IMPORTANT NOTICE
PLEASE READ IMMEDIATELY
AQUILA ROCKY MOUNTAIN EQUITY FUND
380 Madison Avenue, Suite 2300, New York, N.Y. 10017
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD
On March 10, 2000
TO SHAREHOLDERS OF THE FUND
The purpose of this Notice is to advise you that a Special Meeting
of the Shareholders of Aquila Rocky Mountain Equity Fund (the
"Fund") will be held
Place: (a) at the offices of the Fund
380 Madison Avenue
New York, NY 10017
Time: (b) on March 10, 2000 at 10:00 a.m. local time
Purposes: (c) for the following purposes:
(i) to consider a proposed new advisory and
administration agreement between the Fund and
Aquila Management Corporation as Manager (Proposal
No. 1);
(ii) to consider a change in the Fund's fundamental
policies to allow the Fund to invest in real estate
investment trusts (Proposal No. 2);
(iii) to act upon any other matters which may
properly come before the Meeting at the scheduled
time and place or any adjourned meeting or
meetings.
Please Note:
If you do not expect to attend the Meeting, please indicate voting
instructions in any of three ways: by telephone, by e-mail or by
completing the enclosed proxy and returning it in the accompanying
stamped envelope. To avoid unnecessary expense to the Fund, we
request your cooperation in voting no matter how large or small
your holding may be.
Who Can
Vote What
Shares: (d) To vote at the Meeting, you must have been a
shareholder on the Fund's records at the close of
business on December 15, 1999 (the "record date").
The number of shares of each of the Fund's classes
of shares that you held at that time and the
respective net asset values of each class of shares
at that time determine the number of votes you may
cast at the Meeting (or any adjourned meeting or
meetings).
By Order of the Board of Trustees
EDWARD M. W. HINES
Secretary
January 20, 2000
AQUILA
ROCKY MOUNTAIN EQUITY FUND
380 Madison Avenue, Suite 2300, New York, New York 10017
PROXY STATEMENT
This special meeting of the shareholders of Aquila Rocky
Mountain Equity Fund will consider two proposals of vital
importance to the Fund:
Action on a proposed new advisory and administration
agreement between the Fund and Aquila Management
Corporation as the Fund's Manager (Proposal No. 1);
and
Action on a proposed change in the Fund's fundamental
policies to allow the Fund to invest in real estate
investment trusts (Proposal No. 2);
All classes of the Fund's outstanding shares will vote on these
proposals. The Board of Trustees believes that these proposals
are in the best interest of the Fund and its shareholders. Please
read the proxy statement and then indicate your vote as soon as
possible.
INTRODUCTION
The purpose of the Notice (the first two pages of this
document) is to advise you of the time, place and purposes of a
Special Meeting of the Shareholders of Aquila Rocky Mountain
Equity Fund (the "Fund"). The purpose of this Proxy Statement
(all the rest of this document) is to give you information on
which you may base your decisions as to the choices you make on
the enclosed proxy card.
This Notice and Proxy Statement are first being mailed on or
about January 20, 2000.
A copy of the Fund's most recent annual report and most recent
semi-annual report will be sent to you without charge upon
written request to the Fund's Distributor, Aquila Distributors,
Inc., 380 Madison Avenue, Suite 2300, New York, NY 10017 or by
calling 800-762-5955 toll-free or 212-697-6666.
The Fund's founder and current sub adviser performing
investment advisory services and administrator is Aquila
Management Corporation, 380 Madison Avenue, Suite 2300, New York,
NY 10017. The Fund's principal underwriter is Aquila
Distributors, Inc., 380 Madison Avenue, New York, NY 10017.
You can vote in three ways:
Proxy Ballot
The enclosed proxy card authorizes the persons named (or
their substitutes) to vote your shares; the Fund calls these
persons the "proxy holders." You may direct the proxy holders to
vote your shares on any proposal by marking the appropriate box
"For" or "Against" or instruct them not to vote your shares on
the proposal by marking the "Abstain" box. If you return your
signed proxy card and do not mark any box on the proposal, the
proxy holders will vote your shares for the proposal.
Telephone Voting
You can vote your shares by telephone. You should first read
the proxy statement. To vote, call toll free 1-800-6903. You will
be prompted to enter the 12-digit control number on the enclosed
proxy card. Follow the recorded instruction using your proxy card
as a guide. If you vote by phone, do not return the proxy card by
mail.
Internet Voting
You can vote your shares by the Internet. You should first
read the Proxy Statement. To vote, please contact the Fund at
http://proxyvote.com. You will be prompted to enter the 12-digit
control number on the enclosed proxy card. Follow the
instructions on the screen, using your proxy card as a guide. If
you vote by the Internet, do not return the proxy card by mail.
You may end the power of the proxy holders to vote your
shares by: (i) so notifying the Fund in writing; (ii) signing a
new and different proxy card (if the Fund receives it before the
old one is used); (iii) voting your shares at the meeting in
person or by your duly appointed agent; or (iv) calling the toll
free number above or contacting the Fund's internet address
above, entering your 12-digit control number and revoking your
previous vote.
Shares held by brokers in "street name" and not voted or
marked as abstentions will not be counted for purposes of
determining a quorum or voted on any matter.
The Fund is sending you this Notice and Proxy Statement in
connection with the solicitation by its Trustees of proxies to be
used at a Special Meeting to be held at the time and place and
for the purposes indicated in the Notice or any adjourned meeting
or meetings. The Fund pays the costs of the solicitation. Proxies
are being solicited by the use of the mails; they may also be
solicited by telephone, facsimile and personal interviews.
Brokerage firms, banks and others may be requested to forward
this Notice and Proxy Statement to beneficial owners of the
Fund's shares so that these owners may authorize the voting of
their shares. The Fund will pay these firms their out-of-pocket
expenses for doing so.
On the record date, the Fund had three classes of shares
outstanding. All shareholders of the Fund are entitled to vote at
the meeting. Each shareholder on the record date is entitled to
one vote for each dollar (and a proportionate fractional vote for
each fraction of a dollar) of net asset value (determined as of
the record date) represented by full and fractional shares of any
class held on the record date. On the record date, the net asset
value per share of each of the Fund's outstanding classes of
shares was as follows: Class A Shares, $19.38; Class C Shares,
$18.97; and Class Y Shares, $19.48. The meeting is expected to
act only upon matters that affect the Fund as a whole: the two
proposals. On matters that affect the Fund as a whole, all
shareholders of the Fund, including the shareholders of all
classes of the Fund, are entitled to vote at the meeting.
On the record date, the total number of shares of the Fund
outstanding for each class of shares was as follows: Class A
Shares, 72,751; Class C Shares, 9,418; and Class Y Shares,
45,349. Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake
Drive, Jacksonville, FL held of record 22,049 Class A Shares
(30.3% of the class); Fiserv Securities, Inc., One Commerce
Square, Philadelphia, PA held of record in 4 accounts 8,600 Class
C Shares (91.3% of the class); KPM Investment Management, Inc.,
10250 Regency Circle, Omaha, NE held of record 44,864 Class Y
Shares (98.9% of the class). On the basis of information received
from the holders, the Fund's management believes that all of the
shares indicated are held for the benefit of clients. J.T.
Chandler, Fort Collins, CO held of record 3,803 Class A shares
(5.2% of the class) and J. and A. Walchli, Phoenix, AZ held of
record 500 class C Shares (5.3% of the class). The Fund's
management is not aware of any other person beneficially owning
more than 5% of any class of its outstanding shares as of such
date.
In addition, the Sub-Adviser, Aquila Management Corporation
(the" Sub-Adviser") held of record 2,135 Class A Shares, Diana P.
Herrmann, an officer of the Sub Adviser and an officer and
Trustee of the Fund, held of record 72.8 Class A Shares; Tucker
Hart Adams (in the name of a nominee) and Arthur Carlson,
Trustees, held 91 Class A Shares and 779 Class A Shares,
respectively.
BACKGROUND AND REASONS FOR
PROPOSAL NO. 1
Since inception of the Fund in July 1994, Aquila Management
Corporation, 380 Madison Avenue, Suite 2300, New York, NY 10017,
founder of the Fund, has served as Sub-Adviser and Administrator
(the "Sub-Adviser") for the Fund under a Sub-Advisory and
Administration Agreement. From inception of the Fund until July
1999, KPM Investment Management, Inc. acted as the Fund's
investment adviser. In July 1999 after approval by the Board of
Trustees, the advisory agreement with KPM Management, Inc. was
terminated at the investment adviser's election and, under the
provisions of the sub-advisory agreement, the Sub-Adviser assumed
supervision of the Fund's investment program and the composition of
its portfolio.
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 $370 million, Tax-Free Fund of
Colorado, with assets of $198 million and Tax-Free Fund For Utah,
with assets of $38 million, all as of December 31, 1999. In
addition, the Sub-Adviser is founder and Manager and/or
administrator to the Aquilasm Group of Funds, which consists of
tax-free municipal bond funds, money-market funds and equity funds.
As of December 31, 1999, these funds had aggregate assets of
approximately $3.0 billion of which $1.8 billion were invested in
the bond funds and $18.7 million were invested in the equity funds.
Mr. Lacy B. Herrmann controls the Sub-Adviser, which was founded in
1984, directly, through a trust and through share ownership by his
wife.
Since July 1999, Barbara Walchli, C.F.A., Senior Vice
President of the Sub-Adviser, has acted as portfolio manager for
the Fund. Ms. Walchli has had 19 years of analytical investment
experience, including 12 years developing short- and long-term
equity strategy, 11 years as director of equity research and 8
years' managing performance-oriented portfolios and funds. She has
managed or co-managed funds totaling $1.7 billion in assets and has
been responsible for strategy for a group managing $27.5 billion in
assets. She has also hired and supervised a number of equity
analysts. Ms. Walchli holds an MBA in finance from Arizona State
University and an AB in economics from Smith College. She is a
chartered financial analyst and member of various investment
associations.
Proposal No. 1 is designed to change the form of the Fund's
investment advisory and administration arrangements to a new
structure. The proposed arrangements will not result in any
change in overall management fees paid by the Fund, nor any
change in the parties currently providing these services.
Under the proposal, Aquila Management Corporation
("Aquila"), which currently manages the Fund's investment
portfolio, would continue to do so as investment adviser under a
new agreement (the "Advisory and Administration Agreement") under
which it would also continue to provide the Fund with all
administrative services Thus, the investment advisory duties now
performed by Aquila under the sub-advisory agreement would be
performed by Aquila under the Advisory and Administration
Agreement where it would be referred to as the "Manager." The
current sub-advisory agreement will no longer be needed and will
terminate upon implementation of the proposed new agreements.
Aquila has advised the Board of Trustees that since 1998 it
has implemented similar reorganizations in most of the other
funds in the Aquilasm Group of Trusts. The following reasons,
derived from Aquila's experience in those cases, support the
proposed changes, although there can be no assurance that they
will continue to be realized:
There has been heightened public recognition of the Aquilasm
Group and its funds, and better public relations
possibilities.
The new arrangements benefit the entire group because they
tend to increase the negotiating power of Aquila in dealing
with service providers to the funds in various ways.
Aquila expects to improve its ability to negotiate
beneficial terms with service providers, such as transfer agents
and pricing services, under substantially uniform agreements that
would provide services to all of the funds. Because of the
combined size of the funds, Aquila believes that its collective
bargaining position is enhanced and that costs for these services
may be lower than would be obtained if these arrangements were
negotiated on a piecemeal basis
The arrangements potentially increase the standardization of
procedures, e.g. compliance.
The Board of Trustees noted that Aquila is the founder and
organizer of the Fund and has continuously served as its sub-
adviser since 1994. Since 1985, Aquila has formed and sponsored
seven state-specific tax-free municipal bond funds, which have
grown to a total of $1.9 billion in combined assets. These funds
and their years of inception are Hawaiian Tax-Free Trust (1985),
Tax-Free Trust of Oregon (1986), the Trust (1986), Tax-Free Fund
of Colorado (1987), Churchill Tax-Free Fund of Kentucky (1987),
Narragansett Insured Tax-Free Income Fund (1992) and Tax-Free
Fund For Utah (1992). Aquila has also sponsored five money market
funds and two regional capital appreciation equity funds. As of
December 31, 1999, the Aquilasm Group of Funds had combined
assets of approximately $3.2 billion.
By founding the Fund and the state-specific tax-free
municipal bond funds, Aquila has been able to offer to individual
investors in various states a locally managed, quality-oriented
portfolio focused on local opportunities.
The Board of Trustees believes that making Aquila Manager
has definite organizational benefits, including a better
structure for handling any possible future changes. The costs of
the change in structure will be borne by Aquila and not the
Trust.
Other Information About Aquila
Aquila, founded in 1984, is controlled by Mr. Lacy B.
Herrmann (directly, through a trust and through share ownership
by his wife). Aquila's shares are owned as follows:
Elizabeth B. Herrmann 35%
Lacy B. Herrmann 25%
Elizabeth B. Herrmann
1993 Annuity Trust 40%
The names, addresses and principal occupations of the principal
executive officer and each director of Aquila are as follows:
Name Position with Aquila
Lacy B. Herrmann Chairman, Chief Executive Officer
and Director
Diana P. Herrmann President, Chief Operating Officer
and Director
Elizabeth B. Herrmann Director
The address of all of these individuals is 380 Madison
Avenue, Suite 2300, New York, NY 10017. Mr Herrmann is President
and Chairman of the Board of Trustees of the Fund and Ms.
Herrmann is a Trustee and Vice President of the Fund.
Aquila acts as investment adviser to the following investment
Company, which has similar investment objectives to those of the Trust:
Annual Fee
(With Waiver/
Fund Name Net Assets Without Waiver
Aquila Cascadia $15 Million 1.50%
Equity Fund
Fee Arrangements
There will be no increase in overall management fees paid by
the Fund as a result of the new arrangement. Under the Advisory
and Administration Agreement, the Fund will pay to Aquila a fee
payable monthly and computed on the net asset value of the Fund
as of the close of business each business day at the annual rate
of 1.50 of 1% of such net assets Under the Sub-Advisory
Agreement, Aquila became entitled to the same fee when it assumed
portfolio management in July 1999. All of such fees were waived
and it is anticipated that fees will continue to be waived until
the Fund increases in size.
Annual Fee Rates
(Fee rates are annual rates as a percentage of the Fund's average
daily net assets.)
Under
Arrangements
Type of payment under arrangements if Proposal No.1
made by the Fund currently in effect is adopted
Advisory fee 0.0 % 1.50 of 1%
(Sub-Advisory fee
paid by Fund) 1.50 of 1% 0
Total Payments
by the Fund 1.50 of 1% 1.50 of 1%
The following table shows the advisory and sub-advisory fees the Fund
paid during its last fiscal year, the fees it would have paid if the
proposed arrangements had been in effect during that fiscal year and the
percentage change. All such fees were waived.
Type of payment Amount Amount that would Difference between
by the Fund actually paid have been paid the old and new
if the new arrangements as a
arrangements percentage of the
had been in effect old arrangements
Advisory fee $0 $0 0%
(Sub-Advisory
fee Paid by
the Fund 0 0 0
Total payments $0 $0 0%
During the fiscal year ended December 31, 1999, the Fund accrued
advisory fees to its former investment adviser through July 27,
1999 of $11,024. From January 1, 1999 through July 27,1999 the
fund accrued sub advisory fees to the Sub-Adviser of $12,599. For
the balance of the year, the Fund accrued sub-advisory fees
(which are the same as the former advisory fee and sub-advisory
fee combined) to the Sub-Adviser of $16,399. All of such fees
were waived.
The current sub-advisory agreement provides that fees
payable thereunder shall not exceed certain amounts or
percentages of the Fund's net assets or income. These provisions
were required by certain State securities laws, which were
preempted by Federal legislation in 1996 and accordingly, these
provisions, which are no longer required by law, would not be
included in the new agreement.
If the proposal is not approved, the current arrangements
will remain in effect. The Board of Trustees will consider what
further action is appropriate, which could include calling
another shareholder meeting.
For the reasons set forth above, at an in-person meeting
called and held for the purpose in December, 1999, the Board of
Trustees, including a majority of the Trustees who are not
parties to the Advisory and Administration Agreement or the Sub-
Advisory Agreement or "interested persons" (as defined in the
1940 Act) of any such party (the "Independent Trustees"), voted
to approve the Advisory and Administration Agreement.
THE NEW INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT
The new Investment Advisory and Administration Agreement
(the "Advisory Agreement") has several parts, most of which are
substantially identical to corresponding provisions in the Fund's
former sub-advisory agreement. The Advisory Agreement contains
provisions relating to investment advice for the Fund and
management of its portfolio that are substantially identical to
prior sub-advisory agreement, except that the Manager has the
power to delegate its advisory functions to a Sub-Adviser, which
it may employ at its own expense. There is no intention to employ
a sub-adviser for the foreseeable future. The Advisory Agreement
contains provisions relating to administrative services that are
substantially identical to those contained in the Fund's current
sub-advisory agreements. In the following description, Aquila is
referred to as the "Manager."
Description of the Investment Advisory and Administration
Agreement
The Advisory Agreement provides that subject to the
direction and control of the Board of Trustees of the Fund, the
Manager shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund;
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund; and
(iv) at its expense 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, provide for
pricing of the Fund's portfolio at least quarterly using
another such source satisfactory to the Fund.
The Advisory Agreement provides that, subject to the
termination provisions described below, the Manager may at its
own expense delegate to a qualified organization ("Sub-Adviser"),
affiliated or not affiliated with the Manager, any or all of the
above duties. Any such delegation of the duties set forth in (i),
(ii) or (iii) above shall be by a written agreement (the "Sub-
Advisory Agreement") approved as provided in Section 15 of the
Investment Company Act of 1940.
The Advisory Agreement provides that subject to the
direction and control of the Board of Trustees of the Fund, the
Manager shall provide all administrative services to the Fund
other than those relating to its investment portfolio which have
been delegated to a Sub-Adviser of the Fund under a Sub-Advisory
Agreement; as part of such administrative duties, the Manager
shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Fund;
(ii) oversee all relationships between the Fund and any
sub-adviser, transfer agent, custodian, legal counsel,
auditors and principal underwriter, including 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 the effective operation
of the Fund and for the sale, servicing or redemption of the
Fund's shares;
(iii) either keep the accounting records of the Fund,
including the computation of net asset value per share and
the dividends or, at its expense and responsibility,
delegate such duties in whole or in part to a company
satisfactory to the Fund;
(iv) maintain the Fund's books and records, (other than
accounting books and records) and prepare (or assist counsel
and auditors in the preparation of) all required proxy
statements, reports to the Fund's shareholders and Trustees,
reports to and other filings with the Securities and
Exchange Commission and any other governmental agencies, and
tax returns, and oversee the insurance relationships of the
Fund;
(v) prepare, on behalf of the Fund and at the Fund's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Fund and/or
its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Fund and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Fund's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
The Advisory Agreement provides that in connection with its
duties to arrange for the purchase and sale of the Fund's
securities, the Manager shall select such broker-dealers
("dealers") as shall, in the Manager's judgment, implement the
policy of the Fund to achieve "best execution," i.e., prompt,
efficient, and reliable execution of orders at the most favorable
net price. The Manager shall cause the Fund to deal directly
with the selling or purchasing principal or market maker without
incurring brokerage commissions unless the Manager determines
that better price or execution may be obtained by paying such
commissions. The Fund understands that purchases from
underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions placed
through dealers include a spread between the bid and asked
prices. In allocating transactions to dealers, the Manager is
authorized to consider, in determining whether a particular
dealer will provide best execution, the dealer's reliability,
integrity, financial condition and risk in positioning the
securities involved, as well as the difficulty of the transaction
in question, and thus need not pay the lowest spread or
commission available if the Manager determines in good faith that
the amount of commission is reasonable in relation to the value
of the brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the
Manager's overall responsibilities. If, on the foregoing basis,
the transaction in question could be allocated to two or more
dealers, the Manager is authorized, in making such allocation, to
consider (i) whether a dealer has provided research services, as
further discussed below; and (ii) whether a dealer has sold
shares of the Fund. Such research may be in written form or
through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic, or
institutional activities. The Fund recognizes that no dollar
value can be placed on such research services or on execution
services and that such research services may or may not be useful
to the Fund and may be used for the benefit of the Manager or its
other clients.
The Advisory Agreement provides that the Manager shall, at
its own expense, provide office space, facilities, equipment, and
personnel for the performance of its functions thereunder and
shall pay all compensation of Trustees, officers, and employees
of the Fund who are affiliated persons of the Manager.
The Fund shall bear the costs of preparing and setting in
type its prospectuses, statements of additional information and
reports to its 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. All costs and expenses not
expressly assumed by the Manager under the agreement or otherwise
by the Manager, administrator or principal underwriter or by any
Sub-Adviser shall be paid by the Fund, including, but not limited
to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Manager or such
sub-adviser, administrator or principal underwriter; (v) legal
and audit expenses; (vi) custodian and transfer agent, or
shareholder servicing agent, fees and expenses; (vii) expenses
incident to the issuance of its shares (including issuance on the
payment of, or reinvestment of, dividends); (viii) fees and
expenses incident to the registration under Federal or State
securities laws of the Fund or its shares; (ix) expenses of
preparing, printing and mailing reports and notices and proxy
material to shareholders of the Fund; (x) all other expenses
incidental to holding meetings of the Fund's shareholders; and
(xi) such non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligations for which
the Fund may have to indemnify its officers and Trustees.
Under the Advisory and Administration Agreement, the Fund
will pay to the Manager a fee payable monthly and computed on the
net asset value of the Fund as of the close of business each
business day at the annual rate of 1.50 of 1% of such net asset
value.
The Advisory Agreement provides that a Sub-Advisory
Agreement may provide for its termination by the Manager upon
reasonable notice, provided, however, that the Manager agrees not
to terminate the Sub-Advisory Agreement except in accordance with
such authorization and direction of the Board of Trustees, if
any, as may be in effect from time to time.
The Advisory Agreement provides that it will become
effective on the date of its approval by the shareholders of the
Fund and will, unless terminated as hereinafter provided,
continue in effect until the June 30 next preceding the first
anniversary of the effective date of the Advisory Agreement, and
from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (1) by a
vote of the Fund's Board of Trustees, including a vote of a
majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, with votes cast in person at a meeting called for
the purpose of voting on such approval, or (2) by a vote of the
holders of a "majority" (as so defined) of the outstanding voting
securities of the Fund and by such a vote of the Trustees.
The Advisory Agreement provides that it may be terminated by
the Manager at any time without penalty upon giving the Fund
sixty days' written notice (which notice may be waived by the
Fund) and may be terminated by the Fund at any time without
penalty upon giving the Manager sixty days' written notice (which
notice may be waived by the Manager), provided that such
termination by the Fund shall be directed or approved by a vote
of a majority of its Trustees in office at the time or by a vote
of the holders of a majority (as defined in the 1940 Act) of the
voting securities of the Fund outstanding and entitled to vote.
The specific portions of the Advisory Agreement which relate to
providing investment advisory services will automatically
terminate in the event of the assignment (as defined in the 1940
Act) of the Advisory Agreement, but all other provisions relating
to providing services other than investment advisory services
will not terminate, provided however, that upon such an
assignment the annual fee payable monthly and computed on the net
asset value of the Fund as of the close of business each business
day shall be reduced to the annual rate of 0.17 of 1% of such net
asset value.
Action Requested
THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED INVESTMENT
ADVISORY AND ADMINISTRATION AGREEMENT DESCRIBED ABOVE BE APPROVED
Vote Required
The favorable vote of the holders of a majority (as defined
in the 1940 Act) of the outstanding shares of the Fund, is
required for the approval of this Proposal No.1. Under the 1940
Act, the vote of the holders of a majority of the outstanding
shares of the Fund means the vote of the holders of the lesser of
(a) 67% or more of the shares of the Fund present at the Meeting
or represented by proxy if the holders of more than 50% of such
shares are so present or represented, or (b) more than 50% of the
outstanding shares of the Fund. Shares carry one (1) vote for
each dollar (and a proportionate fractional vote for each
fraction of a dollar) of net asset value (determined as of the
record date) represented by full and fractional shares of all of
the Fund's three classes of shares.
The meeting can be adjourned by the affirmative vote of a
majority of the shares present in person or by proxy. In voting
for an adjournment, the proxies will consider all relevant
factors, including possible delay of receipt of proxies and
whether or not a substantial number of negative votes have been
cast with respect to any proposal. The shares of shareholders who
have voted by proxy against a proposal will be voted against
adjournment.
CONSIDERATION OF A CHANGE
IN THE FUND'S FUNDAMENTAL POLICIES
TO ALLOW INVESTMENT IN
REAL ESTATE INVESTMENT TRUSTS
(PROPOSAL No. 2)
The Fund has a number of policies concerning what it can and cannot
do. Those that are called 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. One of the Fund's fundamental
policies provides as follows:
1. The Fund invests only in certain limited securities.
The Fund cannot buy any securities other than those
discussed under "Investment of the Fund's Assets" in the
Prospectus; therefore the Fund cannot buy any commodities
or commodity contracts, any mineral related programs or
leases or combinations thereof.
The Fund cannot purchase or hold the securities of
any issuer if, to its knowledge, Trustees, Directors or
officers of the Fund or its Adviser individually owning
beneficially more than 0.5% of the securities of that
issuer together own in the aggregate more than 5% of such
securities.
The Fund cannot buy real estate or any non-liquid
interests in real estate investment trusts; however, it
can buy any securities, which it can otherwise buy even
though the issuer invests in real estate or has interests
in real estate.
The effect of the last paragraph is to limit the Fund's ability
to invest in real estate investment trusts, commonly called "REITs".
The Board of Trustees has determined that it would be in the best
interests on the Fund and its shareholders if the Fund could invest
a specified portion of its assets in REITs.
What are real estate investment trusts?
Equity real estate investment trusts own real estate
properties. Their value may be affect by changes in the value of the
underlying property of the trusts, the creditworthiness of the
issuer, property taxes, interest rates, and tax and regulatory
requirements such as those relating to the environment.
What are the principal risks of REITs?
REITs are dependent upon management skill. They are not
diversified and are subject to heavy cash flow dependency,
fluctuations in the real estate market, self liquidation and the
possibility of failing to qualify for tax-free status of income
under the internal revenue code and failing to maintain exemption
from the 1940 act.
It is proposed to change the last paragraph of the fundamental
policy to read as follows:
The Fund cannot buy real estate or any non-liquid
interests in real estate investment trusts, provided that
it can invest up to 5% of its net assets in shares of
publicly traded real estate investment trusts; however, it
can buy any securities which it can otherwise buy even
though the issuer invests in real estate or has interests
in real estate.
The effect of this change will be to allow the Fund to participate
to a limited extent in the real estate market. To date, the Manager
has had no experience in investment in REITs.
Action Requested
THE BOARD OF TRUSTEES RECOMMENDS THAT THE PROPOSED CHANGE IN THE
FUND'S FUNDAMENTAL POLICIES DESCRIBED ABOVE BE APPROVED.
Vote Required
The vote required for approval is the same as that for
approval of Proposal No. 1. See Proposal No. 1.
OTHER BUSINESS
The Fund does not know of any other matter, which will come
up for action at the Meeting. If any other matter or matters
properly come up for action at the Meeting, including any
adjournment of the Meeting, the proxy holders will vote the
shares, which the proxy cards entitle them to vote in accordance
with their judgment on such matter or matters. That is, by
signing and returning your proxy card, or by voting by telephone
or the Internet, you give the proxy holders discretionary
authority as to any such matter or matters.
AQUILA ROCKY MOUNTAIN EQUITY FUND
PROXY FOR SHAREHOLDERS MEETING MARCH 10, 2000
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of AQUILA ROCKY MOUNTAIN EQUITY
FUND (the "Fund") does hereby appoint LACY B. HERRMANN, DIANA P.
HERRMANN and EDWARD M. W. HINES, or any of them, as attorneys and
proxies of the undersigned, with full power of substitution, to
attend a Special Meeting of Shareholders of the Fund to be held
at the offices of the Fund, 380 Madison Avenue, New York, New
York 10017 on Friday, March 10, 2000 at 10:00 a.m. local time,
and at all adjournments thereof, and thereat to vote the shares
held in the name of the undersigned on the record date for said
meeting on the matters listed below. Such shares are entitled to
one vote for every dollar of net asset value represented by the
share balance printed below.
Telephone Voting (Touch-tone only)
You can vote your shares by telephone. Read the proxy
statement. To vote, call toll free 1-800-690-6903. You will be
prompted to enter the 12-digit control number on this proxy card.
Follow the simple recorded instruction using this proxy card as a
guide. If you vote by phone, do not return the proxy card by
mail.
Internet voting
You can vote your shares by the internet. Read the proxy
statement. To vote, contact the Fund at www.proxyvote.com. You
will be prompted to enter the 12-digit control number on this
proxy card. Follow the simple instructions at the website, using
your proxy card as a guide. If you vote by the internet, do not
return the proxy card by mail.
Proxy Card Voting
You can vote your shares by completing and returning this
proxy card. Please mark your proxy, date and sign it below and
return it promptly in the accompanying envelope which requires no
postage if mailed in the United States.
MANAGEMENT RECOMMENDS A VOTE FOR THE PROPOSALS LISTED BELOW.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED BELOW OR
FOR IF NO CHOICE IS INDICATED.
As to any other matter said attorneys shall vote in
accordance with their best judgment.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
_________________________________________________________________
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
AQUILA ROCKY MOUNTAIN EQUITY FUND
For address changes and/or comments, please check this box
and write them on the back where indicated. __
[__]
Vote on Proposals
A proposed new advisory and administration
agreement between the Fund and Aquila Management
Corporation as Manager (Proposal No. 1);
FOR [__] AGAINST [__] ABSTAIN [__]
A change in the Fund's fundamental policies to
allow the Fund to invest in real estate investment
trusts (Proposal No. 2);
FOR [__] AGAINST [__] ABSTAIN [__]
PLEASE SIGN EXACTLY AS YOUR NAME (S) APPEAR
HEREON. When signing as a custodian, attorney, executor,
administrator, trustee, guardian, etc., please sign your full
title as such. Joint owners should each sign.
_________________________________Dated: _________
Signature
[Please sign within the box]
_________________________________Dated: __________
Signature
(Joint Owners)
