<PAGE>
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, Oregon 97204
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
David B. Frohnmayer
James A. Gardner
Diana P. Herrmann
Sterling K. Jenson
Raymond H. Lung
John W. Mitchell
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
James M. McCullough, Senior Vice President
Kimball L. Young, Senior Vice President
Sherri Foster, Vice President
Diana P. Herrmann, Vice President
Kerry A. Lemert, Vice President
Christine L. Neimeth, 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 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, 1999
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>
<PAGE>
AQUILA CASCADIA EQUITY FUND
SEMI-ANNUAL REPORT
November 24, 1999
Dear Fellow Shareholders:
We are pleased to provide you with the Semi-Annual Report for Aquila
Cascadia Equity Fund. For the six month period from March 31, 1999 through
September 30, 1999, the Class A shares of the Fund had a total return of 5.65%.
For the period of March 31, 1999 through the date of this report letter,
November 24, 1999, the total return was 12.52%. These returns do not reflect any
sales charges. Throughout this period, the general equity markets have
fluctuated considerably. Consequently, although these results are not
spectacular, they are certainly quite respectable under the circumstances. They
track reasonably closely to various bench marks for the area.
CASCADIA REGION REMAINS ATTRACTIVE
As of September 9, 1999, the Aquila Cascadia Equity Fund had been
investing for shareholders for 3 years. Over this period, we proved out the
potential for continued economic growth that we saw in the Cascadia region. We
also demonstrated the prospects for good capital appreciation, without undue
risk and volatility, from investments in the region.
Recent economic data continues to support our thesis that the
Cascadia region offers above average performance in both economic and population
growth. Were the seven-state area of the Cascadia region carved out into a
separate country, it would collectively possess one of the larger economies in
the whole world - slightly smaller than the economy of Canada and larger than
that of Mexico.
With the characteristics the Cascadia region possesses, we believe
that, over time, the quality of life in the Cascadia region will continue to
attract additional sound businesses and management.
Considering this geographic region by itself - as opposed to being a
separate country - we do not have any foreign market problems with currency,
language, accounting standards, or other detracting factors which one finds with
investing in foreign countries.
In essence, we feel that with the Aquila Cascadia Equity Fund we
have the best of all worlds. We can invest in an area which would be one of the
biggest economies of the world, yet we can do so in our "own backyard" - the
Cascadia region of our country.
</PAGE>
<PAGE>
THE FUND'S KEY INVESTMENTS
As at September 30, 1999, the Fund's key investments and the
location of these investments were as follows:
[Pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY STATE
Alaska 1%
Hawaii 3%
Idaho 7%
Nevada 1%
Oregon 23%
Washington 43%
Utah 1%
Other 21%
[Pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY MARKET SECTOR
Technology 29%
Healthcare 6%
Finance 10%
Energy 3%
Consumer Staples 7%
Consumer Cyclicals 11%
Communication Services 6%
Capital Goods 8%
Basic Materials 12%
Utilities 5%
Transportation 3%
Below are listed the top ten holdings of the Fund as of September
30, 1999. While the individual holdings of the Fund and those that make up the
top ten will vary over time, there is a common denominator in their selection.
This common denominator is growth securities which possess a reasonable or
value-oriented price at time of purchase.
TOP TEN HOLDINGS
PERCENT
COMPANY OF NET ASSETS STATE MARKET SECTOR
Microsoft 5.8% Washington Technology
Intel 5.5% California Technology
Costco Companies 4.4% Washington Consumer Cyclicals
Triquint Semiconductor 4.2% Oregon Technology
Immunex 3.2% Washington Healthcare
Atlantic Richfield 2.9% California Energy
Starbucks 2.7% Washington Consumer Staples
Hewlett-Packard 2.6% California Technology
Weyerhaeuser 2.6% Oregon Basic Materials
Boeing 2.5% Washington Capital Goods
</PAGE>
<PAGE>
BROADENING STOCK MARKET
From June, 1994 to March, 1999 large capitalization growth stocks
provided very dominant and narrow market leadership for U.S. stocks. Other
stocks tended to be neglected. Since March we have seen some broadening of the
U.S. stock market to include value as well as medium to small capitalization
stocks. Investors have been willing to look for good values across the market.
This has led to more recognition for some stocks that are held in the portfolio
of Aquila Cascadia Equity Fund.
REGIONALLY-LOCATED PORTFOLIO MANAGER
As indicated, as of September 9, 1999, the Fund completed its third
year of investment operations. Over this period, we believe the Fund has
produced overall favorable results for investors. By having a portfolio manager
based in the Cascadia region, near many of the companies in the Fund, we will
continue to work to uncover various securities possessing superior opportunities
early, before they are necessarily generally recognized in the marketplace. We
believe in geographic proximity. If there is a problem or a question, our
portfolio manager can be in front of management within a few hours.
INVESTMENT PHILOSOPHY
We remain committed to our investment philosophy and disciplines. We
continue to look for companies with good growth prospects and strong management.
It is our desire to purchase securities of these companies at as reasonable a
price as possible. Furthermore, we will also continue to use our investment
disciplines to control risk.
YOUR CONFIDENCE APPRECIATED
Your investment in Aquila Cascadia Equity Fund is greatly
appreciated. We value your trust and will continue to do our best to merit your
confidence.
Sincerely,
/s/ Lacy B. Herrmann
----------------------
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
</PAGE>
<PAGE>
<TABLE>
<CAPTION>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
MARKET
SHARES COMMON STOCKS - 99.6% VALUE
</CAPTION>
<S> <C> <C>
BASIC MATERIALS - 12.2%
CHEMICALS - 1.1%
3,000 E.I. duPont deNemours $ 182,625
IRON & STEEL - 3.4%
9,100 Northwest Pipe Co. + 142,188
9,400 Oregon Steel Mills Inc. 105,162
17,000 Schnitzer Steel Industries 310,250
557,600
PAPER & FOREST PRODUCTS - 7.7%
10,750 Boise Cascade Corp. 391,703
12,000 Longview Fibre Co. 149,250
7,400 Weyerhaeuser Co. 426,425
6,700 Willamette Industries 288,937
1,256,315
CAPITAL GOODS - 8.0%
AEROSPACE/DEFENSE - 3.1%
9,600 Boeing 409,200
3,500 Cordant Technologies Inc. 106,531
515,731
MACHINERY (DIVERSE) - 1.6%
13,900 Cascade Corp. 145,950
7,700 Esterline Technology Corp.+ 121,275
267,225
METAL PROCESSING - 0.9%
4,800 Precision Castparts Corp. 146,400
TRUCKS & PARTS - 2.4%
7,630 PACCAR Inc. 388,176
COMMUNICATION SERVICES - 5.5%
LONG DISTANCE/TELEPHONE - 1.7%
3,600 GTE Corp. 276,750
TELECOM - WIRELESS - 1.5%
12,300 Metro One Telecommunications + 236,006
TELEPHONE - 2.3%
7,400 Nextlink Communications 383,644
CONSUMER CYCLICALS - 11.3%
AUTO PARTS & EQUIPMENT - 1.1%
8,000 Lithia Motors Inc. Class A + 183,500
BUILDING MATERIALS/BUILDING SUPPLY - 2.0%
3,456 Lowe's Companies 168,480
6,430 TJ International Inc. 161,554
330,034
FOOTWEAR - 2.2%
6,400 Nike Inc. Class B 364,000
RETAIL - GENERAL MERCHANDISE/SPECIALTY - 6.0%
10,000 Costco Cos Inc.+ 720,000
16,800 Hollywood Entertainment Corp. + 252,000
972,000
CONSUMER STAPLES - 6.3%
FOODS - 2.4%
17,816 Kroger Co. + 393,066
RESTAURANTS - 2.7%
17,900 Starbucks Corporation + 443,584
RETAIL - FOOD CHAINS - 1.2%
5,180 Albertsons Inc. 204,934
ENERGY - 3.3%
OIL - DOMESTIC - 2.9%
5,350 Atlantic Richfield Co. 474,144
OIL & GAS - REFINING & MARKETING - 0.4%
5,742 Pennzoil-Quaker State Co. 72,493
FINANCE - 9.4%
BANKS - MAJOR REGIONAL - 3.6%
7,300 Banc West Corp. 296,562
15,000 Columbia Bancorp 120,938
6,600 National Bancorp of Alaska Inc. 169,125
586,625
INSURANCE - PROPERTY - 1.6%
9,400 SAFECO Corp. 263,200
SAVINGS & LOAN - 4.2%
7,650 Interwest Bancorp Inc. 158,738
11,333 Washington Federal Inc. 262,784
9,375 Washington Mutual Inc. 274,219
695,741
HEALTHCARE - 6.3%
DRUGS- 1.5%
10,500 Corixa Corp. + 141,094
3,700 Icos Corporation + 109,150
250,244
MEDICAL PRODUCTS & SUPPLIES/DRUGS - 4.8%
12,000 Immunex Corp. + 520,500
10,000 Spacelabs Medical Inc.+ 151,250
3,728 Watson Pharmaceuticals + 113,937
785,687
TECHNOLOGY - 29.0%
COMPUTER HARDWARE & SOFTWARE SERVICES - 10.0%
4,690 Hewlett-Packard Co. 431,480
10,435 Microsoft Corp.+ 945,020
6,500 Visio Corp + 255,125
1,631,625
ELECTRONICS - 16.4%
12,060 Intel Corp. 896,209
12,000 Lattice Semiconductor + 356,250
13,000 Mentor Graphics Corp. + 111,312
5,800 Micron Technology Inc. + 386,062
7,775 Tektronix Inc. 260,462
12,000 Triquint Semiconductor + 686,250
2,696,545
INTERNET SOFTWARE - 2.6%
2,750 Go2net Inc. + 178,063
2,400 Realnetworks Inc. + 250,950
429,013
TRANSPORTATION - 3.2%
AIR FREIGHT/AIRLINES - 2.4%
6,800 Airborne Freight Corporation 143,225
6,150 Alaska Air Group Inc.+ 250,228
393,453
RAILROADS - 0.8%
11,350 Greenbrier Companies Inc. 125,559
UTILITIES - 5.1%
ELECTRIC COMPANIES - 1.2%
5,600 Hawaiian Electric Industries 197,050
NATURAL GAS - 3.9%
8,300 Southwest Gas Corporation 223,581
10,900 Williams Companies Inc. 408,069
631,650
Total Common Stocks (cost $13,192,588*) 99.6% 16,334,619
Other assets in excess of liabilities 0.4 72,621
Net Assets 100.0% $ 16,407,240
* Cost for Federal tax purposes is identical
+ Non-income producing security.
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at market value (cost $13,192,588) $ 16,334,619
Cash 39,063
Deferred organization expenses (note 2) 37,716
Other Assets 10,000
Dividends receivable 9,445
Total assets 16,430,343
LIABILITIES
Payable for Fund shares redemed 6,972
Management fees payable 9,330
Distribution fees payable 5,252
Accrued expenses 2,049
Total liabilities 23,603
NET ASSETS $ 16,407,240
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares
par value $.01 per share $ 9,406
Additional paid-in capital 12,620,872
Accumulated net gain on investments 634,931
Net unrealized appreciation on investments 3,142,031
$ 16,407,240
CLASS A
Net Assets $ 2,125,984
Capital shares outstanding 122,272
Net asset value and redemption price per share $ 17.39
Offering price per share (100/95.75 of $17.39 adjusted to nearest cent) $ 18.16
CLASS C
Net Assets $ 1,464,034
Capital shares outstanding 85,845
Net asset value and offering price per share $ 17.05
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) $ 17.05*
CLASS Y
Net Assets $ 12,817,222
Capital shares outstanding 732,439
Net asset value, offering and redemption price per share $ 17.50
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 102,402
Expenses:
Advisory and Administrative fees (note 3) $ 66,363
Sub-Advisory fees (note 3) 57,886
Distribution and service fees (note 3) 10,307
Legal fees 10,000
Shareholders' reports 10,000
Amortization of organization expenses (note 2) 9,860
Transfer and shareholder servicing agent fees 6,500
Audit and accounting fees 6,000
Trustees' fees and expenses 4,800
Registration fees 4,000
Custodian fees 718
Miscellaneous 2,314
188,748
Advisory and Administrative fees waived (note 3) (37,446)
Sub-Advisory fees waived (note 3) (28,968)
Expenses paid indirectly (note 6) (718)
Net expenses 121,616
Net investment loss (19,214)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 897,498
Change in unrealized appreciation on investments 25,985
Net realized and unrealized gain on investments 923,483
Net increase in net assets resulting from operations $ 904,269
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (19,214) $ -
Net realized gain (loss) from securities transactions 897,498 (154,745)
Change in unrealized appreciation on investments 25,985 (259,547)
Change in net assets from operations 904,269 (414,292)
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 139,459 1,204,906
Reinvested dividends and distributions - -
Cost of shares redeemed (353,270) (1,400,793)
Change in net assets from capital share transactions (213,811) (195,887)
Change in net assets 690,458 (610,179)
NET ASSETS:
Beginning of period 15,716,782 16,326,961
End of period $ 16,407,240 $ 15,716,782
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<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 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. All classes of
shares represent interests in the same portfolio of investments and are
identical as to rights and privileges but differ with respect to the effect of
sales charges, the distribution and/or service fees borne by each class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: 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.
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.
</PAGE>
<PAGE>
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
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 the
Fund's 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
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.
</PAGE>
<PAGE>
For the six months ended September 30, 1999, the Fund incurred fees under
the Advisory and Administration Agreement and Sub-Advisory Agreement of $66,363
and $57,886, respectively, of which amounts $37,446 and $28,968, respectively,
were 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, 1999, service fees on Class A
Shares amounted to $2,822, of which the Distributor received $194.
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, 1999, amounted to $5,614. 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, 1999, amounted to $1 ,871. The total
of these payments with respect to Class C Shares amounted to $7,485, of which
the Distributor received $3,517.
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.
For the six months ended September 30, 1999, the Distributor received
commissions of $1,723 on sales of Class A Shares.
</PAGE>
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
For the six months ended September 30, 1999, purchases of securities and
proceeds from the sales of securities aggregated $3,339,940 and $3,609,219,
respectively.
At September 30, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$4,241,304 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $1,099,273,
for a net unrealized appreciation of $3,142,031.
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 and are taxable.
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, in cash, or
in a combination of both, at the shareholder's option. 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. There were no
distributions made by the Fund during the six months ended September 30, 1999.
6. EXPENSES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in equity securities rather
than leave cash on deposit.
</PAGE>
<PAGE>
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 2,595 $ 44,977 6,875 $ 103,021
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (9,084) (164,791) (38,529) (612,838)
Net change (6,489) (119,814) (31,654) (509,817)
CLASS C SHARES:
Proceeds from shares sold 4,342 75,816 34,110 535,043
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (4,619) (80,958) (5,770) (94,346)
Net change (277) (5,142) 28,340 440,697
CLASS Y SHARES:
Proceeds from shares sold 1,062 18,666 33,127 566,842
Reinvested dividends and
distributions - - - -
Cost of shares redeemed (6,100) (107,521) (42,384) (693,609)
Net change (5,038) (88,855) (9,257) (126,767)
Total transactions in Fund
shares (11,804) $ (213,811) (12,571) $ (195,887)
</TABLE>
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A CLASS C
SIX MONTHS YEAR ENDED PERIOD(1) SIX MONTHS YEAR ENDED PERIOD(1)
ENDED MARCH 31, ENDED ENDED MARCH 31, ENDED
SEPT. 30, 1999 1999 1998 MARCH 31, 1997 SEPT. 30, 1999 1999 1998 MARCH 31, 1997
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $16.46 $16.89 $12.95 $12.00 $16.21 $16.76 $12.95 $12.00
Income from Investment Operations:
Net investment income (loss) (0.03) - - - (0.10) - - -
Net gain (loss) on securities
(both realized and unrealized) 0.96 (0.43) 3.94 0.95 0.94 (0.55) 3.81 0.95
Total from Investment Operations 0.93 (0.43) 3.94 0.95 0.84 (0.55) 3.81 0.95
Less Distributions (note 5):
Dividends from net investment
income - - - - - - - -
Distributions from capital gains - - - - - - - -
Total Distributions - - - - - - - -
Net Asset Value, End of Period $17.39 $16.46 $16.89 $12.95 $17.05 $16.21 $16.76 $12.95
Total Return (not reflecting sales
charge) (%) 5.65+ (2.55) 30.42 7.92+ 5.18+ (3.28) 29.42 7.92+
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 2,126 2,119 2,709 1,615 1,464 1,396 968 350
Ratio of Expenses to Average
Net Assets (%) 1.57* 1.92 1.77 1.34* 2.32* 2.65 2.53 1.38*
Ratio of Net Investment Income
to Average Net Assets (%) (0.36)* (0.25) (0.18) (0.16)* (1.11)* (1.00) (0.96) (0.16)*
Portfolio Turnover Rate (%) 20.00+ 26.62 29.38 3.53+ 20.00+ 26.62 29.38 3.53+
The expense and net investment income ratios without the effect of the Adviser's
and Administrator's voluntary waiver of fees and the Adviser's voluntary expense
reimbursement in the period ended March 31, 1997 were:
Ratio of Expenses to Average
Net Assets (%) 2.34* 2.37 2.76 4.63* 3.09* 3.09 3.53 5.39*
Ratio of Net Investment
Income (Loss) to Average
Net Assets (%) (1.13)* (0.70) (1.17) (3.45)* (1.89)* (1.44) (1.96) (4.17)*
The expense ratios after giving effect to the waivers, expense reimbursement,
and expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%) 1.56* 1.80 1.75 1.18* 2.31* 2.54 2.51 1.22*
</TABLE>
(1) For the period August 13, 1996 (commencement of operations) through March
31, 1997.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED) (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS Y
SIX MONTHS PERIOD(1)
ENDED YEAR ENDED MARCH 31, ENDED
SEPT. 30, 1999 1999 1998 MARCH 31, 1997
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.55 $16.94 $12.96 $12.00
Income from Investment Operations:
Net investment income (loss) (0.01) - - -
Net gain (loss) on securities (both realized and unrealized) 0.96 (0.39) 3.98 0.96
Total from Investment Operations 0.95 (0.39) 3.98 0.96
Less Distributions (note 5):
Dividends from net investment income - - - -
Distributions from capital gains - - - -
Total Distributions - - - -
Net Asset Value, End of Period $17.50 $16.55 $16.94 $12.96
Total Return (not reflecting sales charge) (%) 5.74+ (2.30) 30.71 8.00+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 12,817 12,202 12,649 7,393
Ratio of Expenses to Average Net Assets (%) 1.32* 1.66 1.52 1.40*
Ratio of Net Investment Income to Average Net Assets (%) (0.11)* - 0.07 (0.16)*
Portfolio Turnover Rate (%) 20.00+ 26.62 29.38 3.53+
The expense and net investment income ratios without the effect of the Adviser's
and Administrator's voluntary waiver of fees and the Adviser's voluntary expense
reimbursement in the period ended March 31, 1997 were:
Ratio of Expenses to Average Net Assets (%) 2.09* 2.11 2.51 4.38*
Ratio of Net Investment Income (Loss) to Average Net Assets (%) (0.89)* (0.45) (0.92) (3.14)*
The expense ratios after giving effect to the waivers, expense reimbursement,
and expense offset for uninvested cash balances were:
Ratio of Expenses to Average Net Assets (%) 1.31* 1.55 1.50 1.24*
</TABLE>
(1) For the period August 13, 1996 (commencement of operations) through March
31, 1997.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Fund have been monitoring issues
involving preparedness for the turn of the century for some time in an effort to
minimize or eliminate any potential impact upon the Fund and its shareholders.
Our officers have focussed significant time and effort in order that the various
computerized functions that could affect the Fund are ready by the beginning of
the year 2000.
The Fund is highly reliant on certain mission-critical suppliers'
services. Each supplier of these services has provided the Fund's officers with
assurances that it is actively addressing potential problems relating to the
year 2000. The officers, in turn, are monitoring and will continue to monitor
the progress of its suppliers.
The Fund has NOT incurred, nor is anticipated to incur, any costs
related to Y2K. All such costs are being incurred by the respective vendors.
As you can well understand, we cannot directly control our supplier
operations. We assure you, however, that we recognize a responsibility to inform
our shareholders if in the future we become aware of any developments which
would lead us to believe that the Fund will be significantly affected by year
2000 problems.
We will continue to keep you up-to-date through future
communications.
</PAGE>
