GROUP OF FUNDS THE AQUILA

GROUP OF FUNDS

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AQUILASM1 Aquila Distributors, Inc. 6/2007

AQUILA THREE PEAKS HIGH INCOME FUND

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AQUILASM

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Please Note

Information contained in this document must be preceded or accompanied by a copy of the Fund’s current prospectus.

The Fund is not a financial institution, deposit or other obligation, is not backed by any financial institution guarantee, is not backed by FDIC or other deposit insurance, and is subject to investment risks, including the possible loss of the principal amount invested.

Past Performance is not predictive of future investment results. Performance data quoted represents past performance; investment return and principal value of an investment will fluctuate with market conditions so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance as of the most recent month end is available from Aquila Distributors Inc., 800-437-1020 or www.aquilafunds.com.

The Fund invests in a variety of fixed-income securities. A basic risk of these securities is that their value will fall if interest rates rise. Since the value of a fixed-income portfolio will generally decrease when interest rates rise, the Fund's net asset value (NAV) will likewise decrease. Another basic risk associated with the Fund is credit or default risk, which is the risk that an issuer will be unable to make principal and interest payments when due.

It is anticipated that the Fund’s portfolio will typically include a high proportion, perhaps even 100%, of high-yield/high-risk securities rated below investment grade. High-yield bonds generally have a greater credit risk than other types of fixed-income securities and may be especially sensitive to economic changes, political changes, or adverse developments specific to the company that issued the bond. Because of these factors, the performance and NAV of the Fund may vary significantly, depending upon its holdings of high-yield/high risk bonds.

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Please Note

Currently, the majority of the Management fees are being voluntarily waived. Results, where shown, would have been lower if the full fees or expenses were applied. The maximum sales charge for the Class A shares of the Fund is 4.00%. The Class C share have no sales charge, but do have a Contingent Deferred Sales Charge of 1.00% on redemptions within 12 months of purchase.

Portfolio holdings information is not necessarily representative of the entire portfolio. Holdings and composition of holdings are subject to change.

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Introduction

Aquila Investment Management, LLC

and

Three Peaks Capital Management,

LLC

create

Aquila Three Peaks High Income Fund

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Aquila Three Peaks High Income

Portfolio Manager: Sandy Rufenacht

Fund Manager since inception, June, 2006

Founded Three Peaks Capital Management, LLC in July 2003

Dedicated focus on specialty fixed-income disciplines

Highly disciplined approach with emphasis on maintaining a stable NAV

Managed Janus High-Yield Bond Fund, Janus Short-Term Bond Fund, separate accounts and sub-advised portfolios for Janus Capital Group Inc. from January 1996 through July 2003

18 years professional investment experience

University of Northern Colorado, B.A., Business

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Three Peaks Capital Management Team

Sandy RufenachtCEO / CIO / PM

Brent OlsonDirector of Research

Assistant PM

Kim CollinsChief Compliance

Officer

David BattilegaResearch Analyst

Andrew BaumanResearch Analyst

Todd TeleszResearch Analyst

Nora Seibert-DispenseTrader / Desk Analyst

Ashley GapuzanClient Services

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Investment Strategy

Produce a high level of current income with a focus on protecting the NAV (Net Asset Value).

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Agenda

The High Yield Market Today

The Case for High Yield Bonds


Fund

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Agenda




Fund

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Growth Financed in the High Yield Market

Bonds which represent the largest Fund holdings, will be presented in an upcoming slide.

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High-Yield Mutual Funds, 14.2%

Investment-Grade Funds, 11.9%

Other, 7.4%

CBOs, 7.9%

Pension funds, 20.0%

Insurance Companies, 25.3%

Foreign, 7.4%

Equity & Income Funds, 6.0%


High Yield Bond Investors

Investors by segment 2006Investors by segment 2006

45.3%

Source: JPMorgan North American High Yield Research, 2006 High-Yield Annual Review, 12/06

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Agenda




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Volatility and Return of Fixed Income Securities

10.2%

10.4%

10.6%

10.8%

11.0%

11.2%

11.4%

11.6%

7.6% 7.8% 8.0% 8.2% 8.4% 8.6% 8.8% 9.0% 9.2%

Annualized Volatility

Ann

ualiz

ed R

etur

n

100% Inv Grade

75% Inv Grade25% High Yield

50% High Yield50% Inv Grade

75% High Yield25% Inv Grade

100% High Yield

Use High Yield to Manage Portfolio Risk and ReturnJP Morgan data for 5 years ending 10-31-05


Investment-grade bond data from 1991 through 2004 is measured by the Merrill Lynch Corporate Master Index; in 2005 it is measured by the JPMorgan JULI Investment-Grade Index. High Yield bond data is measured by the JPMorgan Global High Yield Index. It is not possible to invest directly in an index. Index performance is not illustrative of the performance of the Fund. The Fund commenced operations on June 1, 2006, and does not have performance or volatility history during the period illustrated.

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5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

4.20% 4.40% 4.60% 4.80% 5.00% 5.20% 5.40% 5.60%

Annualized volatility

Annu

alize

d re

turn

25% High yield/75% Investment

grade

Optimum risk/ return point

75% High yield/25% Investment grade

100% High yield

100% Investment grade

50%/50%



Use High Yield to Manage Portfolio Risk and ReturnJP Morgan data for 5 years ending 10-31-06



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5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%



Use High Yield to Manage Portfolio Risk and Return10-31-05 vs. 10-31-06

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00%

Risk

Ret

urn



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Volatility and Return of Various Asset Classes

Incremental Return 15.36% vs. 12.85%

Incremental Volatility

6.17% vs. 11.57%

3 year Volatility (Risk) / Return dataJP Morgan data for 3 years ending 10-31-05


Index performance is not illustrative of the performance of the Fund. The Fund commenced operations on June 1, 2006, and does not have performance or volatility history during the period illustrated.

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Incremental Return 9.01% vs. 11.44%


3.69% vs. 7.34%




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8.03% vs. 15.27%

Incremental Return

8.75% vs. -1.74%




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5.46% vs. 12.78%

Incremental Return

10.87% vs. 7.26%




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Incremental Return

6.89% vs. 8.64%


6.54% vs. 15.52%



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Volatility of Returns

Source: Lehman Brothers, Yahoo Finance

Lehman U.S. Corp. High Yield and S&P 500

Growth of $100Jan. 1987 to Dec. 2006

This chart illustrates a hypothetical investment of $100 in the Lehman U.S. Corporate High Yield Index and the S&P 500 Index. It is not possible to invest directly in an index. The hypothetical illustration does not include the fees and expenses associated with an actual investment; if such fees and expenses were included, the returns would be lower. Index performance is not illustrative of the performance of the Fund. The Fund commenced operations on June 1, 2006, and does not have performance or volatility history during the period illustrated.

$ Value

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The Impact of Shifting Interest Rates

High Yield Index Return vs. 10-yr U.S. Treasury Yield


Source: Lehman Brothers, Yahoo Finance

Lehman U.S Corp. High Yield Bond Index

Growth of $100

Yield on 10-yr. U.S. Treasury

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Performance through Economic Cycles

Average Total Return 1987 – 2006: 9.70%“Golden Age” of High Yield 1991 – 1998: 15.46% Average Return

Average Total Return 1987 – 2006: 9.70%“Golden Age” of High Yield 1991 – 1998: 15.46% Average Return


6.5%

11.4

%

0.4%

-6.4

%

43.8

%

16.7

%

18.9

%

-1.6

%

19.6

%

13.0

%

12.4

%

1.0% 3.

4%

-5.8

%

5.5%

2.1%

27.5

%

11.5

%

3.1%

11.5

%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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Default Rate Near Cyclical Low

Long term Average 4.74%

Average 1/93 to 6/99 2.36%

Jan. ‘98 1.20%

Dec. ‘06 0.84%


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Yield Spread Near Cyclical Low

Long Term Average 548 bps

Average 1/93 to 6/99 421 bps

Dec ‘06 317 bps

Feb ‘97 304 bps


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Tying It All Together

High Yield Spreads High Yield Default RatesHigh Yield Average Annual Returns


6.5%

11.4

%

0.4%

-6.4

%

43.8

%

16.7

%

18.9

%

-1.6

%

19.6

%

13.0

%

12.4

%

1.0% 3.

4%

-5.8

%

5.5%

2.1%

27.5

%

11.5

%

3.1%

11.5

%

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0bp

200bp

400bp

600bp

800bp

1000bp

1200bp

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

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Components of High Yield Market Growth

2006

New public issues 30.4

144A 117.0

Total new issues 147.4

Fallen angels 29.3

Total Supply 176.7

Forward calendar – Public 0.0

Forward calendar – 144A 0.8

Potential supply 0.8

Redemptions & maturities 83.3

Tenders 45.4

Rising stars 26.1

Other 8.3

Demand 163.2

Coupon interest 58.8

Mutual fund inflows 4.4

Total Demand 226.3

Estimated size of high-yield market 955.1

Coupon interest

represented 26% of the 2006

Total Demand for High

Yield Bonds


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Growth of the High Yield Market

Source : JP Morgan North American High Yield Research, 2006 High-Yield Annual Review, 12/06. Note: 2006 data as of December 14th

Global US Dollar-Denominated IssuesGlobal US Dollar-Denominated Issues

The information in this graph has been obtained from, and is based on, sources that Aquila Distributors, Inc. believes to be reliable. Aquila Distributors, Inc. does not guarantee its accuracy. This analysis is for informational purposes only and is not intended as investment advice. The high yield securities represented in this graph will not match and are not intended to be representative of securities held or to be held in Aquila Three Peaks High Income Fund.

The information in this graph has been obtained from, and is based on, sources that Aquila Distributors, Inc. believes to be reliable. Aquila Distributors, Inc. does not guarantee its accuracy. This analysis is for informational purposes only and is not intended as investment advice. The high yield securities represented in this graph will not match and are not intended to be representative of securities held or to be held in Aquila Three Peaks High Income Fund.

83.3

138.

4

182.

8

207.

3

244.

2

199.

6

234.

0

270.

5

295.

0

348.

9

447.

6

565.

2

622.

2

648.

8

753.

5

870.

2

902.

1

891.

9

941.

6

955.

1

24.0

26.0

28.0

30.0

32.0

35.0

43.0

214.

6

20.9

59.0

150.8 147.4

106.1

151.6158.2

94.7

126.0

43.0

10.0

1.4

31.130.5

15.27.8

2.71.51.41.41.61.0

15.7

33.3 29.3

46.0

69.1

47.3

99.8

47.2

67.9

73.6

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

Mar

ket

Siz

e ($

B)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

New

Iss

ue

Vo

lum

e ($

B)

HY market size ($B) New issue volume ($B)

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Agenda




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Management Focus: To Minimize Risk

Relentless Research and Analysis

Typically visit every company in the portfolio

Internal financial model developed on all credits

Income Statement

Balance Sheet

Cash Flow Analysis

Diversified – 25 different industries

Generally, no more than a 5% position in any one name; typically 1.5% or less

Minimize duration risk

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Sell Discipline

We may sell a security based on these factors:

Fundamental analysis proves incorrect

Bond price is higher than justified

Spread too tight relative to the risk

More downside risk vs. upside, given price/yield of bond

Deterioration of communication with management

Company visit is not allowed

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Buy Discipline

We may buy a security based on these factors: Our understanding of industry fundamentals

Our belief that the company is a leader within the industry

Our belief that the management team is exceptional

Management team owns stock; preferably 10% or more

Earnings are reasonably predictable

Company is aggressively seeking deleveraging opportunities

Free cash flow exceeds amortization schedule

Financial model is critical

Bond represents reasonable value on a relative basis

Positive events: ratings upgrade, buyout, tender offer

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Portfolio Construction

Moderate

•Better Known•Seasoned

Issuer

Conservative

•Yield to Call

Aggressive

•Start up•Construction

Higher Return

0% to 20%

Core Portfolio

30% to 75%

Lower Risk

20% to 50%

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Three Peaks Capital Management, LLC

Lessons to live by

Sell first, ask questions later.

Excess issuance relative to size is a problem, unless the issuer finances hard assets, consolidates debt, or buys back commercial paper or bank loans.

Growth companies are often not bondholder friendly.

Covenants count.

Transparency remains a very critical part of assessing credit value. Regular detailed filings help, but an open door policy with credit analysts goes a long way to establish confidence.

Liquidity first.

Boring is good for bond holders. “Rich or tight bonds can outperform as long as blowups are avoided.”

Dig deep to uncover future blowup candidates. Avoiding the blowups is more important than hitting the home runs.

Caveat emptor – if you cannot understand the credit, don’t own it.

Be suspicious of all companies who have done large mergers, particularly those where one company uses the cash flow from an established company to fund growth. Be leery of spin-offs.

Avoid dividend paying debt deals.

Assets count.

Invest only in those sectors that have traditionally been able to support leverage.

Understand who is borrowing, why they are borrowing, when they will pay off the loan and what bondholders will get in the event of an unforeseen default.

Dot all I’s and cross all T’s. Don’t get scooped, get the scoop!!!

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A Time-tested Strategy


and your investment strategy

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December 31, 2007

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September 30, 2007

Largest Holdings

Las Vegas Sands 6.375%, ‘15

Direct TV Holdings 8.375%, ‘13

CSC Holdings Inc 7.25%, ‘08

Felcor Lodging LP 7.25%, ‘11

HCA Inc 6.75%, ‘13

Mandalay Resort 7.625%, ‘13

Aramark Corp 8.50%, ‘15

Corrections Corp 7.50%, ‘11

Ball Corp 6.875%, ‘12

GSC Holding Corp 8.00%, ‘12

5.77%

5.38%

3.13%

3.10%

2.90%

2.21%

1.99%

1.93%

1.92%

1.79%

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December 31, 2007

Performance data is based on past performance and does not guarantee future results. Current performance may be higher or lower. Data current to the most recent month end is available: 800-437-1020 or www.aquilafunds.com. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total return calculations include changes in share price and reinvestment of dividends and capital gain distributions in a hypothetical investment for the period shown. Class A shares have a maximum sales charge of 4.00%; Class C shares have no initial sales charge, but a 1.00% contingent deferred sales charge applies to Class C shares redeemed within 12 months of purchase. Class Y shares have no initial and no contingent

deferred sales charge and are available only through certain financial institutions. Other classes of shares are offered and their performance will vary due to differences in sales charges and fees. Management has contractually undertaken to waive fees and/or reimburse Fund Expenses through December 31, 2007. Returns would have been less if full management fees and expenses were applied.

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Risk / Return Benefit of Low Correlation Extensive Research & Risk Management Sell Discipline 18 Years of Investment Industry

Experience____________________________________

Class A Shares ATPAXClass C Shares ATPCX

Class Y Shares ATPYXClass I Shares ATIPX

www.aquilafunds.com800-437-1020

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AQUILA INVESTMENT MANAGEMENT LLC

EXPERTISE IN NICHE MARKETSDEDICATED TO PROVIDING SUPERIOR SERVICE

High Yield Corporate Bond FundAQUILA THREE PEAKS HIGH INCOME FUND

Single-State Municipal Bond FundsARIZONA, COLORADO, HAWAII, KENTUCKY, OREGON,

RHODE ISLAND, UTAH

Equity FundAQUILA ROCKY MOUNTAIN EQUITY FUND

CLASS A, C, Y and I SHARES

Before investing in any of the Aquila Group of FundsSM, carefully read about and consider the investment objectives, risks, charges, expenses and other information found in the

Fund prospectus. Obtain a prospectus from your financial professional or contact:

AQUILA GROUP OF FUNDSSM

800-437-1020www.aquilafunds.com

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Conclusion

Supporting your Success

Dedicated Management Team Exceptional Marketing and Service

Team Highly Motivated Teamwork

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AQUILA THREE PEAKS HIGH INCOME FUND

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AQUILASM

Documents

GROUP OF FUNDS THE AQUILA