UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-6186
Aquila Rocky Mountain Equity Fund
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 12/31
Date of reporting period: 6/30/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
AQUILA ROCKY MOUNTAIN EQUITY FUND
Mid-Year Report June 30, 2003
[Logo of the Aquila Group of Funds: an eagle's head]
AQUILA(SM)
GROUP OF FUNDS
SERVING ROCKY MOUNTAIN
INVESTORS SINCE 1994
AQUILA ROCKY
MOUNTAIN EQUITY FUND
380 MADISON AVENUE, SUITE 2300 * NEW YORK, NY 10017
800-437-1020 * 212-697-6666
[Logo of Aquila Rocky Mountain Equity Fund: a rectangle with a drawing of two
mountains and the words "Aquila Rocky Mountain Equity Fund"]
SEMI-ANNUAL REPORT
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF INVESTMENTS
JUNE 30, 2003
(UNAUDITED)
MARKET
SHARES COMMON STOCKS - 93.3% VALUE
- -------------- ------------------------------------------------------- -------------
BASIC INDUSTRY - 10.6%
-------------------------------------------------------
15,000 Allied Waste Industries, Inc.+ ........................ $ 150,750
3,500 Ball Corp. ............................................ 159,285
5,000 Boise Cascade Corp. ................................... 119,500
7,000 Knight Transportation, Inc.+ .......................... 173,740
5,000 Newmont Mining Corp. .................................. 162,300
2,000 Phelps Dodge Corp.+ ................................... 76,680
5,000 SkyWest, Inc. ......................................... 95,400
-------------
937,655
-------------
BUSINESS SERVICES - 3.4%
-------------------------------------------------------
6,000 Intrado, Inc. + ....................................... 94,860
9,000 Viad Corp. ............................................ 201,510
-------------
296,370
-------------
CAPITAL SPENDING - 3.4%
-------------------------------------------------------
17,000 Mity Enterprises, Inc. + .............................. 187,510
7,000 Mobile Mini, Inc.+ .................................... 114,170
-------------
301,680
-------------
CONSUMER CYCLICALS - 2.2%
-------------------------------------------------------
4,000 M.D.C. Holdings, Inc. ................................. 193,120
-------------
CONSUMER SERVICES - 21.4%
-------------------------------------------------------
3,500 Apollo Group, Inc. (Class A)+ ......................... 216,300
15,000 Coldwater Creek, Inc.+ ................................ 184,200
3,400 Comcast Corp. (Special Class A)+ ...................... 98,566
9,000 Echostar Communications Corp. (Class A)+ .............. 311,580
4,000 International Game Technology + ....................... 409,320
20,000 Liberty Media Corp. (Class A)+ ........................ 231,200
4,000 MGM Mirage+ ........................................... 136,720
3,000 P.F. Chang's China Bistro, Inc.+ ...................... 147,630
6,000 Station Casinos, Inc.+ ................................ 151,500
-------------
1,887,016
-------------
CONSUMER STAPLES - 0.9%
-------------------------------------------------------
4,000 Albertson's, Inc. ..................................... 76,800
-------------
ENERGY - 3.3%
-------------------------------------------------------
1,500 Evergreen Resources, Inc.+ ............................ $ 81,465
10,000 Prima Energy Corp. + .................................. 208,900
-------------
290,365
-------------
FINANCIAL - 13.6%
-------------------------------------------------------
11,000 First State Bancorporation ............................ 300,630
9,500 Glacier Bancorp, Inc. ................................. 233,890
8,000 Janus Capital Group, Inc.+ ............................ 131,200
4,500 Wells Fargo & Company ................................. 226,800
6,000 Zions Bancorporation .................................. 303,600
-------------
1,196,120
-------------
HEALTH CARE - 11.3%
8,000 Atrix Laboratories, Inc.+ ............................. 175,760
5,000 Gaiam, Inc. + ......................................... 29,600
4,000 Medicis Pharmaceutical (Class A) ...................... 226,800
16,000 Merit Medical Systems, Inc.+ .......................... 320,000
8,000 Myriad Genetics, Inc. + ............................... 108,720
15,000 Sonic Innovations, Inc.+ .............................. 54,000
3,000 Ventana Medical Systems, Inc.+ ........................ 81,210
-------------
996,090
-------------
TECHNOLOGY - 17.6%
-------------------------------------------------------
9,000 Avnet, Inc.+ .......................................... 114,120
16,000 CIBER, Inc.+ .......................................... 112,320
7,000 First Data Corp. ...................................... 290,080
5,000 Inter-Tel, Inc. ....................................... 107,050
6,000 JDA Software Group, Inc. + ............................ 66,540
7,000 J.D. Edwards & Co. + .................................. 100,170
4,000 McData Corp. (Class A)+ ............................... 58,600
15,000 Microchip Technology, Inc. ............................ 371,250
10,000 Micron Technology, Inc.+ .............................. 116,300
10,000 SBS Technologies, Inc.+ ............................... 97,600
10,000 SpectraLink Corp.+ .................................... 97,900
3,000 Three-Five Systems, Inc.+ ............................. 20,700
-------------
1,552,630
-------------
UTILITIES - 5.6%
-------------------------------------------------------
4,000 Kinder Morgan, Inc. ................................... $ 218,600
2,000 Pinnacle West Capital Corp. ........................... 74,900
5,000 Questar Corp. ......................................... 167,350
2,000 UniSource Energy Corp. ................................ 37,600
-------------
498,450
-------------
Total Common Stocks (cost $6,446,905) .............. 8,226,296
-------------
FACE
AMOUNT SHORT-TERM INVESTMENTS - 4.8%
- -------------- -------------------------------------------------------
$ 210,000 AIM S-T Prime ......................................... 210,000
210,000 One Group Prime ....................................... 210,000
-------------
Total Short-Term Investments (cost $420,000) ....... 420,000
-------------
Total Investments (cost $6,866,905*) ........... 98.1% 8,646,296
Other assets less liabilities .................. 1.9 164,872
-------- -------------
Net Assets ..................................... 100.0% $ 8,811,168
======== =============
* Cost for Federal tax purposes is identical.
+ Non-income producing security.
See accompanying notes to financial statements.
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
ASSETS
Investments at market value (cost $6,866,905) ......................................... $ 8,646,296
Cash .................................................................................. 164,760
Receivable for Fund shares sold ....................................................... 115,918
Receivable for investment securities sold ............................................. 26,519
Due from Manager for reimbursement of expenses (note 3) ............................... 687
Dividends and interest receivable ..................................................... 2,484
-----------
Total assets ....................................................................... 8,956,664
-----------
LIABILITIES
Payable for investment securities purchased ........................................... 126,928
Distribution fees payable ............................................................. 4,565
Payable for Fund shares redeemed ...................................................... 4,835
Accrued expenses ...................................................................... 9,168
-----------
Total liabilities .................................................................. 145,496
-----------
NET ASSETS ............................................................................... $ 8,811,168
===========
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share .... $ 4,432
Additional paid-in capital ............................................................ 7,286,168
Net unrealized appreciation on investments (note 4) ................................... 1,779,391
Accumulated net investment loss ....................................................... (28,389)
Accumulated net realized loss on investments .......................................... (230,434)
-----------
$ 8,811,168
===========
CLASS A
Net Assets ............................................................................ $ 6,796,497
===========
Capital shares outstanding ............................................................ 340,568
===========
Net asset value and redemption price per share ........................................ $ 19.96
===========
Offering price per share (100/95.75 of $19.96 adjusted to nearest cent) ............... $ 20.85
===========
CLASS C
Net Assets ............................................................................ $ 969,613
===========
Capital shares outstanding ............................................................ 50,996
===========
Net asset value and offering price per share .......................................... $ 19.01
===========
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) .............................. $ 19.01*
===========
CLASS Y
Net Assets ............................................................................ $ 1,045,058
===========
Capital shares outstanding ............................................................ 51,605
===========
Net asset value, offering and redemption price per share .............................. $ 20.25
===========
See accompanying notes to financial statements.
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
INVESTMENT INCOME:
Dividends .............................................................. $ 21,328
Interest ............................................................... 3,117
-------------
$ 24,445
Expenses:
Management fee (note 3) ................................................ 50,624
Legal fees ............................................................. 17,955
Distribution and service fees (note 3) ................................. 10,472
Registration fees and dues ............................................. 9,164
Trustees' fees and expenses ............................................ 8,314
Auditing fees .......................................................... 6,604
Transfer and shareholder servicing agent fees .......................... 7,603
Shareholders' reports .................................................. 7,094
Custodian fees ......................................................... 1,565
Miscellaneous .......................................................... 6,175
-------------
Total expenses ......................................................... 125,570
Management fee waived (note 3) ......................................... (50,624)
Reimbursement of expenses by Manager (note 3) .......................... (21,876)
Expenses paid indirectly (note 5) ...................................... (236)
-------------
Net expenses ........................................................... 52,834
------------
Net investment loss .................................................... (28,389)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from securities transactions .................. (97,437)
Change in unrealized appreciation on investments ....................... 1,066,663
-------------
Net realized and unrealized gain (loss) on investments ................. 969,226
------------
Net change in net assets resulting from operations ..................... $ 940,837
============
See accompanying notes to financial statements.
AQUILA ROCKY MOUNTAIN EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
OPERATIONS:
Net investment loss ................................................... $ (28,389) $ (42,947)
Net realized gain (loss) from securities transactions ................. (97,437) (131,345)
Change in unrealized appreciation on investments ...................... 1,066,663 (655,823)
----------- -----------
Change in net assets from operations ............................... 940,837 (830,115)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 8):
Class A Shares:
Net realized gain on investments ...................................... -- --
Class C Shares:
Net realized gain on investments ...................................... -- --
Class Y Shares:
Net realized gain on investments ...................................... -- --
----------- -----------
Change in net assets from distributions ............................ -- --
----------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from shares sold ............................................. 2,219,983 4,565,600
Reinvested dividends and distributions ................................ -- --
Cost of shares redeemed ............................................... (367,194) (1,532,058)
----------- -----------
Change in net assets from capital share transactions ............... 1,852,789 3,033,542
----------- -----------
Change in net assets ............................................... 2,793,626 2,203,427
NET ASSETS:
Beginning of period ................................................... 6,017,542 3,814,115
----------- -----------
End of period ......................................................... $ 8,811,168 $ 6,017,542
=========== ===========
See accompanying notes to financial statements.
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 distribution 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. Class C Shares, together with a pro rata portion of all
Class C Shares acquired through reinvestment of dividends or other distributions
paid in additional Class C Shares, automatically convert to Class A Shares after
6 years. 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. As of the report date, 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 accounting principles generally accepted in the United States of
America 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.
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) 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.
e) USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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:
The Fund has a Sub-Advisory and Administration Agreement with Aquila
Management Corporation (the "Manager"), the Fund's founder and sponsor. Under
this agreement, the Manager supervises the investments of the Fund and the
composition of its portfolio, arranges for the purchases and sales of portfolio
securities, and provides for daily pricing of the Fund's portfolio. Besides its
sub-advisory services, it also provides all administrative services. 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 Manager 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; 1.50% on the first $15
million; 1.20% on the next $35 million and 0.90 of 1% on the excess over $50
million.
For the six months ended June 30, 2003, the Fund incurred Management fees
of $50,624, which were waived. Additionally, during this period the Manager
reimbursed the Fund for other expenses in the amount of $21,876. The Manager has
contractually undertaken to waive fees and/or reimburse Fund expenses during the
period January 1, 2003 through December 31, 2003 so that total Fund expenses
will not exceed 1.50% for Class A Shares, 2.25% for Class C Shares or 1.25% for
Class Y Shares. Of this amount, $21,189 was paid prior to June 30, 2003 and the
balance of $687 was paid in early July 2003.
Specific details as to the nature and extent of the services provided by
the Manager 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, 2003, service fees on Class A Shares
amounted to $6,193 of which the Distributor retained $852.
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 average net assets represented by Class C Shares and for the
six months ended June 30, 2003, amounted to $3,209. 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 average net assets represented by Class C
Shares and for the six months ended June 30, 2003, amounted to $1,070. The total
of these payments with respect to Class C Shares amounted to $4,279 of which the
Distributor retained $1,042.
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, 2003, total commissions on sales of Class A Shares
amounted to $258 none of which was received by the Distributor.
c) OTHER RELATED PARTY TRANSACTIONS:
For the six months ended June 30, 2003 the Fund incurred $17,946 of legal
fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Fund, for
legal services in conjunction with the Fund's ongoing operations. The Secretary
of the Fund is a Partner of Hollyer Brady Smith & Hines LLP.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 2003, purchases of securities and
proceeds from the sales of securities (excluding short-term investments)
aggregated $1,777,256 and $40,570, respectively.
At June 30, 2003, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$2,383,742 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $604,351 for
a net unrealized appreciation of $1,779,391.
5. 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.
6. PORTFOLIO ORIENTATION
The Fund's investments are primarily invested in the securities of
companies within the eight state Rocky Mountain region consisting of Colorado,
Arizona, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming 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.
7. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Fund were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS A SHARES:
Proceeds from shares sold ............ 117,070 $ 2,118,577 151,875 $ 2,955,206
Reinvested dividends and
distributions ..................... -- -- -- --
Cost of shares redeemed .............. (15,643) (284,843) (27,374) (522,773)
------------ ----------- ------------ -----------
Net change ........................ 101,427 1,833,734 124,501 2,432,433
------------ ----------- ------------ -----------
CLASS C SHARES:
Proceeds from shares sold ............ 3,530 63,706 35,899 632,556
Reinvested dividends and
distributions ..................... -- -- -- --
Cost of shares redeemed .............. (3,112) (53,036) (3,734) (64,736)
------------ ----------- ------------ -----------
Net change ........................ 418 10,670 32,165 567,820
------------ ----------- ------------ -----------
CLASS Y SHARES:
Proceeds from shares sold ............ 2,102 37,700 47,243 977,838
Reinvested dividends and
distributions ..................... -- -- -- --
Cost of shares redeemed .............. (1,566) (29,315) (45,224) (944,549)
------------ ----------- ------------ -----------
Net change ........................ 536 8,385 2,019 33,289
------------ ----------- ------------ -----------
Total transactions in Fund
shares ............................... 102,381 $ 1,852,789 158,685 $ 3,033,542
============ =========== ============ ===========
8. 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, in cash, or in a combination of both, at the
shareholder's option. Dividends from net investment income and distributions
from realized gains from investment transactions are determined in accordance
with Federal income tax regulations, which may differ from investment income and
realized gains determined under generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes, but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in capital. As of December 31, 2002 Aquila Rocky Mountain Equity Fund
reclassified $42,947 from accumulated undistributed net investment loss to
paid-in capital. Net assets were not affected by these changes.
At December 31, 2002, the Fund had a capital loss carryover of
approximately $22,715, $1,652 of which expires on December 31, 2009 and $21,063
which expires on December 31, 2010. This carryover is available to offset future
net gains on securities transactions to the extent provided for in the Internal
Revenue Code and it is probable the gain so offset will not be distributed. In
addition, the Fund generated a post-October net capital loss of $110,282.
As of December 31, 2002, the components of distributable earnings on a tax
basis were as follows:
Accumulated net realized loss $ (22,715)
Unrealized appreciation 712,728
-----------
$ 690,013
===========
AQUILA ROCKY MOUNTAIN EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/03 ------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ................. $17.74 $20.96 $19.64 $19.96 $16.76 $17.89
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) + .................... (0.07) (0.15) (0.07) (0.03) (0.04) -
Net gain (loss) on securities (both
realized and unrealized) ....................... 2.29 (3.07) 1.58 (0.09) 3.48 (0.96)
------ ------ ------ ------ ------ ------
Total from investment operations .................. 2.22 (3.22) 1.51 (0.12) 3.44 (0.96)
------ ------ ------ ------ ------ ------
Less distributions (note 8):
Dividends from net investment income .............. - - - - - (0.01)
Distributions from capital gains .................. - - (0.19) (0.20) (0.24) (0.16)
------ ------ ------ ------ ------ ------
Total distributions ............................... - - (0.19) (0.20) (0.24) (0.17)
------ ------ ------ ------ ------ ------
Net asset value, end of period ....................... $19.96 $17.74 $20.96 $19.64 $19.96 $16.76
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ........... 12.51%++ (15.36)% 7.73% (0.55)% 20.56% (5.31)%
Ratios/supplemental data
Net assets, end of period (in thousands) .......... $6,796 $4,242 $2,403 $2,109 $1,363 $1,880
Ratio of expenses to average net assets ........... 1.51%* 1.52% 1.60% 1.57% 1.55% 1.74%
Ratio of net investment loss to average
net assets ..................................... (0.79)%* (0.82)% (0.44)% (0.20)% (0.27)% (0.22)%
Portfolio turnover rate ........................... 0.64%++ 1.81% 28.54% 29.27% 6.45% 19.52%
The expense and net investment income ratios without the effect of the voluntary waiver of fees and the voluntary expense
reimbursement were:
Ratio of expenses to average net assets ........... 3.65%* 4.15% 4.81% 5.57% 5.86% 4.74%
Ratio of net investment loss to average
net assets ..................................... (2.93)%* (3.45)% (3.66)% (4.20)% (4.59)% (3.22)%
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 ........... 1.50%* 1.50% 1.50% 1.51% 1.51% 1.55%
- ----------
Note: Effective July 28, 1999, Aquila Management Corporation assumed the role of
Investment Adviser, replacing KPM Investment Management, Inc.
+ Per share amounts have been calculated using the monthly average shares
method.
++ Not annualized.
* Annualized.
See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/03 ------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ................. $16.96 $20.19 $19.07 $19.53 $16.53 $17.79
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) + .................... (0.13) (0.28) (0.21) (0.17) (0.19) (0.16)
Net gain (loss) on securities
(both realized and unrealized) ................. 2.18 (2.95) 1.52 (0.09) 3.43 (0.93)
------ ------ ------ ------ ------ ------
Total from investment operations .................. 2.05 (3.23) 1.31 (0.26) 3.24 (1.09)
------ ------ ------ ------ ------ ------
Less distributions (note 8):
Distributions from net investment income .......... - - - - - (0.01)
Distributions from capital gains .................. - - (0.19) (0.20) (0.24) (0.16)
------ ------ ------ ------ ------ ------
Total distributions ............................... - - (0.19) (0.20) (0.24) (0.17)
------ ------ ------ ------ ------ ------
Net asset value, end of period ....................... $19.01 $16.96 $20.19 $19.07 $19.53 $16.53
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ........... 12.09%++ (16.00)% 6.91% (1.28)% 19.63% (6.07)%
Ratios/supplemental data
Net assets, end of period
(in thousands) ................................. $970 $858 $372 $242 $185 $162
Ratio of expenses to average net assets ........... 2.26%* 2.26% 2.34% 2.29% 2.34% 2.53%
Ratio of net investment income (loss)
to average net assets .......................... (1.53)%* (1.56)% (1.23)% (0.94)% (1.10)% (1.07)%
Portfolio turnover rate ........................... 0.64%++ 1.81% 28.54% 29.27% 6.45% 19.52%
The expense and net investment income ratios without the effect of the voluntary waiver of fees and the voluntary expense
reimbursement were:
Ratio of expenses to average net assets ........... 4.42%* 4.95% 5.52% 6.32% 6.59% 5.70%
Ratio of net investment loss to
average net assets ............................. (3.69)%* (4.25)% (4.40)% (4.97)% (5.35)% (4.23)%
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 ........... 2.25%* 2.25% 2.25% 2.23% 2.30% 2.33%
CLASS Y
---------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/03 ------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
----------- ------ ------ ------ ------ ------
Net asset value, beginning of period ................. $17.97 $21.19 $19.81 $20.07 $16.82 $17.91
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) + .................... (0.05) (0.10) (0.02) 0.03 (0.01) 0.03
Net gain (loss) on securities
(both realized and unrealized) ................. 2.33 (3.12) 1.59 (0.09) 3.50 (0.95)
------ ------ ------ ------ ------ ------
Total from investment operations .................. 2.28 (3.22) 1.57 (0.06) 3.49 (0.92)
------ ------ ------ ------ ------ ------
Less distributions (note 8):
Distributions from net investment income ......... - - - - - (0.01)
Distributions from capital gains .................. - - (0.19) (0.20) (0.24) (0.16)
------ ------ ------ ------ ------ ------
Total distributions ............................... - - (0.19) (0.20) (0.24) (0.17)
------ ------ ------ ------ ------ ------
Net asset value, end of period ....................... $20.25 $17.97 $21.19 $19.81 $20.07 $16.82
====== ====== ====== ====== ====== ======
Total return (not reflecting sales charge) ........... 12.69%++ (15.20)% 7.97% (0.25)% 20.78% (5.08)%
Ratios/supplemental data
Net assets, end of period
(in thousands) ................................. $1,045 $918 $1,040 $962 $922 $789
Ratio of expenses to average net assets ........... 1.26%* 1.26% 1.35% 1.29% 1.33% 1.52%
Ratio of net investment income (loss)
to average net assets .......................... (0.53)%* 0.56% (0.18)% 0.06% (0.09)% (0.01)%
Portfolio turnover rate ........................... 0.64%++ 1.81% 28.54% 29.27% 6.45% 19.52%
The expense and net investment income ratios without the effect of the voluntary waiver of fees and the voluntary expense
reimbursement were:
Ratio of expenses to average net assets ........... 3.42%* 3.87% 4.59% 5.32% 5.60% 4.58%
Ratio of net investment loss to
average net assets ............................. (2.69)%* (3.16)% (3.42)% (3.96)% (4.36)% (3.07)%
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 ........... 1.25%* 1.25% 1.25% 1.23% 1.30% 1.32%
- ----------
Note: Effective July 28, 1999, Aquila Management Corporation assumed the role of
investment adviser, replacing KPM Investment Management, Inc.
+ Per share amounts have been calculated using the monthly average shares
method.
++ Not annualized.
* Annualized.
See accompanying notes to financial statements.
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
Gary C. Cornia
Diana P. Herrmann
Cornelius T. Ryan
OFFICERS
Diana P. Herrmann, President
Barbara S. Walchli, Senior Vice President and
Portfolio Manager
James M. McCullough, Senior Vice President
Kimball L. Young, Senior Vice President
Christine L. Neimeth, Vice President
Emily T. Rae, Vice President
Alan R. Stockman, Vice President
Joseph P. DiMaggio, Chief Financial Officer
and 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.
1111 Polaris Parkway
Columbus, Ohio 43240
TRANSFER AND SHAREHOLDER SERVICING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT AUDITORS
KPMG LLP
757 Third Avenue
New York, New York 10017
Further information is contained in the Prospectus, which must precede or
accompany this report.
SEMI-ANNUAL
REPORT
JUNE 30, 2003
[Logo of Aquila Rocky Mountain Equity Fund: a rectangle with a drawing of two
mountains and the words "Aquila Rocky Mountain Equity Fund"]
A CAPITAL APPRECIATION INVESTMENT
[Logo of the Aquila Group of Funds: an eagle's head]
ONE OF THE
AQUILA(SM) GROUP OF FUNDS
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
905: Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940) as of a date within 90 days of the fling of this report, the registrant's
chief financial and executive officers have concluded that the disclosure
controls and procedures of the registrant are appropriately designed to ensure
that information required to be disclosed in the registrant's reports that are
filed under the Securities Exchange Act of 1934 are accumulated and communicated
to registrant's management, including its principal executive officer(s) and
principal financial officer(s), to allow timely decisions regarding required
disclosure and is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms adopted by the Securities and Exchange
Commission.
(b) There have been no significant changes in registrant's internal controls or
in other factors that could significantly affect registrant's internal controls
subsequent to the date of the most recent evaluation, including no significant
deficiencies or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certifications of principal executive officer and principal financial
officer
as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
AQUILA ROCKY MOUNTAIN EQUITY FUND
By: /s/ Lacy B. Herrmann
- ---------------------------------
Chairman of the Board
September 8, 2003
By: /s/ Diana P. Herrmann
- ---------------------------------
President
September 8, 2003
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Chief Financial Officer
September 8, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Lacy B. Herrmann
- ---------------------------------
Lacy B. Herrmann
Chairman of the Board
September 8, 2003
By: /s/ Diana P. Herrmann
- ---------------------------------
Diana P. Herrmann
President
September 8, 2003
By: /s/ Joseph P. DiMaggio
- -----------------------------------
Joseph P. DiMaggio
Chief Financial Officer
September 8, 2003
AQUILA ROCKY MOUNTAIN EQUITY FUND
EXHIBIT INDEX
(a) (2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certification of chief executive officer and chief financial officer as
required by Rule 30a-2(b) of the Investment Company Act of 1940.