ADMINISTRATOR AND SUB-ADVISER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT ADVISER
KPM INVESTMENT MANAGEMENT, INC.
A Mutual of Omaha Company
10250 Regency Circle, Suite 200
Omaha, Nebraska 68114
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Tucker Hart Adams
Arthur K. Carlson
Diana P. Herrmann
R. Thayne Robson
Cornelius T. Ryan
OFFICERS
Lacy B. Herrmann, President
Sue McCarthy-Jones, Senior Vice President
Jerry G. McGrew, 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
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
SEMI-ANNUAL
REPORT
JUNE 30, 1998
[Logo Graphic: Rectangle with the words AQUILA ROCKY MOUNTAIN EQUITY FUND and
also a drawing of two mountains]
A CAPITAL APPRECIATION INVESTMENT
[Logo of Aquila Group of Funds: eagle's head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
<PAGE>
[Logo Graphic: Rectangle with the words AQUILA ROCKY MOUNTAIN EQUITY FUND and
also a drawing of two mountains]
AQUILA ROCKY MOUNTAIN EQUITY FUND
SEMI-ANNUAL REPORT
"A LITTLE PATIENCE CAN GO A LONG WAY"
August 17, 1998
Dear Investor:
We are pleased to provide you with this Semi-Annual Report for
Aquila Rocky Mountain Equity Fund for the six-month period ended June 30,
1998.
A REVIEW OF THE FUND'S INVESTMENT STRATEGY
THE ROCKY MOUNTAIN REGION
As you are no doubt aware, Aquila Rocky Mountain Equity Fund
searches out growth-oriented companies having a significant business presence
in the Rocky Mountain Region of our country. This region - consisting of
Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming -
continues to boast higher than average projections for employment and
population growth.
Thus, there continues to be a substantial number and diversity of
attractive investment opportunities right here in our "own backyard" of the
Rocky Mountain states. In illustration of this point, the following charts
provide a breakdown of the Fund's portfolio as to distribution by state and
market sector.1
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY STATE
<S> <C>
Idaho 4.52%
Colorado 33.20%
Utah 14.38%
Arizona 11.00%
Nevada 17.42%
Montana 8.15%
New Mexico 4.31%
Other 7.80%
</TABLE>
[Graphic of pie chart with the following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY MARKET SECTOR PIE CHART
<S> <C>
Gaming 15.57%
Energy 12.26%
Transportation 3.41%
Consumer: Non-Durable 10.88%
Consumer: Cyclical 11.87%
Technology 0.83%
Utilities 12.62%
Cable/Communications 10.36%
Financial 15.57%
Healthcare 4.23%
Basic Industry 3.24%
</TABLE>
<PAGE>
VALUE-ORIENTATION
Within this Rocky Mountain region, the Fund's investment
management team searches for securities that it believes to be undervalued in
relationship to their intrinsic value and projected growth rate of the
underlying companies. The Fund then strives to capitalize on these companies
through ownership in the Fund's portfolio prior to recognition of their
potential by the overall marketplace. Thus, while much of Wall Street focuses
on established Fortune 500 companies, Aquila Rocky Mountain Equity Fund seeks
out what we hope to be tomorrow's stars. By striving to "get in on the ground
floor" with some smaller companies in the area as well as established
companies in the Rocky Mountain region, the Fund seeks to maximize the upside
potential and minimize downside risk of its investments.
Following are the top ten holdings of the Fund as of June 30,
1998.1
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
PERCENTAGE
COMPANY OF NET ASSETS STATE MARKET SECTOR
<S> <C> <C> <C>
First State Bancorp 4.31% New Mexico Financial/Insurance
Westerfed Financial 4.14% Montana Financial/Insurance
Montana Power 4.01% Montana Utilities
First Security Corp. 3.81% Utah Financial/Insurance
Mity Lite 3.78% Utah Consumer Cyclical
Prima Energy 3.78% Colorado Energy
Sierra Health Services 3.68% Nevada Healthcare
Jackpot Enterprises 3.44% Nevada Gaming
Viad Corp. 3.37% Arizona Consumer Cyclical
International Game Technology 3.32% Nevada Gaming
</TABLE>
THE VIRTUE OF PATIENCE
We believe that oftentimes the key to success with value-oriented
investing is patience. In many instances, it is really more a question of
WHEN, not IF, securities in the Fund's portfolio will realize the potential
we envision for them. Thus, you could liken an investment in the Fund to the
career of a good actor who struggles for years in bit parts and then gets a
hit show and overnight becomes a success. Once the potential of companies is
appreciated in the marketplace, positive things can happen quickly.
Therefore, investors must learn the virtue of patience, and not
look upon an investment in the Fund as a get-rich-quick scheme. You should
instead look upon your investment as a longer-term capital appreciation
vehicle.
Unfortunately, although we try to buy securities at reasonable
prices, they are still subject to reactions in the marketplace when it goes
down as opposed to up.
<PAGE>
You should be aware of the discipline that we use in the
selection of securities for the Aquila Rocky Mountain Equity Fund. First, we
seek to invest in companies that we believe have solid fundamentals to
support their businesses in good economic times and bad. Then, we pay careful
attention to the price we pay for those companies. We basically look for
companies which are selling for less than their fair values in terms of their
inherent growth prospects. And, we particularly look for companies with
strong prospects for the long term.
RESULTS IN THE INTERIM
Since inception, we believe the Fund has provided credible
absolute returns for investors utilizing the concepts outlined above.
Specifically, on the inception date of July 22, 1994, the Fund's Class A
Shares2 were offered at a maximum public offering price of $12.00. The same
shares had a value of $16.20 at June 30, 1997 and a value of $17.92 at June
30, 1998.
We believe that the positive results produced by the Fund bear
witness to the fact that there are interesting and profitable investments
that can be made in the Rocky Mountain region of our country. The average
annual return produced by the Fund over the nearly four-year period since its
inception was 13.04%.3 Essentially, the Fund has generated a very respectable
return to date on investor's capital.
We continue to search for attractive investments in the Rocky
Mountain region that we believe have the potential for solid capital
appreciation in the future.
YOUR CONFIDENCE APPRECIATED
Your investment in Aquila Rocky Mountain Equity Fund is greatly
appreciated. We value your trust and will continue to do our best to merit
your confidence.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
1 The portfolio distribution data and top ten holdings were as of
June 30, 1998. They are subject to change and, therefore, are not
necessarily representative of the entire portfolio. The Prospectus of the
Fund discusses the special risk considerations of the geographic
concentration strategy of the Fund.
2 Different classes of shares are offered by the Fund and their
performance will vary because of differences in sales charges and fees
paid by shareholders investing in these different classes.
3 The performance shown has been adjusted to reflect the maximum
sales charge of 4.25% for this Class (for the period July 22, 1994 through
April 30, 1996, it was 4.75%). Such performance data quoted represents
past performance and is not indicative of future results. The investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Returns would have been less if management fees and
expenses had been fully applied.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCKS VALUE
<C> <S> <C>
Basic Industry - 3.2%
2,000 Barrick Gold Corp. $38,375
3,000 Cyprus Amax Minerals Co. 39,750
1,200 Newmont Mining 28,350
106,475
Cable/Communications - 10.4%
2,800 Jones Intercable Inc. Class A + 70,000
300 Jones Intercable Inc. + 7,425
1,500 Liberty Media Group Class A + 58,219
1,909 Tele-Communications Inc. TCI Group - A 73,377
2,182 Tele-Communications Inc. - TCI Ventures
Group - A 43,777
2,000 MediaOne Group + 87,875
340,673
Consumer Cyclical - 11.8%
4,500 Building Material Holding Corp. + 62,156
5,600 Koala Corp. + 91,000
7,000 Mity Lite, Inc. + 124,250
4,000 Viad Corporation 111,000
388,406
Consumer Non-Durable - 10.9%
4,500 American Stores Company 108,844
6,500 Avert Inc. + 45,500
3,000 Dial Corp. 77,812
5,000 Franklin Covey Company + 96,250
4,500 Rocky Mountain Chocolate Factory + 29,531
357,937
Energy - 12.3%
6,000 Giant Industries, Inc. 104,250
1,800 KN Energy 97,538
7,000 Prima Energy Corp.+ 124,250
4,377 Union Pacific Resources, Inc. 76,881
402,919
Financial - 15.6%
2,332 Conseco Inc. 109,021
5,850 First Security Corp. 125,227
5,875 First State Bancorp 141,734
5,561 Westerfed Financial Corp. 136,245
512,227
<PAGE>
Gaming - 15.6%
5,000 American Coin Merchandising + 98,750
5,000 Circus Circus Enterprises Inc.+ 84,688
4,500 International Game Technology 109,125
9,000 Jackpot Enterprises 113,062
5,000 Mirage Resorts + 106,562
512,187
Healthcare - 4.2%
1,000 Ballard Medical Products 18,000
4,800 Sierra Health Services Inc.+ 120,900
138,900
Technology - 0.8%
6,000 Microtest Inc. + 27,375
Transportation - 3.4%
3,200 Rural/Metro Corp.+ 41,600
1,600 Union Pacific 70,600
112,200
Utilities -12.6%
2,500 Idaho Power Co. 86,563
3,800 Montana Power Co. 132,050
2,300 New Century Energies Inc. 104,506
1,955 U.S. West Inc. 91,867
414,986
Total Common Stocks (cost $2,587,415*) 100.8% 3,314,285
Other assets in excess of liabilities (0.8) (25,054)
Net Assets 100.0% $ 3,289,231
<FN> * Cost for Federal tax purposes is identical. </FN>
<FN> + Non-income producing security. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at market value (cost $2,587,415) $ 3,314,285
Deferred organization expenses (note 2) 11,391
Due from Administrator for reimbursement of expenses (note 3) 6,610
Dividends receivable 2,729
Other assets 965
Total assets 3,335,980
LIABILITIES
Cash overdraft 29,630
Accrued expenses 7,524
Payable for Fund shares redeemed 7,334
Distribution fees payable 2,261
Total liabilities 46,749
$ 3,289,231
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 1,836
Additional paid-in capital 2,369,137
Undistributed net realized gain on investments 187,957
Undistributed net investment income 3,431
Net unrealized appreciation on investments 726,870
$ 3,289,231
CLASS A
Net Assets $ 2,311,724
Capital shares outstanding 129,037
Net asset value and redemption price per share $ 17.92
Offering price per share (100/95.75 of $17.92 adjusted to
nearest cent) $ 18.72
CLASS C
Net Assets $ 180,311
Capital shares outstanding 10,162
Net asset value and offering price per share $ 17.74
Redemption price per share (*generally, a charge of 1% is
imposed on the proceeds of shares redeemed during the
first 12 months after purchase) $ 17.74*
CLASS Y
Net Assets $ 797,196
Capital shares outstanding 44,396
Net asset value, offering and redemption price per share $ 17.96
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 22,006
Interest 7,584
$ 29,590
Expenses:
Investment Adviser fees (note 3) $ 13,931
Administrator fees (note 3) 15,921
Shareholders' reports 10,000
Legal fees 10,000
Registration fees and dues 8,000
Transfer and shareholder servicing agent fees 7,500
Trustees' fees and expenses 7,000
Amortization of organization expenses (note 2) 5,341
Audit and accounting fees 5,000
Distribution and service fees (note 3) 4,507
Custodian fees (note 6) 1,000
Miscellaneous 2,000
90,200
Investment Adviser fees waived (note 3) (13,931)
Administrator fees waived (note 3) (15,921)
Reimbursement of expenses by Administrator
(note 3) (30,205)
Expenses paid indirectly (note 6) (1,000)
Net expenses 29,143
Net investment income 447
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 179,555
Change in unrealized appreciation on investments (137,273)
Net realized and unrealized gain on investments 42,282
Net increase in net assets resulting from operations $ 42,729
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE DECEMBER
30, 1998 31, 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 447 $ 1,786
Net realized gain from securities transactions 179,555 125,748
Change in unrealized appreciation on investments (137,273) 473,126
Change in net assets from operations 42,729 600,660
DISTRIBUTIONS TO SHAREHOLDERS (note 5):
Class A Shares:
Net investment income - -
Net realized gain on investments - (103,249)
Class C Shares:
Net investment income - -
Net realized gain on investments - (231)
Class Y Shares:
Net investment income - -
Net realized gain on investments - (26,133)
Change in net assets from distributions - (129,613)
CAPITAL SHARE TRANSACTIONS (note 7):
Proceeds from shares sold 426,838 1,544,525
Reinvested dividends and distributions 5,088 112,775
Cost of shares redeemed (1,131,556) (497,888)
Change in net assets from capital share
transactions (699,630) 1,159,412
Change in net assets (656,901) 1,630,459
NET ASSETS:
Beginning of period 3,946,132 2,315,673
End of period $ 3,289,231 $ 3,946,132
</TABLE>
See accompanying notes to financial statements.
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Aquila Rocky Mountain Equity Fund (the "Fund"), a diversified,
open-end investment company, was organized on November 3, 1993 as a
Massachusetts business trust and commenced operations on July 22, 1994. The
Fund is authorized to issue an unlimited number of shares and, since its
inception to May 1, 1996, offered only one class of shares. On that date, the
Fund began offering two additional classes of shares, Class C and Class Y
shares. All shares outstanding prior to that date were designated as Class A
shares and, as was the case since inception, are sold with a front-payment
sales charge and bear an annual service fee. Class C shares are sold with a
level-payment sales charge with no payment at time of purchase but level
service and distribution fees from date of purchase through a period of six
years thereafter. A contingent deferred sales charge of 1% is assessed to any
Class C shareholder who redeems shares of this Class within one year from the
date of purchase. The Class Y shares are only offered to institutions acting
for an investor in a fiduciary, advisory, agency, custodian or similar
capacity. They are not available to individual retail investors. Class Y
shares are sold at net asset value without any sales charge, redemption fees,
contingent deferred sales charge or distribution or service fees. On April
30, 1998 the Fund established Class I shares, which are offered and sold only
through financial intermediaries and are not offered directly to retail
investors. At June 30, 1998 there were no Class I shares outstanding. All
classes of shares represent interests in the same portfolio of investments in
the Fund and are identical as to rights and privileges. They differ only with
respect to the effect of sales charges, the distribution and/or service fees
borne by the respective class, expenses specific to each class, voting rights
on matters affecting a single class and the exchange privileges of each
class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a) PORTFOLIO VALUATION: Securities listed on a national securities exchange
or designated as national market system securities are valued at the last
sale price on such exchanges or market system or, if there has been no
sale that day, at the bid price. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees. Short-term
investments maturing in 60 days or less are valued at amortized cost.
b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and losses
from securities transactions are reported on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is
recorded daily on the accrual basis.
<PAGE>
c) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as
a regulated investment company by complying with the provisions of the
Internal Revenue Code applicable to certain investment companies. The Fund
intends to make distributions of income and securities profits sufficient
to relieve it from all, or substantially all, Federal income and excise
taxes.
d) ORGANIZATION EXPENSES: The Fund's organizational expenses have
been deferred and are being amortized on a straight-line basis over five
years.
e) ALLOCATION OF EXPENSES: Expenses, other than class-specific
expenses, are allocated daily to each class of shares based on the
relative net assets of each class. Class-specific expenses, which include
distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class.
f) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
a) MANAGEMENT ARRANGEMENTS:
Management affairs of the Fund are conducted through two separate
management arrangements.
KPM Investment Management, Inc. (the "Adviser") serves as
Investment Adviser to the Fund. The Adviser is a wholly-owned subsidiary of
KFS Corporation, a member of the nationally oriented Mutual of Omaha
Companies. In this role, under an Investment Advisory Agreement, the Adviser
supervises the Fund's investments and provides various services to the Fund
for which it is entitled to receive a fee which is payable monthly and
computed as of the close of business each day on the net assets of the Fund
at the following annual rates; 0.70 of 1% on the first $15 million; 0.55 of
1% on the next $35 million and 0.40 of 1% on the excess over $50 million.
The Fund also has a Sub-Advisory and Administration Agreement with
Aquila Management Corporation (the "Administrator"), the Fund's founder and
sponsor. Under this agreement, the Administrator provides such advisory
services to the Fund, in addition to those services provided by the Adviser,
as the Administrator deems appropriate. Besides its sub-advisory services,
it also provides all administrative services, other than those relating to
the management of the Fund's investments. This includes providing the office
of the Fund and all related services as well as overseeing the activities
of all the various support organizations to the Fund such as the shareholder
servicing agent, custodian, legal counsel, auditors and distributor and
additionally maintaining the
<PAGE>
Fund's accounting books and records. For its services, the Administrator is
entitled to receive a fee which is payable monthly and computed as of the
close of business each day on the net assets of the Fund at the following
annual rates; 0.80 of 1% on the first $15 million; 0.65 of 1% on the next
$35 million and 0.50 of 1% on the excess over $50 million.
The Adviser and the Administrator each agrees that the above fees
shall be reduced, but not below zero, by an amount equal to its pro-rata
portion (determined on the basis of the respective fees computed as described
above) of the amount, if any, by which the total expenses of the Fund in any
fiscal year, exclusive of taxes, interest and brokerage fees, shall exceed
the most restrictive expense limitation imposed upon the Fund in the States
in which shares are then eligible for sale. At the present time none of the
States in which the Fund's shares are sold have any such limitation.
For the six months ended June 30, 1998, the Fund incurred fees
under the Advisory Agreement and Sub-Advisory and Administration Agreement of
$13,931 and $15,921, respectively, which were voluntarily waived.
Additionally, the Administrator voluntarily agreed to reimburse the Fund for
other expenses during this period in the amount of $30,206. Of this amount,
$23,596 was paid prior to June 30, 1998 and the balance of $6,610 was paid in
early July 1998.
Specific details as to the nature and extent of the services
provided by the Adviser and the Administrator are more fully defined in the
Fund's Prospectus and Statement of Additional Information.
b) DISTRIBUTION AND SERVICE FEES:
The Fund has adopted a Distribution Plan (the "Plan") pursuant to
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940. Under one
part of the Plan, with respect to Class A Shares, the Fund is authorized to
make service fee payments to broker-dealers or others ("Qualified
Recipients") selected by Aquila Distributors, Inc. (the "Distributor"),
including, but not limited to, any principal underwriter of the Fund, with
which the Distributor has entered into written agreements contemplated by the
Rule and which have rendered assistance in the distribution and/or retention
of the Fund's shares or servicing of shareholder accounts. The Fund makes
payment of this service fee at the annual rate of 0.25% of the Fund's average
net assets represented by Class A Shares. For the six months ended June 30,
1998, service fees on Class A Shares amounted to $3,692, of which the
Distributor received $379.
Under another part of the Plan, the Fund is authorized to make
payments with respect to Class C Shares to Qualified Recipients which have
rendered assistance in the distribution and/or retention of the Fund's Class
C shares or servicing of shareholder accounts. These payments are made at the
annual rate of 0.75% of the Fund's net assets represented by Class C Shares
and for the six months ended June 30, 1998, amounted to $611. In addition,
under a Shareholder Services Plan, the Fund
<PAGE>
is authorized to make service fee payments with respect to Class C Shares to
Qualified Recipients for providing personal services and/or maintenance of
shareholder accounts. These payments are made at the annual rate of 0.25%
of the Fund's net assets represented by Class C Shares and for the six
months ended June 30, 1998, amounted to $204. The total of these payments
with respect to Class C Shares amounted to $815, of which the Distributor
received $802.
Specific details about the Plans are more fully defined in the
Fund's Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the
exclusive distributor of the Fund's shares. Through agreements between the
Distributor and various broker-dealer firms ("dealers"), the Fund's shares
are sold primarily through the facilities of these dealers having offices
within the general Rocky Mountain region, with the bulk of sales commissions
inuring to such dealers. For the six months ended June 30, 1998, the
Distributor received sales commissions of $1,342.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1998, purchases of securities and
proceeds from the sales of securities (excluding short-term investments)
aggregated $315,272 and $482,186, respectively.
At June 30, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $980,840 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $253,970,
for a net unrealized appreciation of $726,870.
5. DISTRIBUTIONS
The Fund declares annual distributions to shareholders from net
investment income, if any, and from net realized capital gains, if any.
Distributions are recorded by the Fund on the ex-dividend date and paid in
additional shares at the net asset value per share or in cash, at the
shareholder's option. Due to differences between financial statement
reporting and Federal income tax reporting requirements, distributions made
by the Fund may not be the same as the Fund's net investment income, and/or
net realized securities gains.
6. CUSTODIAN FEES
The Fund has negotiated an expense offset arrangement with its
custodian wherein it receives credit toward the reduction of custodian fees
whenever there are uninvested cash balances. During the six months ended June
30, 1998, the Fund's custodian fees amounted to $1,000, all of which were
offset by such credits. It is the general intention of the Fund to invest, to
the extent practicable, some or all of cash balances in income-producing
assets rather than leave cash on deposit with the custodian.
<PAGE>
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 13,327 $ 248,730 56,515 $ 942,745
Reinvested dividends and
distributions 291 5,088 4,937 86,342
Cost of shares redeemed (60,341) (1,126,566) (30,449) (497,888)
Net change (46,723) (872,748) 31,003 531,199
CLASS C SHARES:
Proceeds from shares sold 10,043 178,108 100 1,780
Reinvested dividends and
distributions - - 18 300
Cost of shares redeemed (272) (4,990) - -
Net change 9,771 173,118 118 2,080
CLASS Y SHARES:
Proceeds from shares sold - - 34,051 600,000
Reinvested dividends and
distributions - - 1,492 26,133
Cost of shares redeemed - - - -
Net change - - 35,543 626,133
Total transactions in Fund
shares (36,952) $(699,630) 66,664 $1,159,412
</TABLE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
FINANCIAL HIGHLIGHTS
(UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class A(1)
Six Months Period
Ended Year Ended December 31, Ended
6/30/98 1997 1996 1995 12/31/94(2)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.89 $15.05 $13.13 $11.06 $11.43
Income from Investment Operations:
Net investment income (loss) - 0.01 (0.02) (0.07) -
Net gain (loss) on securities (both
realized and unrealized) 0.03 3.44 2.47 2.25 (0.37)
Total from Investment Operations 0.03 3.45 2.45 2.18 (0.37)
Less Distributions (note 5):
Dividends from net investment income - - - (0.01) -
Distributions from capital gains - (0.61) (0.53) (0.10) -
Total Distributions - (0.61) (0.53) (0.11) -
Net Asset Value, End of Period $17.92 $17.89 $15.05 $13.13 $11.06
Total Return (not reflecting sales
charge) (%) 0.17# 23.01 18.68 19.68 (3.24)#
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 2,312 3,144 2,178 1,737 530
Ratio of Expenses to Average Net
Assets (%) 1.48* 1.50 1.50 1.91 1.19*
Ratio of Net Investment Income (Loss)
to Average Net Assets (%) 0.02* 0.05 (0.14) (0.60) -
Portfolio Turnover Rate (%) 8.43# 10.39 20.32 15.14 2.95#
<CAPTION>
Net investment income (loss) per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and the
expense offset in custodian fees for uninvested cash balances would have
been:
<S> <C> <C> <C> <C> <C>
Net Investment (Loss) ($) (0.28) (0.83) (1.05) (1.12) -
Ratio of Expenses to Average Net Assets(3) (%) 4.53* 6.56 8.84 10.48 18.20*
Ratio of Net Investment Loss to Average Net
Assets (%) (3.03)* (5.01) (7.48) (9.17) -
<FN> (1) Designated as Class A Shares on May 1, 1996. </FN>
<FN> (2) From July 22, 1994 (commencement of operations) to December
31, 1994. </FN>
<FN> (3) Ratios are based on average net assets of $3,050,096, $2,505,548,
$1,965,012, $1,239,752 and $453,768, respectively. In general, as
the Fund's net assets increase, the expense ratio will decrease. </FN>
<FN> # Not annualized. </FN>
<FN> * Annualized. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Six Months Year Period Six Months Year Period
Ended Ended Ended Ended Ended Ended
6/30/98 12/31/97 12/31/96 6/30/98 12/31/97 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.79 $15.07 $14.59 $17.91 $15.07 $14.59
Income from Investment Operations:
Net investment income (0.09) (0.11) 0.01 0.02 0.04 0.01
Net gain on securities (both
realized and unrealized) 0.04 3.44 1.00 0.03 3.41 1.00
Total from Investment Operations (0.05) 3.33 1.01 0.05 3.45 1.01
Less Distributions (note 5):
Dividends from net investment income - - - - - -
Distributions from capital gains - (0.61) (0.53) - (0.61) (0.53)
Total Distributions - (0.61) (0.53) - (0.61) (0.53)
Net Asset Value, End of Period $17.74 $17.79 $15.07 $17.96 $17.91 $15.07
Total Return (not reflecting sales
charge) (%) (0.28)# 22.18 6.94# 0.28# 22.98 6.94#
Ratios/Supplemental Data
Net Assets, End of Period
($ thousands) 180 7 4 797 795 133
Ratio of Expenses to Average
Net Assets (%) 2.26* 2.26 1.25* 1.25* 1.27 1.25*
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.90)* (0.70) 0.11* 0.22* 0.23 0.11*
Portfolio Turnover Rate (%) 8.43# 10.39 20.32# 8.43# 10.39 20.32#
<CAPTION>
Net investment income (loss) per share and the ratios of income and expenses
to average net assets without the Adviser's and Administrator's voluntary
waiver of fees, the Administrator's voluntary expense reimbursement and the
expense offset in custodian fees for uninvested cash balances would have
been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment (Loss) ($) (0.42) (0.92) (0.72) (0.26) (0.65) (0.72)
Ratio of Expenses to Average
Net Assets (2) (%) 5.54* 7.27 8.59* 4.34* 5.41 8.59*
Ratio of Net Investment Loss to
Average Net Assets (%) (4.18)* (5.71) (7.23)* (2.87)* (3.91) (7.23)*
<FN> (1) New Class of Shares established on May 1, 1996. </FN>
<FN> (2) Ratios are based on average net assets of $146,349, $4,895 and
$542, respectively, for Class C Shares and $816,877, $287,294 and
$52,490, respectively, for Class Y Shares. In general, as the
Fund's net assets increase, the expense ratio will decrease. </FN>
<FN> # Not annualized. </FN>
<FN> * Annualized. </FN>
</TABLE>
<PAGE>
