholders were mailed IRS Form 1099-DIV
which contained information on the status of distributions paid for the 1995
CALENDAR YEAR.
<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.
