<PAGE>
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
Diana P. 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 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, 1999
[Logo of Tax-Free Fund For Utah: a rectangle containing dessert boulders with a
sun rising behind it]
TAX-FREE FUND FOR
UTAH
A TAX-FREE INCOME INVESTMENT
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
ANNUAL REPORT
"TAKE PRIDE IN HOW YOUR INVESTMENT IS HELPING OTHERS -
WHILE PRIMARILY HELPING YOU"
Dear Fellow Shareholders: August 20, 1999
Our surveys of shareholders of Tax-Free Fund For Utah have shown that you
and other owners of the Fund bought your shares primarily for TAX-FREE INCOME.
And, secondarily, the knowledge - provided through the stability of the Fund -
that your money would be there when you needed it.
Additionally, our surveys showed that most of our shareholders are
pre-retirees or retirees. These are people who are looking forward to making
sure that they have the security of a sound income source from the Fund when
they are no longer in the workforce.
The point you may not have fully appreciated - when you made your
investment in the Fund - was that in the process of having the Fund provide you
with these benefits, it also provides help to a variety of others within your
community and Utah. And, this is a factor in which you can take real PRIDE.
The economy of Utah is growing at a dynamic rate. As this growth takes
place, new and additional municipal projects are needed for the benefit of the
citizens of Utah and the various communities in it. These projects include
schools, highways, recreational facilities, and a whole array of useful public
purpose projects. These projects are what help economic development and provide
a high quality of life for the citizens of Utah.
We think it is important for you to realize this. The projects that the
Fund helped finance are all ones that you and others can reach out and touch.
We are illustrating for you some of the various kinds of municipal projects
that your investment in the Fund has helped create in Utah.
[Photo]
Salt Lake City International Airport
[Photo]
St. George Water Treatment Facility
[Photo]
Single Family Mortgage Bonds for Utah Housing
[Photo]
University of Utah
</PAGE>
<PAGE>
The tax laws of Utah, as well as those of the Federal government, allow
you to receive income from your investment in the Fund DOUBLE TAX-FREE. It is
realized by the State and Federal governmental authorities that it is essential
that various municipal projects be built with an advantage to the investor. This
advantage is primarily one of TAX-FREE income for you.
You can take comfort in the knowledge that your investment in the Fund
is comprised of a portfolio of municipal securities which possess extremely high
quality. Therefore, you can "SLEEP WELL AT NIGHT" knowing that the chances of
anything happening to these high quality bonds is very slight indeed. The reason
for this, of course, is that the various municipal projects represented in the
Fund have behind them a very sound stream of taxes and revenues generated by the
projects themselves.
We again wish to emphasize that while primarily helping you, Tax-Free
Fund For Utah is also helping others in your communities and Utah.
Consequently, you can take great PRIDE in your investment in Tax-Free
Fund For Utah.
You can rest assured that the overall management of the Fund is doing a
very careful job of "MINDING THE STORE" for you.
We appreciate the continued confidence that you have placed in the Fund
through your investment in Tax-Free Fund For Utah.
Sincerely,
Diana P. Herrmann
President
Lacy B. Herrmann
Chairman, Board of Trustees
</PAGE>
<PAGE>
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the Class
A shares of Tax-Free Fund For Utah at its inception in July, 1992 and
maintaining this investment through the Fund's latest fiscal year-end, June 30,
1999 as compared with the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (a cost of living index). The performance of each of the other
classes is not shown in the graph but is included in the table below. It should
be noted that the Lehman Index does not include any operating expenses nor sales
charges and being nationally oriented, does not reflect state specific bond
market performance.
[Graphic of a line chart with the following information:]
<TABLE>
<CAPTION>
Lehman Brothers Quality Trust's Class A Shares Cost of Living Index ($)
Intermediate Municipal Bond Index ($) With Sales Charge ($) Without Sales Charge ($)
</CAPTION>
<S> <C> <C> <C>
7/92 10,000 9,600 10,000 10,000
6/93 10,869 10,514 10,953 10,270
6/94 10,891 10,460 10,896 10,526
6/95 11,851 11,509 11,988 10,846
6/96 12,638 12,094 12,598 11,152
6/97 13,684 13,160 13,708 11,401
6/98 14,867 14,233 14,826 11,593
6/99 15,277 14,400 15,000 11,821
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED JUNE 30, 1999
SINCE
1 YEAR 5 YEARS INCEPTION
Class A (7/24/92)
With Sales Charge (2.88)% 5.82% 5.40%
Without Sales Charge 1.19% 6.70% 6.02%
Class C (5/21/96)
With CDSC (0.82)% n/a 4.83%
Without CDSC 0.18% n/a 4.83%
Class Y (5/21/96)
No Sales Charge 1.19% n/a 6.16%
Lehman Index 2.76% 7.00% 6.32% (Class A)
2.76% n/a 6.70% (Class C&Y)
Total return figures shown for the Fund reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC), imposed on
redemptions made within the first 12 months after purchase. Class Y shares are
sold without any sales charge. The rates of return will vary and the principal
value of an investment will fluctuate with market conditions. Shares, if
redeemed, may be worth more or less than their original cost. A portion of each
classes' income may be subject to federal and state income taxes. Past
performance is not predictive of future investment results.
</PAGE>
<PAGE>
MANAGEMENT DISCUSSION
PORTFOLIO MANAGER'S ANALYSIS
FISCAL 1999 REVIEW
The latest fiscal year, July 1, 1998 through June 30, 1999, saw moderate
volatility in interest rates with longer rates generally rising slightly and
shorter-term rates declining. Three-month U.S. Treasury bill rates declined just
over a quarter of a percentage point to close at 4.8%. Yet this represents a
significant jump over the 3.65% rates we saw in October when the international
economy was more of a concern. Longer treasuries closed near their high for the
year and more than 1.5% off the bottom Ten-year municipal index yields traded in
a tighter range of 3.9% to 4.8% and closed at fiscal year end of June 30, 1999
at 4.8%, which was an increase of 40 basis points over the course of the year.
Heavy municipal bond supply and strong demand for U.S. government paper
converged in the Fall of 1998 to take 10-year municipal yields from 80% of
treasuries to 96%, one of the most attractive levels in this decade. Since then,
a moderation in municipal bond supply and a reversal in Fed policy have caused
municipals to outperform and trade back to a normal level of about 83% of
treasuries.
With the rise in interest rates, the net asset value of the Class A shares
of the Fund decreased over the fiscal year from $10.24 to $9.88. As you will
recall, prices of municipal bonds move in an opposite direction from that of
interest rates.
FISCAL 2000 STRATEGY
The municipal demand structure has shifted in recent months as a result of
a virtual disappearance of net new demand from institutions, particularly from
property and casualty insurance companies. Direct retail buyers now make up a
much larger percentage of the market. This change has consequences for the
overall functioning of the market. For example, the liquidity, underwriting
practices, and the magnitude of risk inherent in underwriters acquiring a
position in municipal bonds without having these bonds presold changes the
character of the market.
We think this is generally good for the Fund. Spreads on municipal bonds
will widen off the "high-grade scales", as defined by published financial
services. While this may make it more difficult to sell municipal securities it
will also provide more opportunity to purchase municipal securities at
attractive prices. Published scales represent a very narrowly defined coupon
structure, which represents an optimal structure relative to existing demand.
Municipal bonds that are not structured in this way simply have to yield more.
This situation has caused considerable confusion in the marketplace. We think
there is an opportunity in purchasing municipal securities that fit into these
higher returning categories, such as housing bonds and high-quality bonds that
are prerefunding candidates.
The Fund primarily seeks out attractive Utah bonds for the portfolio.
However, in view of the present market situation, we have currently included
some non-Utah bonds in the Fund's portfolio. These are bonds that are still
double tax-free for Utah residents. The conservative fiscal management in most
Utah communities combined with extensive use of bond insurance has resulted in a
very high quality, and lower yielding market for Utah bonds. Recently, the
magnitude of difference between Utah and other states on yields of comparable
quality double tax-free bonds has been unusually high. Consequently, we believe
that there will be opportunities on a limited basis to add attractive non-Utah
bonds to the portfolio to take advantage of spread differences. We also
anticipate using some smaller issues that offer good quality yet, for one reason
or another, the issuer chooses not to apply for a rating. These offerings
benefit smaller projects in Utah and will provide a higher return to the
portfolio. Overall, we hope to find securities that will help us increase the
relative yield, lower the volatility and improve the total return.
</PAGE>
<PAGE>
[Logo of KPMG LLP: the letters KPMG in front of four solid rectangles]
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,
1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the 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 and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, by correspondence with the custodian and
brokers. 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, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
- --------------
New York, New York
July 27, 1999
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (12.8%) S&P VALUE
</CAPTION>
<S> <C> <C> <C>
CITY AND COUNTY GENERAL OBLIGATION BONDS (4.7%)
$ 2,095,000 Clearfield City Utah 5.125%, 02/01/18 NR/AAA $ 2,019,056
300,000 Weber County, Utah Unlimited Tax, FGIC
Insured, 5.625%, 1/15/11 Aaa/AAA 306,375
2,325,431
SCHOOL DISTRICT GENERAL OBLIGATION BONDS (8.1%)
1,000,000 Davis County, Utah School District,
MBIA Insured, 5.850%, 06/01/0 Aaa/AAA 1,063,750
345,000 Iron County, Utah School District,
5.000%, 01/15/12 Aaa/AAA 342,844
770,000 Nebo County, Utah School District, FGIC Insured,
6.00%, 06/15/18 Aaa/AAA 828,713
1,255,000 Park City Utah School District, FGIC Insured,
6.00%, 2/01/07 Aaa/AAA 1,353,830
365,000 Provo City Utah School District, FGIC Insured,
5.10%, 6/15/15 Aaa/NR 357,700
3,946,837
Total General Obligation Bonds 6,272,268
REVENUE BONDS (88.9%)
EDUCATION REVENUE BONDS (12.2%)
380,000 New Hampshire Higher Education, Androscoggin
Hospital, MBIA Insured, 5.800%, 11/01/27 NR/A- 381,425
500,000 Private College & University, Georgia, Mercer
University Series, MBIA Insured, 5.250%,
10/01/25 NR/A 476,250
200,000 University of Utah Revenue Refunding,
(Biology Research Facilities), MBIA Insured,
5.500%, 04/01/11 Aaa/AAA 205,000
5,000,000 Utah State Board of Regents, University of Utah
4.750%, 04/01/25 Aaa/AAA 4,450,000
500,000 Wisconsin St. Health & Education,
Aurora Health Care 5.625%, 02/15/29 NR/A- 468,750
5,981,425
HOSPITAL REVENUE BONDS (12.5%)
535,000 Abiline Texas Hospital Authority, Hendrick
Medical Center 9.600%, 12/01/12 NR/AAA 685,469
</PAGE>
<PAGE>
2,000,000 Bountiful, Utah Hospital Revenue, IHC Health
Services, MBIA Insured, 5.750%, 12/15/18 NR/NR* 1,905,000
2,000,000 Utah County, Utah Hospital Revenue, IHC Health
Services, MBIA Insured, 5.250%, 08/15/21 Aaa/AAA 1,935,000
1,090,000 Utah County, Utah Hospital Revenue, IHC Health
Services MBIA Insured, 5.250%, 08/15/26 Aaa/AAA 1,042,312
500,000 Wisconsin State Health, Hess Memorial Hospital,
7.875%, 11/01/22 Aaa/AAA 565,625
6,133,406
INDUSTRIAL DEVELOPMENT REVENUE BONDS (0.5%)
250,000 Sandy City, Utah Industrial Development,
H Shirl Wright Project, 6.125%, 08/01/16 NR/AAA 260,000
260,000
LEASE REVENUE BONDS (18.1%)
1,000,000 Logan, Utah Municipal Building Authority,
MBIA Insured, 5.200%, 04/01/18 Aaa/NR 966,250
700,000 Salt Lake County, Utah Municipal
Building Authority, 5.000%, 10/01/12 Aaa/AAA 688,625
1,020,000 Salt Lake City, Utah Municipal Building Authority,
6.000%, 10/15/14 A1/A+ 1,085,025
1,020,000 Salt Lake County, Utah Municipal Building
Authority, Series 1994A, MBIA Insured
6.050%, 10/01/08 Aaa/AAA 1,079,925
665,000 Salt Lake County, Utah Municipal
Building Authority, MBIA Insured
4.900%, 10/01/11 Aaa/AAA 653,362
350,000 Utah State Building Ownership Authority,
5.750%, 08/15/08 Aa/AA 357,438
1,000,000 Utah State Building Ownership Authority,
5.500%, 5/15/09 Aaa/AAA 1,038,750
1,000,000 Utah State Building Ownership Authority,
5.500%, 5/15/19 Aaa/AAA 1,018,750
2,000,000 Utah State Building Ownership Authority,
5.250%, 5/15/20 Aaa/AAA 1,975,000
8,863,125
</PAGE>
<PAGE>
MORTGAGE REVENUE BONDS (5.6%)
500,000 Boulder County Colorado, Multi Family Housing,
6.250%, 06/01/19 NR/NR* 488,750
240,000 Idaho Housing Finance Agency
6.400%, 07/01/11 NR/AA 247,200
590,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series E-1,
6.600%, 07/01/11 NR/AA 611,387
395,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series 1994C,
6.350%, 07/01/11 Aa2/NR 409,319
990,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series 1994C,
5.650%, 07/01/16 Aaa/AAA 991,238
2,747,894
TRANSPORTATION REVENUE BONDS (4.5%)
875,000 Salt Lake City, Utah Airport Revenue,
FGIC Insured, Series B,5.875%, 12/01/12 Aaa/AAA 918,750
285,000 Salt Lake City, Utah Airport Revenue,
FGIC Insured, Series B,5.875%, 12/01/18 Aaa/AAA 298,538
1,000,000 Utah Transit Authority Sales Tax Revenue
FSA Insured,5.375%, 12/15/22 NR/AAA 987,500
2,204,788
WATER AND SEWER REVENUE BONDS (17.1%)
260,000 Ashley Valley, Utah, FGIC Insured,
9.500%, 01/01/08 Aaa/AAA 315,575
670,000 Granger & Hunter Water Revenue, Utah,
FGIC Insured, 4.625%, 03/01/1 Aaa/AAA 642,363
300,000 St. George, Utah Water Revenue, FGIC Insured,
5.375%, 06/01/16 Aaa/AAA 300,000
1,000,000 St. George, Utah Interlocal Agency Revenue,
AMBAC Insured, 5.125%, 12/01/17 NR/AAA 963,750
500,000 Salt Lake City, Utah Water And Sewer Revenue,
AMBAC Insured 5.750%, 02/01/13 Aaa/AAA 518,750
800,000 Timpanogos, Utah Water & Sewer Revenue.
Series A, AMBAC Insured, 6.00%, 06/01/16 Aaa/AAA 866,000
4,000,000 Timpanogos, Utah Water & Sewer Revenue
AMBAC Insured, 5.00%, 06/01/19 Aaa/AAA 3,770,000
</PAGE>
<PAGE>
1,000,000 Utah Water Finance Agency Revenue, Series A
AMBAC Insured, 5.300%, 10/01/23 Aaa/AAA 976,250
8,352,688
UTILITY REVENUE BONDS (18.4%)
1,500,000 Intermountain Power Agency, Utah,
6.500%, 07/01/11 Aaa/AAA 1,693,125
2,430,000 Salt Lake City Utah
5.250%, 12/15/15 Aaa/AAA 2,433,038
790,000 Utah Association Municipal Power
Systems Revenue, 5.250%, 12/01/09 NR/A- 790,988
350,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.500%, 12/01/13 Aaa/AAA 356,125
1,245,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.250%, 06/01/11 Aaa/AAA 1,238,775
695,000 Utah State Municipal Power Agency, Electric Systems
Revenue, FGIC Insured, 5.500%, 07/01/10 Aaa/AAA 714,112
650,000 Utah State Municipal Power Agency, Electric Systems
Revenue, FGIC Insured, 5.500%, 07/01/11 Aaa/AAA 663,000
1,125,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.250%,
07/01/18 Aaa/AAA 1,096,875
8,986,038
Total Revenue Bonds 43,529,364
Total Investments (cost $50,745,045**) 101.7% 49,801,632
Liabilities in excess of other assets (1.7) (878,437)
Net Assets 100.0% $ 48,923,195
</TABLE>
(*) Any security not rated must be determined by the Investment
Sub-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.
(**) Cost for Federal tax purposes is identical.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $50,745,045) $ 49,801,632
Interest receivable 631,198
Receivable for investment securities sold 25,000
Due from Manager for reimbursement of expenses (note 3) 7,901
Receivable for fund shares sold 144
Total assets 50,465,875
LIABILITIES
Cash overdraft 1,433,485
Dividends payable 42,699
Accrued expenses 32,309
Distribution fees payable 28,872
Management fee payable 5,315
Total liabilities 1,542,680
NET ASSETS $ 48,923,195
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share $ 49,537
Additional paid-in capital 49,622,136
Net unrealized depreciation on investments (943,413)
Accumulated net realized gain on investments 238,635
Distributions in excess of net investment income (43,700)
$ 48,923,195
CLASS A
Net Assets $ 47,251,139
Capital shares outstanding 4,784,275
Net asset value and redemption price per share $ 9.88
Offering price per share (100/96 of $9.88 adjusted to nearest cent) $ 10.29
CLASS C
Net Assets $ 1,667,473
Capital shares outstanding 168,957
Net asset value and offering price per share $ 9.87
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if
redeemed during the first 12 months after purchase) $ 9.87*
CLASS Y
Net Assets $ 4,583
Capital shares outstanding 464
Net asset value, offering and redemption price per share $ 9.88
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 2,534,987
Expenses:
Management fee (note 3) $ 252,515
Distribution and service fees (note 3) 114,004
Legal fees 68,379
Shareholders' reports and proxy statements 29,057
Custodian fees 23,176
Transfer and shareholder servicing agent fees 22,312
Trustees' fees and expenses (note 8) 20,971
Audit and accounting fees 19,750
Registration fees and dues 5,816
Insurance 2,321
Miscellaneous 19,144
577,445
Management fee waived (note 3) (200,822)
Reimbursement of expenses by Manager (note 3) (131,525)
Expenses paid indirectly (note 7) (38,043)
Net expenses 207,055
Net investment income 2,327,932
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 762,330
Change in unrealized depreciation on investments (2,618,527)
Net realized and unrealized loss on investments (1,856,197)
Net increase in net assets resulting from operations $ 471,735
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1999 1998
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 2,327,932 $ 1,557,122
Net realized gain from securities transactions 762,330 40,106
Change in unrealized appreciation (depreciation) on investments (2,618,527) 829,222
Change in net assets from operations 471,735 2,426,450
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (2,298,984) (1,492,609)
Net realized gain on investments - -
Class C Shares:
Net investment income (65,213) (32,512)
Net realized gain on investments - -
Class Y Shares:
Net investment income (20,603) (46,710)
Net realized gain on investments - -
Change in net assets from distributions (2,384,800) (1,571,831)
CAPITAL SHARE TRANSACTIONS (NOTE 9):
Proceeds from shares sold 45,921,189 6,634,401
Reinvested dividends and distributions 1,427,466 910,182
Cost of shares redeemed (28,989,047) (5,074,894)
Change in net assets from capital share transactions 18,359,608 2,469,689
Change in net assets 16,446,543 3,324,308
NET ASSETS:
Beginning of period 32,476,652 29,152,344
End of period (including distributions in excess
of net investment income of $43,700 and $28,748,
in 1999 and 1998, respectively) $ 48,923,195 32,476,652
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<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 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 and are
not offered directly to 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, 1999, there were
no Class I shares outstanding. 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.
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>
<PAGE>
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 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.
Zions First National Bank (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.
</PAGE>
<PAGE>
For the year ended June 30, 1999, the Fund incurred fees for advisory and
administrative services of $252,515 of which $200,822 was voluntarily waived.
Additionally, the Manager voluntarily agreed to reimburse the Fund for other
expenses during this period in the amount of $131,525. Of this amount, $123,624
was paid prior to June 30, 1999 and the balance of $7,901 was paid in early July
1999.
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, 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, 1999, service fees on Class A Shares amounted to
$96,628, of which the Distributor received $2,004.
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, 1999, amounted to $13,032. In addition, under a Shareholder
Services Plan, the Fund is authorized to mak 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, 1999, amounted to $4,344. The total of these payments with
respect to Class C Shares amounted to $17,376, of which the Distributor received
$12,460.
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,
1999, the Distributor received commissions of $11,063 on sales of Class A
Shares.
</PAGE>
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30,1999, purchases of securities and proceeds
from the sales of securities aggregated $62,576,486 and $42,939,335,
respectively.
At June 30, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $595,953 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to
$1,539,366, for a net unrealized depreciation of $943,413.
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.
The Fund is also permitted to invest in tax-free municipal obligations of
issuers in other states and U.S. territories meeting comparable quality
standards and providing income which is exempt from both regular Federal and
Utah income taxes. The general policy of the Fund is to invest in such
securities only when comparable securities of Utah issuers are not available in
the market. At June 30, 1999, the Fund had 6.8% of its net assets invested in
seven such municipal issues.
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 taxes at ordinary income and/or capital gain rates.
7. EXPENSES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. 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.
</PAGE>
<PAGE>
8. TRUSTEES' FEES AND EXPENSES
During the fiscal year there were six Trustees. Trustees' fees paid during
the year were at the average annual rate of $1,600 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, 1999, such reimbursements averaged approximately
$2,000 per Trustee. Two of the Trustees, who are affiliated with the Manager,
are not paid any Trustee fees.
9. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 4,369,607 $ 44,913,787 314,265 $ 3,194,917
Reinvested distributions 135,169 1,383,403 87,243 887,298
Cost of shares redeemed (2,553,748) (26,188,074) (491,638) (4,998,075)
Net change 1,951,028 20,109,116 (90,130) (915,860)
CLASS C SHARES:
Proceeds from shares sold 98,144 1,007,402 141,339 1,434,846
Reinvested distributions 4,308 44,057 2,241 22,879
Cost of shares redeemed (77,697) (797,214) (3,501) (35,659)
Net change 24,755 254,245 140,079 1,422,066
CLASS Y SHARES:
Proceeds from shares sold - - 194,062 2,004,638
Reinvested distributions 1 6 1 5
Cost of shares redeemed (193,611) (2,003,759) (4,094) (41,160)
Net change (193,610) (2,003,753) 189,969 1,963,483
Total transactions in Fund shares 1,782,173 $ 18,359,608 239,918 $ 2,469,689
</TABLE>
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A(1)
YEAR ENDED JUNE 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.24 $9.94 $9.74 $9.59 $9.32
Income from Investment Operations:
Net investment income 0.49 0.52 0.52 0.54 0.55
Net gain (loss) on securities (both realized
and unrealized) (0.36) 0.30 0.21 0.15 0.27
Total from Investment Operations 0.13 0.82 0.73 0.69 0.82
Less Distributions (Note 6):
Dividends from net investment income (0.49 (0.52) (0.53) (0.54) (0.55)
Distributions from capital gains - - - - -
Total Distributions (0.49) (0.52) (0.53) (0.54) (0.55)
Net Asset Value, End of Period $9.88 $10.24 $9.94 $9.74 $9.59
Total Return (Not Reflecting Sales Charge)(%) 1.19 8.41 7.72 7.17 9.09
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 47,251 29,013 29,071 28,881 27,536
Ratio of Expenses to Average Net Assets (%) 0.45 0.34 0.28 0.20 0.09
Ratio of Net Investment Income to Average
Net Assets (%) 4.57 5.06 5.44 5.48 5.84
Portfolio Turnover Rate (%) 87.49 11.31 5.09 11.15 22.92
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of
the management fee and the voluntary expense reimbursement were:
Ratio of Expenses to Average Net Assets (%) 1.04 1.30 1.32 1.29 1.29
Ratio of Net Investment Income (Loss) to Average
Net Assets (%) 3.98 4.10 4.40 4.39 4.64
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested
cash balances were:
Ratio of Expenses to Average Net Assets (%) 0.38 0.33 0.27 0.19 0.08
</TABLE>
(1) Designated as Class A Shares on May 21, 1996.
Note: Effective July 16, 1998, Zions First National Bank became the Fund's
Investment Sub-Adviser replacing First Security Investment Management, Inc.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C(1) CLASS Y(1)
PERIOD(2) PERIOD(2)
YEAR ENDED JUNE 30, ENDED YEAR ENDED JUNE 30, ENDED
1999 1998 1997 JUNE 30, 1996 1999 1998 1997 JUNE 30, 1996
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.23 $9.94 $9.74 $9.77 $10.24 $9.94 $9.74 $9.77
Income from Investment Operations:
Net investment income 0.38 0.41 0.44 0.05 0.45 0.53 0.61 0.06
Net gain (loss) on securities (both realized
and unrealized) (0.35) 0.29 0.21 (0.03) (0.32) 0.30 0.21 (0.03)
Total from Investment Operations 0.03 0.70 0.65 0.02 0.13 0.83 0.82 0.03
Less Distributions (Note 6):
Dividends from net investment income (0.39) (0.41) (0.45) (0.05) (0.49) (0.53) (0.62) (0.06)
Distributions from capital gains - - - - - - - -
Total Distributions (0.39) (0.41) (0.45) (0.05) (0.49) (0.53) (0.62) (0.06)
Net Asset Value, End of Period $9.87 $10.23 $9.94 $9.74 $9.88 $10.24 $9.94 $9.74
Total Return (Not Reflecting Sales Charge) (%) 0.18 7.20 6.80 0.20+ 1.19 8.52 8.69 0.29+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 1,667 1,476 41 0.1 5 1,988 41 0.1
Ratio of Expenses to Average Net
Assets (%) 1.45 1.36 1.08 0.14+ 0.43 0.37 0.08 0.03+
Ratio of Net Investment Income to
Average Net Assets (%) 3.57 3.94 4.64 0.50+ 4.45 5.02 5.64 0.61+
Portfolio Turnover Rate (%) 87.49 11.31 5.09 11.15+ 87.49 11.31 5.09 11.15+
The expense and net investment income ratios without the effect of the voluntary waiver of a portion of
the management fee and the voluntary expense reimbursement were:
Ratio of Expenses to Average Net
Assets (%) 1.85 2.08 2.12 0.23+ 0.96 1.10 1.12 0.11+
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) 3.17 3.22 3.60 0.41+ 3.92 4.29 4.60 0.53+
The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested
cash balances were:
Ratio of Expenses to Average Net
Assets (%) 1.37 1.35 1.07 0.14+ 0.34 0.36 0.07 0.03+
</TABLE>
(1) New Class of Shares established on May 21, 1996.
(2) From May 21, 1996 TO June 30, 1996.
+ Not annualized.
Note: Effective July 16, 1998, Zions First National Bank became the Fund's
Investment Sub-Adviser replacing First Security Investment Management, Inc.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
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, 1999, $2,327,157 of dividends paid by
Tax-Free Fund For Utah, constituting 98.19% of total dividends paid during
fiscal 1999, were exempt-interest dividends; $41,916 of dividends paid,
constituting 1.77% of total dividends paid during fiscal 1999, were capital gain
dividends; and the balance was ordinary dividend income.
Prior to January 31, 1999, shareholders were mailed IRS Form 1099-DIV which
contained information on the status of distributions paid for the 1998 CALENDAR
YEAR.
</PAGE>
<PAGE>
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Fund have been monitoring issues involving
preparedness for the turn of the century for some time in an effort to minimize
or eliminate any potential impact upon the Fund and its shareholders. Our
officers have focussed significant time and effort in order that the various
computerized functions that could affect the Fund are ready by the beginning of
the year 2000.
The Fund is highly reliant on certain mission-critical suppliers' services.
Each supplier of these services has provided the Fund's officers with assurances
that it is actively addressing potential problems relating to the year 2000. The
officers, in turn, are monitoring and will continue to monitor the progress of
its suppliers.
The Fund has NOT incurred, nor is anticipated to incur, any costs related
to Y2K. All such costs are being incurred by the respective vendors.
As you can well understand, we cannot directly control our supplier
operations. We assure you, however, that we recognize a responsibility to inform
our shareholders if in the future we become aware of any developments which
would lead us to believe that the Fund will be significantly affected by year
2000 problems.
We will continue to keep you up-to-date through future communications.
</PAGE>
