<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.
SEMI-ANNUAL
REPORT
DECEMBER 31, 1998
TAX-FREE FUND FOR
UTAH
[Logo of Tax-Free Fund For Utah: a rectangle containing desert
boulders with a sun rising behind it]
A TAX-FREE INCOME INVESTMENT
[Logo of Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
</PAGE>
<PAGE>
[Logo of Tax-Free Fund For Utah: a rectangle containing desert
boulders with a sun rising behind it]
TAX-FREE FUND FOR UTAH
SEMI-ANNUAL REPORT
"THE BEST THINGS IN LIFE CAN BE TAX-FREE"
February 17, 1999
Dear Fellow Shareholder:
When you compare TAX-FREE municipal bonds with similar
maturity high quality taxable U.S. Treasuries, we think it is fair
to say, "THE BEST THINGS IN LIFE CAN BE TAX-FREE."
You may well come out way ahead owning a TAX-FREE bond,
since recently the ratio of return on TAXABLE U.S. Treasuries
versus TAX-FREE municipals has been running ahead of what has
normally been the case.
What this means to you in dollars and cents is that
when you take into consideration the effect of taxes you pay with
a TAXABLE bond, you actually get to keep more of your return with
the TAX-FREE investment.
Let us show you the mathematics of how this works out.
Let's suppose you purchase a $1,000 15-year U.S. Treasury bond
yielding 5% and a $1,000 tax-free municipal bond with a maturity of
15 years yielding 4.4%. Your investments would look as follows*:
U.S. TREASURY TAX-FREE
Interest Income $50.00 $44.00
Federal Tax Bracket 28% 28%
Federal Tax Paid $14.00 $-0-
Net Income Retained $36.00 $44.00
Even though on the surface the U.S. Treasury appears to
be yielding higher than the TAX-FREE municipal, once the effect of
Federal taxes is taken into consideration, the TAX-FREE investment
allows you to keep more money in your pocket. State taxes are not
applicable to either investment.
Obviously, investors in higher income tax brackets will
obtain an even greater advantage.
Given the desirability of making sure you have the
right asset allocation with your investment money, the fact that
there is an increased supply of high quality municipal bonds and a
rising ratio of taxable vs. tax-free bonds, we believe it is fair
to say that,
"THE BEST THINGS IN LIFE CAN BE TAX-FREE."
This is particularly true considering the high quality
of the bonds in Tax-Free Fund For Utah and the intermediate
maturity of the overall portfolio of the Fund. Both these factors
lend themselves to the kind of investment that allows you to "sleep
well at night."
</PAGE>
<PAGE>
You can be assured that all those associated with the
management of your investment in Tax-Free Fund For Utah are
consistently working in your best interest. We very much value you
as a shareholder and appreciate the confidence you have shown in
the Fund.
Sincerely,
Lacy B. Herrmann
Chairman, Board of Trustees
* The examples given, while realistic, are for illustrative
purposes only, are strictly hypothetical in nature and do not
represent the performance of any particular investment. For
simplicity, a stable net asset value has been assumed over the life
of each investment and the effect of dividend reinvestment was not
taken into account. Of course, the actual rate of return and share
price of a municipal bond fund, such as Tax-Free Fund For Utah,
will fluctuate with general interest rate changes. Thus, redemption
price may be more or less than original purchase price.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (27.5%) S&P VALUE
</CAPTION>
<S> <C> <C> <C>
City and County General Obligation Bonds (6.1%)
$2,095,000 Clearfield City Utah, 5.125%, 02/01/18 NR/AAA $2,105,475
300,000 Weber County, Utah Unlimited Tax G.O., FGIC
Insured, 5.625%, 1/15/11 Aaa/AAA 314,250
1,025,000 Orem Utah, 4.650%, 12/01/18 Aa3/AA 1,026,281
3,446,006
SCHOOL DISTRICT GENERAL OBLIGATION BONDS (21.4%)
1,000,000 Alpine, Utah School District G.O., 5.000%,
03/15/09 Aaa/AAA 1,067,500
535,000 Beaver County, Utah School District G.O.,
Series 1994, AMBAC Insured, 5.200%, 12/15/12 Aaa/AAA 551,050
595,000 Carbon County, Utah School District G.O.,
Series 1993, MBIA Insured, 5.450%, 06/15/10 Aaa/AAA 618,056
1,000,000 Davis County, Utah School District G.O.,
MBIA Insured, 5.850%, 06/01/09 Aaa/AAA 1,077,500
2,205,000 Grand County, Utah School District G.O.,
MBIA Insured, 4.700%, 07/01/15 Aaa/NR 2,160,900
975,000 Iron County, Utah School District G.O.,
5.000%, 01/15/07 Aaa/AAA 1,034,719
345,000 Iron County, Utah School District G.O.,
5.000%, 01/15/12 Aaa/AAA 358,800
1,575,000 Jordan, Utah School District G.O., 4.000%,
06/15/02 NR/AAA 1,586,812
1,000,000 Nebo County, Utah School District G.O,
FGIC Insured, 5.750%, 06/15/11 Aaa/AAA 1,067,500
770,000 Nebo County, Utah School District, FGIC
Insured, 6.00%, 06/15/18 Aaa/AAA 839,300
1,255,000 Park City Utah School District, FGIC
Insured, 6.00%, 2/01/07 Aaa/AAA 1,407,169
365,000 Provo City Utah School District, FGIC
Insured, 5.10%, 6/15/15 Aaa/NR 373,212
</PAGE>
<PAGE>
12,142,518
Total General Obligation Bonds 15,588,524
REVENUE BONDS (74.5%)
EDUCATION REVENUE BONDS (3.9%)
200,000 University of Utah Revenue Refunding,
(Biology Research Facilities), MBIA
Insured, 5.500%, 04/01/11 Aaa/AAA 214,000
2,000,000 Utah State Board of Regents, University of
Utah, 5.000%, 04/01/20 Aaa/AAA 1,977,500
2,191,500
HOSPITAL REVENUE BONDS (8.9%)
2,000,000 Bountiful, Utah Hospital Revenue, IHC
Health Services, MBIA Insured, 5.750%,
12/15/18 NR/NR* 1,962,500
2,000,000 Utah County, Utah Hospital Revenue, IHC
Health Services, MBIA Insured, 5.250%,
08/15/21 Aaa/AAA 2,022,500
1,090,000 Utah County, Utah Hospital Revenue, IHC
Health Services MBIA Insured, 5.250%,
08/15/26 Aaa/AAA 1,099,537
5,084,537
INDUSTRIAL DEVELOPMENT REVENUE BONDS (3.0%)
1,375,000 Park City Utah Redevelopment Agency, FGIC
Insured, 5.125%, 06/15/16 NR/A- 1,405,937
250,000 Sandy City, Utah Industrial Development,
H Shirl Wright Project, 6.125%, 08/01/16 NR/AAA 265,000
1,670,937
LEASE REVENUE BONDS (24.3%)
600,000 Layton City, Utah Municipal Building
Authority, MBIA Insured, 5.700%, 08/15/08 Aaa/AAA 637,500
1,000,000 Logan, Utah Municipal Building Authority,
MBIA Insured, 5.200%, 04/01/18 Aaa/NR 1,010,000
700,000 Salt Lake County, Utah Municipal Building
Authority, 5.000%, 10/01/12 Aaa/AAA 733,250
1,000,000 Salt Lake County, Utah Municipal Building
Authority, 5.000%, 10/01/14 Aa3/AAA 1,011,250
</PAGE>
<PAGE>
1,000,000 Salt Lake City, Utah Municipal Building
Authority, 6.000%, 10/15/14 A1/A+ 1,070,000
1,000,000 Salt Lake County, Utah Municipal Building
Authority, Series 1994A, MBIA Insured,
6.050%, 10/01/08 Aaa/AAA 1,102,500
665,000 Salt Lake County, Utah Municipal Building
Authority, MBIA Insured, 4.900%, 10/01/11 Aaa/AAA 694,925
515,000 Sandy City, Utah Municipal Building
Authority, Series 1994A, MBIA Insured,
4.550%, 06/15/15 Aaa/NR 493,112
685,000 Utah State Building Ownership Authority,
Series A, 5.750%, 08/15/07 Aa/AA 720,106
350,000 Utah State Building Ownership Authority,
5.750%, 08/15/08 Aa/AA 365,750
1,000,000 Utah State Building Ownership Authority,
5.500%, 5/15/09 Aaa/AAA 1,101,250
1,000,000 Utah State Building Ownership Authority,
5.500%, 5/15/19 Aaa/AAA 1,072,500
2,000,000 Washington County, St. George, MBIA
Insured, 5.125%, 12/01/22 NR/AAA 2,002,500
850,000 West Valley City Utah, Municipal Buildings,
MBIA Insured, 4.450%, 4/15/10 NR/AAA 850,000
1,000,000 West Valley City Utah, Municipal Buildings,
MBIA Insured, 4.750%, 4/15/19 Aaa/AAA 946,250
13,810,893
MORTGAGE REVENUE BONDS (3.7%)
590,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series
E-1, 6.600%, 07/01/11 NR/AA 626,137
395,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series
1994C, 6.350%, 07/01/11 Aa2/NR 419,194
</PAGE>
<PAGE>
990,000 Utah State Housing Finance Agency, Single
Family Housing Mortgage Revenue, Series
1994C, 5.650%, 07/01/16 Aaa/AAA 1,020,937
2,066,268
TRANSPORTATION REVENUE BONDS (4.0%)
875,000 Salt Lake City, Utah Airport Revenue,
FGIC Insured, Series B, 5.875%, 12/01/12 Aaa/AAA 949,375
285,000 Salt Lake City, Utah Airport Revenue,
FGIC Insured, Series B, 5.875%, 12/01/18 Aaa/AAA 304,238
1,000,000 Utah Transit Authority Sales Tax Revenue
FSA Insured, 5.375%, 12/15/22 NR/AAA 1,026,250
2,279,863
WATER AND SEWER REVENUE BONDS (11.9%)
785,000 Central Utah Water Conservation District,
4.700%, 04/01/13 Aa3/AA 788,925
875,000 Granger & Hunter, Utah Water & Sewer
Revenue, 4.750%, 03/01/13 Aaa/AAA 873,906
1,005,000 North Davis County, Utah Water & Sewer
Revenue, 4.100%, 03/01/10 Aaa/NR 977,363
300,000 St. George, Utah Water Revenue, FGIC
Insured, 5.375%, 06/01/16 Aaa/AAA 305,250
1,000,000 St. George, Utah Interlocal Agency Revenue,
AMBAC Insured, 5.125%, 12/01/17 NR/AAA 1,007,500
500,000 Salt Lake City, Utah Water And Sewer
Revenue, AMBAC Insured, 5.750%, 02/01/13 Aaa/AAA 535,000
800,000 Timpanogos, Utah Water & Sewer Revenue,
Series A, AMBAC Insured, 6.00%, 06/01/16 Aaa/AAA 902,000
1,000,000 Utah Water Finance Agency Revenue.
Series A, AMBAC Insured, 5.300%, 10/01/23 Aaa/AAA 1,017,500
300,000 White City Water Improvement District,
Utah Water Revenue, AMBAC Insured, 5.90%,
02/01/22 Aaa/NR 324,750
</PAGE>
<PAGE>
6,732,194
UTILITY REVENUE BONDS (14.8%)
1,500,000 Intermountain Power Agency, 6.500%,
07/01/11 Aaa/AAA 1,796,250
790,000 Utah Association Municipal Power Systems
Revenue, 5.250%, 12/01/09 NR/A- 830,488
350,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.500%, 12/01/13 Aaa/AAA 366,188
1,245,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.250%, 06/01/14 Aaa/AAA 1,290,131
1,535,000 Utah Association Municipal Power Systems
Revenue, AMBAC Insured, 5.250%, 06/01/15 Aaa/AAA 1,542,675
695,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.500%,
07/01/10 Aaa/AAA 737,569
650,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.500%,
07/01/11 Aaa/AAA 686,563
1,125,000 Utah State Municipal Power Agency, Electric
Systems Revenue, FGIC Insured, 5.250%,
07/01/18 Aaa/AAA 1,139,063
8,388,927
Total Revenue Bonds 42,225,119
Total Investments (cost $56,550,384**) 102.0% 57,813,644
Liabilities in excess of other assets ( 2.0) (1,126,425)
Net Assets 100.0% $ 56,687,219
* 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.
</TABLE>
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $56,550,384) $ 57,813,644
Interest receivable 780,700
Receivable for investment securities sold 135,000
Due from Administrator for reimbursement of expenses (note 3) 12,215
Total assets 58,741,559
LIABILITIES
Cash overdraft 1,848,709
Payable for Fund shares redeemed 89,751
Dividends payable 68,524
Distribution fees payable 30,702
Accrued expenses 11,836
Management fee payable 4,818
Total liabilities 2,054,340
NET ASSETS $ 56,687,219
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 55,097
Additional paid-in capital 55,285,400
Net unrealized appreciation on investments 1,263,260
Accumulated net realized gain on investments 126,467
Distributions in excess of net investment income (43,005)
$ 56,687,219
CLASS A
Net Assets $ 54,895,678
Capital shares outstanding 5,335,452
Net asset value and redemption price per share $ 10.29
Offering price per share (100/96 of $10.29 adjusted to
nearest cent) $ 10.72
CLASS C
Net Assets $ 1,786,771
Capital shares outstanding 173,773
Net asset value and offering price per share $ 10.28
Redemption price per share (*generally, a charge of 1%
is imposed on the proceeds of shares redeemed during
the first 12 months after purchase) $ 10.28*
CLASS Y
Net Assets $ 4,770
Capital shares outstanding 463
Net asset value, offering and redemption price per share $ 10.29
See accompanying notes to financial statements.
</TABLE>
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 1,168,153
Expenses:
Management fee (note 3) $ 116,744
Distribution and service fees (note 3) 52,738
Legal fees 26,000
Shareholders' reports and proxy statements 19,500
Transfer and shareholder servicing agent fees 15,000
Trustees' fees and expenses 12,700
Audit and accounting fees 9,300
Registration fees and dues 6,500
Custodian fees 4,541
Insurance 400
Miscellaneous 8,938
272,361
Management fee waived (note 3) (100,074)
Reimbursement of expenses by Manager (note 3) (65,624)
Expenses paid indirectly (note 7) (13,935)
Net expenses 92,728
Net investment income 1,075,425
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 608,245
Change in unrealized appreciation on investments (411,854)
Net realized and unrealized gain on investments 196,391
Net increase in net assets resulting from operations $ 1,271,816
See accompanying notes to financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
DEC. 31, 1998 JUNE 30, 1998
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 1,075,425 $ 1,557,122
Net realized gain from securities transactions 608,245 40,106
Change in unrealized appreciation on investments (411,854) 829,222
Change in net assets from operations 1,271,816 2,426,450
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (1,039,404) (1,492,609)
Net realized gain on investments - -
Class C Shares:
Net investment income (32,047) (32,512)
Net realized gain on investments - -
Class Y Shares:
Net investment income (20,490) (46,710)
Net realized gain on investments - -
Change in net assets from distributions (1,091,941) (1,571,831)
CAPITAL SHARE TRANSACTIONS (NOTE 8):
Proceeds from shares sold 31,588,983 6,634,401
Reinvested dividends and distributions 699,947 910,182
Cost of shares redeemed (8,258,238) (5,074,894)
Change in net assets from capital share transactions 24,030,692 2,469,689
Change in net assets 24,210,567 3,324,308
NET ASSETS:
Beginning of period 32,476,652 29,152,344
End of period $ 56,687,219 $ 32,476,652
See accompanying notes to financial statements.
</TABLE>
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 December 31, 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>
<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 andAdministration 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.
</PAGE>
<PAGE>
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. 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.
For the six months ended December 31, 1998, the Fund
incurred fees for advisory and administrative services of $116,744
of which $100,074 was voluntarily waived. Additionally, the Manager
voluntarily agreed to reimburse the Fund for other expenses during
this period in the amount of $65,624. Of this amount, $53,409 was
paid prior to December 31, 1998 and the balance of $12,215 was paid
in early January 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 six months ended December 31, 1998, service fees
on Class A Shares amounted to $44,066, of which the Distributor
received $1,035.
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 six months ended December 31, 1998, amounted to $6,504.
Inaddition, 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 six months ended December 31, 1998,
amounted to $2,168. The total of these payments with respect to
Class C Shares amounted to $8,672, of which the Distributor
received $6,944.
</PAGE>
<PAGE>
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 six
months ended December 31, 1998, the Distributor received
commissions of $5,560 on sales of Class A Shares.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended December 31, 1998, purchases
of securities and proceeds from the sales of securities aggregated
$44,884,241 and $19,322,952, respectively.
At December 31, 1998, aggregate gross unrealized
appreciation for all securities in which there is an excess of
market value over tax cost amounted to $1,448,815 and aggregate
gross unrealized depreciation for all securities in which there is
an excess of tax cost over market value amounted to $185,555, for
a net unrealized appreciation of $1,263,260.
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 taxes at ordinary income
and/or capital gain rates.
</PAGE>
<PAGE>
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.
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30, 1998
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 3,017,486 $ 31,045,240 314,265 $ 3,194,917
Reinvested distributions 65,828 677,803 87,243 887,298
Cost of shares redeemed (581,108) (5,992,625) (491,638) (4,998,075)
Net change 2,502,206 25,730,418 (90,130) (915,860)
CLASS C SHARES:
Proceeds from shares sold 52,844 543,743 141,339 1,434,846
Reinvested distributions 2,153 22,142 2,241 22,879
Cost of shares redeemed (25,426) (261,854) (3,501) (35,659)
Net change 29,571 304,031 140,079 1,422,066
CLASS Y SHARES:
Proceeds from shares sold - - 194,062 2,004,638
Reinvested distributions - 2 1 5
Cost of shares redeemed (193,611) (2,003,759) (4,094) (41,160)
Net change (193,611) (2,003,757) 189,969 1,963,483
Total transactions in Fund
shares 2,338,166 $ 24,030,692 239,918 $ 2,469,689
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A(1)
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DEC. 31, 1998 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.24 $9.94 $9.74 $9.59 $9.32 $10.00
Income from Investment Operations:
Net investment income 0.24 0.52 0.52 0.54 0.55 0.55
Net gain (loss) on securities (both
realized and unrealized) 0.06 0.30 0.21 0.15 0.27 (0.65)
Total from Investment Operations 0.30 0.82 0.73 0.69 0.82 (0.10)
Less Distributions (note 6):
Dividends from net investment income (0.25) (0.52) (0.53) (0.54) (0.55) (0.55)
Distributions from capital gains - - - - - (0.03)
Total Distributions (0.25) (0.52) (0.53) (0.54) (0.55) (0.58)
Net Asset Value, End of Period $10.29 $10.24 $9.94 $9.74 $9.59 $9.32
Total Return (not reflecting sales
charge)(%) 2.91+ 8.41 7.72 7.17 9.09 (1.09)
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 54,896 29,013 29,071 28,881 27,536 26,116
Ratio of Expenses to Average Net
Assets (%) 0.42* 0.34 0.28 0.20 0.09 0.04
Ratio of Net Investment Income to
Average Net Assets (%) 4.59* 5.06 5.44 5.48 5.84 5.57
Portfolio Turnover Rate (%) 42.25+ 11.31 5.09 11.15 22.92 27.53
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 (%) 1.08* 1.30 1.32 1.29 1.29 1.59
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) 3.93* 4.10 4.40 4.39 4.64 4.02
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 (%) 0.36* 0.33 0.27 0.19 0.08 0.03
(1) Designated as Class A Shares on May 21, 1996.
+ Not annualized.
* 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.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C(1)
SIX MONTHS PERIOD(2)
ENDED ENDED
DEC. 31, YEAR ENDED JUNE 30, JUNE 30,
1998 1998 1997 1996
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.23 $9.94 $9.74 $9.77
Income from Investment Operations:
Net investment income 0.19 0.41 0.44 0.05
Net gain (loss) on securities
(both realized and unrealized) 0.05 0.29 0.21 (0.03)
Total from Investment Operations 0.24 0.70 0.65 0.02
Less Distributions (note 6):
Dividends from net investment income (0.19) (0.41) (0.45) (0.05)
Distributions from capital gains - - - -
Total Distributions (0.19) (0.41) (0.45) (0.05)
Net Asset Value, End of Period $10.28 $10.23 $9.94 $9.74
Total Return (not reflecting sales
charge) (%) 2.90+ 7.20 6.80 0.20+
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 1,787 1,476 41 0.1
Ratio of Expenses to Average Net
Assets (%) 1.42* 1.36 1.08 0.14+
Ratio of Net Investment Income to
Average Net Assets (%) 3.57* 3.94 4.64 0.50+
Portfolio Turnover Rate (%) 42.25+ 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 (%) 1.89* 2.08 2.12 0.23+
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) 3.10* 3.22 3.60 0.41+
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 (%) 1.36* 1.35 1.07 0.14+
(1) New Class of Shares established on May 21, 1996.
(2) From May 21, 1996 to June 30, 1996.
+ Not annualized.
* 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.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS Y(1)
SIX MONTHS PERIOD(2)
ENDED ENDED
DEC. 31, YEAR ENDED JUNE 30, JUNE 30,
1998 1998 1997 1996
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.24 $9.94 $9.74 $9.77
Income from Investment Operations:
Net investment income 0.24 0.53 0.61 0.06
Net gain (loss) on securities
(both realized and unrealized) 0.05 0.30 0.21 (0.03)
Total from Investment Operations 0.29 0.83 0.82 0.03
Less Distributions (note 6):
Dividends from net investment income (0.24) (0.53) (0.62) (0.06)
Distributions from capital gains - - - -
Total Distributions (0.24) (0.53) (0.62) (0.06)
Net Asset Value, End of Period $10.29 $10.24 $9.94 $9.74
Total Return (not reflecting sales
charge) (%) 0.00+ 8.52 8.69 0.29+
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 5 1,988 41 0.1
Ratio of Expenses to Average Net
Assets (%) 0.40* 0.37 0.08 0.03+
Ratio of Net Investment Income to
Average Net Assets (%) 4.47* 5.02 5.64 0.61+
Portfolio Turnover Rate (%) 42.25+ 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 (%) 0.96* 1.10 1.12 0.11+
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) 3.91* 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 (%) 0.34* 0.36 0.07 0.03+
(1) New Class of Shares established on May 21, 1996.
(2) From May 21, 1996 to June 30, 1996.
+ Not annualized.
* 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.
</TABLE>
</PAGE>
<PAGE>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Tax-Free Fund For Utah (the
"Fund") was held on October 12, 1998. The holders of shares
representing 75% of the total net asset value of the shares
entitled to vote were present in person or 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. To elect Trustees.
NUMBER OF VOTES:
TRUSTEE FOR WITHHELD
Lacy B. Herrmann 24,369,182.19 1,097,860.88
Gary C. Cornia 24,442,030.54 1,025,012.53
William L. Ensign 24,442,030.54 1,025,012.53
Diana P. Herrmann 24,442,030.54 1,025,012.53
Anne J. Mills 24,442,030.54 1,025,012.53
R. Thayne Robson 24,442,030.54 1,025,012.53
2. To ratify the selection of KPMG Peat Marwick LLP as the
Fund's independent auditors.
NUMBER OF VOTES:
FOR AGAINST ABSTAIN
24,538,402.73 65,558.41 863,071.72
</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.
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>
