-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NMCACP8a2fvav34yjtcQDqpsunn356tviFr2qaFF31/QLJYgYiyr7N1MouKLzHPj TICCskebZfzC1PaHk+9EJA== 0000915402-04-000019.txt : 20040907 0000915402-04-000019.hdr.sgml : 20040906 20040907104427 ACCESSION NUMBER: 0000915402-04-000019 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040907 DATE AS OF CHANGE: 20040907 EFFECTIVENESS DATE: 20040907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUILA ROCKY MOUNTAIN EQUITY FUND CENTRAL INDEX KEY: 0000915402 IRS NUMBER: 133753850 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08168 FILM NUMBER: 041017992 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 390 MADISON AVENUE STREET 2: SUITE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 N-CSR 1 armefncsr604.txt AQUILA ROCKY MOUNTAIN EQUITY FUND 6/30/04 NCSR 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 811-8168 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: 6/30/04 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. [Logo of Aquila Rocky Mountain Equity Fund: a rectangle with a drawing of two mountains and the words "Aquila Rocky Mountain Equity Fund"] AQUILA ROCKY MOUNTAIN EQUITY FUND SEMI-ANNUAL REPORT MANAGEMENT DISCUSSION Aquila Rocky Mountain Equity Fund's Class A shares had a total return of 4.65% without provision for sales charges, for the six months ended June 30, 2004. This compares to the S&P 500 with a total return of 3.44% and the Russell 2000 Index with a total return of 6.80%. For the five years cumulatively ending June 30, 2004, Aquila Rocky Mountain A Shares; before provision for sales charges, had a total return of 38.01% compared to -10.54% for the S&P 500 and 38.46% for the Russell 2000 Index. We do not have a perfect benchmark or performance comparison for the Fund since we invest in companies in a specific region rather than a specific size. At mid-year 2004, 18.1% of the Fund was invested in companies with a market capitalization of over $10 billion (large cap companies), 38.4% of the Fund was invested in companies with a market capitalization between $2 billion and $10 billion (mid-cap) and 43.49% of the Fund was invested in small and micro-cap companies (below $2 billion.) We continued to use our growth at a reasonable price (GARP) or core investment style in 2004. We look for good growth companies that are selling at what we believe to be a reasonable price relative to their growth rates. For the first six months of 2004, the Lipper median for U.S. equity mutual funds that invest in different sized companies using a core style (multi-cap core) was 3.34% compared to the 4.65%, without provision for sales charges, for Aquila Rocky Mountain Equity Fund. At mid-year we had holdings of 57 companies in the portfolio across a number of industries. We work to hold our individual position sizes to 5% or less of the portfolio and try to diversify the Fund across industries. We believe this helps control specific security risk as well as industry risk. Our biggest individual position size on June 30th was Microchip Technology at 3.76% of the portfolio. The five best performers in the Fund during the first half of 2004 were from four industries and four states. Coldwater Creek, based in Sandpoint, Idaho had a total return of 140.6%. This retailer which serves women in the 45 - 60 age range is benefiting from new stores to complement its catalogue operation. Station Casinos based in Las Vegas, Nevada was up 59.2%, benefiting from population growth in Nevada and management fees from its new native American gaming businesses. Shufflemaster, a Las Vegas-based provider of card shuffling systems and other table gaming equipment, benefited from the growth of native American gaming in many states, was up 57.8%. Mobile Mini, a Tempe, Arizona based provider of mobile storage units, was up 44.07%, also benefiting from a pickup in the economy. Atrix Laboratories, a Fort Collins, Colorado based provider of drug delivery systems was up 42.6%. The company benefited from new product approvals and the news that the company would be acquired. Our three worst performers were also from different industries. McData is a Broomfield, Colorado based provider of switches and software for storage networks. This market segment has experienced a slow-down in demand over the past six months, pulling the stock down 43.5%. NPS Pharmaceuticals is a Salt Lake City based developmental stage drug company that is not yet producing earnings but has several products nearing market. Despite the new products, the stock declined 31.5%. During a period of rising interest rates, the market tends to penalize developmental stage companies since they are not yet producing earnings or dividends. That is why we tend to limit our exposure to developmental stage companies. Merit Medical, a Jordan, Utah based med-tech provider was down 28.4%. The company had a price pullback in part because several new products were delayed. We continue to work to invest the Fund strategically since we believe that trading and transaction costs do matter. We prefer to do our own research, focusing on the two to five year time frame. We are often surprised by how short term oriented many investors are. We continue to look for the best management teams in the Rocky Mountain region to invest in for our shareholders. Currently we have four companies in the portfolio in the process of being acquired. They are all small cap companies. This suggests to us that small cap companies are still priced attractively. Larger companies may also be looking for ways to enhance their growth rates in a slower growth environment. The four companies in the process of being acquired are: Unisource (the old Tucson Electric Power), Prima Energy, Evergreen Resources and Atrix Labs. We are working hard to replace these companies in the portfolio. We would note that we especially hate to lose Prima Energy as a holding. Dick Lewis, Prima's founder and CEO, has achieved what we believe to be superior results over time due to his personal integrity and discipline and focusing on what would be best for investors for the long term, rather than allowing himself to be influenced by short term market forces. We continue to harvest short term trading losses to use to offset capital gains in the future. At mid-year, we are carrying over trading losses that we will be able to use to offset gains from the acquisitions of the four companies that will close in the second half of 2004. During the first half of 2004, we had three companies with stock splits and one company that paid a stock dividend. Medicis Pharmaceutical split their shares two for one on January 26th. Shufflemaster split their shares three for two on April 19th and Glacier Bancorp split their shares five for four on May 21st. MDC paid a 10% stock dividend on March 4th. While stock splits and stock dividends are really just an accounting adjustment, they often attract investor attention. During the first half of 2004, small cap stocks as measured by the Russell 2000 outperformed large cap stocks as measured by the S&P 500. This outperformance of small cap stocks has continued for the past five and a half years. While market leadership for the entire year is still to be determined, we believe small cap outperformance could continue. We find the current period similar to the 1974-1983 period when small caps as measured by the Russell 2000 outperformed every year. Both periods were preceded by a period in which valuations of large capitalization stocks reached an extreme level. In 1973, it was the "Nifty 50" and in 1999, it was the "Technology Bubble." At year-end we noted that we thought that 2004 could be quite a different year from 2003 due to more market volatility coming from changes in interest rates and possibly currencies. Changes in commodity prices are also causing some pressures on earnings and on the economy. In the last six weeks, we have seen evidence that the economy is slowing, caused in part by oil prices near $40. Both consumers and businesses alike are being squeezed by oil prices at this level. We attribute the pull back in the stock market from its highs of the first half to some adjustment in earnings expectations along with multiple contraction in part caused by rising interest rates. Once these adjustments are fully discounted in the market, the market should be able to move in line with earnings growth. AQUILA ROCKY MOUNTAIN EQUITY FUND SCHEDULE OF INVESTMENTS JUNE 30, 2004 (UNAUDITED) MARKET SHARES COMMON STOCKS - 88.4% VALUE - ---------- ---------------------------------------------------- ----------- BASIC INDUSTRY - 10.1% 18,000 Allied Waste Industries, Inc.+....................... $ 237,240 3,500 Ball Corp............................................ 252,175 7,000 Boise Cascade Corp................................... 263,480 9,000 Knight Transportation, Inc.+......................... 258,570 5,000 Newmont Mining Corp.................................. 193,800 3,500 Phelps Dodge Corp.+.................................. 271,285 8,000 SkyWest, Inc......................................... 139,280 ----------- 1,615,830 ----------- BUSINESS SERVICES - 3.0% 10,000 Intrado, Inc.+....................................... 160,900 12,000 Viad Corp............................................ 324,120 ----------- 485,020 ----------- CAPITAL SPENDING - 4.4% 6,000 Advanced Energy Industries, Inc.+.................... 94,320 22,000 Mity Enterprises, Inc.+.............................. 375,100 8,000 Mobile Mini, Inc.+................................... 227,280 ----------- 696,700 ----------- CONSUMER CYCLICALS - 2.0% 4,950 M.D.C. Holdings, Inc................................. 314,869 ----------- CONSUMER SERVICES - 21.9% 4,000 Action Performance Companies, Inc.................... 60,280 4,000 Apollo Group, Inc. (Class A)+........................ 353,160 22,500 Coldwater Creek, Inc.+............................... 595,575 3,400 Comcast Corp. (Special Class A)+..................... 93,874 10,000 Echostar Communications Corp. (Class A)+............. 307,500 15,000 International Game Technology........................ 579,000 22,000 Liberty Media Corp. (Class A)+....................... 197,780 1,100 Liberty Media International, Inc. Class A+........... 40,810 6,000 MGM MIRAGE+.......................................... 281,640 5,000 PETsMART, Inc........................................ 162,250 5,000 P.F. Chang's China Bistro, Inc.+..................... 205,750 6,000 Shuffle Master, Inc.+................................ 217,860 8,000 Station Casinos, Inc................................. 387,200 ----------- 3,482,679 ----------- CONSUMER STAPLES - 1.0% 6,000 Albertson's, Inc..................................... $ 159,240 ----------- ENERGY - 4.9% 5,000 Evergreen Resources, Inc.+........................... 202,000 7,000 Headwaters, Inc.+.................................... 181,510 10,000 Prima Energy Corp.+.................................. 395,700 ----------- 779,210 ----------- FINANCIAL - 10.1% 12,000 First State Bancorporation........................... 370,320 12,500 Glacier Bancorp, Inc................................. 352,125 10,000 Janus Capital Group, Inc............................. 164,900 4,500 Wells Fargo & Company................................ 257,535 7,500 Zions Bancorporation................................. 460,875 ----------- 1,605,755 ----------- HEALTH CARE - 11.3% 9,000 Atrix Laboratories, Inc.+............................ 308,520 12,000 Medicis Pharmaceutical Corp. (Class A)............... 479,400 28,001 Merit Medical Systems, Inc.+......................... 446,056 10,000 Myriad Genetics, Inc.+............................... 149,200 6,000 NPS Pharmaceuticals, Inc.+........................... 126,000 19,000 Sonic Innovations, Inc.+............................. 107,730 4,000 Ventana Medical Systems, Inc.+....................... 190,120 ----------- 1,807,026 ----------- TECHNOLOGY - 15.8% 3,000 Altiris, Inc.+....................................... 82,830 11,000 Avnet, Inc.+......................................... 249,700 18,000 CIBER, Inc.+......................................... 147,960 11,000 First Data Corp...................................... 489,720 5,000 Inter-Tel, Inc....................................... 124,850 10,000 JDA Software Group, Inc.+............................ 131,700 7,000 McData Corp. (Class A)+.............................. 37,660 19,000 Microchip Technology, Inc............................ 599,260 16,000 Micron Technology, Inc.+............................. 244,960 14,000 SBS Technologies, Inc.+.............................. $ 224,980 12,000 SpectraLink Corp..................................... 178,800 ------------ 2,512,420 ------------ UTILITIES - 3.9% 4,000 Kinder Morgan, Inc................................... 237,160 3,000 Pinnacle West Capital Corp........................... 121,170 5,000 Questar Corp......................................... 193,200 3,000 UniSource Energy Corp................................ 74,550 ------------ 626,080 ------------ Total Common Stocks (cost $9,031,248)........... 14,084,829 ------------ FACE AMOUNT SHORT-TERM INVESTMENTS - 9.1% - ---------- ------------------------------------------------- $ 725,000 AIM S-T Invest. Co. Prime Port. Inst. Cl. Money Market Fund.................................... 725,000 725,000 One Group Prime Money Market Fund................ 725,000 ------------ Total Short-Term Investments (cost $1,450,000)......................... 1,450,000 ------------ Total Investments (cost $10,481,248*)..... 97.5% 15,534,829 Other assets less liabilities............. 2.5 391,190 ----- ------------ Net Assets ............................... 100.0% $ 15,926,019 ===== ============ * 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, 2004 (UNAUDITED) ASSETS Investments at market value (cost $10,481,248) ..................................... $ 15,534,829 Cash ............................................................................... 514,853 Receivable for Fund shares sold .................................................... 16,861 Dividends and interest receivable .................................................. 5,905 Other assets ....................................................................... 947 ------------ Total assets .................................................................... 16,073,395 ------------ LIABILITIES Payable for investment securities purchased ........................................ 119,353 Distribution fees payable .......................................................... 9,854 Management fee payable ............................................................. 3,820 Accrued expenses ................................................................... 14,349 ------------ Total liabilities ............................................................... 147,376 ------------ NET ASSETS ............................................................................ $ 15,926,019 ============ Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share . $ 6,144 Additional paid-in capital ......................................................... 11,208,278 Net unrealized appreciation on investments (note 4) ................................ 5,053,581 Accumulated net realized loss on investments ....................................... (276,462) Accumulated net investment loss .................................................... (65,522) ------------ $ 15,926,019 ============ CLASS A Net Assets ......................................................................... $ 12,291,277 ============ Capital shares outstanding ......................................................... 471,333 ============ Net asset value and redemption price per share ..................................... $ 26.08 ============ Offering price per share (100/95.75 of $26.08 adjusted to nearest cent) ............ $ 27.24 ============ CLASS C Net Assets ......................................................................... $ 2,129,954 ============ Capital shares outstanding ......................................................... 86,380 ============ Net asset value and offering price per share ....................................... $ 24.66 ============ 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) ...................................... $ 24.66* ============ CLASS Y Net Assets ......................................................................... $ 1,504,788 ============ Capital shares outstanding ......................................................... 56,724 ============ Net asset value, offering and redemption price per share ........................... $ 26.53 ============
See accompanying notes to financial statements. AQUILA ROCKY MOUNTAIN EQUITY FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
INVESTMENT INCOME: Dividends ............................................ $ 46,782 Interest ............................................. 5,293 -------- $ 52,075 Expenses: Management fee (note 3) .............................. 111,668 Distribution and service fees (note 3) ............... 24,374 Legal fees ........................................... 16,934 Trustees' fees and expenses .......................... 13,213 Transfer and shareholder servicing agent fees ........ 10,045 Shareholders' reports ................................ 9,498 Auditing and tax fees ................................ 7,394 Registration fees and dues ........................... 7,341 Custodian fees ....................................... 2,571 Miscellaneous ........................................ 13,327 -------- Total expenses ....................................... 216,365 Management fee waived (note 3) ....................... (96,596) Expenses paid indirectly (note 5) .................... (2,171) -------- Net expenses ......................................... 117,598 -------- Net investment loss .................................. (65,523) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions (28,721) Change in unrealized appreciation on investments ..... 762,934 -------- Net realized and unrealized gain (loss) on investments 734,213 -------- Net change in net assets resulting from operations ... $668,690 ========
See accompanying notes to financial statements. AQUILA ROCKY MOUNTAIN EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2004 YEAR ENDED (UNAUDITED) DECEMBER 31, 2003 ---------------- ----------------- OPERATIONS: Net investment loss ................................... $ (65,523) $ (74,618) Net realized gain (loss) from securities transactions . (28,721) (114,744) Change in unrealized appreciation on investments ...... 762,934 3,577,919 ------------ ------------ Change in net assets from operations ............... 668,690 3,388,557 ------------ ------------ 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 ............................. 3,131,398 5,175,850 Short-term trading redemption fee ..................... 1,025 -- Reinvested dividends and distributions ................ -- -- Cost of shares redeemed ............................... (1,454,412) (1,002,631) ------------ ------------ Change in net assets from capital share transactions 1,678,011 4,173,219 ------------ ------------ Change in net assets ............................... 2,346,701 7,561,776 NET ASSETS: Beginning of period ................................... 13,579,318 6,017,542 ------------ ------------ End of period ......................................... $ 15,926,019 $ 13,579,318 ============ ============
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) MULTIPLE CLASS ALLOCATIONS: All income, expenses (other than class-specific expenses), and realized and unrealized gains or losses 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 Investment Management LLC (the "Manager"), a wholly-owned subsidiary of Aquila Management Corporation, 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 managing relationships with 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% on the excess over $50 million. For the six months ended June 30, 2004, the Fund incurred Management fees of $111,668, of which $96,596 were waived. The Manager had contractually undertaken to waive fees and/or reimburse Fund expenses during the period January 1, 2004 through December 31, 2004 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. 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, 2004, distribution fees on Class A Shares amounted to $14,320 of which the Distributor retained $1,372. 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, 2004, amounted to $7,541. 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, 2004, amounted to $2,513. The total of these payments with respect to Class C Shares amounted to $10,054 of which the Distributor retained $1,003. 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, 2004, total commissions on sales of Class A Shares amounted to $40,862 of which $4,365 was received by the Distributor. c) OTHER RELATED PARTY TRANSACTIONS: For the six months ended June 30, 2004, the Fund incurred $16,771 of legal fees allocable to Hollyer Brady Barrett & 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 Barrett & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the six months ended June 30, 2004, purchases of securities and proceeds from the sales of securities (excluding short-term investments) aggregated $916,186 and $9,480, respectively. At June 30, 2004, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $5,289,839 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $236,258 for a net unrealized appreciation of $5,053,581. 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 a) Transactions in Capital Shares of the Fund were as follows:
SIX MONTH ENDED JUNE 30, 2004 YEAR ENDED (UNAUDITED) DECEMBER 31, 2003 -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ CLASS A SHARES: Proceeds from shares sold .. 97,011 $ 2,470,974 212,420 $ 4,259,877 Reinvested dividends and distributions ........... -- -- -- -- Cost of shares redeemed .... (40,756) (1,045,752) (36,483) (759,051) -------- ----------- -------- ----------- Net change .............. 56,255 1,425,222 175,937 3,500,826 -------- ----------- -------- ----------- CLASS C SHARES: Proceeds from shares sold .. 22,548 548,104 37,062 786,448 Reinvested dividends and distributions ........... -- -- -- -- Cost of shares redeemed .... (13,726) (334,036) (10,082) (207,947) -------- ----------- -------- ----------- Net change .............. 8,822 214,068 26,980 578,501 -------- ----------- -------- ----------- CLASS Y SHARES: Proceeds from shares sold .. 4,291 112,320 6,061 129,525 Reinvested dividends and distributions ........... -- -- -- -- Cost of shares redeemed .... (2,856) (74,624) (1,841) (35,633) -------- ----------- -------- ----------- Net change .............. 1,435 37,696 4,220 93,892 -------- ----------- -------- ----------- Total transactions in Fund shares ..................... 66,512 $ 1,676,986 207,137 $ 4,173,219 ======== =========== ======== ===========
b) SHORT-TERM TRADING REDEMPTION FEE: The Fund and the Distributor may reject any order for the purchase of shares, on a temporary or permanent basis, from investors exhibiting a pattern of frequent or short-term trading in Fund shares. In addition, the Fund imposes a redemption fee of 2.00% of the shares' redemption value on any redemption of Class A Shares on which a sales charge is not imposed or of Class Y Shares, if the redemption occurs within 120 days of purchase. The fee will be paid to the Fund and is designed to offset the costs to the Fund caused by short-term trading in Fund shares. The fee will not apply to shares sold under an Automatic Withdrawal Plan, or sold due to the shareholder's death or disability. For the six months ended June 30, 2004, fees collected did not have a material effect on the financial highlights. 8. INCOME TAX INFORMATION AND 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, 2003 due to a net investment loss, Aquila Rocky Mountain Equity Fund reclassified $74,618 from accumulated undistributed net investment loss to paid-in capital. Net assets were not affected by these changes. At December 31, 2003, the Fund had a capital loss carryover of approximately $247,741, $1,652 of which expires on December 31, 2009 and $21,063 which expires on December 31, 2010 and $225,026 which expires on December 31, 2011. 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. As of December 31, 2003, the components of distributable earnings on a tax basis were as follows: Accumulated net realized loss $ (247,741) Unrealized appreciation 4,290,647 ------------ $ 4,042,906 ============ AQUILA ROCKY MOUNTAIN EQUITY FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A ----------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 6/30/04 ------------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 ----------- ------- ------- ------- ------- ------- Net asset value, beginning of period ................. $ 24.92 $ 17.74 $ 20.96 $ 19.64 $ 19.96 $ 16.76 ------- ------- ------- ------- ------- ------- Income (loss) from investment operations: Net investment income (loss)+ .................... (0.10) (0.16) (0.15) (0.07) (0.03) (0.04) Net gain (loss) on securities (both realized and unrealized) ..................... 1.26 7.34 (3.07) 1.58 (0.09) 3.48 ------- ------- ------- ------- ------- ------- Total from investment operations ................. 1.16 7.18 (3.22) 1.51 (0.12) 3.44 ------- ------- ------- ------- ------- ------- Less distributions (note 8): Dividends from net investment income ............. -- -- -- -- -- -- Distributions from capital gains ................. -- -- -- (0.19) (0.20) (0.24) ------- ------- ------- ------- ------- ------- Total distributions .............................. -- -- -- (0.19) (0.20) (0.24) ------- ------- ------- ------- ------- ------- Net asset value, end of period ....................... $ 26.08 $ 24.92 $ 17.74 $ 20.96 $ 19.64 $ 19.96 ======= ======= ======= ======= ======= ======= Total return (not reflecting sales charge) ........... 4.65%++ 40.47% (15.36)% 7.73% (0.55)% 20.56% Ratios/supplemental data Net assets, end of period (in thousands) ......... $12,291 $10,345 $ 4,242 $ 2,403 $ 2,109 $ 1,363 Ratio of expenses to average net assets .......... 1.53%* 1.50% 1.52% 1.60% 1.57% 1.55% Ratio of net investment loss to average net assets ................................... (0.83)%* (0.77)% (0.82)% (0.44)% (0.20)% (0.27)% Portfolio turnover rate .......................... 0.07%++ 3.01% 1.81% 28.54% 29.27% 6.45% 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 .......... 2.79%* 3.25% 4.15% 4.81% 5.57% 5.86% Ratio of net investment loss to average net assets ................................... (2.09)%* (2.51)% (3.45)% (3.66)% (4.20)% (4.59)% 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%* 1.48% 1.50% 1.50% 1.51% 1.51%
- ---------------- Note: Effective July 28, 1999, Aquila Management Corporation assumed the role of Investment Adviser, replacing KPM Investment Management, Inc. Effective January 1, 2004, Aquila Management Corporation, founder of the Fund, assigned its Advisory and Administration Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC. + 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 JUNE 30, 6/30/04 ----------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ....... $23.66 $16.96 $20.19 $19.07 $19.53 $16.53 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income (loss)+ .......... (0.19) (0.30) (0.28) (0.21) (0.17) (0.19) Net gain (loss) on securities (both realized and unrealized) ..... 1.19 7.00 (2.95) 1.52 (0.09) 3.43 ------ ------ ------ ------ ------ ------ Total from investment operations ... 1.00 6.70 (3.23) 1.31 (0.26) 3.24 ------ ------ ------ ------ ------ ------ Less distributions (note 8): Distributions from net investment income -- -- -- -- -- -- Distributions from capital gains ....... -- -- -- (0.19) (0.20) (0.24) ------ ------ ------ ------ ------ ------ Total distributions .................... -- -- -- (0.19) (0.20) (0.24) ------ ------ ------ ------ ------ ------ Net asset value, end of period ............. $24.66 $23.66 $16.96 $20.19 $19.07 $19.53 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) . 4.23%++ 39.50% (16.00)% 6.91% (1.28)% 19.63% Ratios/supplemental data Net assets, end of period (in thousands) $2,130 $1,835 $ 858 $ 372 $ 242 $ 185 Ratio of expenses to average net assets 2.27%* 2.26% 2.26% 2.34% 2.29% 2.34% Ratio of net investment income (loss) to average net assets .............. (1.57)%* (1.53)% (1.56)% (1.23)% (0.94)% (1.10)% Portfolio turnover rate .................... 0.07%++ 3.01% 1.81% 28.54% 29.27% 6.45% 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 3.54%* 4.02% 4.95% 5.52% 6.32% 6.59% Ratio of net investment loss to average net assets ................. (2.84)%* (3.29)% (4.25)% (4.40)% (4.97)% (5.35)% 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 2.24%* 2.24% 2.25% 2.25% 2.23% 2.30% CLASS Y ---------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 6/30/04 ------------------------------------------------------ (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ....... $25.32 $17.97 $21.19 $19.81 $20.07 $16.82 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income (loss)+ .......... (0.07) (0.10) (0.10) (0.02) 0.03 (0.01) Net gain (loss) on securities (both realized and unrealized) ..... 1.28 7.45 (3.12) 1.59 (0.09) 3.50 ------ ------ ------ ------ ------ ------ Total from investment operations ... 1.21 7.35 (3.22) 1.57 (0.06) 3.49 ------ ------ ------ ------ ------ ------ Less distributions (note 8): Distributions from net investment income -- -- -- -- -- -- Distributions from capital gains ....... -- -- -- (0.19) (0.20) (0.24) ------ ------ ------ ------ ------ ------ Total distributions .................... -- -- -- (0.19) (0.20) (0.24) ------ ------ ------ ------ ------ ------ Net asset value, end of period ............. $26.53 $25.32 $17.97 $21.19 $19.81 $20.07 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) . 4.78%++ 40.90% (15.20)% 7.97% (0.25)% 20.78% Ratios/supplemental data Net assets, end of period (in thousands) $1,505 $1,400 $ 918 $1,040 $ 962 $ 922 Ratio of expenses to average net assets 1.27%* 1.25% 1.26% 1.35% 1.29% 1.33% Ratio of net investment income (loss) to average net assets .............. (0.58)%* (0.51)% 0.56% (0.18)% 0.06% (0.09)% Portfolio turnover rate .................... 0.07%*++ 3.01% 1.81% 28.54% 29.27% 6.45% 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 2.54%* 3.05% 3.87% 4.59% 5.32% 5.60% Ratio of net investment loss to average net assets ................. (1.84)%* (2.32)% (3.16)% (3.42)% (3.96)% (4.36)% 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%* 1.23% 1.25% 1.25% 1.23% 1.30%
- ----------- Note: Effective July 28, 1999, Aquila Management Corporation assumed the role of investment adviser, replacing KPM Investment Management, Inc. Effective January 1, 2004, Aquila Management Corporation, founder of the Fund, assigned its Advisory and Administration Agreement to its wholly-owned subsidiary, Aquila Investment Management LLC. + Per share amounts have been calculated using the monthly average shares method. ++ Not annualized * Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- INFORMATION AVAILABLE (UNAUDITED) Much of the information that the funds in the Aquila(SM) Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent the entire list of portfolio securities of your fund twice a year in the semi-annual and annual reports you receive. You should know, however, that we prepare, and have available, portfolio listings at the end of each quarter. Whenever you may be interested in seeing a listing of your Fund's portfolio other than in your shareholder reports, please check our website (www.aquilafunds.com) or call us at 1-800-437-1020. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Proxy Voting and Procedures of the Fund are available without charge, upon request, by calling our toll free number (1-800-437-1020). This information is also available at http://www.aquilafunds.com/EquityFunds/armef/armefmain.htm or on the SEC's Web site - www.sec.gov - -------------------------------------------------------------------------------- FOUNDER AQUILA MANAGEMENT CORPORATION MANAGER AQUILA INVESTMENT MANAGEMENT LLC 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, Vice Chair and President Barbara S. Walchli, Senior Vice President and Portfolio Manager Marie E. Aro, Senior Vice President 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. 760 Moore Road King of Prussia, Pennsylvania 19406 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 757 Third Avenue New York, New York 10017 Further information is contained in the Prospectus, which must precede or accompany this report. 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 6, 2004 By: /s/ Diana P. Herrmann - --------------------------------- Vice Chair, Trustee and President September 6 2004 By: /s/ Joseph P. DiMaggio - ----------------------------------- Chief Financial Officer and Treasurer September 6, 2004 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 6, 2004 By: /s/ Diana P. Herrmann - --------------------------------- Diana P. Herrmann Vice Chair, Trustee and President September 6, 2004 By: /s/ Joseph P. DiMaggio - ----------------------------------- Joseph P. DiMaggio Chief Financial Officer and Treasurer September 6, 2004 EX-99.CERT 2 armef302cert.txt SECTION 302 CERTIFICATIONS CERTIFICATIONS I, Lacy B. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Aquila Rocky Mountain Equity Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 3. The registrant's other certifying officers and I are responsible For establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the EvaluationDate; 4. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 6, 2004 /s/ Lacy B. Herrmann - ---------------------- Title: Chairman of the Board I, Diana P. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Aquila Rocky Mountain Equity Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 6, 2004 /s/ Diana P. Herrmann - ---------------------- Title: Vice Chair, Trustee and President I, Joseph P. DiMaggio, certify that: 1. I have reviewed this report on Form N-CSR of Aquila Rocky Mountain Equity Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 6, 2004 /s/ Joseph P. DiMaggio - ------------------------ Title: Chief Financial Officer and Treasurer EX-99.906 CERT 3 armef906cert.txt SECTION 906 CERTIFICATIONS CERTIFICATION Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18,United States Code), each of the undersigned officers of Aquila Rocky Mountain Equity Fund , do hereby certify to such officer's knowledge, that: The semi-annual report on Form N-CSR of Aquila Rocky Mountain Equity Fund for the period ended June 30, 2004 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of Aquila Rocky Mountain Equity Fund. Dated: September 6, 2004 /s/ Lacy B. Herrmann ------------------------------- Lacy B. Herrmann Chairman of the Board Aquila Rocky Mountain Equity Fund Dated: September 6, 2004 /s/ Diana P. Herrmann ---------------------------------- Vice Chair, Trustee and President Aquila Rocky Mountain Equity Fund Dated: September 6, 2004 /s/ Joseph P. DiMaggio ------------------------------------ Chief Financial Officer and Treasurer Aquila Rocky Mountain Equity Fund A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Aquila Rocky Mountain Equity Fund and will be retained by Aquila Rocky Mountain Equity Fund and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----