<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
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus,
which must precede or accompany this report.
ANNUAL
REPORT
JUNE 30, 2000
[Logo of Tax-Free Fund For Utah: a rectangle containing desert boulders with the
sun rising behind them]
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>
[Logo of Tax-Free Fund For Utah: a rectangle containing desert boulders with the
sun rising behind them]
TAX-FREE FUND FOR UTAH
ANNUAL REPORT
"CONSISTENCY"
August 18, 2000
Dear Fellow Shareholder:
If there is one word that captures the essence of Tax-Free Fund For Utah,
that word is "CONSISTENCY."
The Fund has constantly attempted to provide:
* CONSISTENCY of share value,
* CONSISTENCY in the TAX-FREE return produced by the Fund
* CONSISTENCY of quality of investments and
* CONSISTENCY in the type of investments for the Fund.
CONSISTENCY OF SHARE VALUE
As you are aware, management of the Fund cannot control interest rates or
their effect upon the market. Interest rates are primarily controlled by the
Federal Reserve Board. The Fed increases or decreases rates as they feel is
necessary in order to maintain the stability and growth potential of the economy
of the United States.
When the Federal Reserve feels that growth in the economy is increasing at
too rapid a pace, they tend to increase interest rates and reduce the supply of
money in order to slow down the rate of growth. (This is what has happened
during the past year or so.) On the other hand, when the Federal Reserve feels
that the economy needs stimulation, there is a tendency to decrease interest
rates and increase the supply of money in order to provide an additional impetus
to the overall economy.
Interest rate changes have the effect in the marketplace of creating
changes in the share value of fixed-income securities such as the Fund. As we
have previously indicated, when interest rates go up, the share value goes down.
And, when interest rates go down, the share value goes up. What we have done is
to use various investment management techniques to dampen the swings that can
occur in the share value of the Fund.
Despite the variations in share price that have taken place since the
inception of the Fund, management of the Fund has strived to provide, to the
maximum extent possible, CONSISTENCY in the value of the Fund's shares. This you
will note from the chart below.
[Graphic of a bar chart with the following information:]
SHARE NET ASSET VALUE
7/24/92 $9.60
12/31/92 9.57
12/31/93 10.14
12/31/94 8.95
12/31/95 10.05
12/31/96 9.92
12/31/97 10.22
12/31/98 10.29
12/31/99 9.21
6/30/2000 9.35
</PAGE>
<PAGE>
Since the majority of investors using the Fund are pre-retirees or
retirees, this action by the Fund of maintaining a stable share value is what we
feel is in the best interest of all shareholders. We want you to know that when
you need money from your investment in the Fund, it is THERE - at approximately
the same value that it has been all along.
CONSISTENCY IN THE TAX-FREE RETURN PRODUCED BY THE FUND
When you look at the Fund in terms of income produced on a year-by-year
basis, you will observe that we have tried to provide the maximum level of
yearly TAX-FREE return as can be produced by a quality-oriented portfolio of
municipal securities.
As you are aware, this level of return will vary from year to year as
interest rate changes by the Federal Reserve affect the overall marketplace.
Nevertheless, there is a CONSISTENCY to the level of return that the Fund would
like to provide for you and other shareholders.
Although the income level received by shareholders will vary from year to
year, it does have a CONSISTENCY to it. And, this is why shareholders buy and
own the Fund - for that CONSISTENCY of TAX-FREE income.
During recent years, the level of SPENDABLE TAX-FREE return provided to
shareholders has ranged between 4.30% to 5.46% based upon an average share value
of the Fund.
Shareholders of Tax-Free Fund For Utah should not buy or sell the Fund
based upon capital appreciation, such as they would with an equity or stock
fund.
An analogy for a shareholder of Tax-Free Fund For Utah would be a person
buying a dairy cow for the steady stream of milk it supplies, not for what it
might be worth when he/she sells it.
What the Fund is providing is a relatively steady stream of TAX-FREE
income and a relatively stable share value.
Shareholders buy and hold their position in Tax-Free Fund For Utah for the
longer term, not for a quick in and out. Therefore, shareholders do NOT and
should NOT look upon the Fund for its total return - but, rather for the income
stream it provides in the form of TAX-FREE dividends.
Also, when you look at the recent level of TAX-FREE income provided by the
Fund and measure that against the taxable income required to provide the same
amount of money in your pocket, here's what things look like.
[Graphic of a 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
RATE OF RETURN
DOUBLE TAX-FREE DISTRIBUTION RATE TAXABLE EQUIVALENT RATE
TAX BRACKET
28% 5.19% 7.75%
31% 5.19% 8.09%
36% 5.19% 8.87%
40% 5.19% 9.42%
</PAGE>
<PAGE>
CONSISTENCY OF QUALITY OF INVESTMENTS
Since inception of the Fund, management has CONSISTENTLY sought
high-quality investments for its shareholders.
We don't like surprises. Nor, do shareholders like surprises. We believe
the best way to avoid surprises is to stick with quality.
The pie chart below gives you a breakdown of the quality of the individual
securities of the Fund as at the Annual Report date of June 30, 2000.
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY QUALITY
AAA 62.5%
AA 16.6%
A 5.0%
Below A and not rated 15.9%
As you will recall, the Fund's prospectus restricts its investments to only
the top four quality securities - AAA, AA, A, Baa - although there are nine
different grades of quality associated with municipal bond investing ranging
from the highest to the lowest. We have always tried to make sure that
shareholders know that, to the maximum extent possible, their invested money
will be there when they need it. The best way we know to accomplish this
objective is by sticking with quality.
This is why we CONSISTENTLY seek to maintain most of the Fund's money in
the upper quality securities - AAA AND AA. As you will appreciate, the exact
level of quality will vary from time to time based upon availability of
securities in the marketplace to achieve the Fund's objective.
CONSISTENCY IN THE TYPE OF INVESTMENTS FOR THE FUND
Management of Tax-Free Fund For Utah has CONSISTENTLY embraced the idea
that your investment should not only help shareholders financially, but also
help your state and its communities. Thus, investments in the Fund are as
diversified as possible. Diversification geographically and by type of project
is another way of ensuring that your money is doing the best job possible for
not only you, but also for your community and state.
PORTFOLIO DISTRIBUTION BY MARKET SECTOR
Education 4.4%
Healthcare 14.9%
Housing 18.5%
Industrial 1.6%
Leases 19.6%
Transportation 6.6%
Utilities 2.3%
Water and Sewer 13.8%
County/City/School District 15.2%
Other 3.1%
</PAGE>
<PAGE>
SUMMARY
As we have tried to illustrate in this report to you, the essence of
Tax-Free Fund For Utah is CONSISTENCY. This is what we feel that shareholders
are primarily interested in. And, this is exactly what we are trying to provide
to you and other shareholders.
CONSISTENCY OF APPRECIATION
As always, we again wish to express our appreciation for the confidence you
have shown by your investment in Tax-Free Fund For Utah. We can assure you that
we will CONSISTENTLY do our best to merit your continued level of trust.
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,
2000 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>
FUND'S CLASS A SHARES
LEHMAN BROTHERS MUNICIPAL BOND INDEX WITH SALES CHARGE WITHOUT SALES CHARGE COST OF LIVING INDEX
</CAPTION>
<S> <C> <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
6/00 15,775 14,482 15,086 12,263
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED JUNE 30, 2000
SINCE
1 YEAR 5 YEARS INCEPTION
Class A (7/24/92)
With Sales Charge (3.44)% 4.10% 4.77%
Without Sales Charge 0.57 4.95 5.31
Class C (5/21/96)
With CDSC (1.32) n/a 3.54
Without CDSC (0.33) n/a 3.54
Class Y (5/21/96)
No Sales Charge 0.86 n/a 4.84
Lehman Index 3.25 5.89 5.93 (Class A)
3.25 n/a 5.86 (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 OF FUND PERFORMANCE
PORTFOLIO MANAGER'S ANALYSIS
FISCAL 2000 REVIEW
The latest fiscal year, July 1, 1999 through June 30, 2000, saw higher than
normal volatility in interest rates. AA rated General Obligation municipal bonds
with a 10-year maturity ranged in yield from 4.78% to 5.47% over the year and
had four distinct cycles of up and down moves. For the entire period yields rose
30 basis points from 4.88% to 5.18%. This rise in rates caused most bond prices
to fall resulting in a drop in Net Asset Value. Municipal yields relative to U.S
Treasury yields were attractive over most of the period except in late December
and early January when municipal bonds rallied in the face of weak supply.
Generic 10-year municipals ended the period yielding about 85% of treasuries,
which is about average for the last 4-5 years.
One interesting development was the perceived "shortage" of long-term
(25-30 years) securities available in the U.S Treasury market. This resulted in
lower yields on the long end of the Treasury curve relative to shorter
maturities. The municipal market does not have the same supply constraints and
saw no such falloff in longer rates. As a result, longer municipal yields are
particularly attractive relative to Treasuries.
FISCAL 2001 STRATEGY
The Federal Reserve has continued to rein in money supply growth. This,
along with higher short-term interest rates and higher energy costs, appears to
be having the intended consequence of slowing the economy. We would note rising
initial unemployment insurance claims, declining lumber prices and housing
sales, anecdotal evidence of a lack of manufacturing pricing power and growth
forecasts, and more overall more signs of weakness showing up than signs of
strength. One correlation that has developed over recent years is between the
stock market and the economy. It appears that with a greater percentage of
people's savings invested in the stock market that the swings of the market are
directly influencing consumer confidence and spending patterns. Contrary to
recent perceptions of a Federal Reserve without influence, this correlation
actually makes it easier for the Fed to fine-tune the economy than had
previously been the case. We look for the economy to provide a solid foundation
for good bond returns.
Bond calls reach a mini-peak on June 1 and a higher peak on July 1 of each
year. We have viewed this as a positive since reinvestment would be into a
market of lower supply and stable fund flows. In addition, recent favorable
performance in the taxable sector and some evidence of reallocation away from
equities should result in a continuation of the recent firm municipal market.
The Utah municipal market continues to benefit from conservative fiscal
management in most municipalities. To add value in the Fund we have looked to
add quality bonds in the housing sector, smaller community bonds, and selected
"structure" stories, such as securities that we feel provide a high likelihood
of being advance refunded. We think there is opportunity in purchasing
securities that fit into these higher returning categories. Recently, the
magnitude of difference between Utah and other states on yields of comparable
quality bonds has been unusually high. We see opportunities on a limited basis
to add attractive non-Utah bonds to the portfolio to take advantage of spread
differences. 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: four solid squares with the letters KPMG in front of them]
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,
2000, 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, 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 accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
--------------
New York, New York
August 4, 2000
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF INVESTMENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT GENERAL OBLIGATION BONDS (15.7%) S&P VALUE
</CAPTION>
<S> <C> <C> <C> <C>
CITY, COUNTY AND STATE (9.0%)
$ 405,000 Brian Head, Utah, 6.500%, 03/15/24 NR/NR* $ 410,063
2,095,000 Clearfield City Utah, MBIA Insured,
5.125%, 02/01/18 NR/AAA 1,943,112
295,000 Hurricane, Utah, Asset Guaranty Insured,
5.400%, 11/01/09 NR/AA 298,319
100,000 Indianapolis, Indiana Local Public Improvement,
6.000%, 1/10/18 Aaa/AAA 101,500
400,000 Weber County, Utah Unlimited Tax, FGIC Insured,
5.625%, 01/15/11 Aaa/AAA 406,000
3,158,994
SCHOOL DISTRICT (6.3%)
1,000,000 Jackson & Williamson County, Illinois School District,
AMBAC Insured, 6.250%, 12/01/15 Aaa/AAA 1,056,250
1,000,000 Jackson & Williamson County, Illinois School District,
AMBAC Insured, 6.500%, 12/01/18 Aaa/AAA 1,060,000
120,000 Rich County Utah School, School District XX
5.500%, 12/15/09 NR/NR* 120,600
2,236,850
TAX ALLOCATION (0.4%)
165,000 Ogden Utah Neighborhood Dev A Tax Allocation,
zero coupon, 12/30/05 A3/NR 123,131
123,131
Total General Obligation Bonds 5,518,975
REVENUE BONDS (80.1%)
EDUCATION (4.3%)
1,000,000 Salt Lake City, Utah Westminster College
5.750%, 10/01/27 NR/BBB 941,250
375,000 Southern Utah University Revenue, 6.300%, 06/01/16 NR/NR* 379,687
200,000 University of Utah Revenue Refunding, (Biology Research
Facilities), MBIA Insured, 5.500%, 04/01/11 Aaa/AAA 201,750
1,522,687
HEALTH (14.5%)
315,000 California Health Facilities, Hospital of the Good
Samaritan, 7.000%, 09/01/21 Ba1/BBB 310,275
500,000 Lufkin Texas Health Facs D Hospital Revenue S
6.875%, 02/15/26 NR/BBB- 465,000
400,000 Minneapolis & St. Paul Minnesota, 6.900%, 10/15/22 Baa1/BBB+ 402,500
380,000 New Hampshire Higher Education, Androscoggin
Hospital, 5.800%, 11/01/27 NR/A- 338,675
</PAGE>
<PAGE>
$ 400,000 Pike Cnty Ohio Facs Hospital Revenue S
6.3500%, 07/01/07 NR/NR* $ 394,500
2,000,000 Utah County, Utah Hospital Revenue, IHC Health
Services, MBIA Insured, 5.250%, 08/15/21 Aaa/AAA 1,855,000
400,000 Washington County Pennsylvania, 7.350%, 06/01/13 NR/NR* 390,000
500,000 Weber County, Utah Hospital Revenue, IHC Health
Services, 5.000%, 08/15/30 Aa2/AA 417,500
500,000 Wisconsin State Health, Hess Memorial Hospital,
7.875%, 11/01/22 NR/NR* 520,000
5,093,450
INDUSTRIAL DEVELOPMENT (1.2%)
250,000 Sandy City, Utah Industrial Development, H Shirl Wright
Project, LOC Olympus Bank, 6.125%, 08/01/16 NR/AAA 254,375
170,000 West Valley City, Utah Development Agency Tax Inc.,
6.000%, 03/01/24 NR/A- 170,213
424,588
LEASE (19.4%)
1,000,000 Logan, Utah Municipal Building Authority, AMBAC
Insured, 5.200%, 04/01/18 Aaa/NR 938,750
1,280,000 Salt Lake County, Utah Municipal Building Authority,
Lease Revenue A, 5.850%, 10/01/17 Aa3/AA- 1,291,200
1,110,000 Salt Lake City, Utah Municipal Building Authority,
6.000%, 10/15/14 Aa3/A+ 1,143,300
1,000,000 St. George, Utah Interlocal Agency Revenue,
AMBAC Insured, 5.125%, 12/01/17 NR/AAA 945,000
350,000 Utah State Building Ownership Authority,
5.750%, 08/15/08 Aa1/AA 355,250
2,000,000 Utah State Building Ownership Authority,
FSA Insured, 5.250%, 05/15/20 Aaa/AAA 1,897,500
250,000 Utah State Municipal Finance Corp. Local
Government Revenue,
6.400%, 08/01/09 A1/A 258,437
6,829,437
HOUSING (17.7%)
500,000 Boulder County Colorado, Multi Family Housing,
6.250%, 06/01/19 NR/NR* 458,750
630,000 Colorado Housing Authority, 6.750%, 10/01/21 Aa2/NR 666,225
205,000 Idaho Housing Finance Agency FHA, VA, FMHA
Mortgages, 6.400%, 07/01/11 Aa1/NR 210,638
175,000 Idaho Housing Finance Agency FHA, VA, FMHA
Mortgage, 6.600%, 07/01/15 Aaa/NR 183,094
</PAGE>
<PAGE>
$ 255,000 Nevada Housing Division FHA/VA Mortgages
6.55%, 10/01/11 Aa2/NR $ 265,200
500,000 Provo City Utah Hsg Auth, 5.800%, 07/20/22 Aaa/NR 486,250
225,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series E-1,
6.600%, 07/01/11 NR/AA 231,750
195,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series 1994C,
6.350%, 07/01/11 Aa2/NR 200,850
285,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, 7.250%, 07/01/11 Aa2/AA 299,250
585,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, 6.900%, 07/01/12 NR/AAA 599,625
1,390,000 Utah State Housing Finance Agency, Single Family
Housing Mortgage Revenue, Series 1994C,
5.650%, 07/01/16 Aaa/AAA 1,367,413
360,000 West Jordan Utah Multi Family Housing
6.80%, 01/01/15 Aaa/AAA 374,850
645,000 Washington State Housing , Single Family Housing
Mortgage Revenue, 6.050%, 12/01/16 Aaa/NR 653,062
225,000 Wisconsin Housing and Economic Development,
Series C, MBIA Insured, 5.800%, 11/01/13 Aaa/AAA 226,406
6,223,363
US GOVERNMENT ESCROW (0.7%)
250,000 Maricopa County Arizona, MBIA Insured, escrowed
to maturity, 7.000%, 12/01/13 Aaa/AAA 257,138
257,138
TRANSPORTATION (6.5%)
150,000 Michigan St Trunk Line, 5.50%, 10/01/21 Aa3/AA 145,125
875,000 Salt Lake City, Utah Airport Revenue, FGIC Insured,
Series B, 5.875%, 12/01/12 Aaa/AAA 899,062
285,000 Salt Lake City, Utah Airport Revenue, FGIC Insured,
Series B, 5.875%, 12/01/18 Aaa/AAA 289,275
1,000,000 Utah Transit Authority Sales Tax Revenue FSA
Insured, 5.375%, 12/15/22 NR/AAA 945,000
2,278,462
WATER AND SEWER (13.6%)
345,000 Ashley Valley, Utah, AMBAC Insured,
9.500%, 01/01/08 Aaa/AAA 402,356
</PAGE>
<PAGE>
$ 1,000,000 Detroit Michigan Sewer Disp Re Water and Sewer
Services, FGIC Insured, zero coupon, 07/01/20 Aaa/AAA $ 306,250
670,000 Granger & Hunter Water Revenue, Utah, FSA Insured,
4.625%, 03/01/11 Aaa/NR 621,425
300,000 St. George, Utah Water Revenue, AMBAC Insured,
5.375%, 06/01/16 Aaa/AAA 294,375
500,000 Salt Lake City, Utah Water And Sewer Revenue,
AMBAC Insured, 5.750%, 02/01/13 Aaa/AAA 506,875
2,000,000 Timpanogos, Utah Water & Sewer Revenue,
MBIA Insured, 5.00%, 06/01/19 Aaa/AAA 1,820,000
200,000 Weber-Box Elder Consv Di Water/Sewer Revenue, Utah
6.450%, 11/01/14 Baa3/NR 205,500
335,000 Weber-Box Elder Consv Di Water/Sewer Revenue, Utah
6.900%, 11/01/20 Baa3/NR 344,212
300,000 White City Water Improvement, Utah
5.900%, 02/01/22 Aaa/AAA 301,875
4,802,868
UTILITY (2.2%)
790,000 Utah Association Municipal Power Systems Revenue,
5.250%, 12/01/09 NR/A 787,039
787,039
Total Revenue Bonds 28,219,032
Total Investments (cost $34,462,595**) 95.8% 33,738,007
Other assets in excess of liabilities 4.2 1,469,019
Net Assets 100.0% $ 35,207,026
</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.
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
<TABLE>
<S> <C> <C> <C>
ASSETS
Investments at value (cost $34,462,595) $ 33,738,007
Cash 762,065
Interest receivable 613,846
Receivable for investment securities sold 175,000
Receivable for Fund shares sold 107,743
Due from Manager for reimbursement of expenses (note 3) 5,609
Total assets 35,402,270
LIABILITIES
Payable for Fund shares redeemed 107,087
Dividends payable 37,146
Accrued expenses 29,679
Distribution fees payable 19,598
Management fee payable 1,734
Total liabilities 195,244
NET ASSETS $ 35,207,026
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share $ 37,648
Additional paid-in capital 38,355,870
Net unrealized depreciation on investments (724,588)
Accumulated net realized loss on investments (2,423,757)
Distributions in excess of net investment income (38,147)
$ 35,207,026
CLASS A
Net Assets $ 34,170,537
Capital shares outstanding 3,653,873
Net asset value and redemption price per share $ 9.35
Offering price per share (100/96 of $9.35 adjusted to nearest cent) $ 9.74
CLASS C
Net Assets $ 1,036,367
Capital shares outstanding 110,880
Net asset value and offering price per share $ 9.35
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) $ 9.35*
CLASS Y
Net Assets $ 122
Capital shares outstanding 13
Net asset value, offering and redemption price per share $ 9.36
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
<TABLE>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 2,244,305
Expenses:
Management fee (note 3) $ 204,781
Distribution and service fees (note 3) 91,683
Legal fees 38,527
Shareholders' reports and proxy statements 29,312
Trustees' fees and expenses (note 8) 27,719
Transfer and shareholder servicing agent fees 22,223
Audit and accounting fees 19,500
Custodian fees 16,508
Registration fees and dues 9,281
Insurance 1,543
Miscellaneous 17,064
478,141
Management fee waived (note 3) (166,101)
Reimbursement of expenses by Manager (note 3) (126,313)
Expenses paid indirectly (note 7) (13,768)
Net expenses 171,959
Net investment income 2,072,346
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss from securities transactions (2,423,756)
Change in unrealized depreciation on investments 218,825
Net realized and unrealized loss on investments (2,204,931)
Net decrease in net assets resulting from operations $ (132,585)
</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,
2000 1999
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 2,072,346 $ 2,327,932
Net realized gain (loss) from securities transactions (2,423,756) 762,330
Change in unrealized depreciation on investments 218,825 (2,618,527)
Change in net assets from operations (132,585) 471,735
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (2,161,485) (2,298,984)
Net realized gain on investments (232,324) -
Class C Shares:
Net investment income (54,411) (65,213)
Net realized gain on investments (6,288) -
Class Y Shares:
Net investment income (126) (20,603)
Net realized gain on investments (27) -
Change in net assets from distributions (2,454,661) (2,384,800)
CAPITAL SHARE TRANSACTIONS (NOTE 9):
Proceeds from shares sold 3,752,027 45,921,189
Reinvested dividends and distributions 1,419,022 1,427,466
Cost of shares redeemed (16,299,972) (28,989,047)
Change in net assets from capital share transactions (11,128,923) 18,359,608
Change in net assets (13,716,169) 16,446,543
NET ASSETS:
Beginning of period 48,923,195 32,476,652
End of period $ 35,207,026 $ 48,923,195
</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, 2000, 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, 2000, the Fund incurred fees for advisory and
administrative services of $204,781 of which $166,101 was voluntarily waived.
Additionally, the Manager voluntarily agreed to reimburse the Fund for other
expenses during this period in the amount of $126,313. Of this amount, $120,704
was paid prior to June 30, 2000 and the balance of $5,609 was paid in early July
2000.
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, 2000, service fees on Class A Shares amounted to
$79,463, of which the Distributor received $2,003.
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, 2000, amounted to $9,165. 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, 2000, amounted to $3,055. The total of these payments with
respect to Class C Shares amounted to $12,220, of which the Distributor received
$6,364.
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,
2000, total commissions on sales of Class AShares amounted to $53,367, of which
the Distributor received $8,298.
</PAGE>
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 2000, purchases of securities and proceeds
from the sales of securities aggregated $19,896,303 and $33,630,632,
respectively.
At June 30, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$399,926 and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over market value amounted to $1,124,514, for a
net unrealized depreciation of $724,588.
At June 30, 2000, the Fund has a capital loss carryover of $415,533 which
expires on June 30, 2008. This carryover is available to offset future net
realized gains on securities transactions to the extent provided for in the
Internal Revenue Code. To the extent that this loss is used to offset future
realized capital gains, it is probable that the gains so offset will not be
distributed.
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, 2000, the Fund had 23.9% of its net assets invested in
20 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, in cash,
or in a combination of both, 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, two of whom are affiliated
with the Manager and are not paid any trustee fees. Trustees' fees paid during
the year were at the annual rate of $3,400 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 of Shareholders. For the fiscal year ended
June 30, 2000, such reimbursements averaged approximately $1,800 per Trustee.
9. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 368,809 $ 3,479,331 4,369,607 $ 44,913,787
Reinvested distributions 147,190 1,379,176 135,169 1,383,403
Cost of shares redeemed (1,646,401) (15,430,650) (2,553,748) (26,188,074)
Net change (1,130,402) (10,572,143) 1,951,028 20,109,116
CLASS C SHARES:
Proceeds from shares sold 29,475 272,693 98,144 1,007,402
Reinvested distributions 4,256 39,837 4,308 44,057
Cost of shares redeemed (91,808) (865,170) (77,697) (797,214)
Net change (58,077) (552,640) 24,755 254,245
CLASS Y SHARES:
Proceeds from shares sold - 3 - -
Reinvested distributions 1 9 1 6
Cost of shares redeemed (452) (4,152) (193,611) (2,003,759)
Net change (451) (4,140) (193,610) (2,003,753)
Total transactions in Fund shares (1,188,930) $ (11,128,923) 1,782,173 $ 18,359,608
</TABLE>
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
YEAR ENDED JUNE 30,
2000 1999 1998 1997 1996
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.88 $10.24 $9.94 $9.74 $9.59
Income from Investment Operations:
Net investment income 0.48 0.49 0.52 0.52 0.54
Net gain (loss) on securities (both realized
and unrealized) (0.44) (0.36) 0.30 0.21 0.15
Total from Investment Operations 0.04 0.13 0.82 0.73 0.69
Less Distributions (note 6):
Dividends from net investment income (0.51) (0.49) (0.52) (0.53) (0.54)
Distributions from capital gains (0.06) - - - -
Total Distributions (0.57) (0.49) (0.52) (0.53) (0.54)
Net Asset Value, End of Period $9.35 $9.88 $10.24 $9.94 $9.74
Total Return (not reflecting sales charge)(%) 0.57 1.19 8.41 7.72 7.17
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 34,171 47,251 29,013 29,071 28,881
Ratio of Expenses to Average Net Assets (%) 0.42 0.45 0.34 0.28 0.20
Ratio of Net Investment Income to Average
Net Assets (%) 5.06 4.57 5.06 5.44 5.48
Portfolio Turnover Rate (%) 48.99 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 (%) 1.11 1.04 1.30 1.32 1.29
Ratio of Net Investment Income to
Average Net Assets (%) 4.37 3.98 4.10 4.40 4.39
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 (%) 0.39 0.38 0.33 0.27 0.19
</TABLE>
Note: Effective July 16, 1998, Zions First National Bank became the Fund's
Investment Sub-Adviser replacing First Security Investment Management, Inc.
</PAGE>
<PAGE>
TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C CLASS Y
PERIOD PERIOD
YEAR ENDED JUNE 30, ENDED YEAR ENDED JUNE 30, ENDED
2000 1999 1998 1997 6/30/96(1) 2000 1999 1998 1997 6/30/96(1)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.87 $10.23 $9.94 $9.74 $9.77 $9.88 $10.24 $9.94 $9.74 $9.77
Income from Investment Operations:
Net investment income 0.38 0.38 0.41 0.44 0.05 0.45 0.45 0.53 0.61 0.06
Net gain (loss) on securities (both
realized and unrealized) (0.42) (0.35) 0.29 0.21 (0.03) (0.38) (0.32) 0.30 0.21 (0.03)
Total from Investment Operations (0.04) 0.03 0.70 0.65 0.02 0.07 0.13 0.83 0.82 0.03
Less Distributions (note 6):
Dividends from net investment income (0.42) (0.39) (0.41) (0.45) (0.05) (0.53) (0.49) (0.53) (0.62) (0.06)
Distributions from capital gains (0.06) - - - - (0.06) - - - -
Total Distributions (0.48) (0.39) (0.41) (0.45) (0.05) (0.59) (0.49) (0.53) (0.62) (0.06)
Net Asset Value, End of Period $9.35 $9.87 $10.23 $9.94 $9.74 $9.36 $9.88 $10.24 $9.94 $9.74
Total Return (not reflecting sales charge) (%) (0.33) 0.18 7.20 6.80 0.20+ 0.86 1.19 8.52 8.69 0.29+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 1,036 1,667 1,476 41 0.1 0.1 5 1,988 41 0.1
Ratio of Expenses to Average Net Assets (%) 1.43 1.45 1.36 1.08 0.14+ 0.42 0.43 0.37 0.08 0.03+
Ratio of Net Investment Income to Average
Net Assets (%) 4.07 3.57 3.94 4.64 0.50+ 4.88 4.45 5.02 5.64 0.61+
Portfolio Turnover Rate (%) 48.99 87.49 11.31 5.09 11.15+ 48.99 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 (%) 1.91 1.85 2.08 2.12 0.23+ 0.86 0.96 1.10 1.12 0.11+
Ratio of Net Investment Income to Average
Net Assets (%) 3.58 3.17 3.22 3.60 0.41+ 4.43 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 (%) 1.39 1.37 1.35 1.07 0.14+ 0.39 0.34 0.36 0.07 0.03+
</TABLE>
(1) For the period May 21, 1996 (commencement of operations) through 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, 2000, $2,071,934 of dividends paid by
Tax-Free Fund For Utah, constituting 84.22% of total dividends paid during
fiscal 2000, were exempt-interest dividends; $238,636 of dividends paid,
constituting 9.70% of total dividends paid during fiscal 2000, were capital gain
dividends; and the balance was ordinary dividend income.
Prior to January 31, 2000, shareholders were mailed IRS Form 1099-DIV which
contained information on the status of distributions paid for the 1999 CALENDAR
YEAR.
</PAGE>
