AQUILA ROCKY MOUNTAIN EQUITY FUND
N-30B-2, 1996-03-08
Previous: NATIONWIDE VARIABLE ACCOUNT 5, N-30D, 1996-03-08
Next: TIFF INVESTMENT PROGRAM INC, NSAR-B/A, 1996-03-08



(fund logo)

       

                          AQUILA ROCKY MOUNTAIN EQUITY FUND

                                 ANNUAL REPORT

                                                                              
                                                           February 22, 1996

Dear Investor:

      We are pleased to provide you with this Annual Report for the first
full fiscal year  of operation of Aquila Rocky Mountain Equity Fund. 

STRONG REGIONAL ECONOMIC GROWTH

      The  Rocky Mountain  region of our  country continued to  experience
strong economic growth during 1995. While the  rate and depth  of this growth
varied from state to state  within the eight states comprising the Rocky
Mountain area, it still provided a number and variety of excellent investment
opportunities. 

      The chart below illustrates the allocation of the Fund's assets within
the region.

<TABLE>
<CAPTION>
      Percent of Portfolio By State
     <S>                  <C>
      Colorado             31.39%
      Arizona              22.49%
      Utah                 22.00%
      Nevada               13.52%
      Idaho                 3.07%
      New Mexico            3.02%
      Montana               0.97%
      Cash & Other Assets   3.54%
</TABLE>

BASIC INVESTMENT PHILOSOPHY

     The basic investment philosophy used in the management of the Fund is
to seek out in different industries a variety of attractive growth companies
which have equity-oriented  securities that are undervalued  in relationship
to their intrinsic value and also the projected growth rate of the company. 

     The  Fund's Investment Adviser, KPM  Investment Management, Inc., has
followed this value-oriented investment approach since the Fund's inception
in July, 1994.
<PAGE>

     We fully realize that with  this value-oriented approach, it  is
difficult to put a specific timetable upon when the  desired level of capital
appreciation of the securities might  occur. However,  we are convinced that
pursuit of this discipline will tend to mitigate against significant adverse
price action in uncertain and declining market conditions. 

     All of us should be aware that equity markets possess a degree of
volatility to them substantially different and greater than the market of
fixed-income securities.  We have to live with this situation. 

     What  we  seek to  do,  however,  through pursuing a value-oriented
approach in selection of  securities for the  Fund is  to lessen the level of
volatility through the purchase  of undervalued securities. The normal
process of  selling overvalued securities and  replacing  them  with 
undervalued  ones should  result  in  lower Fund share price volatility. 

     Our  objective is to produce, over a  reasonable length time frame,
highly desirable  absolute capital appreciation results. 

     We recognize that it is commendable to produce good performance 
results relative to various indexes or  some other form of measurement.
However, what we are striving for with the Fund is achievement of
consistency  in absolute capital appreciation.  It is absolute
results that one can take to the bank and spend not relative performance. 

SECURITY SELECTION

     There is a good variety  of different type industries within the 
Rocky Mountain region.  And, a significant number of companies within these
industries many of which are experiencing healthy growth. Our research has
convinced us that there are more than enough alternative investment
opportunities to achieve significant capital appreciation. 

     Many  of the companies whose securities we  might select are less
well-known outside of this particular  region and  may  well have smaller
market capitalization than some nationally-known firms.  This often times
gives  us the  chance to secure participation at bargain prices before the
companies are "discovered" by others. 

    The  underlying economic  growth characteristics  of the  Rocky
Mountain region are broad-based.  It thus offers the Fund's  management good
prospects for you to participate  effectively in the thriving and dynamic
character of the Rocky Mountain region. 

                                 2
<PAGE>

     We have listed  below the 10 largest  investments held by  the Fund
at December 31, 1995 and the Rocky Mountain states in which these companies
are located.
           
<TABLE>
          <S>                                           <C>      <C>
           Dial Corporation  . . . . . . . . . . . .     5.12%    Arizona
           Prima Energy Corp.  . . . . . . . . . . .     4.88%    Colorado
           American Stores Company . . . . . . . . .     4.62%    Utah
           Finova Group Inc. . . . . . . . . . . . .     4.45%    Arizona
           Jackpot Enterprises . . . . . . . . . . .     4.22%    Nevada
           Novell Inc. . . . . . . . . . . . . . . .     3.86%    Utah
           Pinnacle West Capital . . . ... . . . . .     3.31%    Arizona
           Giant Industries, Inc.  . . . . . . . . .     3.17%    Arizona
           International Game Technology . . . . . .     3.13%    Nevada
           First Security Corp.  . . . . . . . . . .     3.10%    Utah
</TABLE>

     What this means is that there is a premium placed on "doing one's 
homework."  Having the Fund's portfolio manager based in Denver, the heart of
the Rocky Mountain region, backed-up by an in-depth and  experienced KPM
Investment  Management team in  Omaha, aids immeasurably in uncovering sound
equity security selections. 

INVESTMENT RESULTS

     Over the course  of 1995,  the share price of Aquila Rocky Mountain
Equity Fund experienced a total return of 19.7%. While this may not be as
significant as  some indices over this same time period, it is still highly
commendable. 

     Further, it certainly validates the fact that good sound capital
appreciation can be achieved through investments in Rocky Mountain companies. 

     Since January 1, 1996, the equity markets have continued to advance,
but with a fair amount of fluctuation. 

     We are pleased to report to you that the Fund has gained an additional
4.6% in price appreciation as of the February 22, 1996 date of this Report
letter. 

YOUR INVESTMENT APPRECIATED 

     We thank you for the confidence you have placed through your 
investment in Aquila Rocky Mountain Equity Fund. 

     Every effort will be expended to merit your continued trust.

                                          Sincerely,
                                          /s/ Lacy B. Herrmann
                                          Lacy B. Herrmann
                                          President and Chairman
                                          of the Board of Trustees
                           3
<PAGE>

              MANAGEMENT DISCUSSION OF FUND PERFORMANCE

     The  graph below illustrates  the value of an initial $10,000 
investment in Aquila Rocky Mountain Equity Fund at inception of the Fund on
July 22, 1994  and subsequently through the Fund's latest fiscal year-end, 
December 31, 1995 as compared with a hypothetical similar  size investment
in the  Russell 2000 Stock Index  (the "Index") over that same period.  The
total return of  the Fund is shown after deduction of the  maximum sales
charge of 4.75% at the  time of initial investment, and also reflects
deduction of the Fund's  annual operating expenses  and reinvestment of
dividends and capital gains distributions without sales charge.  On the
other hand,  the Index does not reflect any sales charge nor operating 
expenses, but does reflect reinvestment of dividends. 

     It  should  be  specifically  noted,  that  the  Index  is 
nationally-oriented and consisted, over the  period covered by  the graph,
of  an unmanaged group of 2000  equity securities of issuers throughout the
United States, mostly of companies having relatively small  capitalizations.
However, the Fund's investment portfolio consisted of a significantly lesser
number of equity securities principally of companies within the eight state 
Rocky Mountain region of  the country over  the same period. 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 the
nationally-oriented Index. 

     Consequently, a portion of the difference in the  performance of the
Fund versus the Index can  be attributed to  the different characteristics
of the regional market of the securities in the Fund's portfolio as compared
with the national orientation of securities in the Index.  Additionally,
some of the difference in performance of the Index versus the Fund can be
attributed to the fact that there is no initial sales charge applicable to
the Index, nor are there annual operating expenses as is the case with the
Fund.

     The  Fund has been  managed, since  its inception,  to provide capital
appreciation through selection of equity-oriented securities on a value
basis. 

     As can be observed, the pattern of the Fund's results and that of the
Index over the period since inception of the Fund track in a reasonably
similar pattern, even though they are not entirely comparable in character. 

                                     4
<PAGE>

<TABLE>
<CAPTION>
                PERFORMANCE COMPARISON

            Russell 2000      Fund After Sales
            Stock Index       Charge and Expenses
     <S>      <C>              <C>
      7/94     $ 10000          $  9525
      9/94       10521             9383
      12/94      10325             9217
      3/95       10801             9883
      6/95       11813            10517
      9/95       12981            11083
      12/95      13262            11031
</TABLE>

<TABLE>
<CAPTION>
              FUND'S AVERAGE ANNUAL TOTAL RETURN

      For the Period Ended
      December 31, 1995         1 Year     Life of Fund Since 7/22/94
      <S>                      <C>        <C>              
      Including Sales Charge
      and Expenses              14.01%     7.07%
</TABLE>

      PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS



     Aquila Rocky Mountain Equity  Fund achieved a total  return of 19.7%
for the twelve months ended  December 31, 1995, while the Russell 2000 Index
returned 28.4%. The relative under performance of the Aquila Rocky Mountain
Equity Fund compared to the Index was the result of several different
factors. One key factor is that while the Index is the closest comparative
measurement tool of the various indices available, it still does not
represent a true correlation  with the regional characteristics of equity 
securities in the Rocky Mountain region. 

     The  bull market of  1995 was  led by  large capitalization  "Blue
Chip"  stocks and technology  issues.   Large  company  stocks  and  indices
generally outperformed  small capitalization stocks, as has been widely
reported.  This size effect was reflected in the portfolio's under
performance since the average size of Rocky Mountain
domiciled companies is relatively small. 

     Our overall technology  exposure was modest and our results in this
industry  were mixed.  Our holdings of Novell and Artisoft (both are
manufacturers of networking software) significantly lagged the share price
advances of chip makers, while Clinicom and Megahertz  were acquired by
other companies, resulting in significant capital gains. 

      Oil and gas prices in  the Rocky Mountains remained relatively low 
throughout 1995, which depressed the  earnings of energy  exploration
companies. This is reflected in the relative  under-performance of the group.
Our holdings include three exploration companies (Prima Energy,  Barrett 
Resources, Tipperary  Corp.), a  refiner (Giant Industries)  and a service
company  (KN Energy).  As value  managers, we  are happy  to
continue  holding the shares of these  energy companies since  we believe
they  are under-valued in relation  to their intrinsic value and the
projected long-term worldwide demand for oil and gas. 

     Population growth  in the Rocky Mountain  region has increased the 
demand for goods and  services  which, in  turn, contributed  to the 
success  of several industry groups, notably  utilities and banks. 
Specifically, Pinnacle West and  Idaho Power both performed  well while U.S.
West's stock

                                  5
<PAGE>
price has benefitted from the issuance of the tracking stock,  U.S. West
Media Group.  Zions Bancorp and West One both turned in good stock
price results as earnings continued to improve.  West One was acquired by
U.S. Bancorp late  in the year resulting  in a significant price  gain, and
we  sold our shares.  Our shares in Finova, a finance company, also did
well. 

     The  best performing sector of the portfolio  in 1995 was healthcare.
In particular, our positions in Utah Medical Products, Ballard  Medical
Products, and Research Industries Corp. all turned in impressive price
performances. 

     In the  cable industry, continued legislative uncertainty regarding
deregulation and competing technologies dampened  the price  returns of TCI, 
Jones Intercable, and  United International  Holding,  despite strong growth
prospects  for  these companies.  We  are optimistic  that the  recent 
passage  of  legislation  allowing deregulation  of  cable, telephone, and
long distance should allow these cable companies to compete successfully in
new markets. 

     We will  continue to apply  our long-term value  criteria to  the
universe of Rocky Mountain  companies in our search to  find securities that
we believe are under-valued in the marketplace.  We are optimistic that 1996
will bring continuing economic growth to the Rocky  Mountains  region;  and 
that  this  growth  will  create  new equity investment opportunities. 

                               6
<PAGE>

KPMG Peat Marwick LLP
Certified Public Accountants

                    INDEDPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders of
Aquila Rocky Mountain Equity Fund:

     We have audited the accompanying statement of assets and liabilities
of Aquila Rocky Mountain Equity Fund, including the statement of investments,
as of December 31, 1995, the related statement of operations for the year 
then ended, and the statements of changes in net assets and the financial 
highlights for the year then ended and for the period July 22, 1994
(commencement of operations) through December 31, 1994.  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. Our procedures included confirmation of
securities owned as of December 31, 1995, 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 Rocky Mountain Equity Fund as of December 31, 1995,
the results of its operations for the year then ended, and the changes in 
its net assets and the financial highlights for the year then ended and for 
the period July 22, 1994 (commencement of operations) through December 31,
1994 in conformity with generally accepted accounting principles.


                                                 KPMG Peat Marwick LLP

New York, New York
February 2, 1996                                                        
                                     7
<PAGE>

<TABLE>
<CAPTION>
                    AQUILA ROCKY MOUNTAIN EQUITY FUND
                        STATEMENT OF INVESTMENTS
                          DECEMBER 31, 1995
                                                                                
                                                         MARKET
      SHARES     COMMON STOCKS                           VALUE
     <C>       <S>                                   <C>
                Basic Industry   1.6% 
       400      Barrick Gold Corp.                     $10,550
       300      Cyprus Amax Minerals Co.                 7,838
       200      Newmont Mining                           9,050
                                                        27,438 

                Consumer Cyclical   14.0% 
      2,000     BMC West Corp.#                         29,500
      1,200     Circus Circus Enterprises Inc.#         33,450
      5,000     International Game Technology           54,375
      6,300     Jackpot Enterprises                     73,238
        450     Mirage Resorts#                         15,525
      5,000     Mity Lite, Inc.#                        36,875
                                                       242,963 

                Consumer Non-cyclical   32.7% 
       3,000    American Stores Company                 80,250
       1,000    Ballard Medical Products                17,875
       3,000    Dial Corp.                              88,875
       2,700    Franklin Quest#                         52,650
       1,500    Inter-Tel Inc.#                         23,156
       2,800    Jones Intercable Inc. Class A#          34,650
         300    Jones Intercable Inc.#                   3,750
         500    Liberty Media Group Class A#            13,438
       2,500    Rocky Mountain Chocolate Factory#       30,000
       1,800    Rural/Metro Corp.#                      40,725
       1,500    Sierra Health Services Inc.#            47,625
       2,000    Tele-Communications Inc. Class A#       39,750
       1,400    U.S. West Media Group#                  26,600
       1,300    United International Holding, Inc.
                  Class A#                              19,175
       2,500    Utah Medical Products#                  49,531
                                                       568,050 

                Energy   9.3% 
         300    Barrett Resources Corp.#                 8,812
       4,500    Giant Industries, Inc.                  55,125
       6,400    Prima Energy Corp.#                     84,800
       2,500    Tipperary Corp.#                        12,187
                                                       160,924 
</TABLE>
                                  8
<PAGE>
<TABLE>
<CAPTION>
                      AQUILA ROCKY MOUNTAIN EQUITY FUND
                     STATEMENT OF INVESTMENTS (continued)

                                                       MARKET
      SHARES     COMMON STOCKS                         VALUE
     <C>        <S>                                    <C>    
                 Financial   15.9% 
       1,600     Finova Group Inc.                       $77,200
       1,400     First Security Corp.                     53,900
       4,375     First State Bancorp                      52,500
         900     Guaranty National Corp.                  13,837
       2,800     Life Partners Group Inc.                 38,150
         800     Security Bancorp                         16,800
         300     Zions Bancorp                            24,075
                                                         276,462 

                 Technology   10.4% 
       4,000     Analytical Surveys Inc.#                 39,000
       4,000     Artisoft Inc.#                           25,250
         480     HBO & Company                            36,780
         300     Micron Technology                        11,887
       4,700     Novell Inc.#                             66,975
                                                         179,892 

                 Transportation   1.3% 
       1,500     Swift Transportation#                     22,875 

                 Utilities   11.3% 

         400     Idaho Power Co.                          12,000
       1,800     KN Energy                                52,425
       2,000     Pinnacle West Capital                    57,500
         700     Public Service Co. Colorado              24,763
       1,400     U.S. West Communications Group           50,050
                                                         196,738

                 Total Common Stocks - 96.5%
                    (Cost $1,542,759*)                 1,675,342
                 Other assets in excess of 
                    liabilities - 3.5%                    61,386
                 Net Assets - 100%                    $1,736,728 
<FN>
* Cost for Federal tax purposes is identical. 
</FN>
<FN>
# Non-income producing security. 
</FN>
</TABLE>
                                 9
<PAGE>
<TABLE>
<CAPTION>
                AQUILA ROCKY MOUNTAIN EQUITY FUND
                STATEMENT OF ASSETS AND LIABILITIES
                          December 31, 1995

<S>                                                            <C>
ASSETS
Investments at market value (identified cost - $1,542,759)         $1,675,342
Cash                                                                   30,177
Deferred organization expenses (note A)                                53,356
Due from Administrator for reimbursement of expenses                   14,073
Dividends receivable                                                    1,902

   Total assets                                                     1,774,850

LIABILITIES

Payable for Fund shares redeemed                                       20,744
Accrued expenses                                                       16,201
Distribution fees payable                                               1,177

   Total liabilities                                                   38,122


NET ASSETS (equivalent to $13.13 per share on 132,320 shares             
  outstanding)                                                     $1,736,728
  
  Net Assets consist of:

  Capital Stock - Authorized an unlimited number of shares,
       par value $.01 per share                                        $1,323
  Additional paid-in capital                                        1,586,668
  Undistributed net realized gain on investments                       16,154
  Net unrealized appreciation on investments                          132,583
                                                                   $1,736,728

  Net Asset Value, redemption price per share                          $13.13

   Offering price per share (100/95.25 of $13.13 adjusted to
     nearest cent)                                                     $13.78

</TABLE>
             See accompanying notes to financial statements.
                                       10
<PAGE>
<TABLE>
<CAPTION>
                     AQUILA ROCKY MOUNTAIN EQUITY FUND
                         STATEMENT OF OPERATIONS
                   For the Year Ended December 31, 1995
<S>                                               <C>             <C>
INVESTMENT INCOME:
   Dividend income                                   $15,205
   Other income                                        1,035          $16,240

EXPENSES:
   Investment Adviser fees (note B)                   $8,679
   Administrator fees (note B)                         9,918
   Legal fees                                         20,767
   Trustees' fees and expenses                        16,947
   Registration fees                                  15,058
   Amortization of organization expenses (note A)     15,014
   Shareholders' reports and proxy statements         10,785
   Transfer and shareholder servicing agent fees      10,677
   Audit and accounting fees                           9,825
   Distribution fees (note B)                          3,099
   Custodian fees (note E)                             1,517
   Miscellaneous                                       7,684
                                                     129,970

   Investment Adviser fees waived (note B)           (8,679)
   Administrator fees waived (note B)                (9,918)
   Reimbursement of expenses by Administrator
     (note B)                                       (86,185)
   Expenses paid indirectly (note E)                 (1,448)

      Net expenses                                                     23,740
      Net investment loss                                             (7,500)

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
 
  Net realized gain from securities transactions      32,529
  Change in unrealized appreciation on investments   149,483
  Net realized and unrealized gain on investments                     182,012
  Net increase in net assets resulting from
    operations                                                       $174,512

</TABLE>
           See accompanying notes to financial statements.
                                 11
<PAGE>

<TABLE>
<CAPTION>
                    AQUILA ROCKY MOUNTAIN EQUITY FUND
                    STATEMENT OF CHANGES IN NET ASSETS
  
                                                  Year ended     Period ended
                                                  December 31,   December 31,  
                                                  1995           1994*
<S>                                              <C>             <C>
OPERATIONS:
  Net investment loss                              $(7,500)       $    ---
  Net realized gain from securities transactions     32,529            314
  Unrealized appreciation (depreciation) on
    investments                                     149,483         (16,900)

  Net increase (decrease) in net assets
    resulting from operations                       174,512         (16,586)

DISTRIBUTIONS TO SHAREHOLDERS (note D):
  Net investment income ($0.0054 and $-0- per
    share, respectively)                              (721)            ---
  Net realized gain from securities transactions
    ($0.1005 and $-0- per share, respectively)      (13,420)           ---    
 
 Total distributions                                (14,141)           ---
      
    Net increase (decrease) from investment
            activities                              160,371         (16,586)
</TABLE>
<TABLE>
<CAPTION>
FUND SHARE TRANSACTIONS:
                                 Shares                             
                         Year ended   Period ended
                         December     December
                         31, 1995     31, 1994*

<S>                      <C>          <C>           <C>            <C>
Shares sold               106,291        42,183      1,330,661       479,783
Shares issued through
   reinvestment of
   dividends and
   distributions              985           ---         12,828           ---   
Shares redeemed          (22,898)        (2,990)     (297,410)       (32,919)
 
Increase in shares
   and net assets
   derived from Fund
   share transactions      84,378         39,193     1,046,079        446,864

Total increase in
   net assets                                        1,206,450        430,278

NET ASSETS:
  Beginning of period                                  530,278        100,000
  End of period                                     $1,736,728       $530,278

<FN>
*  For the period from July 22, 1994 (commencement of operations) to December
31, 1994.
</FN>
</TABLE>
                See accompanying notes to financial statements.
                                      12
<PAGE>

                     AQUILA ROCKY MOUNTAIN EQUITY FUND
                       NOTES TO FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Aquila Rocky Mountain Equity  Fund (the "Fund"), a diversified, 
open-end investment company, was organized on November 3, 1993 as a
Massachusetts business trust and commenced operations on July 22, 1994.
The Fund is authorized to issue an unlimited number of shares and, since
its inception, has  issued only one class  of shares, to which these
financial statements relate.  It is  anticipated that  the Fund will begin
offering two additional classes of shares during the  second calendar
quarter of 1996. The shares outstanding at that time will be designated as
Class A shares and, as is the case now, will be sold with a front-end sales
charge  and bear a  service fee.  Class C shares will be sold with no
front-end sales charge but will be assessed a contingent deferred sales
charge if redeemed within 18 months from the time of purchase and a level
charge for service and distribution fees.  Class Y  shares will be offered
only to institutions acting for investors in a fiduciary, advisory, agency
custodial or similar capacity,  and will not be  offered directly to retail
customers, and will be sold at net asset value with no sales charge, no
redemption fee, no  contingent deferred sales charge and no  service or
distribution fees.  All classes of shares will have identical rights and
privileges except 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 privilege of each class. 

     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. 

(1)   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. 

(2)   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. 

(3)   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. 

(4)   Organization expenses: The Fund's organizational expenses have been
      deferred and are being amortized on a straight-line basis over five
      years. 

                                      13
<PAGE>
                       AQUILA ROCKY MOUNTAIN EQUITY FUND
                   NOTES TO FINANCIAL STATEMENTS (continued)
 
(5)   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. 

NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:

     Management  affairs  of  the Fund  are  conducted  through  two
separate  management arrangements. 

     KPM Investment Management, Inc. (the "Adviser"), a wholly owned 
subsidiary of Kirkpatrick, Pettis, Smith, Polian Inc., serves as
Investment Adviser to  the  Fund.  Kirkpatrick, Pettis is, in turn, a
subsidiary of the nationally oriented Mutual of Omaha Insurance Company.
In this role, under an Investment Advisory Agreement, the Adviser supervises
the Fund's investments and provides various services to the Fund for which
it 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 over $50 million. 

     The Fund also has a Sub-Advisory and Administration Agreement with
Aquila Management Corporation (the "Sub-Adviser"), the Fund's founder and
sponsor. Under this Agreement, the Sub-Adviser provides such  advisory
services to  the Fund, in  addition to those services provided by the
Adviser,  as the Sub-Adviser deems  appropriate. Besides its sub-advisory
services, it also provides all  administrative services, other than those
relating to the management of the Fund's  investments. 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 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; 0.80 of 1% on the first $15 million; 0.65 of 1% on the next $35
million and 0.50 of 1% on the excess over $50 million. 

     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. 

     The Adviser and the Sub-Adviser  each agrees that the above  fees
shall be reduced, but not below zero, by an amount equal to its pro-rata
portion (determined on the basis of the respective fees computed as
described above) of the amount, if any, by which the total expenses of the
Fund in any fiscal year, exclusive of taxes, interest and brokerage fees,
shall exceed the most restrictive  expense limitation imposed upon the Fund 
in the States in which  shares are then  eligible for sale.  At the present
time none of the States in which the Fund's shares are sold have any such
limitation. 
                                  14
<PAGE>
                       AQUILA ROCKY MOUNTAIN EQUITY FUND
                      NOTES TO FINANCIAL STATEMENTS (continued)

     For the year ended December 31, 1995,  the Fund incurred fees 
under the Advisory Agreement and the Sub-Advisory Agreement of $8,679 and
$9,918, respectively.  However, all of these fees were voluntarily waived.
Additionally, the Sub-Adviser voluntarily agreed to reimburse the Fund for
other expenses during this period in the amount of $86,185. 

     Under a Distribution Agreement, Aquila Distributors, Inc. (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 general Rocky Mountain region,
with the bulk of sales commissions  inuring to such dealers.  However, for
the year ended December 31, 1995, the Distributor received sales commissions
in the amount of $1,304. 

     The  Fund  adopted a  Distribution  Plan (the  "Plan")  pursuant to 
Rule 12b-1 (the "Rule") under  the Investment Company  Act of 1940.  The
Plan authorizes the Fund to make service fee  payments at the rate of 0.25%
of the average annual net assets of the Fund to broker-dealers or others 
selected by 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.  For the year ended December 31, 1995,
service fees totaled $3,099, of which the Distributor received $371.
Specific details about the Plan are more fully defined in the Fund's
Prospectus and Statement of Additional Information. 

NOTE C - PURCHASES AND SALES OF SECURITIES:

     For the  year ended December 31, 1995, purchases of securities and
proceeds from the sales of securities aggregated $1,199,635 and $162,369,
respectively. 

     At  December 31, 1995, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over  tax cost
amounted to $251,257 and aggregate gross unrealized depreciation  for all
securities in which there is an excess of tax cost over market value amounted
to $118,674, for a net unrealized appreciation of $132,583. 

NOTE D - DISTRIBUTIONS:

     The Fund declares annual  distributions to shareholders from net 
investment income, if any, and from  net realized capital gains, if any.
Distributions are recorded by the Fund  on the ex-dividend  date and paid
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. 

NOTE E - 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.  During

                                15
<PAGE>
                    AQUILA ROCKY MOUNTAIN EQUITY FUND
                 NOTES TO FINANCIAL STATEMENTS (continued)

the year ended December 31, 1995,  the Fund's custodian fees amounted
to  $1,517, of which $1,448 was offset by such credits. The Fund could
have invested its cash balances in an income-producing  asset if it had
not agreed to a reduction in fees under the expense offset arrangement
with the custodian.

                                16
<PAGE>
<TABLE>
<CAPTION>
                            AQUILA ROCKY MOUNTAIN EQUITY FUND
                                  FINANCIAL HIGHLIGHTS
   
                                                  Year ended     Period ended
                                                  December 31,   December 31,
                                                  1995           1994**

For a share outstanding throughout each period
<S>                                               <C>             <C>
Net Asset Value, Beginning of Period                 $11.06           $11.43

Income from Investment Operations:
  Net investment income (loss)                       (0.07)             ---
  Net gain (loss) on securities (both realized
    and unrealized)                                    2.25           (0.37)
  Total from Investment Operations                     2.18           (0.37)

Less Distributions (note D):
  Dividends from net investment income                 (.01)            ---
  Distributions from capital gains                     (.10)            ---
    
  Total Distributions                                  (.11)            ---    
      
Net Asset Value, End of Period                        $13.13          $11.06

Total Return (not reflecting sales load)              19.68%         (3.24)%+ 

Ratios/Supplemental Data
  Net Assets, End of Period (in thousands)            $1,737           $530
  Ratio of Expenses to Average Net Assets              1.91%          1.19%*
  Ratio of Net Investment Loss to Average
    Net Assets                                       (0.60)%            ---
  Portfolio Turnover Rate                             15.14%           2.95%+ 

<CAPTION> 
Net investment income (loss) per share and the ratios of income and
expenses to average net assets without the Adviser's and Administrator's
voluntary waiver of fees, the Administrator's voluntary expense
reimbursement and the expense offset in custodian fees for uninvested cash
balances would have been:
<S>                                                 <C>           <C>
  Net Investment Income (loss)                        $(1.12)       $  ---
  Ratio of Expenses to Average Net Assets #            10.48%        18.20%*
  Ratio of Net Investment Income to Average Net
    Assets                                            (9.17)%          ---
      
<FN>
+  Not annualized
</FN>
<FN>
*  Annualized
</FN>
<FN>
#  These ratios were annualized based on average net assets of $1,239,752 
   and $453,768, respectively.  In general, as the Fund's net assets
   increase, the expense ratio will decrease.
</FN>
<FN>
** For the period from July 22, 1994 (commencement of operations) to December
   31, 1994. 
</FN>
</TABLE>
             See accompanying notes to financial statements.
                                   17
<PAGE>
                         

REPORT ON THE SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)

     A Special Meeting of Shareholders of the Fund was held on November
27, 1995.  At the meeting, the shareholders voted  on and approved an
amendment to the Fund's Declaration of Trust to authorize the creation of
additional classes of shares (votes for:  74,541 (94.3%); votes against:
2,313 (2.9%); abstentions: 2,191 (2.8%); broker non-votes: 0).* 

___________
*  On the record date for this meeting, 140,687 shares of the Trust were
outstanding and entitled to vote.  The holders of 79,045 shares (56.2%)
entitled to vote were present in person or by proxy at the meeting. 







FEDERAL TAX STATUS OF 1995 DISTRIBUTIONS (UNAUDITED)

     The dividend from net investment income of $0.0054 per share and
the distribution from net realized short-term gain of $0.0392 per share,
paid on December 27,  1995, are taxable to shareholders in 1995 as ordinary
income. 

     The distribution from net realized long-term gain of $0.0613 per
share,  paid on December 27, 1995,  is designated as a "capital gain
dividend"  and is  taxable to shareholders as long-term capital gain. 

     Prior to January 31, 1996, shareholders were mailed IRS Form 
1099-DIV  which contained information on the status of distributions paid
for the 1995 CALENDAR YEAR.
                             18
<PAGE>

INVESTMENT ADVISER

   KPM INVESTMENT MANAGEMENT, INC.
   A Mutual of Omaha Company
   10250 Regency Circle, Suite 200
   Omaha, Nebraska 68114
              and
   One Norwest Center
   1700 Lincoln Street
   Denver, Colorado 80203

SUB-ADVISER AND ADMINISTRATOR

    AQUILA MANAGEMENT CORPORATION
    380 Madison Avenue, Suite 2300
    New York, New York 10017

BOARD OF TRUSTEES

    Lacy B. Herrmann, Chairman
    Tucker Hart Adams
    Arthur K. Carlson
    R. Thayne Robson

OFFICERS 

    Lacy B. Herrmann, President
    W. Dennis Cheroutes, Senior 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

    ADMINISTRATIVE DATA
        MANAGEMENT CORP.
    581 Main Street
    Woodbridge, New Jersey 07095-1198

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.


          Annual
          Report

          December 31, 1995

          AQUILA ROCKY MOUNTAIN EQUITY FUND
          (logo)

          A capital appreciation investment
          (picture of eagle>

          One of the
          AQUILAsm Group of Funds


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission