ADVISER AND ADMINISTRATOR
Aquila Management Corporation
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
Ferguson, Wellman, Rudd,
Purdy & Van Winkle, Inc.
888 SW Fifth Avenue, Suite 1200
Portland, OR 97204-2026
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
James A. Gardner
Diana P. Herrmann
Ann R. Leven
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
Sue McCarthy-Jones, Senior Vice President
Nancy Kayani, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 1997
AQUILA
CASCADIA
EQUITY FUND
[Graphic: Small picture of an antique pocket watch in front of a larger
picture of a cascading waterfall]
ONE OF THE
AQUILASM GROUP
OF FUNDS
<PAGE>
AQUILA CASCADIA EQUITY FUND
SEMI-ANNUAL REPORT
"VALUE ORIENTATION AND THE
LONGER-TERM VIEWPOINT"
November 17, 1997
Dear Investor:
We are pleased to provide you with this Semi-Annual Report for
Aquila Cascadia Equity Fund for the six-month period ended September 30,
1997.
THE CASCADIA REGION
As you are most likely aware, the Cascadia region - consisting of
Oregon, Washington, Idaho, Utah, Nevada, Alaska, and Hawaii - continues to
flourish. Projections for employment, population growth, and economic
activity for this region remain consistently above the national average.
Aquila Cascadia Equity Fund was specifically designed to allow investors to
participate in the dynamic growth possibilities of this area.
Aquila Cascadia Equity Fund has focused its investments on
growth-oriented companies having a significant business presence in the
Pacific Northwest region of our country. We believe now - as strongly as we
did at inception of the Fund a little over a year ago - that this region will
remain an attractive investment area. Furthermore, we believe that our
strategy with the Fund's investment portfolio is both sound and viable.
At September 30, 1997, the companies whose securities made up the
10 largest common stock holdings in the portfolio were:
COMPANY STATE % OF NET ASSETS
Fred Meyer Inc. Oregon 3.4%
Washington Federal Inc Washington 3.2%
Costco Cos Inc. Washington 3.2%
Washington Mutual Inc. Washington 2.9%
Intel Corp. Oregon 2.8%
First Hawaiian Inc Hawaii 2.6%
Schnitzer Steel Industries Oregon 2.4%
Atlantic Richfield Co. California 2.4%
PACCAR Inc. Washington 2.3%
SAFECO Corp. Washington 2.2%
THE FUND'S INVESTMENT STRATEGY
A locally-based organization was specifically sought out and
chosen as portfolio manager in order to take maximum advantage of the
investment opportunities available. The investment approach of the Cascadia
Fund is basically one in which it invests in situations "in your own
backyard" of the Pacific Northwest region.
<PAGE>
Our portfolio manager, located in Portland, Oregon, searches for
investment situations which, at the time of purchase, are considered
undervalued in the marketplace. Since inception of Aquila Cascadia Equity
Fund, the investment approach taken has been one of being value-oriented in
security selection. As such, the investment manager seeks out securities
which possess inherent value and which can be obtained at prices which are
reasonable within the marketplace. The key to this approach is to capture
upside potential while at the same time limiting downside risks in price
movements to the maximum extent practicable.
In general, we search for companies which have a strong presence
in their specific market and which possess upward momentum in earnings and
cash flow.
It must be recognized, however, that with the emphasis on
value-oriented investing, it is sometimes difficult to put a specific
timetable upon when the market will recognize the full potential inherent in
the securities. Aquila Cascadia Equity Fund should not be viewed as a "get
rich quick" vehicle. Rather, you should instead look upon your investment in
the Fund as a vehicle which provides sound longer-term capital appreciation
possibilities.
THE FUND'S RETURN
Our primary goal is to offer you an attractive average annual
return while still mitigating price volatility risks along the way. This
means that the price of individual portfolio securities, as well as the
Fund's shares, should, in general, not suffer declines in adverse markets as
substantial as those of other equity investments. Conversely, the price of
the Fund's shares should still appreciate nicely over time.
Part of our strategy in this value-oriented approach involves
choosing securities for the Fund's portfolio when they have lower price
earnings ratios than the norm for these types of companies. This approach
should result in the Fund's share price being less volatile in a "bear
market" than a portfolio which possesses stocks having inflated price
earnings ratios.
The benefit of the Fund's value-oriented approach became vividly
evident during the late October sell-off in the securities market. While the
market, as measured by many indices, lost an average of 7%, the price of the
Fund's shares declined quite a bit less. Moreover, we are pleased to note
that the price of the Fund's shares recovered quickly from its temporary
decline.
It is noteworthy to point out that the latest sell-off of the
market was prompted by problems that exist in the Far East. Because of the
high growth rate potential of this region, we anticipate that these problems
will be solved over time. It is further worth noting that a number of mutual
funds have been created to invest in this region which since their inception
attracted a substantial amount of money. However, what started out to be an
interesting situation has turned out to be a more difficult one with which to
cope.
Unlike investing "in your own backyard," such as Aquila Cascadia
Equity Fund does, investing globally has many problems with which to cope.
Specifically, you have to worry about currency fluctuations, accounting
systems, and liquidity of markets. As a consequence, the Cascadia region has
many plusses that some of those formerly "hot" regions by their very nature
do not.
<PAGE>
In general, since the Fund started its investment operations on
September 9, 1996, Aquila Cascadia Equity Fund has produced credible ABSOLUTE
returns to date. Specifically, the Fund's return on Class A Shares, based
upon maximum public offering price, since inception on September 9, 1996
through the period ending September 30, 1997, was at the AVERAGE ANNUAL RATE
OF 25.56%*. The return on the Class Y Shares for the same period of September
9, 1996 through September 30, 1997 was at the AVERAGE ANNUAL RATE OF 30.95%.
When viewing the value-oriented approach of Aquila Cascadia
Equity Fund, we tend to liken the Fund to a solid baseball hitter in the
major leagues. The Fund would not necessarily be classified as a superstar
consistently hitting homeruns over the fence or striking out. Rather, it is
our objective to have the Fund consistently hit singles, doubles, and
triples. We believe that in most circumstances, the Fund would be considered
an asset to any team.
LONGER-TERM OUTLOOK
It is our longer-term goal for Aquila Cascadia Equity Fund to
provide shareholders a high level of ABSOLUTE capital appreciation. In doing
so, our strategy is designed to also include controlling price volatility to
the maximum extent possible.
YOUR CONFIDENCE IS APPRECIATED
Your investment in Aquila Cascadia Equity Fund is greatly
appreciated. We value your trust and will strive to merit your continued
confidence.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
*The Class A Share return takes into consideration the maximum
sales charge of 4.25%. Such performance data quoted represents past
performance and is not indicative of future results. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Returns would be less if full management fees and expenses had been applied.
As of 9/30/97, the Fund's Class A share average annual total return for the pa
st one-year period was 23.76%. The Fund's Class Y share average annual total
return for the past one-year period was 29.44%.
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
MARKET
SHARES COMMON STOCKS VALUE
Aerospace/Defense - 1.8%
3,000 Boeing $ 163,313
1,150 Thiokol Corp. 98,900
262,213
Automotive - 2.3%
6,000 PACCAR Inc. 336,000
Building Materials - 3.9%
19,300 Building Materials Holding# 252,106
7,700 Eagle Hardware and Garden # 151,593
6,430 TJ International Inc. 164,367
568,066
Communications - 2.3%
3,700 AT&T Corporation 163,956
3,600 GTE Corp 163,350
327,306
Computer Products and Services - 11.5%
26,520 Casino Data Systems # 149,175
1,890 Hewlett-Packard Co. 131,473
4,670 In Focus Systems Inc.# 104,491
4,430 Intel Corp. 408,944
6,210 Iomega Corp.# 162,236
6,870 Micron Electronics Inc.# 120,225
2,340 Microsoft Corp.# 309,611
11,230 Pragitzer Industries Inc.# 155,816
5,020 Sequent Computer Systems Inc. # 124,559
1,666,530
Consumer Products and Services - 14.1%
6,880 Albertsons Inc. 239,940
10,520 American Stores Co. 256,425
12,200 Costco Cos Inc.# 459,025
9,800 Hollywood Entertainment Corp. # 128,013
9,100 Fred Meyer Inc.# 484,575
4,800 Nike Inc. Class B 254,400
5,320 Quality Food Centers Inc. # 217,788
2,040,166
<PAGE>
Electronics - 3.8%
2,740 Electro Scientific Industries Inc. # 167,140
2,440 Fluke Corp. 131,760
9,300 Mosaix # 99,394
2,250 Tektronix Inc. 151,735
550,029
Financial Services - 16.4%
9,600 First Hawaiian Inc. 381,600
5,100 Interwest Bancorp Inc. 205,275
6,300 Klamath First Bancorp Inc. 139,388
2,150 National Bancorp of Alaska Inc. 202,100
1,400 Pacific Century Financial Corp. 75,512
6,000 SAFECO Corp. 318,000
1,585 US Bancorp 152,953
15,730 Washington Federal Inc. 466,001
6,000 Washington Mutual Inc. 418,500
2,359,329
Food and Beverage - 2.7%
2,210 McDonalds Corp. 105,251
6,550 Nabisco Holdings Corp. 278,784
384,035
Healthcare - 1.8%
7,150 Sierra Health Services # 261,869
Household Products - 1.6%
12,420 Paragon Trade Brands Inc.# 230,546
Leisure Time - 0.9%
4,400 Mirage Resorts Inc.# 132,550
Machinery - 2.0%
7,000 Cascade Corp. 138,250
3,850 Esterline Technology Corp.# 150,150
288,400
<PAGE>
Medical Products - 5.9%
3,800 ATL Ultrasound Inc.# 177,650
10,500 Ballard Medical Products 253,313
2,369 Baxter International Inc. 123,780
10,000 Spacelabs Medical Inc.# 218,750
7,000 Theratech# 81,375
854,868
Metal Processing - 4.4%
4,800 Northwest Pipe Co.# 129,600
5,700 Oregon Steel Mills Inc. 154,612
10,300 Schnitzer Steel Industries 346,338
630,550
Natural Gas - 6.9%
4,200 Apache Corp. 180,075
4,050 Atlantic Richfield Co. 346,022
6,400 Valero Energy Corp. 210,000
5,450 Williams Companies Inc. 255,128
991,225
Paper and Related Products - 3.7%
3,950 Pope & Talbot Inc. 83,691
4,100 Weyerhaeuser Co. 243,437
5,200 Willamette Industries 198,900
526,028
Railroad - 1.2%
10,050 Greenbrier Companies Inc. 168,337
Specialized Services - 1.0%
5,400 Franklin Covey Co.# 150,863
Transportation - 2.6%
4,150 Alaska Air Group Inc.# 136,431
5,000 Amerco # 152,500
12,920 Reno Air Inc.# 92,863
381,794
<PAGE>
Utilities - 7.6%
5,800 Hawaiian Electric Industries 217,137
8,900 Nevada Power Co. 195,800
13,350 Pacificorp 298,706
3,545 PG&E Corp. 82,200
7,300 Puget Sound Energy, Inc. 194,363
5,200 Washington Water Power 104,000
1,092,206
Total Common Stocks
(cost $11,912,257*) 98.4% 14,202,910
Other assets in excess
of liabilities 1.6 230,349
Net Assets 100.0% $ 14,433,259
* Cost for Federal tax purposes is identical.
# Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
ASSETS
Investments at market value (identified cost $11,912,257) $ 14,202,910
Cash 93,577
Receivable for Fund shares sold 84,500
Deferred organization expenses (note 2) 77,049
Dividends receivable 6,014
Total assets 14,464,050
LIABILITIES
Management fees payable 20,540
Accrued expenses 7,367
Distribution fees payable 2,694
Payment for Fund shares redeemed 190
Total liabilities 30,791
NET ASSETS $ 14,433,259
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 9,047
Additional paid-in capital 12,076,342
Accumulated net gain on investments 57,217
Net unrealized appreciation on investments 2,290,653
$ 14,433,259
CLASS A
Net Assets $ 2,396,390
Capital shares outstanding 150,378
Net asset value and redemption price per share $ 15.94
Offering price per share (100/95.75 of $15.94 adjusted
to nearest cent) $ 16.65
CLASS C
Net Assets $ 589,963
Capital shares outstanding 37,164
Net asset value and offering price per share $ 15.87
Redemption price per share (*varies by length of time
shares are held) $ *
CLASS Y
Net Assets $ 11,446,906
Capital shares outstanding 717,169
Net asset value, offering and redemption price per share $ 15.96
See accompanying notes to financial statements.
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
INVESTMENT INCOME:
Dividends $ 90,452
Expenses:
Management fees (note 3) $ 86,818
Transfer and shareholder servicing agent fees 15,000
Shareholders' reports 11,000
Legal fees 11,000
Amortization of organization expenses (note 2) 9,860
Registration fees 8,000
Audit and accounting fees 5,000
Trustees' fees and expenses 5,000
Distribution and service fees (note 3) 4,863
Custodian fees (note 6) 1,615
Miscellaneous 1,710
159,866
Management fees waived (note 3) (66,278)
Expenses paid indirectly (note 6) (1,615)
Net expenses 91,973
Net investment loss (1,521)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 65,816
Unrealized appreciation on investments 2,336,508
Net realized and unrealized gain on investments 2,402,324
Net increase in net assets resulting from
operations $ 2,400,803
See accompanying notes to financial statements.
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
Six Months Period
Ended Ended
Sept. 30, 1997 March 31, 1997*
OPERATIONS:
Net investment loss $ (1,521) $ -
Net realized gain (loss) from
securities transactions 65,816 (8,598)
Unrealized appreciation (depreciation)
on investments 2,336,508 (45,855)
Change in net assets from operations 2,400,803 (54,453)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 5):
Class A Shares:
Net investment income - -
Net realized gain on investments - -
Class C Shares:
Net investment income - -
Net realized gain on investments - -
Class Y Shares:
Net investment income - -
Net realized gain on investments - -
Change in net assets from distributions - -
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold 2,808,758 10,689,463
Reinvested dividends and distributions - -
Cost of shares redeemed (135,748) (1,276,565)
Change in net assets from capital
share transactions 2,673,010 9,412,898
Change in net assets 5,073,813 9,358,445
NET ASSETS:
Beginning of period 9,359,446 1,001
End of period $ 14,433,259 $ 9,359,446
*For the period August 13, 1996 (commencement of operations) through March
31, 1997.
See accompanying notes to financial statements.
<PAGE>
AQUILA CASCADIA EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Aquila Cascadia Equity Fund (the "Fund"), is a diversified open-end
investment company organized as a Massachusetts business trust. The Fund
began its current investment operations as a capital appreciation fund on
September 9, 1996.
The Fund is authorized to issue an unlimited number of shares and began
offering Class A, Class C and Class Y shares on August 13, 1996. Class A
shares are sold with a front-payment sales charge and bear an annual service
fee. Class C shares are sold with a level-payment sales charge with no
payment at time of purchase but level service and distribution fees from date
of purchase through a period of six years thereafter. A contingent deferred
sales charge of 1% is assessed to any Class C shareholder who redeems shares
of this Class within one year from the date of purchase. The Class Y shares
are only offered to institutions acting for an investor in a fiduciary,
advisory, agency, custodian or similar capacity. They are not available to
individual retail investors. Class Y shares are sold at net asset value
without any sales charge, redemption fees, contingent deferred sales charge
or distribution or service fees. All classes of shares represent interests in
the same portfolio of investments in the Fund and are identical as to rights
and privileges. They differ only with respect to the effect of sales charges,
the distribution and/or service fees borne by the respective class, expenses
specific to each class, voting rights on matters affecting a single class and
the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: Securities listed on a national
securities exchange or designated as national market system
securities are valued at the last sale price on such exchanges or
market system or, if there has been no sale that day, at the bid
price. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by
or at the direction of the Board of Trustees. Short-term
investments maturing in 60 days or less are valued at amortized
cost.
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. Dividend income is recorded on the
ex-dividend date. Interest income is recorded daily on the accrual
basis.
<PAGE>
c) FEDERAL INCOME TAXES: The Fund intends to qualify as a
regulated investment company by complying with the provisions of
the Internal Revenue Code (the "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) ORGANIZATION EXPENSES: The Fund's organizational expenses have
been deferred and are being amortized on a straight-line basis
over five years.
e) ALLOCATION OF EXPENSES: Expenses, other than class-specific
expenses, are allocated daily to each class of shares based on the
relative net assets of each class. Class-specific expenses, which
include distribution and service fees and any other items that are
specifically attributed to a particular class, are charged directly
to such class.
f) USE OF ESTIMATES: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Management affairs of the Fund are conducted through two separate
management arrangements.
Aquila Management Corporation, the Fund's founder and sponsor, serves as
Adviser and Administrator (the "Adviser") for the Fund under an Advisory and
Administration Agreement. Under this agreement, the Adviser provides such
advisory services to the Fund, in addition to those services provided by the
Sub-Adviser, as the Adviser deems appropriate. Besides its advisory services,
it also provides all administrative services, other than those relating to
its investment portfolio handled by the Sub-Adviser. This includes providing
the office of the Fund and all related services as well as overseeing the
activities of all the various support organizations to the Fund such as the
shareholder servicing agent, custodian, legal counsel, auditors and
distributor and additionally maintaining the Fund's accounting books and
records. For its services, the Adviser is entitled to receive a fee
which is payable monthly and computed as of the close of business each day
on the net assets of the Fund at the following annual rates; 0.80 of 1% on
the first $15 million; 0.65 of 1% on the next $35 million and 0.50 of 1% on
the excess above $50 million.
The Fund also has an Investment Sub-Advisory Agreement with Ferguson,
Wellman, Rudd, Purdy & Van Winkle, Inc. (the "Sub-Adviser"). Under this
agreement, the Sub-Adviser supervises the investment program of the Fund and
the composition of its portfolio, and provides for daily pricing of the
Fund's portfolio. For its services, the Sub-Adviser is entitled to receive a
fee which
<PAGE>
is payable monthly and computed as of the close of business each day on the
net assets of the Fund at the following annual rates; 0.70 of 1% on the first
$15 million; 0.55 of 1% on the next $35 million and 0.40 of 1% on the excess
above $50 million.
For the six months ended September 30, 1997, the Fund incurred Management
fees of $86,818 of which $66,278 was voluntarily waived.
Specific details as to the nature and extent of the services provided by
the Adviser and the Sub-Adviser are more fully defined in the Fund's
Prospectus and Statement of Additional Information.
B) DISTRIBUTION AND SERVICE FEES:
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Fund is authorized to make
service fee payments to broker-dealers or others ("Qualified Recipients")
selected by Aquila Distributors, Inc. (the "Distributor"), including, but not
limited to, any principal underwriter of the Fund, with which the Distributor
has entered into written agreements contemplated by the Rule and which have
rendered assistance in the distribution and/or retention of the Fund's shares
or servicing of shareholder accounts. The Fund makes payment of this service
fee at the annual rate of 0.25% of the Fund's average net assets represented
by Class A Shares. For the six months ended September 30, 1997, service fees
on Class A Shares amounted to $2,537, of which the Distributor received $143.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares
or servicing of shareholder accounts. These payments are made at the annual
rate of 0.75% of the Fund's net assets represented by Class C Shares and for
the six months ended September 30, 1997, amounted to $1,745. In addition,
under a Shareholder Services Plan, the Fund is authorized to make service fee
payments with respect to Class C Shares to Qualified Recipients for providing
personal services and/or maintenance of shareholder accounts. These payments
are made at the annual rate of 0.25% of the Fund's net assets represented by
Class C Shares and for the six months ended September 30, 1997, amounted to
$581. The total of these payments with respect to Class C Shares amounted to
$2,326, of which the Distributor received $2,307.
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 the
Fund's general investment region, with the bulk of sales commissions inuring
to such dealers.
<PAGE>
For the six months ended September 30, 1997, the Distributor received sales
commissions in the amount of $864.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1997, purchases of securities and
proceeds from the sales of securities aggregated $4,656,760 and $1,708,899,
respectively.
At September 30, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $2,447,544 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to
$156,891, for a net unrealized appreciation of $2,290,653.
5. DISTRIBUTIONS
The Fund anticipates that, to the extent necessary, income generated by
its investment portfolio will be used primarily to offset the Fund's
operating expenses. Whatever income that accrues above the level of the
Fund's operating expenses will be distributed annually to shareholders. Net
realized capital gains, if any, will be distributed annually to shareholders.
Distributions are recorded by the Fund on the ex-dividend date and paid
to shareholders in additional shares at the net asset value per share or in
cash, at the shareholder's option. Due to differences between financial
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. There were no distributions made by the Fund
during the six months ended September 30, 1997.
6. CUSTODIAN FEES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. For the six months ended September 30,
1997, the Fund's custodian fees amounted to $1,615, all of which was offset
by such credits. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit with the custodian.
<PAGE>
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended Period Ended
Sept. 30, 1997 March 31, 1997*
Shares Amount Shares Amount
CLASS A SHARES:
Proceeds from shares sold 34,020 $ 486,707 125,725 $ 1,640,953
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (8,363) (123,592) (1,088) (13,804)
Net change 25,657 363,115 124,637 1,627,149
CLASS C SHARES:
Proceeds from shares sold 10,804 155,782 27,271 359,661
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (709) (10,612) (202) (2,743)
Net change 10,095 145,170 27,069 356,918
CLASS Y SHARES:
Proceeds from shares sold 146,662 2,166,269 674,409 8,688,849
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (100) (1,544) (103,802) (1,260,018)
Net change 146,562 2,164,725 570,607 7,428,831
Total transactions in Fund
shares 182,314 $ 2,673,010 722,313 $ 9,412,898
* For the period from August 13, 1996 (commencement of operations) through
March 31, 1997.
<PAGE>
AQUILA CASCADIA EQUITY FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
Class A Class C Class Y
Six Months Period(1) Six Months Period(1) Six Months Period(1)
Ended Sept. Ended March Ended Sept. Ended March Ended Sept. Ended March
30, 1997 31, 1997 30, 1997 31, 1997 30, 1997 31, 1997(1)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $12.95 $12.00 $12.95 $12.00 $12.96 $12.00
Income from Investment Operations:
Net investment income (loss) (0.01) - (0.07) - - -
Net gain on securities
(both realized and
unrealized) 3.00 0.95 2.99 0.95 3.00 0.96
Total from Investment Operations 2.99 0.95 2.92 0.95 3.00 0.96
Less Distributions (note 5):
Dividends from net investment income - - - - - -
Distributions from capital gains - - - - - -
Total Distributions - - - - - -
Net Asset Value, End of Period $15.94 $12.95 $15.87 $12.95 $15.96 $12.96
Total Return (not reflecting
sales charge) (%) 23.09# 7.92# 22.55# 7.92# 23.15# 8.00#
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 2,396 1,615 590 350 11,447 7,393
Ratio of Expenses to Average Net
Assets (%) 1.75* 1.18* 2.48* 1.22* 1.51* 1.24*
Ratio of Net Investment Income to
Average Net Assets (%) (0.18)* 0.00* (0.93)* 0.00* 0.06* 0.00*
Portfolio Turnover Rate (%) 17.29# 3.53# 17.29# 3.53# 17.29# 3.53#
Average commision rate paid** ($) 0.0663 0.0672 0.0663 0.0672 0.0663 0.0672
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the Adviser's and Sub-Adviser's voluntary waiver
of fees, the voluntary expense reimbursement and the expense offset in
custodian fees for uninvested cash balances would have been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income ($) (0.10) - (0.15) - (1.58) -
Ratio of Expenses to Average Net
Assets (%) 2.92* 4.79* 3.65* 5.55* 2.68* 4.54*
Ratio of Net Investment Income to
Average Net Assets (%) (1.36)* (3.61)* (2.10)* (4.33)* (1.11)* (3.30)*
<FN> # Not annualized. </FN>
<FN> * Annualized. </FN>
<FN> ** Represents the average per share broker commission rate paid by
the Fund in connection with the execution of its portfolio
transactions in equity securities on which commissions were
charged. </FN>
<FN> (1) For the period August 13, 1996 (commencement of operations) through
March 31, 1997. </FN>
</TABLE>
See accompanying notes to financial statements.
