N-CSR 1 tffuncsr.txt TAX-FREE FUND FOR UTAH 6/30/06 NCSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6239 Tax-Free Fund for Utah (Exact name of Registrant as specified in charter) 380 Madison Avenue New York, New York 10017 (Address of principal executive offices) (Zip code) Joseph P. DiMaggio 380 Madison Avenue New York, New York 10017 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 697-6666 Date of fiscal year end: 6/30 Date of reporting period: 06/30/06 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. ANNUAL REPORT JUNE 30, 2006 [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: ONE OF THE AN EAGLE'S HEAD] 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 "BUILT TO RIDE THE WAVES" August, 2006 Dear Fellow Shareholder: As you are no doubt aware, the financial markets have certainly had their fair share of crests and troughs recently ? one day the markets are up, and the next day, they are down. Riding these waves is not always easy for investors. The management of Tax-Free Fund For Utah understands investors' apprehension when it comes to fluctuations with your hard-earned investment monies. And, this concern is especially pertinent as it relates to saving for and funding your retirement. With this very real and inevitable concern in mind, Tax-Free Fund For Utah has endeavored to structure the Fund to "ride the waves" with the least upset to investors as possible. How do we go about seeking to accomplish this? INVESTMENT QUALITY No matter what quality rating exists with a security, it will still be subject to market fluctuations. However, our experience has been that top-quality ratings do not fluctuate as much as lower quality ratings. Furthermore, when they do fluctuate, they tend to fluctuate less and return to their base market price at a quicker rate than lower-grade securities. In accordance with the Fund's prospectus, Tax-Free Fund For Utah can only purchase investment-grade securities ? those within the top four credit quality ratings - AAA, AA, A and Baa. In point of practice, however, we have consistently sought to have the bulk of the portfolio securities invested within the top two grades ? AAA and AA. On June 30, 2006, 83.0% of the portfolio consisted of AAA and AA rated securities. INTERMEDIATE MATURITY As we have emphasized in the past, long-term bonds tend to produce a higher return than short-term bonds. However, such longer maturity bonds also tend to experience a higher degree of volatility in their price. Tax-Free Fund For Utah balances out longer-term maturities by having a portion of the Fund's investments in shorter-term maturities. Through utilizing a blend of maturities ? both shorter-term and longer-term ? Tax-Free Fund For Utah attempts to provide a satisfactory level of return without subjecting the share price to excessive swings as interest rates increase and decrease. We feel that this focus on keeping the average of maturities relatively intermediate in term takes the best that each investment has to offer ? gaining stability from the shorter-term maturities and higher yields from the longer-term maturities. NOT A PART OF THE ANNUAL REPORT DIVERSIFICATION OF THE PORTFOLIO To the maximum extent possible, Tax-Free Fund For Utah strives to invest in as many projects as possible throughout the state. The portfolio might be comprised of a school district bond in Salt Lake City, a transportation bond in Ogden and a housing bond in St. George. In this way, we strive to ensure that no one project, type of project, or area of the State can have any significant adverse influence upon your investment in the Fund. TAX-FREE INCOME No matter what return Tax-Free Fund For Utah provides, it must be remembered that you would have to earn significantly more from a taxable investment in order to be equal to what you get to keep from a tax-free investment. As an example, you would have to earn 6.6%* on a taxable investment in order to equal the tax-free level of 4%. Keep this illustration in mind the next time you examine the yield that Tax-Free Fund For Utah offers you. You will find that a 3%, 4% or 5% tax-free yield looks considerably more attractive to you when you consider the implications of taxes. SUMMARY The Fund uses this combination of quality, maturity, and diversification as it seeks to provide you with as high a level of tax-free income as is consistent with preservation of capital. As we are sure you are aware, there is no way to take ALL the waves out of investing. But, you can rest assured that Tax-Free Fund For Utah continually strives to do its very best to make sure your ride is as smooth as possible. Sincerely, /s/ Diana P. Herrmann /s/ Lacy B. Herrmann Diana P. Herrmann Lacy B. Herrmann President Founder and Chairman Emeritus * For illustration purposes only - assumes a 35% Federal and 7% state tax-rate. This does not represent past or future performance of any investment. NOT A PART OF THE ANNUAL REPORT [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 ANNUAL REPORT MANAGEMENT DISCUSSION OF FUND PERFORMANCE The Federal Reserve (the "Fed") has raised the target for the overnight federal funds rate at each of the past 17 consecutive Open Market Committee meetings. It has risen from a low of 1.00% to 5.25% currently. This upward shift in rates, however, has been much more pronounced in short and intermediate-term maturities than in the longer end of the yield curve. The Fed's goal of containing inflation by not allowing the national economy to overheat may be paying off ? finally. Both the Consumer Price Index-CPI and the Producer Price Index-PPI have been reasonably well contained, when factoring out food and energy costs. Recent comments from new Fed Chairman Paul Bernanke hint at the possibility that further rate hikes will depend more on economic growth as opposed to inflation. With the economy "cooling down", especially the housing market, perhaps rates are approaching their peak. The jury is still out, but we remain hopeful! We have been witness to a number of national and international events that affect both our spirit and the economy: London terrorist threat, the ongoing conflicts in Iraq and Afghanistan, renewed battling in Israel and Lebanon, provocative rocket test firings by North Korea, continued rhetoric with Iran regarding their nuclear ambitions, cleanup and rebuilding of our Gulf Coast after a season of devastating hurricanes and accompanying disasters, and paying record prices at the gas pump. As we head into the second half of 2006, it is likely that the Federal Reserve is at or near the end of short-term rate increases. The unemployment rate of 4.6% matches the lowest rate reported since July 2001. Other measures of economic progress - retail sales, housing starts, and industrial production are all off their highs of the past 12 months ? clear signs of a moderating economy. Historically, as we see slowing on the economic front, inflation will also show signs of easing. While this cycle is a bit different because of hurricane damage and world events affecting gasoline prices, it is likely that we will see the economy grow at an estimated 3.50% annual rate. The Class A shares of Tax-Free Fund For Utah experienced a decline in share value (Net Asset Value) of 3.80% for the 12-month period ending June 30, 2006. The share value of the Fund was $10.26 on July 1, 2005 and $9.87 on June 30, 2006. A typical AA-rated general obligation bond with a 15 year maturity rose in yield from 4.06% to 4.51% over the 12-month period ended June 30, 2006. Equity returns for the 12 months ended June 30, 2006 were positive: the Dow Jones Industrial Average was up 11.09%; the S & P 500 Index was up 8.63%; and the NASDAQ Composite Index was up 6.48%. The Class A shares of Tax-Free Fund For Utah had a total rate of return of 0.28% for the 12 months ended June 30th. Historically, as the economy has grown, commodity prices and interest rates begin to rise. We continue to monitor any changes and position Tax-Free Fund For Utah's portfolio accordingly. To address the concerns raised by an increase in the overall level of interest rates, we take great care in MANAGEMENT DISCUSSION OF FUND PERFORMANCE (CONTINUED) the selection of the individual bonds purchased for the Fund. We will seek to continue to add high quality, intermediate maturity Utah municipal bonds that best meet our demanding standards. The investment objective of Tax-Free Fund For Utah is to provide as high a level of double tax-exempt current income as is consistent with the preservation of capital. We believe this objective continues to be successfully addressed by our adherence to a discipline of solid fundamental, conservative portfolio management ideals. The Fund continues to maintain an average quality rating of "AA", with over 74% of the portfolio rated "AAA". The Fund's laddered maturity structure helps us manage price volatility. The portfolio has an average life of approximately 13.3 years and a modified duration of 6.87 years. We seek to maintain a well-diversified portfolio, which currently consists of 350 different issues, of which 100% are exempt from Utah State and regular Federal income taxes. With the national and local economies continuing to show improvement, we will remain vigilant and do whatever is necessary as we strive to continue to meet the Fund's investment objective. We will endeavor to "stay the course" and manage the portfolio by taking advantage of opportunities in the marketplace that are consistent with the high standards of the Fund. PERFORMANCE REPORT The following graph illustrates the value of $10,000 invested in the Class A shares of Tax-Free Fund For Utah for the 10-year period ended June 30, 2006 as compared with the Lehman Brothers Quality Intermediate 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:]
Lehman Brothers Cost of Fund Class A Shares Fund Class A Shares Quality Intermediate Living Index no sales charge with sales charge Municipal Bond Index 6/96 $10,000 $10,000 $ 9,600 $10,000 6/97 10,230 10,797 10,360 10,684 6/98 10,402 11,676 11,205 11,426 6/99 10,606 11,768 11,293 11,772 6/00 11,002 11,831 11,353 12,247 6/01 11,359 12,931 12,408 13,329 6/02 11,481 13,834 13,275 14,256 6/03 11,723 15,229 14,614 15,371 6/04 12,106 15,206 14,592 15,424 6/05 12,412 16,467 15,802 16,254 6/06 12,948 16,527 15,860 16,309
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED JUNE 30, 2006 -------------------------------------- SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ------ ------- -------- --------- Class A (7/24/92) With Sales Charge ....... -3.76% 4.21% 4.72% 5.15% Without Sales Charge .... 0.28 5.06 5.15 5.46 Class C (5/21/96) With CDSC ............... -1.51 4.20 4.20 4.25 Without CDSC ............ -0.52 4.20 4.20 4.25 Class Y (5/21/96) No Sales Charge ......... 0.49 5.23 5.41 5.39 Lehman Index ............... 0.34 4.12 5.01 5.29* (Class A) 4.86** (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 class's income may be subject to federal and state income taxes and/or the federal alternative minimum tax. Past performance is not predictive of future investment results. * From commencement of operations on 7/24/92. ** From commencement of operations on 5/21/96. -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Tax-Free Fund For Utah: We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Tax-Free Fund For Utah as of June 30, 2006 and the related statement of operations, changes in net assets, and the financial highlights for the year 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 audit. The statement of changes in net assets for the year ended June 30, 2005 and the financial highlights for each of the years in the four year period ended June 30, 2005 have been audited by other auditors, whose report dated August 12, 2005 expressed an unqualified opinion on such financial statement and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2006, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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, 2006, the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER LLP Philadelphia, Pennsylvania August 11, 2006 -------------------------------------------------------------------------------- TAX-FREE FUND FOR UTAH SCHEDULE OF INVESTMENTS JUNE 30, 2006
RATING PRINCIPAL MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (21.2%) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- CITY, COUNTY AND STATE (8.6%) Anderson, Indiana San District $ 505,000 4.600%, 07/15/23 AMBAC Insured ........................ Aaa/AAA $ 503,813 Brian Head, Utah 405,000 6.500%, 03/15/24 ...................................... NR/NR* 439,255 Cedar City, Utah Special Improvement District Assessment 235,000 5.050%, 09/01/10 ...................................... NR/NR* 237,702 215,000 5.200%, 09/01/11 ...................................... NR/NR* 219,954 Cedar Park, Texas 835,000 4.500%, 02/15/22 MBIA Insured++ ....................... Aaa/AAA 817,540 Clearfield City, Utah 2,095,000 5.125%, 02/01/18 MBIA Insured (pre-refunded) .......... Aaa/AAA 2,157,620 Coral Canyon, Utah Special Service District 140,000 4.850%, 07/15/17 ...................................... NR/NR* 140,108 580,000 5.700%, 07/15/18 ...................................... NR/NR* 588,242 Dawson County, Texas Hospital District 555,000 4.375%, 02/15/24 AMBAC Insured ........................ NR/AAA 528,421 Draper, Utah 370,000 4.500%, 02/01/18 AMBAC Insured ........................ Aaa/NR 368,997 Hurricane, Utah 240,000 5.400%, 11/01/09 Radian Insured ....................... NR/AA 248,671 Laredo, Texas 300,000 4.250%, 08/15/21 AMBAC Insured ........................ Aaa/AAA 283,080 500,000 4.500%, 02/15/24 AMBAC Insured ........................ Aaa/AAA 483,435 Mckinney, Texas 1,700,000 4.500%, 08/15/23 XLCA Insured ......................... Aaa/AAA 1,648,592 Mesquite, Texas 510,000 4.625%, 02/15/22 FSA Insured .......................... Aaa/AAA 506,338 Nevada State 965,000 4.500%, 08/01/21 FSA Insured .......................... Aaa/AAA 953,526 Salt Lake City, Utah 120,000 5.750%, 06/15/17 (pre-refunded) ....................... Aaa/NR 127,991 San Antonio, Texas 125,000 4.750%, 02/01/24 FSA Insured .......................... Aaa/AAA 125,486
RATING PRINCIPAL MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- CITY, COUNTY AND STATE (CONTINUED) Spokane County, Washington $ 420,000 4.500%, 12/01/23 MBIA Insured ......................... Aaa/AAA $ 412,524 Waco, Texas 2,560,000 4.500%, 02/01/24 MBIA Insured ......................... Aaa/AAA 2,490,189 Washington County, Utah 1,250,000 5.000%, 10/01/22 MBIA Insured ......................... Aaa/NR 1,287,688 Washington State 3,315,000 4.500%, 01/01/22 MBIA Insured ......................... Aaa/AAA 3,256,921 705,000 4.500%, 07/01/23 FSA Insured .......................... Aaa/AAA 688,623 ------------- Total City, County and State 18,514,716 ------------- SCHOOL DISTRICT (12.6%) Alpine, Utah School District 375,000 5.000%, 03/15/12 (pre-refunded) ....................... Aaa/NR 393,300 Carbon County, Utah School District 800,000 5.000%, 06/15/21 ...................................... Aaa/NR 823,592 Dallas, Texas Independent School District 2,500,000 5.000%, 08/15/29 ...................................... Aaa/AAA 2,546,575 Davis County, Utah School District 575,000 5.000%, 06/01/15 (pre-refunded) ....................... Aaa/NR 604,095 250,000 5.100%, 06/01/16 (pre-refunded) ....................... Aaa/NR 264,592 675,000 5.150%, 06/01/17 (pre-refunded) ....................... Aaa/NR 716,155 Dripping Springs, Texas 725,000 4.375%, 08/15/22 ...................................... Aaa/AAA 694,441 Eagle Mountain & Saginaw, Texas Independent School District 300,000 4.750%, 08/15/21 ...................................... Aaa/AAA 303,081 525,000 4.750%, 08/15/23 ...................................... Aaa/AAA 528,449 Frisco, Texas Independent School District 1,260,000 5.000%, 07/15/26 ...................................... Aaa/NR 1,288,388 Galena Park, Texas Independent School District 295,000 4.625%, 08/15/25 ...................................... Aaa/NR 288,215 Iron County, Utah School District 1,375,000 4.000%, 01/15/18 ...................................... Aaa/AAA 1,298,921 2,115,000 4.000%, 01/15/20 ...................................... Aaa/AAA 1,963,566 1,260,000 5.000%, 01/15/21 ...................................... Aaa/NR 1,317,292
RATING PRINCIPAL MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- SCHOOL DISTRICT (CONTINUED) La Feria, Texas Independent School District $ 210,000 4.400%, 02/15/24 ...................................... Aaa/NR $ 201,772 Lancaster, Texas School District 300,000 4.375%, 02/15/22 ...................................... Aaa/AAA 288,006 Lindale, Texas Independent School District 440,000 4.250%, 02/15/21 ...................................... NR/AAA 415,906 1,000,000 4.250%, 02/15/22 ...................................... NR/AAA 939,660 445,000 4.375%, 02/15/23 ...................................... NR/AAA 425,464 200,000 4.500%, 02/15/24 ...................................... NR/AAA 194,536 Navasota, Texas Independent School District 475,000 5.000%, 08/15/23 FGIC Insured ......................... Aaa/NR 488,039 Nebo, Utah School District 440,000 5.500%, 07/01/11 (pre-refunded) ....................... Aaa/AAA 465,590 North Summit County, Utah School District 760,000 5.000%, 02/01/23 ...................................... Aaa/NR 789,625 800,000 5.000%, 02/01/24 ...................................... Aaa/NR 828,984 Prosper, Texas Independent School District 395,000 4.125%, 08/15/21 ...................................... NR/AAA 367,532 Salt Lake City, Utah School District 265,000 5.000%, 03/01/21 (pre-refunded) ....................... Aaa/NR 278,549 Spring, Texas Independent School District 300,000 4.750%, 08/15/23 ...................................... Aaa/AAA 301,605 Tooele County, Utah School District 670,000 4.000%, 06/01/20 ...................................... Aaa/AAA 616,360 Van, Texas Independent School District 750,000 4.875%, 02/15/26+ ..................................... Aaa/AAA 752,122 Washington County, Utah 440,000 5.000%, 10/01/18 XLCA Insured ......................... Aaa/NR 457,120 465,000 5.000%, 10/01/19 XLCA Insured ......................... Aaa/NR 482,442 490,000 5.000%, 10/01/20 XLCA Insured ......................... Aaa/NR 507,356 510,000 5.000%, 10/01/21 XLCA Insured ......................... Aaa/NR 527,707 535,000 5.000%, 10/01/22 XLCA Insured ......................... Aaa/NR 551,719 565,000 5.000%, 10/01/23 XLCA Insured ......................... Aaa/NR 580,312 320,000 5.000%, 10/01/24 XLCA Insured ......................... Aaa/NR 328,230
RATING PRINCIPAL MOODY'S/ AMOUNT GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- SCHOOL DISTRICT (CONTINUED) Washoe County, Nevada School District $ 200,000 4.625%, 06/01/23 FGIC Insured ......................... Aaa/AAA $ 199,410 Weber County, Utah School District 750,000 5.000%, 06/15/18 ...................................... Aaa/NR 785,025 825,000 5.000%, 06/15/20 ...................................... Aaa/NR 871,481 Weber County, Utah School District Series B 1,485,000 5.000%, 06/15/21 ...................................... Aaa/NR 1,554,350 ------------- Total School District 27,229,564 ------------- Total General Obligation Bonds 45,744,280 ------------- REVENUE BONDS (76.7%) AIRPORT (1.2%) Clark County, Nevada Passenger Facility Charge 255,000 4.750%, 07/01/22 MBIA Insured AMT ..................... Aaa/AAA 255,548 Hillsborough County, Florida Aviation Authority 2,185,000 5.250%, 10/01/23 MBIA Insured AMT ..................... Aaa/AAA 2,252,429 ------------- Total Airport 2,507,977 ------------- COUNTY (0.5%) Davis County, Utah Lease Revenue DMV Project 78,000 5.400%, 11/01/17 ...................................... NR/NR* 77,995 83,000 5.450%, 11/01/18 ...................................... NR/NR* 82,990 87,000 5.500%, 11/01/19 ...................................... NR/NR* 86,990 92,000 5.550%, 11/01/20 ...................................... NR/NR* 91,990 97,000 5.600%, 11/01/21 ...................................... NR/NR* 96,986 103,000 5.650%, 11/01/22 ...................................... NR/NR* 102,988 108,000 5.700%, 11/01/23 ...................................... NR/NR* 107,986 115,000 5.700%, 11/01/24 ...................................... NR/NR* 114,986 121,000 5.750%, 11/01/25 ...................................... NR/NR* 120,985 128,000 5.750%, 11/01/26 ...................................... NR/NR* 127,942 ------------- Total County 1,011,838 ------------- EDUCATION (14.2%) Carmel, Indiana 2002 School Building Corp. 1,235,000 4.300%, 01/15/23 FSA Insured .......................... NR/AAA 1,156,516 1,525,000 4.300%, 07/15/23 FSA Insured .......................... NR/AAA 1,426,622
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- EDUCATION (CONTINUED) Clinton Prairie, Indiana Community School Building $ 675,000 4.625%, 01/15/19 FGIC Insured ......................... NR/AAA $ 681,196 Florida State Board Education Public Education 210,000 4.500%, 06/01/25 FSA Insured .......................... NR/AAA 206,577 Laredo, Texas Independent School District Public Facility Corp. 190,000 5.000%, 08/01/24 AMBAC Insured ........................ Aaa/AAA 194,689 Nevada System Higher Education Certificates of Participation 1,000,000 5.000%, 07/01/25 AMBAC Insured ........................ NR/AAA 1,027,370 Raven Hills, Texas Higher Education Housing & Education Revenue 215,000 5.000%, 06/01/26 AMBAC Insured ........................ Aaa/NR 224,965 Salt Lake County, Utah Westminster College Project 115,000 5.050%, 10/01/10 ...................................... NR/BBB 116,742 100,000 5.500%, 10/01/19 ...................................... NR/BBB 102,454 1,200,000 5.000%, 10/01/22 ...................................... NR/BBB 1,180,260 1,250,000 5.000%, 10/01/25 ...................................... NR/BBB 1,224,200 1,000,000 5.750%, 10/01/27 ...................................... NR/BBB 1,027,050 Texas State College Student Loan Revenue 100,000 5.000%, 08/01/22 AMT .................................. Aa1/AA 101,207 Texas State University System Financing Revenue 655,000 4.375%, 03/15/23 FSA Insured .......................... Aaa/AAA 626,868 Tyler, Texas Independent School District 325,000 5.000%, 02/15/26 FSA Insured .......................... Aaa/AAA 332,748 University of Nevada University Revenues 190,000 4.500%, 07/01/24 MBIA Insured ......................... Aaa/AAA 186,778 University of Utah University Revenues 770,000 5.000%, 04/01/18 MBIA Insured ......................... Aaa/AAA 802,024 Utah County, Utah School Facility Revenue 1,440,000 6.500%, 12/01/25 ...................................... NR/NR* 1,413,475 Utah State Board Regents Auxiliary & Campus Facility 1,000,000 4.125%, 04/01/20 MBIA Insured ......................... Aaa/AAA 929,250
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- EDUCATION (CONTINUED) Utah State Board Regents Dixie State College $ 115,000 5.500%, 05/01/13 MBIA Insured ......................... Aaa/AAA $ 123,130 120,000 5.500%, 05/01/14 MBIA Insured ......................... Aaa/AAA 128,741 130,000 5.500%, 05/01/15 MBIA Insured ......................... Aaa/AAA 139,957 400,000 5.100%, 05/01/21 MBIA Insured ......................... Aaa/AAA 412,348 Utah State Board Regents Lease Revenue 410,000 4.500%, 05/01/20 AMBAC Insured ........................ Aaa/AAA 405,404 425,000 4.500%, 05/01/21 AMBAC Insured ........................ Aaa/AAA 419,097 450,000 4.625%, 05/01/22 AMBAC Insured ........................ Aaa/AAA 448,222 120,000 4.650%, 05/01/23 AMBAC Insured ........................ Aaa/AAA 119,300 Utah State Board Regents Office Facility Revenue 450,000 5.050%, 02/01/20 MBIA Insured ......................... Aaa/AAA 462,060 360,000 5.125%, 02/01/22 MBIA Insured ......................... Aaa/AAA 371,678 Utah State Board Regents Revenue 2,885,000 4.500%, 08/01/18 MBIA Insured ......................... Aaa/AAA 2,863,680 500,000 5.000%, 05/01/26 ...................................... Aa/AAA 512,050 250,000 5.250%, 04/01/24 MBIA Insured ......................... Aaa/AAA 262,118 Utah State Board Regents Revenue Salt Lake Community College 1,260,000 5.500%, 06/01/16 FSA Insured .......................... Aaa/AAA 1,330,132 Utah State Board Regents Revenue University Utah 1,045,000 5.000%, 04/01/23 MBIA Insured ......................... Aaa/AAA 1,073,205 Utah State Board Regents Revenue University Utah- Auxiliary & Campus Revenue 1,015,000 5.000%, 04/01/20 MBIA Insured (pre-refunded) .......... Aaa/AAA 1,045,074 Utah State Board Regents Revenue University Utah Hospital Revenue 2,030,000 5.500%, 08/01/17 MBIA Insured (pre-refunded) .......... Aaa/AAA 2,173,216 905,000 5.000%, 05/01/19 AMBAC Insured ........................ Aaa/AAA 933,408 3,595,000 5.000%, 08/01/19 MBIA Insured ......................... Aaa/AAA 3,682,107 Weber State University, Utah Revenue 100,000 5.250%, 04/01/24 FSA Insured .......................... NR/AAA 103,457 Weber State University, Utah Revenue Student Facilities System Series A 300,000 5.100%, 04/01/16 ...................................... NR/AA 312,267 425,000 5.250%, 04/01/19 ...................................... NR/AA 446,773 ------------- Total Education 30,728,415 -------------
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- HEALTHCARE (1.0%) Harris County, Texas Health Facility Development Corp. $ 145,000 5.000%, 11/15/28 AMBAC Insured ........................ NR/AAA $ 146,119 Lee Memorial Health System, Florida Hospital Revenue 450,000 4.250%, 04/01/22 MBIA Insured ......................... Aaa/AAA 422,523 Murray City, Utah Hospital Revenue 595,000 5.000%, 05/15/22 MBIA Insured ......................... Aaa/AAA 598,493 Salt Lake County, Utah Hospital Revenue - IHC Hospitals, Inc. 500,000 5.500%, 05/15/13 AMBAC Insured ........................ Aaa/AAA 529,640 Tarrant County, Texas Health Facilities Revenue 230,000 5.000%, 02/15/26 MBIA Insured ......................... Aaa/AAA 232,102 Utah State Board Regents Revenue University Utah Hospital Revenue 310,000 5.000%, 08/01/21 MBIA Insured ......................... Aaa/AAA 317,087 ------------- Total Healthcare 2,245,964 ------------- HOUSING (8.2%) Henderson, Nevada Local Improvement District 150,000 5.000%, 09/01/15 ...................................... NR/NR* 149,663 200,000 5.000%, 09/01/16 ...................................... NR/NR* 199,672 200,000 5.050%, 09/01/17 ...................................... NR/NR* 199,650 200,000 5.100%, 09/01/18 ...................................... NR/NR* 199,628 Indiana Housing & Community Development Authority 1,500,000 4.900%, 07/01/26 AMT .................................. Aaa/NR 1,481,730 Indiana State Housing Finance Authority Single Family 245,000 4.850%, 07/01/22 AMT .................................. Aaa/NR 246,051 Indianapolis, Indiana Multi-Family 500,000 4.850%, 01/01/21 AMT .................................. Aaa/NR 498,245 Miami-Dade County, Florida Housing Finance Authority 535,000 5.000%, 11/01/23 FSA Insured AMT ...................... NR/AAA 540,414 Provo City, Utah Housing Authority 500,000 5.800%, 07/20/22 GNMA Collateralized .................. Aaa/NR 512,125 Snohomish County, Washington Housing Authority 185,000 4.875%, 09/01/12 AMT .................................. NR/NR* 181,857 225,000 5.000%, 09/01/13 AMT .................................. NR/NR* 221,402 185,000 5.000%, 09/01/14 AMT .................................. NR/NR* 181,232 145,000 5.100%, 09/01/15 AMT .................................. NR/NR* 142,290
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- HOUSING (CONTINUED) South Dakota Housing Development Authority $ 1,250,000 4.900%, 05/01/26 AMT .................................. Aa1/AAA $ 1,242,863 Utah Housing Corporation Single Family Housing 270,000 4.000%, 07/01/11 AMT .................................. Aaa/AAA 264,649 60,000 5.250%, 07/01/23 AMT .................................. Aa2/AA 60,269 Utah Housing Corporation Single Family Mortgage 235,000 4.000%, 07/01/11 AMT .................................. Aaa/AAA 232,253 335,000 4.600%, 07/01/15 AMT+ ................................. Aaa/AAA 334,266 240,000 4.650%, 07/01/16 AMT+ ................................. Aaa/AAA 239,429 50,000 5.150%, 07/01/23 AMT .................................. Aaa/AAA 49,536 250,000 4.875%, 07/01/23 AMT .................................. Aa3/AA- 249,568 1,310,000 5.000%, 07/01/25 AMT .................................. Aa3/AA- 1,318,423 880,000 5.100%, 01/01/26 AMT .................................. Aa3/AA- 881,223 850,000 5.000%, 07/01/31 AMT .................................. Aa2/AA 836,885 Utah State Housing Agency Housing Revenue 140,000 5.650%, 07/01/27 AMT .................................. Aa2/AA 142,919 Utah State Housing Corporation Single Family Housing Revenue 1,380,000 5.125%, 07/01/24 AMT .................................. Aa3/AA- 1,394,393 Utah State Housing Finance Agency 5,000 6.350%, 07/01/11 Mezzanine Series G-1 ................. AAA/NR 5,021 255,000 5.700%, 07/01/15 AMT .................................. Aa3/AA- 262,410 130,000 5.650%, 07/01/16 Series 1994C ......................... Aaa/AAA 131,102 50,000 5.400%, 07/01/16 AMT .................................. Aa2/AA 50,178 75,000 6.000%, 07/01/17 AMT .................................. Aaa/AA 76,016 795,000 5.500%, 07/01/18 AMT .................................. Aa3/AA- 812,681 90,000 5.300%, 07/01/18 AMT .................................. Aaa/AAA 92,541 100,000 5.000%, 07/01/18 AMT .................................. Aaa/AAA 100,573 170,000 5.400%, 07/01/20 AMT .................................. Aa2/AA 172,008 375,000 5.600%, 07/01/23 AMT .................................. Aa2/AA 378,694 105,000 5.700%, 07/01/26 MBIA Insured ......................... Aaa/AAA 105,443 Washington State Housing Finance Commission 2,290,000 4.800%, 12/01/21 AMT .................................. Aaa/NR 2,269,253
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- HOUSING (CONTINUED) Wyoming Community Development Authority Housing Revenue $ 150,000 4.600%, 12/01/12 AMT .................................. Aa1/AA+ $ 150,996 580,000 4.700%, 06/01/17 AMT .................................. Aa1/AA+ 578,016 520,000 4.700%, 12/01/17 AMT .................................. Aa1/AA+ 518,159 120,000 5.000%, 12/01/22 ...................................... Aa1/AA+ 121,898 ------------- Total Housing ......................................... 17,825,624 ------------- INDUSTRIAL DEVELOPMENT & POLLUTION CONTROL (0.6%) Sandy City, Utah Industrial Development, H Shirley Wright Project, Refunding Bonds, LOC Olympus Bank 250,000 6.125%, 08/01/16 ...................................... NR/AAA 250,352 Utah County Environmental Improvement Revenue 935,000 5.050%, 11/01/17 ...................................... Baa1/BBB+ 972,353 ------------- Total Industrial Development & Pollution Control ...... 1,222,705 ------------- LEASE (6.8%) Celebration Community Development District, Florida 290,000 5.000%, 05/01/22 MBIA Insured ......................... Aaa/AAA 299,103 Draper, Utah Municipal Building Authority 355,000 5.000%, 11/15/20 AMBAC Insured ........................ Aaa/NR 368,142 Marion County, Indiana Convention & Recreational Facilities Authority 390,000 5.000%, 06/01/27 MBIA Insured ......................... Aaa/AAA 393,003 Murray City, Utah Municipal Building Authority 520,000 5.050%, 12/01/15 AMBAC Insured ........................ Aaa/NR 540,129 Salt Lake County, Utah Municipal Building Authority 320,000 5.400%, 10/15/19 AMBAC Insured (pre-refunded) ......... Aaa/AAA 337,523 3,900,000 5.200%, 10/15/20 AMBAC Insured (pre-refunded) + ....... Aaa/AAA 4,129,866 Utah County, Utah Municipal Building Authority 120,000 5.500%, 11/01/16 AMBAC Insured ........................ Aaa/NR 128,838 240,000 5.500%, 11/01/17 AMBAC Insured ........................ Aaa/NR 257,676 Utah State Building Ownership Authority 465,000 5.000%, 05/15/21 ...................................... Aa1/AA+ 482,572 1,755,000 5.250%, 05/15/23 ...................................... Aa1/AA+ 1,838,854 510,000 5.000%, 05/15/23 ...................................... Aa1/AA+ 527,223 1,845,000 5.250%, 05/15/24 ...................................... Aa1/AA+ 1,930,663 1,080,000 5.000%, 05/15/25 ...................................... Aa1/AA+ 1,110,316
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- LEASE (CONTINUED) Washington County - St. George, Utah Interlocal Agency Revenue $ 1,000,000 5.125%, 12/01/17 AMBAC Insured ........................ NR/AAA $ 1,028,350 100,000 5.125%, 12/01/22 AMBAC Insured ........................ NR/AAA 102,614 West Bountiful, Utah Courthouse Revenue 410,000 5.000%, 05/01/19 ...................................... NR/A- 421,718 West Valley City, Utah 865,000 5.000%, 08/01/21 AMBAC Insured ........................ Aaa/AAA 888,182 ------------- Total Lease ........................................... 14,784,772 ------------- TAX REVENUE (22.5%) Bay County, Florida Sales Tax Revenue 175,000 4.750%, 09/01/23 FSA Insured .......................... Aaa/NR 176,109 Bluffdale City, Utah Series 2004 295,000 6.000%, 12/01/13 ...................................... NR/NR* 292,897 310,000 6.000%, 12/01/14 ...................................... NR/NR* 307,563 330,000 6.000%, 12/01/15 ...................................... NR/NR* 328,574 350,000 6.000%, 12/01/16 ...................................... NR/NR* 348,638 370,000 6.000%, 12/01/17 ...................................... NR/NR* 368,768 395,000 6.000%, 12/01/18 ...................................... NR/NR* 393,949 420,000 6.000%, 12/01/19 ...................................... NR/NR* 419,206 Bluffdale, Utah Sales Tax Revenue 2,045,000 5.500%, 08/01/23 ...................................... NR/NR* 2,089,867 Bountiful, Utah Special Improvement District Special Assessment Revenue 203,000 5.000%, 06/01/14 ...................................... NR/NR* 200,128 213,000 5.150%, 06/01/15 ...................................... NR/NR* 211,043 224,000 5.300%, 06/01/16 ...................................... NR/NR* 221,274 236,000 5.500%, 06/01/17 ...................................... NR/NR* 235,030 249,000 5.650%, 06/01/18 ...................................... NR/NR* 248,980 Brian Head, Utah Special Service Improvement District Revenue 330,000 5.350%, 11/01/12 ...................................... NR/NR* 338,055
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- TAX REVENUE (CONTINUED) Cache County, Utah Sales Tax Revenue $ 670,000 5.000%, 12/15/16 FGIC Insured ......................... Aaa/AAA $ 696,512 600,000 5.000%, 12/15/17 FGIC Insured ......................... Aaa/AAA 621,006 510,000 5.000%, 12/15/18 FGIC Insured ......................... Aaa/AAA 525,545 855,000 5.000%, 12/15/19 FGIC Insured ......................... Aaa/AAA 880,582 Clark County, Nevada Improvement District Revenue 250,000 5.000%, 08/01/16 ...................................... NR/NR* 247,072 Clearfield, Utah Sales Tax Revenue 590,000 5.000%, 07/01/18 FGIC Insured ......................... Aaa/AAA 611,446 620,000 5.000%, 07/01/19 FGIC Insured ......................... Aaa/AAA 639,902 650,000 5.000%, 07/01/20 FGIC Insured ......................... Aaa/AAA 669,292 Coral Canyon, Utah Special Service District 110,000 5.000%, 07/15/13 ...................................... NR/NR* 111,576 250,000 5.500%, 07/15/18 ...................................... NR/NR* 254,805 Davis County, Utah Sales Tax Revenue 1,470,000 5.150%, 10/01/18 AMBAC Insured ........................ NR/AAA 1,532,710 Fishers, Indiana Redevelopment Authority Lease Revenue 175,000 4.500%, 07/15/20 AMBAC Insured ........................ Aaa/AAA 175,311 Henderson, Nevada Local Improvement District Revenue 100,000 4.500%, 09/01/12 ...................................... NR/NR* 98,674 300,000 5.000%, 09/01/14 ...................................... NR/NR* 301,977 300,000 5.000%, 09/01/15 ...................................... NR/NR* 299,979 Jordanelle, Utah Special Service District 186,000 5.000%, 11/15/14 ...................................... NR/NR* 186,727 196,000 5.100%, 11/15/15 ...................................... NR/NR* 197,025 206,000 5.200%, 11/15/16 ...................................... NR/NR* 206,756 216,000 5.300%, 11/15/17 ...................................... NR/NR* 216,838 228,000 5.400%, 11/15/18 ...................................... NR/NR* 228,935 240,000 5.500%, 11/15/19 ...................................... NR/NR* 241,034 253,000 5.600%, 11/15/20 ...................................... NR/NR* 254,032 268,000 5.700%, 11/15/21 ...................................... NR/NR* 269,091 283,000 5.800%, 11/15/22 ...................................... NR/NR* 284,149 299,000 6.000%, 11/15/23 ...................................... NR/NR* 300,145
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- TAX REVENUE (CONTINUED) Jordanelle, Utah Special Service Improvement District $ 320,000 8.000%, 10/01/11 ...................................... NR/NR* $ 326,864 Lehi, Utah Sales Tax 610,000 5.000%, 06/01/21 FSA Insured .......................... Aaa/AAA 631,710 790,000 5.000%, 06/01/24 FSA Insured .......................... Aaa/AAA 811,235 Mesquite, Nevada New Special Improvement District 185,000 4.600%, 08/01/11 ...................................... NR/NR* 182,521 195,000 4.750%, 08/01/12 ...................................... NR/NR* 191,798 230,000 4.900%, 08/01/13 ...................................... NR/NR* 226,072 140,000 5.250%, 08/01/17 ...................................... NR/NR* 136,702 315,000 5.350%, 08/01/19 ...................................... NR/NR* 306,419 135,000 5.400%, 08/01/20 ...................................... NR/NR* 131,277 500,000 5.500%, 08/01/25 ...................................... NR/NR* 483,590 Mountain Regional Water District, Utah Special Assessment Revenue 1,800,000 7.000%, 12/01/18 ...................................... NR/NR* 1,850,094 Mountain Regional Water, Utah Special Service District 2,000,000 5.000%, 12/15/20 MBIA Insured ......................... Aaa/AAA 2,062,580 North Ogden, Utah Sales Tax Revenue 195,000 5.000%, 11/01/24 XLCA Insured ......................... Aaa/AAA 199,382 Plainfield, Indiana Independent Redevelopment Authority 1,070,000 4.375%, 08/01/20 CIFG Insured ......................... Aaa/NR 1,026,376 Salt Lake City, Utah Sales Tax Revenue 265,000 5.250%, 02/01/13 ...................................... NR/AAA 280,571 1,320,000 5.250%, 02/01/15 ...................................... NR/AAA 1,387,478 100,000 5.250%, 02/01/17 ...................................... NR/AAA 104,859 Salt Lake County, Utah Sales Tax Revenue 955,000 5.000%, 02/01/21 ...................................... NR/AAA 990,679 1,725,000 5.000%, 08/01/21 ...................................... NR/AAA 1,792,499 1,005,000 5.000%, 02/01/22 ...................................... NR/AAA 1,040,376 1,060,000 5.000%, 02/01/23 ...................................... NR/AAA 1,095,786 1,115,000 5.000%, 02/01/24 ...................................... NR/AAA 1,155,051
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- TAX REVENUE (CONTINUED) Sandy City, Utah Sales Tax Revenue $ 520,000 5.000%, 09/15/18 AMBAC Insured ........................ NR/AAA $ 535,579 605,000 5.000%, 09/15/20 AMBAC Insured ........................ NR/AAA 621,147 South Jordan, Utah Sales Tax 570,000 5.000%, 08/15/15 AMBAC Insured ........................ Aaa/AAA 589,682 South Jordan, Utah Special Assignment 1,000,000 6.875%, 11/01/17 ...................................... NR/NR* 1,014,330 South Weber City, Utah 525,000 5.000%, 01/15/24 MBIA Insured ......................... Aaa/AAA 537,553 Springville, Utah Special Improvement District Revenue 400,000 5.500%, 1/15/2017 ..................................... NR/NR* 396,216 423,000 5.650%, 1/15/2018 ..................................... NR/NR* 418,762 446,000 5.800%, 1/15/2019 ..................................... NR/NR* 441,304 472,000 5.900%, 1/15/2020 ..................................... NR/NR* 467,228 500,000 6.000%, 1/15/2021 ..................................... NR/NR* 495,215 Utah Water Finance Agency Revenue 775,000 5.100%, 07/01/18 AMBAC Insured ........................ Aaa/NR 801,211 510,000 5.000%, 07/01/18 AMBAC Insured ........................ Aaa/NR 526,988 260,000 5.000%, 06/01/19 MBIA Insured ......................... Aaa/AAA 263,708 685,000 5.000%, 07/01/19 AMBAC Insured ........................ Aaa/NR 706,989 Wasatch County, Utah Building Authority 130,000 5.000%, 10/01/15 ...................................... A3/NR 132,679 135,000 5.000%, 10/01/16 ...................................... A3/NR 137,284 Wasatch County, Utah Sales Tax Revenue 205,000 5.000%, 12/01/16 AMBAC Insured ........................ Aaa/AAA 213,065 210,000 5.000%, 12/01/17 AMBAC Insured ........................ Aaa/AAA 217,310 225,000 5.000%, 12/01/18 AMBAC Insured ........................ Aaa/AAA 231,946 Washington City, Utah Sales Tax Revenue 680,000 5.250%, 11/15/17 AMBAC Insured++ ...................... Aaa/AAA 719,460 Washoe County, Nevada Tax Revenue 210,000 5.000%, 12/01/23 MBIA Insured ......................... Aaa/AAA 213,650 Weber County, Utah Sales Tax Revenue 385,000 5.000%, 07/01/23 AMBAC Insured ........................ Aaa/NR 395,268
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- TAX REVENUE (CONTINUED) West Valley City, Utah Redevelopment Agency Revenue $ 1,625,000 5.000%, 03/01/21 ...................................... NR/A- $ 1,645,394 320,000 5.000%, 03/01/22 ...................................... NR/A- 323,338 350,000 5.000%, 03/01/23 ...................................... NR/A- 353,161 1,000,000 5.000%, 03/01/24 ...................................... NR/A- 1,007,620 West Valley City, Utah Sales Tax Revenue 800,000 5.500%, 07/15/17 MBIA Insured ......................... Aaa/AAA 841,856 250,000 5.000%, 07/15/20 AMBAC Insured ........................ Aaa/AAA 257,195 340,000 5.000%, 07/15/21 MBIA Insured ......................... Aaa/AAA 348,486 Woodland Hills, Utah Special Assessment Revenue 18,000 5.500%, 08/01/09 ...................................... NR/NR* 18,050 221,000 5.500%, 08/01/10 ...................................... NR/NR* 222,269 233,000 5.500%, 08/01/11 ...................................... NR/NR* 236,486 246,000 5.500%, 08/01/12 ...................................... NR/NR* 249,660 261,000 5.500%, 08/01/13 ...................................... NR/NR* 265,881 ------------- Total Tax Revenue ..................................... 48,491,091 ------------- TRANSPORTATION (4.1%) Florida State Turnpike Authority Turnpike Revenue 500,000 4.500%, 07/01/22 MBIA Insured ......................... Aaa/AAA 497,740 Port of Seattle, Washington Revenue 100,000 5.100%, 04/01/24 AMT FGIC Insured ..................... Aaa/AAA 100,917 Utah Transit Authority Sales Tax & Transportation Revenue 1,000,000 5.400%, 12/15/16 FSA Insured .......................... NR/AAA 1,032,970 100,000 5.000%, 06/15/21 FSA Insured .......................... Aaa/AAA 103,331 3,300,000 4.125%, 06/15/21 FSA Insured .......................... Aaa/AAA 3,109,722 3,450,000 4.125%, 06/15/22 FSA Insured .......................... Aaa/AAA 3,234,341 590,000 5.000%, 06/15/24 FSA Insured .......................... Aaa/AAA 607,317 100,000 5.000%, 06/15/25 FSA Insured .......................... Aaa/AAA 102,879 ------------- Total Transportation .................................. 8,789,217 -------------
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- UTILITY (9.3%) Alaska Industrial Development & Export Authority Revenue $ 400,000 4.625%, 12/01/16 AMBAC Insured AMT .................... NR/AAA $ 399,164 Eagle Mountain, Utah Gas & Electric 1,385,000 4.250%, 06/01/20 Radian Insured ....................... NR/AA 1,284,865 1,440,000 5.000%, 06/01/21 Radian Insured ....................... Aa3/AA 1,457,482 1,515,000 5.000%, 06/01/22 Radian Insured ....................... NR/AA 1,529,014 Garland, Texas Water & Sewer 440,000 4.500%, 03/01/21 AMBAC Insured ........................ NR/AAA 431,644 Indianapolis, Indiana Gas Utility 290,000 5.000%, 08/15/24 AMBAC Insured ........................ Aaa/AAA 292,639 Intermountain Power Agency Utilities Light & Power Service, Utah 450,000 5.000%, 07/01/12 MBIA Insured ETM ..................... Aaa/AAA 452,461 1,470,000 5.250%, 07/01/15 MBIA Insured ......................... Aaa/AAA 1,520,039 775,000 5.000%, 07/01/18 FSA Insured .......................... Aaa/AAA 803,644 1,380,000 5.000%, 07/01/19 MBIA Insured ......................... Aaa/AAA 1,409,463 Lower Colorado River Authority, Texas 175,000 5.000%, 05/15/26 FSA Insured .......................... Aaa/AAA 178,986 Manti City, Utah Electric System Revenue 603,000 5.750%, 02/01/17 ...................................... NR/NR* 620,692 Murray City, Utah Utility Electric Revenue 400,000 5.625%, 06/01/18 AMBAC Insured ........................ Aaa/NR 424,820 1,340,000 5.000%, 06/01/25 AMBAC Insured ........................ Aaa/NR 1,376,019 St. George, Utah Electric Revenue 1,910,000 4.500%, 06/01/20 FSA Insured .......................... Aaa/NR 1,888,532 Salem, Utah Electric Revenue 125,000 5.300%, 11/01/07 ...................................... NR/NR* 125,734 130,000 5.350%, 11/01/08 ...................................... NR/NR* 131,799 140,000 5.400%, 11/01/09 ...................................... NR/NR* 142,068 Seattle, Washington Municipal Light & Power 1,360,000 4.500%, 08/01/19 FSA Insured .......................... Aaa/AAA 1,357,294
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- UTILITY (CONTINUED) Southern Utah Valley Power System $ 210,000 5.250%, 09/15/13 MBIA Insured ......................... NR/AAA $ 222,839 225,000 5.250%, 09/15/14 MBIA Insured ......................... NR/AAA 239,263 235,000 5.250%, 09/15/15 MBIA Insured ......................... NR/AAA 249,499 185,000 5.125%, 09/15/21 MBIA Insured ......................... NR/AAA 191,986 Springville, Utah Electric Revenue 550,000 5.600%, 03/01/09 ...................................... Baa1/NR 562,584 Utah Assessed Municipal Power System 790,000 5.250%, 12/01/09 ...................................... NR/A- 809,466 1,000,000 5.000%, 04/01/21 FSA Insured .......................... Aaa/AAA 1,029,290 Washington, Utah Electric Revenue 985,000 5.000%, 09/01/21 XLCA Insured ......................... Aaa/NR 1,015,525 ------------- Total Utility ......................................... 20,146,811 ------------- WATER AND SEWER (8.3%) Ashley Valley, Utah 140,000 9.500%, 01/01/08 AMBAC Insured ........................ Aaa/AAA 145,646 Eagle Mountain, Utah Water and Sewer 750,000 5.800%, 11/15/16 ACA Insured .......................... NR/A 782,220 Granger and Hunter, Utah Improvement District Water and Sewer 350,000 5.000%, 03/01/18 FSA Insured (pre-refunded) ........... Aaa/NR 356,762 Jordan Valley, Utah Water Conservancy District 715,000 4.375%, 10/01/18 AMBAC Insured ........................ Aaa/AAA 701,343 Mesquite, Texas Waterworks & Sewer 225,000 4.500%, 03/01/24 FSA Insured .......................... Aaa/AAA 217,532 Murray City, Utah Sewer and Water 465,000 5.000%, 10/01/17 AMBAC Insured ........................ Aaa/NR 482,977 390,000 5.000%, 10/01/18 AMBAC Insured ........................ Aaa/NR 403,365 440,000 5.000%, 10/01/19 AMBAC Insured ........................ Aaa/NR 454,529 North Davis County, Utah Sewer District 1,350,000 5.000%, 03/01/21 AMBAC Insured ........................ Aaa/NR 1,394,091 150,000 5.125%, 03/01/22 AMBAC Insured (pre-refunded) ......... Aaa/NR 158,610
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- WATER AND SEWER (CONTINUED) Orem, Utah Water & Storm Sewer Revenue $ 1,720,000 4.500%, 07/15/17 MBIA Insured ......................... Aaa/AAA $ 1,722,511 Riverton, Utah Water Revenue 100,000 5.350%, 09/01/15 FGIC Insured (pre-refunded) .......... Aaa/NR 105,465 Salt Lake City, Utah Metropolitan Water Revenue 1,200,000 5.375%, 07/01/24 AMBAC Insured (pre-refunded) ......... Aaa/AAA 1,249,776 125,000 5.375%, 07/01/29 AMBAC Insured (pre-refunded) ......... Aaa/AAA 130,185 Salt Lake City, Utah Water and Sewer Revenue 675,000 5.000%, 02/01/19 FSA Insured .......................... Aaa/AAA 698,179 845,000 5.000%, 02/01/20 FSA Insured .......................... Aaa/AAA 871,820 Salt Lake & Sandy, Utah Water District 1,000,000 5.000%, 07/01/20 AMBAC Insured ........................ Aaa/NR 1,033,230 South Valley, Utah Water Reclamation Facility 710,000 4.375%, 08/15/18 ...................................... NR/AAA 696,560 Spanish Fork City, Utah Water Revenue 195,000 5.500%, 06/01/17 FSA Insured .......................... Aaa/NR 208,437 55,000 5.500%, 06/01/17 FSA Insured (pre-refunded) ........... Aaa/NR 59,357 Upper Trinity Regional Water District, Texas 205,000 4.500%, 08/01/20 AMBAC Insured ........................ Aaa/AAA 201,636 Utah Water Finance Agency Revenue 100,000 5.000%, 06/01/14 MBIA Insured ......................... Aaa/AAA 102,216 200,000 5.250%, 07/01/16 AMBAC Insured ........................ Aaa/NR 211,446 250,000 5.375%, 09/01/17 AMBAC Insured ........................ Aaa/NR 266,858 310,000 5.000%, 10/01/17 AMBAC Insured ........................ Aaa/NR 320,540 750,000 5.250%, 10/01/18 AMBAC Insured ........................ Aaa/NR 794,873 465,000 5.000%, 10/01/20 AMBAC Insured ........................ Aaa/NR 477,490 830,000 4.500%, 10/01/22 AMBAC Insured ........................ Aaa/NR 814,936 100,000 5.125%, 07/01/23 AMBAC Insured ........................ Aaa/NR 103,194 285,000 5.300%, 10/01/23 MBIA Insured (pre-refunded) .......... Aaa/AAA 294,188 870,000 4.500%, 10/01/23 AMBAC Insured ........................ Aaa/NR 849,546 450,000 5.400%, 10/01/24 AMBAC Insured (pre-refunded) ......... Aaa/AAA 470,448 250,000 5.500%, 10/01/29 AMBAC Insured (pre-refunded) ......... Aaa/AAA 262,113
RATING PRINCIPAL MOODY'S/ AMOUNT REVENUE BONDS (CONTINUED) S&P VALUE ------------ ------------------------------------------------------- --------- ------------- WATER AND SEWER (CONTINUED) Weber-Box Elder, Utah Conservation District Water Revenue $ 200,000 6.450%, 11/01/14 (pre-refunded) ....................... Baa3/NR $ 219,164 200,000 6.500%, 11/01/19 (pre-refunded) ....................... Baa3/NR 219,556 335,000 6.900%, 11/01/20 (pre-refunded) ....................... Baa3/NR 373,023 ------------- Total Water and Sewer ................................. 17,853,822 ------------- Total Revenue Bonds ................................... 165,608,236 ------------- Total Investments (cost $212,712,353**) ............... 97.9% 211,352,516 Other assets less liabilities ......................... 2.1 4,456,829 ------ ------------- Net Assets ............................................ 100.0% $ 215,809,345 ====== =============
PERCENT OF PORTFOLIO DISTRIBUTION BY QUALITY RATING (UNAUDITED) PORTFOLIO ---------------------------------------------------- --------- Aaa of Moody's or AAA of S&P ............................... 73.9% Aa of Moody's or AA of S&P ................................. 9.1 A of Moody's or S&P ........................................ 2.7 Baa of Moody's or BBB of S&P ............................... 2.8 Not rated* ................................................. 11.5 ------ 100.0% ====== * Any security not rated (NR) by either credit rating service must be determined by the Manager 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 note 4. + Security traded on a "when-issued" basis. ++ These securities are pledged as collateral for the Fund's when-issued commitments. PORTFOLIO ABBREVIATIONS: ------------------------ ACA - American Capital Assurance Financial Guaranty Corp. AMBAC - American Municipal Bond Assurance Corp. AMT - Alternative Minimum Tax CIFG - CIFG Assurance North America, Inc. ETM- Escrowed to Maturity FGIC- Financial Guaranty Insurance Co. FSA- Financial Security Assurance GNMA- Government National Mortgage Association LOC- Letter of Credit MBIA- Municipal Bond Investors Assurance NR- Not Rated XLCA- XL Capital Assurance TAX-FREE FUND FOR UTAH STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2006 ASSETS Investments at value (cost $212,712,353) ......................................... $ 211,352,516 Cash ............................................................................. 2,842,475 Interest receivable .............................................................. 3,104,973 Receivable for investment securities sold ........................................ 305,000 Receivable for Fund shares sold .................................................. 281,091 Other assets ..................................................................... 34,265 ------------- Total assets ..................................................................... 217,920,320 ------------- LIABILITIES Payable for investment securities purchased ........................................ 1,321,371 Payable for Fund shares redeemed ................................................... 474,837 Dividends payable .................................................................. 161,869 Distribution and service fees payable .............................................. 103,703 Management fees payable ............................................................ 35,456 Accrued expenses ................................................................... 13,739 ------------- Total liabilities .................................................................. 2,110,975 ------------- NET ASSETS ............................................................................ $ 215,809,345 ============= Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 218,469 Additional paid-in capital ......................................................... 219,461,435 Net unrealized depreciation on investments (note 4) ................................ (1,359,837) Accumulated net realized loss on investments ....................................... (2,391,121) Distributions in excess of net investment income ................................... (119,601) ------------- $ 215,809,345 ============= CLASS A Net Assets ......................................................................... $ 142,227,430 ============= Capital shares outstanding ......................................................... 14,405,730 ============= Net asset value and redemption price per share ..................................... $ 9.87 ============= Offering price per share (100/96 of $9.87 adjusted to nearest cent) ................ $ 10.28 ============= CLASS C Net Assets ......................................................................... $ 33,790,806 ============= Capital shares outstanding ......................................................... 3,423,742 ============= Net asset value and offering price per share ....................................... $ 9.87 ============= Redemption price per share (*a charge of 1% is imposed on the redemption proceeds of the shares, or on the original price, whichever is lower, if redeemed during the first 12 months after purchase) ...................................... $ 9.87* ============= CLASS Y Net Assets ......................................................................... $ 39,791,109 ============= Capital shares outstanding ......................................................... 4,017,395 ============= Net asset value, offering and redemption price per share ........................... $ 9.90 =============
See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH STATEMENT OF OPERATIONS JUNE 30, 2006 INVESTMENT INCOME: Interest income ...................................... $ 9,068,592 Expenses: Management fee (note 3) .............................. $ 998,167 Distribution and service fees (note 3) ............... 586,376 Trustees' fees and expenses (note 8) ................. 119,751 Transfer and shareholder servicing agent fees ........ 106,492 Legal fees (note 3) .................................. 76,252 Fund accounting fees ................................. 47,353 Shareholders' reports and proxy statements ........... 41,832 Registration fees and dues ........................... 26,035 Auditing and tax fees ................................ 17,000 Custodian fees ....................................... 14,956 Insurance ............................................ 10,850 Chief compliance officer (note 3) .................... 5,044 Miscellaneous ........................................ 41,146 ----------- Total expenses ....................................... 2,091,254 Management fee waived (note 3) ....................... (625,501) Expenses paid indirectly (note 6) .................... (57,953) ----------- Net expenses ......................................... 1,407,800 ------------ Net investment income ................................ 7,660,792 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions 349,428 Change in unrealized appreciation on investments ..... (7,697,675) ----------- Net realized and unrealized gain (loss) on investments (7,348,247) ------------ Net increase in net assets resulting from operations ...... $ 312,545 ============
See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended June 30, 2006 June 30, 2005 ------------- ------------- OPERATIONS: Net investment income ....................................... $ 7,660,792 $ 5,597,480 Net realized gain (loss) from securities transactions ....... 349,428 339,699 Change in unrealized appreciation on investments ............ (7,697,675) 4,737,661 ------------- ------------- Change in net assets from operations ..................... 312,545 10,674,840 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10): Class A Shares: Net investment income ....................................... (5,675,675) (4,664,445) Class C Shares: Net investment income ....................................... (1,052,465) (844,820) Class Y Shares: Net investment income ....................................... (1,389,390) (481,279) ------------- ------------- Change in net assets from distributions .................. (8,117,530) (5,990,544) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold ................................... 90,295,939 61,124,699 Reinvested dividends and distributions ...................... 5,246,203 3,507,838 Cost of shares redeemed ..................................... (43,527,443) (22,013,872) ------------- ------------- Change in net assets from capital share transactions ..... 52,014,699 42,618,665 ------------- ------------- Change in net assets ..................................... 44,209,714 47,302,961 NET ASSETS: Beginning of period ........................................... 171,599,631 124,296,670 End of period* ................................................ $ 215,809,345 $ 171,599,631 ============= ============= * Includes distributions in excess of net investment income of: $ (119,601) $ (117,170) ============= =============
See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 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 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 by the pricing service at the mean of bid and asked quotations. If market quotations or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith 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 is 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 exceeds 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) MULTIPLE CLASS ALLOCATIONS: All income, expenses (other than class-specific expenses), and realized and unrealized gains or losses 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: On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management believes that the adoption of FIN 48 will have no impact on the financial statements of the Fund. 3. FEES AND RELATED PARTY TRANSACTIONS a) MANAGEMENT ARRANGEMENTS: Aquila Investment Management LLC (the "Manager"), a wholly-owned subsidiary of Aquila Management Corporation, the Fund's founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. Under the Advisory and Administration Agreement, the Manager provides all investment management and administrative services to the Fund. The Manager's services include providing the office of the Fund and all related services as well as managing relationships with all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, fund accounting agent, auditors and distributor. 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 year ended June 30, 2006, the Fund incurred management fees of $998,167 of which $625,501 was waived. The Manger has contractually undertaken to waive fees and/or reimburse Fund expenses during the period July 1, 2005 through June 30, 2006 so that total Fund expenses would not exceed 0.86% for Class A Shares, 1.55% for Class C Shares or 0.66% for Class Y Shares. Under a Compliance Agreement with the Manager, the Manager is compensated for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940. 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, as amended. Under one part of the Plan, with respect to Class A Shares, the Fund is authorized to make distribution 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, 2006, distribution fees on Class A Shares amounted to $272,953, of which the Distributor retained $4,277. 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 average net assets represented by Class C Shares and for the year ended June 30, 2006, amounted to $235,067. 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 year ended June 30, 2006 amounted to $78,356. The total of these payments with respect to Class C Shares amounted to $313,423, of which the Distributor retained $56,018. 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, 2006, total commissions on sales of Class AShares amounted to $581,296, of which the Distributor received $48,990. c) OTHER RELATED PARTY TRANSACTIONS: For the year ended June 30, 2006, the Fund incurred $74,904 of legal fees allocable to Hollyer Brady Barrett & 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 at that firm. 4. PURCHASES AND SALES OF SECURITIES During the year ended June 30, 2006, purchases of securities and proceeds from the sales of securities aggregated $69,450,135 and $18,874,920, respectively. At June 30, 2006, the aggregate tax cost for all securities was $212,670,085. At June 30, 2006, the aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $1,836,030 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $3,153,599, for a net unrealized depreciation of $1,317,569. 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 meeting comparable quality standards of issuers in certain states that do not tax the interest on obligations of Utah issuers and that provide income which is exempt from both regular Federal and Utah income taxes. At June 30, 2006, the Fund had 78% 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, its cash balances in income-producing assets rather than leave cash uninvested. 7. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Fund were as follows:
Year Ended Year Ended June 30, 2006 June 30, 2005 ----------------------------- ----------------------------- Shares Amount Shares Amount ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold 3,497,622 $ 35,254,242 3,901,386 $ 39,687,818 Reinvested distributions 369,013 3,717,136 277,575 2,823,980 Cost of shares redeemed . (1,747,696) (17,557,375) (1,384,213) (14,072,096) ------------ ------------ ------------ ------------ Net change ........... 2,118,939 21,414,003 2,794,748 28,439,702 ------------ ------------ ------------ ------------ CLASS C SHARES: Proceeds from shares sold 1,195,649 12,049,190 825,234 8,390,613 Reinvested distributions 63,534 639,693 48,338 491,581 Cost of shares redeemed . (524,023) (5,274,452) (401,020) (4,069,806) ------------ ------------ ------------ ------------ Net change ........... 735,160 7,414,431 472,552 4,812,388 ------------ ------------ ------------ ------------ CLASS Y SHARES: Proceeds from shares sold 4,237,512 42,992,507 1,275,070 13,046,268 Reinvested distributions 88,225 889,374 18,832 192,277 Cost of shares redeemed . (2,049,983) (20,695,616) (380,156) (3,871,970) ------------ ------------ ------------ ------------ Net change ........... 2,275,754 23,186,265 913,746 9,366,575 ------------ ------------ ------------ ------------ Total transactions in Fund shares .................. 5,129,853 $ 52,014,699 4,181,046 $ 42,618,665 ============ ============ ============ ============
8. TRUSTEES' FEES AND EXPENSES At June 30, 2006 there were 5 Trustees, one of which is affiliated with the Manager and is not paid any fees. The total amount of Trustees' service and attendance fees paid during the year ended June 30, 2006 was $81,000, to cover carrying out their responsibilities and attendance at regularly scheduled quarterly Board Meetings and meetings of the Independent Trustees held prior to each quarterly Board Meeting. When additional or special meetings are held, the meeting fees are paid to those Trustees in attendance. Trustees are reimbursed for their expenses such as travel, accommodations, and meals incurred in connection with attendance at Board Meetings and the Annual Meeting of Shareholders. For the year ended June 30, 2006, such meeting-related expenses amounted to $38,751. 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 an amount equal to or greater than 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. INCOME TAX INFORMATION AND 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. In this regard, the Fund credited distributions in excess of net investment income in the amount of $454,307 and debited additional paid-in capital in the amount of $454,307 at June 30, 2006. This adjustment had no impact on the Fund's aggregate net assets at June 30, 2006. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income rates. For certain shareholders some dividend income may, under some circumstances, be subject to the alternative minimum tax. At June 30, 2006, the Fund had a capital loss carryover of $2,391,120 of which $2,121,836 expires on June 30, 2009, $15,469 expires on June 30, 2011, and $253,815 expires on June 30, 2012. 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. The tax character of distributions: Year Ended June 30, 2006 2005 ---------- ---------- Net tax-exempt income $7,658,064 $5,604,701 Ordinary income 459,466 385,843 ---------- ---------- $8,117,530 $5,990,544 ========== ========== As of June 30, 2006, the components of distributable earnings on a tax basis were as follows: Accumulated net realized loss $(2,391,121) Unrealized depreciation (1,317,569) ----------- $(3,708,690) =========== At June 30, 2006, the difference between book basis and tax basis unrealized appreciation was attributable primarily to the treatment of accretion of discounts and amortization of premiums. TAX-FREE FUND FOR UTAH FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class A ------------------------------------------------------------------------------ Year Ended June 30, ------------------------------------------------------------------------------ 2006 2005 2004 2003 2002 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period .......... $ 10.26 $ 9.91 $ 10.31 $ 9.85 $ 9.65 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income ...................... 0.40+ 0.41+ 0.43++ 0.44+ 0.46+ Net gain (loss) on securities (both realized and unrealized) ......................... (0.37) 0.38 (0.37) 0.48 0.22 ----------- ----------- ----------- ----------- ----------- Total from investment operations ........... 0.03 0.79 0.06 0.92 0.68 ----------- ----------- ----------- ----------- ----------- Less distributions (note 10): Dividends from net investment income ....... (0.42) (0.44) (0.46) (0.46) (0.48) Distributions from capital gains ........... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total distributions ........................ (0.42) (0.44) (0.46) (0.46) (0.48) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period ................ $ 9.87 $ 10.26 $ 9.91 $ 10.31 $ 9.85 =========== =========== =========== =========== =========== Total return (not reflecting sales charge) .... 0.28% 8.06% 0.54% 9.55% 7.22% Ratios/supplemental data Net assets, end of period (in thousands) ... $ 142,227 $ 126,091 $ 94,103 $ 85,329 $ 55,957 Ratio of expenses to average net assets .... 0.64% 0.59% 0.48% 0.43% 0.46% Ratio of net investment income to average net assets .............................. 3.90% 3.98% 4.19% 4.31% 4.65% Portfolio turnover rate .................... 9.61% 8.68% 15.98% 6.43% 27.42% The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expense reimbursement were (note 3): Ratio of expenses to average net assets .... 0.93% 0.97% 0.94% 1.02% 1.00% Ratio of net investment income to average net assets .............................. 3.61% 3.60% 3.73% 3.72% 4.11% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were (note 3): Ratio of expenses to average net assets .... 0.61% 0.56% 0.47% 0.42% 0.40%
Note: Effective January 1, 2004, Aquila Management Corporation, founder of the Fund, assigned its Advisory and Administration Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC. ---------- + Per share amounts have been calculated using the monthly average shares method. ++ Per share amount calculated using the daily average shares method. See accompanying notes to financial statements. TAX-FREE FUND FOR UTAH FINANCIAL HIGHLIGHTS (continued) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Class C ------------------------------------------------------------------------- Year Ended June 30, ------------------------------------------------------------------------- 2006 2005 2004 2003 2002 -------- -------- -------- -------- -------- Net asset value, beginning of period ...... $ 10.26 $ 9.91 $ 10.30 $ 9.85 $ 9.64 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income .................. 0.32+ 0.32+ 0.34++ 0.34+ 0.37+ Net gain (loss) on securities (both realized and unrealized) ........... (0.37) 0.38 (0.36) 0.48 0.23 -------- -------- -------- -------- -------- Total from investment operations .......... (0.05) 0.70 (0.02) 0.82 0.60 -------- -------- -------- -------- -------- Less distributions (note 10): Dividends from net investment income ... (0.34) (0.35) (0.37) (0.37) (0.39) Distributions from capital gains ....... -- -- -- -- -- -------- -------- -------- -------- -------- Total distributions .................... (0.34) (0.35) (0.37) (0.37) (0.39) -------- -------- -------- -------- -------- Net asset value, end of period ............ $ 9.87 $ 10.26 $ 9.91 $ 10.30 $ 9.85 ======== ======== ======== ======== ======== Total return (not reflecting sales charge) (0.52)% 7.20% (0.16)% 8.48% 7.86% Ratios/supplemental data Net assets, end of period (in thousands) $ 33,791 $ 27,581 $ 21,961 $ 16,420 $ 6,694 Ratio of expenses to average net assets 1.44% 1.39% 1.27% 1.31% 1.84% Ratio of net investment income to average net assets .................. 3.10% 3.18% 3.38% 3.39% 3.72% Portfolio turnover rate ................ 9.61% 8.68% 15.98% 6.43% 27.42% The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expens reimbursement were (note 3): Ratio of expenses to average net assets 1.72% 1.77% 1.74% 1.81% 1.78% Ratio of net investment income to average net assets .................. 2.81% 2.80% 2.93% 2.89% 3.28% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were (note Ratio of expenses to average net assets 1.41% 1.36% 1.27% 1.30% 1.28% Class Y ---------------------------------------------------------------------- Year Ended June 30, ---------------------------------------------------------------------- 2006 2005 2004 2003 2002 -------- -------- -------- -------- -------- Net asset value, beginning of period ...... $ 10.29 $ 9.94 $ 10.34 $ 9.89 $ 9.68 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income .................. 0.42+ 0.42+ 0.44++ 0.42+ 0.50+ Net gain (loss) on securities (both realized and unrealized) ........... (0.37) 0.39 (0.36) 0.50 0.20 -------- -------- -------- -------- -------- Total from investment operations .......... 0.05 0.81 0.08 0.92 0.70 -------- -------- -------- -------- -------- Less distributions (note 10): Dividends from net investment income ... (0.44) (0.46) (0.48) (0.47) (0.49) Distributions from capital gains ....... -- -- -- -- -- -------- -------- -------- -------- -------- Total distributions .................... (0.44) (0.46) (0.48) (0.47) (0.49) -------- -------- -------- -------- -------- Net asset value, end of period ............ $ 9.90 $ 10.29 $ 9.94 $ 10.34 $ 9.89 ======== ======== ======== ======== ======== Total return (not reflecting sales charge) 0.49% 8.27% 0.76% 9.55% 7.41% Ratios/supplemental data Net assets, end of period (in thousands) $ 39,791 $ 17,928 $ 8,233 $ 883 $ 30 Ratio of expenses to average net assets 0.44% 0.39% 0.28% 0.30% 0.36% Ratio of net investment income to average net assets .................. 4.10% 4.15% 4.41% 4.17% 4.75% Portfolio turnover rate ................ 9.61% 8.68% 15.98% 6.43% 27.42% The expense and net investment income ratios without the effect of the waiver of a portion of the management fee and the expens reimbursement were (note 3): Ratio of expenses to average net assets 0.72% 0.77% 0.74% 0.78% 0.80% Ratio of net investment income to average net assets .................. 3.82% 3.78% 3.95% 3.70% 4.31% The expense ratios after giving effect to the waiver, reimbursement and expense offset for uninvested cash balances were (note Ratio of expenses to average net assets 0.41% 0.37% 0.27% 0.29% 0.30%
Note: Effective January 1, 2004, Aquila Management Corporation, founder of the Fund, assigned its Advisory and Administration Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC. ---------- + Per share amounts have been calculated using the monthly average shares method. ++ Per share amount calculated using the daily average shares method. See accompanying notes to financial statements. Additional Information (unaudited) Trustees(1) and Officers
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) ----------------- ---------- ------------------- ---------- --------------------- INTERESTED TRUSTEES(4) Diana P. Herrmann Trustee since 1997 Vice Chair and Chief Executive Officer 12 ICI Mutual Insurance New York, NY and President since of Aquila Management Corporation, Company (02/25/58) 1998 Founder of the Aquila Group of Funds(SM) (5) and parent of Aquila Investment Management LLC, Manager since 2004, President and Chief Operating Officer since 1997, a Director since 1984, Secretary since 1986 and previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; Chief Executive Officer and Vice Chair since 2004 and President, Chief Operating Officer and Manager of the Manager since 2003; Chair, Vice Chair, President, Executive Vice President or Senior Vice President of funds in the Aquila Group of Funds(SM) since 1986; Director of the Distributor since 1997; trustee, Reserve Money-Market Funds, 1999-2000 and Reserve Private Equity Series, 1998-2000; Governor, Investment Company Institute and head of its Small Funds Committee since 2004; active in charitable and volunteer organizations. NON-INTERESTED TRUSTEES Gary C. Cornia Chair of the Board Director, Romney Institute of Public 4 None Orem, UT of Trustees since Management, Marriott School of (06/24/48) 2005 and Trustee Management, Brigham Young University, since 1993 2004 - present; Professor, Marriott School of Management, 1980 - present; Past President, the National Tax Association; Fellow, Lincoln Institute of Land Policy, 2002-2003; Associate Dean, Marriott School of Management, Brigham Young University, 1991-2000; Utah Governor's Tax Review Committee since 1993.
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) ----------------- ---------- ------------------- ---------- --------------------- Thomas A. Trustee since 2006 Vice President of Robinson, Hughes & 3 None Christopher(6) Christopher, C.P.A.s, P.S.C., since Danville, KY 1977; President, A Good Place for Fun, (12/19/47) Inc., a sports facility, since 1987; currently or formerly active with various professional and community organizations. Lyle W. Hillyard Trustee since 2003 President of the law firm of Hillyard, 2 None Logan, UT Anderson & Olsen, Logan, Utah, since (09/25/40) 1967; member of Utah Senate, 1985 to present, in the following positions: President, 2000, Senate Majority Leader, 1999-2000, Assistant Majority Whip, 1995-1998; served as Chairman of the following Senate Committees: Tax and Revenue, Senate Judiciary Standing, Joint Executive Appropriations, and Senate Rules; also serves on the Appropriations Subcommittees for Higher Education and for Public Education. John C. Lucking Trustee since 2004 President, Econ-Linc, an economic 3 Director, Sanu Phoenix, AZ consulting firm, since 1995; formerly Resources (05/20/43) Consulting Economist, Bank One Arizona and Chief Economist, Valley National Bank; member, Arizona's Joint Legislative Budget Committee Economic Advisory Panel and the Western Blue Chip Economic Forecast Panel; Board, Northern Arizona University Foundation since 1997; member, various historical, civic and economic associations. Anne J. Mills Trustee since 1994 President, Loring Consulting Company 4 None Castle Rock, CO since 2001; Vice President for Business (12/23/38) Affairs, Ottawa University, 1992-2001; IBM Corporation, 1965-1991; Budget Review Officer, the American Baptist Churches/USA, 1994-1997; director, the American Baptist Foundation; Trustee, Ottawa University; and Trustee Emerita, Brown University.
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) ----------------- ---------- ------------------- ---------- --------------------- OTHER INDIVIDUALS Lacy B. Herrmann Founder, Chairman Founder and Chairman of the Board, N/A N/A New York, NY Emeritus(7) since Aquila Management Corporation, the (05/12/29) 2005 and Chairman of sponsoring organization and parent of the Board of the Manager or Administrator and/or Trustees, 1992-2005 Adviser or Sub-Adviser to each fund of the Aquila Group of Funds(SM); Chairman of the Manager or Administrator and/or Adviser or Sub-Adviser to each since 2004; Founder and Chairman Emeritus of each fund in the Aquila Group of Funds(SM); previously Chairman and a Trustee of each fund in the Aquila Group of Funds(SM) since its establishment until 2004 or 2005; Director of the Distributor since 1981 and formerly Vice President or Secretary, 1981-1998; Trustee Emeritus, Brown University and the Hopkins School; active in university, school and charitable organizations. Tucker Hart Adams(6) Consultant President, The Adams Group, Inc., an 2 Director, Colorado Colorado Springs, CO economic consulting firm, since 1989; Health Facilities (01/11/38) formerly Chief Economist, United Banks Authority and of Colorado; currently or formerly Mortgage Analysis active with numerous professional and Computer Corp. community organizations. OFFICERS Charles E. Childs, III Executive Vice Executive Vice President of all funds in N/A N/A New York, NY President since 2003 the Aquila Group of Funds(SM) and the (04/01/57) Manager and the Manager's parent since 2003; formerly Senior Vice President, corporate development, Vice President, Assistant Vice President and Associate of the Manager's parent since 1987; Senior Vice President, Vice President or Assistant Vice President of the Aquila Money-Market Funds, 1988-2003.
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) ----------------- ---------- ------------------- ---------- --------------------- Jerry G. McGrew Senior Vice President of the Distributor since 1998, N/A N/A New York, NY President since 1997 Registered Principal since 1993, Senior (06/18/44) Vice President, 1997-1998 and Vice President, 1993-1997; Senior Vice President, Aquila Rocky Mountain Equity Fund and five Aquila Municipal Bond Funds since 1995; Vice President, Churchill Cash Reserves Trust, 1995-2001. Kimball L. Young Senior Vice Co-portfolio manager, Tax-Free Fund For N/A N/A Salt Lake City, UT President since 1997 Utah since 2001; Co-founder, Lewis Young (08/07/46) Robertson & Burningham, Inc., a NASD licensed broker/dealer providing public finance services to Utah local govern-ments, 1995-2001; Senior Vice President of two Aquila Bond Funds and Aquila Rocky Mountain Equity Fund; formerly Senior Vice President-Public Finance, Kemper Securities Inc., Salt Lake City, Utah. Thomas S. Albright Senior Vice Senior Vice President and Portfolio N/A N/A Louisville, KY President since 2003 Manager, Churchill Tax-Free Fund of (07/26/52) and Vice President, Kentucky since July 2000; Senior Vice 2001-2003 President, Tax-Free Fund For Utah since 2003, Vice President, 2001-2003 and co-portfolio manager since 2001; Vice President and backup portfolio manager, Tax-Free Trust of Arizona, since 2004; Vice President and Portfolio Manager, Banc One Investment Advisors, Inc., 1994-2000. Mary Kayleen Willis Vice President since Vice President, Tax-Free Fund For Utah N/A N/A Salt Lake City, UT 2003 and Assistant since September 2003, Assistant Vice (06/11/63) Vice President, President, 2002-2003; Vice President, 2002-2003 Aquila Rocky Mountain Equity Fund, since 2004; various securities positions: Paine Webber, Inc., Salt Lake City, 1999-2002, Dean Witter Reynolds, Inc., Salt Lake City, 1996-1998.
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, FUND AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) ----------------- ---------- ------------------- ---------- --------------------- Robert W. Anderson Chief Compliance Chief Compliance Officer of the Fund and N/A N/A New York, NY Officer since 2004 each of the other funds in the Aquila (08/23/40) and Assistant Group of Funds(SM), the Manager and the Secretary since 2000 Distributor since 2004, Compliance Officer of the Manager or its predecessor and current parent 1998-2004; Assistant Secretary of the Aquila Group of Funds(SM) since 2000. Joseph P. DiMaggio Chief Financial Chief Financial Officer of the Aquila N/A N/A New York, NY Officer since 2003 Group of Funds(SM) since 2003 and (11/06/56) and Treasurer since Treasurer since 2000. 2000 Edward M. W. Hines Secretary since 1992 Partner, Hollyer Brady Barrett & Hines N/A N/A New York, NY LLP, legal counsel to the Fund, since (12/16/39) 1989; Secretary of the Aquila Group of Funds(SM). John M. Herndon Assistant Secretary Assistant Secretary of the Aquila Group N/A N/A New York, NY since 1995 of Funds(SM) since 1995 and Vice President (12/17/39) of the three Aquila Money-Market Funds since 1990; Vice President of the Manager or its predecessor and current parent since 1990. Lori A. Vindigni Assistant Treasurer Assistant Treasurer of the Aquila Group N/A N/A New York, NY since 2000 of Funds(SM) since 2000; Assistant Vice (11/02/66) President of the Manager or its predecessor and current parent since 1998; Fund Accountant for the Aquila Group of Funds(SM), 1995-1998.
---------- (1) The Fund's Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 800-437-1020 (toll-free) or by visiting the EDGAR Database at the SEC's internet site at www.sec.gov. (2) The mailing address of each Trustee and officer is c/o Tax-Free Fund For Utah, 380 Madison Avenue, New York, NY 10017. (3) Each Trustee holds office until the next annual meeting of shareholders or until his or her successor is elected and qualifies. The term of office of each officer is one year. (4) Ms. Herrmann is an interested person of the Fund as an officer of the Fund, as a director, officer and shareholder of the Manager's corporate parent, as an officer and Manager of the Manager, and as a shareholder and director of the Distributor. (5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S. Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets Trust, each of which is a money-market fund, are called the "Aquila Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of which is a tax-free municipal bond fund, are called the "Aquila Municipal Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; Aquila Three Peaks High Income Fund is a high income corporate bond fund; considered together, these 12 funds are called the "Aquila Group of Funds(SM)." (6) As of July 1, 2006. (7) The Chairman Emeritus may attend Board meetings but has no voting power. -------------------------------------------------------------------------------- ANALYSIS OF EXPENSES (UNAUDITED) As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges ("CDSC") with respect to Class C shares; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The table below is based on an investment of $1,000 invested on January 1, 2006 and held for the six months ended June 30, 2006. ACTUAL EXPENSES This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled "Expenses Paid During the Period". FOR THE SIX MONTHS ENDED JUNE 30, 2006 Actual Total Return Beginning Ending Expenses Without Account Account Paid During Sales Charges(1) Value Value the Period(2) -------------------------------------------------------------------------------- Class A (0.31)% $1,000.00 $996.90 $2.97 -------------------------------------------------------------------------------- Class C (0.60)% $1,000.00 $994.00 $6.92 -------------------------------------------------------------------------------- Class Y (0.20)% $1,000.00 $998.00 $1.98 -------------------------------------------------------------------------------- (1) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF ANY, AT NET ASSET VALUE AND DOES NOT REFLECT THE DEDUCTION OF THE APPLICABLE SALES CHARGES WITH RESPECT TO CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS C SHARES. TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL RETURN FOR THE YEAR. (2) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.60%, 1.40% AND 0.40% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD). -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ANALYSIS OF EXPENSES (UNAUDITED) (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds. Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of contingent deferred sales charges ("CDSC") with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher. FOR THE SIX MONTHS ENDED JUNE 30, 2006 Hypothetical Annualized Beginning Ending Expenses Total Account Account Paid During Return Value Value the Period(1) -------------------------------------------------------------------------------- Class A 5.00% $1,000.00 $1,021.82 $3.01 -------------------------------------------------------------------------------- Class C 5.00% $1,000.00 $1,017.85 $7.00 -------------------------------------------------------------------------------- Class Y 5.00% $1,000.00 $1,022.81 $2.01 -------------------------------------------------------------------------------- (1) EXPENSES ARE EQUAL TO THE ANNUALIZED EXPENSE RATIO OF 0.60%, 1.40% AND 0.40% FOR THE FUND'S CLASS A, C AND Y SHARES, RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD). -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INFORMATION AVAILABLE (UNAUDITED) Much of the information that the funds in the Aquila Group of Funds(SM) produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent the entire list of portfolio securities of your Fund twice a year in the semi-annual and annual reports you receive. Additionally, we prepare, and have available, portfolio listings at the end of each quarter. Whenever you may be interested in seeing a listing of your Fund's portfolio other than in your shareholder reports, please check our website http://www.aquilafunds.com or call us at 1-800-437-1020. The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at http://www.sec.gov. You may also review or, for a fee, copy the forms at the SEC's Public Reference Room in Washington, DC or by calling 800-SEC-0330. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PROXY VOTING RECORD (UNAUDITED) The Fund does not invest in equity securities. Accordingly, there were no matters relating to a portfolio security considered at any shareholder meeting held during the 12 months ended June 30, 2006 with respect to which the Fund was entitled to vote. Applicable regulations require us to inform you that the foregoing proxy voting information is available on the SEC website at http://www.sec.gov. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2006, $7,658,064 of dividends paid by Tax-Free Fund For Utah, constituting 94.34% of total dividends paid during the fiscal year ended June 30, 2006, were exempt-interest dividends, and the balance was ordinary dividend income. Prior to January 31, 2006, shareholders were mailed IRS Form 1099-DIV which contained information on the status of distributions paid for the 2005 CALENDAR YEAR. Prior to January 31, 2007, shareholders will be mailed IRS Form 1099-DIV which will contain information on the status of distributions paid for the 2006 CALENDAR YEAR. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PRIVACY NOTICE (UNAUDITED) TAX-FREE FUND FOR UTAH OUR PRIVACY POLICY. In providing services to you as an individual who owns or is considering investing in shares of the Fund, we collect certain non-public personal information about you. Our policy is to keep this information strictly safeguarded and confidential, and to use or disclose it only as necessary to provide services to you or as otherwise permitted by law. Our privacy policy applies equally to former shareholders and persons who inquire about a fund. INFORMATION WE COLLECT. "Non-public personal information" is personally identifiable financial information about you as an individual or your family. The kinds of non-public personal information we have about you may include the information you provide us on your share purchase application or in telephone calls or correspondence with us, and information about your fund transactions and holdings, how you voted your shares and the account where your shares are held. INFORMATION WE DISCLOSE. We disclose non-public personal information about you to companies that provide necessary services to us, such as the Fund's transfer agent, distributor, investment adviser or sub-adviser, as permitted or required by law, or as authorized by you. Any other use is strictly prohibited. We do not sell information about you or any of our fund shareholders to anyone. NON-CALIFORNIA RESIDENTS: We also may disclose some of this information to another fund in the Aquila Group of Funds(SM) (or its service providers) under joint marketing agreements that permit the funds to use the information only to provide you with information about other funds in the Aquila Group of Funds(SM) or new services we are offering that may be of interest to you. CALIFORNIA RESIDENTS ONLY: In addition, unless you "opt-out" of the following disclosures using the form that is being mailed to you under separate cover, we may disclose some of this information to another fund in the Aquila Group of Funds(SM) (or its sevice providers) under joint marketing agreements that permit the funds to use the information only to provide you with information about other funds in the Aquila Group of Funds(SM) or new services we are offering that may be of interest to you. HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to non-public personal information about you to only those persons who need it to provide services to you or who are permitted by law to receive it. We maintain physical, electronic and procedural safeguards to protect the confidentiality of all non-public personal information we have about you. If you have any questions regarding our Privacy Policy, please contact us at 1-800-437-1020. AQUILA DISTRIBUTORS, INC. AQUILA INVESTMENT MANAGEMENT LLC This Privacy Policy also has been adopted by Aquila Distributors, Inc. and Aquila Investment Management LLC and applies to all non-public information about you that each of these companies may obtain in connection with services provided to the Fund or to you as a shareholder of the Fund. -------------------------------------------------------------------------------- (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) FOUNDERS Lacy B. Herrmann, Chairman Emeritus Aquila Management Corporation MANAGER AQUILA investment MANAGEMENT LLC 380 Madison Avenue, Suite 2300 New York, New York 10017 BOARD OF TRUSTEES Gary C. Cornia, Chair Thomas A. Christopher Diana P. Herrmann Lyle W. Hillyard John C. Lucking 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, Senior Vice President and Co-Portfolio Manager M. Kayleen Willis, Vice President Robert W. Anderson, Chief Compliance Officer Joseph P. DiMaggio, Chief Financial Officer and 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. 101 Sabin Street Pawtuckett, RI 02860 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Tait, Weller & Baker LLP 1818 Market Street, Suite 2400 Philadelphia, PA 19103 Further information is contained in the Prospectus, which must precede or accompany this report. ITEM 2. CODE OF ETHICS. (a) As of June 30, 2006 (the end of the reporting period) the Trust has adopted a code of ethics that applies to the Fund's principal executive officer(s)and principal financial officer(s) and persons performing similar functions ("Covered Officers") as defined in the Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002.; (f)(1) Pursuant to Item 10(a)(1), a copy of the Fund's Code of Ethics that applies to the Trust's principal executive officer(s) and principal financial officer(s) and persons performing similar functions is included as an exhibit to its annual report on this Form N-CSR; (f)(2) The text of the Fund's Code of Ethics that applies to the Fund's principal executive officer(s) and principal financial officer(s) and persons performing similar functions has been posted on its Internet website which can be found at the Fund's Internet address at aquilafunds.com. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1)(ii) The Board of Trustees of the Fund has determined that it does not have at least one audit committee financial expert serving on its audit committee. The Fund does not have such a person serving on the audit committee because none of the persons currently serving as Trustees happens to have the technical accounting and auditing expertise included in the definition of "audit committee financial expert" recently adopted by the Securities and Exchange Commission in connection with this Form N-CSR, and the Board has not heretofore deemed it necessary to seek such a person for election to the Board. The primary mission of the Board, which is that of oversight over the operations and affairs of the Fund, confronts the Trustees with a wide and expanding range of issues and responsibilities. The Trustees believe that, accordingly, it is essential that the Board's membership consist of persons with as extensive experience as possible in fulfilling the duties and responsibilities of mutual fund directors and audit committee members and, ideally, with extensive experience and background relating to the economic and financial sectors and securities in which the Fund invests, including exposure to the financial and accounting matters commonly encountered with respect to those sectors and securities. The Board believes that its current membership satisfies those criteria. It recognizes that it would also be helpful to have a member with the relatively focused accounting and auditing expertise reflected in the applicable definition of "audit committee financial expert," just as additional members with similarly focused technical expertise in other areas relevant to the Fund's operations and affairs would also contribute added value. However, the Board believes that the Fund is better served, and its assets better employed, by a policy of hiring experts in various the specialized area of technical accounting and auditing matters, if and as the Board identifies the need, rather than by seeking to expand its numbers by adding technical experts in the areas constituting its domain of responsibility. The Fund's Audit Committee Charter explicitly authorizes the Committee to retain such experts as it deems necessary in fulfilling its duties under the Charter. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES a) Audit Fees - The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $14,000 in 2006 and $17,500 in 2005. b) Audit Related Fees - There were no amounts billed for audit-related fees over the past two years other than stated above. c) Tax Fees - The Registrant was billed by the principal accountant $3,000 and $7,755 in 2006 and 2005, respectively, for tax return preparation, tax compliance and tax planning. d) All Other Fees - There were no additional fees paid for audit and non- audit services other than those disclosed in a) thorough c) above. e)(1) Currently, the audit committee of the Registrant pre-approves audit services and fees on an engagement-by-engagement basis. e)(2) None of the services described in b) through d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, all were pre-approved on an engagement-by-engagement basis. f) No applicable. g) There were no non-audit services fees billed by the Registrant's accountant to the Registrant's investment adviser or distributor over the past two years. h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) as of a date within 90 days of the fling of this report, the registrant's chief financial and executive officers have concluded that the disclosure controls and procedures of the registrant are appropriately designed to ensure that information required to be disclosed in the registrant's reports that are filed under the Securities Exchange Act of 1934 are accumulated and communicated to registrant's management, including its principal executive officer(s) and principal financial officer(s), to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002. (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TAX-FREE FUND FOR UTAH By: /s/ Diana P. Herrmann - - --------------------------------- President and Trustee September 7, 2006 By: /s/ Joseph P. DiMaggio - - ----------------------------------- Chief Financial Officer and Treasurer September 7, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 And the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Diana P. Herrmann - - --------------------------------- Diana P. Herrmann President and Trustee September 7, 2006 By: /s/ Joseph P. DiMaggio - - ----------------------------------- Joseph P. DiMaggio Chief Financial Officer and Treasurer September 7, 2006 TAX-FREE FUND FOR UTAH EXHIBIT INDEX (a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002. (a) (2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940.