<PAGE>
ADMINISTRATOR AND SUB-ADVISER
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
Diana P. Herrmann
R. Thayne Robson
Cornelius T. Ryan
OFFICERS
Lacy B. Herrmann, President
Jerry G. McGrew, Senior Vice President
Barbara S. Walchli, Senior Vice President
Susan A. Cook, Vice President
Diana P. Herrmann, Vice President
Christine L. Neimeth, Vice President
Jean M. Smith, Vice President
Alan R. Stockman, Vice President
Jessica L. Wiltshire, Vice President
Kimball L. Young, 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 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, 1999
[Logo of the Aquila Rocky Mountain Equity Fund: Rectangle with the words AQUILA
ROCKY MOUNTAIN EQUITY FUND and a drawing of two mountains]
A CAPITAL APPRECIATION INVESTMENT
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILAsm GROUP OF FUNDS
</PAGE>
<PAGE>
[Logo of the Aquila Rocky Mountain Equity Fund: Rectangle with the words AQUILA
ROCKY MOUNTAIN EQUITY FUND and a drawing of two mountains]
AQUILA ROCKY MOUNTAIN EQUITY FUND
SEMI-ANNUAL REPORT
August 23, 1999
Dear Fellow Shareholders:
We are pleased to provide you with the Semi-Annual Report for Aquila Rocky
Mountain Equity Fund for the six month period ended June 30, 1999. During this
period, the Class A shares of the Fund had a total return of 16.35%, and it was
19.03% through July 31, 1999. These returns do not reflect sales charges.
ROCKY MOUNTAIN REGION REMAINS ATTRACTIVE
As of July 22, 1999, the Aquila Rocky Mountain Equity Fund had been in
existence for 5 years. Over this period, we proved out the potential for growth
that we saw in the Rocky Mountain region. We also demonstrated the prospects for
good capital appreciation, without undue risk and volatility, from investments
in the region.
Recent economic data continues to support our thesis that the Rocky
Mountain region offers above average performance in both economic and population
growth. Were the eight-state area of the Rocky Mountain region carved out into a
separate country, it would possess one of the larger economies in the whole
world - slightly smaller than the economy of Canada and larger than that of
Mexico.
Moreover, the economic and population growth of the Rocky Mountain region
has been above the average of the entire United States. Furthermore, we believe
that, over time, the quality of life in the Rocky Mountain region will continue
to attract additional sound businesses and management.
If this region were a separate country, we would not have any foreign
market problems with currency, language, accounting standards, or other
detracting factors which one finds with investing in other areas.
In essence, we feel that with the Aquila Rocky Mountain Equity Fund we have
the best of all worlds. We can invest in an area which would be one of the
biggest economies of the world, yet we can do so in our "own backyard" - the
Rocky Mountain region of our country.
</PAGE>
<PAGE>
THE FUND'S KEY INVESTMENTS
As at June 30, 1999, the Fund's key investments and the location of these
investments were as follows:
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY REGION
Colorado 40.92%
Utah 10.59%
Arizona 10.76%
Nevada 6.74%
Montana 8.28%
New Mexico 4.06%
Idaho 9.50%
Other 9.15%
[Graphic of a pie chart with the following information:]
PORTFOLIO DISTRIBUTION BY MARKET SECTOR
Basic Industry 9.81%
Business Services 5.81%
Consumer Cyclicals 9.42%
Consumer Services 28.64%
Consumer Staples 3.98%
Technology 3.56%
Financial Services 15.53%
Health Care 1.99%
Energy 8.21%
Utilities 12.32%
Other 0.73%
Below are listed the top ten holdings of the Fund as of June 30, 1999.
While the individual holdings of the Fund and those that make up the top ten
will vary over time, there is a common denominator in their selection. This
common denominator is securities which possess a reasonable or value-oriented
price at time of purchase.
TOP TEN HOLDINGS
PERCENT
COMPANY OF NET ASSETS STATE MARKET SECTOR
Liberty Media Group 6.91% Colorado Consumer Services
First Security Corp. 5.69% Utah Financial Services
Prima Energy 5.65% Colorado Energy
Koala Corp. 5.35% Colorado Consumer Cyclicals
Media One Group 5.31% Colorado Consumer Services
Montana Power Co. 5.03% Montana Utilities
Jones Intercable Inc. (Class A) 4.90% Colorado Consumer Services
Albertson's Inc. 4.64% Idaho Consumer Services
Viad Corp. 4.42% Arizona Business Services
Mity Lite, Inc. 4.07% Utah Consumer Cyclicals
BROADENING STOCK MARKET
From June, 1994 to March, 1999 large capitalization growth stocks provided
very dominant and narrow market leadership for U.S. stocks. Other stocks tended
to be neglected. Since March we have seen a broadening of the U.S. stock market
to include value as well as small capitalization stocks. Investors have been
willing to look for good values across the market. This has led to more
recognition for the stocks that are held in the Aquila Rocky Mountain Equity
Fund.
DEDICATED MANAGER
As indicated, as of July 22, 1999, the Fund completed its fifth year in
operation. Over this period, we believe the Fund has produced overall favorable
results for investors. Aquila has renewed our strategic commitment to the Fund
by hiring an in-house, Arizona-based portfolio manager to be dedicated to
investment research in the region and management of the Fund. By having a
specific Aquila portfolio manager based in the Rocky Mountain region, near many
of the companies in the Fund, we will continue to work to uncover superior
opportunities early, before they are generally recognized in the marketplace. We
believe in geographic proximity. If there is a problem or a question, our
portfolio manager can be in front of management within a few hours.
INVESTMENT PHILOSOPHY
We remain committed to our investment philosophy and disciplines. We
continue to look for companies with good growth prospects and strong management.
It is our desire to purchase securities of these companies at a reasonable or
value-oriented price. Furthermore, we will also continue to use our investment
disciplines to control risk.
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,
Barbara S. Walchli
Senior Vice President and
Portfolio Manager
Lacy B. Herrmann
President and
Chairman, Board of Trustees
</PAGE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES COMMON STOCKS - 99.3% VALUE
</CAPTION>
<S> <C> <C>
BASIC INDUSTRY - 9.8%
3,000 Barrick Gold Corp. $ 58,125
5,000 Building Materials Holding Corp.+ 57,500
3,000 Swift Transportation+ 66,000
1,600 Union Pacific 93,300
274,925
BUSINESS SERVICES - 5.8%
6,500 Avert Inc. + 39,000
4,000 Viad Corporation 123,750
162,750
CONSUMER CYCLICALS - 9.4%
5,600 Koala Corp.+ 149,800
6,000 Mity Lite, Inc.+ 114,000
263,800
CONSUMER SERVICES - 28.7%
2,520 Albertson's Inc. 129,938
5,000 American Coin Merchandising+ 32,500
4,500 International Game Technology 83,250
2,800 Jones Intercable Inc. Class A+ 137,200
300 Jones Intercable Inc.+ 14,400
5,268 Liberty Media Group Class A+ 193,599
2,000 Media One Group+ 148,750
900 Mirage Resorts+ 15,075
8,000 Rocky Mountain Chocolate Factory+ 48,000
802,712
CONSUMER STAPLES - 4.0%
3,000 Dial Corp. 111,563
ENERGY - 8.2%
7,000 Prima Energy Corp.+ 158,375
4,400 Union Pacific Resources, Inc. 71,784
230,159
FINANCIAL SERVICES - 15.5%
2,332 Conseco Inc. 70,980
5,850 First Security Corp. 159,413
5,875 First State Bancorp 113,828
5,561 Westerfed Financial Corp. 91,062
435,283
HEALTH CARE - 2.0%
1,000 Ballard Medical Products 23,313
2,250 Sierra Health Services Inc.+ 32,484
55,797
TECHNOLOGY - 3.6%
11,000 Navidec Inc.+ 99,687
UTILITIES - 12.3%
2,500 Idacorp Inc. 78,750
2,700 KN Energy 36,112
2,000 Montana Power Co. 141,000
2,300 New Century Energies Inc. 89,269
345,131
OTHER - 00.0%
10 Morrison Knudsen Corp. Warrants+ 36
Total Common Stocks (cost $1,739,077) 2,781,842
FACE
AMOUNT SHORT-TERM INVESTMENTS - 0.5%
$ 15,000 Churchill Cash Reserves Trust 15,000
500 The One Group Prime Money Market Fund 500
Total Short-Term Investments (cost $15,500) 15,500
Total Investments (cost $1,754,577) 99.8% 2,797,342
Other assets in excess of liabilities 0.2 4,743
Net Asset 100.0% $ 2,802,085
</TABLE>
* Cost for Federal tax purposes is identical.
+ Non-income producing security.
See accompanying notes to financial statements
</PAGE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
ASSETS
Investments at market value (cost $1,754,577) $ 2,797,342
Cash 973
Due from Administrator for reimbursement of expenses (note 3) 9,758
Dividends and interest receivable 2,115
Other assets 114
Deferred organization expenses (note 2) 38
Total assets $ 2,810,340
LIABILITIES
Accrued expenses $ 6,756
Distribution fees payable 1,499
Total liabilities 8,255
NET ASSETS $ 2,802,085
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share $ 1,437
Additional paid-in capital 1,687,255
Net unrealized appreciation on investments 1,042,765
Undistributed net realized gain on investments 69,269
Undistributed net investment income 1,359
$ 2,802,085
CLASS A
Net Assets $ 1,727,373
Capital shares outstanding 88,592
Net asset value and redemption price per share $ 19.50
Offering price per share (100/95.75 of $19.50 adjusted to nearest cent) $ 20.37
CLASS C
Net Assets $ 176,866
Capital shares outstanding 9,235
Net asset value and offering price per share $ 19.15
Redemption price per share (*a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower, if redeemed
during the first 12 months after purchase) $ 19.15*
CLASS Y
Net Assets $ 897,846
Capital shares outstanding 45,844
Net asset value, offering and redemption price per share $ 19.59
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 17,122
Interest 1,325
$ 18,447
Expenses:
Investment Adviser fees (note 3) $ 9,547
Administrator fees (note 3) 10,911
Legal fees 14,000
Registration fees and dues 10,000
Shareholders' reports 9,000
Trustees' fees and expenses 6,700
Audit and accounting fees 5,000
Transfer and shareholder servicing agent fees 5,000
Amortization of organization expenses (note 2) 4,417
Distribution and service fees (note 3) 3,002
Custodian fees 500
Miscellaneous 1,647
79,724
Investment Adviser fees waived (note 3) (9,547)
Administrator fees waived (note 3) (10,911)
Reimbursement of expenses by Administrator (note 3) (42,079)
Expenses paid indirectly (note 6) (100)
Net expenses 17,087
Net investment income 1,360
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from securities transactions 80,547
Change in unrealized appreciation on investments 334,081
Net realized and unrealized gain on investments 414,628
Net increase in net assets resulting from operations $ 415,988
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
</CAPTION>
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 1,360 $ (391)
Net realized gain from securities transactions 80,547 7,746
Change in unrealized appreciation on investments 334,081 (155,516)
Change in net assets from operations 415,988 (148,161)
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 5):
Class A Shares:
Net investment income - (1,387)
Net realized gain on investments - (18,386)
Class C Shares:
Net investment income - (120)
Net realized gain on investments - (1,588)
Class Y Shares:
Net investment income - (574)
Net realized gain on investments - (7,609)
Change in net assets from distributions - (29,664)
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold 95,102 475,496
Reinvested dividends and distributions - 31,719
Cost of shares redeemed (539,822) (1,444,705)
Change in net assets from capital share transactions (444,720) (937,490)
Change in net assets (28,732) (1,115,315)
NET ASSETS:
Beginning of period 2,830,817 3,946,132
End of period $ 2,802,085 $ 2,830,817
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<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 are sold with a
front-payment sales charge and bear an annual service fee. Class C shares are
sold with a level-payment sales charge with no payment at time of purchase but
level service and distribution fees from date of purchase through a period of
six years thereafter. A contingent deferred sales charge of 1% is assessed to
any Class C shareholder who redeems shares of this Class within one year from
the date of purchase. The Class Y shares are only offered to institutions acting
for an investor in a fiduciary, advisory, agency, custodian or similar capacity
and are not offered directly to retail investors. Class Y shares are sold at net
asset value without any sales charge, redemption fees, contingent deferred sales
charge or distribution or service fees. 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, 1999 there were no
Class I shares outstanding. All classes of shares represent interests in the
same portfolio of investments and are identical as to rights and privileges but
differ with respect to the effect of sales charges, the distribution and/or
service fees borne by each class, expenses specific to each class, voting rights
on matters affecting a single class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
a) PORTFOLIO VALUATION: Securities listed on a national securities exchange or
designated as national market system securities are valued at the last sale
price on such exchanges or market system or, if there has been no sale that
day, at the bid price. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by
or at the direction of the Board of Trustees. Short-term investments
maturing in 60 days or less are valued at amortized cost.
b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities
transactions are recorded on the trade date. Realized gains and losses from
securities transactions are reported on the identified cost basis. Dividend
income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis.
</PAGE>
<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 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.
</PAGE>
<PAGE>
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, 1999, the Fund incurred fees under the
Advisory Agreement and Sub-Advisory and Administration Agreement of $9,547 and
$10,911, respectively, which were voluntarily waived. Also, during this period
the Administrator reimbursed the Fund for unamortized deferred organization
expenses of $1,506 and voluntarily agreed to reimburse the Fund for other
expenses during this period in the amount of $42,079. Of this amount, $32,321
was paid prior to June 30, 1999 and the balance of $9,758 was paid in early July
1999.
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.
On June 10, 1999, the Board of Trustees approved a change in the portfolio
management arrangements described above. Since the inception of the Fund,
KPMInvestment Management, Inc. has acted as the Fund's investment adviser.
Effective on July 28, 1999, the Fund's Sub-Adviser, Aquila Management
Corporation, will supervise the investment program of the Fund and the
composition of its portfolio and KPM Investment Management, Inc. will
discontinue its services as Adviser to the Fund. At that time the Sub-Adviser
will be entitled to additional fees at the rate currently paid to the Adviser;
the aggregate management fees paid by the Fund will not be changed. However,
since inception, all advisory and administrative fees have been waived.
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, 1999, service fees on Class A Shares
amounted to $2,181, of which the Distributor received $231.
</PAGE>
<PAGE>
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, 1999, amounted to $616. In addition, under a Shareholder
Services Plan, the Fund is authorized to make service fee payments with respect
to Class C Shares to Qualified Recipients for providing personal services and/or
maintenance of shareholder accounts. These payments are made at the annual rate
of 0.25% of the Fund's net assets represented by Class C Shares and for the six
months ended June 30, 1999, amounted to $205. The total of these payments with
respect to Class C Shares amounted to $821, of which the Distributor received
$281.
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, 1999, the Distributor received commissions of $252
on sales of Class A Shares.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 1999, purchases of securities and
proceeds from the sales of securities (excluding short-term investments)
aggregated $55,335 and $435,112, respectively.
At June 30, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$1,161,993 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $119,228, for
a net unrealized appreciation of $1,042,765.
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. EXPENSES
The Fund has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees and other Fund
expenses whenever there are uninvested cash balances. The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Fund to invest, to the
extent practicable, some or all of cash balances in equity securities rather
than leave cash on deposit.
</PAGE>
<PAGE>
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 5,380 $ 94,102 14,054 $ 260,372
Reinvested dividends and
distributions - - 1,318 21,904
Cost of shares redeemed (28,935) (510,173) (78,986) (1,431,876)
Net change (23,555) (416,071) (63,614) (1,149,600)
CLASS C SHARES:
Proceeds from shares sold - - 10,043 178,108
Reinvested dividends and
distributions - - 101 1,632
Cost of shares redeemed (558) (9,649) (743) (12,829)
Net change (558) (9,649) 9,401 166,911
CLASS Y SHARES:
Proceeds from shares sold 52 1,000 2,035 37,016
Reinvested dividends and
distributions - - 498 8,183
Cost of shares redeemed (1,138) (20,000) - -
Net change (1,086) (19,000) 2,533 45,199
Total transactions in Fund
shares (25,199) $ (444,720) (51,680) $ (937,490)
</TABLE>
8. PORTFOLIO ORIENTATION
The Fund's investments are primarily invested in the securities of
companies within the eight state Rocky Mountain region and therefore are subject
to economic and other conditions affecting the various states which comprise the
region. Accordingly, the investment performance of the Fund might not be
comparable with that of a broader universe of companies.
</PAGE>
<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
6/30/99 1998 1997 1996 1995 12/31/94(2)
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.76 $17.89 $15.05 $13.13 $11.06 $11.43
Income from Investment Operations:
Net investment income (loss) 0.01 - 0.01 (0.02) (0.07) -
Net gain (loss) on securities (both realized
and unrealized) 2.73 (0.96) 3.44 2.47 2.25 (0.37)
Total from Investment Operations 2.74 (0.96) 3.45 2.45 2.18 (0.37)
Less Distributions (note 5):
Dividends from net investment income - (0.01) - - (0.01) -
Distributions from capital gains - (0.16) (0.61) (0.53) (0.10) -
Total Distributions - (0.17) (0.61) (0.53) (0.11) -
Net Asset Value, End of Period $19.50 $16.76 $17.89 $15.05 $13.13 $11.06
Total Return (not reflecting sales charge) (%) 16.35+ (5.31) 23.01 18.68 19.68 (3.24)+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 1,727 1,880 3,144 2,178 1,737 530
Ratio of Expenses to Average Net Assets (%) 1.29* 1.74 1.58 1.55 2.03 1.70*
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) 0.07* (0.22) (0.03) (0.19) (0.72) (0.51)*
Portfolio Turnover Rate (%) 2.08+ 19.52 10.39 20.32 15.14 2.95+
The expense and net investment income ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees and the
Administrator's voluntary expense reimbursement were:
Ratio of Expenses to Average Net Assets (%)(3) 5.85* 4.74 6.48 8.79 10.36 17.69*
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (4.49)* (3.22) (4.93) (7.43) (9.05) (16.50)*
The expense ratios after giving effect to the waivers, reimbursements and
expense offset for uninvested cash balances were:
Ratio of Expenses to Average Net Assets (%) 1.28* 1.55 1.50 1.50 1.91 1.19*
</TABLE>
(1) Designated as Class A Shares on May 1, 1996.
(2) From July 22, 1994 (commencement of operations) to December 31, 1994.
(3) Ratios are based on average net assets of $1,758,801, $2,489,469,
$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.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C(1) CLASS Y(1)
SIX MONTHS YEAR ENDED PERIOD SIX MONTHS YEAR ENDED PERIOD
ENDED DECEMBER 31, ENDED ENDED DECEMBER 31, ENDED
6/30/99 1998 1997 12/31/96 6/30/99 1998 1997 12/31/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.53 $17.79 $15.07 $14.59 $16.82 $17.91 $15.07 $14.59
Income from Investment Operations:
Net investment income (0.06) (0.16) (0.11) 0.01 0.03 0.03 0.04 0.01
Net gain on securities (both
realized and unrealized) 2.68 (0.93) 3.44 1.00 2.74 (0.95) 3.41 1.00
Total from Investment Operations 2.62 (1.09) 3.33 1.01 2.77 (0.92) 3.45 1.01
Less Distributions (note 5):
Dividends from net investment income - (0.01) - - - (0.01) - -
Distributions from capital gains - (0.16) (0.61) (0.53) - (0.16) (0.61) (0.53)
Total Distributions - (0.17) (0.61) (0.53) - (0.17) (0.61) (0.53)
Net Asset Value, End of Period $19.15 $16.53 $17.79 $15.07 $19.59 $16.82 $17.91 $15.07
Total Return (not reflecting sales
charge) (%) 15.85+ (6.07) 22.18 6.94+ 16.47+ (5.08) 22.98 6.94+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 177 162 7 4 898 789 795 133
Ratio of Expenses to Average Net
Assets (%) 2.04* 2.53 2.34 1.30* 1.04* 1.52 1.34 1.30*
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (0.70)* (1.07) (0.78) 0.06* 0.30* (0.01) 0.16 0.06*
Portfolio Turnover Rate (%) 2.08+ 19.52 10.39 20.32+ 2.08+ 19.52 10.39 20.32+
The expense and net investment income ratios without the effect of the
Adviser's and Administrator's voluntary waiver of fees and the
Administrator's voluntary expense reimbursement were:
Ratio of Expenses to Average
Net Assets (%)(2) 6.65* 5.70 7.19 8.54* 5.66* 4.58 5.34 8.54*
Ratio of Net Investment Income
(Loss) to Average Net Assets (%) (5.31)* (4.23) (5.63) (7.18)* (4.32)* (3.07) (3.84) (7.18)*
The expense ratios after giving effect to the waivers, reimbursements and
expense offset for uninvested cash balances were:
Ratio of Expenses to Average
Net Assets (%) 2.04* 2.33 2.26 1.25* 1.04* 1.32 1.27 1.25*
</TABLE>
(1) New Class of Shares established on May 1, 1996.
(2) Ratios are based on average net assets of $165,613, $153,364, $4,895
and $542, respectively, for Class C Shares and $825,370, $789,453,
$287,294 and $52,490, respectively, for Class Y Shares. In general, as
the Fund's net assets increase, the expense ratio will decrease.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Fund have been monitoring issues involving
preparedness for the turn of the century for some time in an effort to minimize
or eliminate any potential impact upon the Fund and its shareholders. Our
officers have focussed significant time and effort in order that the various
computerized functions that could affect the Fund are ready by the beginning of
the year 2000.
The Fund is highly reliant on certain mission-critical suppliers' services.
Each supplier of these services has provided the Fund's officers with assurances
that it is actively addressing potential problems relating to the year 2000. The
officers, in turn, are monitoring and will continue to monitor the progress of
its suppliers.
The Fund has NOT incurred, nor is anticipated to incur, any costs related
to Y2K. All such costs are being incurred by the respective vendors.
As you can well understand, we cannot directly control our supplier
operations. We assure you, however, that we recognize a responsibility to inform
our shareholders if in the future we become aware of any developments which
would lead us to believe that the Fund will be significantly affected by year
2000 problems.
We will continue to keep you up-to-date through future communications.
</PAGE>
