AQUILA ROCKY MOUNTAIN EQUITY FUND
Supplement to the prospectus
for Class A and Class C shares dated April 30, 1996
previously supplemented May 1, 1996
The following material is added to "Highlights":
Class A Shares and Class C Shares of the Fund are only offered for sale
in certain states. (See "How to Invest in the Fund.") If shares of the Fund
are sold outside those states the Fund may be required to redeem them.
The following material is added to "How to Invest in the Fund":
At the date of this supplement, Class A Shares and Class C Shares of
the Fund are available only in the following states: Arizona, Colorado,
District of Columbia, Hawaii, Idaho, Kentucky, Montana, Nebraska, Nevada,
New Jersey, New Mexico, Ohio, Oregon, Utah and Wyoming. If you do not reside
in one of these states you should not purchase shares of the Fund. If shares
are sold outside of these states the Fund can redeem them. Such a redemption
may result in a loss to you and may have tax consequences.
The date of this supplement is December 27, 1996
<PAGE>
Prospectus
Aquila Rocky Mountain Equity Fund
[LOGO]
380 Madison Avenue April 30, 1996
Suite 2300 as supplemented May 1, 1996
New York, New York 10017
800-762-5955 Class A Shares
212-697-6666 Class C Shares
Aquila Rocky Mountain Equity Fund (the "Fund") is a mutual fund
whose objective is capital appreciation. (See "Investment of the
Fund's Assets.") It seeks to achieve its objective through
investment in securities (primarily equity securities) of
companies having a significant business presence in the general
Rocky Mountain region of our country. See "Investment of the
Fund's Assets."
The Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information dated April 30, 1996 about the Fund (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request
to Administrative Data Management Corp., the Fund's Shareholder
Servicing Agent, at the address given below, or by calling the
telephone number(s) given below. The Additional Statement
contains information about the Fund and its management not
included in the Prospectus. The Additional Statement is
incorporated by reference in its entirety in the Prospectus. Only
when you have read both the Prospectus and the Additional
Statement are all material facts about the Fund available to you.
SHARES OF THE FUND ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY ANY BANK. SHARES OF THE FUND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL GOVERNMENT
OR ANY STATE.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact
The Fund's Transfer Agent: Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-ROCKY-22 (800-762-5922) toll free or 908-855-5731
For General Inquiries
Call 800-ROCKY-55 (800-762-5955) toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
HIGHLIGHTS
Aquila Rocky Mountain Equity Fund (the "Fund") is a
diversified, open-end mutual fund which continuously offers to
sell or redeem its shares on any business day (see "How to Invest
in the Fund" and "How to Redeem Your Investment"). The Fund's
shares are designed to be a suitable investment for investors who
seek capital appreciation, primarily through the securities of
companies having a significant business presence in the Rocky
Mountain Region of the country.
The Fund's investment objective is capital appreciation. The
Fund seeks to achieve this objective by investing primarily in
equity securities of companies having a significant business
presence in the general Rocky Mountain region of our country,
consisting of Colorado, Arizona, Idaho, Montana, Nevada, New
Mexico, Utah and Wyoming. It is anticipated that under normal
circumstances, the Fund will invest at least 65%, and possibly up
to 100%, of its total assets in equity securities issued by such
companies. Companies with a significant business presence in the
Rocky Mountain Region are defined as those companies (i) whose
principal executive offices are located in the Region, (ii) which
have more than 50% of their assets located in the Rocky Mountain
Region or (iii) which derive more than 50% of their revenues or
profits from the Rocky Mountain Region. Since the Fund's
objective is capital appreciation, it is not expected to provide
any significant current income to investors from dividend or
interest payments. (See "Table of Expenses" and "Investment of
the Fund's Assets.")
Investment Selection Criteria - The Fund will acquire only
those equity securities which, at the time of purchase, the
Adviser considers to be reasonably priced issues of financially
sound companies possessing good growth characteristics and solid
management. The Fund may also make other types of investments.
(See "Investment of the Fund's Assets.")
Regional Portfolio Management - KPM Investment Management,
Inc. (the "Adviser") serves as the Fund's investment adviser. The
Fund's portfolio is managed in the Adviser's Denver office. The
firm provides professional investment advisory services to a
broad base of clients and currently manages over $750 million of
clients' assets of which approximately $475 million consists of
equity investments. The Adviser is a wholly-owned subsidiary of
Kirkpatrick, Pettis, Smith, Polian Inc. ("Kirkpatrick, Pettis")
which is a full service investment firm serving institutional and
retail markets through its investment banking, sales and trading
facilities. The firm currently provides professional investment
advisory services to a broad base of clients and investment
banking services to corporate and public finance clients. Tracing
its history to 1925, Kirkpatrick, Pettis currently staffs 9
offices in Colorado, Iowa, Kansas, Missouri, Nebraska and New
York that serve primarily the midwest and Rocky Mountain regions.
Since 1983 Kirkpatrick, Pettis has been a wholly-owned subsidiary
of Mutual of Omaha Insurance Company.
Aquila Management Corporation, the Fund's founder and
Sub-Adviser and Administrator, is the founder of and serves as
administrator for three other funds with a Rocky Mountain Region
orientation: Tax-Free Trust of Arizona, with assets of $387
million, Tax-Free Fund of Colorado, with assets of $215 million
and Tax-Free Fund For Utah, with assets of $29 million, all as of
March 31, 1996. Through its Denver office, the Adviser currently
acts as investment adviser for Tax-Free Fund of Colorado. See
"Management Arrangements."
Fee Arrangements - The Fund can pay fees at an annual rate
of up to 0.70 of 1% of average annual net assets to its Adviser
and up to 0.80 of 1% of average annual net assets to its
Sub-Adviser and Administrator (for total fees at a rate of up to
1.50% of the first $15 million of average annual net assets). The
overall rates of these fees decline as the asset size of the Fund
increases. See "Advisory and Administration Fees." Some or all of
these fees may be waived in the early development phase of the
Fund. In addition, the Fund can pay a service fee of up to 0.25
of 1% of average annual net assets to brokers and other
investment professionals. (See "Table of Expenses," "Management
Arrangements" and "Distribution Plan.")
Diversification - The Fund will invest its assets in a
number of different securities. Additionally, investments will be
spread over a reasonably broad range of industries. Only the most
affluent investors can achieve such diversification on their own
among securities of Rocky Mountain Companies. In general, a
diversified portfolio, such as is provided by the Fund, can be
used to reduce your investment risk as compared with less
diversified portfolios. See "Investment of the Fund's Assets."
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Fund," which includes applicable sales charge
information.)
Additional Investments - You may make additional investments
at any time and in any amount, directly or, if in an amount of
$50 or more, through the convenience of having your investment
electronically transferred from your financial institution
account into the Fund by Automatic Investment or Telephone
Investment. (See "How to Invest in the Fund.")
Alternative Purchase Plans - The Fund provides two
alternative ways for individuals to invest. (See "Alternative
Purchase Plans.") One way permits individual investors to pay
distribution and certain service charges principally at the time
they purchase shares; the other way permits investors to pay such
costs over a period of time, but without paying anything at time
of purchase, much as goods can be purchased on an installment
plan. For this purpose the Fund offers the following classes of
shares, which differ in their expense levels and sales charges:
* Front-Payment Class Shares ("Class A Shares")
are offered to anyone at net asset value plus
a sales charge, paid at the time of purchase,
at the maximum rate of 4.25% of the public
offering price, with lower rates for larger
purchases. (See "How to Purchase Class A
Shares.") Class A Shares are subject to an
asset retention service fee under the Fund's
Distribution Plan at the rate of 0.25 of 1%
of the average annual net assets represented
by the Class A Shares. (See "Distribution
Plan.")
* Level-Payment Class Shares ("Class C Shares")
are offered to anyone at net asset value with
no sales charge payable at the time of
purchase but with a level charge for service
and distribution fees for six years after the
date of purchase at the aggregate annual rate
of 1% of the average annual net assets of the
Class C Shares. (See "Distribution Plan" and
"Service Plan.") Six years after the date of
purchase, Class C Shares are automatically
converted to Class A Shares. In addition,
Class C Shares are subject to a contingent
deferred sales charge ("CDSC") if redeemed
before they have been held for 12 months from
the date of purchase; this charge is 1%,
calculated on the net asset value of the
Class C Shares at the time of purchase or at
redemption, whichever is less. There is no
CDSC after Class C Shares have been held
beyond the applicable period. (See
"Alternative Purchase Plans," "Computation of
Holding Periods for Class C Shares" and "How
to Purchase Class C Shares.")
The Fund also issues Institutional Class Shares ("Class Y
Shares") that are sold only to certain institutional investors.
Class Y Shares are not offered by this Prospectus.
Redemptions - Liquidity - You may redeem any amount of your
account on any business day at the next determined net asset
value by telephone, FAX or mail request, with proceeds being sent
to a predesignated financial institution, if you have elected
Expedited Redemption. Proceeds will be wired or transferred
through the facilities of the Automated Clearing House, wherever
possible, upon request, if in an amount of $1,000 or more, or
will be mailed. For these and other redemption procedures see
"How to Redeem Your Investment." There are no penalties or
redemption fees for redemption of Class A Shares. However, there
is a contingent deferred sales charge with respect to certain
Class A Shares which have been purchased in amounts of $1 million
or more (see "Purchases of $1 Million or More"). If you redeem
Class C Shares before you have held them for 12 months from the
date of purchase you will pay a Contingent Deferred Sales Charge
("CDSC") at the rate of 1%. (See "Alternative Purchase Plans"
- --"Class C Shares.")
Distributions from the Fund - Distribution of any income net
of operating expenses or any net realized capital gains will be
made annually. The Fund's net income and short-term capital gains
are taxed as ordinary income, while long-term capital gains
distributions are taxed to you as long-term capital gains,
regardless of how long you have held your shares. See "Dividend
and Tax Information."
Convenience - Through ownership of a single security
consisting of shares of the Fund, you achieve investment
participation in a variety of Rocky Mountain Companies and are
relieved of all the various inconveniences - including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping - associated with direct investment in individual
securities of those companies. The Fund handles all paperwork
involved with share ownership, advising you of the Federal tax
status of dividends and capital gains and providing you with
simplified records. You receive statements of your account
quarterly as well as each time you add to your investment or
redeem part or all of it. Additionally, you receive a semi-annual
report and an audited annual report.
Exchanges - You may exchange Class A or Class C Shares of
the Fund into corresponding classes of shares of the
Aquila-sponsored tax-free municipal bond mutual funds. You may
also exchange them into shares of certain Aquila-sponsored money
market funds. The exchange prices will be the respective net
asset values of the shares. (See "Exchange Privilege.")
Risk Factors - The Fund seeks to provide you with capital
appreciation over a period of time. The value of the Fund's
shares will fluctuate due to changes in the equity markets and
the proceeds of redemptions may be more or less than your cost.
The Fund's assets, being primarily or entirely invested in the
securities of Rocky Mountain Companies, are subject to economic
and other conditions affecting that area and it may have less
diversification than funds without this investment policy. (See
"Risks and Special Considerations Regarding the Rocky Mountain
Region.") The Fund may also to a limited degree buy put options
and buy and sell call options; there may be risks associated with
these practices. (See "Options Transactions.")
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
TABLE OF EXPENSES
Class A Class C
Shares Shares
Shareholder Transaction Expenses
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases .......... 4.25% None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None None
Deferred Sales Charge .............................. None(1) 1.00%(2)
Redemption Fees .................................... None None
Exchange Fee ....................................... None None
Annual Fund Operating Expenses (3)
(as a percentage of average net assets)
Management Fees After Waivers (4) .................. 0.00% 0.00%
12b-1 Fee .......................................... 0.25% 0.75%
All Other Expenses After Expense
Reimbursement (4) ................................ 1.66% 1.91%
Service Fee ............................... None 0.25%
Other Expenses After Expense
Reimbursement (4) ....................... 1.66% 1.66%
Total Fund Operating Expenses After Expense
Reimbursement and Fee Waivers (4) ................ 1.91% 2.66%
Example (5)
You would pay the following expenses on a $ 1,000 investment, assuming
a 5% annual return and redemption at the end of each time period:
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A Shares $61 $100 $141 $256
Class C Shares
With complete redemption
at end of period $37 $83 $141 $265(6)
With no redemption $27 $83 $141 $265(6)
<FN>
(1) Certain shares purchased in transactions of $1 million or more
without a sales charge may be subject to a contingent deferred sales
charge of up to 1% upon redemption during the first four years after
purchase. See "Purchase of $1 Million or More".
</FN>
<FN>
(2) A contingent deferred sales 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.
</FN>
<FN>
(3) Estimated based upon expenses incurred by the Fund during its
most recent fiscal year. During that period, only Class A Shares
were outstanding.
</FN>
<FN>
(4) The Adviser and the Sub-Adviser and Administrator (the "Sub-Adviser")
have undertaken to waive all their fees until the Fund attains an asset
size of $10 million. After the Fund attains the asset size of $10
million, it is anticipated that certain fees for that fiscal year will
be waived following a predetermined formula. If the Adviser and Sub-
Adviser determine that it would be advisable to waive some or all of
their fees, it is anticipated that as the asset size of the Fund
increases, waivers would be progressively reduced so that when assets
exceed approximately $25 million a substantial portion or all of these
fees would be paid. Since the Fund's inception, the Sub-Adviser, in its
sole discretion, has been reimbursing some or all of the Fund's other
operating expenses. Without fee waiver and expense reimbursement, the
operating expenses of the Fund for the fiscal year ended December 31,
1995 would have been incurred at the following annual rates: for Class
A Shares, management fees, 1.50%; 12b-1 fee, 0.25%; and other expenses,
8.73%, resulting in Total Fund Operating Expenses of 10.48%; for Class
C Shares, management fees, 1.50%; 12b-1 fee, 0.75%; service fee, 0.25%;
and other expenses, 8.73%, resulting in Total Fund Operating Expenses
of 11.23%. If the Fund remains at the same asset size as on the date
of this Prospectus (approximately $1.8 million) and the Sub-Adviser
reimburses expenses as it currently intends, then, based upon expenses
for the fiscal year ended December 31, 1995, the annual rates at which
the Fund incurs Total Fund Operating Expenses will be 2.54% for Class
A Shares and 3.29% for Class C Shares.
</FN>
<FN>
(5) The expense example is based upon the above shareholder transaction
expenses (in the case of Class A Shares, this includes a sales charge
of $42.50 for a $1,000 investment) and estimated annual Fund operating
expenses. It is also based upon amounts at the beginning of each year
which includes the prior year's assumed results. A year's results
consist of an assumed 5% annual return less total operating expenses;
the expense ratio was applied to an assumed average balance (the year's
starting investment plus one-half the year's results). Each figure
represents the cumulative expenses so determined for the period specified.
</FN>
<FN>
(6) Six years after the date of purchase, Class C Shares are
automatically converted to Class A Shares.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE
SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL
MUTUAL
FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING
THE
ABOVE EXAMPLE. THE ASSUMED 5% ANNUAL RETURN SHOULD NOT BE
INTERPRETED
AS A PREDICTION OF AN ACTUAL RETURN, WHICH MAY BE HIGHER OR LOWER.
THE
EXAMPLE ALSO REFLECTS THE MAXIMUM SALES CHARGE. (SEE "HOW TO INVEST
IN
THE FUND").
The purpose of the above table is to assist the investor in understanding
the various costs that an investor in the Fund will bear directly or
indirectly. Although not obligated to do so, those entitled to
investment advisory and administration fees expect to waive a portion or
all of those fees in the early stages of the Fund's existence and Aquila
Management Corporation, the organizer and Sub-Adviser of the Fund, may
reimburse the Fund for various expenses; the above table reflects one
possible such arrangement and should not be considered as a commitment
or prediction that any fees, or that any particular portion of fees, will
be waived, or that any particular expenses will be reimbursed. (See
"Management Arrangements" for a more complete description of the various
investment advisory and administration fees.)
<PAGE>
<TABLE>
<CAPTION>
The following historical financial information applies only to
shares of the Fund which have been designated Class A Shares,
upon adoption of the class structure described in the Prospectus.
Similar information does not exist for Class C Shares.
AQUILA ROCKY MOUNTAIN EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is included in the Fund's financial statements contained
in its Annual Report, which are incorporated by reference into
the Additional Statement. The information provided in the table
should be read in conjunction with the financial statements and
related notes.
Year Ended Period Ended
December 31, December 31,
1995 1994**
<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:
Dividends from net investment
income............................ (0.01) ---
Distributions from capital gains.. (0.10) ---
Total Distributions............... (0.11) ---
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 Income
to Average Net Assets............. (0.60)% ---
Portfolio Turnover Rate........... 15.14% 2.95% +
Net investment income 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:
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>
** For the period from July 22, 1994 (commencement of
operations) to December 31, 1994.
</FN>
<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>
</TABLE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
INTRODUCTION
Aquila Rocky Mountain Equity Fund is a diversified, open-end
mutual fund which continuously offers to purchase or redeem its
shares on any business day (see "How to Invest in the Fund" and
"How to Redeem Your Investment.") The Fund's shares are designed
to be a suitable investment for investors who seek capital
appreciation primarily through the equity securities of companies
operating in the Rocky Mountain region of the country.
The Fund provides you with the opportunity to have the
benefits of a diversified and professionally managed portfolio of
securities intended to allow participation in the economic
development of the Rocky Mountain Region. Through the convenience
of a single security consisting of shares of the Fund, you are
relieved of all the various inconveniences - including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping - associated with direct investment in individual
securities of various Rocky Mountain Companies.
The Fund was organized by Aquila Management Corporation (the
"Sub-Adviser"), which has provided administrative and/or
investment advisory services to various mutual funds founded by
it since 1984. It currently acts as administrator to thirteen
Aquila-sponsored funds, including the Fund, with combined net
assets as of December 31, 1995 in excess of $2.7 billion.
Continuous and active portfolio management of the Fund is
provided by its regionally-located investment adviser, KPM
Investment Management, Inc.
INVESTMENT OF THE FUND'S ASSETS
The Fund's investment objective, which is a fundamental
policy of the Fund, is to purchase and hold securities for
capital appreciation. There is no assurance that the Fund will
achieve its objective. The Fund does not expect to receive
dividends of sufficient size to enable it to provide investors
with any significant amount of current income and during at least
its early fiscal years expects to apply all of such income to
Fund operating expenses so that none will be available for
distribution to shareholders.
As used in the Prospectus and Additional Statement, the
general area consisting of Colorado, Arizona, Idaho, Montana,
Nevada, New Mexico, Utah and Wyoming is called the "Rocky
Mountain Region." The Fund seeks to achieve its objective by
investing primarily in equity securities of companies ("Rocky
Mountain Companies") having a significant business presence in
the Rocky Mountain Region. It is anticipated that under normal
circumstances, the Fund will invest at least 65%, and possibly up
to 100%, of its total assets in securities issued by such
companies.
For purposes of this Prospectus, companies with a
significant business presence in the Rocky Mountain Region are
defined as those companies (i) whose principal executive offices
are located in the Region, (ii) which have more than 50% of their
assets located in the Rocky Mountain Region or (iii) which derive
more than 50% of their revenues or profits from the Rocky
Mountain Region. In determining that companies have a significant
business presence in the Rocky Mountain Region, the Adviser may
rely on any publicly available information about those companies
that it considers reliable. There may be risks associated with
this investment policy. (See "Risk Factors and Special
Considerations.")
As used in the Prospectus, the term "equity securities"
means (i) common stocks and (ii) preferred stocks, bonds,
debentures and notes convertible into common stocks. Under normal
conditions, it is anticipated that the Fund will invest at least
65%, and possibly up to 100%, of its total assets in such
securities. The Fund may also, to a limited extent, make certain
other types of investments. (See below.)
In unusual market conditions when the Adviser believes a
defensive posture for the Fund's investments is warranted, the
Fund may temporarily invest a portion or all of its assets in
high quality fixed-income securities such as U.S. Treasury
securities, corporate bonds or high grade short-term money-market
securities, without geographic or percentage limitation. Only
corporate securities rated "A" or equivalent by a nationally
recognized statistical rating organization will be purchased. See
the Additional Statement for a description of these organizations
and an explanation of their ratings.
Since the practice of many growth-oriented companies in
which the Fund will invest is to reinvest most or all of their
earnings in the development of their business, the Fund does not
expect to receive dividends enabling it to provide investors with
any significant amount of current income.
In general, the Fund will take a long-term approach toward
investing. Accordingly, the turnover rate will normally be
consistent with this approach. (See "Portfolio Turnover.") At
times the Fund may make investments for short-term purposes.
Also, under changing market conditions, the Fund may dispose of
portfolio securities whenever the Adviser deems such action
advisable without regard to the length of time the securities
have been held.
In selecting investments for the Fund, the Adviser will
generally employ the investment philosophy of seeking to invest
in established, financially sound, well-managed Rocky Mountain
Companies whose securities it considers to be selling at a
reasonable price relative to their growth rate and anticipated
future values. Emphasis will be placed upon selection of Rocky
Mountain Companies whose securities are selling at lower than
average prices; other securities may be selected whose issuers
the Adviser believes are experiencing better than average growth.
It is anticipated that a number of factors will be considered in
investment selection, including but not limited to: product
characteristics and market potential, operating ratios,
management abilities, intrinsic value of securities, securities'
market action, and the overall economic, monetary, political and
market environment. The Adviser currently focuses on
approximately 300-400 Rocky Mountain Companies from which it
selects investments for the Fund's portfolio.
Although the Fund may invest in large capitalization
companies, it is anticipated that the companies represented in
the Fund's portfolio will be primarily those having middle size
to smaller size market capitalization which the Adviser believes
offer the potential of capital appreciation due to their overall
characteristics. These companies are likely to be less well known
because they are smaller in size, have smaller capitalizations,
and have a lesser number of shares traded. The prices of
securities of such companies may be more volatile than the prices
of securities of issuers which are more mature, have larger
capitalizations and whose securities are more actively traded.
Convertible Securities
The Fund may invest up to 25% of its assets in convertible
securities, primarily of Rocky Mountain Companies, if the Adviser
believes there is potential of capital growth through the
conversion option and greater investment income prior to
conversion. Only convertible securities rated investment grade by
a nationally recognized statistical rating organization will be
purchased. Not more than 5% of the Fund's net assets may be
invested in such securities having the lowest of the four
investment grade ratings. Obligations rated in the fourth such
credit rating are considered by the rating agencies to be of
medium quality and thus may present investment risks not present
in more highly rated obligations. Such bonds lack outstanding
investment characteristics and may in fact have speculative
characteristics as well; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case for higher
grade bonds. See the Additional Statement for a description of
these organizations and an explanation of their ratings.
A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within
a specified period of time into a certain quantity of the common
stock of the same or a different issuer. Convertible securities
are senior to common stocks in a corporation's capital structure,
but are usually subordinated to similar nonconvertible
securities. While providing a fixed income stream (generally
higher in yield than the dividends received from a common stock
but lower than that afforded by a similar nonconvertible
security), a convertible security also affords the opportunity
through its conversion feature to participate in the capital
appreciation attendant upon a market price advance in the
convertible security's underlying common stock.
In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a
fixed-income security, a convertible security tends to increase
in market value when interest rates decline and tends to decrease
in value when interest rates rise. However, the price of a
convertible security is also influenced by the market value of
the security's underlying common stock. The price of a
convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. While no
securities investment is without some risk, investments in
convertible securities generally entail less risk than
investments in the common stock of the same issuer.
Warrants
The Fund may also invest up to 5% of its net assets, as
determined at time of purchase, in warrants of Rocky Mountain
Companies. Warrants entitle the holder to purchase a fixed number
of shares of the common stock of the issuer at a fixed price
during certain specified times. The value of the warrants from
time to time depends upon the market evaluation of the likelihood
that exercise of the warrants would be economically advantageous
before they expire. The market price of warrants tends to be more
volatile than that of the underlying common stock.
Options Transactions
The Fund may purchase put and write (i.e., sell) call
options and purchase call options for hedging purposes or in
order to generate additional income or for taking a position in a
security deemed attractive by the Adviser. The Fund will purchase
or write options only on equity securities that are traded on
national securities exchanges or that are listed on NASDAQ
(NASDAQ options). The Fund may purchase put and write call
options only on equity securities which are held in the Fund's
investment portfolio or to close out positions. Additionally, the
Fund may purchase calls on securities which are not in the Fund's
portfolio or to close out positions.
The Fund will not (a) write call options if immediately
after any such transaction, the aggregate value of the securities
underlying the calls would exceed 20% of the Fund's net assets,
or (b) purchase put or call options if, immediately after such
purchases, the premiums paid for all such options owned at the
time would exceed 5% of the Fund's net assets. The Fund will not
write put options except to close out positions. See the
Additional Statement for a description of these instruments and
their uses.
While the Fund may engage in puts and calls to a limited
extent, there are certain risks associated with this activity
that are different than investing in the underlying securities
directly (see the Additional Statement). Option transactions
involve risks and transaction costs which the Fund would not
incur if it did not engage in option transactions. If the
Adviser's predictions of movements in the direction of the
securities markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of options
include dependence upon the Adviser's ability to predict
correctly movements in the direction of securities prices and the
possible absence of a liquid secondary market for any particular
instrument at any time. See the Additional Statement for a
description of these and other risks with respect to option
transactions.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend
portfolio securities, up to 25% of the net assets, to
broker-dealers, banks or other financial borrowers of securities.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the Fund
will enter into loan arrangements only with broker-dealers,
banks, or other institutions which the Adviser has determined are
creditworthy under guidelines established by the Fund's Board of
Trustees and will receive collateral in the form of cash or
short-term U.S. Government securities equal at least to 100% of
the value of the securities loaned. The value of the collateral
and the securities loaned will be marked to market on a daily
basis. During the time portfolio securities are on loan, the
borrower pays the Fund an amount equivalent to any dividends or
interest paid on the securities and the Fund may invest the cash
collateral and earn additional income or receive an agreed upon
amount of interest income from the borrower. However, the amounts
received by the Fund may be reduced by any finders' fee paid to
broker-dealers and any other related expenses.
Borrowings by the Fund
The Fund can borrow money for temporary or emergency
purposes from a bank. The Fund will not borrow amounts in excess
of 10% of net assets and will not purchase securities if
borrowings are equal to or greater than 5% of net assets. The
Fund intends primarily to exercise such borrowing authority to
meet any abnormal level of shareholder redemptions and under
circumstances where redemptions exceed available cash.
Repurchase Agreements
The Fund may purchase securities subject to repurchase
agreements, provided that such securities consist entirely of
U.S. Government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest
rating category by at least one nationally recognized statistical
rating organization. Repurchase agreements may be entered into
only with commercial banks or broker-dealers. Subject to the
control of the Board of Trustees, the Adviser will regularly
review the financial strength of all parties to repurchase
agreements with the Fund.
Under a repurchase agreement, at the time the Fund purchases
a security, the Fund also resells it to the seller and must
deliver the security (or securities substituted for it) to the
seller on an agreed-upon date in the future. (The securities so
resold or substituted are referred to herein as the "Resold
Securities.") The resale price is in excess of the purchase price
in that it reflects an agreed-upon market interest rate effective
for the period of time during which the Fund's money is invested
in the Resold Securities. The majority of these transactions run
from day to day, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the Investment Company Act of 1940 (the
"1940 Act"). The return on such "collateral" may be more or less
than that from the repurchase agreement. The Resold Securities
under any repurchase agreement will be marked to market every
business day so that the value of the "collateral" is at least
equal to the resale price provided in the agreement, including
the accrued interest earned thereon, plus sufficient additional
market value as is considered necessary to provide a margin of
safety. During the term of the repurchase agreement, the Fund or
its custodian either has actual physical possession of the Resold
Securities or, in the case of a security registered in book entry
system, the book entry is maintained in the name of the Fund or
its custodian.
The Fund retains an unqualified right to possess and sell
the Resold Securities in the event of a default by the other
party. However, in the event of bankruptcy or other default by
the other party, there may be possible delays and expenses in
liquidating the Resold Securities, decline in their value and
loss of interest.
Shares of Investment Companies
The Fund may purchase shares of investment companies with
money market portfolios which are any of the money-market funds
in the Aquilasm Group of Funds. As of the date of the Prospectus,
these funds are Capital Cash Management Trust, Pacific Capital
Cash Assets Trust (Original Shares), Pacific Capital Tax-Free
Cash Assets Trust (Original Shares), Pacific Capital U.S.
Treasuries Cash Assets Trust (Original Shares) and Churchill Cash
Reserves Trust. The Fund will not purchase shares of an
investment company which imposes a sales or redemption charge of
any sort; however, an investment company in which the Fund
invests may have a distribution plan under which it may pay for
distribution expenses or services. Such investments will
ordinarily be made to provide additional liquidity and at the
same time to earn higher yields than are usually associated with
the overnight or short-term obligations in which the Fund might
otherwise invest for this purpose. While higher yields than those
of alternative investments may be obtainable, these yields will
reflect management fees and operating and distribution expenses
of the investment companies and will result in duplication of
management fees with respect to assets of the Fund so invested.
The Fund may not invest in the shares of investment companies if
immediately thereafter it has invested more than 10% of the value
of its total assets in such companies or more than 5% of the
value of its total assets in any one such company; it may not
invest in such a company if immediately thereafter it owns more
than 3% of the total outstanding voting stock of such a company.
Risk Factors and Special Considerations
While the Fund will be actively managed to seek growth of
your capital, the value of the Fund's shares will fluctuate as a
result of equity market factors. On redemption the value of your
shares may be more or less than your cost.
There are two types of risk generally associated with owning
equity securities: market risk and financial risk. Market risk is
the risk associated with the movement of the stock market in
general. Financial risk is associated with the financial
conditions and profitability of the underlying company. Smaller
companies may experience different growth rates and higher
failure rates than those of larger companies having longer
operating histories. Moreover, the stock price movements of
smaller companies may experience more volatility than those of
larger and more mature companies.
There are two types of risk associated with owning debt
securities: interest rate risk and credit risk. Interest rate
risk relates to fluctuations in market value arising from changes
in interest rates. If interest rates rise, the value of debt
securities will normally decline and if interest rates fall, the
value of debt securities will normally increase. All debt
securities, including U.S. Government securities, which are
generally considered to be the most creditworthy of all debt
obligations, are subject to interest rate risk. Securities with
longer maturities generally have a more pronounced reaction to
interest rate changes than shorter-term securities.
Credit risk relates to the ability of the issuer to make
periodic interest payments and ultimately repay principal at
maturity. The Fund does not intend to hold corporate debt
securities unless the opportunities for capital appreciation and
income, combined, remain attractive.
Risks and Special Considerations Regarding the
Rocky Mountain Region
The Fund's assets, being primarily or entirely invested in
the securities of Rocky Mountain Companies, are subject to
economic and other conditions affecting the various states which
comprise the Rocky Mountain Region.
The states of the Rocky Mountain Region are characterized by
wide differences in climate, great distances and relatively low
population density. In some areas, availability of water is a
factor of considerable importance in economic development and
water issues will likely affect the growth and prosperity of much
of the Region in the future. Originally heavily oriented toward
the exploitation of natural resources, in recent years the
economies of the states of the Rocky Mountain Region have shifted
toward more diversity with increases in tourism, high technology
and the service sector. The region has been characterized in
recent years by population growth and immigration from other
areas of the United States. Some of the states in the Rocky
Mountain Region have experienced growth rates above the national
averages.
Because of the large size of the Rocky Mountain Region, the
above factors may have varying importance from one state to
another. It is not possible to predict what effect they may
individually or collectively have on any particular company in
which the Fund may choose to invest.
In addition, companies with headquarters in the Rocky
Mountain Region or with a significant business presence in the
Region may also have significant business interests, sales and
assets outside of the Region and may thus be subject to other
economic influences. Because the Fund will invest most, and may
invest all, of its assets in Rocky Mountain Companies, it may
have less diversification than funds without this investment
policy.
Portfolio Turnover
Given the Fund's orientation to capital appreciation, it is
not expected that the Fund's portfolio turnover rate will exceed
60%. See the Additional Statement.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the
Prospectus and Additional Statement as "fundamental policies,"
cannot be changed unless the holders of a "majority," as defined
in the 1940 Act, of the Fund's outstanding shares vote to change
them. All other policies can be changed from time to time by the
Board of Trustees without shareholder approval. Some of the more
important of the Fund's fundamental policies, not otherwise
identified in the Prospectus, are set forth below; others are
listed in the Additional Statement.
1. The Fund has industry investment requirements.
The Fund cannot buy securities in any one industry if more
than 25% of its total assets would then be invested in securities
of that industry.
2. The Fund can make loans only by lending securities or entering
into repurchase agreements.
The Fund can lend its portfolio securities (see "Lending of
Portfolio Securities") and can enter into repurchase agreements
(see "Repurchase Agreements") but cannot otherwise make loans.
The Fund can buy debt securities as described above (see
"Investment of the Fund's Assets"); this is investing, not making
a loan.
3. The Fund can borrow only in limited amounts for special
purposes.
The Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage
or pledge its assets only in connection with such borrowing and
only up to the lesser of the amounts borrowed or 5% of the value
of its total assets. Interest on borrowings would reduce the
Fund's income. Except in connection with borrowings, the Fund
will not issue senior securities. The Fund will not purchase any
security while it has any outstanding borrowings which exceed 5%
of the value of its total assets.
NET ASSET VALUE PER SHARE
The Fund's net asset value and offering price per share are
determined as of 4:00 p.m. New York time on each day that the New
York Stock Exchange is open (a "business day"). The close of the
principal exchanges or other markets on which some of the Fund's
portfolio securities are traded may be later than 4:00 p.m. The
net asset value per share is determined by dividing the value of
the net assets (i.e., the value of the assets less liabilities)
by the total number of shares outstanding. Determination of the
value of the Fund's assets is subject to the direction and
control of the Fund's Board of Trustees. Securities listed on a
national securities exchange or designated as national market
system securities are valued at the last prior sale price or, if
there has been no sale that day, at the bid price. The value of
other securities is in general based on market value, except that
short-term investments maturing in 60 days or less are generally
valued at amortized cost; see the Additional Statement for
further information.
ALTERNATIVE PURCHASE PLANS
In the Prospectus, the Fund provides individual investors
with the option of two alternative ways to purchase shares,
through two separate classes of shares. All classes represent
interests in the same portfolio of securities. The primary
distinction among the classes of shares offered to individuals
lies in their sales charge structures and ongoing expenses, as
described below. You should choose the class that best suits your
own circumstances and needs.
If you choose to purchase Class A Shares you will pay the
applicable sales charge at the time of your purchase. By
purchasing Class C Shares, you will pay a sales charge over a
period of six years after purchase but without paying anything at
time of purchase, much as goods can be purchased on an
installment plan. You are subject to a conditional deferred sales
charge, described below, but only if you redeem your Class C
Shares before they have been held 12 months from your purchase.
(See "Computation of Holding Periods for Class C Shares.")
* Class A Shares, "Front-Payment Class Shares," are
offered to anyone at net asset value plus a sales
charge, paid at the time of purchase, at the maximum
rate of 4.25% of the public offering price, with lower
rates for larger purchases. Under the Fund's
Distribution Plan, Class A Shares are subject to a fee
of 0.25 of 1% of the average annual net assets of the
Class A Shares. When you purchase Class A Shares, the
amount of your investment is reduced by the applicable
sales charge. Certain Class A Shares purchased in
transactions of $1 million or more are subject to a
contingent deferred sales charge. (See "Purchases of $1
Million or More.")
* Class C Shares, "Level-Payment Class Shares," are
offered to anyone at net asset value with no sales
charge payable at purchase but with a level charge for
distribution fees and service fees for six years after
the date of purchase at the aggregate annual rate of 1%
of the average annual net assets of the Class C Shares.
(See "Distribution Plan" and "Shareholder Services Plan
for Class C Shares.") Six years after the date of
purchase, Class C Shares, including Class C Shares
acquired in exchange for other Class C Shares under the
Exchange Privilege (see "Exchange Privilege"), are
automatically converted to Class A Shares. In addition,
if you redeem Class C Shares before you have held them
for 12 months from the date of purchase you will pay a
contingent deferred sales charge ("CDSC") at the rate
of 1%, calculated on the net asset value of the
redeemed Class C Shares at the time of purchase or of
redemption, whichever is less. The amount of any CDSC
will be paid to the Distributor. The CDSC does not
apply to shares acquired through the reinvestment of
dividends on Class C Shares or to any Class C Shares
held for more than 12 months after purchase. In the
Prospectus, 12-month and six-year holding periods are
considered modified by up to one month depending upon
when during a month your purchase of such shares is
made. (See "Computation of Holding Periods for Class C
Shares" and "How to Purchase Class C Shares.")
In determining whether a CDSC is payable on a redemption of
Class C Shares, it will be assumed that the redemption is made
first of any shares acquired as dividends or distributions,
second of any Class C Shares you have held for more than 12
months from the date of purchase and finally of those Class C
Shares as to which the CDSC is payable which you have held the
longest. This will result in your paying the lowest possible
CDSC.
Computation of Holding Periods for Class C Shares
For purposes of determining the holding period for Class C
Shares, all of your purchases made during a calendar month will
be deemed to have been made on the first business day of that
month at the average cost of all purchases made during that
month. The 12-month CDSC holding period will end on the first
business day of the 12th calendar month after the date your
purchase is deemed to have been made. Accordingly, the CDSC
holding period applicable to your Class C Shares may be up to one
month less than the full 12 months depending upon when your
actual purchase was made during a month. Running of the 12-month
CDSC holding period will be suspended for one month for each
period of thirty days during which you have held shares of a
money market fund you have received in exchange for Class C
Shares under the Exchange Privilege. (See "Exchange Privilege.")
Your Class C Shares will automatically convert to Class A
Shares six years after the date of purchase, together with a
pro-rata portion of all Class C Shares representing dividends and
other distributions paid in additional Class C Shares. The Class
C Shares so converted will no longer be subject to the higher
expenses borne by the Class C Shares. The conversion will be
effected at relative net asset values on the first business day
of the month following that in which the sixth anniversary of
your purchase of the Class C Shares occurred, except as noted
below. Accordingly, the holding period applicable to your Class C
Shares may be up to one month more than the six years depending
upon when your actual purchase was made during a month. Because
the per share value of Class A Shares may be higher than that of
Class C Shares at the time of conversion, you may receive fewer
Class A Shares than the number of Class C Shares converted. If
you have made one or more exchanges of Class C Shares among the
Aquila-sponsored tax-free municipal bond funds or equity funds
under the Exchange Privilege, the six-year holding period is
deemed to have begun on the date you purchased your original
Class C Shares of the Fund or of another of the Aquila bond or
equity funds. The six-year holding period will be suspended by
one month for each period of thirty days during which you hold
shares of a money market fund you have received in exchange for
Class C Shares under the Exchange Privilege. (See "Exchange
Privilege.")
The following chart summarizes the principal differences
between Class A Shares and Class C Shares.
<TABLE>
Class A Class C
<S> <C> <C>
Initial Sales Maximum of 4.25% None
Charge of the public
offering price
Contingent None (except Maximum CDSC
Deferred for certain of 1% if shares
Sales Charge purchases over redeemed before
$1 million) 12 months; 0%
after 12 months
Distribution and 0.25 of 1% Distribution fee
Service Fees of 0.75 of 1% and
a service fee of
0.25 of 1% for a
total of 1%,
payable for six
years
Other Information Initial sales Shares convert
charge waived to Class A Shares
or reduced in after six years
some cases
</TABLE>
Factors to Consider in Choosing Classes of Shares
This discussion relates to the major differences between
Class A Shares and Class C Shares. It is recommended that any
investment in the Fund be considered long-term in nature.
Over time, the cumulative total cost of the 1% annual
service and distribution fees on the Class C Shares will equal or
exceed the total cost of the initial 4.25% maximum initial sales
charge and 0.25 of 1% annual fee payable for Class A Shares. For
example, if equal amounts were paid at the same time for Class A
Shares (where the amount invested is reduced by the amount of the
sales charge) and for Class C Shares (which carry no sales charge
at the time of purchase) and the net asset value per share
remained constant over time, the total of such costs for Class C
Shares would equal the total of such costs for Class A Shares
after approximately five and two-thirds years. This example
assumes no redemptions and disregards the time value of money.
Purchasers of Class C Shares have all of their investment dollars
invested from the time of purchase, without having their
investment reduced at the outset by the initial sales charge
payable for Class A Shares. If you invest in Class A Shares you
will pay the entire sales charge at the time of purchase.
Accordingly, if you expect to redeem your shares shortly after
purchase, you should consider the total cost of such an
investment in Class A Shares compared with a similar investment
in Class C Shares. The example under "Table of Expenses" shows
the effect of Fund expenses for both classes if a hypothetical
investment in each of the classes is held for 1, 3, 5 and 10
years. (See the Table of Expenses.)
Dividends and other distributions paid by the Fund with
respect to shares of each class are calculated in the same manner
and at the same time. The dividends actually paid with respect to
Class C Shares will be lower than those paid on Class A Shares
because Class C Shares bear higher distribution and service fees
and will have a higher expense ratio. In addition, the dividends
of each class can vary because each class will bear certain
class-specific charges. For example, each class will bear the
costs of printing and mailing annual reports to its own
shareholders.
HOW TO INVEST IN THE FUND
The Fund's shares may be purchased through any investment
broker or dealer (a "selected dealer") which has a sales
agreement with Aquila Distributors, Inc. (the "Distributor") or
through the Distributor. There are two ways to make an initial
investment: (i) order the shares through your investment broker
or dealer, if it is a selected dealer; or (ii) mail the
Application with payment to Administrative Data Management Corp.
(the "Agent") at the address on the Application. If you purchase
Class A Shares the applicable sales charge, if any, will apply in
either instance. Subsequent investments are also subject to the
applicable sales charges. You are urged to complete an
Application and send it to the Agent so that expedited
shareholder services can be established at the time of your
investment. Unless your initial investment is specified to be
made in Class C Shares, it will be made in Class A Shares.
The minimum initial investment for Class A Shares and Class
C Shares is $1,000, except as otherwise stated in the Prospectus
or Additional Statement. You may also make an initial investment
of at least $50 by establishing an Automatic Investment Program
for automatic investments of at least $50 per month and paying at
least $50. (See below and "Automatic Investment Program" in the
Application.) Such investment must be drawn in United States
dollars on a United States commercial or savings bank or credit
union or a United States branch of a foreign commercial bank
(each of which is a "Financial Institution") . You may make
subsequent investments in the same class of shares in any amount
(unless you have an Automatic Withdrawal Plan). Your subsequent
investment may be made through a selected dealer or by forwarding
payment to the Agent, with the name(s) of account owner(s), the
account number , the name of the Fund and the class of shares to
be purchased. With subsequent investments, please send the
pre-printed stub attached to the Fund's confirmations.
Subsequent investments of $50 or more in shares of the same
class as your initial investment can be made by electronic funds
transfer from your demand account at a Financial Institution. To
use electronic funds transfer for your purchases, your Financial
Institution must be a member of the Automated Clearing House and
the Agent must have received your completed Application
designating this feature, or, after your account has been opened,
a Ready Access Features form available from the Distributor or
the Agent. A pre-determined amount can be regularly transferred
for investment ("Automatic Investment"), or single investments
can be made upon receipt by the Agent of telephone instructions
from anyone ("Telephone Investment"). The maximum amount of each
Telephone Investment is $50,000. Upon 30 days' written notice to
shareholders, the Fund may modify or terminate these investment
methods at any time or charge a service fee, although no such fee
is currently contemplated.
The offering price is the net asset value per share for
Class C Shares and the net asset value per share plus the
applicable sales charge for Class A Shares. The offering price
determined on any day applies to all purchase orders received by
the Agent from selected dealers that day, except that orders
received by it after 4:00 p.m. New York time will receive that
day's offering price only if such orders were received by
selected dealers from customers prior to such time and
transmitted to the Distributor prior to its close of business
that day (normally 5:00 p.m. New York time); if not so
transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next
business day. In the case of Telephone Investment your order will
be filled at the next determined offering price. If your order is
placed after the time for determining the net asset value of the
Fund shares for any day it will be executed at the price
determined on the following business day. The sale of shares will
be suspended during any period when the determination of net
asset value is suspended and may be suspended by the Distributor
when the Distributor judges it in the Fund's best interest to do
so.
How to Purchase Class A Shares
(Front-Payment Class Shares)
The following table shows the amount of the sales charges to
a "single purchaser" (defined below) together with the dealer
discounts paid to dealers and the agency commissions paid to
brokers (collectively called the "commissions"):
<TABLE>
<CAPTION>
Sales Sales Commis-
Charge Charge sions
as as as
Percentage Approximate Percentage
of Public Percentage of
Amount of Offering of Amount Offering
Purchase Price Invested Price
<S> <C> <C> <C>
Less than $50,000...... 4.25% 4.44% 3.75%
$50,000 but less
than $100,000....... 4.00% 4.17% 3.50%
$100,000 but less
than $250,000....... 3.50% 3.63% 3.25%
$250,000 but less
than $500,000....... 2.50% 2.56% 2.25%
$500,000 but less
than $1,000,000..... 1.50% 1.52% 1.25%
</TABLE>
For purchase of $1 million or more see "Purchase of $1
Million or More," below.
The table of sales charges is applicable to purchases of
Class A Shares by a "single purchaser," i.e.: (a) an individual;
(b) an individual together with his or her spouse and their
children under the age of 21 purchasing shares for his or their
own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a
pension, profit-sharing or other employee benefit plan qualified
or non-qualified under Section 401 of the Code and (e) a
tax-exempt organization enumerated in Section 501(c)(3) or (13)
of the Internal Revenue Code.
Upon notice to all selected dealers, the Distributor may
reallow up to the full amount of the applicable sales charge as
shown in the above schedule during periods specified in such
notice. During periods when all or substantially all of the
entire sales charge is reallowed, such selected dealers may be
deemed to be underwriters as that term is defined in the
Securities Act of 1933.
Purchase of $1 Million or More
Class A Shares issued in purchases of $1 million or more by
a single purchaser are called "CDSC Class A Shares." CDSC Class A
Shares also include certain Class A Shares issued in purchases of
$1 million or more under the program captioned "Special Dealer
Arrangements," below. (CDSC Class A Shares do not include (i)
Class A Shares purchased without sales charge pursuant to the
terms described under "General," below and (ii) Class A Shares
purchased in transactions of less than $1 million and when
certain special dealer arrangements are not in effect under
"Special Dealer Arrangements," below.)
When you purchase CDSC Class A Shares you will not pay a
sales charge at the time of purchase, and the Distributor will
pay to any dealer effecting such a purchase an amount equal to 1%
of the sales price of the shares purchased for purchases of $1
million but less than $2.5 million, 0.50 of 1% for purchases of
$2.5 million but less than $5 million, and 0.25 of 1% for
purchases of $5 million or more, if the CDSC Class A Shares
remain outstanding for a period of at least one year. A pro-rata
portion of this fee will be payable for each day the CDSC Class A
Shares are outstanding in the first one-year period following
issuance of such shares. The fee payable for each calendar
quarter will be made within fifteen days of the end of that
quarter.
If you redeem all or part of your CDSC Class A Shares during
the four years after your purchase of such shares, at the time of
redemption you will be required to pay to the Distributor a
special contingent deferred sales charge based on the lesser of
(i) the net asset value of your redeemed CDSC Class A Shares at
the time of purchase or (ii) the net asset value of your redeemed
CDSC Class A Shares at the time of redemption (the "Redemption
Value"). The special charge will be an amount equal to 1% of the
Redemption Value if the redemption occurs within the first two
years after purchase, and 0.50 of 1% of the Redemption Value if
the redemption occurs within the third or fourth year after
purchase. The special charge will apply to redemptions of CDSC
Class A Shares purchased without a sales charge pursuant to a
Letter of Intent, as described below under "Reduced Sales Charges
for Certain Purchases of Class A Shares." The special charge does
not apply to shares acquired through the reinvestment of
dividends on CDSC Class A Shares or to any CDSC Class A Shares
held for more than four years after purchase. In determining
whether the special charge is applicable, it will be assumed that
the CDSC Class A Shares you have held the longest are the first
CDSC Class A Shares to be redeemed, unless you instruct the Agent
otherwise. It will also be assumed that if you have both CDSC
Class A Shares and non-CDSC Class A Shares the non-CDSC Class A
Shares will be redeemed first.
For purposes of determining the holding period for CDSC
Class A Shares, all of your purchases made during a calendar
month will be deemed to have been made on the first business day
of that month at the average cost of all purchases made during
that month. The four-year holding period will end on the first
business day of the 48th calendar month after the date your
purchase is deemed to have been made. Accordingly, the CDSC
holding period applicable to your CDSC Class A Shares may be up
to one month less than the full 48 months depending upon when
your actual purchase was made during a month. Running of the
48-month CDSC holding period will be suspended for one month for
each period of thirty days during which you have held shares of a
money market fund you have received in exchange for CDSC Class A
Shares under the Exchange Privilege. (See "Exchange Privilege.")
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation: If you are a "single purchaser" you
may benefit from a reduction of the sales charge in accordance
with the above schedule for subsequent purchases of Class A
Shares if the cumulative value (at cost or current net asset
value, whichever is higher) of Class A Shares you have previously
purchased with a sales charge, together with Class A Shares of
your subsequent purchase with such a charge, amounts to $50,000
or more.
Letters of Intent: The foregoing schedule of reduced sales
charges will also be available to "single purchasers" who enter
into a written Letter of Intent (included in the Application)
providing for the purchase, within a thirteen-month period, of
Class A Shares of the Fund through a single selected dealer or
through the Distributor. Class A Shares of the Fund which you
previously purchased during a 90-day period prior to the date of
receipt by the Distributor of your Letter of Intent and which you
still own may also be included in determining the applicable
reduction. For further details, including escrow provisions, see
the Letter of Intent provisions of the Application.
General: Class A Shares may be purchased at the next
determined net asset value by the Fund's Trustees and officers,
by the Trustees and officers of any other fund in the Aquilasm
Group of Funds, by the directors, officers and certain employees,
retired employees and representatives of the Adviser and its
parent and affiliates, the Sub-Adviser and the Distributor, by
selected dealers and brokers and their officers and employees, by
a pension, profit-sharing or other employee benefit plan
qualified or non-qualified under Section 401 of the Code, by
tax-exempt organizations enumerated in Section 501(c)(3) or (13)
of the Code, by certain persons connected with firms providing
legal, advertising or public relations assistance, by certain
family members of, and plans for the benefit of, the foregoing,
and for the benefit of trust or similar clients of banking
institutions over which these institutions have full investment
authority if the Distributor has entered into an agreement
relating to such purchases. Except for the last category,
purchasers must give written assurance that the purchase is for
investment and that the shares will not be resold except through
redemption. There may be tax consequences of these purchases.
Such purchasers should consult their own tax counsel. Shares may
also be issued at net asset value in a merger, acquisition or
exchange offer made pursuant to a plan of reorganization to which
the Fund is a party. If you own shares of any other fund in the
Aquilasm Group of Funds (see "Exchange Privilege") and have an
account in the Fund, arrangements may be made to have dividends
paid by that other fund automatically invested in shares of the
Fund at net asset value.
The Fund permits the sale of its Class A Shares at prices
that reflect the reduction or elimination of the sales charge to
investors who are members of certain qualified groups meeting the
following requirements. A qualified group (i) is a group or
association, or a category of purchasers who are represented by a
fiduciary, professional or other representative (other than a
registered broker-dealer), which (ii) satisfies uniform criteria
which enable the Distributor to realize economies of scale in its
costs of distributing shares; (iii) gives its endorsement or
authorization (if it is a group or association) to an investment
program to facilitate solicitation of its membership by a broker
or dealer; and (iv) complies with the conditions of purchase that
are set forth in any agreement entered into between the Fund and
the group, representative or broker or dealer. At the time of
purchase you must furnish the Distributor with information
sufficient to permit verification that the purchase qualifies for
a reduced sales charge, either directly or through a broker or
dealer.
Certain Investment Companies: Class A Shares of the Fund may
be purchased at net asset value without sales charge (except as
set forth below under "Special Dealer Arrangements") to the
extent that the aggregate net asset value of such Class A Shares
does not exceed the proceeds from a redemption (a "Qualified
Redemption"), made within 120 days prior to such purchase, of
shares of another investment company on which a sales charge,
including a contingent deferred sales charge, has been paid.
Additional information is available from the Distributor.
To qualify, the following special procedures must be
followed:
1. A completed Application (included in the Prospectus) and
payment for the shares to be purchased must be sent to the
Distributor, Aquila Distributors, Inc., 380 Madison Avenue,
Suite 2300, New York, NY 10017 and should not be sent to the
Shareholder Servicing Agent of the Fund, Administrative Data
Management Corp. (This instruction replaces the mailing
address contained on the Application.)
2. The Application must be accompanied by evidence
satisfactory to the Distributor that the prospective
shareholder has made a Qualified Redemption in an amount at
least equal to the net asset value of the Class A Shares to
be purchased. Satisfactory evidence includes a confirmation
of the date and the amount of the redemption from the
investment company, its transfer agent or the investor's
broker or dealer, or a copy of the investor's account
statement with the investment company reflecting the
redemption transaction.
3. You must complete and return to the Distributor a
Transfer Request Form, which is available from the
Distributor.
The Fund reserves the right to alter or terminate this
privilege at any time without notice. The Prospectus will be
supplemented to reflect such alteration or termination.
Special Dealer Arrangements: During certain periods
determined by the Distributor, the Distributor (not the Fund)
will pay to any dealer effecting a purchase of Class A Shares of
the Fund using the proceeds of a Qualified Redemption the lesser
of (i) 1% of such proceeds or (ii) the same amounts described
under "Purchase of $1 Million or More," above on the same terms
and conditions. Class A Shares of the Fund issued in such a
transaction will be CDSC Class A Shares and if you thereafter
redeem all or part of such shares during the four-year period
from the date of purchase you will be subject to the special
contingent deferred sales charge described under "Purchases of $1
Million or More," above, on the same terms and conditions.
Whenever the Special Dealer Arrangements are in effect the
Prospectus will be supplemented.
How to Purchase Class C Shares
(Level-Payment Class Shares)
Level-Payment Class Shares (Class C Shares) are offered at
net asset value with no sales charge payable at purchase. A level
charge is imposed for service and distribution fees for the first
six years after the date of purchase at the aggregate annual rate
of 1% of the average annual net assets of the Fund represented by
the Class C Shares. In addition, Class C Shares are subject to a
contingent deferred sales charge ("CDSC") if redeemed before you
have held them for 12 months from the date of purchase at the
rate of 1%, calculated on the net asset value of the Class C
Shares at the time of purchase or of redemption, whichever is
less. There is no CDSC after Class C Shares have been held beyond
the applicable period. The CDSC does not apply to shares acquired
through the reinvestment of dividends on Class C Shares.
The Distributor will pay to any dealer effecting a purchase
of Class C Shares an amount equal to 1% of the sales price of the
Class C Shares purchased.
Additional Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of
any class of shares of the Fund. Additional compensation may
include payment or partial payment for advertising of the Fund's
shares, payment of travel expenses, including lodging, incurred
in connection with attendance at sales seminars taken by
qualifying registered representatives to locations within or
outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences. In some instances, such compensation may be made
available only to certain dealers whose representatives have sold
or are expected to sell significant amounts of such shares.
Dealers may not use sales of the Fund's shares to qualify for the
incentives to the extent such may be prohibited by the laws of
any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. The cost to the
Distributor of such promotional activities and such payments to
participating dealers will not exceed the amount of the sales
charges in respect of sales of all classes of shares of the Fund
effected through such participating dealers, whether retained by
the Distributor or reallowed to participating dealers. No such
additional compensation to dealers in connection with sales of
shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and Dealers may receive different levels of
compensation for selling different classes of shares.
Systematic Payroll Investments
If your employer has established with the Fund a Systematic
Payroll Investment Plan ("Payroll Plan") you may arrange for
systematic investments into the Fund through a Payroll Plan.
Investments can be made in either Class A Shares or Class C
Shares. In order to participate in a Payroll Plan, you should
make arrangements with your own employer's payroll department,
and you must complete and sign any special application forms
which may be required by your employer. You must also complete
the Application included in the Prospectus. Once your application
is received and put into effect, under a Payroll Plan the
employer will make a deduction from payroll checks in an amount
you determine, and will remit the proceeds to the Fund. An
investment in the Fund will be made for you at the offering
price, which includes applicable sales charges determined as
described above, when the Fund receives the funds from your
employer. The Fund will send a confirmation of each transaction
to you. To change the amount of or to terminate your
participation in the Payroll Plan (which could take up to ten
days), you must notify your employer.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to
you in an account maintained for you at the Agent in full and
fractional shares of the Fund (rounded to the nearest 1/1000th of
a share).
No share certificates will be issued for Class C Shares.
Share certificates for Class A Shares will be issued only if you
so request in writing to the Agent. All share certificates
previously issued by the Fund represent Class A Shares. No
certificates will be issued for fractional Class A shares or if
you have elected Automatic Investment or Telephone Investment for
Class A Shares (see "How to Invest in the Fund" above) or
Expedited Redemption (see "How to Redeem Your Investment" below).
If certificates for Class A Shares are issued at your request,
Expedited Redemption Methods described below will not be
available. In addition, you may incur delay and expense if you
lose the certificates.
The Fund and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule provides in
substance that an investment company may not engage directly or
indirectly in financing any activity which is primarily intended
to result in the sale of its shares except pursuant to a written
plan adopted under the Rule. The Plan has three parts.
Under the Plan, the Fund is authorized to make payments with
respect to Class A Shares ("Class A Permitted Payments") to
Qualified Recipients, which payments shall be made through the
Distributor or shareholder servicing agent as disbursing agent
and may not exceed, for any fiscal year of the Fund (as adjusted
for any part or parts of a fiscal year during which payments
under the Plan are not accruable or for any fiscal year which is
not a full fiscal year), 0.25 of 1% of the average annual net
assets represented by the Class A Shares of the Fund. Such
payments shall be made only out of the Fund's assets allocable to
the Class A Shares. "Qualified Recipients" means 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 and which have
rendered assistance (whether direct, administrative, or both) in
the distribution and/or retention of the Fund's Class A Shares or
servicing of accounts of shareholders owning Class A Shares.
Until May 1, 1996, all outstanding shares of the Fund were
what are currently designated Class A Shares. During the fiscal
year ended December 31, 1995, $3,099 was paid to Qualified
Recipients under the Plan as then in effect, of which $371 was
retained by the Distributor. (See the Additional Statement for a
description of the Distribution Plan.)
Under another part of the Plan, the Fund is authorized to
make payments with respect to Class C Shares ("Class C Permitted
Payments"), to Qualified Recipients. Class C Permitted Payments
shall be made through the Distributor or shareholder servicing
agent as disbursing agent, and may not exceed, for any fiscal
year of the Fund (as adjusted for any part or parts of a fiscal
year during which payments under the Plan are not accruable or
for any fiscal year which is not a full fiscal year), 0.75 of 1%
of the average annual net assets represented by the Class C
Shares of the Fund. Such payments shall be made only out of the
Fund's assets allocable to the Class C Shares. "Qualified
Recipients" means 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 and which have rendered assistance
(whether direct, administrative, or both) in the distribution
and/or retention of the Fund's Class C Shares or servicing of
accounts of shareholders owning Class C Shares. Payments with
respect to Class C Shares during the first year after purchase
are paid to the Distributor and thereafter to other Qualified
Recipients.
Another part of the Plan is designed to protect against any
claim against or involving the Fund that some of the expenses
which might be considered to be sales-related which the Fund pays
or may pay come within the purview of the Rule. The Fund believes
that except for Permitted Payments it is not financing any such
activity and does not consider any payment enumerated in this
part of the Plan as so financing any such activity. However, it
might be claimed that some of the expenses the Fund pays come
within the purview of the Rule. If and to the extent that any
payment as specifically listed in the Plan (see the Additional
Statement) is considered to be primarily intended to result in or
as indirect financing of any activity which is primarily intended
to result in the sale of Fund shares, these payments are
authorized under the Plan. In addition, if the Sub-Adviser, out
of its own funds, makes payment for distribution expenses such
payments are authorized. See the Additional Statement.
Shareholder Services Plan for Class C Shares
Under a Shareholder Services Plan, the Fund is authorized to
make payments with respect to Class C Shares ("Service Fees") to
Qualified Recipients. Service Fees shall be paid through the
Distributor or shareholder servicing agent as disbursing agent,
and may not exceed, for any fiscal year of the Fund (as adjusted
for any part or parts of a fiscal year during which payments
under the Plan are not accruable or for any fiscal year which is
not a full fiscal year), 0.25 of 1% of the average annual net
assets represented by the Class C Shares of the Fund. Such
payments shall be made only out of the Fund's assets represented
by the Class C Shares. "Qualified Recipients" means
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 and
which have agreed to provide personal services to holders of
Class C Shares and/or maintenance of Class C Shares shareholder
accounts. See the Additional Statement. Service Fees with respect
to Class C Shares will be paid to the Distributor.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your shares at the net
asset value next determined after acceptance of your redemption
request at the Agent (subject to any applicable contingent
deferred sales charge for redemptions of Class C Shares and CDSC
Class A Shares). For redemptions of Class C Shares and CDSC Class
A Shares, at the time of redemption a sufficient number of
additional shares will be redeemed to pay for any applicable
contingent deferred sales charge. Redemptions can be made by the
various methods described below. There is no minimum period for
any investment in the Fund, except for shares recently purchased
by check, Automatic Investment or Telephone Investment as
discussed below. Except for CDSC Class A Shares (see "Purchases
of $1 Million or More") there are no redemption fees or
withdrawal penalties for Class A Shares. Class C Shares are
subject to a contingent deferred sales charge if redeemed before
they have been held 12 months from the date of purchase. (See
"Alternative Purchase Plans.") A redemption may result in a
transaction taxable to you. If you own both Class A Shares and
Class C Shares and do not specify which you wish to redeem, it
will be assumed that you wish to redeem Class A Shares.
For your convenience the Fund offers expedited redemption
for all classes of shares to provide you with a high level of
liquidity for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares of any
class not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed to
you, if your shares are registered in your name at the
Fund and the check is sent to your address of record,
provided that there has not been a change of your
address of record during the 30 days preceding your
redemption request. You can make only one request for
telephone redemption by check in any 7-day period.
See "Redemption Payments " below for payment methods. Your
name your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
Toll-free 800-ROCKY-22 (800-762-5922) or 908-855-5731.
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, by FAX at 908-855-5730
or by mail at 581 Main Street, Woodbridge, NJ 07095-1198,
indicating account name(s), account number, amount to be
redeemed, and any payment directions, signed by the
registered holder(s). Signature guarantees are not required.
See "Redemption Payments " below for payment methods.
If you wish to use the above procedures you should so elect
on the Expedited Redemption section of the Application or the
Ready Access Features form and provide the required information
concerning your Financial Institution account number. The
Financial Institution account must be in the exclusive name(s) of
the shareholder(s) as registered with the Fund. You may change
the designated Financial Institution account at any time by
completing and returning a Ready Access Features form. For
protection of your assets, this form requires signature
guarantees and possible additional documentation.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing Class A
Shares to be redeemed should be sent in blank (unsigned) to
the Fund's Shareholder Servicing Agent: Administrative Data
Management Corp., Attn: Aquilasm Group of Funds, 581 Main
Street, Woodbridge, NJ 07095-1198, with payment
instructions. A stock assignment form signed by the
registered shareholder(s) exactly as the account is
registered must also be sent to the Shareholder Servicing
Agent.
For your own protection, it is essential that certificates
be mailed separately from signed redemption documentation.
Because of possible mail problems, it is also recommended that
certificates be sent by registered mail, return receipt
requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required
if sufficient documentation is not on file with the Agent.
Additional documentation may be required where shares are held by
certain types of shareholders such as corporations, partnerships,
trustees or executors, or if redemption is requested by other
than the shareholder of record. If redemption proceeds of $50,000
or less are payable to the record holder and are to be sent to
the record address, no signature guarantee is required, except as
noted above. In all other cases, signatures must be guaranteed by
a member of a national securities exchange, a U.S. bank or trust
company, a state-chartered savings bank, a federally chartered
savings and loan association, a foreign bank having a U.S.
correspondent bank, a participant in the Securities Transfer
Association Medallion Program (STAMP), the Stock Exchanges
Medallion Program (SEMP) or the New York Stock Exchange, Inc.
Medallion Signature Program (MSP). A notary public is not an
acceptable signature guarantor.
2. Non-Certificate Shares. If you own non-certificate shares
registered on the books of the Fund, and you have not elected
Expedited Redemption to a predesignated Financial Institution
account, you must use the Regular Redemption Method. Under this
redemption method you should send a letter of instruction to:
Administrative Data Management Corp., Attn: Aquilasm Group of
Funds, 581 Main Street, Woodbridge, NJ 07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
above.
Redemption Payments
Redemption payments will ordinarily be mailed to you at your
address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will,
wherever possible, be wired or transferred through the facilities
of the Automated Clearing House to the Financial Institution
account specified in the Expedited Redemption section of your
Application or Ready Access Features form. The Fund may impose a
charge, not exceeding $5.00 per wire redemption, after written
notice to shareholders who have elected this redemption
procedure. The Fund has no present intention of making this
charge. Upon 30 days' written notice to shareholders, the Fund
may modify or terminate the use of the Automated Clearing House
to make redemption payments at any time or charge a service fee,
although no such fee is presently contemplated. If any such
changes are made, the Prospectus will be supplemented to reflect
them. If you use a broker or dealer to arrange for a redemption,
it may charge you a fee for this service.
The Fund will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven
days after acceptance of such a redemption request. However, the
right of redemption may be suspended or the date of payment
postponed (i) during periods when the New York Stock Exchange is
closed for other than weekends and holidays or when trading on
such Exchange is restricted as determined by the Securities and
Exchange Commission by rule or regulation; (ii) during periods in
which an emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption of shares recently purchased by check (irrespective of
whether the check is a regular check or a certified, cashier's or
official bank check) or by Automatic Investment or Telephone
Investment may be delayed up to 15 days or until (i) the purchase
check or Automatic Investment or Telephone Investment has been
honored or (ii) the Agent has received assurances by telephone or
in writing from the Financial Institution on which the purchase
check was drawn, or from which the funds for Automatic Investment
or Telephone Investment were transferred, satisfactory to the
Agent and the Fund, that the purchase check or Automatic
Investment or Telephone Investment will be honored. Possible
delays in payment of redemption proceeds can be eliminated by
using wire payments or Federal Reserve drafts to pay for
purchases. purchase check was drawn or from which the funds for
Automatic }Investment or Telephone Investment were transferred,
satisfactory to the Agent and the Fund, that the purchase check
or Automatic Investment or Telephone Investment will be honored.
Possible delays in payment of redemption proceeds can be
eliminated by using wire payments or Federal Reserve drafts to
pay for purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by the distribution in kind
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. See the Additional Statement for details.
The Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 as a result of shareholder redemptions
or failure to meet the minimum investment level under an
Automatic Purchase Program. If the Board elects to do this,
shareholders who are affected will receive prior written notice
and will be permitted 60 days to bring their accounts up to the
minimum before this redemption is processed.
Reinvestment Privilege
You may reinvest without payment of any additional sales
charge all or part of any redemption proceeds within 120 days of
a redemption of shares in shares of the Fund of the same class as
the shares redeemed at the net asset value next determined after
the Agent receives your reinvestment order. In the case of Class
C Shares or CDSC Class A Shares on which a contingent deferred
sales charges was deducted at the time of redemption, the
Distributor will refund to you the amount of such sales charge,
which will be added to the amount of the reinvestment. The Class
C Shares or CDSC Class A Shares issued on reinvestment will be
deemed to have been outstanding from the date of your original
purchase of the redeemed shares, less the period from redemption
to reinvestment. The reinvestment privilege for any class may be
exercised only once a year, unless otherwise approved by the
Distributor. If you have realized a gain on the redemption of
your shares, the redemption transaction is taxable, and
reinvestment will not alter any capital gains tax payable. If
there has been a loss on the redemption, some or all of the loss
may be tax deductible, depending on the amount reinvested and the
length of time between the redemption and the reinvestment. You
should consult your own tax advisor on this matter.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase Class A Shares of the Fund having a net asset value of
at least $5,000. The Automatic Withdrawal Plan is not available
for Class C Shares.
Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions
must be reinvested in your shareholder account. Redemption of
shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.
Purchases of additional Class A Shares concurrently with
withdrawals are undesirable because of sales charges when
purchases are made. Accordingly, a Planholder may not maintain an
Automatic Withdrawal Plan while simultaneously making regular
purchases. While an occasional lump sum investment may be made,
such investment should normally be an amount at least equal to
three times the annual withdrawal or $5,000, whichever is less.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
The Advisory Agreement
KPM Investment Management, Inc. (the "Adviser") supervises
the investment program of the Fund and the composition of its
portfolio. Through its Denver office, the Adviser currently
serves as investment adviser for Tax-Free Fund of Colorado, a
tax-free municipal bond fund which was also founded and sponsored
by Aquila Management Corporation.
The services of the Adviser are rendered under an Investment
Advisory Agreement (the "Advisory Agreement") which provides,
subject to the control of the Board of Trustees, for investment
supervision. The Advisory Agreement states that the Adviser
shall, at its expense, provide to the Fund all office space and
facilities, equipment and clerical personnel necessary for the
carrying out of the Adviser's duties under the Advisory
Agreement. At the Adviser's expense the Adviser shall provide for
pricing of the Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees, for pricing
of the Fund's portfolio at least quarterly using another such
source satisfactory to the Fund.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Adviser.
Under the Advisory Agreement, the Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to shareholders and the costs
of printing or otherwise producing and distributing those copies
of such prospectuses, statements of additional information and
reports as are sent to its shareholders. Under the Advisory
Agreement, all costs and expenses not expressly assumed by the
Adviser or by the Sub-Adviser under the Sub-Advisory and
Administration Agreement or by the Fund's Distributor (principal
underwriter) are paid by the Fund. The Advisory Agreement lists
examples of such expenses borne by the Fund, the major categories
of such expenses being: legal and audit expenses, custodian and
transfer agent, or shareholder servicing agent fees and expenses,
stock issuance and redemption costs, certain printing costs,
registration costs of the Fund and its shares under Federal and
State securities laws, interest, taxes and brokerage commissions,
and non-recurring expenses, including litigation.
Under the Advisory Agreement, the Fund pays an Advisory fee
computed on the net asset value of the Fund as set forth in the
table that appears below.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. In general, the primary consideration in
effecting transactions for the Fund is obtaining the most
favorable prices and efficient execution. This means that the
Adviser will seek to execute each transaction at a price and
commission, if any, which provide the most favorable total cost
or proceeds reasonably attainable in the circumstances. While the
Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest
spread or commission available. The Adviser has complete freedom
as to the markets in which and the broker-dealers through whom
(acting on an agency basis or as principal) it operates to seek
this result. The Adviser may consider a number of factors in
determining which broker-dealers to use. These factors, which are
more fully discussed in the Additional Statement, include, but
are not limited to, research services, the reasonableness of
commissions and quality of services and execution. The Adviser is
authorized to consider sales of shares of the Fund.
The Sub-Advisory and Administration Agreement
Aquila Management Corporation, founder of the Fund, serves
as Sub-Adviser and Administrator (the "Sub-Adviser") for the Fund
under a Sub-Advisory and Administration Agreement (the
"Sub-Advisory and Administration Agreement"). The Sub-Adviser is
the founder and serves as administrator for three other funds
oriented to the Rocky Mountain Region: Tax-Free Trust of Arizona,
with assets of $387 million, Tax-Free Fund of Colorado, with
assets of $215 million and Tax-Free Fund For Utah, with assets of
$29 million, all as of March 31, 1996.
At its own expense, the Sub-Adviser provides office space,
personnel, facilities and equipment for the performance of its
functions thereunder and as is necessary in connection with the
maintenance of the headquarters of the Fund and pays all
compensation of the Fund's Trustees, officers and employees who
are affiliated persons of the Sub-Adviser.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, 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.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, the Sub-Adviser
provides all administrative services to the Fund other than those
relating to its investment portfolio handled by the Adviser under
the Advisory Agreement. Such administrative services include, but
are not limited to, overseeing all relationships between the Fund
and its various support organizations including the transfer
agent, custodian, legal counsel, auditors and principal
underwriter. Its services include the negotiation of agreements
in relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Fund and for the sale, servicing, or
redemption of the Fund's shares. Additionally, the Sub-Adviser
either keeps the accounting and other books and records of the
Fund, including the computation of net asset value per share and
the dividends (utilizing daily pricing of the securities in the
Fund's portfolio performed by the Adviser under the Advisory
Agreement) or, at its expense and responsibility, delegates such
duties in whole or in part to a company satisfactory to the Fund.
See the Additional Statement for a further description of
functions listed in the Sub-Advisory and Administration Agreement
as part of such duties.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, the Sub-Adviser
provides sub-advisory services to the Fund, which include review
of the investment activities of the Fund, and may include
providing the Adviser and the Fund with material relevant to the
investment in securities of issuers in various states. Although
such event is not anticipated, if the Advisory Agreement were
terminated, the Sub-Adviser would assume the duties of managerial
investment adviser, in addition to continuing its duties as
sub-adviser and administrator, subject to and in compliance with
the 1940 Act and the rules thereunder. In such event, it would be
paid an additional fee at the rate currently paid to the Adviser.
See the Additional Statement.
The Sub-Advisory and Administration Agreement contains
provisions as to the Sub-Adviser's allocation of the portfolio
transactions of the Fund similar to those in the Advisory
Agreement; see the Additional Statement.
Under the Sub-Advisory and Administration Agreement, the
Fund pays a sub-advisory and administration fee computed on the
net asset value of the Fund as described in the table below.
Advisory and Sub-Advisory Fees
Under the Advisory Agreement and the Sub-Advisory and
Administration Agreement, the Fund pays fees to the Adviser and
Sub-Adviser which are payable monthly and computed on the net
asset value of the Fund at the end of each business day at
different levels, depending on the net assets of the Fund. The
aggregate annual rate of the fees payable with respect to net
assets at different levels are set forth in the following table:
<TABLE>
<CAPTION>
Aggregate Annual Rates
Sub-Advisory and
Administration
Fund Net Assets Advisory Fee Fee Total Fees
<S> <C> <C> <C>
Up to $15 million..... 0.70 of 1% 0.80 of 1% 1.50%
$15 million up to
$50 million........ 0.55 of 1% 0.65 of 1% 1.20%
Above $50 million..... 0.40 of 1% 0.50 of 1% 0.90%
</TABLE>
The Adviser and the Sub-Adviser may each waive all or part
of their respective fees during the early development phase of
the Fund. The combined fees paid by the Fund to the Adviser and
the Sub-Adviser are higher than those paid by most other
investment companies. In authorizing such fees, the Board of
Trustees considered a number of factors including the
difficulties of managing a portfolio oriented primarily to the
Rocky Mountain Region, and the expertise with respect to that
area possessed by both the Adviser and the Sub-Adviser.
The Adviser and Sub-Adviser have each agreed that their
respective fees shall be reduced, but not below zero, by an
amount equal to their respective pro-rata portions (based upon
the aggregate fees of the Adviser and the Sub-Adviser) of the
amount, if any, by which the total expenses of the Fund in any
fiscal year, exclusive of taxes, interest, and brokerage fees,
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
will be sold have any such limitation.
Information about the Adviser, the Sub-Adviser and the
Distributor
The Adviser provides professional investment advisory
services to a broad base of clients and currently manages over
$750 million in clients' assets, of which approximately $450
million consists of equity investments. The Adviser is a
wholly-owned subsidiary of Kirkpatrick, Pettis, Smith, Polian
Inc. ("Kirkpatrick, Pettis" ), which is a full service investment
firm serving institutional and retail markets through its
investment banking, sales and trading facilities.
The Fund's portfolio is managed in the Adviser's Denver
office. Mr. John Henry Schonewise is the Fund's Portfolio
Manager. He has been a Vice President of the Adviser since 1994.
From 1992 to 1994 he was Vice President and a portfolio manager
of Banc One Investment Advisors Corporation. From 1985 through
1992, he was a portfolio manager at United Bank of Denver (now
Norwest Bank, Denver). He holds a B.S. in Business Administration
from the University of Nebraska at Lincoln and a M.A. in
Economics from the University of Kansas.
Tracing its history to 1925, Kirkpatrick, Pettis currently
staffs 9 offices in Colorado, Iowa, Kansas, Missouri, Nebraska
and New York that serve primarily the midwest and Rocky Mountain
regions. Its principal office is located at 10250 Regency Circle,
Omaha, NE 68114 and its Denver office is located at One Norwest
Center, 1700 Lincoln Street, Denver, CO 80203. Since 1983, the
Adviser has been a wholly-owned subsidiary of Mutual of Omaha
Insurance Company, whose principal office is at Mutual of Omaha
Plaza, Omaha, NE 68175.
The Fund's founder, Sub-Adviser and Administrator is
administrator to the Aquilasm Group of Funds, which consists of
13 funds, seven tax-free municipal bond funds , five money market
funds and the Fund. As of December 31, 1995, these funds had
aggregate assets of approximately $2.7 billion, of which
approximately $800 million consisted of assets of money market
funds and $1.9 billion consisted of assets of the tax-free bond
funds. The Sub-Adviser, which was founded in 1984, is controlled
by Mr. Lacy B. Herrmann (directly, through a trust and through
share ownership by his wife). See the Additional Statement for
information on Mr. Herrmann.
During the fiscal year ended December 31, 1995, the Fund
accrued fees to the Adviser and Sub-Adviser respectively of
$8,679 and $9,981. All of such fees were waived. In addition, the
Sub-Adviser agreed to reimburse $86,185 of the Fund's expenses.
The Distributor currently handles the distribution of the
shares of thirteen funds, five money market funds, seven tax-free
municipal bond funds and the Fund. Under the Distribution
Agreement, the Distributor is responsible for the payment of
certain printing and distribution costs relating to prospectuses
and reports as well as the costs of supplemental sales
literature, advertising and other promotional activities.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which
are currently owned by Mr. Herrmann, will be owned by certain
directors and/or officers of the Sub-Adviser and/or the
Distributor, including Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
The Fund distributes dividends from net investment income on
an annual basis following the end of its fiscal year which is
December 31st. If the Fund has had net long-term capital gains or
net short-term capital gains for the year, it distributes
dividends on those items at the same time. Short-term capital
gains include the gains from the disposition of securities held
less than one year, the premiums from expired call options
written by the Fund and net gains from closing transactions with
respect to such options. If required by tax laws to avoid excise
or other taxes, dividends and/or capital gains distributions may
be made more frequently. Dividends and other distributions paid
by the Fund with respect to Class A Shares and Class C Shares are
calculated at the same time and in the same manner. The per share
dividends of Class C Shares will be lower than the per share
dividends on the Class A Shares as a result of the higher service
and distribution fees applicable to those shares. In addition,
the dividends of each class can vary because each class will bear
certain class-specific charges.
Unless you request otherwise by letter addressed to the
Agent or by filing an appropriate Application prior to a given
ex-dividend date, dividends and distributions will be
automatically reinvested in full and fractional shares of the
Fund at net asset value on the record date for the dividend or
distribution or other date fixed by the Board of Trustees. An
election to receive cash will continue in effect until written
notification of a change is received by the Agent. All
shareholders, whether their dividends are received in cash or are
being reinvested, will receive a quarterly account summary
indicating the current status of their investment. There is no
fixed dividend rate.
Tax Information
The Fund intends to qualify for taxation as a regulated
investment company under the provisions of Subchapter M of the
Internal Revenue Code. As such, the Fund will not be taxed on its
net investment income or its net realized capital gains, if any,
to the extent they have been distributed to the Fund's
shareholders. Distributions from the Fund's net income and net
short-term capital gains are taxed as ordinary income. If the
Fund has net long-term capital gains which are greater than its
net short-term capital loses, it will distribute the excess and
such distribution will be taxed to you as long-term capital
gains, regardless of how long you have held your shares. Although
distributions will be made in January, you must report the income
or capital gain on your return for the prior calendar year,
assuming you file your returns on a calendar year basis.
For purposes of Federal income tax, certain options, if any,
held by the Fund at the end of its fiscal year generally will be
treated as having been sold at market value. As a general rule
any gain or loss on such contracts will be treated as 60%
long-term and 40% short-term. See the Additional Statement for
more details on the tax aspects of options. Dividends paid by the
Fund will qualify for the dividends received deduction for
corporations only to the extent that they represent payment of
qualifying dividend income received by the Fund. Shortly after
the end of each calendar year, the Fund will send you a statement
of the amount and nature of net income and capital gains.
Distributions from the Fund, whether ordinary income or
capital gain in nature, will be taxable to you whether you take
them in cash or have them automatically reinvested in shares of
the Fund.
The Fund will be obliged to withhold certain percentages of
distributions and pay over the amounts to the Internal Revenue
Service in either of two instances:
(1) if you do not supply the Fund or the institution
through which you receive distributions with your correct
taxpayer identification number, which for most individuals is
their Social Security number, the Fund will have to withhold 31%
on ordinary income dividends, capital gains dividends and
redemption payments; and
(2) if you are a non-resident alien or foreign entity, the
Fund will have to withhold 30% (or a lower rate if provided by
treaty with the country in which the alien or entity resides) of
such payments.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid
for the shares. If you are required to pay a conditional deferred
sales charge at the time of redemption, the amount of that charge
will reduce the amount of your gain or increase the amount of
your loss as the case may be. The gain or loss will be long-term
if you held the redeemed shares for over a year, and short-term,
if for a year or less.
Tax Effect of Conversion
Class C Shares will automatically convert to Class A Shares
approximately six years after purchase. No gain or loss will be
recognized by the Fund or its shareholders upon such conversions;
each shareholder's adjusted tax basis in the Class A Shares
received upon conversion will equal the shareholder's adjusted
tax basis in the Class C Shares held immediately before the
conversion; and each shareholder's holding period for the Class A
Shares received upon conversion will include the period for which
the shareholder held as capital assets the converted Class C
Shares immediately before conversion.
The above information is a summary of the tax treatment that
will be applied to the Fund and its distributions. If you have
any questions, you should contact your tax adviser, particularly
in connection with state and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among this
Fund and certain tax-free municipal bond funds (the "Bond or
Equity Funds") and certain money market funds (the "Money-Market
Funds"), all of which are in the Aquilasm Group of Funds and have
the same Administrator and Distributor as the Fund. All exchanges
are subject to certain conditions described below. As of the date
of this Prospectus, the Bond or Equity Funds are this Fund,
Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free
Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free
Fund of Kentucky, Tax-Free Fund For Utah and Narragansett Insured
Tax-Free Income Fund; the Money-Market Funds are Capital Cash
Management Trust, Pacific Capital Cash Assets Trust (Original
Shares), Pacific Capital Tax-Free Cash Assets Trust (Original
Shares), Pacific Capital U.S. Treasuries Cash Assets Trust
(Original Shares) and Churchill Cash Reserves Trust.
Class A Shares of the Fund can be exchanged only into Class
A Shares of any Bond or Equity Fund or into shares of the
Money-Market Funds. Class C Shares can be exchanged only into
Class C Shares of any Bond or Equity Fund that offers Class C
Shares or into shares of the Money-Market Funds. At the date of
the Prospectus, it is expected that all of the Bond or Equity
Funds will offer Class C Shares by May 31, 1996.
Class A Shares Exchange Privilege
Under the Class A Shares exchange privilege, once any
applicable sales charge has been paid on Class A Shares of any
Bond or Equity Fund, those shares (and any shares acquired as a
result of reinvestment of dividends and/or distributions) may be
exchanged any number of times between Money-Market Funds and Bond
or Equity Funds without the payment of any additional sales
charge.
CDSC Class A Shares of the Fund (see "Purchases of $1
Million or More" and "Special Dealer Arrangements") can be
exchanged for CDSC Class A Shares of a Bond or Equity Fund or
into a Money-Market Fund. The CDSC Class A Shares will not be
subject to a contingent deferred sales charge at the time of
exchange, but the contingent deferred sales charge will be
payable upon a redemption which occurs before the expiration of
the applicable holding period of any CDSC Class A Shares or any
shares of a Money-Market Fund received on exchange for CDSC Class
A Shares. (The contingent deferred sales charge does not apply to
any shares acquired as a result of reinvestment of dividends
and/or distributions.) For purposes of computing the time period
for the applicable contingent deferred sales charge, the length
of time of ownership of CDSC Class A Shares will be determined by
the time of original purchase and not by the time of the
exchange. Any period of 30 days or more during which any
Money-Market shares received on an exchange of CDSC Class A
Shares are held is not counted in computing the period of
ownership of CDSC Class A Shares. (See "Alternative Purchase
Plans.")
Class C Shares Exchange Privilege
Under the Class C Shares exchange privilege, Class C Shares
(and any shares acquired as a result of reinvestment of dividends
and/or distributions) may be exchanged any number of times
between Money-Market Funds and for Class C Shares of Bond or
Equity Funds. Class C Shares will not be subject to a contingent
deferred sales charge at the time of exchange, but the contingent
deferred sales charge will be payable upon redemption which
occurs before the expiration of the applicable holding period of
any Class C Shares or any shares of a Money-Market Fund received
on exchange for Class C Shares. (The contingent deferred sales
charge does not apply to any shares acquired as a result of
reinvestment of dividends and/or distributions.) For purposes of
computing the time period for the applicable contingent deferred
sales charge or for the conversion of Class C Shares into Class A
Shares, the length of time of ownership of Class C shares will be
determined by time of original purchase and not by the time of
the exchange. Any period of 30 days or more during which any
Money-Market shares received on an exchange of Class C Shares are
held is not counted in computing the period of ownership of Class
C Shares. (See "Alternative Purchase Plans.")
Eligible Shares
The "Class A Eligible Shares" of any Bond or Equity Fund are
those Class A Shares which were (a) acquired by direct purchase
with payment of any applicable sales charge, or which were
received in exchange for shares of another Bond or Equity Fund on
which any applicable sales charge was paid; (b) acquired by
exchange for shares of a Money-Market Fund with payment of the
applicable sales charge; (c) acquired in one or more exchanges
between shares of a Money-Market Fund and a Bond or Equity Fund
so long as the shares of the Bond or Equity Fund were originally
purchased as set forth in (a) or (b); (d) acquired on conversion
of Class C Shares or (e) acquired as a result of reinvestment of
dividends and/or distributions on otherwise Class A Eligible
Shares.
The "CDSC Class A Eligible Shares" of any Bond or Equity
Fund are those CDSC Class A Shares which were (a) acquired by
direct purchase in the amount of $1 million or more without a
sales charge or in certain purchases when Special Dealer
Arrangements are in effect or which were received in exchange for
CDSC Class A Shares of another Bond or Equity Fund acquired under
the same conditions; (b) acquired by exchange for shares of a
Money-Market Fund under the same conditions; (c) acquired in one
or more exchanges between shares of a Money-Market Fund and a
Bond or Equity Fund so long as the shares of the Bond or Equity
Fund were originally purchased as set forth in (a) or (b); or (d)
acquired as a result of reinvestment of dividends and/or
distributions on otherwise CDSC Class A Eligible Shares.
The "Class C Eligible Shares" of any Bond or Equity Fund are
those shares which were (a) acquired by direct purchase including
by exchange from a Money-Market Fund, or which were received in
exchange for shares of Class C Shares of another Bond or Equity
Fund; or (b) acquired as a result of reinvestment of dividends
and/or distributions on otherwise Class C Eligible Shares.
If you own Class A or Class C Eligible Shares of any Bond or
Equity Fund, you may exchange them for shares of any Money Market
Fund or the Class A or Class C Shares, respectively, of any other
Bond or Equity Fund without payment of any sales charge or CDSC.
The shares received will continue to be Class A or Class C
Eligible shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class A Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class A Shares of any Bond or
Equity Fund without payment of any sales charge.
If you own shares of a Money-Market Fund which you have
acquired by exchange for CDSC Class A Eligible Shares of any Bond
or Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for CDSC Class A shares of any
Bond or Equity Fund but you will be required to pay the
applicable contingent deferred sales charge if you redeem such
shares before you have held CDSC Class A Shares for four years.
You will also be required to pay the applicable contingent
deferred sales charge if you redeem such shares of a Money-Market
Fund before you have held CDSC Class A Shares for four years. The
running of the four-year period is suspended during the period
you hold shares of a Money-Market Fund received in exchange for
CDSC Class A Shares.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Class C Eligible Shares of any Bond or
Equity Fund, you may exchange these shares, and any shares
acquired as a result of reinvestment of dividends and/or
distributions on these shares, for Class C Shares of any Bond or
Equity Fund, but you will be required to pay the applicable
contingent deferred sales charge if you redeem such Class C
shares before you have held Class C Shares for 12 months. You
will also be required to pay the applicable contingent deferred
sales charge if you redeem such shares of a Money-Market Fund
before you have held Class C Shares for 12 months. The running of
the 12-month CDSC period and the six-year conversion period for
Class C Shares is suspended during the period you hold shares of
a Money-Market Fund received in exchange for Class C Shares. (See
"Alternative Purchase Plans.")
Shares of a Money-Market Fund may be exchanged for shares of
another Money-Market Fund or for Class A Shares or Class C Shares
of a Bond or Equity Fund; however, if the shares of a
Money-Market Fund were not acquired by exchange of Eligible
Shares of a Bond or Equity Fund or of shares of a Money-Market
Fund acquired in such an exchange, they may be exchanged for
Class A Shares of a Bond or Equity Fund only upon payment of the
applicable sales charge.
This Fund, as well as the Money-Market Funds and other Bond
or Equity Funds, reserves the right to reject any exchange into
its shares, if shares of the fund into which exchange is desired
are not available for sale in your state of residence. The Fund
may also modify or terminate this exchange privilege at any time.
In the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take
effect on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset
value of the shares surrendered for exchange are at least equal
to the minimum investment requirements of the investment company
whose shares are being acquired and (iii) the ownership of the
accounts from which and to which the exchange is made are
identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-ROCKY-22 (800-762-5922) toll free or 908-855-5731
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
Exchanges will be effected at the relative exchange prices
of the shares being exchanged next determined after receipt by
the Agent of your exchange request. The exchange prices will be
the respective net asset values of the shares, unless a sales
charge is to be deducted in connection with an exchange of
shares, in which case the exchange price of shares of a Bond or
Equity Fund will be their public offering price. Prices for
exchanges are determined in the same manner as for purchases of
the Fund's shares. See "How to Invest in the Fund."
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the
realization of a capital gain or loss, depending on the cost or
other tax basis of the shares exchanged and the holding period
(see the Additional Statement); no representation is made as to
the deductibility of any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable, except
to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free
Money-Market Fund) are exempt from regular Federal income tax,
and to the extent that a portion or all of the dividends paid by
Pacific Capital U.S. Treasuries Cash Assets Trust (which invests
in U.S. Treasury obligations) are exempt from state income taxes.
If your state of residence is not the same as that of the issuers
of obligations in which a tax-free municipal Bond Fund or a
tax-free Money-Market Fund invests, the dividends from that fund
may be subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a Bond Fund or a tax-free Money-Market Fund under
the exchange privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including various expressions of total return.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes any applicable sales charge) for 1- and 5-year periods
and for a period since the inception of the Fund, to the extent
applicable, through the end of such periods, assuming
reinvestment (without sales charge) of all distributions. The
Fund may also furnish total return quotations for other periods
or based on investments at various applicable sales charge levels
or at net asset value. For such purposes total return equals the
total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a
percentage of the purchase price. See the Additional Statement.
Performance figures are based upon past performance, reflect
as appropriate all recurring charges against Fund income net of
fee waivers and reimbursement of expenses, if any, and will
assume the payment of the maximum sales charge on the purchase of
shares, but not on reinvestment of income dividends for which the
Fund does not impose a sales charge.
The investment results of the Fund, like those of all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's total return may be in
any future period.
Description of the Fund and Its Shares
The Fund is an open-end, diversified management investment
company organized in 1993 as a Massachusetts business trust. The
Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares and to divide or combine the
shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. Each
share represents an equal proportionate interest in the Fund with
each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders. If they deem it
advisable and in the best interests of shareholders, the Board of
Trustees of the Fund may create additional classes of shares
(subject to rules and regulations of the Securities and Exchange
Commission or by exemptive order). The Board of Trustees may
also, at its own discretion, create additional series of shares,
each of which may have separate assets and liabilities (in which
case any such series will have a designation including the word
"Series"). See the Additional Statement for further information
about possible additional series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
In addition to Class A and Class C Shares, which are offered
by this Prospectus, the Fund also has Institutional Class Shares
("Class Y Shares"), which are offered only to institutions acting
for investors in a fiduciary, advisory, agency, custodial or
similar capacity and are not offered directly to retail
customers. Class Y Shares are offered by means of a separate
prospectus, which can be obtained by calling the Fund at
800-ROCKY-55 (800-762-5955).
The primary distinction among the Fund's three classes of
shares lies in their different sales charge structures and
ongoing expenses, which are likely to be reflected in differing
yields and other measures of investment performance. All three
classes represent interests in the same portfolio of securities
and have the same rights, except that each class bears the
separate expenses, if any, of its Distribution Plan and has
exclusive voting rights with respect to its Plan.
Of the shares of the Fund outstanding on April 10, 1996, the
Sub-Adviser held of record 8,768 shares (7.1%) and M.
Quackenbush, 25 Corticelli Street, Florence, MA held of record
8,306 shares (6.7%), all of which were Class A Shares. Except for
the last, the Fund has no information to indicate that the
foregoing record holdings are not also beneficial.
See the notes to the "Statement of Assets and Liabilities"
in the Additional Statement for information as to the
amortization of the Fund's organizational and start-up expenses.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) per share held (and proportionate
fractional votes for fractional dollar amounts). Shareholders
will vote on the election of Trustees and on other matters
submitted to the vote of shareholders. See the Additional
Statement for information about shareholder voting if the Fund
were in the future to have more than one portfolio (series). No
amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding
shares of the Fund except that the Fund's Board of Trustees may
change the name of the Fund. The Fund may be terminated (i) upon
the sale of its assets to another issuer, or (ii) upon
liquidation and distribution of the assets of the Fund, in either
case if such action is approved by the vote of the holders of a
majority of the outstanding shares of the Fund. If not so
terminated, the Fund will continue indefinitely.
<PAGE>
Application for Aquila Rocky Mountain Equity Fund
For Class A or Class C Shares only
Please complete steps 1 through 4 and mail to:
ADM, Attn: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
Tel. #1-800-762-5922
STEP 1 ACCOUNT REGISTRATION
A. REGISTRATION
___Individual (Use line 1)
___Joint Account* (Use lines 1&2)
___For a Minor (Only one custodian and one minor permitted.)
(Use line 3)
___For Trust, Corporation, Partnership or other Entity (Use line 4)
* Joint Accounts will be Joint Tenants With Rights of Survivorship
unless otherwise specified.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name
Under the _________Uniformed Gifts/Transfers to Minors Act.
State
Custodian for ____________________________________________________
Minor's First Name Middle Initial Last Name
_____________________________
Minor's Social Security No.
4. __________________________________________________________________
(Name of Corporation or Partnership. PLEASE INDICATE TYPE OF
ORGANIZATION. If a Trust, include the name and date of the Trust
Instrument. The name(s) of the Trustees in which account will be
registered should be listed below. Account for a Pension or Profit
Sharing Plan or Trust may be registered in the name of the Plan or
Trust itself.)
______________________________________________________________________
Tax I.D. Number Trustee(s) or Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
__________________________________________________________________________
Street or P.O. Box City State Zip Code
(_______)_________________________________________________________________
Area Code Daytime Telephone # Occupation
__________________________________________________________________________
Employer's Name/Employer's Address City State
Citizen or resident of U.S.___ Other___
Check here___ if you are a non U.S. citizen or resident and not subject to
back-up withholding. See certification in Step 4.
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
__________________________________________________________________________
Dealer Name Branch Office Address
__________________________________________________________________________
Branch Office City/State Branch #
__________________________________________________________________________
Representative's Name Rep #
(_______)_________________________________________________________________
Area Code Telephone # [Agent Use: Dealer # / Branch #]
STEP 2 PURCHASE OF SHARES
A. INITIAL INVESTMENT
Indicate Method of Payment (For either method, make check payable to
Aquila Rocky Mountain Equity Fund)
Indicate class of shares:
__ Class A Shares (Front-Payment Class)
__ Class C Shares (Level-Payment Class)
IF NO SHARE CLASS IS MARKED, INVESTMENT WILL AUTOMATICALLY BE MADE
IN CLASS A SHARES.
___Initial Investment $________________ (Minimum $1,000)
___Automatic Investment $________________(Minimum $50)
For Automatic Investment of at least $50 per month, you must complete
Step 3, Section A, Step 4, Section A & B and attach a PRE-PRINTED
DEPOSIT SLIP OR VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions will be reinvested
in additional shares at Net Asset Value unless otherwise indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___Wire directly into my financial institution account, ATTACHED IS
A VOIDED CHECK showing the account information where I would like
the dividend deposited.
___Mail check to my address listed in Step 1a.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ YES ___ NO
This option provides you with a convenient way to have amounts
automatically drawn on your financial institution account and invested
in your Aquila Rocky Mountain Equity Fund account. To establish this
program, please complete Step 4, Sections A & B of this Application.
I wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or
on the first business day after that date).
YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ YES ___ NO
This option provides you with a convenient way to add to your account
(minimum of $50 and maximum of $50,000) at any time you wish by simply
calling the Fund toll-free at 1-800-ROCKY-22. To establish this program,
please complete Step 4, Sections A & B of this Application. YOU MUST
ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
C. LETTER OF INTENT
APPLICABLE TO CLASS A SHARES ONLY.
(See Terms of Escrow for Letter of Intent at the end of this application)
(Check appropriate box)
___ YES ___ NO
I/we intend to invest in shares of the Fund during the 13-month period
from the date of my first purchase pursuant to this Letter (which
purchase cannot be more than 90 days prior to the date of this Letter),
an aggregate amount (excluding any reinvestment of dividends or
distributions) of at least $50,000 which together with my present
holdings of Fund shares (at public offering price on date of this
Letter), will exceed the minimum amount checked below:
___ $50,000 ___ $100,000 ___ $250,000
___ $500,000 ___ $1,000,000
D. AUTOMATIC WITHDRAWAL PLAN
APPLICABLE TO CLASS A SHARES ONLY.
(Minimum investment $5,000)
Application must be received in good order at least two weeks prior
to 1st actual liquidation date.
(Check appropriate box)
___ YES ___ NO
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, Administrative Data
Management Corp. (the "Agent") is authorized to redeem sufficient
shares from this account at the then current Net Asset Value, in
accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning________________,
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
___ Mail check to my address listed in Step 1a.
E. TELEPHONE EXCHANGE
This option allows you to effect exchanges among accounts in your name
within the Aquila SM Group of Funds by telephone.
(Check appropriate box)
___ YES ___ NO
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares of
one Aquila-sponsored fund for shares of another Aquila-sponsored fund
with identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I(we) understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorney's fees, resulting
from acceptance of or acting or failure to act upon this Authorization.
F. EXPEDITED REDEMPTION
The proceeds will be deposited to your Financial Institution
account listed.
(Check appropriate box)
___ YES ___ NO
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my(our) account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this
Fund account is registered. YOU MUST ATTACH A PRE-PRINTED DEPOSIT
SLIP OR VOIDED CHECK.
_______________________________ ______________________________________
Financial Institution Financial Institution
Account Registration Account Number
_______________________________ ______________________________________
Name of Financial Institution Financial Institution Transit/Routing
Number
_______________________________ ______________________________________
Street City State Zip Code
STEP 4
Section A
DEPOSITOR'S AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge my/our
account for any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number ______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City_______________________________________State _________ Zip Code________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
______________________________________________
Please Print
X_____________________________________________ __________________
Signature Date
______________________________________________
Please Print
X_____________________________________________ __________________
Signature Date
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila
Distributors, Inc. (the "Distributor") agrees:
1. Electronic Funds Transfer debit and credit items transmitted
pursuant to the above authorization shall be subject to the
provisions of the Operating Rules of the National Automated
Clearing House Association.
2. To indemnify and hold you harmless from any loss you may suffer
in connection with the execution and issuance of any electronic
debit in the normal course of business initiated by the Agent
(except any loss due to your payment of any amount drawn against
insufficient or uncollected funds), provided that you promptly
notify us in writing of any claim against you with respect to
the same, and further provided that you will not settle or
pay or agree to settle or pay any such claim without the written
permission of the Distributor.
3. To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause,
any such electronic debit.
Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of
legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Fund and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Fund account to make up any
deficiency resulting from any decline in the net asset value of
shares so purchased and any dividends paid on those shares. I/We
authorize the Fund and its agents to correct any transfer error by
a debit or credit to my/our Financial Institution account and/or
Fund account and to charge the account for any related charges.
I/We acknowledge that shares purchased either through Automatic
Investment or Telephone Investment are subject to applicable sales
charges.
The Fund, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transaction if the Agent follows
reasonable procedures designed to verify the identity of the caller.
The Agent will request some or all of the following information:
account name and number, name(s) and social security number registered
to the account and personal identification; the Agent may also record
calls. Shareholders should verify the accuracy of confirmation
statements immediately upon receipt. Under penalties of perjury, the
undersigned whose Social Security (Tax I.D.) Number is shown above
certifies (i) that Number is my correct taxpayer identification number
and (ii) currently I am not under IRS notification that I am subject
to backup withholding (line out (ii) if under notification). If no such
Number is shown, the undersigned further certifies, under penalties of
perjury, that either (a) no such Number has been issued, and a Number
has been or will soon be applied for. If a Number is not provided to
you within sixty days, the undersigned understands that all payments
(including liquidations) are subject to 31% withholding under federal
tax law, until a Number is provided and the undersigned may be subject
to a $50 I.R.S. penalty, or (b) that the undersigned is not a citizen
or resident of the U.S.; and either does not expect to be in the
U.S. for more than 183 days during each calendar year and does not
conduct a business in the U.S. which would receive any gain from the
Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee(s), etc.
* For a Trust, Corporation or Association, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment,
Expedited Redemption and Direct Deposit of Dividends) are effective
15 days after this form is received in good order by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after the
Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days' written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access Features Form which may be obtained from Aquila
Distributors at 1-800-ROCKY-55 and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution changes is effective in 15
days after this form is received in good order by the Fund's Agent.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 3c and signing the Application, the investor
is entitled to make each purchase at the public offering price
applicable to a single transaction of the dollar amount checked
above, and agrees to be bound by the terms and conditions applicable
to Letters of Intent appearing below.
The investor is making no commitment to purchase shares, but if
the investor's purchases within thirteen months from the date of the
investor's first purchase do not aggregate $50,000, or, if such
purchases added to the investor's present holdings do not aggregate
the minimum amount specified above, the investor will pay the increased
amount of sales charge prescribed in the terms of escrow below.
The commission to the dealer or broker, if any, named herein
shall be at the rate applicable to the minimum amount of the investor's
specified intended purchases checked above. If the investor's actual
purchases do not reach this minimum amount, the commissions previously
paid to the dealer will be adjusted to the rate applicable to the
investor's total purchases. If the investor's purchases exceed the
dollar amount of the investor's intended purchases and pass the next
commission break-point, the investor shall receive the lower sales
charge, provided that the dealer returns to the Distributor the excess
of commissions previously allowed or paid to him over that which would
be applicable to the amount of the investor's total purchases.
The investor's dealer or broker shall refer to this Letter of
Intent in placing any future purchase orders for the investor
while this Letter is in effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary),
3% of the dollar amount specified in the Letter of Intent shall be
held in escrow in shares of the Fund by the Agent. All dividends
and any capital distribution on the escrowed shares will be credited
to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within a thirteen-month period, the escrowed shares will
be promptly released to the investor. However, shares disposed of
prior to completion of the purchase requirement under the Letter
will be deducted from the amount required to complete the
investment commitment.
3. If the total purchases pursuant to the Letter are less than the
amount specified in the Letter as the intended aggregate purchases,
the investor must remit to the Agent an amount equal to the
difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the
total amount purchased had been made at a single time. If such
difference in sales charges is not paid within twenty days after
receipt of a request from the Agent or the Dealer, the Agent
will, within sixty days after the expiration of the Letter, redeem
the number of escrowed shares necessary to realize such difference
in sales charges. Any shares remaining after such redemption will
be released to the investor. The escrow of shares will not be
released until any additional sales charge due has been paid as
stated in this section.
4. By checking Box 3c and signing the Application, the investor
irrevocably constitutes and appoints the Agent or the Distributor
as his attorney to surrender for redemption any or all escrowed
shares on the books of the Fund.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees
to the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Agent will credit all such shares
to the Planholder on the records of the Fund. Any share certificates
now held by the Planholder may be surrendered unendorsed to the Agent
with the application so that the shares represented by the certificate
may be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the Fund
at the Net Asset Value.
4. Redemptions of shares in connection with disbursement payments will
be made at the Net Asset Value per share in effect at the close of
business on the first business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address
to which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then
current Prospectus of the Fund) to redeem all, or any part of, the
shares held under the Plan. In such case the Agent will redeem the
number of shares requested at the Net Asset Value per share in effect
in accordance with the Fund's usual redemption procedures and will
mail a check for the proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Fund. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal
incapacity of the Planholder. Upon termination of the Plan by the
Agent or the Fund, shares remaining unredeemed will be held in an
uncertificated account in the name of the Planholder, and the account
will continue as a dividend-reinvestment, uncertificated account
unless and until proper instructions are received from the Planholder,
his executor or guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously making regular purchases. While an occasional lump
sum investment may be made, such investment should normally be an
amount equivalent to three times the annual withdrawal or $5,000,
whichever is less.
<PAGE>
INVESTMENT ADVISER
KPM Investment Management, Inc.
a subsidiary of Mutual of Omaha Insurance 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
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................2
Table of Expenses................................5
Financial Highlights.............................7
Introduction.....................................8
Investment Of The Fund's Assets..................8
Investment Restrictions.........................13
Net Asset Value Per Share.......................13
Alternative Purchase Plans......................14
How To Invest In The Fund.......................16
Distribution Plan...............................21
How To Redeem Your Investment...................23
Automatic Withdrawal Plan.......................26
Management Arrangements.........................26
Dividend And Tax Information....................29
Exchange Privilege..............................31
General Information.............................34
Application
Aquila
[LOGO]
Rocky
Mountain
Equity Fund
A capital appreciation investment
PROSPECTUS
April 30, 1996
as supplemented May 1, 1996
[LOGO]
One of The
Aquilasm Group Of Funds
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
Supplement to the prospectus
for Class Y shares dated April 30, 1996
previously supplemented May 1, 1996
The following material is added to "Highlights":
Class Y Shares of the Fund are only offered for sale in certain states.
(See "How to Invest in the Fund.") If Class Y Shares of the Fund are sold
outside those states, except to certain institutional investors, the Fund
may be required to redeem them.
The following material is added to "How to Invest in the Fund":
At the date of this supplement, Class Y Shares of the Fund are
available only in Arizona, Colorado, Montana and Utah. If you do not reside
in one of these states you should not purchase shares of the Fund.
If shares are sold outside of these states, except to certain institutional
investors, the Fund can redeem them. Such a redemption may result in a loss
to you and may have tax consequences.
The date of this supplement is December 27, 1996
<PAGE>
Prospectus
Aquila Rocky Mountain Equity Fund
[LOGO]
380 Madison Avenue April 30, 1996
Suite 2300 as supplemented May 1, 1996
New York, New York 10017
800-762-5955 Class Y Shares
212-697-6666
Aquila Rocky Mountain Equity Fund (the "Fund") is a mutual fund
whose objective is capital appreciation. (See "Investment of the
Fund's Assets.") It seeks to achieve its objective through
investment in securities (primarily equity securities) of
companies having a significant business presence in the general
Rocky Mountain region of our country. See "Investment of the
Fund's Assets."
There are three classes of shares of the Fund: Institutional
Class Shares ("Class Y Shares") are offered only to institutions
acting for investors in a fiduciary, advisory, agency, custodial
or similar capacity, and are not offered directly to retail
customers. Class Y Shares are offered at net asset value with no
sales charge, no redemption fee, no contingent deferred sales
charge and no distribution fee. (See "How to Purchase Class Y
Shares.") The other classes, Front-Payment Class Shares ("Class A
Shares") and Level-Payment Class Shares ("Class C Shares") are
not offered by this Prospectus. See "General Information -
Description of Classes."
The Prospectus concisely states information about the Fund
that you should know before investing. A Statement of Additional
Information dated April 30, 1996 about the Fund (the "Additional
Statement") has been filed with the Securities and Exchange
Commission and is available without charge upon written request
to Administrative Data Management Corp., the Fund's Shareholder
Servicing Agent, at the address given below, or by calling the
telephone number(s) given below. The Additional Statement
contains information about the Fund and its management not
included in this Prospectus. The Additional Statement is
incorporated by reference in its entirety in this Prospectus.
Only when you have read both the Prospectus and the Additional
Statement are all material facts about the Fund available to you.
SHARES OF THE FUND ARE NOT DEPOSITS IN, OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY ANY BANK. SHARES OF THE FUND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL GOVERNMENT
OR ANY STATE.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
For Purchase, Redemption or Account inquiries contact
The Fund's Transfer Agent: Administrative Data Management Corp.
581 Main Street, Woodbridge, NJ 07095-1198
Call 800-ROCKY-22 (800-762-5922) toll free or 908-855-5731
For General Inquiries
Call 800-ROCKY-55 (800-762-5955) toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
HIGHLIGHTS
Aquila Rocky Mountain Equity Fund (the "Fund") is a
diversified, open-end mutual fund which continuously offers to
sell or redeem its shares on any business day (see "How to Invest
in the Fund" and "How to Redeem Your Investment"). The Fund's
shares are designed to be a suitable investment for investors who
seek capital appreciation, primarily through the securities of
companies having a significant business presence in the Rocky
Mountain Region of the country.
The Fund's investment objective is capital appreciation. The
Fund seeks to achieve this objective by investing primarily in
equity securities of companies having a significant business
presence in the general Rocky Mountain region of our country,
consisting of Colorado, Arizona, Idaho, Montana, Nevada, New
Mexico, Utah and Wyoming. It is anticipated that under normal
circumstances, the Fund will invest at least 65%, and possibly up
to 100%, of its total assets in equity securities issued by such
companies. Companies with a significant business presence in the
Rocky Mountain Region are defined as those companies (i) whose
principal executive offices are located in the Region, (ii) which
have more than 50% of their assets located in the Rocky Mountain
Region or (iii) which derive more than 50% of their revenues or
profits from the Rocky Mountain Region. Since the Fund's
objective is capital appreciation, it is not expected to provide
any significant current income to investors from dividend or
interest payments. (See "Table of Expenses" and "Investment of
the Fund's Assets.")
Investment Selection Criteria - The Fund will acquire only
those equity securities which, at the time of purchase, the
Adviser considers to be reasonably priced issues of financially
sound companies possessing good growth characteristics and solid
management. The Fund may also make other types of investments.
(See "Investment of the Fund's Assets".)
Regional Portfolio Management - KPM Investment Management,
Inc. (the "Adviser") serves as the Fund's investment adviser. The
Fund's portfolio is managed in the Adviser's Denver office. The
firm provides professional investment advisory services to a
broad base of clients and currently manages over $750 million of
clients' assets of which approximately $475 million consists of
equity investments. The Adviser is a wholly-owned subsidiary of
Kirkpatrick, Pettis, Smith, Polian Inc. ("Kirkpatrick, Pettis")
which is a full service investment firm serving institutional and
retail markets through its investment banking, sales and trading
facilities. The firm currently provides professional investment
advisory services to a broad base of clients and investment
banking services to corporate and public finance clients. Tracing
its history to 1925, Kirkpatrick, Pettis currently staffs 9
offices in Colorado, Iowa, Kansas, Missouri, Nebraska and New
York that serve primarily the midwest and Rocky Mountain regions.
Since 1983, Kirkpatrick, Pettis has been a wholly-owned
subsidiary of Mutual of Omaha Insurance Company.
Aquila Management Corporation, the Fund's founder and
Sub-Adviser and Administrator, is the founder of and serves as
administrator for three other funds with a Rocky Mountain Region
orientation: Tax-Free Trust of Arizona, with assets of $387
million, Tax-Free Fund of Colorado, with assets of $215 million
and Tax-Free Fund For Utah, with assets of $29 million, all as of
March 31, 1996. Through its Denver office, the Adviser currently
acts as investment adviser for Tax-Free Fund of Colorado. See
"Management Arrangements."
Fee Arrangements - The Fund can pay fees at an annual rate
of up to 0.70 of 1% of average annual net assets to its Adviser
and up to 0.80 of 1% of average annual net assets to its Sub-
Adviser and Administrator (for total fees at a rate of up to
1.50% of the first $15 million of average annual net assets). The
overall rates of these fees decline as the asset size of the Fund
increases. See "Advisory and Administration Fees." Some or all of
these fees may be waived in the early development phase of the
Fund. (See "Table of Expenses" and "Management Arrangements.")
Diversification - The Fund will invest its assets in a
number of different securities. Additionally, investments will be
spread over a reasonably broad range of industries. Only the most
affluent investors can achieve such diversification on their own
among securities of Rocky Mountain Companies. In general, a
diversified portfolio, such as is provided by the Fund, can be
used to reduce your investment risk as compared with less
diversified portfolios. See "Investment of the Fund's Assets."
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $50 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Fund.")
Additional Investments - You may make additional investments
at any time and in any amount, directly or, if in an amount of
$50 or more, through the convenience of having your investment
electronically transferred from your financial institution
account into the Fund by Automatic Investment or Telephone
Investment. (See "How to Invest in the Fund.")
Alternative Purchase Plans - The Fund provides alternative
ways to invest. (See "Description of the Fund and its Shares.")
For this purpose the Fund offers classes of shares, which differ
in their expense levels and sales charges:
Institutional Class Shares ("Class Y Shares")
are offered by this Prospectus. Class Y
Shares are offered only to institutions
acting for investors in a fiduciary,
advisory, agency, custodial or similar
capacity, and are not offered directly to
retail customers. Class Y Shares are offered
at net asset value with no sales charge, no
redemption fee, no contingent deferred sales
charge and no distribution fee. (See "How to
Purchase Class Y Shares.")
The other classes, Front-Payment Class Shares ("Class A
Shares") and Level-Payment Class Shares ("Class C Shares"), are
not offered by the Prospectus. See "General Information -
Description of the Fund and Its Shares."
Redemptions - Liquidity - You may redeem any amount of your
Class Y Shares on any business day at the next determined net
asset value by telephone, FAX or mail request, with proceeds
being sent to a predesignated financial institution, if you have
elected Expedited Redemption. Proceeds will be wired or
transferred through the facilities of the Automated Clearing
House, wherever possible, upon request, if in an amount of $1,000
or more, or will be mailed. For these and other redemption
procedures see "How to Redeem Your Investment." There are no
redemption fees for redemption of Class Y Shares.
Distributions from the Fund - Distribution of any income net
of operating expenses or any net realized capital gains will be
made annually. The Fund's net income and short-term capital gains
are taxed as ordinary income, while long-term capital gains
distributions are taxed to you as long-term capital gains,
regardless of how long you have held your shares. See "Dividend
and Tax Information."
Convenience - Through ownership of a single security
consisting of shares of the Fund, you achieve investment
participation in a variety of Rocky Mountain Companies and are
relieved of all the various inconveniences - including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping - associated with direct investment in individual
securities of those companies. The Fund handles all paperwork
involved with share ownership, advising you of the Federal tax
status of dividends and capital gains and providing you with
simplified records. You receive statements of your account
quarterly as well as each time you add to your investment or
redeem part or all of it. Additionally, you receive a semi-annual
report and an audited annual report.
Exchanges - You may exchange Class Y Shares of the Fund into
Class Y Shares of the Aquila-sponsored tax-free municipal bond
mutual funds. You may also exchange them into shares of the
Aquila-sponsored money market funds. The exchange prices will be
the respective net asset values of the shares. (See "Exchange
Privilege.")
Risk Factors - The Fund seeks to provide you with capital
appreciation over a period of time. The value of the Fund's
shares will fluctuate due to changes in the equity markets and
the proceeds of redemption of your shares may be more or less
than your cost. The Fund's assets, being primarily or entirely
invested in the securities of Rocky Mountain Companies, are
subject to economic and other conditions affecting that area and
it may have less diversification than funds without this
investment policy. (See "Risks and Special Considerations
Regarding Investment in the Rocky Mountain Region.") The Fund may
also to a limited degree buy put options and buy and sell call
options; there may be risks associated with these practices. (See
"Options Transactions.")
<PAGE>
<TABLE>
<CAPTION>
AQUILA ROCKY MOUNTAIN EQUITY FUND
TABLE OF EXPENSES
Class Y
Shares
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Charge Imposed on Purchases .................. None
(as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends ....... None
Deferred Sales Charge ...................................... None
Redemption Fees ............................................ None
Exchange Fee ............................................... None
Annual Fund Operating Expenses (1)(2)
(as a percentage of average net assets)
Management Fees After Waivers .............................. 0.00%
Other Expenses After Expense Reimbursement ................. 1.66%
Total Fund Operating Expenses After Expense
Reimbursement and Fee Waivers ......................... 1.66%
1 year 3 years 5 years 10 years
Example (3)
You would pay the following expenses
on a $ 1,000 investment, assuming a
5% annual return and redemption at
the end of each time period: $17 $52 $90 $197
<FN>
(1) Estimated based upon expenses incurred by the Fund during its
most recent fiscal year. During that period, only Class A Shares
were outstanding.
</FN>
<FN>
(2) The Adviser and the Sub-Adviser and Administrator (the "Sub-Adviser")
have undertaken to waive all their fees until the Fund attains an asset
size of $10 million. After the Fund attains the asset size of $10
million, it is anticipated that certain fees for that fiscal year will
be waived following a predetermined formula. If the Adviser and Sub-
Adviser determine that it would be advisable to waive some or all of
their fees, it is anticipated that as the asset size of the Fund
increases, waivers would be progressively reduced so that when assets
exceed approximately $25 million a substantial portion or all of these
fees would be paid. Since the Fund's inception, the Sub-Adviser, in its
sole discretion, has been reimbursing some or all of the Fund's other
operating expenses. Without fee waiver and expense reimbursement, the
operating expenses of the Fund for the fiscal year ended December 31,
1995 would have been incurred at the following annual rates for Class
Y Shares: management fees, 1.50%, and other expenses, 8.73%, resulting
in Total Fund Operating Expenses of 10.23%. If the Fund remains at the
same asset size as on the date of this Prospectus (approximately $1.8
million) and the Sub-Adviser reimburses expenses as it currently intends,
then, based upon expenses for the fiscal year ended December 31, 1995,
the annual rate at which the Fund incurs Total Fund Operating Expenses
will be 2.29% for Class Y Shares.
</FN>
<FN>
(3) The expense example is based upon the above estimated annual Fund
operating expenses. It is also based upon amounts at the beginning of
each year which includes the prior year's assumed results. A year's
results consist of an assumed 5% annual return less total operating
expenses; the expense ratio was applied to an assumed average balance
(the year's starting investment plus one-half the year's results). Each
figure represents the cumulative expenses so determined for the period
specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST
OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE
SHOWN. THE SECURITIES AND EXCHANGE COMMISSION SPECIFIES THAT ALL
MUTUAL
FUNDS USE THE 5% ANNUAL RATE OF RETURN FOR PURPOSES OF PREPARING
THE
ABOVE EXAMPLE. THE ASSUMED 5% ANNUAL RETURN SHOULD NOT BE
INTERPRETED AS A
PREDICTION OF AN ACTUAL RETURN, WHICH MAY BE HIGHER OR LOWER.
The purpose of the above table is to assist the investor in understanding
the various costs that an investor in the Fund will bear directly or
indirectly. Although not obligated to do so, those entitled to
investment advisory and administration fees expect to waive a portion or
all of those fees in the early stages of the Fund's existence and Aquila
Management Corporation, the organizer and Sub-Adviser of the Fund, may
reimburse the Fund for various expenses; the above table reflects one
possible such arrangement and should not be considered as a commitment
or prediction that any fees, or that any particular portion of fees, will
be waived, or that any particular expenses will be reimbursed. (See
"Management Arrangements" for a more complete description of the various
investment advisory and administration fees.)
<PAGE>
<TABLE>
<CAPTION>
The following historical financial information applies only to
shares of the Fund which have been designated Class A Shares,
upon adoption of the class structure described in the Prospectus.
Class A Shares are not offered by this Prospectus. Similar
information does not exist for Class Y Shares which are offered
by this Prospectus.
AQUILA ROCKY MOUNTAIN EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights has been audited
by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is included in the Fund's financial statements contained
in its Annual Report, which are incorporated by reference into
the Additional Statement. The information provided in the table
should be read in conjunction with the financial statements and
related notes.
Year Ended Period Ended
December 31, December 31,
1995 1994**
<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:
Dividends from net investment
income............................ (0.01) ---
Distributions from capital gains.. (0.10) ---
Total Distributions............... (0.11) ---
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 Income
to Average Net Assets............. (0.60)% ---
Portfolio Turnover Rate........... 15.14% 2.95% +
Net investment income 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:
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>
** For the period from July 22, 1994 (commencement of
operations) to December 31, 1994.
</FN>
<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>
</TABLE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
INTRODUCTION
Aquila Rocky Mountain Equity Fund is a diversified, open-
end mutual fund which continuously offers to purchase or redeem
its shares on any business day (see "How to Invest in the Fund"
and "How to Redeem Your Investment.") The Fund's shares are
designed to be a suitable investment for investors who seek
capital appreciation primarily through the equity securities of
companies operating in the Rocky Mountain region of the country.
The Fund provides you with the opportunity to have the
benefits of a diversified and professionally managed portfolio of
securities intended to allow participation in the economic
development of the Rocky Mountain Region. Through the convenience
of a single security consisting of shares of the Fund, you are
relieved of all the various inconveniences - including selecting,
purchasing or selling, continuously monitoring, handling, and
safekeeping - associated with direct investment in individual
securities of various Rocky Mountain Companies.
The Fund was organized by Aquila Management Corporation (the
"Sub-Adviser") which has provided administrative and/or
investment advisory services to various mutual funds founded by
it since 1984. It currently acts as administrator to thirteen
Aquila-sponsored funds, including the Fund, with combined net
assets as of December 31, 1995 in excess of $2.7 billion.
Continuous and active portfolio management of the Fund is
provided by its regionally-located investment adviser, KPM
Investment Management, Inc.
INVESTMENT OF THE FUND'S ASSETS
The Fund's investment objective, which is a fundamental
policy of the Fund, is to purchase and hold securities for
capital appreciation. There is no assurance that the Fund will
achieve its objective. The Fund does not expect to receive
dividends of sufficient size to enable it to provide investors
with any significant amount of current income and during at least
its early years expects to apply all of such income to Fund
operating expenses so that none will be available for
distribution to shareholders.
In the Prospectus and Additional Statement, the general area
consisting of Colorado, Arizona, Idaho, Montana, Nevada, New
Mexico, Utah and Wyoming is called the "Rocky Mountain Region."
The Fund seeks to achieve its objective by investing primarily in
equity securities of companies ("Rocky Mountain Companies")
having a significant business presence in the Rocky Mountain
Region. It is anticipated that under normal circumstances, the
Fund will invest at least 65%, and possibly up to 100%, of its
total assets in securities issued by such companies.
For purposes of this Prospectus, companies with a
significant business presence in the Rocky Mountain Region are
defined as those companies (i) whose principal executive offices
are located in the Region, (ii) which have more than 50% of their
assets located in the Rocky Mountain Region or (iii) which derive
more than 50% of their revenues or profits from the Rocky
Mountain Region. In determining that companies have a significant
business presence in the Rocky Mountain Region, the Adviser may
rely on any publicly available information about those companies
that it considers reliable. There may be risks associated with
this investment policy. (See "Risk Factors and Special
Considerations.")
As used in the Prospectus, the term "equity securities"
means (i) common stocks and (ii) preferred stocks, bonds,
debentures and notes convertible into common stocks. Under normal
conditions, it is anticipated that the Fund will invest at least
65%, and possibly up to 100%, of its total assets in such
securities. The Fund may also, to a limited extent, make certain
other types of investments. (See below.)
In unusual market conditions when the Adviser believes a
defensive posture for the Fund's investments is warranted, the
Fund may temporarily invest a portion or all of its assets in
high quality fixed-income securities such as U.S. Treasury
securities, corporate bonds or high grade short-term money-market
securities, without geographic or percentage limitation. Only
corporate securities rated "A" or equivalent by a nationally
recognized statistical rating organization will be purchased. See
the Additional Statement for a description of these organizations
and an explanation of their ratings.
Since the practice of many growth-oriented companies in
which the Fund will invest is to reinvest most or all of their
earnings in the development of their business, the Fund does not
expect to receive dividends enabling it to provide investors with
any significant amount of current income.
In general, the Fund will take a long-term approach toward
investing. Accordingly, the turnover rate will normally be
consistent with this approach. (See "Portfolio Turnover.") At
times the Fund may make investments for short-term purposes.
Also, under changing market conditions, the Fund may dispose of
portfolio securities whenever the Adviser deems such action
advisable without regard to the length of time the securities
have been held.
In selecting investments for the Fund, the Adviser will
generally employ the investment philosophy of seeking to invest
in established, financially sound, well-managed Rocky Mountain
Companies whose securities it considers to be selling at a
reasonable price relative to their growth rate and anticipated
future values. Emphasis will be placed upon selection of Rocky
Mountain Companies whose securities are selling at lower than
average prices; other securities may be selected whose issuers
the Adviser believes are experiencing better than average growth.
It is anticipated that a number of factors will be considered in
investment selection, including but not limited to: product
characteristics and market potential, operating ratios,
management abilities, intrinsic value of securities, securities'
market action, and the overall economic, monetary, political and
market environment. The Adviser currently focuses on
approximately 300-400 Rocky Mountain Companies from which it
selects investments for the Fund's portfolio.
Although the Fund may invest in large capitalization
companies, it is anticipated that the companies represented in
the Fund's portfolio will be primarily those having middle size
to smaller size market capitalization which the Adviser believes
offer the potential of capital appreciation due to their overall
characteristics. These companies are likely to be less well known
because they are smaller in size, have smaller capitalizations,
and have a lesser number of shares traded. The prices of
securities of such companies may be more volatile than the prices
of securities of issuers which are more mature, have larger
capitalizations and whose securities are more actively traded.
Convertible Securities
The Fund may invest up to 25% of its net assets in
convertible securities, primarily of Rocky Mountain Companies, if
the Adviser believes there is potential of capital growth through
the conversion option and greater investment income prior to
conversion. Only convertible securities rated investment grade by
a nationally recognized statistical rating organization will be
purchased. Not more than 5% of the Fund's net assets may be
invested in such securities having the lowest of the four
investment grade ratings. Obligations rated in the fourth such
credit rating are considered by the rating agencies to be of
medium quality and thus may present investment risks not present
in more highly rated obligations. Such bonds lack outstanding
investment characteristics and may in fact have speculative
characteristics as well; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case for higher
grade bonds. See the Additional Statement for a description of
these organizations and an explanation of their ratings.
A convertible security is a fixed-income security (a bond or
preferred stock) which may be converted at a stated price within
a specified period of time into a certain quantity of the common
stock of the same or a different issuer. Convertible securities
are senior to common stocks in a corporation's capital structure,
but are usually subordinated to similar nonconvertible
securities. While providing a fixed income stream (generally
higher in yield than the dividends received from a common stock
but lower than that afforded by a similar nonconvertible
security), a convertible security also affords the opportunity
through its conversion feature to participate in the capital
appreciation attendant upon a market price advance in the
convertible security's underlying common stock.
In general, the market value of a convertible security is at
least the higher of its "investment value" (i.e., its value as a
fixed-income security) or its "conversion value" (i.e., its value
upon conversion into its underlying common stock). As a
fixed-income security, a convertible security tends to increase
in market value when interest rates decline and tends to decrease
in value when interest rates rise. However, the price of a
convertible security is also influenced by the market value of
the security's underlying common stock. The price of a
convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. While no
securities investment is without some risk, investments in
convertible securities generally entail less risk than
investments in the common stock of the same issuer.
Warrants
The Fund may also invest up to 5% of its net assets, as
determined at time of purchase, in warrants of Rocky Mountain
Companies. Warrants entitle the holder to purchase a fixed number
of shares of the common stock of the issuer at a fixed price
during certain specified times. The value of the warrants from
time to time depends upon the market evaluation of the likelihood
that exercise of the warrants would be economically advantageous
before they expire. The market price of warrants tends to be more
volatile than that of the underlying common stock.
Options Transactions
The Fund may purchase put and write (i.e., sell) call
options and purchase call options for hedging purposes or in
order to generate additional income or for taking a position in a
security deemed attractive by the Adviser. The Fund will purchase
or write options only on equity securities that are traded on
national securities exchanges or that are listed on NASDAQ
(NASDAQ options). The Fund may purchase put and write call
options only on equity securities which are held in the Fund's
investment portfolio or to close out positions. Additionally, the
Fund may purchase calls on securities which are not in the Fund's
portfolio or to close out positions.
The Fund will not (a) write call options if immediately
after any such transaction, the aggregate value of the securities
underlying the calls would exceed 20% of the Fund's net assets,
or (b) purchase put or call options if, immediately after such
purchases, the premiums paid for all such options owned at the
time would exceed 5% of the Fund's net assets. The Fund may write
put options, but only to close out positions. See the Additional
Statement for a description of these instruments and their uses.
While the Fund may engage in puts and calls to a limited
extent, there are certain risks associated with this activity
that are different than investing in the underlying securities
directly (see the Additional Statement). Option transactions
involve risks and transaction costs which the Fund would not
incur if it did not engage in option transactions. If the
Adviser's predictions of movements in the direction of the
securities markets are inaccurate, the adverse consequences to
the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of options
include dependence upon the Adviser's ability to predict
correctly movements in the direction of securities prices and the
possible absence of a liquid secondary market for any particular
instrument at any time. See the Additional Statement for a
description of these and other risks with respect to option
transactions.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend
portfolio securities, up to 25% of the net assets, to
broker-dealers, banks or other financial borrowers of securities.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the Fund
will enter into loan arrangements only with broker-dealers,
banks, or other institutions which the Adviser has determined are
creditworthy under guidelines established by the Fund's Board of
Trustees and will receive collateral in the form of cash or
short-term U.S. Government securities equal at least to 100% of
the value of the securities loaned. The value of the collateral
and the securities loaned will be marked to market on a daily
basis. During the time portfolio securities are on loan, the
borrower pays the Fund an amount equivalent to any dividends or
interest paid on the securities and the Fund may invest the cash
collateral and earn additional income or receive an agreed upon
amount of interest income from the borrower. However, the amounts
received by the Fund may be reduced by any finders' fee paid to
broker-dealers and any other related expenses.
Borrowings by the Fund
The Fund can borrow money for temporary or emergency
purposes from a bank. The Fund will not borrow amounts in excess
of 10% of net assets and will not purchase securities if
borrowings are equal to or greater than 5% of net assets. The
Fund intends primarily to exercise such borrowing authority to
meet any abnormal level of shareholder redemptions and under
circumstances where redemptions exceed available cash.
Repurchase Agreements
The Fund may purchase securities subject to repurchase
agreements, provided that such securities consist entirely of
U.S. Government securities or securities that, at the time the
repurchase agreement is entered into, are rated in the highest
rating category by at least one nationally recognized statistical
rating organization. Repurchase agreements may be entered into
only with commercial banks or broker-dealers. Subject to the
control of the Board of Trustees, the Adviser will regularly
review the financial strength of all parties to repurchase
agreements with the Fund.
Under a repurchase agreement, at the time the Fund purchases
a security, the Fund also resells it to the seller and must
deliver the security (or securities substituted for it) to the
seller on an agreed-upon date in the future. (The securities so
resold or substituted are referred to herein as the "Resold
Securities.") The resale price is in excess of the purchase price
in that it reflects an agreed-upon market interest rate effective
for the period of time during which the Fund's money is invested
in the Resold Securities. The majority of these transactions run
from day to day, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase.
Repurchase agreements can be considered as loans
"collateralized" by the Resold Securities, such agreements being
defined as "loans" in the Investment Company Act of 1940 (the
"1940 Act"). The return on such "collateral" may be more or less
than that from the repurchase agreement. The Resold Securities
under any repurchase agreement will be marked to market every
business day so that the value of the "collateral" is at least
equal to the resale price provided in the agreement, including
the accrued interest earned thereon, plus sufficient additional
market value as is considered necessary to provide a margin of
safety. During the term of the repurchase agreement, the Fund or
its custodian either has actual physical possession of the Resold
Securities or, in the case of a security registered in book entry
system, the book entry is maintained in the name of the Fund or
its custodian.
The Fund retains an unqualified right to possess and sell
the Resold Securities in the event of a default by the other
party. However, in the event of bankruptcy or other default by
the other party, there may be possible delays and expenses in
liquidating the Resold Securities, decline in their value and
loss of interest.
Shares of Investment Companies
The Fund may purchase shares of investment companies with
money market portfolios which are any of the money-market funds
in the Aquilasm Group of Funds. As of the date of the Prospectus
these funds are Capital Cash Management Trust, Pacific Capital
Cash Assets Trust (Original Shares), Pacific Capital Tax-Free
Cash Assets Trust (Original Shares), Pacific Capital U.S.
Treasuries Cash Assets Trust (Original Shares) and Churchill Cash
Reserves Trust. The Fund will not purchase shares of an
investment company which imposes a sales or redemption charge of
any sort; however, an investment company in which the Fund
invests may have a distribution plan under which it may pay for
distribution expenses or services. Such investments will
ordinarily be made to provide additional liquidity and at the
same time to earn higher yields than are usually associated with
the overnight or short-term obligations in which the Fund might
otherwise invest for this purpose. While higher yields than those
of alternative investments may be obtainable, these yields will
reflect management fees and operating and distribution expenses
of the investment companies and will result in duplication of
management fees with respect to assets of the Fund so invested.
The Fund may not invest in the shares of investment companies if
immediately thereafter it has invested more than 10% of the value
of its total assets in such companies or more than 5% of the
value of its total assets in any one such company; it may not
invest in such a company if immediately thereafter it owns more
than 3% of the total outstanding voting stock of such a company.
Risk Factors and Special Considerations
While the Fund will be actively managed to seek growth of
your capital, the value of the Fund's shares will fluctuate as a
result of equity market factors. On redemption the value of your
shares may be more or less than your cost.
There are two types of risk generally associated with owning
equity securities: market risk and financial risk. Market risk is
the risk associated with the movement of the stock market in
general. Financial risk is associated with the financial
conditions and profitability of the underlying company. Smaller
companies may experience different growth rates and higher
failure rates than those of larger companies having longer
operating histories. Moreover, the stock price movements of
smaller companies may experience more volatility than those of
larger and more mature companies.
There are two types of risk associated with owning debt
securities: interest rate risk and credit risk. Interest rate
risk relates to fluctuations in market value arising from changes
in interest rates. If interest rates rise, the value of debt
securities will normally decline and if interest rates fall, the
value of debt securities will normally increase. All debt
securities, including U.S. Government securities, which are
generally considered to be the most creditworthy of all debt
obligations, are subject to interest rate risk. Securities with
longer maturities generally have a more pronounced reaction to
interest rate changes than shorter-term securities.
Credit risk relates to the ability of the issuer to make
periodic interest payments and ultimately repay principal at
maturity. The Fund does not intend to hold corporate debt
securities unless the opportunities for capital appreciation and
income, combined, remain attractive.
Risks and Special Considerations Regarding
the Rocky Mountain Region
The Fund's assets, being primarily or entirely invested in
the securities of Rocky Mountain Companies, are subject to
economic and other conditions affecting the various states which
comprise the Rocky Mountain Region.
The states of the Rocky Mountain Region are characterized by
wide differences in climate, great distances and relatively low
population density. In some areas, availability of water is a
factor of considerable importance in economic development and
water issues will likely affect the growth and prosperity of much
of the Region in the future. Originally heavily oriented toward
the exploitation of natural resources, in recent years the
economies of the states of the Rocky Mountain Region have shifted
toward more diversity with increases in tourism, high technology
and the service sector. The region has been characterized in
recent years by population growth and immigration from other
areas of the United States. Some of the states in the Rocky
Mountain Region have experienced growth rates above the national
averages.
Because of the large size of the Rocky Mountain Region, the
above factors may have varying importance from one state to
another. It is not possible to predict what effect they may
individually or collectively have on any particular company in
which the Fund may choose to invest.
In addition, companies with headquarters in the Rocky
Mountain Region or with a significant business presence in the
Region may also have significant business interests, sales and
assets outside of the Region and may thus be subject to other
economic influences. Because the Fund will invest most, and may
invest all, of its assets in Rocky Mountain Companies, it may
have less diversification than funds without this investment
policy.
Portfolio Turnover
Given the Fund's orientation to capital appreciation, it is
not expected that the Fund's portfolio turnover rate will exceed
60%. See the Additional Statement.
INVESTMENT RESTRICTIONS
The Fund has a number of policies about what it can and
cannot do. Certain of these policies, identified in the
Prospectus and Additional Statement as "fundamental policies,"
cannot be changed unless the holders of a "majority," as defined
in the 1940 Act, of the Fund's outstanding shares vote to change
them. All other policies can be changed from time to time by the
Board of Trustees without shareholder approval. Some of the more
important of the Fund's fundamental policies, not otherwise
identified in the Prospectus, are set forth below; others are
listed in the Additional Statement.
1. The Fund has industry investment requirements.
The Fund cannot buy securities in any one industry if more
than 25% of its total assets would then be invested in securities
of that industry.
2. The Fund can make loans only by lending securities
or entering into repurchase agreements.
The Fund can lend its portfolio securities (see "Lending of
Portfolio Securities") and can enter into repurchase agreements
(see "Repurchase Agreements") but cannot otherwise make loans.
The Fund can buy debt securities as described above (see
"Investment of the Fund's Assets"); this is investing, not making
a loan.
3. The Fund can borrow only in limited amounts for special
purposes.
The Fund can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage
or pledge its assets only in connection with such borrowing and
only up to the lesser of the amounts borrowed or 5% of the value
of its total assets. Interest on borrowings would reduce the
Fund's income. Except in connection with borrowings, the Fund
will not issue senior securities. The Fund will not purchase any
security while it has any outstanding borrowings which exceed 5%
of the value of its total assets.
NET ASSET VALUE PER SHARE
The Fund's net asset value and offering price per share are
determined as of 4:00 p.m. New York time on each day that the New
York Stock Exchange is open (a "business day"). The close of the
principal exchanges or other markets on which some of the Fund's
portfolio securities are traded may be later than 4:00 p.m. The
net asset value per share is determined by dividing the value of
the net assets (i.e., the value of the assets less liabilities)
by the total number of shares outstanding. Determination of the
value of the Fund's assets is subject to the direction and
control of the Fund's Board of Trustees. Securities listed on a
national securities exchange or designated as national market
system securities are valued at the last prior sale price or, if
there has been no sale that day, at the bid price. The value of
other securities is in general based on market value, except that
short-term investments maturing in 60 days or less are generally
valued at amortized cost; see the Additional Statement for
further information.
HOW TO INVEST IN THE FUND
Institutional Class Shares (Class Y Shares) are offered only
to institutional investors for investments held in a fiduciary,
advisory, agency, custodial or similar capacity, or through them
to their clients, and are not offered directly to retail
customers. Class Y Shares are offered at net asset value with no
sales charge, no redemption fee, no contingent deferred sales
charge and no distribution fee.
How to Purchase Class Y Shares
Class Y Shares of the Fund may be purchased through any
investment broker or dealer (a "selected dealer") which has a
sales agreement with Aquila Distributors, Inc. (the
"Distributor") or through the Distributor. There are two ways to
make an initial investment: (i) order the shares through your
investment broker or dealer, if it is a selected dealer; or (ii)
mail the Application with payment to Administrative Data
Management Corp. (the "Agent") at the address on the Application.
There is no sales charge on initial or subsequent investments.
You are urged to complete an Application and send it to the Agent
so that expedited shareholder services can be established at the
time of your investment.
The minimum initial investment for Class Y Shares is $1,000,
except as otherwise stated in the Prospectus or Additional
Statement. You may also make an initial investment of at least
$50 by establishing an Automatic Investment Program for automatic
investments of at least $50 per month and paying at least $50.
(See below and "Automatic Investment Program" in the
Application.) Such investment must be drawn in United States
dollars on a United States commercial or savings bank or credit
union or a United States branch of a foreign commercial bank
(each of which is a "Financial Institution"). You may make
subsequent investments in Class Y Shares in any amount (unless
you have an Automatic Withdrawal Plan). Your subsequent
investment may be made through a selected dealer or by forwarding
payment to the Agent, with the name(s) of account owner(s), the
account number and the name of the Fund. With subsequent
investments, please send the pre-printed stub attached to the
Fund's confirmations.
Subsequent investments of $50 or more in Class Y Shares can
be made by electronic funds transfer from your demand account at
a Financial Institution. To use electronic funds transfer for
your purchases, your Financial Institution must be a member of
the Automated Clearing House and the Agent must have received
your completed Application designating this feature, or, after
your account has been opened, a Ready Access Features form
available from the Distributor or the Agent. A pre-determined
amount can be regularly transferred for investment ("Automatic
Investment"), or single investments can be made upon receipt by
the Agent of telephone instructions from anyone ("Telephone
Investment"). The maximum amount of each Telephone Investment is
$50,000. Upon 30 days' written notice to shareholders, the Fund
may modify or terminate these investment methods at any time or
charge a service fee, although no such fee is currently
contemplated.
The offering price for Class Y Shares is the net asset value
per share. The offering price determined on any day applies to
all purchase orders received by the Agent from selected dealers
that day, except that orders received by it after 4:00 p.m. New
York time will receive that day's offering price only if such
orders were received by selected dealers from customers prior to
such time and transmitted to the Distributor prior to its close
of business that day (normally 5:00 p.m. New York time); if not
so transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next
business day. In the case of Telephone Investment your order will
be filled at the next determined offering price. If your order is
placed after the time for determining the net asset value of the
Fund's shares for any day it will be executed at the price
determined on the following business day. The sale of shares will
be suspended during any period when the determination of net
asset value is suspended and may be suspended by the Distributor
when the Distributor judges it in the Fund's best interest to do
so.
Possible Compensation for Dealers
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of
any class of shares of the Fund. Additional compensation may
include payment or partial payment for advertising of the Fund's
shares, payment of travel expenses, including lodging, incurred
in connection with attendance at sales seminars taken by
qualifying registered representatives to locations within or
outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences. In some instances, such compensation may be made
available only to certain dealers whose representatives have sold
or are expected to sell significant amounts of such shares.
Dealers may not use sales of the Fund's shares to qualify for the
incentives to the extent such may be prohibited by the laws of
any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. The cost to the
Distributor of such promotional activities and such payments to
participating dealers will not exceed the amount of the sales
charges in respect of sales of all classes of shares of the Fund
effected through such participating dealers, whether retained by
the Distributor or reallowed to participating dealers. No such
additional compensation to dealers in connection with sales of
shares of the Fund will affect the price you pay for shares or
the amount that the Fund will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Brokers and Dealers may receive different levels of
compensation for selling different classes of shares.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to
you in an account maintained for you at the Agent in full and
fractional shares of the Fund (rounded to the nearest 1/1000th of
a share). No share certificates will be issued for Class Y
Shares.
The Fund and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") under
Rule 12b-1 (the "Rule") under the 1940 Act. The Rule provides in
substance that an investment company may not engage directly or
indirectly in financing any activity which is primarily intended
to result in the sale of its shares except pursuant to a written
plan adopted under the Rule. No payments under the Plan from
assets represented by Class Y Shares are authorized.
The Plan contains provisions designed to protect against any
claim against or involving the Fund that some of the expenses
which might be considered to be sales-related which the Fund pays
or may pay come within the purview of the Rule. The Fund believes
that except for payments made with respect to Class A Shares and
Class C Shares it is not financing any such activity and does not
consider any payment enumerated in such provisions as so
financing any such activity. If and to the extent that any
payment as specifically listed in the Plan (see the Additional
Statement) is considered to be primarily intended to result in or
as indirect financing of any activity which is primarily intended
to result in the sale of Fund shares, these payments are
authorized under the Plan. In addition, if the Sub-Adviser, out
of its own funds, makes payment for distribution expenses such
payments are authorized. See the Additional Statement.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your Class Y Shares at the
net asset value next determined after acceptance of your
redemption request at the Agent. Redemptions can be made by the
various methods described below. There is no minimum period for
any investment in the Fund, except for shares recently purchased
by check, Automatic Investment or Telephone Investment as
discussed below. There are no redemption fees or penalties on
redemption of Class Y Shares. A redemption may result in a
transaction taxable to you.
For your convenience the Fund offers expedited redemption
for Class Y Shares to provide you with a high level of liquidity
for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares of any
class not represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed to
you, if your shares are registered in your name at the
Fund and the check is sent to your address of record,
provided that there has not been a change of your
address of record during the 30 days preceding your
redemption request. You can make only one request for
telephone redemption by check in any 7-day period.
See "Redemption Payments" below for payment methods. Your
name, your account number and your address of record must be
supplied.
To redeem an investment by this method, telephone:
Toll-free 800-ROCKY-22 (800-762-5922) or 908-855-5731.
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management
Corp., Attn: Aquilasm Group of Funds, by FAX at 908-855-5730
or by mail at 581 Main Street, Woodbridge, NJ 07095-1198,
indicating account name(s), account number, amount to be
redeemed, and any payment directions, signed by the
registered holder(s). Signature guarantees are not required.
See "Redemption Payments" below for payment methods.
If you wish to use the above procedures you should so elect
on the Expedited Redemption section of the Application or the
Ready Access Features form and provide the required information
concerning your Financial Institution account number. The
Financial Institution account must be in the exclusive name(s) of
the shareholder(s) as registered with the Fund. You may change
the designated Financial Institution account at any time by
completing and returning a Ready Access Features form. For
protection of your assets, this form requires signature
guarantees and possible additional documentation.
Regular Redemption Method
If you own Class Y Shares registered on the books of the
Fund, and you have not elected Expedited Redemption to a
predesignated Financial Institution account, you must use the
Regular Redemption Method. Under this redemption method you
should send a letter of instruction to: Administrative Data
Management Corp., Attn: Aquilasm Group of Funds, 581 Main Street,
Woodbridge, NJ 07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Fund);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated
below.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration
of the account. In a joint account, the signatures of both
shareholders are necessary. Signature guarantees may be required
if sufficient documentation is not on file with the Agent.
Additional documentation may be required where shares are held by
certain types of shareholders such as corporations, partnerships,
trustees or executors, or if redemption is requested by other
than the shareholder of record. If redemption proceeds of $50,000
or less are payable to the record holder and are to be sent to
the record address, no signature guarantee is required, except as
noted above. In all other cases, signatures must be guaranteed by
a member of a national securities exchange, a U.S. bank or trust
company, a state-chartered savings bank, a federally chartered
savings and loan association, a foreign bank having a U.S.
correspondent bank, a participant in the Securities Transfer
Association Medallion Program (STAMP), the Stock Exchanges
Medallion Program (SEMP) or the New York Stock Exchange, Inc.
Medallion Signature Program (MSP). A notary public is not an
acceptable signature guarantor.
Redemption Payments
Redemption payments will ordinarily be mailed to you at your
address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will,
wherever possible, be wired or transferred through the facilities
of the Automated Clearing House to the Financial Institution
account specified in the Expedited Redemption section of your
Application or Ready Access Features form. The Fund may impose a
charge, not exceeding $5.00 per wire redemption, after written
notice to shareholders who have elected this redemption
procedure. The Fund has no present intention of making this
charge. Upon 30 days' written notice to shareholders, the Fund
may modify or terminate the use of the Automated Clearing House
to make redemption payments at any time or charge a service fee,
although no such fee is presently contemplated. If any such
changes are made, the Prospectus will be supplemented to reflect
them. If you use a broker or dealer to arrange for a redemption,
it may charge you a fee for this service.
The Fund will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven
days after acceptance of such a redemption request. However, the
right of redemption may be suspended or the date of payment
postponed (i) during periods when the New York Stock Exchange is
closed for other than weekends and holidays or when trading on
such Exchange is restricted as determined by the Securities and
Exchange Commission by rule or regulation; (ii) during periods in
which an emergency, as determined by the Securities and Exchange
Commission, exists which causes disposal of, or valuation of the
net asset value of, the portfolio securities to be unreasonable
or impracticable; or (iii) for such other periods as the
Securities and Exchange Commission may permit. Payment for
redemption of shares recently purchased by check (irrespective of
whether the check is a regular check or a certified, cashier's or
official bank check) or by Automatic Investment or Telephone
Investment may be delayed up to 15 days or until (i) the purchase
check or Automatic Investment or Telephone Investment has been
honored or (ii) the Agent has received assurances by telephone or
in writing from the Financial Institution on which the purchase
check was drawn, or from which the funds for Automatic Investment
or Telephone Investment were transferred, satisfactory to the
Agent and the Fund, that the purchase check or Automatic
Investment or Telephone Investment will be honored. Possible
delays in payment of redemption proceeds can be eliminated by
using wire payments or Federal Reserve drafts to pay for
purchases.
If the Trustees determine that it would be detrimental to
the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the
redemption price in whole or in part by the distribution in kind
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. See the Additional Statement for details.
The Fund has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such
shares is less than $500 as a result of shareholder redemptions
or failure to meet the minimum investment level under an
Automatic Purchase Program. If the Board elects to do this,
shareholders who are affected will receive prior written notice
and will be permitted 60 days to bring their accounts up to the
minimum before this redemption is processed.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase Class Y Shares of the Fund having a net asset value of
at least $5,000.
Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions
must be reinvested in your shareholder account. Redemption of
shares to make payments under the Automatic Withdrawal Plan will
give rise to a gain or loss for tax purposes. See the Automatic
Withdrawal Plan provisions of the Application included in the
Prospectus, the Additional Statement under "Automatic Withdrawal
Plan," and "Dividend and Tax Information" below.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Fund are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Fund's Trustees and officers and provides
further information about them.
The Advisory Agreement
KPM Investment Management, Inc. (the "Adviser") supervises
the investment program of the Fund and the composition of its
portfolio. Through its Denver office, the Adviser currently
serves as investment adviser for Tax-Free Fund of Colorado, a
tax-free municipal bond fund which was also founded and sponsored
by Aquila Management Corporation.
The services of the Adviser are rendered under an Investment
Advisory Agreement (the "Advisory Agreement") which provides,
subject to the control of the Board of Trustees, for investment
supervision. The Advisory Agreement states that the Adviser
shall, at its expense, provide to the Fund all office space and
facilities, equipment and clerical personnel necessary for the
carrying out of the Adviser's duties under the Advisory
Agreement. At the Adviser's expense the Adviser shall provide for
pricing of the Fund's portfolio daily using a pricing service or
other source of pricing information satisfactory to the Fund and,
unless otherwise directed by the Board of Trustees, for pricing
of the Fund's portfolio at least quarterly using another such
source satisfactory to the Fund.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Fund and of
those Trustees, if any, who are affiliated with the Adviser.
Under the Advisory Agreement, the Fund bears the cost of
preparing and setting in type its prospectuses, statements of
additional information, and reports to shareholders and the costs
of printing or otherwise producing and distributing those copies
of such prospectuses, statements of additional information and
reports as are sent to its shareholders. Under the Advisory
Agreement, all costs and expenses not expressly assumed by the
Adviser or by the Sub-Adviser under the Sub-Advisory and
Administration Agreement or by the Fund's Distributor (principal
underwriter) are paid by the Fund. The Advisory Agreement lists
examples of such expenses borne by the Fund, the major categories
of such expenses being: legal and audit expenses, custodian and
transfer agent, or shareholder servicing agent fees and expenses,
stock issuance and redemption costs, certain printing costs,
registration costs of the Fund and its shares under Federal and
State securities laws, interest, taxes and brokerage commissions,
and non-recurring expenses, including litigation.
Under the Advisory Agreement, the Fund pays an Advisory fee
computed on the net asset value of the Fund as set forth in the
table that appears below.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Fund; see the
Additional Statement. In general, the primary consideration in
effecting transactions for the Fund is obtaining the most
favorable prices and efficient execution. This means that the
Adviser will seek to execute each transaction at a price and
commission, if any, which provide the most favorable total cost
or proceeds reasonably attainable in the circumstances. While the
Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest
spread or commission available. The Adviser has complete freedom
as to the markets in which and the broker-dealers through whom
(acting on an agency basis or as principal) it operates to seek
this result. The Adviser may consider a number of factors in
determining which broker-dealers to use. These factors, which are
more fully discussed in the Additional Statement, include, but
are not limited to, research services, the reasonableness of
commissions and quality of services and execution. The Adviser is
authorized to consider sales of shares of the Fund.
The Sub-Advisory and Administration Agreement
Aquila Management Corporation, founder of the Fund, serves
as Sub-Adviser and Administrator (the "Sub-Adviser") for the Fund
under a Sub-Advisory and Administration Agreement (the "Sub-
Advisory and Administration Agreement"). The Sub-Adviser is the
founder of and serves as administrator for three other funds
oriented to the Rocky Mountain Region: Tax-Free Trust of Arizona,
with assets of $387 million, Tax-Free Fund of Colorado, with
assets of $215 million and Tax-Free Fund For Utah, with assets of
$29 million, all as of March 31, 1996.
At its own expense, the Sub-Adviser provides office space,
personnel, facilities and equipment for the performance of its
functions thereunder and as is necessary in connection with the
maintenance of the headquarters of the Fund and pays all
compensation of the Fund's Trustees, officers and employees who
are affiliated persons of the Sub-Adviser.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, 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.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, the Sub-Adviser
provides all administrative services to the Fund other than those
relating to its investment portfolio handled by the Adviser under
the Advisory Agreement. Such administrative services include, but
are not limited to, overseeing all relationships between the Fund
and its various support organizations including the transfer
agent, custodian, legal counsel, auditors and principal
underwriter. Its services include the negotiation of agreements
in relation thereto, the supervision and coordination of the
performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation of the Fund and for the sale, servicing, or
redemption of the Fund's shares. Additionally, the Sub-Adviser
either keeps the accounting and other books and records of the
Fund, including the computation of net asset value per share and
the dividends (utilizing daily pricing of the securities in the
Fund's portfolio performed by the Adviser under the Advisory
Agreement) or, at its expense and responsibility, delegates such
duties in whole or in part to a company satisfactory to the Fund.
See the Additional Statement for a further description of
functions listed in the Sub-Advisory and Administration Agreement
as part of such duties.
Under the Sub-Advisory and Administration Agreement, subject
to the control of the Fund's Board of Trustees, the Sub-Adviser
provides sub-advisory services to the Fund, which include review
of the investment activities of the Fund, and may include
providing the Adviser and the Fund with material relevant to the
investment in securities of issuers in various states. Although
such event is not anticipated, if the Advisory Agreement were
terminated, the Sub-Adviser would assume the duties of managerial
investment adviser, in addition to continuing its duties as sub-
adviser and administrator, subject to and in compliance with the
1940 Act and the rules thereunder. In such event, it would be
paid an additional fee at the rate currently paid to the Adviser.
See the Additional Statement.
The Sub-Advisory and Administration Agreement contains
provisions as to the Sub-Adviser's allocation of the portfolio
transactions of the Fund similar to those in the Advisory
Agreement; see the Additional Statement.
Under the Sub-Advisory and Administration Agreement, the
Fund pays a sub-advisory and administration fee computed on the
net asset value of the Fund as described in the table below.
Advisory and Sub-Advisory Fees
Under the Advisory Agreement and the Sub-Advisory and
Administration Agreement, the Fund pays fees to the Adviser and
Sub-Adviser which are payable monthly and computed on the net
asset value of the Fund at the end of each business day at
different levels, depending on the net assets of the Fund. The
aggregate annual rate of the fees payable with respect to net
assets at different levels are set forth in the following table:
<TABLE>
<CAPTION>
Aggregate Annual Rates
Sub-Advisory and
Fund Net Assets Advisory Fee Administration Fee Total Fees
<S> <C> <C> <C>
Up to $15 million..... 0.70 of 1% 0.80 of 1% 1.50%
$15 million up to
$50 million........ 0.55 of 1% 0.65 of 1% 1.20%
Above $50 million..... 0.40 of 1% 0.50 of 1% 0.90%
</TABLE>
The Adviser and the Sub-Adviser may each waive all or part
of their respective fees during the early development phase of
the Fund. The combined fees paid by the Fund to the Adviser and
the Sub-Adviser are higher than those paid by most other
investment companies. In authorizing such fees, the Board of
Trustees considered a number of factors including the
difficulties of managing a portfolio oriented primarily to the
Rocky Mountain Region, and the expertise with respect to that
area possessed by both the Adviser and the Sub-Adviser.
The Adviser and Sub-Adviser have each agreed that their
respective fees shall be reduced, but not below zero, by an
amount equal to their respective pro-rata portions (based upon
the aggregate fees of the Adviser and the Sub-Adviser) of the
amount, if any, by which the total expenses of the Fund in any
fiscal year, exclusive of taxes, interest, and brokerage fees,
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
will be sold have any such limitation.
Information about the Adviser,
the Sub-Adviser and the Distributor
The Adviser provides professional investment advisory
services to a broad base of clients and currently manages over
$750 million in clients' assets, of which approximately $450
million consists of equity investments. The Adviser is a wholly-
owned subsidiary of Kirkpatrick, Pettis, Smith, Polian Inc.
("Kirkpatrick, Pettis"), which is a full service investment firm
serving institutional and retail markets through its investment
banking, sales and trading facilities.
The Fund's portfolio is managed in the Adviser's Denver
office. Mr. John Henry Schonewise is the Fund's Portfolio
Manager. He has been a Vice President of the Adviser since 1994.
From 1992 to 1994, he was Vice President and a portfolio manager
of Banc One Investment Advisors Corporation. From 1985 through
1992, he was a portfolio manager at United Bank of Denver (now
Norwest Bank, Denver). He holds a B.S. in Business Administration
from the University of Nebraska at Lincoln and a M.A. in
Economics from the University of Kansas.
Tracing its history to 1925, Kirkpatrick, Pettis currently
staffs 9 offices in Colorado, Iowa, Kansas, Missouri, Nebraska
and New York that serve primarily the midwest and Rocky Mountain
regions. Its principal office is located at 10250 Regency Circle,
Omaha, NE 68114 and its Denver office is located at One Norwest
Center, 1700 Lincoln Street, Denver, CO 80203. Since 1983, the
Adviser has been a wholly-owned subsidiary of Mutual of Omaha
Insurance Company, whose principal office is at Mutual of Omaha
Plaza, Omaha, NE 68175.
The Fund's founder, Sub-Adviser and Administrator is
administrator to the Aquilasm Group of Funds, which consists of
13 funds, seven tax-free municipal bond funds, five money market
funds and the Fund. As of December 31, 1995, these funds had
aggregate assets of approximately $2.7 billion, of which
approximately $800 million consisted of assets of money market
funds and $1.9 billion consisted of assets of the tax-free bond
funds. The Sub-Adviser, which was founded in 1984, is controlled
by Mr. Lacy B. Herrmann (directly, through a trust and through
share ownership by his wife). See the Additional Statement for
information on Mr. Herrmann.
During the fiscal year ended December 31, 1995, the Fund
accrued fees to the Adviser and Sub-Adviser respectively of
$8,679 and $9,981. All of such fees were waived. In addition, the
Sub-Adviser agreed to reimburse $86,185 of the Fund's expenses.
The Distributor currently handles the distribution of the
shares of thirteen funds, five money market funds, seven tax-free
municipal bond funds and the Fund. Under the Distribution
Agreement, the Distributor is responsible for the payment of
certain printing and distribution costs relating to prospectuses
and reports as well as the costs of supplemental sales
literature, advertising and other promotional activities.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which
are currently owned by Mr. Herrmann, will be owned by certain
directors and/or officers of the Sub-Adviser and/or the
Distributor, including Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
The Fund distributes dividends from net investment income on
an annual basis following the end of its fiscal year, which is
December 31st. If the Fund has had net long-term capital gains or
net short-term capital gains for the year, it distributes
dividends on those items at the same time. Short-term capital
gains include the gains from the disposition of securities held
less than one year, the premiums from expired call options
written by the Fund and net gains from closing transactions with
respect to such options. If required by tax laws to avoid excise
or other taxes, dividends and/or capital gains distributions may
be made more frequently. Dividends and other distributions for
all classes of the Fund's shares are calculated at the same time
and in the same manner. In addition, the dividends of each class
can vary because each class will bear certain class-specific
charges.
Unless you request otherwise by letter addressed to the
Agent or by filing an appropriate Application prior to a given
ex-dividend date, dividends and distributions will be
automatically reinvested in full and fractional shares of the
Fund at net asset value on the record date for the dividend or
distribution or other date fixed by the Board of Trustees. An
election to receive cash will continue in effect until written
notification of a change is received by the Agent. All
shareholders, whether their dividends are received in cash or are
being reinvested, will receive a quarterly account summary
indicating the current status of their investment. There is no
fixed dividend rate.
Tax Information
The Fund intends to qualify for taxation as a regulated
investment company under the provisions of Subchapter M of the
Internal Revenue Code. As such, the Fund will not be taxed on its
net investment income or its net realized capital gains, if any,
to the extent they have been distributed to the Fund's
shareholders. Distributions from the Fund's net income and net
short-term capital gains are taxed as ordinary income. If the
Fund has net long-term capital gains which are greater than its
net short-term capital loses, it will distribute the excess and
such distribution will be taxed to you as long-term capital
gains, regardless of how long you have held your shares. Although
distributions will be made in January, you must report the income
or capital gain on your return for the prior calendar year,
assuming you file your returns on a calendar year basis.
For purposes of Federal income tax, certain options, if any,
held by the Fund at the end of its fiscal year generally will be
treated as having been sold at market value. As a general rule
any gain or loss on such contracts will be treated as 60%
long-term and 40% short-term. See the Additional Statement for
more details on the tax aspects of options. Dividends paid by the
Fund will qualify for the dividends received deduction for
corporations only to the extent that they represent payment of
qualifying dividend income received by the Fund. Shortly after
the end of each calendar year, the Fund will send you a statement
of the amount and nature of net income and capital gains.
Distributions from the Fund, whether ordinary income or
capital gain in nature, will be taxable to you whether you take
them in cash or have them automatically reinvested in shares of
the Fund.
The Fund will be obliged to withhold certain percentages of
distributions and pay over the amounts to the Internal Revenue
Service in either of two instances:
(1) if you do not supply the Fund or the institution
through which you receive distributions with your correct
taxpayer identification number, which for most individuals is
their Social Security number, the Fund will have to withhold 31%
on ordinary income dividends, capital gains dividends and
redemption payments; and
(2) if you are a non-resident alien or foreign entity, the
Fund will have to withhold 30% (or a lower rate if provided by
treaty with the country in which the alien or entity resides) of
such payments.
Tax Effects of Redemptions
Normally, when you redeem shares of the Fund you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid
for the shares. The gain or loss will be long-term if you held
the redeemed shares for over a year, and short-term if for a year
or less.
The above information is a summary of the tax treatment that
will be applied to the Fund and its distributions. If you have
any questions, you should contact your tax adviser, particularly
in connection with state and local taxes.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among this
Fund and certain tax-free municipal bond funds (the "Bond or
Equity Funds") and certain money market funds (the "Money-Market
Funds"), all of which are in the Aquilasm Group of Funds and have
the same Administrator and Distributor as the Fund. All exchanges
are subject to certain conditions described below. As of the date
of the Prospectus, the Bond or Equity Funds are this Fund,
Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free
Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free
Fund of Kentucky, Tax-Free Fund For Utah and Narragansett Insured
Tax-Free Income Fund; the Money-Market Funds are Capital Cash
Management Trust, Pacific Capital Cash Assets Trust (Original
Shares), Pacific Capital Tax-Free Cash Assets Trust (Original
Shares), Pacific Capital U.S. Treasuries Cash Assets Trust
(Original Shares) and Churchill Cash Reserves Trust.
Class Y Shares of the Fund may be exchanged only for Class Y
Shares of the Bond or Equity Funds or for shares of a Money-
Market Fund.
Under the Class Y exchange privilege, once Class Y Shares of
any Bond or Equity Fund have been purchased, those shares (and
any shares acquired as a result of reinvestment of dividends
and/or distributions) may be exchanged any number of times
between Money-Market Funds and Class Y Shares of the Bond or
Equity Funds without the payment of any sales charge.
The "Class Y Eligible Shares" of any Bond or Equity Fund are
those shares which were (a) acquired by direct purchase including
by exchange by an institutional investor from a Money-Market
Fund, or which were received in exchange for Class Y Shares of
another Bond or Equity Fund; or (b) acquired as a result of
reinvestment of dividends and/or distributions on otherwise Class
Y Eligible Shares. Shares of a Money-Market Fund not acquired in
exchange for Class Y Eligible Shares of a Bond or Equity Fund can
be exchanged for Class Y Shares of a Bond or Equity Fund only by
persons eligible to make an initial purchase of Class Y Shares.
This Fund, as well as the Money-Market Funds and other Bond
or Equity Funds, reserves the right to reject any exchange into
its shares, if shares of the fund into which exchange is desired
are not available for sale in your state of residence. The Fund
may also modify or terminate this exchange privilege at any time.
In the case of termination, the Prospectus will be appropriately
supplemented. No such modification or termination shall take
effect on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset
value of the shares surrendered for exchange are at least equal
to the minimum investment requirements of the investment company
whose shares are being acquired and (iii) the ownership of the
accounts from which and to which the exchange is made are
identical.
The Agent will accept telephone exchange instructions from
anyone. To make a telephone exchange telephone:
800-ROCKY-22 (800-762-5922) toll free or 908-855-5731
Note: The Fund, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed
to verify the identity of the caller. The Agent will request some
or all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
Exchanges of Class Y Shares will be effected at the relative
net asset values of the Class Y Shares being exchanged next
determined after receipt by the Agent of your exchange request.
Prices for exchanges are determined in the same manner as for
purchases of the Fund's shares. See "How to Invest in the Fund."
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the
realization of a capital gain or loss, depending on the cost or
other tax basis of the shares exchanged and the holding period
(see the Additional Statement); no representation is made as to
the deductibility of any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable, except
to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free
Money-Market Fund) are exempt from regular Federal income tax,
and to the extent that a portion or all of the dividends paid by
Pacific Capital U.S. Treasuries Cash Assets Trust (which invests
in U.S. Treasury obligations) are exempt from state income taxes.
If your state of residence is not the same as that of the issuers
of obligations in which a tax-free municipal Bond Fund or a
tax-free Money-Market Fund invests, the dividends from that fund
may be subject to income tax of the state in which you reside.
Accordingly, you should consult your tax adviser before acquiring
shares of such a Bond Fund or a tax-free Money-Market Fund under
the exchange privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Fund's
performance, including various expressions of total return.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes any applicable sales charge) for 1- and 5-year periods
and for a period since the inception of the Fund, to the extent
applicable, through the end of such periods, assuming
reinvestment (without sales charge) of all distributions. The
Fund may also furnish total return quotations for other periods
or based on investments at various applicable sales charge levels
or at net asset value. For such purposes total return equals the
total of all income and capital gains paid to shareholders,
assuming reinvestment of all distributions, plus (or minus) the
change in the value of the original investment, expressed as a
percentage of the purchase price. See the Additional Statement.
Performance figures are based upon past performance, reflect
as appropriate all recurring charges against Fund income net of
fee waivers and reimbursement of expenses, if any, and will
assume the payment of the maximum sales charge on the purchase of
shares, but not on reinvestment of income dividends for which the
Fund does not impose a sales charge.
The investment results of the Fund, like those of all other
investment companies, will fluctuate over time; thus, performance
figures should not be considered to represent what an investment
may earn in the future or what the Fund's total return may be in
any future period.
Description of the Fund and Its Shares
The Fund is an open-end, diversified management investment
company organized in 1993 as a Massachusetts business trust. The
Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares and to divide or combine the
shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Fund. Each
share represents an equal proportionate interest in the Fund with
each other share. Upon liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders. If they deem it
advisable and in the best interests of shareholders, the Board of
Trustees of the Fund may create additional classes of shares
(subject to rules and regulations of the Securities and Exchange
Commission or by exemptive order). The Board of Trustees may
also, at its own discretion, create additional series of shares,
each of which may have separate assets and liabilities (in which
case any such series will have a designation including the word
"Series"). See the Additional Statement for further information
about possible additional series. Shares are fully paid and
non-assessable, except as set forth under the caption "General
Information" in the Additional Statement; the holders of shares
have no pre-emptive or conversion rights.
The other two classes of shares of the Fund are Front-
Payment Class Shares ("Class A Shares") and Level-Payment Class
Shares ("Class C Shares"), which are fully described in a
separate prospectus that can be obtained by calling the Fund at
800-ROCKY-55 (800-762-5955) toll free or 212-697-6666.
The primary distinction among the Fund's three classes of
shares lies in their different sales charge structures and
ongoing expenses, which are likely to be reflected in differing
yields and other measures of investment performance. All three
classes represent interests in the same portfolio of securities
and have the same rights, except that each class bears the
separate expenses, if any, of its Distribution Plan and has
exclusive voting rights with respect to its Plan. There are no
distribution fees with respect to Class Y Shares.
Dividends and other distributions paid by the Fund with
respect to shares of each class are calculated in the same manner
and at the same time, but may differ depending upon the
distribution and service fees, if any, and other class-specific
expenses borne by each class.
The Fund's Distribution Plan has three parts. In addition to
the defensive provisions described above, Parts I and II of the
Plan authorize payments, to certain "Qualified Recipients," out
of the Fund's assets allocable to the Class A Shares and Class C
Shares, respectively. See the Additional Statement. The Fund has
also adopted a Shareholder Services Plan under which the Fund is
authorized to make certain payments out of the Fund's assets
allocable to the Class C Shares. See the Additional Statement.
Of the shares of the Fund outstanding on April 10, 1996, the
Sub-Adviser held of record 8,768 shares (7.1%) and M.
Quackenbush, 25 Corticelli Street, Florence, MA held of record
8,306 shares (6.7%) all of which were Class A Shares. Except for
the last, the Fund has no information to indicate that the
foregoing record holdings are not also beneficial.
See the notes to the "Statement of Assets and Liabilities"
in the Additional Statement for information as to the
amortization of the Fund's organizational and start-up expenses.
Voting Rights
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) per share held (and proportionate
fractional votes for fractional dollar amounts). Shareholders
will vote on the election of Trustees and on other matters
submitted to the vote of shareholders. See the Additional
Statement for information about shareholder voting if the Fund
were in the future to have more than one portfolio (series). No
amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding
shares of the Fund except that the Fund's Board of Trustees may
change the name of the Fund. The Fund may be terminated (i) upon
the sale of its assets to another issuer, or (ii) upon
liquidation and distribution of the assets of the Fund, in either
case if such action is approved by the vote of the holders of a
majority of the outstanding shares of the Fund. If not so
terminated, the Fund will continue indefinitely.
<PAGE>
Application for Aquila Rocky Mountain Equity Fund
For Class Y Shares only
Please complete steps 1 through 4 and mail to:
ADM, Attn: Aquilasm Group of Funds
581 Main Street, Woodbridge, NJ 07095-1198
Tel. #1-800-762-5922
STEP 1 ACCOUNT REGISTRATION
A. REGISTRATION
___Individual (Use line 1)
___Joint Account* (Use lines 1&2)
___For a Minor (Only one custodian and one minor permitted.)
(Use line 3)
___For Trust, Corporation, Partnership or other Entity (Use line 4)
* Joint Accounts will be Joint Tenants With Rights of Survivorship
unless otherwise specified.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodian's First Name Middle Initial Last Name
Under the _________Uniformed Gifts/Transfers to Minors Act.
State
Custodian for ____________________________________________________
Minor's First Name Middle Initial Last Name
_____________________________
Minor's Social Security No.
4. __________________________________________________________________
(Name of Corporation or Partnership. PLEASE INDICATE TYPE OF
ORGANIZATION. If a Trust, include the name and date of the Trust
Instrument. The name(s) of the Trustees in which account will be
registered should be listed below. Account for a Pension or Profit
Sharing Plan or Trust may be registered in the name of the Plan or
Trust itself.)
______________________________________________________________________
Tax I.D. Number Trustee(s) or Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
__________________________________________________________________________
Street or P.O. Box City State Zip Code
(_______)_________________________________________________________________
Area Code Daytime Telephone # Occupation
__________________________________________________________________________
Employer's Name/Employer's Address City State
Citizen or resident of U.S.___ Other___
Check here___ if you are a non U.S. citizen or resident and not subject to
back-up withholding. See certification in Step 4.
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
__________________________________________________________________________
Dealer Name Branch Office Address
__________________________________________________________________________
Branch Office City/State Branch #
__________________________________________________________________________
Representative's Name Rep #
(_______)_________________________________________________________________
Area Code Telephone # [Agent Use: Dealer # / Branch #]
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
Indicate Method of Payment (For either method, make check
payable to: Aquila Rocky Mountain Equity Fund)
___Initial Investment $ ______________ (Minimum investment $1,000)
___Automatic Investment $______________ (Minimum $50)
For Automatic Investment of at least $50 per month, you must
complete Step 3, Section A, Step 4, Sections A & B and ATTACH
A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK.
B. DISTRIBUTIONS
All income dividends and capital gains distributions will be reinvested
in additional shares at Net Asset Value unless otherwise indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___Wire directly into my financial institution account, ATTACHED IS
A VOIDED CHECK showing the account information where I would like
the dividend deposited.
___Mail check to my address listed in Step 1a.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested
in your Aquila Rocky Mountain Equity Fund Account. To establish this
program, please complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or on
the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your
account (minimum $50 and maximum $50,000) at any time you wish by
simply calling the Fund toll-free at 1-800-ROCKY-22. To establish
this program, please complete Step 4, Sections A & B of this
Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks
prior to 1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, Administrative
Data Management Corp. (the "Agent") is authorized to redeem sufficient
shares from this account at the then current Net Asset Value, in
accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning________________ .
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
___ Mail check to my address listed in Step 1a.
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your
name within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any
other persons telephone instructions to execute the exchange of
shares of one Aquila-sponsored fund for shares of another Aquila-
sponsored fund with identical shareholder registration in the manner
described in the Prospectus. Except for gross negligence in acting
upon such telephone instructions to execute an exchange, and subject
to the conditions set forth herein, I/we understand and agree to
hold harmless the Agent, each of the Aquila Funds, and their
respective officers, directors, trustees, employees, agents and
affiliates against any liability, damage, expense, claim or loss,
including reasonable costs and attorneys fees, resulting from
acceptance of, or acting or failure to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution
account listed.
Cash proceeds in any amount from the redemption of shares will
be mailed or wired, whenever possible, upon request, if in an amount
of $1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this
Fund account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ ____________________________________
Account Registration Financial Institution Account Number
_______________________________ ____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ ____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated
by the Agent, Administrative Data Management Corp., and to pay such
sums in accordance therewith, provided my/our account has sufficient
funds to cover such drafts or debits. I/We further agree that your
treatment of such orders will be the same as if I/we personally signed
or initiated the drafts or debits. I/We understand that this authority
will remain in effect until you receive my/our written instructions to
cancel this service. I/We also agree that if any such drafts or debits
are dishonored, for any reason, you shall have no liabilities.
Financial Institution Account Number _______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila
Distributors, Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted
pursuant to the above authorization shall be subject to the
provisions of the Operating Rules of the National Automated
Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer
in connection with the execution and issuance of any electronic
debit in the normal course of business initiated by the Agent
(except any loss due to your payment of any amount drawn against
insufficient or uncollected funds), provided that you promptly
notify us in writing of any claim against you with respect to
the same, and further provided that you will not settle or pay
or agree to settle or pay any such claim without the written
permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs
and expenses in the event that you dishonor, with or without
cause, any such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is
of legal age to purchase shares of the Fund and has received and
read a current Prospectus of the Fund and agrees to its terms.
- - I/We authorize the Fund and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment
or Telephone Investment, if my/our account at the Financial
Institution has insufficient funds, the Fund and its agents may
cancel the purchase transaction and are authorized to liquidate
other shares or fractions thereof held in my/our Fund account to
make up any deficiency resulting from any decline in the net
asset value of shares so purchased and any dividends paid on
those shares. I/We authorize the Fund and its agents to correct
any transfer error by a debit or credit to my/our Financial
Institution account and/or Fund account and to charge the account
for any related charges. I/We acknowledge that shares purchased
either through Automatic Investment or Telephone Investment are
subject to applicable sales charges.
- - The Fund, the Agent and the Distributor and their Trustees,
directors, employees and agents will not be liable for acting
upon instructions believed to be genuine, and will not be
responsible for any losses resulting from unauthorized
telephone transactions if the Agent follows reasonable
procedures designed to verify the identity of the caller. The
Agent will request some or all of the following information:
account name and number; name(s) and social security number
registered to the account and personal identification; the
Agent may also record calls. Shareholders should verify the
accuracy of confirmation statements immediately upon receipt.
Under penalties of perjury, the undersigned whose Social
Security (Tax I.D.) Number is shown above certifies (i) that
Number is my correct taxpayer identification number and (ii)
currently I am not under IRS notification that I am subject to
backup withholding (line out (ii) if under notification). If no
such Number is shown, the undersigned further certifies, under
penalties of perjury, that either (a) no such Number has been
issued, and a Number has been or will soon be applied for; if
a Number is not provided to you within sixty days, the
undersigned understands that all payments (including
liquidations) are subject to 31% withholding under federal tax
law, until a Number is provided and the undersigned may be
subject to a $50 I.R.S. penalty; or (b) that the undersigned is
not a citizen or resident of the U.S.; and either does not
expect to be in the U.S. for 183 days during each calendar year
and does not conduct a business in the U.S. which would receive
any gain from the Fund, or is exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW.
FOR A TRUST, ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be
accompanied by proof of authority to sign, such as a certified
copy of the corporate resolution or a certificate of incumbency
under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment,
Expedited Redemption and Direct Deposit of Dividends) are
effective 15 days after this form is received in good order
by the Fund's Agent.
- - You may cancel any feature at any time, effective 3 days after
the Agent receives written notice from you.
- - Either the Fund or the Agent may cancel any feature, without
prior notice, if in its judgment your use of any feature involves
unusual effort or difficulty in the administration of your account.
- - The Fund reserves the right to alter, amend or terminate any or
all features or to charge a service fee upon 30 days written notice
to shareholders except if additional notice is specifically
required by the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete
a Ready Access features form which may be obtained from Aquila
Distributors at 1-800-ROCKY-55 and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Fund's Agent.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to
the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan
(the "Plan") as agent for the person (the "Planholder") who
executed the Plan authorization.
2. Certificates will not be issued for shares of the Fund purchased
for and held under the Plan, but the Agent will credit all such
shares to the Planholder on the records of the Fund. Any share
certificates now held by the Planholder may be surrendered
unendorsed to the Agent with the application so that the shares
represented by the certificate may be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the
Fund at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments
will be made at the Net Asset Value per share in effect at the
close of business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the
address to which checks are to be mailed may be changed, at any
time, by the Planholder on written notification to the Agent.
The Planholder should allow at least two weeks time in mailing
such notification before the requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written
notice (in proper form in accordance with the requirements of the
then current Prospectus of the Fund) to redeem all, or any part of,
the shares held under the Plan. In such case the Agent will redeem
the number of shares requested at the Net Asset Value per share in
effect in accordance with the Fund's usual redemption procedures
and will mail a check for the proceeds of such redemption to the
Planholder.
7. The Plan may, at any time, be terminated by the Planholder on
written notice to the Agent, or by the Agent upon receiving
directions to that effect from the Fund. The Agent will also
terminate the Plan upon receipt of evidence satisfactory to it
of the death or legal incapacity of the Planholder. Upon
termination of the Plan by the Agent or the Fund, shares
remaining unredeemed will be held in an uncertificated account
in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder,
his executor or guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any
action taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent
for the Fund, the Planholder will be deemed to have appointed
any successor transfer agent to act as his agent in administering
the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously making regular purchases. While an occasional lump
sum investment may be made, such investment should normally be an
amount equivalent to three times the annual withdrawal or $5,000,
whichever is less.
page>
INVESTMENT ADVISER
KPM Investment Management, Inc.
a subsidiary of Mutual of Omaha Insurance 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
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights.......................................2
Table of Expenses................................5
Financial Highlights.............................6
Introduction.....................................7
Investment Of The Fund's Assets..................7
Investment Restrictions.........................12
Net Asset Value Per Share.......................13
How To Invest In The Fund.......................13
Distribution Plan...............................15
How To Redeem Your Investment...................15
Automatic Withdrawal Plan.......................17
Management Arrangements.........................18
Dividend And Tax Information....................21
Exchange Privilege..............................22
General Information.............................23
Application
Aquila
[LOGO]
Rocky
Mountain
Equity Fund
A capital appreciation investment
PROSPECTUS
April 30, 1996
as supplemented May 1, 1996
[LOGO]
One of The
Aquilasm Group Of Funds
