<PAGE>
ANNUAL
REPORT
MARCH 31, 2000
AQUILA
CASCADIA
EQUITY FUND
[Graphic: Small picture of an antique pocketwatch in front of a larger picture
of a cascading waterfall]
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILASM GROUP OF FUNDS
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
Ralph R. Shaw
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
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus,
which must precede or accompany this report.
</PAGE>
<PAGE>
[Graphic: Small picture of an antique pocketwatch in front of a larger picture
of a cascading waterfall]
AQUILA CASCADIA EQUITY FUND
ANNUAL REPORT
May 15, 2000
Dear Fellow Shareholders:
We are pleased to present to you the Annual Report for Aquila Cascadia
Equity Fund for the fiscal year ended March 31, 2000. The total return,
exclusive of sales charges, produced by the Fund's Class A shares over this
period was 43.1%. By way of comparison, the Bloomberg Northwest Index, which
currently serves as one comparable "benchmark" for the Fund's performance,
produced a total return of 41.7% over this same period. This dynamic return is
pleasant to witness. However, the environment of the equity markets during this
past year was unusual. Consequently, similar results on an annual basis may not
be repeatable.
THE CASCADIA REGION CONTINUES ITS ECONOMIC GROWTH
As a result of the continued economic activity in the various seven states
within the Cascadia region, we are pleased to report that the Cascadia area
continues to rank as one of the major growth regions of our country. It is
important for you to know and appreciate that the absolute size of the Gross
Domestic Product ("GDP") of the combined seven state Cascadia region - Oregon,
Washington, Idaho, Utah, Nevada, Alaska and Hawaii - ranks this region's gross
economy between 11th or 12th in the whole world - slightly behind the total
produced by Canada and ahead of that of Mexico.
Of equal importance is the character of the area. Due to the excellent
quality of life available in the region, together with the generally dynamic
entrepreneurial spirit that is intrinsic to the area, companies are more able to
recruit skilled workers at a time when the job market is tight. We believe this
is an important factor in contributing to the growth potential of the region.
INVESTMENT OPPORTUNITIES
At present, there are a significant number of public companies - more than
300 - within the Cascadia region and thousands of additional private companies,
with many of these private companies becoming publicly owned every year. All of
these companies represent various industry sectors. Many of them participate in
rapidly expanding markets. Consequently, they offer various diverse, interesting
and dynamic investment prospects. This, in turn, presents for your Fund's
portfolio management very exciting investment opportunities. Your Fund has the
ability to select and invest in securities that may not necessarily be as well
known as other companies in the country, but which are growing at a rapid rate
that is highly attractive.
What we have with the Cascadia region is the opportunity to invest in "our
own backyard." Yet, in reality, many of the companies are also nationally and
even internationally known. And, we can invest with great pride and potential
for capital appreciation. Moreover, although we have the ability to invest in an
area which, by itself, would be one of the very largest economies in the world,
we can make such investments without any accounting differences, language
barriers, currency exchange and cultural aspe cts or other detracting problems
which one finds when investing in various countries throughout the world.
</PAGE>
<PAGE>
DEVELOPMENT PERIOD FOR THE FUND
In a sense, the first 3 1/2 years ending March 31, 2000 represented a
development period for Aquila Cascadia Equity Fund.
From inception of the Fund, we have believed that the Cascadia region
possessed the basic characteristics for sound capital appreciation from its
investments. However, we wanted to prove out our basic theories. More
importantly, we wanted to do so at a relatively low risk for investors.
Because the industry base of the area is broadening considerably from what
it used to be, we feel even more certain that the Cascadia region represents
excellent potential for investors seeking growth of capital. Our investment
approach has developed somewhat into one which is "growth at a reasonable
price." Through this approach, it is our intent to invest in all kinds of
industries that are present within the area at whatever price seems reasonable
for the prevailing characteristics of the various industries.
Nevertheless, we continue to pay careful attention to the elements of risk
in the selection of any and all securities for the Fund's portfolio. Our intent
in management of the Fund is to moderate downside risk for investment capital
which may develop as a result of adverse conditions in companies, as well as the
marketplace. Yet, this strategy still provides opportunities for capital growth
participation.
You should be aware that the Cascadia region, like other areas of our
country, is an evolving one. Consequently, over time, there will be changes that
do occur in various industries as well as companies in the area. In a sense, we
have already seen the changes that have occurred in the Cascadia region. Over
the last decade, we have seen this geographic area move from one which was
primarily "wood chips" oriented to one that is driven by "micro chips." We will
stay alert to these continuing potential changes. And, we will attempt to
provide opportunities for investors to benefit from the evolution that will
occur in companies, as well as in various industry sectors.
THE FUND'S KEY INVESTMENTS
As of March 31, 2000, the Aquila Cascadia Equity Fund's key areas of
investments and location of these investments were as follows:
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY MARKET SECTOR
TECHNOLOGY 39%
TRANSPORTATION 2%
UTILITIES 3%
BASIC MATERIALS 7%
CAPITAL GOODS 6%
COMMUNICATION SERVICES 8%
CONSUMER CYCLICALS 9%
CONSUMER STAPLES 6%
ENERGY 3%
FINANCE 4%
HEALTHCARE 13%
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY STATE
HAWAII 2%
IDAHO 6%
NEVADA 1%
OREGON 19%
WASHINGTON 49%
UTAH 2%
OTHER 21%
</PAGE>
<PAGE>
Listed below are the top ten holdings of the Fund as of March 31, 2000.
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. The
common denominator is securities which possess "growth at a reasonable price,"
at time of purchase. In addition, we work to identify strong management teams
who also possess an ownership position in their company's stock.
TOP TEN HOLDINGS
PERCENT
COMPANY OF NET ASSETS STATE MARKET SECTOR
Immunex 9.2% Washington Healthcare
Intel 8.6% California Technology
Microsoft 6.0% Washington Technology
Costco Wholesale 5.7% Washington Consumer Cyclicals
Triquint Semiconductor 5.3% Oregon Technology
Nextlink Communications 4.9% Washington Communication Services
Lattice Semiconductor 4.4% Oregon Technology
Starbucks 4.3% Washington Consumer Staples
Micron Technology 3.9% Idaho Technology
Hewlett-Packard 3.4% California Technology
INVESTMENT PHILOSOPHY AND RETURN ON INVESTMENT
We again wish to emphasize that 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.
The chart below shows the return on investment that the Fund has produced
since its inception on September 9, 1996. This illustration is presented without
sales charges. However, the return illustrates the point that with a disciplined
approach and selectivity to moderate the degree of risk, one would have nearly
doubled the level of their investment over the period of 3 1/2 years.
[Graphic of a mountain chart with the following information:]
GROWTH OF $10,000 SINCE INCEPTION (WITHOUT SALES CHARGES)
9/96 $10,000
12/96 $10,758
6/97 $12,158
12/97 $13,100
6/98 $13,400
12/98 $13,842
6/99 $15,367
12/99 $16,601
3/00 $19,624
</PAGE>
<PAGE>
APPRECIATION
Your confidence 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
In keeping with industry standards, total return figures indicated above do not
include sales charges, but do reflect reinvestment of dividends and capital
gains. Different classes of shares are offered and their performance will vary
because of differences in sales charges and fees paid by shareholders investing
in different classes. The performance shown represents that of Class A shares,
adjusted to reflect the absence of sales charges, which is currently a maximum
amount of 4.25% for this Class. Management fees and certain expenses are being
absorbed. Returns would be less if sales charges, management fees, and expenses,
were fully applied. Share net asset value and investment return fluctuate so
that an investor may receive more or less than original investment upon
redemption. The prospectus of the Fund, which contains more complete
information, including management fees and expenses and which discusses the
special risk considerations of the geographic concentration strategy of the
Fund, should, of course, be carefully reviewed before investing.
</PAGE>
<PAGE>
PERFORMANCE REPORT
The graph below illustrates the value of $10,000 invested in Class A Shares
of Aquila Cascadia Equity Fund (the "Fund") since the commencement of its
investment operations on September 9, 1996 and maintaining this investment
through the Fund's latest fiscal year-end, March 31, 2000 as compared with a
hypothetical similar-size investment in the Bloomberg Northwest Index (the
"Index") over the same period. The Fund has been managed, since its inception,
to provide capital appreciation through selection of equity securities based on
growth at a reasonable price with a value bias. The Fund's universe of companies
are primarily within the seven state "Cascadia" region.
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 Index does not
include operating expenses nor sales charges but does reflect reinvestment of
dividends. It should also be noted that the Index is a Northwest-oriented,
unmanaged portfolio of 75 equity securities, of companies based in Alaska,
Idaho, Oregon and Washington. However, the Fund's investment portfolio consisted
over the same period of a significant lesser number of securities primarily of
companies domiciled in the seven-state "Cascadia" region of our country.
The market prices and behavior of the individual securities in the Fund's
investment portfolio can be affected by local and regional factors which may
well result in variances from the market action of the securities in a four
state only index. Furthermore, whatever the difference in the performance in the
Index versus the Fund may also be attributed to the lack of application of
annual operating expenses and sales charges to the Index.
[Graphic of a line chart with the following information:]
Fund's Class A Shares
Bloomberg Northwest Index With Sales Charge Without Sales Charge
9/9/96 $10,000 $9,575 $10,000
9/96 $10,267 $9,840 $10,275
3/97 $10,828 $10,335 $10,792
9/97 $14,201 $12,721 $13,283
3/98 $15,025 $13,480 $14,075
9/98 $11,525 $11,093 $11,583
3/99 $14,983 $13,136 $13,717
9/99 $15,753 $13,879 $14,492
3/00 $21,235 $18,794 $19,624
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED MARCH 31, 2000
SINCE
1 YEAR INCEPTION
Class A (9/9/96)
With Sales Charge 36.99% 19.40%
Without Sales Charge 43.07% 20.86%
Class C (9/9/96)
With CDSC 40.90% 20.07%
Without CDSC 41.94% 20.07%
Class Y (9/9/96)
No Sales Charge 43.32% 21.10%
Bloomberg Northwest Index 41.70% 23.21% (Class A)
41.70% 23.21% (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
4.25% 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. Past performance
is not predictive of future investment results.
</PAGE>
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
FUND PERFORMANCE
For the fiscal year ended March 31, 2000, the Aquila Cascadia Equity Fund's
Class A shares had a total return of 43.1%. This compares favorably with the
Bloomberg Northwest Index which posted a total return of 41.7% over the same
period. Since the Fund's inception 3 1/2 years ago on September 9, 1996, the
Aquila Cascadia Equity Fund has enjoyed an overall total return of 96.2% -
nearly double one's initial investment. These returns do not, however, reflect
any sales charges.
The results for the Fund's latest fiscal year are indicative of the
incredibly strong market conditions for technology stocks. The NASDAQ index over
the Fund's fiscal year was up 86%, while the S&P 500 index showed a gain of only
17%. The Fund itself benefited greatly from its over-weighting in technology
stocks, as well as, biotechnology and communication holdings - all of which
industries are intrinsic to the Cascadia area.
Over the last fiscal year, the Fund has purchased securities of some of the
most compelling growth companies in the Cascadia region. While you can expect
the portfolio to continue to hold some of the core Cascadia names such as
Boeing, Nike, Microsoft, Intel, Hewlett Packard and Costco, we also are
constantly searching for emerging companies with higher growth expectations. New
additions last year included Immunex, Triquent and Nextlink. In the final
quarter of the past fiscal year, we witnessed a shift by investors toward
companies with basic earnings, as well as interesting business plans.
Some stocks turned in a performance that was truly amazing during the 1999
calendar year. For example, Nextlink was up 495%, Immunex was up 379% and
Triquint was up over 1,000%. Though we are always mindful of the impact of
capital gains, we have trimmed our positions in these holdings in order to
diversify the Fund as well as book some of the spectacular gains in these
stocks. It is interesting to note that all three of these companies are in
different economic sectors - telecommunications, biotechnology and wireless
telecommunications - yet they represent the dynamic growth prospects in the
region. We would also like to point out that the technology stocks in the
portfolio were up 152% during the Fund's last fiscal year. This sector now
represents 38.5% of the overall portfolio.
As you probably realize, the equity markets were quite disparate last year.
This is the other side of the technology coin. Three stocks that hurt the Fund's
performance this past fiscal year were Hollywood Entertainment (down 57%),
Kroger (down 41%), and Albertson's (down 43%). The magnitude of this behavior
was quite disappointing. Consequently, we sold the entire position in
Albertson's, primarily to realize a loss and offset some gains in other areas.
We still believe that the Kroger/Fred Meyer story is basically intact. However,
this area of investment is just not witnessing purchasing dollars by investors.
Over the near term, Hollywood Entertainment's venture into the Internet has been
disappointing. However, we are still hopeful that the company can find a way to
realize some shareholder value from this area in the nearer term future.
</PAGE>
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE (CONTINUED)
ECONOMIC OVERVIEW
During the past 12 months the US economy continued its record expansion. We
have had a "4x4x4" economy - 4 straight years of better than 4% GDP growth with
only 4% unemployment. The performance of the economy has been like Murphy's Law
in reverse - virtually everything that could go right, did go right. It appears
to us that with the recovery of the various global markets, the overall economic
condition of the world can only be described as being quite favorable.
THE REGION
We continue to be very positive about the growth prospects for the Cascadia
region. In addition, we are excited about the kind of companies that are
emerging throughout the entire 7-state territory. For example, Seattle and Salt
Lake City have both become home to biotechnology companies. While we realize the
inherent volatility in biotechnology stocks, we still believe that biotechnology
stocks represent incredible long-term growth stories. Microsoft has helped turn
Seattle into a technology Mecca. Similarly, Portland continues to nurture many
high tech companies as well.
CONCLUSION/OUTLOOK
In terms of market action during this coming fiscal year, we can visualize
that it may well feature the renaissance of the "old-economy" stocks. Many
different types of companies throughout the United States will be huge
beneficiaries of the dynamic technological changes existent in our world today.
The current technology-driven productivity era is unlikely to exhaust itself for
some time. We will continue to focus on building for the Fund an overall
portfolio that provides growth prospects that are the hallmark of the Cascadia
region. It is our intent to focus upon a core group of companies and also
surround them with securities of those companies that we believe will provide an
attractive risk/return trade-off. Our current thinking is that we will remain
invested in many different economic sectors of the Standard & Poor's 500 Index
in an effort to provide stability to the Fund's overall portfolio. In addition,
however, we will try to emphasize in our investments, securities of companies
that possess a near-term catalyst that would enable the companies to realize
their full value.
Currently, we believe that technology will continue to lead us into this
next fiscal year of the Fund. However, we also look for the stock market to
broaden which should allow other sectors in the market to participate. As
investors look for companies within the stock market that will benefit from the
dynamism enveloping the global economy, we believe that several of the basic
industries will be rewarding investments. However, you should be aware that
volatility will remain high as the stock market continues to digest both the
effects of higher interest rates, and the tug-of-war between the "old economy"
and the "new economy".
</PAGE>
<PAGE>
[Logo of KPMG LLP: four solid rectangles with the letters KPMG in white in front
of them]
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Aquila Cascadia Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Aquila Cascadia Equity Fund, including the statement of investments, as of March
31, 2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended and for the period from August 13, 1996 (commencement of operations)
through March 31, 1997. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of March 31, 2000, by correspondence with the custodian. An
audit also includes assessing the accounting principles used, and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Aquila Cascadia Equity Fund as of March 31, 2000, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended and for the period from August 13, 1996
(commencement of operations) through March 31, 1997, in conformity with
generally accepted accounting principles.
KPMG LLP
New York, New York
May 2, 2000
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF INVESTMENTS
MARCH 31, 2000
MARKET
SHARES COMMON STOCKS - 99.7% VALUE
BASIC MATERIALS - 6.8%
PAPER & FOREST PRODUCTS - 6.8%
10,750 Boise Cascade Corp. $ 373,563
22,250 Longview Fibre Co. 328,187
20,000 Louisiana Pacific 277,500
5,000 Weyerhaeuser Co. 285,000
1,264,250
CAPITAL GOODS - 5.6%
AEROSPACE/DEFENSE - 2.0%
9,600 Boeing 364,200
ELECTRICAL EQUIPMENT - 1.6%
5,200 Electro Scientific Industries+ 301,600
TRUCKS & PARTS - 2.0%
7,630 PACCAR Inc. 381,500
COMMUNICATION SERVICES - 8.3%
LONG DISTANCE/TELEPHONE - 1.4%
3,600 GTE Corp. 255,600
TELECOM - CELLULAR - 1.1%
4,300 Western Wireless Communications+ 196,994
TELECOM - WIRELESS - 0.9%
12,300 Metro One Telecommunications + 164,512
TELEPHONE - 4.9%
7,400 Nextlink Communications 915,288
CONSUMER CYCLICALS - 9.1%
BUILDING MATERIALS/BUILDING SUPPLY - 0.1%
216 Lowe's Companies 12,609
FOOTWEAR - 1.4%
6,400 Nike Inc. Class B 253,600
</PAGE>
<PAGE>
RETAIL - GENERAL MERCHANDISE/SPECIALTY - 7.6%
3,500 Amazon.com+ 234,500
20,000 Costco Wholesale Corp.+ 1,051,250
16,800 Hollywood Entertainment Corp. + 135,450
1,421,200
CONSUMER STAPLES - 6.0%
FOODS - 1.7%
17,816 Kroger Co. + 312,894
RESTAURANTS - 4.3%
17,900 Starbucks Corporation + 802,144
ENERGY - 2.5%
OIL - DOMESTIC - 2.5%
5,350 Atlantic Richfield Co. 454,750
FINANCE - 4.3%
BANKS - MAJOR REGIONAL - 3.0%
14,600 Banc West Corp. 288,350
15,000 Columbia Bancorp 84,375
4,200 Zions Bancorp 174,825
547,550
SAVINGS & LOAN - 1.3%
9,375 Washington Mutual Inc. 248,437
HEALTHCARE - 13.3%
BIOTECH - 0.3%
1,000 Myriad Genetics Inc.+ 60,250
DRUGS - 3.4%
10,500 Corixa Corp. + 433,125
5,500 Icos Corporation + 198,687
631,812
DRUGS-MAJOR - 9.6%
27,000 Immunex Corp. + 1,712,812
5,000 NPS Pharmaceuticals+ 75,313
1,788,125
</PAGE>
<PAGE>
TECHNOLOGY - 38.5%
COMPUTER HARDWARE & SOFTWARE SERVICES - 10.9%
4,690 Hewlett-Packard Co. 621,718
10,435 Microsoft Corp.+ 1,108,719
4,000 Webtrends Corp.+ 288,000
2,018,437
ELECTRONICS - 24.3%
12,060 Intel Corp. 1,591,166
12,000 Lattice Semiconductor + 812,250
25,700 Mentor Graphics Corp. + 388,712
5,800 Micron Technology Inc. + 730,800
13,500 Triquint Semiconductor + 4,515,178
INTERNET SOFTWARE - 3.3%
4,250 Go2net Inc. + 342,391
4,800 Realnetworks Inc. + 273,300
615,691
TRANSPORTATION - 1.9%
AIR FREIGHT/AIRLINES - 1.9%
6,800 Airborne Freight Corporation 163,200
6,150 Alaska Air Group Inc.+ 184,884
348,084
UTILITIES - 3.4%
NATURAL GAS - 3.4%
8,300 Southwest Gas Corporation 158,219
10,900 Williams Companies Inc. 478,919
637,138
Total Common Stocks (cost $10,356,915*) 99.7% 18,511,843
Other assets in excess of liabilities 0.3 63,343
Net Assets 100.0% $ 18,575,186
* Cost for Federal tax purposes is identical.
+ Non-income producing security.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
<TABLE>
<S> <C> <C> <C>
ASSETS
Investments at market value (cost $10,356,915) $ 18,511,843
Cash 56,392
Deferred organization expenses (note 2) 27,856
Receivable for Fund shares sold 16,286
Dividends receivable 7,493
Total assets 18,619,870
LIABILITIES
Management fees payable 9,641
Distribution fees payable 6,063
Payable for Fund shares redeemed 1,500
Accrued expenses 27,480
Total liabilities 44,684
NET ASSETS $ 18,575,186
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares
par value $.01 per share $ 8,149
Additional paid-in capital 10,134,328
Net unrealized appreciation on investments 8,154,928
Accumulated net realized gain on investments 277,781
$ 18,575,186
CLASS A
Net Assets $ 1,892,971
Capital shares outstanding 83,323
Net asset value and redemption price per share $ 22.72
Offering price per share (100/95.75 of $22.72 adjusted to nearest cent) $ 23.73
CLASS C
Net Assets $ 2,061,240
Capital shares outstanding 92,935
Net asset value and offering price per share $ 22.18
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) $ 22.18*
CLASS Y
Net Assets $ 14,620,975
Capital shares outstanding 638,610
Net asset value, offering and redemption price per share $ 22.89
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 194,874
Expenses:
Advisory and Administrative fees (note 3) $ 134,085
Sub-Advisory fees (note 3) 116,921
Distribution and service fees (note 3) 21,595
Legal fees 30,967
Shareholders' reports 25,856
Amortization of organization expenses (note 2) 19,720
Transfer and shareholder servicing agent fees 15,580
Audit and accounting fees 15,250
Trustees' fees and expenses 11,298
Registration fees 3,620
Custodian fees 2,425
Miscellaneous 3,995
401,312
Advisory and Administrative fees waived (note 3) (76,711)
Sub-Advisory fees waived (note 3) (59,547)
Expenses paid indirectly (note 6) (2,425)
Net expenses 262,629
Net investment loss (67,755)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 1,233,868
Change in unrealized appreciation on investments 5,038,882
Net realized and unrealized gain on investments 6,272,750
Net increase in net assets resulting from operations $ 6,204,995
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1999 1998
</CAPTION>
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment loss $ (67,755) $ -
Net realized gain (loss) from securities transactions 1,233,868 (154,745)
Change in unrealized appreciation on investments 5,038,882 (259,547)
Change in net assets from operations 6,204,995 (414,292)
DISTRIBUTIONS TO SHAREHOLDERS (note 5):
Class A Shares:
Net investment income - -
Net realized gain on investments (81,288) -
Class C Shares:
Net investment income - -
Net realized gain on investments (58,813) -
Class Y Shares:
Net investment income - -
Net realized gain on investments (504,879) -
Change in net assets from distributions (644,980) -
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold 626,528 1,204,906
Reinvested dividends and distributions 450,542 -
Cost of shares redeemed (3,778,681) (1,400,793)
Change in net assets from capital share transactions (2,701,611) (195,887)
Change in net assets 2,858,404 (610,179)
NET ASSETS:
Beginning of period 15,716,782 16,326,961
End of period $ 18,575,186 $ 15,716,782
</TABLE>
</PAGE>
See accompanying notes to financial statements.
<PAGE>
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 l iabilities 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 year ended March 31, 2000, the Fund incurred fees under the
Advisory and Administration Agreement and Sub-Advisory Agreement of $134,085 and
$116,921, respectively, of which amounts $76,711 and $59,547, 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 year ended March 31, 2000, service fees on Class A Shares
amounted to $5,587, of which the Distributor received $375.
Under another part of the Plan, the Fund is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention of the Fund's Class C shares or
servicing of shareholder accounts. These payments are made at the annual rate of
0.75% of the Fund's net assets represented by Class C Shares and for the year
ended March 31, 2000, amounted to $12,006. In addition, under a Shareholder
Services Plan, the Fund is authorized to make service fee payments with respect
to Class C Shares to Qualified Recipients for providing personal services and/or
maintenance of shareholder accounts. These payments are made at the annual rate
of 0.25% of the Fund's net assets represented by Class C Shares and for the year
ended March 31, 2000, amounted to $4,002. The total of these payments with
respect to Class C Shares amounted to $16,008, of which the Distributor received
$7,491.
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 year ended March 31, 2000, total commissions on sales of Class A Shares
amounted to $5,494, of which the Distributor received $927.
</PAGE>
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
For the year ended March 31, 2000, purchases of securities and proceeds
from the sales of securities aggregated $6,358,694 and $9,798,641, respectively.
At March 31, 2000, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$8,853,025 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $698,097, for
a net unrealized appreciation of $8,154,928.
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.
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>
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 14,162 $ 269,760 6,875 $ 103,021
Reinvested dividends and
distributions 1,580 29,989 - -
Cost of shares redeemed (61,180) (1,277,766) (38,529) (612,838)
Net change (45,438) (978,017) (31,654) (509,817)
CLASS C SHARES:
Proceeds from shares sold 14,162 267,567 34,110 535,043
Reinvested dividends and
distributions 185 3,437 - -
Cost of shares redeemed (7,534) (136,326) (5,770) (94,346)
Net change 6,813 134,678 28,340 440,697
CLASS Y SHARES:
Proceeds from shares sold 4,406 89,201 33,127 566,842
Reinvested dividends and
distributions 21,827 417,116 - -
Cost of shares redeemed (125,100) (2,364,589) (42,384) (693,609)
Net change (98,867) (1,858,272) (9,257) (126,767)
Total transactions in Fund
shares (137,492) $ (2,701,611) (12,571) $ (195,887)
</TABLE>
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A CLASS C
PERIOD(1) PERIOD(1)
YEAR ENDED MARCH 31, ENDED YEAR ENDED MARCH 31, ENDED
2000 1999 1998 MARCH 31, 1997 2000 1999 1998 MARCH 31, 1997
</CAPTION>
<S> <C> <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 loss (0.10) - - - (0.24) - - -
Net gain (loss) on securities
(both realized and unrealized) 7.05 (0.43) 3.94 0.95 6.90 (0.55) 3.81 0.95
Total from Investment Operations 6.95 (0.43) 3.94 0.95 6.66 (0.55) 3.81 0.95
Less Distributions (note 5):
Dividends from net investment
income - - - - - - - -
Distributions from capital gains (0.69) - - - (0.69) - - -
Total Distributions (0.69) - - - (0.69) - - -
Net Asset Value, End of Period $22.72 $16.46 $16.89 $12.95 $22.18 $16.21 $16.76 $12.95
Total Return (not reflecting sales
charge) (%) 43.07 (2.55) 30.42 7.92+ 41.94 (3.28) 29.42 7.92+
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 1,893 2,119 2,709 1,615 2,061 1,396 968 350
Ratio of Expenses to Average
Net Assets (%) 1.67 1.92 1.77 1.34* 2.42 2.65 2.53 1.38*
Ratio of Net Investment Loss
to Average Net Assets (%) (0.53) (0.25) (0.18) (0.16)* (1.30) (1.00) (0.96) (0.16)*
Portfolio Turnover Rate (%) 37.46 26.62 29.38 3.53+ 37.46 26.62 29.38 3.53+
The expense and net investment loss ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees and the Adviser's
voluntary expense reimbursement were:
Ratio of Expenses to Average
Net Assets (%) 2.44 2.37 2.76 4.63* 3.20 3.09 3.53 5.39*
Ratio of Net Investment Loss to
Average Net Assets (%) (1.30) (0.70) (1.17) (3.45)* (2.08) (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 (%) 1.65 1.80 1.75 1.18* 2.40 2.54 2.51 1.22*
</TABLE>
(1) For the period August 13, 1996 (commencement of operations) through March
31, 1997.
+ Not annualized.
* Annualized.
</PAGE>
<PAGE>
AQUILA CASCADIA EQUITY FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS Y
PERIOD(1)
YEAR ENDED MARCH 31, ENDED
2000 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 loss (0.05) - - -
Net gain (loss) on securities (both realized and unrealized) 7.08 (0.39) 3.98 0.96
Total from Investment Operations 7.03 (0.39) 3.98 0.96
Less Distributions (note 5):
Dividends from net investment income - - - -
Distributions from capital gains (0.69) - - -
Total Distributions (0.69) - - -
Net Asset Value, End of Period $22.89 $16.55 $16.94 $12.96
Total Return (not reflecting sales charge) (%) 43.32 (2.30) 30.71 8.00+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 14,621 12,202 12,649 7,393
Ratio of Expenses to Average Net Assets (%) 1.42 1.66 1.52 1.40*
Ratio of Net Investment Loss to Average Net Assets (%) (0.28) - 0.07 (0.16)*
Portfolio Turnover Rate (%) 37.46 26.62 29.38 3.53+
The expense and net investment loss ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees and the Adviser's
voluntary expense reimbursement were:
Ratio of Expenses to Average Net Assets (%) 2.20 2.11 2.51 4.38*
Ratio of Net Investment Loss to Average Net Assets (%) (1.06) (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 (%) 1.40 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>
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 March 31, 2000, $192,744 of dividends paid by
Aquila Cascadia Equity Fund, constituting 29.88% of total dividends paid during
fiscal 2000, were exempt-interest dividends and the balance of the dividends
paid was ordinary dividend income.
The percentage of investment company taxable income eligable for the
dividends received deduction available for certain corporate shareholders with
respect to the fiscal year ended March 31, 2000 is 100%.
Prior to January 31, 2000, shareholders were mailed IRS Form 1099-DIV which
contained information on the status of distributions paid for the 1999 CALENDAR
YEAR.
</PAGE>
