N-30D 1 utah122002.txt TAX-FREE FUND FOR UTAH 12/31/2002 SEMI-ANNUAL REPORT MANAGER, FOUNDER AND INVESTMENT ADVISER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Gary C. Cornia William L. Ensign Diana P. Herrmann Anne J. Mills OFFICERS Diana P. Herrmann, President Jerry G. McGrew, Senior Vice President Kimball L. Young, Senior Vice President and Co-Portfolio Manager Thomas S. Albright, Vice President and Co-Portfolio Manager M. Kayleen Willis, Assistant Vice President Rose F. Marotta, Chief Financial Officer Joseph P. DiMaggio, 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. 1111 Polaris Parkway Columbus, Ohio 43240 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. SEMI-ANNUAL REPORT DECEMBER 31, 2002 [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 AQUILA(SM) GROUP OF FUNDS [Logo of Tax-Free Fund for Utah: a rectangle containing desert boulders with the sun rising behind them] SERVING UTAH INVESTORS FOR MORE THAN A DECADE TAX-FREE FUND FOR UTAH SEMI-ANNUAL REPORT "CONSISTENT TAX-FREE DIVIDENDS" February 14, 2003 Dear Fellow Shareholder: If you happen to have read the January "Thought For The Month," you will remember that it, too, talked about consistent tax-free* dividends. We feel it is important to highlight this concept again since it is the very basis of the Fund. MEETING THE NEEDS OF SHAREHOLDERS You probably won't be surprised to learn that a large percentage of shareholders in Tax-Free Fund For Utah are pre-retirees or retirees who depend on monthly income to meet their living expenses. Thus, Tax-Free Fund For Utah's objective of providing "as high a level of current income exempt from Utah state and regular Federal income taxes as is consistent with preservation of capital" is "just what the doctor ordered" for many of our shareholders. Since Tax-Free Fund For Utah's inception in July, 1992, shareholders have been the beneficiaries of dividends that have been paid each and every month. And, since we fully recognize that our shareholders depend on this income, we purposefully arrange to have the number of days for each dividend payment fluctuate only slightly from month to month. In this way, we provide you with as consistent a level of income as possible. And, since these dividends are not only consistent, but also tax-free, you and our other shareholders get to utilize the full purchasing power of every dollar earned. (As you know, with a taxable investment, 20% or more of each dividend dollar could be eaten away by state and Federal taxes.) For those shareholders who are on a fixed income, these additional dollars which stay in your own pocket - instead of going toward taxes - could prove to be extremely beneficial to you. STABILITY OF YOUR CAPITAL The other significant need of our shareholders that we meet besides providing consistent tax-free dividends, is managing the Fund so that its share price remains relatively stable.** Following is the Class A share price of Tax-Free Fund For Utah for the past three semi-annual report periods. As you will note, the share price of the Fund did fluctuate somewhat as interest rates changed over the period. However, the total fluctuation over this period was only $0.48, or approximately 5% - a slight variance when compared to other investments you might have made over this same time period. December 31, 2002 $10.07 December 31, 2001 $ 9.59 December 31, 2000 $ 9.69 PORTFOLIO CHARACTERISTICS In order to ensure that Tax-Free Fund For Utah's objective of capital preservation and steady tax-free income is accomplished, the Fund employs very distinct techniques in the construction of the Fund's portfolio. To the maximum extent possible, we strive to make certain that there are no "surprises" with any of the securities in the Fund's portfolio. To help limit the degree of uncertainty, our knowledgeable Utah-based portfolio manager constructs the Fund's portfolio with high quality, intermediate maturity and geographic diversification in mind. As we have pointed out before, municipal securities have various credit ratings which attempt to measure the safety that the securities represent. With Tax-Free Fund For Utah, we specifically limit the credit ratings to those within the TOP FOUR categories - AAA, AA, A, AND BAA. We further ensure that, in general, the majority of securities in the Fund's portfolio are within the top TWO credit grades - AAA AND AA. And, we very carefully monitor the quality characteristics of each investment once it is in the portfolio. Another technique we use in the construction of the overall portfolio to help keep a stable share price is a laddering of maturity levels with the various municipal securities that we purchase. As you know, long-term bonds tend to produce a higher return than short-term bonds. However, such longer maturity bonds also experience a higher degree of volatility in their price. Therefore, for Tax-Free Fund For Utah's portfolio, we include both short-term and long-term bonds, so that the overall average of these maturities run at an intermediate level. In this way, we can capture a substantial amount of income available from the bonds, but avoid any undue level of price volatility. DIVERSIFICATION OF THE PORTFOLIO We also employ diversification in the construction of the Fund's portfolio - both in terms of project type as well as geographic characteristics. We strive to include in the portfolio securities representing locations throughout Utah and all types of public purpose projects. In this way, we can assure ourselves that no one project or area of the State can have any significant adverse influence upon your investment in the Fund. APPRECIATION With the stock market being so tumultuous over the past several years, we hope that you and our other shareholders are comforted by the fact that Tax-Free Fund For Utah is still meeting its objective - just as it has from day one. Your continued confidence in the Fund through your investment is greatly appreciated. We will continually strive to do what is necessary to merit the confidence you have placed in us. Sincerely, /s/ Diana P. Herrmann ---------------------- Diana P. Herrmann President /s/ Lacy B. Herrmann ---------------------- Lacy B. Herrmann Chairman of the Board of Trustees * For certain investors, some dividends may be subject to Federal and state taxes, including the Alternative Minimum Tax (AMT). ** Past performance does not guarantee future stability. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. TAX-FREE FUND FOR UTAH STATEMENT OF INVESTMENTS DECEMBER 31, 2002 (UNAUDITED)
RATING FACE MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (16.4%) S&P VALUE ---------- -------------------------------------------------------- -------- ----------- CITY, COUNTY AND STATE (10.5%) -------------------------------------------------------- American Fork City, Utah $ 610,000 5.00%, 12/01/14 FGIC Insured ........................ Aaa/NR $ 642,787 645,000 5.00%, 12/01/15 FGIC Insured ........................ Aaa/NR 678,863 Brian Head, Utah 405,000 6.50%, 03/15/24 ..................................... NR/NR* 458,662 Brigham City Utah Tax Allocation 140,000 5.50%, 06/15/11 FSA Insured (pre-refunded) .......... Aaa/AAA 157,325 Cedar City, Utah Special Impt. Dist. Assessment 235,000 5.05%, 09/01/10 ..................................... NR/NR* 238,525 215,000 5.20%, 09/01/11 ..................................... NR/NR* 218,763 Clearfield City, Utah 2,095,000 5.125%, 02/01/18 MBIA Insured ....................... NR/AAA 2,186,656 Coral Canyon, Utah Spl. Svc. District 580,000 5.70%, 07/15/18 ..................................... NR/NR* 582,900 Hurricane, Utah 295,000 5.40%, 11/01/09 Radian Insured ...................... NR/AA 331,875 North Davis County Utah Sewer District 1,330,000 5.375%, 03/01/18 AMBAC Insured ...................... Aaa/NR 1,436,400 125,000 5.125%, 03/01/22 AMBAC Insured ...................... Aaa/NR 128,750 St. George, Utah 100,000 5.375%, 08/01/21 FGIC Insured ....................... Aaa/AAA 105,625 Salt Lake City, Utah 120,000 5.75%, 06/15/17 (pre-refunded) ...................... Aaa/NR 140,550 Washington County 1,000,000 5.00%, 10/01/22 MBIA Insd ........................... Aaa/NR 1,021,250 ----------- 8,328,931 ----------- SCHOOL DISTRICT (5.9%) -------------------------------------------------------- Alpine Utah School District 1,000,000 5.25%, 03/15/12 ..................................... Aaa/NR 1,106,250 375,000 5.00%, 03/15/12 ..................................... Aaa/NR 412,031 Davis County, Utah School District 575,000 5.00%, 06/01/15 ..................................... Aaa/NR 615,250 250,000 5.10%, 06/01/16 ..................................... Aaa/NR 270,000 675,000 5.15%, 06/01/17 ..................................... Aaa/NR 724,781 Nebo, Utah School District 440,000 5.50%, 07/01/11 ..................................... Aaa/AAA 495,550 Rich County, Utah School, School District $ 120,000 5.50%, 12/15/09 ..................................... NR/NR* $ 127,500 100,000 5.60%, 12/15/10 ..................................... NR/NR* 104,125 Weber County, Utah School District 750,000 5.00%, 06/15/18 ..................................... Aaa/NR 783,750 ----------- 4,639,237 ----------- Total General Obligation Bonds ...................... 12,968,168 ----------- REVENUE BONDS (80.0%) -------------------------------------------------------- EDUCATION (12.5%) -------------------------------------------------------- Salt Lake County, Utah Westminster College Project 115,000 5.05%, 10/01/10 ..................................... NR/BBB 123,769 1,000,000 5.75%, 10/01/27 ..................................... NR/BBB 1,027,500 Southern Utah University Revenue 375,000 6.30%, 06/01/16 ..................................... NR/NR* 396,094 University of Utah Revenue Refunding, (Biology Research Facilities), 200,000 5.50%, 04/01/11 MBIA Insured ........................ Aaa/AAA 215,000 Utah State Board Regents Univ. Utah-Aux. & Campus Rev .......................................... 895,000 5.25%, 04/01/12 MBIA Insured ........................ Aaa/AAA 973,312 1,000,000 5.00%, 04/01/20 MBIA Insured ........................ Aaa/AAA 1,023,750 Utah State Board Regents Dixie St. College 115,000 5.50%, 05/01/13 MBIA Insured ........................ NR/AAA 130,094 120,000 5.50%, 05/01/14 MBIA Insured ........................ NR/AAA 134,550 130,000 5.50%, 05/01/15 MBIA Insured ........................ NR/AAA 145,438 400,000 5.10%, 05/01/21 MBIA Insured ........................ NR/AAA 414,000 Utah State Board Regents Office Fac. Revenue 450,000 5.05%, 02/01/20 MBIA Insured ........................ NR/AAA 466,312 360,000 5.125%, 02/01/22 MBIA Insured ....................... NR/AAA 370,800 Utah State Board Regents SLC Cmty. College 1,260,000 5.50%, 06/01/16 FSA Insured ......................... NR/AAA 1,387,575 Utah State Board Regents Univ. Utah Hosp. Rev .......... 2,030,000 5.50%, 08/01/17 MBIA Insured ........................ Aaa/AAA 2,222,850 Weber St. University Utah Rev. Student Facs. Sys ....... Series A 300,000 5.10%, 04/01/16 ..................................... NR/AA 319,500 425,000 5.25%, 04/01/19 ..................................... NR/AA 452,094 ----------- 9,802,638 ----------- HEALTH (3.9%) -------------------------------------------------------- Murray City Utah Hospital Revenue $ 570,000 5.00%, 05/15/22 MBIA Insured ........................ Aaa/AAA $ 578,550 Salt Lake County Utah Hospital Revenue - IHC Hospitals, Inc. ..................................... 500,000 5.50%, 05/15/13 AMBAC Insured ....................... Aaa/AAA 560,000 Utah County, Utah Hospital Revenue, IHC Health Services 1,500,000 5.25%, 08/15/21 MBIA Insured ........................ Aaa/AAA 1,563,750 375,000 5.25%, 08/15/26 MBIA Insured ........................ Aaa/AAA 385,313 ----------- 3,087,613 ----------- HOUSING (7.9%) -------------------------------------------------------- Provo City Utah Housing Authority 500,000 5.80%, 07/20/22 GNMA Collateralized ................. Aaa/NR 520,625 Utah Housing Corporation Single Family Housing 145,000 5.25%, 07/01/23 ..................................... Aa2/AA 146,088 Utah State Housing Finance Agency 160,000 5.00%, 07/01/09 Series F ............................ Aaa/AAA 168,400 260,000 6.35%, 07/01/12 AMBAC Insured AMT ................... Aaa/AAA 267,475 45,000 6.15%, 07/01/16 Senior Issue A-1 .................... Aaa/AAA 46,744 350,000 5.30%, 07/01/18 AMT ................................. Aaa/AAA 356,125 205,000 5.00%, 07/01/18 AMT ................................. Aaa/AAA 207,050 845,000 5.40,%, 07/01/20 AMT ................................ Aa2/AA 852,394 60,000 7.25%, 07/01/11 Mezzanine Series G-1 ................ Aa2/AA 62,250 90,000 6.60%, 07/01/11 Series E-1 .......................... NR/AA 93,600 80,000 6.35%, 07/01/11 Series 1994C ........................ Aa2/NR 82,900 855,000 5.65%, 07/01/16 Series 1994C ........................ Aaa/AAA 889,200 200,000 5.40%, 07/01/16 AMT ................................. Aa2/AA 206,000 440,000 6.00%, 07/01/17 AMT ................................. Aaa/AAA 455,400 1,000,000 5.50%, 07/01/18 AMT ................................. Aa3/AA- 1,030,000 470,000 5.60%, 07/01/23 AMT ................................. Aa2/AA 480,575 West Jordan, Utah Multi-Family Housing 360,000 6.80%, 01/01/15 FSA Insured ......................... Aaa/AAA 373,950 ----------- 6,238,776 ----------- INDUSTRIAL DEVELOPMENT & POLLUTION CONTROL (0.9%) -------------------------------------------------------- Sandy City, Utah Industrial Development, H Shirley Wright Project, Refunding Bonds, LOC Olympus Bank, 250,000 6.125%, 08/01/16 .................................... NR/AAA 258,272 Utah County Environmental Improvement Revenue $ 435,000 5.05%, 11/01/17 ..................................... Baa1/BBB+ $ 431,738 ----------- 690,010 ----------- LEASE (17.5%) -------------------------------------------------------- Emery County Utah Municipal Building Authority Lease 840,000 5.125, 03/01/23 Radian Insured ...................... NR/AA 851,550 Lehi, Utah Municipal Building Lease Revenue, Building Revenue 1,020,000 5.50%, 06/15/15 AMBAC Insured ....................... Aaa/NR 1,119,450 Murray City, Utah Municipal Building Revenue 270,000 5.05%, 12/01/15 AMBAC Insured ....................... Aaa/NR 289,575 Salt Lake County, Utah Municipal Building Authority, Lease Revenue 400,000 5.00%, 10/01/11 MBIA Insured ........................ Aaa/AAA 430,500 1,120,000 6.00%, 10/15/14 ..................................... Aa1/AA 1,178,094 320,000 5.40%, 10/15/19 AMBAC Insured ....................... Aaa/AAA 340,800 3,900,000 5.20%, 10/15/20 AMBAC Insured ....................... Aaa/AAA 4,070,625 Sandy City, Utah Muni. Bldg. Auth ...................... 700,000 5.60%, 06/15/15 AMBAC Insured ....................... Aaa/NR 782,250 Tooele City Utah Muni Building Lease Rev 250,000 5.60%, 12/01/15 AMBAC Insured ....................... Aaa/AAA 281,562 Utah County, Utah Municipal Building Authority, Lease Revenue 120,000 5.50%, 11/01/16 AMBAC Insured ....................... Aaa/NR 132,600 240,000 5.50%, 11/01/17 AMBAC Insured ....................... Aaa/NR 263,400 Utah State Building Ownership Authority 1,300,000 5.25%, 05/15/20 FSA Insured ......................... Aaa/AAA 1,358,500 Washington Co. - St. George, Utah Interlocal Agency Revenue 1,000,000 5.125%, 12/01/17 AMBAC Insured ...................... NR/AAA 1,055,000 Weber County, Utah Municipal Building Lease Revenue 1,500,000 5.75%, 12/15/19 MBIA Insured ........................ Aaa/AAA 1,666,875 ----------- 13,820,781 ----------- TAX REVENUE (14.0%) -------------------------------------------------------- Brian Head, Utah Spl. Svc. Impt. Dist. Revenue 500,000 5.35%, 11/01/12 ..................................... NR/NR* 505,625 Cache County Utah Sales Tax Revenue 500,000 5.00%, 12/15/14 FGIC Insured ........................ Aaa/AAA 544,375 830,000 5.00%, 12/15/19 FGIC Insured ........................ Aaa/AAA 869,425 Jordanelle, Utah Spl. Svc. Improvement District $ 435,000 8.00%, 10/01/11 ..................................... NR/NR* $ 452,400 Pleasant Grove City Utah Sales Tax Revenue 410,000 5.25%, 12/01/17 MBIA Insured ........................ NR/Aaa 443,825 Salt Lake City, Utah Sales Tax Revenue 490,000 5.25%, 02/01/12 ..................................... NR/AAA 551,250 265,000 5.25%, 02/01/13 ..................................... NR/AAA 294,150 1,320,000 5.25%, 02/01/15 ..................................... NR/AAA 1,447,050 100,000 5.25%, 02/01/17 ..................................... NR/AAA 108,750 Sandy City Utah Sales Tax Revenue 520,000 5.00%, 09/15/18 AMBAC Insured ....................... NR/AAA 546,650 605,000 5.00%, 09/15/20 AMBAC Insured ....................... NR/AAA 626,175 South Jordan, Utah Sales Tax 570,000 5.00%, 08/15/15 AMBAC Insured ....................... NR/AAA 608,475 South Jordan Utah Special Assignment 1,000,000 6.875%, 11/01/17 .................................... NR/NR* 1,007,500 Wasatch County Utah Sales Tax Revenue 205,000 5.00%, 12/01/16 AMBAC Insured ....................... NR/AAA 218,581 210,000 5.00%, 12/01/17 AMBAC Insured ....................... NR/AAA 222,338 225,000 5.00%, 12/01/18 AMBAC Insured ....................... NR/AAA 236,531 West Valley City, Utah Sales Tax Revenue 800,000 5.50%, 07/15/17 MBIA Insured ........................ Aaa/AAA 876,000 1,400,000 6.00%, 03/01/24 ..................................... NR/A- 1,471,750 ----------- 11,030,850 ----------- TRANSPORTATION (3.7%) -------------------------------------------------------- Salt Lake City, Utah Airport Revenue Series B 875,000 5.875%, 12/01/12 FGIC Insured ....................... Aaa/AAA 923,011 370,000 5.875%, 12/01/18 FGIC Insured ....................... Aaa/AAA 387,242 Utah Transit Auth Sales Tax & Trans. Rev ............... 1,000,000 5.40%, 12/15/16 FSA Insured ......................... NR/AAA 1,073,750 500,000 5.00%, 06/15/23 FSA Insured ......................... Aaa/AAA 508,750 ----------- 2,892,753 ----------- UTILITY (8.6%) -------------------------------------------------------- Intermountain Power Agency Utilities Light & Power Service, Utah 520,000 5.00%, 07/01/12 MBIA Insured ........................ Aaa/AAA 528,450 1,470,000 5.25%, 07/01/15 MBIA Insured ........................ Aaa/AAA 1,585,763 90,000 5.00%, 07/01/16 ..................................... A1/A+ 94,162 670,000 5.00%, 07/01/21 MBIA Insured ........................ Aaa/AAA 681,725 Manti City, Utah Electric System Rev $ 603,000 5.75%, 02/01/17 ..................................... NR/NR* $ 603,000 Murray City, Utah Utility Electric Revenue 400,000 5.625%, 06/01/18 AMBAC Insured ...................... Aaa/NR 436,500 Salem, Utah Electric Revenue 125,000 5.30%, 11/01/07 ..................................... NR/NR* 136,875 130,000 5.35%, 11/01/08 ..................................... NR/NR* 142,675 140,000 5.40%, 11/01/09 ..................................... NR/NR* 153,300 Southern Utah Valley Power System Revenue 210,000 5.25%, 09/15/13 MBIA Insured ........................ NR/AAA 234,412 225,000 5.25%, 09/15/14 MBIA Insured ........................ NR/AAA 248,625 235,000 5.25%, 09/15/15 MBIA Insured ........................ NR/AAA 257,913 185,000 5.125%, 09/15/21 MBIA Insured ....................... NR/AAA 191,937 Springville, Utah Electric Revenue 550,000 5.60%, 03/01/09 ..................................... Baa1/NR 607,750 Utah Association Municipal Power Systems Revenue 790,000 5.25%, 12/01/09 ..................................... NR/A 884,800 ----------- 6,787,887 ----------- WATER AND SEWER (11.0%) -------------------------------------------------------- Ashley Valley, Utah 385,000 9.50%, 01/01/08 AMBAC Insured ....................... Aaa/AAA 446,600 Eagle Mountain, Utah Water and Sewer 750,000 5.80%, 11/15/16 ACA Insured ......................... NR/A 811,875 Granger and Hunter Utah Imp. Dist. Wtr. & Swr .......... 250,000 5.00%, 03/01/18 FSA Insured ......................... Aaa/NR 259,687 Riverton, Utah Water Revenue 100,000 5.35%, 09/01/15 FGIC Insured ........................ Aaa/NR 108,625 St. George, Utah Water Revenue 300,000 5.375%, 06/01/16 AMBAC Insured ...................... Aaa/AAA 304,461 Salt Lake City, Utah Metropolitan Water Revenue 1,200,000 5.375%, 07/01/24 AMBAC Insured (pre-refunded) ....... Aaa/AAA 1,377,000 125,000 5.375%, 07/01/29 AMBAC Insured (pre-refunded) ....... Aaa/AAA 143,438 Salt Lake City, Utah Water And Sewer Revenue 500,000 5.75%, 02/01/13 AMBAC Insured ....................... Aaa/AAA 536,250 Spanish Fork City Utah Water Revenue 250,000 5.50%, 06/01/17 FSA Insured ......................... Aaa/NR 275,625 Utah Water Finance Agency Revenue $ 100,000 5.00%, 06/01/14 MBIA Insured ........................ Aaa/AAA $ 105,875 910,000 5.50%, 10/01/14 AMBAC Insured ....................... Aaa/AAA 993,037 200,000 5.25%, 07/01/16 AMBAC Insured ....................... Aaa/NR 217,500 310,000 5.00%, 10/01/17 AMBAC Insured ....................... Aaa/NR 327,825 500,000 5.25%, 10/01/18 AMBAC Insured ....................... Aaa/NR 543,750 240,000 5.30%, 10/01/23 MBIA Insured ........................ Aaa/AAA 253,200 450,000 5.40%, 10/01/24 AMBAC Insured ....................... Aaa/AAA 467,438 250,000 5.50%, 10/01/29 AMBAC Insured ....................... Aaa/AAA 261,250 Weber-Box Elder, Utah Conservation District Water Revenue 200,000 6.45%, 11/01/14 (pre-refunded) ...................... Baa3/NR 242,250 200,000 6.50%, 11/01/19 (pre-refunded) ...................... Baa3/NR 242,750 335,000 6.90%, 11/01/20 (pre-refunded) ...................... Baa3/NR 415,819 White City, Utah Water Improvement 300,000 5.90%, 02/01/22 AMBAC Insured ....................... Aaa/AAA 324,750 ----------- 8,659,005 ----------- Total Revenue Bonds ................................. 63,010,313 ----------- Total Investments (cost $72,645,154**) ........... 96.4% 75,978,481 Other assets less liabilities .................... 3.6 2,822,612 ------ ----------- Net Assets ....................................... 100.0% $78,801,093 ====== ===========
* Any security not rated must be determined by the Investment Adviser to have sufficient quality to be ranked in the top four ratings if a credit rating were to be assigned by a rating service. ** See notes 2f and 4. PORTFOLIO ABBREVIATIONS: ACA - ACA Financial Guaranty Corp. AMBAC - American Municipal Bond Assurance Corp. AMT - Alternative Minimum Tax FGIC - Financial Guaranty Insurance Co. FSA - Financial Security Assurance MBIA - Municipal Bond Investors Assurance Corp. See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2002 (UNAUDITED) ASSETS Investments at value (cost $72,645,154) .................................................. $ 75,978,481 Cash ..................................................................................... 537,288 Receivable for investment securities sold ................................................ 1,210,000 Interest receivable ...................................................................... 1,090,530 Receivable for Fund shares sold .......................................................... 206,705 Due from Manager for reimbursement of expenses (note 3) .................................. 8,410 Other Assets ............................................................................. 16 ------------ Total assets ............................................................................. 79,031,430 ------------ LIABILITIES Dividends payable ........................................................................ 87,873 Payable for Fund shares redeemed ......................................................... 60,425 Distribution fees payable ................................................................ 52,714 Accrued expenses ......................................................................... 29,325 ------------ Total liabilities ........................................................................ 230,337 ------------ NET ASSETS ..................................................................................... $ 78,801,093 ============ Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ....... $ 78,242 Additional paid-in capital ............................................................... 78,201,107 Net unrealized appreciation on investments (note 4) ...................................... 3,333,327 Accumulated net realized loss on investments ............................................. (2,701,035) Distributions in excess of net investment income ......................................... (110,548) ------------ $ 78,801,093 ============ CLASS A Net Assets ............................................................................... $ 69,278,279 ============ Capital shares outstanding ............................................................... 6,878,322 ============ Net asset value and redemption price per share ........................................... $ 10.07 ============ Offering price per share (100/96 of $10.07 adjusted to nearest cent) ..................... $ 10.49 ============ CLASS C Net Assets ............................................................................... $ 9,400,851 ============ Capital shares outstanding ............................................................... 933,853 ============ Net asset value and offering price per share ............................................. $ 10.07 ============ 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) .......................................... $ 10.07* ============ CLASS Y Net Assets ............................................................................... $ 121,963 ============ Capital shares outstanding ............................................................... 12,062 ============ Net asset value, offering and redemption price per share ................................. $ 10.11 ============
See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 (UNAUDITED) INVESTMENT INCOME: Interest income ....................................... $ 1,742,691 Expenses: Management fee (note 3) .................................. $ 180,057 Distribution and service fees (note 3) ................... 105,758 Legal fees ............................................... 30,915 Trustees' fees and expenses (note 8) ..................... 18,418 Shareholders' reports and proxy statements ............... 17,966 Transfer and shareholder servicing agent fees ............ 13,957 Audit and accounting fees ................................ 10,720 Fund accounting fee ...................................... 7,800 Custodian fees ........................................... 4,543 Registration fees and dues ............................... 3,080 Miscellaneous ............................................ 12,196 ----------- Total expenses ........................................... 405,410 Management fee waived (note 3) ........................... (180,057) Reimbursement of expenses by Manager (note 3) ............ (38,894) Expenses paid indirectly (note 6) ........................ (2,489) ----------- Net expenses ............................................. 183,970 ----------- Net investment income .................................... 1,558,721 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions .... (30,277) Change in unrealized appreciation on investments ......... 1,583,718 ----------- Net realized and unrealized gain (loss) on investments ... 1,553,441 ----------- Net increase in net assets resulting from operations ........ $ 3,112,162 ===========
See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED DECEMBER 31, 2002 YEAR ENDED (UNAUDITED) JUNE 30, 2002 ----------------- ------------- OPERATIONS: Net investment income ............................................. $ 1,558,721 $ 2,396,879 Net realized gain (loss) from securities transactions ............. (30,277) 204,218 Change in unrealized appreciation on investments .................. 1,583,718 869,002 ------------ ------------ Change in net assets from operations ........................... 3,112,162 3,470,099 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10): Class A Shares: Net investment income ............................................. (1,471,278) (2,313,148) Class C Shares: Net investment income ............................................. (156,873) (179,895) Class Y Shares: Net investment income ............................................. (1,001) (1,405) ------------ ------------ Change in net assets from distributions ........................ (1,629,152) (2,494,448) ------------ ------------ CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ......................................... 16,622,338 33,014,783 Reinvested dividends and distributions ............................ 862,223 1,280,612 Cost of shares redeemed ........................................... (2,847,145) (8,790,503) ------------ ------------ Change in net assets from capital share transactions ........... 14,637,416 25,504,892 ------------ ------------ Change in net assets ........................................... 16,120,426 26,480,543 NET ASSETS: Beginning of period ............................................... 62,680,667 36,200,124 ------------ ------------ End of period* .................................................... $ 78,801,093 $ 62,680,667 ============ ============ * Includes distributions in excess of net investment income of: ... $ (110,548) $ (40,117) ============ ============
See accompanying notes to financial statements. 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 are sold with a front-payment sales charge and bear an annual distribution 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. Class C Shares, together with a pro-rata portion of all Class C Shares acquired through reinvestment of dividends and other distributions paid in additional Class C Shares, automatically convert to Class A Shares after 6 years. 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. As of the report date, 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 accounting principles generally accepted in the United States of America 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. 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 and market discount. 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 accounting principles generally accepted in the United States of America 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. f) NEW ACCOUNTING PRONOUNCEMENT: In November 2000, the AICPA issued a revised audit and accounting guide, AUDITS OF INVESTMENT COMPANIES, which is effective for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize premium and all discounts on all fixed-income securities. The Fund elected to adopt this requirement effective July 1, 2001. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. The Fund recorded an adjustment to increase the cost of securities and increase accumulated undistributed net investment income by $14,470 to reflect the cumulative effect of this change up to the date of adoption. For the six months ended December 31, 2002, the new accounting pronouncement did not have a material impact on the financial highlights of the Fund. 3. FEES AND RELATED PARTY TRANSACTIONS a) MANAGEMENT ARRANGEMENTS: Aquila Management Corporation (the "Manager"), the Fund's founder and sponsor, serves as the Investment Adviser for the Fund under an Advisory and Administration Agreement with the Fund since August 1, 2001. 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 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 average net assets. For the six months ended December 31, 2002, the Fund incurred management fees of $180,057 all of which was voluntarily waived. Additionally, the Manager voluntarily agreed to reimburse the Fund for other expenses during this period in the amount of $38,894. Of this amount, $30,484 was paid prior to December 31, 2002 and the balance of $8,410 was paid in early January 2002. Specific details as to the nature and extent of the services provided by the Manager 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, 2002 service fees on Class A Shares amounted to $63,536, of which the Distributor received $2,705. 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% average of the Fund's average net assets represented by Class C Shares and for the six months ended December 31, 2002, amounted to $31,667. 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 average net assets represented by Class C Shares and for the six months ended December 31, 2002 amounted to $10,555. The total of these payments with respect to Class C Shares amounted to $42,222, of which the Distributor received $5,033. 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, 2002, total commissions on sales of Class AShares amounted to $163,058, of which the Distributor received $13,688. c) OTHER RELATED PARTY TRANSACTIONS: For the six months ended December 31, 2002, the Fund incurred $30,765 of legal fees allocable to Hollyer Brady Smith & Hines LLP counsel to the Fund for legal services in conjunction with the Fund's ongoing operations. The Secretary of the Fund is a Partner of Hollyer Brady Smith & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the six months ended December 31, 2002, purchases of securities and proceeds from the sales of securities aggregated $16,776,001 and $3,838,570, respectively. At December 31, 2002, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost of $72,626,081 amounted to $3,392,630 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $40,230, for a net unrealized appreciation of $3,352,400. 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 December 31, 2002, the Fund had 100% of its net assets invested in State of Utah municipal issues. 6. 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. 7. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Fund were as follows:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 2002 (UNAUDITED) JUNE 30, 2002 ----------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ----------- ---------- ------------ CLASS A SHARES: Proceeds from shares sold .... 1,386,462 13,884,048 2,863,782 $ 27,941,204 Reinvested distributions ..... 77,942 778,916 121,762 1,185,746 Cost of shares redeemed ...... (264,883) (2,662,887) (863,821) (8,393,387) ---------- ----------- ---------- ------------ Net change ................ 1,199,521 12,000,077 2,121,723 20,733,563 ---------- ----------- ---------- ------------ CLASS C SHARES: Proceeds from shares sold .... 262,880 2,632,987 516,778 5,048,579 Reinvested distributions ..... 8,340 83,307 9,685 94,203 Cost of shares redeemed ...... (17,035) (169,333) (41,134) (396,459) ---------- ----------- ---------- ------------ Net change ................ 254,185 2,546,961 485,329 4,746,323 ---------- ----------- ---------- ------------ CLASS Y SHARES: Proceeds from shares sold .... 10,478 105,303 2,567 25,253 Reinvested distributions ..... -- -- 55 410 Cost of shares redeemed ...... (1,500) (14,925) (67) (657) ---------- ----------- ---------- ------------ Net change ................ 8,978 90,378 2,555 25,006 ---------- ----------- ---------- ------------ Total transactions in Fund shares ....................... 1,462,684 14,637,416 2,609,607 $ 25,504,892 ========== =========== ========== ============
8. TRUSTEES' FEES AND EXPENSES During the prior fiscal year ended June 30, 2002 there were six trustees, two of whom were affiliated with the Manager and are not paid any trustee fees. Trustee's 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, 2002 such reimbursements averaged approximately $3,000 per Trustee. 9. SECURITIES TRADED ON A WHEN-ISSUED BASIS The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in the amount of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. 10. 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. At June 30, 2002, the Fund had a capital loss carryover of $2,670,713 of which $211,315 expires on June 30, 2008 and $2,459,398 expires on June 30, 2009. 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. TAX-FREE FUND FOR UTAH FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A ------------------------------------------------------------- Six Months Ended Year Ended June 30, 12/31/02 ---------------------------------------------- (unaudited) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ......................... $9.85 $9.65 $9.35 $ 9.88 $10.24 $9.94 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ................................... 0.22 0.46 0.48 0.48 0.49 0.52 Net gain (loss) on securities (both realized and unrealized) ........................................ 0.23 0.22 0.32 (0.44) (0.36) 0.30 ------ ------ ------ ------ ------ ------ Total from investment operations .......................... 0.45 0.68 0.80 0.04 0.13 0.82 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ...................... (0.23) (0.48) (0.50) (0.51) (0.49) (0.52) Distributions from capital gains .......................... - - - (0.06) - - ------ ------ ------ ------ ------ ------ Total distributions ....................................... (0.23) (0.48) (0.50) (0.57) (0.49) (0.52) ------ ------ ------ ------ ------ ------ Net asset value, end of period ............................... $10.07 $9.85 $9.65 $9.35 $9.88 $10.24 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ................... 4.65%++ 7.22% 8.72% 0.57% 1.19% 8.41% Ratios/supplemental data Net assets, end of period (in thousands) .................. $69,278 $55,957 $34,321 $34,171 $47,251 $29,013 Ratio of expenses to average net assets ................... 0.41%* 0.46% 0.48% 0.42% 0.45% 0.34% Ratio of net investment income to average net assets ............................................. 4.44%* 4.65% 4.95% 5.06% 4.57% 5.06% Portfolio turnover rate ................................... 5.51%++ 27.42% 44.17% 48.99% 87.49% 11.31% 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 ................... 1.03%* 1.00% 1.11% 1.11% 1.04% 1.30% Ratio of net investment income to average net assets ............................................. 3.81%* 4.11% 4.32% 4.37% 3.98% 4.10% 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 ................... 0.41%* 0.40% 0.39% 0.39% 0.38% 0.33%
---------- Note: Effective July 16, 1998, Zions First National Bank became the Fund's Investment Sub-Adviser replacing First Security Investment Management, Inc. Effective August 1, 2001, Aquila Management Corporation became the Fund's Investment Adviser replacing Zions First National Bank which was the sub-adviser. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized * Annualized See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C ----------------------------------------------------------------- Six Months Ended Year Ended June 30, 12/31/02 -------------------------------------------------- (unaudited) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ............. $9.85 $9.64 $9.35 $9.87 $10.23 $9.94 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ....................... 0.18 0.37 0.38 0.38 0.38 0.41 Net gain (loss) on securities (both realized and unrealized) ................... 0.23 0.23 0.31 (0.42) (0.35) 0.29 ------ ------ ------ ------ ------ ------ Total from investment operations ................. 0.41 0.60 0.69 (0.04) 0.03 0.70 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income .......... (0.19) (0.39) (0.40) (0.42) (0.39) (0.41) Distributions from capital gains .............. - - - (0.06) - - ------ ------ ------ ------ ------ ------ Total distributions ........................... (0.19) (0.39) (0.40) (0.48) (0.39) (0.41) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................... $10.07 $ 9.85 $ 9.64 $ 9.35 $ 9.87 $10.23 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ....... 4.17%++ 6.36% 7.52% (0.33)% 0.18% 7.20% Ratios/supplemental data Net assets, end of period (in thousands) ...... $9,401 $6,694 $1,874 $1,036 $1,667 $1,476 Ratio of expenses to average net assets ....... 1.32%* 1.34% 1.47% 1.43% 1.45% 1.36% Ratio of net investment income to average net assets ......................... 3.52%* 3.72% 3.93% 4.07% 3.57% 3.94% Portfolio turnover rate ....................... 5.51%++ 27.42% 44.17% 48.99% 87.49% 11.31% 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 ....... 1.82%* 1.78% 1.89% 1.91% 1.85% 2.08% Ratio of net investment income to average net assets ......................... 3.00%* 3.28% 3.51% 3.58% 3.17% 3.22% 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 ....... 1.31%* 1.28% 1.39% 1.39% 1.37% 1.35%
Class Y ----------------------------------------------------------------- Six Months Ended Year Ended June 30, 12/31/02 -------------------------------------------------- (unaudited) 2002 2001 2000 1999 1998 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ............. $9.89 $9.68 $9.36 $9.88 $10.24 $9.94 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ....................... 0.20 0.50 0.49 0.45 0.45 0.53 Net gain (loss) on securities (both realized and unrealized) ................... 0.26 0.20 0.34 (0.38) (0.32) 0.30 ------ ------ ------ ------ ------ ------ Total from investment operations ................. 0.46 0.70 0.83 0.07 0.13 0.83 ------ ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income .......... (0.24) (0.49) (0.51) (0.53) (0.49) (0.53) Distributions from capital gains .............. - - - (0.06) - - ------ ------ ------ ------ ------ ------ Total distributions ........................... (0.24) (0.49) (0.51) (0.59) (0.49) (0.53) ------ ------ ------ ------ ------ ------ Net asset value, end of period ................... $10.11 $9.89 $9.68 $9.36 $9.88 $10.24 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ....... 4.69%++ 7.41% 9.05% 0.86% 1.19% 8.52% Ratios/supplemental data Net assets, end of period (in thousands) ...... $122 $30 $5 $0.1 $5 $1,988 Ratio of expenses to average net assets ....... 0.31%* 0.36% 0.42% 0.42% 0.43% 0.37% Ratio of net investment income to average net assets ......................... 4.52%* 4.75% 4.83% 4.88% 4.45% 5.02% Portfolio turnover rate ....................... 5.51%++ 27.42% 44.17% 48.99% 87.49% 11.31% 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 ....... 0.83%* 0.80% 0.64% 0.86% 0.96% 1.10% Ratio of net investment income to average net assets ......................... 3.99%* 4.31% 4.62% 4.43% 3.92% 4.29% 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 ....... 0.30%* 0.30% 0.36% 0.39% 0.34% 0.36%
---------- Note: Effective July 16, 1998, Zions First National Bank became the Fund's Investment Sub-Adviser replacing First Security Investment Management, Inc. Effective August 1, 2001, Aquila Management Corporation became the Fund's Investment Adviser replacing Zions First National Bank which was the sub-adviser. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized * Annualized See accompanying notes to financial statements. SHAREHOLDER MEETING RESULTS (UNAUDITED) The Annual Meeting of Shareholders of Tax-Free Fund for Utah (the "Fund") was held on September 27, 2002. The holders of shares representing 87% 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 4,660,186 856,685 Gary C. Cornia 5,490,774 26,097 William L. Ensign 5,490,774 26,097 Diana P. Herrmann 4,656,584 860,287 Anne J. Mills 5,490,774 26,097 2. To ratify the selection of KPMG LLP as the Fund's independent auditors. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 5,481,576 26,524 8,771 RESULTS OF ADJOURNED SESSION (UNAUDITED) The adjourned Annual Meeting of Shareholders of Tax-Free Fund for Utah (the "Fund") was held on October 31, 2002. The holders of shares representing 87% 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). 2. Approval of a new revised and amended Investment Advisory and Administration Agreement for the Fund. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 3,220,980 27,086 2,310,105