MANAGER AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
ZIONS FIRST NATIONAL BANK
One South Main Street
Salt Lake City, Utah 84111
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Gary C. Cornia
William L. Ensign
Diana P. Herrmann
Anne J. Mills
R. Thayne Robson
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Senior Vice President
Kimball L. Young, Senior Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
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.
ANNUAL
REPORT
JUNE 30, 1998
AQUILA
[Logo of Aquila Group of Funds: an eagle's head]
TAX-FREE FUND FOR
UTAH
A tax-free income investment
[Logo of Tax-Free Fund For Utah: a rectangle containing dessert boulders with
a sun rising behind it]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
[Logo of Tax-Free Fund For Utah: a rectangle containing dessert boulders with
a sun rising behind it]
TAX-FREE FUND FOR UTAH
ANNUAL REPORT
"ATTRACTIVE TAX-FREE RETURNS PLUS HIGH STABILITY"
August 17, 1998
Dear Investor:
In our last report letter to you, we discussed the initial impact
of the serious economic and currency problems of various countries in the Far
East. We observed that these problems have resulted in a "FLIGHT TO QUALITY."
Specifically, we pointed out that, on a comparative basis, the
economy of the United States has continued to be very strong. As a result,
the U.S. dollar as a currency, as well as U.S. securities markets, have stood
out in the world as a "BEACON OF QUALITY." Tax-Free Fund For Utah shares in
this high quality ranking.
Therefore, in this letter to you, we wish to focus upon the level
of tax-free* return provided to you by Tax-Free Fund For Utah in the current
marketplace.
ATTRACTIVE TAX-FREE RETURNS
The rate of inflation in the United States has continued to be
relatively low throughout the recent expansion of the economy. This has
caused the level of interest rates to decline over recent years.
This decline in interest rates has provided the opportunity for
various municipalities to finance new projects and also to refinance existing
projects at lower interest costs to them. Municipalities act much like you
and I would when refinancing home mortgages to take advantage of attractive
rates. Basically, they are acting to save money.
While interest rates generated by TAX-FREE municipal bonds have
declined over the years, they have not declined as much as rates on a taxable
investment. As a result, TAX-FREE municipal securities have become
exceptionally attractive - on a comparative basis - with other types of
fixed-income securities.
Indeed, while the benchmark 30-year maturity U.S. Treasury bond
is currently yielding approximately 5.65%, its interest income is still
subject to taxes. On the other hand, similar maturity municipal securities,
of comparable quality, are yielding roughly 5.15% and are TAX-FREE. Thus,
comparable TAX-FREE municipal bonds are yielding more than 90% of what
high-quality TAXABLE bonds are paying. Consequently, with TAX-FREE municipal
securities, you are getting to keep more of the actual return paid. Most
significantly, this level of return represents for investors one of the best
for TAX-FREE securities in recent years.
The advantage to you of owning a TAX-FREE investment such as
Tax-Free Fund For Utah is vividly illustrated in the following chart. This
chart compares the 4.92%** average level of distribution return for Class A
Shares (as measured against the maximum public offering price) for the past
twelve months with what you would have had to earn with a taxable investment.
<PAGE>
[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>
<S> <C> <C> <C> <C>
Tax Bracket 28% 31% 36% 39.6%
Taxable Equivalent Rate 7.35% 7.77% 8.41% 8.93%
Double Tax-Free Distribution Rate 4.92% 4.92% 4.92% 4.92%
</TABLE>
As you will note, you would have to find taxable fixed-income
securities that would yield you a level of return quite a bit higher than
that achieved by your investment in Tax-Free Fund For Utah. Given the current
economic environment, such higher levels of yield would not be possible to
obtain, unless significant additional risk was taken in the form of lesser
quality securities.
You should be aware of just how attractive the TAX-FREE return
from the Fund is in today's marketplace.
STABILITY OF YOUR INVESTMENT
Additionally, what we have always tried to achieve for your
investment in Tax-Free Fund For Utah is a high level of stability of share
value. This is one of the prime objectives that shareholders in the Fund have
indicated to us that they would like to have in addition to a good level of
tax-free return.
[Graphic of bar chart with the following information:]
SHARE NET ASSET VALUE
<TABLE>
<CAPTION>
In Dollars
<C> <C>
7/31/92 9.60
12/31/92 9.57
6/30/93 10.00
12/31/93 10.14
6/30/94 9.32
12/31/94 8.95
6/30/95 9.59
12/31/95 10.05
6/30/96 9.67
12/31/96 9.92
6/30/97 9.94
12/31/97 10.22
6/30/98 10.24
</TABLE>
As you will note from the above chart, the Class A share value of
the Fund has achieved a high level of stability since the Fund began.
<PAGE>
SLEEPING WELL AT NIGHT
We have always been conscious of the fact that since many of our
shareholders are retirees or pre-retirees, they want comfort with regard to
obtaining a high degree of safety for their invested capital in the Fund.
Indeed, in our management of Tax-Free Fund For Utah, we have always tried to
ensure that you are able to "SLEEP WELL AT NIGHT" knowing that your
investment dollars are being well looked after.
Achieving an attractive level of tax-free return PLUS high
stability for your investment in Tax-Free Fund For Utah requires use of
various investment strategies.
We again want to highlight these various investment strategies
which the Fund uses to ensure that YOUR MONEY IS WELL PROTECTED.
These strategies include emphasis on municipal securities having
high quality credit ratings, broad diversification with respect to both
number and nature of securities, and an intermediate maturity level with the
various holdings in the Fund's portfolio.
The accompanying three pie charts illustrate these points.
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY QUALITY
(By Credit Rating)
<C> <C>
AAA 71.53%
AA 20.37%
A 4.16%
Below A and Not Rated 3.94%
</TABLE>
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DIVERSIFICATION BY PROJECT
<S> <C>
Industrial Development 1.21%
Higher Education 5.01%
Hospitals 4.10%
Utilities 11.03%
Water and Sewer 14.73%
Pollution Control 1.15%
Leases 21.10%
Mortgages 5.76%
Transportation 7.09%
School Districts 25.64%
Other 3.18%
</TABLE>
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY MATURITY
(in Years)
<C> <C>
0 - 5 8.21%
6 - 10 13.35%
11 - 15 42.67%
16 - 20 21.49%
Over 20 14.28%
</TABLE>
At June 30, 1998, 91.9% of the Fund's overall portfolio was rated
AAA or AA - the two HIGHEST quality credit ratings available for securities.
There are presently 61 individual issues in the Fund's portfolio,
representing a broad diversification in number and variety of project
categories throughout the State.
<PAGE>
The average overall maturity of the portfolio is in the
intermediate range of 14.04 years. And, the duration is 5.5 years.
Basically, all these factors are designed to give you "PEACE OF
MIND" with your investment in Tax-Free Fund For Utah - providing attractive
tax-free return PLUS high stability.
KEEPING YOU IN MIND
We want you to know, that since the inception of Tax-Free Fund
For Utah, we have always kept in mind the level of tax-free return you
receive from your investment in the Fund.
We also keep in mind the degree of stability that we want your
investment to possess.
We achieve this through paying attention to the various areas we
have highlighted above.
These are the prime focuses that we continue to have for you with
the Fund.
YOUR CONFIDENCE VALUED
We value the opportunity to be of service to you. It is our
intent to consistently work in your interest with your investment in Tax-Free
Fund For Utah.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
* In certain circumstances, a small portion of the dividends paid by the
Fund will be subject to income taxes, including the alternative minimum
tax.
** The distribution rate shown represents that of Class A shares. Such data
quoted represents past performance and is not indicative of future
results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Different classes of shares are
offered by the Fund and their distribution rate and performance will
vary because of differences in sales charges and fees paid by
shareholders investing in different classes.
<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, 1998, 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 44,000 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. Futhermore, whatever the difference in
performance of the Index versus the Fund might also be attributed to the lack
of application of annual operating expenses and initial sales charge to 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 a 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> <C>
7/92 $10,000 $9,600 $10,000
6/93 10,869 10,514 10,270
6/94 10,891 10,460 10,533
6/95 11,851 11,509 10,846
6/96 12,638 12,094 11,145
6/97 13,684 13,160 11,401
6/98 14,867 14,221 11,593
</TABLE>
[Table setup with the following information:]
FUND'S AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED LIFE OF FUND
JUNE 30, 1998 1 YEAR 5 YEARS Since 7/24/92
<S> <C> <C> <C>
INCLUDING SALES
CHARGE AND EXPENSES 4.12% 5.34% 6.11%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS
<PAGE>
PORTFOLIO MANAGER'S ANALYSIS
FISCAL 1998 REVIEW
For the latest fiscal year - July 1, 1997 through June 30, 1998 -
a major change in the structure of interest rates occurred. Federal Funds
rates, which represent the overnight rate banks charge each other for
borrowed funds, were held constant by the Federal Reserve at 5.50%. Long-term
U.S. Treasury bond yields, however, fell over 1% from 6.8% to 5.6% for the
same corresponding period in spite of strong U.S. economic growth. Several
reasons for this flattening of the yield curve include the continued
reduction in the rate of inflation, the impact of increasing price
competition from the Far East nations affected by currency devaluations, and
the flight of foreign assets into U.S. government bonds as a safe haven due
to contracting economies around the globe. The downward movement in U.S.
government bond yields has not been matched correspondingly by municipal
bonds. The supply of new municipal bonds into the market and residual fear
of flat tax proposals have kept municipals relatively cheap to treasuries.
Therefore, long-term municipal bond yields relative to U.S. Treasury bond
yields have moved from an 85% level to 92% over the past year.
The net asset value of the Class A shares of the Fund increased
over the fiscal year with the decline in interest rates from $9.94 to $10.24,
providing capital appreciation in addition to the tax-exempt interest
payouts. The 30-day yield presently is 4.9%, giving an attractive double
tax-exempt yield to investors when compared to taxable returns.
FISCAL 1998 STRATEGY
The first half of 1998 represented the third largest half year
issuance of municipal bonds at $146.4 billion in the history of the municipal
market. This level was exceeded only by the first half of 1993, as yields
plummeted and refunding volume skyrocketed, and that of the second half of
1985, as issuers rushed in to evade proposed limitations under Tax Reform.
During those two former periods, the municipal market enjoyed sources of
demand that simply do not exist today. In the present market, volume is being
swelled by new offerings and refundings as municipalities continue to replace
older high coupon bonds with those bearing lower rates. This pressure of new
supply coupled with retail investor indifference and international demand for
U.S. Treasuries should continue into the next fiscal year. We expect that
this, in turn, will cause municipal bond price performance to lag treasuries
but continue in a positive direction due to declining interest rates.
Potential favorable signs are beginning to emerge that should
help municipal bonds over the next year. New issue volume should not continue
at current levels. Once this volume eases, municipals should begin to
outperform U.S. treasuries, at least a bit. Additionally, any weakening of
the Treasury market would help, as well as were there to be a significant,
sustained correction in the equity market.
The Utah economy should continue its eleventh straight year of
strong performance, although at rates of growth below that of the past
several years. In a recent Regional Financial Review publication Utah's real
gross state product is forecasted to grow at the rate of 4.5% - 1Oth best in
U.S. - in 1998. For 1999, the projection for growth rate is 3.91% - number 1
in U.S. The unemployment rate in Utah should remain among the best in the
country, at 3% or below. Conservative fiscal management by our various
municipalities should ensure their capability to meet timely interest and
principal payments for investors from the investment grade municipalities
represented in the Tax-Free Fund For Utah portfolio. Utah municipal bonds
continue to be viewed throughout the country as premier quality, top-grade
paper.
<PAGE>
KPMG Peat Marwick LLP
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, 1998, and 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 five-year period then ended. 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, 1998, 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, 1998, 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 five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
August 7, 1998
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<C> <S> <C> <C>
Rating
Face Moody's/
Amount General Obligation Bonds (28.5%) S&P Value
City and County General Obligation Bonds (3.3%)
$ 125,000 Blanding City, Utah, San Juan County, Natural
Gas Project G.O., Series 1994, 5.800% 07/15/13 Baa/NR $ 129,844
225,000 Provo City Utah Housing Authority Aaa/NR 232,875
Multi-Family Revenue, 5.800% 07/20/22
290,000 Sandy City, Utah Refunding Public Building G.O.,
6.700%, 12/15/10 A/NR 313,925
100,000 Salt Lake City, Utah G.O., 6.375%, 06/15/11 Aaa/NR 105,875
300,000 Weber County, Utah Unlimited Tax G.O., FGIC
Insured, 5.625%, 1/15/11 Aaa/AAA 312,750
1,095,269
School District General Obligation Bonds (24.7%)
535,000 Beaver County, Utah School District G.O.,
Series 1994, AMBAC Insured, 5.200%, 12/15/12 Aaa/AAA 545,700
510,000 Cache County, Utah School District G.O.,
Series A, AMBAC Insured, 5.750%, 06/15/08 Aaa/AAA 548,888
700,000 Cache County, Utah School District G.O.,
Series A, AMBAC Insured, 5.80%, 06/15/09 Aaa/AAA 755,125
1,000,000 Cache County, Utah School District G.O.,
Series A, AMBAC Insured, 5.900%, 06/15/13 Aaa/AAA 1,083,750
595,000 Carbon County, Utah School District G.O.,
Series 1993, MBIA Insured, 5.450%, 06/15/10 Aaa/AAA 615,081
1,000,000 Davis County, Utah School District G.O.,
MBIA Insured, 5.850%, 06/01/09 Aaa/AAA 1,068,750
500,000 Jordan, Utah School District G.O., 5.900%,
06/15/04 Aa/NR 537,500
665,000 Jordan, Utah School District G.O., 6.000%,
06/15/05 Aa3/NR 717,369
235,000 Jordan, Utah School District G.O., 6.100%,
06/15/07 Aa3/NR 253,506
1,000,000 Nebo County, Utah School District G.O, FGIC
Insured, 5.750%, 06/15/11 Aaa/AAA 1,048,750
770,000 Nebo County, Utah School District , FGIC
Insured, 6.00%, 06/15/18 Aaa/AAA 829,675
8,004,094
<PAGE>
Recreational Facilities General Obligation Bonds (0.5%)
150,000 West Bountiful City, Utah Golf Course G.O,
6.350%, 09/01/13 Baa/NR 160,875
Total General Obligation Bonds 9,260,238
REVENUE BONDS (70.2%)
Education Revenue Bonds (5.9%)
275,000 Salt Lake County Utah, Westminster College
Revenue, 5.700%, 10/01/17 NR/BBB 280,156
250,000 Salt Lake County Utah, Westminster College
Revenue, 5.750%, 10/01/27 NR/BBB 254,687
200,000 University of Utah Revenue Refunding,
(Biology Research Facilities), MBIA Insured,
5.500%, 04/01/11 Aaa/AAA 211,750
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 534,375
300,000 Utah State University Agricultural Education
Facilities, MBIA Insured, 6.150%, 12/01/14 Aaa/NR 325,125
300,000 Weber County, Utah School District, MBIA
Insured, 6.000%, 06/15/07 Aaa/AAA 313,500
1,919,593
Hospital Revenue Bonds (3.9%)
250,000 Salt Lake City, Utah Hospital Revenue,
Intermountain Health Care, 8.000%, 05/15/07 NR/AAA 292,187
1,000,000 Utah County, Utah Hospital Revenue, IHC
Health Services, MBIA Insured, 5.250% 08/15/26 Aaa/AAA 992,500
1,284,687
Industrial Development Revenue Bonds (1.2%)
120,000 Salt Lake County, Utah Industrial Development,
Plaza 5400, 6.200%, 09/01/12 NR/AAA 126,450
250,000 Sandy City, Utah Industrial Development, H Shirl
Wright Project, 6.125%, 08/01/16 NR/AAA 265,312
391,762
<PAGE>
Lease Revenue Bonds (17.8%)
600,000 Layton City, Utah Municipal Building Authority,
MBIA Insured, 5.700%, 08/15/08 Aaa/AAA 630,750
200,000 Ogden City, Utah Municipal Building Authority,
Series 1992, 6.800%, 12/15/08 NR/NR* 210,750
200,000 Ogden City, Utah Municipal Building Authority,
Series 1992, 7.000%, 12/15/12 NR/NR* 210,250
600,000 Salt Lake City, Utah Municipal Building
Authority, Series 1993A, 5.750%, 10/15/08 A1/A+ 640,500
1,000,000 Salt Lake City, Utah Municipal Building
Authority, 6.000%, 10/15/14 A1/A+ 1,078,750
1,000,000 Salt Lake County, Utah Municipal Building
Authority, Series 1994A, MBIA Insured
6.050%, 10/01/08 Aaa/AAA 1,087,500
475,000 Utah Municipal Building Authority, Logan
Municipal Building, Series 1993, 5.900%,
04/01/11 A/NR 495,187
685,000 Utah State Building Ownership Authority,
Series A, 5.750%, 08/15/07 Aa/AA 716,681
350,000 Utah State Building Ownership Authority,
5.750%, 08/15/08 Aa/AA 365,312
315,000 West Valley City, Utah Municipal Building
Authority, Series 1993, MBIA Insured
6.000%, 01/15/10 Aaa/AAA 334,294
5,769,974
Mortgage Revenue Bonds (5.0%)
210,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series E-1,
5.850%, 07/01/13 Aa/NR 219,450
135,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series
1994B, 6.200%, 07/01/06 A1/A+ 144,113
710,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series E-1,
6.600%, 07/01/11 NR/AA 762,363
475,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series 1994C,
6.350%, 07/01/11 Aa/NR 507,063
1,632,989
<PAGE>
Pollution Control Revenue Bonds (1.2%)
350,000 Box Elder County Pollution Control Revenue,
Nucor Corporation Project, 6.900%, 05/15/17 NR/AA- 383,250
Transportation Revenue Bonds (7.0%)
875,000 Salt Lake City, Utah Airport Revenue, FGIC
Insured, Series B, 5.875%, 12/01/12 Aaa/AAA 938,438
285,000 Salt Lake City, Utah Airport Revenue, FGIC
Insured, Series B, 5.875%, 12/01/18 Aaa/AAA 300,319
1,000,000 Utah Transit Authority Sales Tax Revenue,
FSA Insured, 5.375%, 6/15/22 NR/AAA 1,020,000
2,258,757
Water and Sewer Revenue Bonds (17.5%)
270,000 St. George, Utah Sewer Revenue, AMBAC
Insured, 5.500%, 06/15/07 Aaa/AAA 281,813
300,000 St. George, Utah Water Revenue, FGIC
Insured, 5.375%, 06/01/16 Aaa/AAA 304,500
1,000,000 St. George, Utah Interlocal Agency Revenue,
AMBAC Insured, 5.125%, 12/01/17 NR/AAA 1,005,000
500,000 Salt Lake City, Utah Water And Sewer
Revenue, AMBAC Insured, 5.750%, 02/01/13 Aaa/AAA 526,875
525,000 Salt Lake County, Utah Water & Sewer Revenue
AMBAC Insured, 6.00%, 02/01/10 Aaa/AAA 570,281
300,000 Salt Lake County, Utah Water & Sewer Revenue
AMBAC Insured, 5.100%, 10/01/08 Aaa/AAA 307,500
290,000 Salt Lake County Utah Conservancy District
Revenue, Series A, AMBAC Insured, 5.350%,
10/01/18 Aaa/AAA 293,263
200,000 Timpanogos, Utah Water & Sewer Revenue,
Series A AMBAC Insured, 5.90%, 06/01/11 Aaa/AAA 216,750
800,000 Timpanogos, Utah Water & Sewer Revenue,
Series A AMBAC Insured, 6.00%, 06/01/16 Aaa/AAA 866,000
<PAGE>
1,000,000 Utah Water Finance Agency Revenue, Series A
AMBAC Insured, 5.300%, 10/01/23 Aaa/AAA 1,006,250
300,000 White City Water Improvement District,
Utah Water Revenue, AMBAC Insured, 5.90%,
02/01/22 NR/AAA 318,375
5,696,607
Utility Revenue Bonds (10.7%)
790,000 Utah Association Municipal Power Systems
Revenue, 5.250%, 12/01/09 NR/A- 817,650
350,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.500%, 12/01/13 Aaa/AAA 363,125
695,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.500%,
07/01/10 Aaa/AAA 729,750
650,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.500%,
07/01/11 Aaa/AAA 680,875
875,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.250%,
07/01/18 Aaa/AAA 878,281
3,469,681
Total Revenue Bonds 22,807,300
Total Investments (cost $30,392,424**) 98.7% 32,067,538
Other assets in excess of liabilities 1.3 409,114
Net Assets 100.0% $ 32,476,652
<FN> * Any security not rated must be determined by the
Investment Adviser to have sufficient quality to
be ranked in the top four ratings if a credit rating
were to be assigned by a rating service. </FN>
<FN> ** Cost for Federal tax purposes is identical. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments at value (cost $30,392,424) $ 32,067,538
Cash 14,026
Interest receivable 361,284
Receivable for Fund shares sold 104,619
Receivable for investment securities sold 35,000
Due from Administrator for reimbursement of expenses
(note 3) 13,365
Total assets 32,595,832
LIABILITIES
Accrued expenses 42,871
Dividends payable 34,464
Payable for Fund shares redeemed 22,224
Distribution fees payable 18,018
Management fee payable 1,603
Total liabilities 119,180
NET ASSETS $ 32,476,652
Net Assets consist of:
Capital Stock - Authorized an unlimited number of
shares, par value $.01 per share $ 31,715
Additional paid-in capital 31,280,349
Net unrealized appreciation on investments 1,675,114
Accumulated net realized loss on investment (481,778)
Distributions in excess of net investment income (28,748)
$ 32,476,652
CLASS A
Net Assets $ 29,012,978
Capital shares outstanding 2,833,247
Net asset value and redemption price per share $ 10.24
Offering price per share (100/96 of $10.24 adjusted
to nearest cent) $ 10.67
CLASS C
Net Assets $ 1,475,527
Capital shares outstanding 144,202
Net asset value and offering price per share $ 10.23
Redemption price per share (*generally, a charge
of 1% is imposed on the proceeds of shares
redeemed during the first 12 months after purchase) $ 10.23*
CLASS Y
Net Assets $ 1,988,147
Capital shares outstanding 194,074
Net asset value, offering and redemption price per share $ 10.24
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,668,457
Expenses:
Management fee (note 3) $ 154,372
Distribution and service fees (note 3) 66,415
Legal fees 41,194
Transfer and shareholder servicing agent fees 36,362
Shareholders' reports and proxy statements 36,188
Trustees' fees and expenses (note 8) 28,746
Audit and accounting fees 20,571
Custodian fees (note 7) 6,146
Registration fees and dues 5,224
Insurance 523
Miscellaneous 12,788
408,529
Management fee waived (note 3) (135,847)
Reimbursement of expenses by Administrator (note 3) (157,610)
Expenses paid indirectly (note 7) (3,737)
Net expenses 111,335
Net investment income 1,557,122
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 40,106
Change in unrealized appreciation on investments 829,222
Net realized and unrealized gain on investments 869,328
Net increase in net assets resulting from operations $ 2,426,450
</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,
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,557,122 $ 1,564,340
Net realized gain from securities transactions 40,106 870
Change in unrealized appreciation on investments 829,222 636,155
Change in net assets from operations 2,426,450 2,201,365
DISTRIBUTIONS TO SHAREHOLDERS (note 6):
Class A Shares:
Net investment income (1,492,609) (1,580,556)
Net realized gain on investments - -
Class C Shares:
Net investment income (32,512) (670)
Net realized gain on investments - -
Class Y Shares:
Net investment income (46,710) (425)
Net realized gain on investments - -
Change in net assets from distributions (1,571,831) (1,581,651)
CAPITAL SHARE TRANSACTIONS (note 9):
Proceeds from shares sold 6,634,401 3,500,104
Reinvested dividends and distributions 910,182 927,229
Cost of shares redeemed (5,074,894) (4,775,558)
Change in net assets from capital
share transactions 2,469,689 (348,225)
Change in net assets 3,324,308 271,489
NET ASSETS:
Beginning of period 29,152,344 28,880,855
End of period $ 32,476,652 $ 29,152,344
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
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 an annual service fee. Class C shares are sold with a level-payment
sales charge with no payment at time of purchase but level service and
distribution fees from date of purchase through a period of six years
thereafter. A contingent deferred sales charge of 1% is assessed to any Class
C shareholder who redeems shares of this Class within one year from the date
of purchase. The Class Y shares are only offered to institutions acting for
an investor in a fiduciary, advisory, agency, custodian or similar capacity.
They are not available to individual retail investors. Class Y shares are
sold at net asset value without any sales charge, redemption fees, contingent
deferred sales charge or distribution or service fees. On October 31, 1997
the Fund established Class I shares, which are offered and sold only through
financial intermediaries and are not offered directly to retail investors.
At June 30, 1998, there were no Class I shares outstanding. All classes of
shares, represent interests in the same portfolio of investments in the Fund
and are identical as to rights and privileges. They differ only with respect
to the effect of sales charges, the distribution and/or service fees borne by
the respective class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
a) PORTFOLIO VALUATION: Municipal securities which have remaining
maturities of more than 60 days are valued at fair value 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.
<PAGE>
In Fiscal 1997, the Fund began amortizing bond premium using the
constant yield method. Accordingly, net unrealized appreciation and
additional paid-in capital have been adjusted by equal amounts at the
beginning of the year. This change had no effect on the Fund's net asset
value or distribution policy and conforms to the amortization policy
followed by the Fund for Federal tax purposes.
b) 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 premium and accretion of original issue discount. Market
discount is recognized upon disposition of the security.
c) 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.
d) 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.
e) 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 and disclosure of contingent 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.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Aquila Management Corporation (the "Manager"), the Fund's founder
and sponsor, serves as the Manager for the Fund under an Advisory and
Administration Agreement with the Fund. The portfolio management of the Fund
has been delegated to a Sub-Adviser as described below. Under the Advisory
and Administration Agreement, the Manager provides all administrative
services to the Fund, other than those relating to the day-to-day portfolio
management. The Manager's services include providing the office of the Fund
and all related services as well as overseeing the activities of the
Sub-Adviser and all the various support organizations to theFund 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 Manager is entitled to receive a fee
<PAGE>
which is payable monthly and computed as of the close of business each day
at the annual rate of 0.50 of 1% on the Fund's net assets.
First Security Investment Management, Inc. (the "Sub-Adviser")
serves as the Investment Sub-Adviser for the Fund under a Sub-Advisory
Agreement between the Manager and the Sub-Adviser. Under this agreement, the
Sub-Adviser continuously provides, subject to oversight of the Manager and
the Board of Trustees of the Fund, the investment program of the Fund and the
composition of its portfolio, arranges for the purchases and sales of
portfolio securities, and provides for daily pricing of the Fund's portfolio.
For its services, the Sub-Adviser is entitled to receive a fee from the
Manager which is payable monthly and computed as of the close of business
each day at the annual rate of 0.23 of 1% on the Fund's net assets.
On October 24, 1997, the Mangement arrangements described above
were approved by the Fund's shareholders and went into effect on October 31,
1997. From inception of the Fund to that date, Aquila Management Corporation
and First Security Investment Management Inc. had served as the Fund's
Administrator and Investment Manager, respectively, pursuant to agreements
with the Fund, for total fees at an annual rate of 0.50 of 1% of the Fund's
net assets, the same fee as under the new arrangements.
For the year ended June 30, 1998, the Fund incurred fees for
advisory and administrative services of $154,372 of which $135,847 was
voluntarily waived. Additionally, the Manager voluntarily agreed to reimburse
the Fund for other expenses during this period in the amount of $157,610. Of
this amount, $144,245 was paid prior to June 30, 1998 and the balance of
$13,365 was paid in early July 1998.
At a meeting held on July 15, 1998, the Fund's shareholders
approved the Manager's selection of Zions First National Bank to replace
First Security Investment Management, Inc. as the Fund's Investment
Sub-Adviser. This change was effective on July 16, 1998, pursuant to a
Sub-Advisory Agreement between the Manager and the new Sub-Adviser, the terms
of which are substantially identical to those of the previous agreement
between the Manager and the former sub-adviser, including the fee schedule.
Specific details as to the nature and extent of the services
provided by the Manager and the Sub-Adviser are more fully defined in the
Fund's Prospectus and Statement of Additional Information.
b) DISTRIBUTION AND SERVICE FEES:
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 ("Qualified
Recipients") selected by Aquila Distributors, Inc. (the "Distributor")
including, but not limited to,
<PAGE>
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. 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, 1998,
service fees on Class A Shares amounted to $58,192, of which the Distributor
received $1,871.
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
and for the year ended June 30, 1998, amounted to $6,167. 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 and for the year ended June 30, 1998, amounted to $2,056. The
total of these payments with respect to Class C Shares amounted to $8,223, of
which the Distributor received $6,404.
Specific details about the Plans are more fully defined in the
Fund's Prospectus and Statement of Additional Information.
Under a Distribution Agreement, 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, 1998, the Distributor received sales commissions of
$6,762.
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1998, purchases of securities and
proceeds from the sales of securities aggregated $5,727,621 and $3,417,615,
respectively.
At June 30, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $1,685,096 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to $9,982,
for a net unrealized appreciation of $1,675,114.
At June 30, 1998, the Fund had a capital loss carryover of
$481,778, which is available to offset future net realized gains on
securities transactions to the extent provided for in the Internal Revenue
Code. Of this amount, $354,223 expires on June 30, 2003; $114,226 expires on
June 30, 2004; and $13,329 expires on June 30, 2005, if not offset with
gains.
<PAGE>
5. 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.
6. 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 and are taxable.
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 statement 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.
7. CUSTODIAN FEES
The Fund has negotiated an expense offset arrangement 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,
1998, the Fund's custodian fees amounted to $6,146, of which $3,737 was
offset by such credits. It is the general intention of the Fund to invest, to
the extent practicable, some or all of cash balances in income-producing
assets rather than leave cash on deposit with the custodian.
8. TRUSTEES' FEES AND EXPENSES
During the fiscal year there were eight Trustees. Trustees' fees paid
during the year were at the average 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,
accommodations, 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, 1998, such
reimbursements averaged approximately $2,100 per Trustee. Two of the
Trustees, who are affiliated with the Manager, are not paid any Trustee fees.
<PAGE>
9. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1998 June 30, 1997
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 314,265 $ 3,194,917 346,477 $ 3,420,264
Reinvested distributions 87,243 887,298 94,031 926,736
Cost of shares redeemed (491,638) (4,998,075) (483,708) (4,775,559)
Net change (90,130) (915,860) (43,200) (428,559)
CLASS C SHARES:
Proceeds from shares sold 141,339 1,434,846 4,061 39,841
Reinvested distributions 2,241 22,879 52 486
Cost of shares redeemed (3,501) (35,659) - -
Net change 140,079 1,422,066 4,113 40,327
CLASS Y SHARES:
Proceeds from shares sold 194,062 2,004,638 4,094 40,000
Reinvested distributions 1 5 1 7
Cost of shares redeemed (4,094) (41,160) - -
Net change 189,969 1,963,483 4,095 40,007
Total transactions in Fund
shares 239,918 $ 2,469,689 (34,992) $ (348,225)
</TABLE>
<PAGE>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class A(1)
Year ended June 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.74 $9.59 $9.32 $10.00
Income from Investment Operations:
Net investment income 0.52 0.52 0.54 0.55 0.55
Net gain (loss) on securities (both realized
and unrealized) 0.30 0.21 0.15 0.27 (0.65)
Total from Investment Operations 0.82 0.73 0.69 0.82 (0.10)
Less Distributions (note 6):
Dividends from net investment income (0.52) (0.53) (0.54) (0.55) (0.55)
Distributions from capital gains - - - - (0.03)
Total Distributions (0.52) (0.53) (0.54) (0.55) (0.58)
Net Asset Value, End of Period $10.24 $9.94 $9.74 $9.59 $9.32
Total Return (not reflecting sales charge)(%) 8.41 7.72 7.17 9.09 (1.09)
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 29,013 29,071 28,881 27,536 26,116
Ratio of Expenses to Average Net Assets (%) 0.33 0.27 0.19 0.08 0.03
Ratio of Net Investment Income to Average
Net Assets (%) 5.07 5.45 5.49 5.85 5.58
Portfolio Turnover Rate (%) 11.31 5.09 11.15 22.92 27.53
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the voluntary waiver of a portion of the
management fee, the Manager's voluntary expense reimbursement and the expense
offset in custodian fees for uninvested cash balances would have been:
<S> <C> <C> <C> <C> <C>
Net Investment Income ($) 0.42 0.42 0.43 0.43 0.40
Ratio of Expenses to Average Net Assets (%) 1.31 1.33 1.30 1.30 1.60
Ratio of Net Investment Income to Average
Net Assets (%) 4.09 4.39 4.37 4.63 4.00
<FN> (1) Designated as Class A Shares on May 21, 1996. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Year Ended Period(2) Year Ended Period(2)
June 30, Ended June June 30, Ended
1998 1997 30, 1996 1998 1997 June 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.74 $9.77 $9.94 $9.74 $9.77
Income from Investment Operations:
Net investment income 0.41 0.44 0.05 0.53 0.61 0.06
Net gain (loss) on securities (both
realized and unrealized) 0.29 0.21 (0.03) 0.30 0.21 (0.03)
Total from Investment Operations 0.70 0.65 0.02 0.83 0.82 0.03
Less Distributions (note 6):
Dividends from net investment income (0.41) (0.45) (0.05) (0.53) (0.62) (0.06)
Distributions from capital gains - - - - - -
Total Distributions (0.41) (0.45) (0.05) (0.53) (0.62) (0.06)
Net Asset Value, End of Period $10.23 $9.94 $9.74 $10.24 $9.94 $9.74
Total Return (not reflecting sales
charge) (%) 7.20 6.80 0.20# 8.52 8.69 0.29#
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 1,476 41 0.1 1,988 41 0.1
Ratio of Expenses to Average Net
Assets (%) 1.35 1.07 0.14# 0.36 0.07 0.03#
Ratio of Net Investment Income to
Average Net Assets (%) 3.95 4.65 0.50# 5.03 5.65 0.61#
Portfolio Turnover Rate (%) 11.31 5.09 11.15# 11.31 5.09 11.15#
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the voluntary waiver of a portion of the
management fee, the Manager'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 ($) 0.33 0.35 0.04 0.45 0.50 0.05
Ratio of Expenses to Average Net
Assets (%) 2.09 2.13 0.23# 1.11 1.13 0.11#
Ratio of Net Investment Income to
Average Net Assets (%) 3.21 3.59 0.42# 4.28 4.59 0.53#
<FN> (1) New Class of Shares established on May 21, 1996. </FN>
<FN> (2) From May 21, 1996 to June 30, 1996. </FN>
<FN> # Not annualized. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
REPORT ON THE ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of the Tax-Free Fund For Utah
(the "Fund") was held on October 24, 1997. The holders of shares representing
75% of the total net asset value of the shares entitled to vote were present
in person by proxy. At the meeting, the following matters were voted upon and
approved by the shareholders (the resulting votes for each matter are
presented below).
(1) The election of Lacy B. Herrmann, Philip E. Albrecht, Gary
C. Cornia, William L. Ensign, D. George Harris, Diana P. Herrmann,
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 21,944,520.05 affirmative votes; no more than 296,602.05
votes were withheld for any Trustee).
(2) The ratification of the selection of KPMG Peat Marwick LLP
as the Fund's independent auditors for the fiscal year ending June
30, 1998 (votes for: 21,715,133.93; votes against: 75,313.04;
abstentions: 450,665.00; broker non-votes: 0.00).
(3) The approval of a proposed Investment Advisory and
Administration Agreement with Aquila Management Corp. (votes for:
21,397,609.09; votes against: 156,811.17; abstentions: 658,871.84;
broker non-votes: 27,819.88).
(4) The approval of a proposed Sub-Advisory Agreement between
Aquila Management Corporation as Manager and First Security
Investment Management, Inc. as Sub-Adviser (votes for:
21,433,524.97; votes against: 89,968.57; abstentions: 689,798.56;
broker non-votes: 27,819.88).
At a meeting held July 15, 1998, the Fund's shareholders approved
the Manager's selection of Zions First National Bank to replace First
Security Investment Management Inc. as the Fund's Investment Sub-Adviser.
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, 1998, of the total amount of
dividends paid by Tax-Free Fund For Utah, 99.87% was "exempt-interest
dividends" and the balance was ordinary dividend income.
Prior to January 31, 1998, shareholders were mailed IRS Form
1099-DIV which contained information on the status of distributions paid for
the 1997 CALENDAR YEAR.
<PAGE>
