UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4503
AQUILA MUNICIPAL TRUST
(Exact name of Registrant as specified in charter)
120 West 45th Street, Suite 3600
New York, New York 10036
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
120 West 45th Street, Suite 3600
New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 3/31/16
Date of reporting period: 9/30/16
FORM N-CSRS
ITEM 1. | REPORTS TO STOCKHOLDERS. |
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Semi-Annual Report September 30, 2016 | ||||||||||||||||||||||||||
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Please Save the Date for Your 2017 Shareholder Meeting Thursday, April 20, 2017 Details will be available on our website as the date approaches: www.aquilafunds.com or through your financial professional |
![]() | Aquila Churchill Tax-Free Fund of Kentucky “The Role of Trustees” Serving Kentucky investors since 1987 | ![]() |
November, 2016
Dear Fellow Shareholder:
As you may be aware, the Investment Company Act of 1940 (the “1940 Act”) is the primary federal law governing the structure and operation of mutual funds. It is enforced and regulated by the U.S. Securities and Exchange Commission (the “SEC”) and defines, among other things, certain responsibilities of Trustees.
Under applicable state law, Trustees are charged, as their primary responsibility, with safeguarding the interests of shareholders. As such, your Trustees seek to act in your best interests, putting your interests ahead of their own interests and those of anyone else, in overseeing the policies and procedures of Aquila Churchill Tax-Free Fund of Kentucky (your “Fund”), as well as the services provided by your Fund’s key service providers.
Your Trustees’ key role is to be alert and sensitive to any conflicts of interest. By law, a substantial number of the Trustees must be “independent,” meaning that they have no affiliation with any sponsoring or support organization of the Fund. This requirement is in place in an effort to enhance Trustee impartiality. In order to ensure that your Board of Trustees continually maintains adequate independence, your Trustees complete a questionnaire on an annual basis which is, in turn, reviewed by your Fund’s legal counsel. It is also worthy to note that, at all times, a significant percentage of the Trustees must have been elected by you, the shareholders.
The 1940 Act requires your Board of Trustees to review certain of your Fund’s contracts on at least an annual basis, at which time, the majority of your Trustees, including a majority of the independent Trustees, must be present in person. Moreover, in their review of the contract with your Fund’s adviser, the Trustees seek to consider certain factors and their conclusions are disclosed to you in your Fund’s next annual or semi-annual report (as is the case with this semi-annual report). Your Trustees’ other key responsibilities include oversight of your Fund’s compliance policies and procedures, valuation and risk management.
Your Board of Trustees oversees the business of your Fund through regular quarterly and ad hoc board meetings, committee meetings (which focus on specific subject matters) and frequent communications. These meetings allow Trustees to be brought up-to-date on the affairs of your Fund, ask questions, and deliberate and vote on issues important to your Fund and its shareholders.
Selection and nomination of independent Trustees is by the existing independent Trustees. As detailed in the Nominating Committee Charter which is available on your Fund’s website (www.aquilafunds.com), your Board of Trustees seeks to develop and maintain a board of high quality, independence and integrity to best serve your interests. The Trustees associated with the Aquila Group of Funds are additionally selected on the basis of being accomplished individuals of diverse backgrounds from various parts of the United States, including Kentucky. Through this diversity, we strive to provide your Fund with a broad breadth and balance of knowledge and experience. Biographical and other information on your Board of Trustees is available on our website and, by law, is included in your Fund’s annual report and Statement of Additional Information.
NOT A PART OF THE SEMI-ANNUAL REPORT
Although, not required, Trustees in the Aquila Group of Funds self-impose some additional criteria.
• | In addition to overseeing your Fund, all Trustees are also fellow shareholders. While Trustees, like any investor, must consider, among other things, their own personal investment objectives (including tax benefits afforded the investment by their state of residence) when deciding upon the size of their investment in Aquila Churchill Tax-Free Fund of Kentucky, we believe it is important that each Trustee has “some skin the game.” |
• | Consideration is given to including local residents as Trustees. In this way, the Fund can benefit from their hands-on insight and knowledge of their State. |
In short, your Board of Trustees are your “watchdogs,” looking over operations of Aquila Churchill Tax-Free Fund of Kentucky.
It has been our experience that those who have undertaken to serve as Trustees diligently devote their energies, talents and experience to furthering the interests of you, our shareholders.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsiga.jpg)
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsig2a.jpg)
Diana P. Herrmann, Vice Chair and President
Any information in this Shareholder Letter regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
NOT A PART OF THE SEMI-ANNUAL REPORT
Mutual fund investing involves risk and loss of principal is possible.
The market prices of the Fund’s securities may rise or decline in value due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. When market prices fall, the value of your investment may go down. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
The value of your investment may go down when interest rates rise. A rise in interest rates tends to have a greater impact on the prices of longer term securities. Conversely, when interest rates fall, the value of your investment may rise. Interest rates in the U.S. recently have been historically low, so the Fund faces a heightened risk that interest rates may rise. A general rise in interest rates may cause investors to move out of fixed income securities and could also result in increased redemptions from the Fund.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of underlying securities and their inability to meet their debt obligations.
The value of municipal securities can be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory developments, legislative actions, and by uncertainties and public perceptions concerning these and other factors. The Fund may be affected significantly by adverse economic, political or other events affecting state and other municipal issuers in which it invests, and may be more volatile than a more geographically diverse fund.
If interest rates fall, an issuer may exercise its right to prepay its securities, and the Fund could be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security.
A portion of income may be subject to local, state, Federal and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax.
These risks may result in share price volatility.
Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
Any information in this Semi-Annual Report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes.
NOT A PART OF THE SEMI-ANNUAL REPORT
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (5.5%) | Rating Moody’s, S&P | Value | ||||||
Henderson County, Kentucky | |||||||||
$ | 330,000 | 3.000%, 11/01/20 | Aa3/NR/NR | $ | 350,962 | ||||
Lexington-Fayette Urban | |||||||||
County, Kentucky | |||||||||
3,600,000 | 4.000%, 09/01/29 | Aa2/AA/NR | 4,031,712 | ||||||
4,175,000 | 4.250%, 05/01/23 NPFG Insured | Aa2/AA/NR | 4,185,605 | ||||||
570,000 | 4.000%, 08/01/21 Series B | Aa2/AA/NR | 644,265 | ||||||
Rowan County, Kentucky | |||||||||
400,000 | 3.000%, 06/01/21 AGMC Insured | A1/AA/NR | 428,932 | ||||||
645,000 | 3.000%, 06/01/22 AGMC Insured | A1/AA/NR | 695,813 | ||||||
835,000 | 4.000%, 06/01/30 AGMC Insured | A1/AA/NR | 937,262 | ||||||
865,000 | 4.000%, 06/01/31 AGMC Insured | A1/AA/NR | 963,887 | ||||||
Warren County, Kentucky | |||||||||
615,000 | 4.000%, 06/01/25 | Aa2/AA-/NR | 683,001 | ||||||
635,000 | 4.000%, 06/01/26 | Aa2/AA-/NR | 703,097 | ||||||
660,000 | 4.000%, 06/01/27 | Aa2/AA-/NR | 729,221 | ||||||
Total General Obligation Bonds | 14,353,757 | ||||||||
Revenue Bonds (74.3%) | |||||||||
State Agency (17.5%) | |||||||||
Kentucky Asset & Liability Commission | |||||||||
Federal Highway Notes | |||||||||
1,000,000 | 5.000%, 09/01/22 Series A | A2/AA/A+ | 1,136,760 | ||||||
2,000,000 | 5.250%, 09/01/25 Series A | A2/AA/A+ | 2,441,780 | ||||||
2,000,000 | 5.000%, 09/01/26 Series A | A2/AA/A+ | 2,441,600 | ||||||
1,000,000 | 5.000%, 09/01/27 Series A | A2/AA/A+ | 1,231,670 | ||||||
Kentucky Economic Development | |||||||||
Finance Authority Louisville | |||||||||
Arena Project | |||||||||
2,500,000 | 5.750%, 12/01/28 AGC Insured | A3/AA/NR | 2,638,825 | ||||||
Kentucky Higher Education Student Loan | |||||||||
400,000 | 5.000%, 06/01/24 Senior | ||||||||
Series A AMT | NR/A/A | 454,928 | |||||||
1,235,000 | 3.750%, 06/01/26 Senior | ||||||||
Series A AMT | NR/A/A | 1,255,871 | |||||||
Kentucky Rural Water Finance Corp. | |||||||||
355,000 | 4.600%, 02/01/25 | NR/A+/NR | 370,542 | ||||||
205,000 | 4.250%, 08/01/19 NPFG Insured | A3/AA-/NR | 205,392 | ||||||
210,000 | 4.250%, 08/01/20 NPFG Insured | A3/AA-/NR | 210,401 | ||||||
200,000 | 4.375%, 08/01/22 NPFG Insured | A3/AA-/NR | 200,394 |
1 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
State Agency (continued) | |||||||||
Kentucky Rural Water Finance Corp. | |||||||||
(continued) | |||||||||
240,000 | 4.500%, 08/01/23 NPFG Insured | A3/AA-/NR | $ | 240,504 | |||||
255,000 | 4.500%, 08/01/24 NPFG Insured | A3/AA-/NR | 255,533 | ||||||
290,000 | 4.500%, 08/01/27 NPFG Insured | A3/AA-/NR | 290,592 | ||||||
245,000 | 4.600%, 08/01/28 NPFG Insured | A3/AA-/NR | 245,495 | ||||||
315,000 | 4.625%, 08/01/29 NPFG Insured | A3/AA-/NR | 315,614 | ||||||
375,000 | 4.000%, 02/01/28 Series 2012C | NR/A+/NR | 407,846 | ||||||
305,000 | 4.000%, 02/01/29 Series 2012C | NR/A+/NR | 331,053 | ||||||
435,000 | 4.000%, 02/01/26 Series 2012F | NR/A+/NR | 482,654 | ||||||
450,000 | 4.000%, 02/01/27 Series 2012F | NR/A+/NR | 496,890 | ||||||
465,000 | 4.000%, 02/01/28 Series 2012F | NR/A+/NR | 512,463 | ||||||
490,000 | 4.000%, 02/01/29 Series 2012F | NR/A+/NR | 538,716 | ||||||
Kentucky State Office Building COP | |||||||||
1,640,000 | 5.000%, 06/15/34 | Aa3/NR/NR | 1,938,874 | ||||||
Kentucky State Property and Buildings | |||||||||
Commission | |||||||||
1,020,000 | 5.000%, 11/01/20 | Aa3/A/A+ | 1,100,182 | ||||||
1,000,000 | 5.000%, 10/01/25 | Aa3/A/A+ | 1,207,080 | ||||||
625,000 | 4.000%, 04/01/26 Project 105 | A1/A/A+ | 701,525 | ||||||
655,000 | 4.000%, 04/01/27 Project 105 | A1/A/A+ | 730,122 | ||||||
1,500,000 | 5.000%, 10/01/29 Project 106 | Aa3/A/A+ | 1,783,530 | ||||||
3,000,000 | 5.000%, 08/01/33 Project 108 | Aa3/A/A+ | 3,535,770 | ||||||
5,000,000 | 5.000%, 08/01/32 Project 110 | Aa3/A/A+ | 5,914,450 | ||||||
2,500,000 | 5.000%, 02/01/31 Project 112 | Aa3/A/A+ | 2,989,200 | ||||||
845,000 | 3.000%, 04/01/20 Project 113 | A1/A/A+ | 892,658 | ||||||
875,000 | 3.000%, 04/01/21 Project 113 | A1/A/A+ | 932,951 | ||||||
895,000 | 3.000%, 04/01/22 Project 113 | A1/A/A+ | 961,078 | ||||||
1,055,000 | 2.500%, 10/01/21 Project 114 | Aa3/A/A+ | 1,109,164 | ||||||
1,510,000 | 3.000%, 10/01/22 Project 114 | Aa3/A/A+ | 1,627,584 | ||||||
1,400,000 | 4.000%, 10/01/30 Project 114 | Aa3/A/A+ | 1,558,410 | ||||||
870,000 | 4.000%, 10/01/31 Project 114 | Aa3/A/A+ | 962,020 | ||||||
170,000 | 5.375%, 11/01/23 Unrefunded balance | Aa3/A/NR | 184,629 | ||||||
85,000 | 5.500%, 11/01/28 Unrefunded balance | Aa3/A/NR | 92,494 | ||||||
320,000 | 5.250%, 02/01/28 Unrefunded balance | ||||||||
AGC Insured | NR/AA/NR | 348,662 | |||||||
340,000 | 5.000%, 02/01/29 Unrefunded balance | ||||||||
AGC Insured | NR/AA/NR | 367,540 | |||||||
Total State Agency | 45,643,446 |
2 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Airports (5.2%) | |||||||||
Lexington-Fayette Urban County Airport | |||||||||
Board, Kentucky | |||||||||
$ | 1,555,000 | 5.000%, 07/01/28 2012 Series A AMT | Aa2/AA/NR | $ | 1,835,351 | ||||
400,000 | 5.000%, 07/01/29 2012 Series A AMT | Aa2/AA/NR | 471,396 | ||||||
1,350,000 | 5.000%, 07/01/30 2012 Series A AMT | Aa2/AA/NR | 1,588,532 | ||||||
750,000 | 5.000%, 07/01/31 2012 Series A AMT | Aa2/AA/NR | 881,175 | ||||||
Louisville, Kentucky Regional Airport | |||||||||
Authority | |||||||||
2,070,000 | 5.000%, 07/01/23 AMT | NR/A+/A+ | 2,501,699 | ||||||
2,325,000 | 5.000%, 07/01/26 AMT | NR/A+/A+ | 2,795,022 | ||||||
2,895,000 | 5.000%, 07/01/27 Series A AMT | NR/A+/A+ | 3,439,376 | ||||||
Total Airports | 13,512,551 | ||||||||
Higher Education (6.4%) | |||||||||
Boyle County, Kentucky College | |||||||||
Refunding & Improvement | |||||||||
1,035,000 | 4.500%, 06/01/22 AGC Insured | A3/AA/NR | 1,057,221 | ||||||
200,000 | 4.625%, 06/01/24 AGC Insured | A3/AA/NR | 204,430 | ||||||
Eastern Kentucky University | |||||||||
General Receipts | |||||||||
1,250,000 | 4.000%, 10/01/27 | Aa3/A/NR | 1,371,875 | ||||||
870,000 | 4.500%, 04/01/32 Series A | Aa3/NR/NR | 1,005,224 | ||||||
Kentucky Bond Development Corp. | |||||||||
Industrial Building Revenue Refunding, | |||||||||
City of Paris (Transylvania University | |||||||||
Project) | |||||||||
380,000 | 3.000%, 03/01/20 Series D | NR/A-/NR | 400,277 | ||||||
390,000 | 3.000%, 03/01/21 Series D | NR/A-/NR | 415,705 | ||||||
400,000 | 3.000%, 03/01/22 Series D | NR/A-/NR | 425,660 | ||||||
Lexington-Fayette, Kentucky Urban | |||||||||
County Government Transylvania | |||||||||
University Project | |||||||||
1,390,000 | 4.500%, 03/01/29 | NR/A-/NR | 1,538,925 | ||||||
Morehead State University, Kentucky | |||||||||
General Receipts | |||||||||
1,000,000 | 5.000%, 04/01/29 Series A | Aa3/NR/NR | 1,216,600 | ||||||
1,000,000 | 4.000%, 04/01/31 Series A | Aa3/NR/NR | 1,118,960 |
3 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Higher Education (continued) | |||||||||
Murray State University Project, | |||||||||
Kentucky General Receipts | |||||||||
$ | 1,850,000 | 4.500%, 03/01/30 Series A | Aa3/NR/NR | $ | 2,124,355 | ||||
Northern Kentucky University | |||||||||
General Receipts | |||||||||
1,095,000 | 4.000%, 09/01/21 Series B | Aa3/NR/NR | 1,233,386 | ||||||
1,190,000 | 4.000%, 09/01/22 Series B | Aa3/NR/NR | 1,359,694 | ||||||
University of Kentucky General Receipts | |||||||||
2,000,000 | 4.000%, 04/01/33 | Aa2/AA/NR | 2,221,700 | ||||||
University of Louisville, Kentucky | |||||||||
General Receipts | |||||||||
1,000,000 | 5.000%, 09/01/30 2011 Series A | Aa3/AA-/NR | 1,160,810 | ||||||
Total Higher Education | 16,854,822 | ||||||||
Hospital (15.2%) | |||||||||
City of Ashland, Kentucky, Medical | |||||||||
Center (Ashland Hospital Corp.) | |||||||||
2,000,000 | 5.000%, 02/01/22 Series B | Baa2/BBB/A- | 2,195,940 | ||||||
2,535,000 | 5.000%, 02/01/23 Series B | Baa2/BBB/A- | 2,766,243 | ||||||
805,000 | 4.000%, 02/01/32 Series 2016A | Baa2/BBB/A- | 847,230 | ||||||
2,035,000 | 4.000%, 02/01/36 Series 2016A | Baa2/BBB/A- | 2,110,336 | ||||||
Hardin County, Kentucky, Hardin | |||||||||
Memorial Hospital | |||||||||
735,000 | 5.500%, 08/01/22 AGMC Insured | A2/AA/NR | 877,928 | ||||||
675,000 | 5.500%, 08/01/23 AGMC Insured | A2/AA/NR | 822,541 | ||||||
500,000 | 5.250%, 08/01/24 AGMC Insured | A2/AA/NR | 598,555 | ||||||
Kentucky Bond Development Corp. | |||||||||
Hospital Facilities Revenue Refunding | |||||||||
(St. Elizabeth Medical Center, Inc.) | |||||||||
1,810,000 | 4.000%, 05/01/32 | NR/AA/AA | 2,012,123 | ||||||
Kentucky Economic Development | |||||||||
Finance Authority, Baptist Healthcare | |||||||||
System | |||||||||
4,795,000 | 5.375%, 08/15/24 | A3/NR/A+ | 5,161,338 | ||||||
Kentucky Economic Development | |||||||||
Finance Authority, Catholic Health | |||||||||
2,500,000 | 2.700%, 05/01/39 Series B | A3/A-/BBB+ | 2,606,600 |
4 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Hospital (continued) | |||||||||
Kentucky Economic Development | |||||||||
Finance Authority, Kings Daughter | |||||||||
Medical Center | |||||||||
$ | 1,000,000 | 5.000%, 02/01/30 | Baa2/BBB/A- | $ | 1,071,920 | ||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Government Health | |||||||||
System, Norton Healthcare, Inc. | |||||||||
1,100,000 | 5.000%, 10/01/30 | NR/A-/A | 1,100,000 | ||||||
3,500,000 | 4.000%, 10/01/34 Series A | NR/A-/A | 3,844,540 | ||||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Government, Louisville | |||||||||
Medical Center, Laundry Facility | |||||||||
Project | |||||||||
695,000 | 4.250%, 05/01/23 Series 2012 | NR/A-/NR | 775,314 | ||||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Government, Louisville | |||||||||
Medical Center, Steam & Chilled | |||||||||
Water Plant Project | |||||||||
915,000 | 4.250%, 05/01/22 Series 2012A | NR/A-/NR | 1,035,414 | ||||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Government Revenue | |||||||||
Refunding, Catholic Health Initiatives | |||||||||
1,000,000 | 5.000%, 12/01/30 | A3/A-/BBB+ | 1,120,410 | ||||||
650,000 | 5.000%, 12/01/35 | ||||||||
Unrefunded balance | A3/A-/NR | 718,562 | |||||||
Russell, Kentucky Bon Secours | |||||||||
Health System | |||||||||
3,100,000 | 5.000%, 11/01/26 Series 2013 | A2/A-/A | 3,697,649 | ||||||
Warren County, Kentucky, Warren | |||||||||
County Community Hospital Corp. | |||||||||
4,975,000 | 5.000%, 04/01/28 | NR/A+/NR | 5,722,146 | ||||||
680,000 | 4.000%, 10/01/29 | NR/A+/NR | 726,641 | ||||||
Total Hospital | 39,811,430 | ||||||||
Housing (1.4%) | |||||||||
Kentucky Housing Corporation | |||||||||
Housing Revenue | |||||||||
30,000 | 4.500%, 07/01/25 | Aaa/AAA/NR | 30,049 |
5 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Housing (continued) | |||||||||
Kentucky Housing Corporation | |||||||||
Housing Revenue (continued) | |||||||||
$ | 600,000 | 4.750%, 07/01/26 | Aaa/AAA/NR | $ | 636,882 | ||||
1,570,000 | 4.800%, 07/01/22 AMT | Aaa/AAA/NR | 1,586,140 | ||||||
Kentucky Housing Multifamily | |||||||||
Mortgage Revenue | |||||||||
1,310,000 | 5.000%, 06/01/35 AMT | NR/NR/NR* | 1,316,000 | ||||||
Total Housing | 3,569,071 | ||||||||
Local Public Property (7.6%) | |||||||||
Boyd County, Kentucky Capital Projects | |||||||||
Corp., Revenue Refunding, First | |||||||||
Mortgage, Court Facilities Project | |||||||||
655,000 | 3.000%, 08/01/21 | Aa3/NR/NR | 699,586 | ||||||
Jefferson County, Kentucky Capital | |||||||||
Projects | |||||||||
1,575,000 | 4.250%, 06/01/23 AGMC Insured | Aa3/NR/AA+ | 1,605,634 | ||||||
1,950,000 | 4.375%, 06/01/24 AGMC Insured | Aa3/NR/AA+ | 1,989,370 | ||||||
1,640,000 | 4.375%, 06/01/28 AGMC Insured | Aa3/NR/AA+ | 1,672,029 | ||||||
2,060,000 | 4.375%, 06/01/26 Series A AGMC | ||||||||
Insured | Aa3/NR/AA+ | 2,101,324 | |||||||
1,070,000 | 4.375%, 06/01/27 Series A AGMC | ||||||||
Insured | Aa3/NR/AA+ | 1,091,111 | |||||||
Kentucky Association of Counties | |||||||||
Finance Corp. Financing Program | |||||||||
1,145,000 | 4.250%, 02/01/24 | NR/AA-/NR | 1,263,324 | ||||||
515,000 | 4.000%, 02/01/25 | NR/AA-/NR | 576,692 | ||||||
315,000 | 5.375%, 02/01/27 | NR/AA-/NR | 371,832 | ||||||
330,000 | 5.375%, 02/01/28 | NR/AA-/NR | 388,007 | ||||||
315,000 | 3.000%, 02/01/21 Series B | NR/AA-/NR | 334,971 | ||||||
350,000 | 4.000%, 02/01/22 Series B | NR/AA-/NR | 394,212 | ||||||
Kentucky Bond Corp. Financing Program | |||||||||
915,000 | 5.125%, 02/01/28 | NR/AA-/NR | 1,052,460 | ||||||
Lexington-Fayette Urban County, | |||||||||
Kentucky Public Facilities | |||||||||
500,000 | 4.125%, 10/01/23 NPFG Insured | Aa3/NR/NR | 501,225 | ||||||
500,000 | 4.250%, 10/01/26 NPFG Insured | Aa3/NR/NR | 501,270 |
6 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Local Public Property (continued) | |||||||||
Louisville & Jefferson County, Kentucky | |||||||||
Visitors & Convention Commission, | |||||||||
Kentucky International | |||||||||
Convention Center | |||||||||
$ | 3,090,000 | 4.000%, 06/01/20 | A2/A/NR | $ | 3,372,982 | ||||
River City Parking Authority of | |||||||||
River City, Inc., Kentucky First | |||||||||
Mortgage | |||||||||
1,000,000 | 4.750%, 06/01/27 2013 Series B | Aa2/AA/NR | 1,171,230 | ||||||
Wolfe County, Kentucky Public Properties | |||||||||
Corp., First Mortgage Revenue Refunding, | |||||||||
Justice Center Project | |||||||||
615,000 | 4.000%, 04/01/23 | Aa3/NR/NR | 699,532 | ||||||
Total Local Public Property | 19,786,791 | ||||||||
School Building (8.9%) | |||||||||
Bullitt County, Kentucky School District | |||||||||
Finance Corp. | |||||||||
1,145,000 | 4.500%, 04/01/27 | Aa3/NR/NR | 1,198,506 | ||||||
1,200,000 | 4.500%, 04/01/28 | Aa3/NR/NR | 1,255,536 | ||||||
Campbell County, Kentucky School | |||||||||
District Finance Corp. School Building | |||||||||
340,000 | 3.500%, 08/01/22 | Aa3/NR/NR | 371,181 | ||||||
Fayette County, Kentucky School | |||||||||
District Finance Corp. | |||||||||
3,000,000 | 5.000%, 08/01/31 | Aa3/A+/NR | 3,614,100 | ||||||
515,000 | 4.000%, 08/01/33 Series 2015 D | Aa3/A+/NR | 564,265 | ||||||
1,000,000 | 5.000%, 10/01/27 Series A | A1/A+/NR | 1,185,450 | ||||||
750,000 | 4.250%, 06/01/29 Series A | A1/A+/NR | 821,145 | ||||||
Franklin County, Kentucky School | |||||||||
District Finance Corp. | |||||||||
1,560,000 | 4.000%, 06/01/29 | Aa3/NR/NR | 1,719,869 | ||||||
1,135,000 | 4.000%, 04/01/24 Second Series | Aa3/NR/NR | 1,310,062 | ||||||
Jefferson County, Kentucky School | |||||||||
District Finance Corp. | |||||||||
1,975,000 | 3.000%, 07/01/22 Series A | Aa3/AA-/NR | 2,145,225 | ||||||
805,000 | 5.000%, 04/01/28 Series A | Aa3/AA-/NR | 984,249 | ||||||
1,075,000 | 4.500%, 04/01/32 Series A | Aa3/AA-/NR | 1,241,195 |
7 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
School Building (continued) | |||||||||
Jefferson County, Kentucky School | |||||||||
District Finance Corp. (continued) | |||||||||
$ | 4,000,000 | 4.000%, 07/01/26 Series B | Aa3/AA-/NR | $ | 4,542,440 | ||||
Logan County, Kentucky School | |||||||||
District Finance Corp., Energy | |||||||||
Conservation Revenue Bonds | |||||||||
575,000 | 4.000%, 04/01/33 Series 2016 | Aa3/NR/NR | 632,149 | ||||||
615,000 | 4.000%, 04/01/34 Series 2016 | Aa3/NR/NR | 673,972 | ||||||
Shelby County, Kentucky School District | |||||||||
Finance Corp. School Building | |||||||||
915,000 | 3.000%, 02/01/21††† | Aa3/NR/NR | 975,518 | ||||||
Total School Building | 23,234,862 | ||||||||
Turnpike/Highway (4.6%) | |||||||||
Kentucky State Turnpike Authority | |||||||||
5,000,000 | 5.000%, 07/01/29 Series A | Aa2/AA-/A+ | 5,904,450 | ||||||
4,030,000 | 5.000%, 07/01/30 Series A | Aa2/AA-/A+ | 4,897,498 | ||||||
1,000,000 | 5.000%, 07/01/30 Series A | Aa2/AA-/A+ | 1,179,090 | ||||||
Total Turnpike/Highway | 11,981,038 | ||||||||
Utilities (7.5%) | |||||||||
Campbell & Kenton Counties, Kentucky | |||||||||
(Sanitation District) | |||||||||
2,370,000 | 4.000%, 08/01/27 | Aa3/AA/NR | 2,586,476 | ||||||
1,695,000 | 4.300%, 08/01/24 NPFG Insured | Aa3/AA/NR | 1,699,356 | ||||||
300,000 | 4.300%, 08/01/27 NPFG Insured | Aa3/AA/NR | 300,735 | ||||||
1,450,000 | 4.300%, 08/01/28 NPFG Insured | Aa3/AA/NR | 1,453,045 | ||||||
Kentucky State Municipal Power Agency, | |||||||||
Prairie St. Project | |||||||||
1,000,000 | 5.000%, 09/01/23 AGMC Insured | A2/AA/NR | 1,134,310 | ||||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Sewer District | |||||||||
500,000 | 5.000%, 05/15/28 Series A | Aa3/AA/AA- | 585,245 | ||||||
1,920,000 | 4.500%, 05/15/30 Series A | Aa3/AA/NR | 2,265,120 | ||||||
Northern Kentucky Water District | |||||||||
1,000,000 | 5.000%, 02/01/26 | Aa3/NR/NR | 1,174,460 | ||||||
1,825,000 | 6.000%, 02/01/28 AGMC Insured | Aa3/NR/NR | 1,990,035 |
8 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Utilities (continued) | |||||||||
Owensboro, Kentucky Electric, Light | |||||||||
and Power | |||||||||
$ | 1,000,000 | 5.000%, 01/01/21 AGMC Insured | A2/AA/NR | $ | 1,112,580 | ||||
3,500,000 | 5.000%, 01/01/26 AGMC Insured | ||||||||
Series B | A2/AA/NR | 3,892,840 | |||||||
Owensboro, Kentucky Water Revenue | |||||||||
350,000 | 5.000%, 09/15/27 Unrefunded balance | ||||||||
AGC Insured | A1/NR/NR | 375,344 | |||||||
Owensboro-Daviess County, Kentucky | |||||||||
Regional Water Resource Agency | |||||||||
Wastewater Refunding & Improvement | |||||||||
930,000 | 4.375%, 01/01/27 Series A | ||||||||
Syncora Guarantee, Inc. Insured | NR/A+/NR | 936,780 | |||||||
Total Utilities | 19,506,326 | ||||||||
Total Revenue Bonds | 193,900,337 | ||||||||
Pre-Refunded Bonds (19.3%)†† | |||||||||
Pre-Refunded General | |||||||||
Obligation Bonds (0.4%) | |||||||||
Louisville & Jefferson County, Kentucky | |||||||||
955,000 | 4.200%, 11/01/22 NPFG Insured | Aa1/AA+/AAA | 957,388 | ||||||
Pre-Refunded Revenue Bonds (18.9%) | |||||||||
State Agency (5.9%) | |||||||||
Kentucky Asset & Liability Commission | |||||||||
University of Kentucky Project | |||||||||
500,000 | 5.000%, 10/01/25 Series B | Aa2/AA/NR | 520,745 | ||||||
750,000 | 5.000%, 10/01/26 Series B | Aa2/AA/NR | 781,117 | ||||||
1,000,000 | 5.000%, 10/01/27 Series B | Aa2/AA/NR | 1,041,490 | ||||||
Kentucky State Property and Buildings | |||||||||
Commission | |||||||||
1,205,000 | 5.375%, 11/01/23 Project 90 | NR/NR/NR | 1,314,149 | ||||||
665,000 | 5.500%, 11/01/28 Project 90 | NR/NR/NR | 726,938 | ||||||
2,820,000 | 5.750%, 04/01/24 Project 91 | A1/A/A+ | 3,023,125 | ||||||
2,625,000 | 5.750%, 04/01/29 Project 91 | A1/A/A+ | 2,814,079 | ||||||
2,480,000 | 5.250%, 02/01/28 Project 93 | ||||||||
AGC Insured | NR/AA/NR | 2,726,735 |
9 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
State Agency (continued) | |||||||||
Kentucky State Property and Buildings | |||||||||
Commission (continued) | |||||||||
$ | 2,160,000 | 5.000%, 02/01/29 Project 93 AGC | |||||||
Insured | NR/AA/NR | $ | 2,362,522 | ||||||
Total State Agency | 15,310,900 | ||||||||
Airports (0.8%) | |||||||||
Louisville, Kentucky Regional | |||||||||
Airport Authority | |||||||||
1,060,000 | 5.000%, 07/01/18 AMT | NR/A+/A+ | 1,131,370 | ||||||
1,000,000 | 5.250%, 07/01/23 AGMC | ||||||||
Insured AMT | NR/NR/A+ | 1,070,730 | |||||||
Total Airports | 2,202,100 | ||||||||
Higher Education (4.0%) | |||||||||
Murray State University Project, | |||||||||
Kentucky General Receipts | |||||||||
745,000 | 4.500%, 09/01/23 AMBAC Insured | Aa3/A/NR | 769,607 | ||||||
University of Kentucky General Receipts | |||||||||
885,000 | 4.500%, 10/01/22 | ||||||||
Syncora Guarantee, Inc. Insured | Aa2/AA/NR | 885,000 | |||||||
1,545,000 | 4.500%, 10/01/23 | ||||||||
Syncora Guarantee, Inc. Insured | Aa2/AA/NR | 1,545,000 | |||||||
1,625,000 | 4.500%, 10/01/25 | ||||||||
Syncora Guarantee, Inc. Insured | Aa2/AA/NR | 1,625,000 | |||||||
1,010,000 | 4.500%, 10/01/26 | ||||||||
Syncora Guarantee, Inc. Insured | Aa2/AA/NR | 1,010,000 | |||||||
Western Kentucky University | |||||||||
General Receipts | |||||||||
2,000,000 | 4.200%, 09/01/25 Series A NPFG | ||||||||
Insured | Aa3/AA-/NR | 2,060,660 | |||||||
2,475,000 | 4.200%, 09/01/26 Series A NPFG | ||||||||
Insured | Aa3/AA-/NR | 2,550,067 | |||||||
Total Higher Education | 10,445,334 | ||||||||
Hospital (0.8%) | |||||||||
Louisville & Jefferson County, Kentucky | |||||||||
Metropolitan Government Revenue, | |||||||||
Catholic Health Initiatives | |||||||||
1,715,000 | 5.000%, 12/01/35 | NR/NR/NR* | 2,069,250 |
10 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Local Public Property (0.5%) | |||||||||
Grant County, Kentucky Public Property | |||||||||
Corp. Justice Center Project | |||||||||
$ | 1,000,000 | 4.500%, 12/01/24 | Aa3/NR/NR | $ | 1,041,990 | ||||
Laurel County, Kentucky Public | |||||||||
Property Corp. Justice Center Project | |||||||||
250,000 | 4.625%, 03/01/28 | Aa3/NR/NR | 263,085 | ||||||
Total Local Public Property | 1,305,075 | ||||||||
School Building (3.3%) | |||||||||
Boone County, Kentucky School District | |||||||||
Finance Corp. School Building | |||||||||
Revenue | |||||||||
1,250,000 | 4.125%, 03/01/25 AGMC Insured | Aa3/NR/NR | 1,266,787 | ||||||
Kenton County, Kentucky School | |||||||||
District Finance Corp. | |||||||||
590,000 | 4.250%, 10/01/22 AGMC Insured | Aa3/NR/NR | 590,000 | ||||||
Ohio County, Kentucky School | |||||||||
Building Revenue | |||||||||
790,000 | 4.500%, 05/01/24 | Aa3/NR/NR | 834,682 | ||||||
325,000 | 4.500%, 05/01/25 | Aa3/NR/NR | 343,382 | ||||||
Oldham County, Kentucky School | |||||||||
District Finance Corp. | |||||||||
1,000,000 | 4.500%, 09/01/27 NPFG Insured | Aa3/NR/NR | 1,033,030 | ||||||
Owensboro, Kentucky Independent | |||||||||
School District Finance Corp. School | |||||||||
Building Revenue | |||||||||
890,000 | 4.375%, 09/01/24 | Aa3/NR/NR | 948,473 | ||||||
Pendleton County, Kentucky School | |||||||||
District Finance Corp. School | |||||||||
Building Revenue | |||||||||
730,000 | 4.000%, 02/01/23 NPFG Insured | Aa3/NR/NR | 737,497 | ||||||
Pike County, Kentucky School Building | |||||||||
Revenue | |||||||||
1,355,000 | 4.375%, 10/01/26 NPFG Insured | Aa3/NR/NR | 1,402,208 | ||||||
Spencer County, Kentucky School | |||||||||
District Finance Corp., School | |||||||||
Building Revenue | |||||||||
1,000,000 | 4.500%, 08/01/27 AGMC Insured | Aa3/NR/NR | 1,030,000 |
11 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P | Value | ||||||||
School Building (continued) | |||||||||||
Warren County, Kentucky School | |||||||||||
District Finance Corp. | |||||||||||
$ | 500,000 | 4.375%, 04/01/27 AGMC Insured | Aa3/NR/NR | $ | 525,870 | ||||||
Total School Building | 8,711,929 | ||||||||||
Turnpike/Highway (3.5%) | |||||||||||
Kentucky State Turnpike Authority | |||||||||||
3,500,000 | 5.000%, 07/01/25 | Aa2/AA-/A+ | 3,883,285 | ||||||||
1,000,000 | 5.000%, 07/01/25 | Aa2/AA-/A+ | 1,070,930 | ||||||||
2,750,000 | 5.000%, 07/01/27 | Aa2/AA-/A+ | 2,945,057 | ||||||||
1,100,000 | 5.000%, 07/01/28 | Aa2/AA-/A+ | 1,178,023 | ||||||||
Total Turnpike/Highway | 9,077,295 | ||||||||||
Utilities (0.1%) | |||||||||||
Owensboro, Kentucky Water Revenue | |||||||||||
150,000 | 5.000%, 09/15/27 AGC Insured | A1/NR/NR | 161,706 | ||||||||
Total Pre-Refunded Revenue Bonds | 49,283,589 | ||||||||||
Total Pre-Refunded Bonds | 50,240,977 | ||||||||||
Total Municipal Bonds (cost $246,388,004) | 258,495,071 | ||||||||||
Shares | Short-Term Investment (1.1%) | ||||||||||
2,921,275 | Dreyfus Tax Exempt Cash Management, | ||||||||||
Institutional Shares, 0.55%** | |||||||||||
(cost $2,921,275) | NR/Aaam/NR | 2,921,275 | |||||||||
Total Investments | |||||||||||
(cost $249,309,279-note 4) | 100.2 | % | 261,416,346 | ||||||||
Other assets less liabilities | (0.2 | ) | (439,664 | ) | |||||||
Net Assets | 100.0 | % | $ | 260,976,682 | |||||||
Portfolio Distribution By Quality Rating | Percent of Investments† | ||||||||||
Aaa of Moody’s or AAA of S&P | 0.9 | % | |||||||||
Pre-refunded bonds†† | 19.4 | ||||||||||
Aa of Moody’s or AA of S&P or Fitch | 54.9 | ||||||||||
A of Moody’s or S&P or Fitch | 24.3 | ||||||||||
Not Rated* | 0.5 | ||||||||||
100.0 | % |
12 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
PORTFOLIO ABBREVIATIONS: | ||
AGC - Assured Guaranty Corp. | ||
AGMC - Assured Guaranty Municipal Corp. | ||
AMBAC - American Municipal Bond Assurance Corp. | ||
AMT - Alternative Minimum Tax | ||
COP - Certificates of Participation | ||
NPFG - National Public Finance Guarantee | ||
NR - Not Rated | ||
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) has been determined by the Investment Adviser to have sufficient quality to be ranked in the top credit four ratings if a credit rating were to be assigned by a NRSRO. | |
** | The rate is an annualized seven-day yield at period end. | |
† | Where applicable, calculated using the highest rating of the three NRSROs. | |
†† | Pre-refunded bonds are bonds secured by an escrow account, comprised of U.S. Government Obligations (unless otherwise noted), to retire the bonds at their earliest call date. | |
††† | Security purchased on a delayed delivery or when-issued basis. |
See accompanying notes to financial statements.
13 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2016 (unaudited)
ASSETS | ||||
Investments at value (cost $249,309,279) | $ | 261,416,346 | ||
Interest receivable | 2,984,296 | |||
Receivable for Fund shares sold | 26,997 | |||
Other assets | 19,604 | |||
Total assets | 264,447,243 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 3,087,575 | |||
Payable for Fund shares redeemed | 54,347 | |||
Dividends payable | 178,451 | |||
Management fee payable | 91,174 | |||
Distribution and service fees payable | 2,666 | |||
Accrued expenses payable | 56,348 | |||
Total liabilities | 3,470,561 | |||
NET ASSETS | $ | 260,976,682 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 239,757 | ||
Additional paid-in capital | 248,879,706 | |||
Net unrealized appreciation on investments (note 4) | 12,107,067 | |||
Undistributed net investment income | 236,657 | |||
Accumulated net realized loss on investments | (486,505 | ) | ||
$ | 260,976,682 | |||
CLASS A | ||||
Net Assets | $ | 196,566,331 | ||
Capital shares outstanding | 18,059,196 | |||
Net asset value and redemption price per share | $ | 10.88 | ||
Maximum offering price per share (100/96 of $10.88) | $ | 11.33 | ||
CLASS C | ||||
Net Assets | $ | 10,112,477 | ||
Capital shares outstanding | 929,586 | |||
Net asset value and offering price per share | $ | 10.88 | ||
Redemption price per share (*a charge of 1% is imposed on the | ||||
redemption proceeds, or on the original price, whichever is | ||||
lower, if redeemed during the first 12 months after purchase) | $ | 10.88 | * | |
CLASS I | ||||
Net Assets | $ | 8,594,989 | ||
Capital shares outstanding | 790,004 | |||
Net asset value, offering and redemption price per share | $ | 10.88 | ||
CLASS Y | ||||
Net Assets | $ | 45,702,885 | ||
Capital shares outstanding | 4,196,903 | |||
Net asset value, offering and redemption price per share | $ | 10.89 |
See accompanying notes to financial statements.
14 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 4,669,895 | ||||||
Expenses: | ||||||||
Management fee (note 3) | $ | 529,773 | ||||||
Distribution and service fees (note 3) | 203,640 | |||||||
Transfer and shareholder servicing agent | ||||||||
fees (note 3) | 87,731 | |||||||
Trustees’ fees and expenses (note 7) | 47,466 | |||||||
Legal fees | 27,261 | |||||||
Fund accounting fees | 19,646 | |||||||
Auditing and tax fees | 10,562 | |||||||
Shareholders’ reports | 6,443 | |||||||
Insurance | 5,599 | |||||||
Registration fees and dues | 5,561 | |||||||
Chief compliance officer services (note 3) | 4,491 | |||||||
Custodian fees | 4,367 | |||||||
Miscellaneous | 17,322 | |||||||
Total expenses | 969,862 | |||||||
Net investment income | 3,700,033 | |||||||
| ||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 221,048 | |||||||
Change in unrealized appreciation on | ||||||||
investments | (20,783 | ) | ||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | 200,265 | |||||||
Net change in net assets resulting from | ||||||||
operations | $ | 3,900,298 |
See accompanying notes to financial statements.
15 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2016 | Year Ended | |||||||
(unaudited) | March 31, 2016 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,700,033 | $ | 7,213,387 | ||||
Net realized gain (loss) from | ||||||||
securities transactions | 221,048 | 256,955 | ||||||
Change in unrealized appreciation | ||||||||
on investments | (20,783 | ) | (908,663 | ) | ||||
Change in net assets from | ||||||||
operations | 3,900,298 | 6,561,679 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 10): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,741,590 | ) | (5,606,743 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (100,801 | ) | (218,711 | ) | ||||
Class I Shares: | ||||||||
Net investment income | (115,214 | ) | (237,826 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (724,481 | ) | (1,143,110 | ) | ||||
Change in net assets from | ||||||||
distributions | (3,682,086 | ) | (7,206,390 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 7): | ||||||||
Proceeds from shares sold | 22,037,398 | 42,879,350 | ||||||
Reinvested dividends and | ||||||||
distributions | 2,299,106 | 4,664,954 | ||||||
Cost of shares redeemed | (18,167,277 | ) | (29,466,029 | ) | ||||
Change in net assets from capital | ||||||||
share transactions | 6,169,227 | 18,078,275 | ||||||
Change in net assets | 6,387,439 | 17,433,564 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 254,589,243 | 237,155,679 | ||||||
End of period* | $ | 260,976,682 | $ | 254,589,243 | ||||
*Includes undistributed net investment income of: | $ | 236,657 | $ | 218,710 |
See accompanying notes to financial statements.
16 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (unaudited)
1. Organization
Aquila Churchill Tax-Free Fund of Kentucky (the “Fund”), a series of Aquila Municipal Trust (prior to October 12, 2013, the Fund operated under the name Churchill Tax-Free Fund of Kentucky), a non-diversified, open-end investment company, was organized in March, 1987 as a Massachusetts business trust and commenced operations on May 21, 1987. The Fund is authorized to issue an unlimited number of shares. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. 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: Municipal securities are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. |
b) | Fair value measurements: The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy: |
17 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the valuation inputs, representing 100% of the Fund’s investments, used to value the Fund’s net assets as of September 30, 2016:
Valuation Inputs* | Investments in Securities | ||||
Level 1 – Quoted Prices - Short-term Investment | $ | 2,921,275 | |||
Level 2 – Other Significant Observable | |||||
Inputs — Municipal Bonds | 258,495,071 | ||||
Level 3 – Significant Unobservable Inputs | — | ||||
Total | $ | 261,416,346 |
* See schedule of investments for a detailed listing of securities.
c) | Subsequent events: In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date these financial statements were issued. |
d) | 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. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. |
e) | Federal income taxes: It is the policy of the Fund to continue 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. |
Management has reviewed the tax positions for each of the open tax years (2013–2015) or expected to be taken in the Fund’s 2016 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
18 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
f) | 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 also charged directly to such class on a daily basis. |
g) | 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. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. On March 31, 2016, the Fund decreased additional paid in capital by $112,779, and decreased accumulated realized loss by $112,779. These reclassifications had no effect on net assets or net asset value per share |
i) | The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies”. |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. Under the Advisory and Administration Agreement, the Manager provides all investment management and administrative services to the Fund. The Manager’s services include providing the office of the Fund and all related services as well as managing relationships with all of the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, fund accounting agent, auditors and distributor. 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 at the annual rate of 0.40% on the Fund’s average net assets.
19 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Under a Compliance Agreement with the Manager, the Manager is compensated by the Fund for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
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 distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors LLC (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 distribution fee at the annual rate of 0.15% of the Fund’s average net assets represented by Class A Shares. For the six months ended September 30, 2016, distribution fees on Class A Shares amounted to $147,346 of which the Distributor retained $4,532.
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 September 30, 2016, amounted to $38,958. 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 September 30, 2016, amounted to $12,986. For the six months ended September 30, 2016, the total of these payments with respect to Class C Shares amounted to $51,944 of which the Distributor retained $11,751.
Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed for any fiscal year of the Fund a rate (currently 0.10%), set from time to time by the Board of Trustees, of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, Class I has a Shareholder Services Plan under which it may pay service fees (currently 0.25%) of not more than 0.25% of the average annual net assets represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the six months ended September 30, 2016, these payments were made at the average annual rate of 0.35% of such net assets and amounted to $15,224 of which $4,350 related to the Plan and $10,874 related to the Shareholder Services Plan.
20 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
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 brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Kentucky, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2016, total commissions on sales of Class A Shares amounted to $188,657 of which the Distributor received $16,213.
4. Purchases and Sales of Securities
During the six months ended September 30, 2016, purchases of securities and proceeds from the sales of securities aggregated $45,605,049 and $37,576,893, respectively.
At September 30, 2016, the aggregate tax cost for all securities was $249,258,381. At September 30, 2016, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $12,211,373 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $53,408 for a net unrealized appreciation of $12,157,965.
5. Portfolio Orientation
Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Kentucky, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Kentucky and whatever effects these may have upon Kentucky issuers’ ability to meet their obligations.
21 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2016 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 1,143,383 | $ | 12,487,386 | 1,625,075 | $ | 17,578,663 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 181,642 | 1,981,438 | 371,104 | 4,016,001 | ||||||||||||
Cost of shares redeemed | (651,822 | ) | (7,124,034 | ) | (1,756,446 | ) | (19,003,005 | ) | ||||||||
Net change | 673,203 | 7,344,790 | 239,733 | 2,591,659 | ||||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 120,198 | 1,311,769 | 261,322 | 2,825,198 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 7,841 | 85,497 | 16,671 | 180,361 | ||||||||||||
Cost of shares redeemed | (144,255 | ) | (1,576,041 | ) | (255,887 | ) | (2,765,902 | ) | ||||||||
Net change | (16,216 | ) | (178,775 | ) | 22,106 | 239,657 | ||||||||||
Class I Shares: | ||||||||||||||||
Proceeds from shares sold | 9,651 | 105,000 | 68,656 | 742,565 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 10,357 | 113,059 | 21,748 | 235,360 | ||||||||||||
Cost of shares redeemed | (25,326 | ) | (275,677 | ) | (11,837 | ) | (128,371 | ) | ||||||||
Net change | (5,318 | ) | (57,618 | ) | 78,567 | 849,554 | ||||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 745,033 | 8,133,243 | 2,005,739 | 21,732,924 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 10,901 | 119,112 | 21,532 | 233,232 | ||||||||||||
Cost of shares redeemed | (840,041 | ) | (9,191,525 | ) | (698,447 | ) | (7,568,751 | ) | ||||||||
Net change | (84,107 | ) | (939,170 | ) | 1,328,824 | 14,397,405 | ||||||||||
Total transactions in Fund | ||||||||||||||||
shares | 567,562 | $ | 6,169,227 | 1,669,230 | $ | 18,078,275 |
22 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
7. Trustees’ Fees and Expenses
For the six months ended September 30, 2016, there were 9 Trustees, one of whom is affiliated with the Manager and is not paid any fees. The total amount of Trustees’ service fees (for carrying out their responsibilities) and attendance fees paid during the six months ended September 30, 2016 was $38,325. Attendance fees are paid to those in attendance at regularly scheduled quarterly Board Meetings and meetings of the independent Trustees held prior to each quarterly Board Meeting, as well as additional meetings (such as Audit, Nominating, Shareholder and special meetings). Trustees are reimbursed for their expenses such as travel, accommodations and meals incurred in connection with attendance at Board Meetings and at the Annual Meeting of Shareholders. For the six months ended September 30, 2016, such meeting-related expenses amounted to $9,141.
8. Securities Traded on a When-Issued Basis
The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
9. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. Dividends and capital gains distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and Commonwealth of Kentucky income taxes. Due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax. As a result of the passage of the Regulated Investment Company Modernization Act of 2010 (the “Act”), losses incurred in this fiscal year and beyond retain their character as short-term or long-term, have no expiration date and are utilized before capital losses incurred prior to the enactment of the Act. At March 31, 2016, the Fund had capital loss carryforwards of $654,083 of which $175,082 expires in 2017 and $479,001 has no expiration and retains its character of short-term.
23 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
The tax character of distributions was as follows:
Year | Year | |||||||
Ended | Ended | |||||||
March 31, 2016 | March 31, 2015 | |||||||
Net tax-exempt income | $ | 7,178,304 | $ | 7,125,154 | ||||
Ordinary Income | 28,086 | – | ||||||
$ | 7,206,390 | $ | 7,125,154 |
As of March 31, 2016, the components of distributable earnings on a tax basis were as follows:
Accumulated net realized loss | $ | (654,083 | ) | |||||
Unrealized appreciation | 12,271,735 | |||||||
Undistributed tax-exempt income | 178,062 | |||||||
Other temporary differences | (156,707 | ) | ||||||
$ | 11,639,007 |
The difference between book basis and tax basis undistributed income is due to the timing difference, and other temporary differences, in recognizing dividends paid and the tax treatment of market discount amortization.
24 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months Ended | Year | Year | Year | Three Months | Year Ended December 31, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.97 | $ | 11.07 | $ | 10.84 | $ | 10.26 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.16 | 0.32 | 0.33 | 0.34 | 0.08 | 0.36 | 0.39 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | – | (0.03 | ) | 0.26 | (0.32 | ) | (0.10 | ) | 0.23 | 0.58 | ||||||||||||||||||
Total from investment operations | 0.16 | 0.29 | 0.59 | 0.02 | (0.02 | ) | 0.59 | 0.97 | ||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.32 | ) | (0.33 | ) | (0.34 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.16 | ) | (0.32 | ) | (0.33 | ) | (0.34 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.88 | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.97 | $ | 11.07 | $ | 10.84 | ||||||||||||||
Total return (not reflecting sales charge) | 1.41 | %(2) | 2.75 | % | 5.61 | % | 0.21 | % | (0.14 | )%(2) | 5.53 | % | 9.64 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 197 | $ | 189 | $ | 187 | $ | 188 | $ | 215 | $ | 219 | $ | 199 | ||||||||||||||
Ratio of expenses to average net assets | 0. 73 | %(3) | 0.73 | % | 0.78 | % | 0.80 | %(4) | 0.77 | %(3) | 0.76 | % | 0.77 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.83 | %(3) | 3.00 | % | 3.07 | % | 3.18 | %(4) | 3.11 | %(3) | 3.30 | % | 3.73 | % | ||||||||||||||
Portfolio turnover rate | 15 | %(2) | 7 | % | 14 | % | 9 | % | 2 | %(2) | 12 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.76% and 3.22%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
25 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months Ended | Year | Year | Year | Three Months | Year Ended December 31, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.96 | $ | 11.07 | $ | 10.83 | $ | 10.25 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | �� | 0.11 | 0.23 | 0.24 | 0.25 | 0.06 | 0.27 | 0.30 | ||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.01 | (0.03 | ) | 0.26 | (0.32 | ) | (0.11 | ) | 0.24 | 0.58 | ||||||||||||||||||
Total from investment operations | 0.12 | 0.20 | 0.50 | (0.07 | ) | (0.05 | ) | 0.51 | 0.88 | |||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.25 | ) | (0.06 | ) | (0.27 | ) | (0.30 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.25 | ) | (0.06 | ) | (0.27 | ) | (0.30 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.88 | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.96 | $ | 11.07 | $ | 10.83 | ||||||||||||||
Total return (not reflecting CDSC) | 1.07 | %(2) | 1.88 | % | 4.72 | % | (0.64 | )% | (0.44 | )%(2) | 4.73 | % | 8.72 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 10 | $ | 10 | $ | 10 | $ | 10 | $ | 12 | $ | 13 | $ | 9 | ||||||||||||||
Ratio of expenses to average net assets | 1.59 | %(3) | 1.58 | % | 1.63 | % | 1.65 | %(4) | 1.62 | %(3) | 1.61 | % | 1.62 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.98 | %(3) | 2.14 | % | 2.21 | % | 2.33 | %(4) | 2.26 | %(3) | 2.43 | % | 2.87 | % | ||||||||||||||
Portfolio turnover rate | 15 | %(2) | 7 | % | 14 | % | 9 | % | 2 | %(2) | 12 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.61% and 2.37%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
26 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class I | ||||||||||||||||||||||||||||
Six Months Ended | Year | Year | Year | Three Months | Year Ended December 31, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.97 | $ | 11.07 | $ | 10.83 | $ | 10.25 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.15 | 0.31 | 0.32 | 0.32 | 0.08 | 0.34 | 0.37 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.01 | (0.03 | ) | 0.26 | (0.33 | ) | (0.10 | ) | 0.24 | 0.58 | ||||||||||||||||||
Total from investment operations | 0.16 | 0.28 | 0.58 | (0.01 | ) | (0.02 | ) | 0.58 | 0.95 | |||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | (0.08 | ) | (0.34 | ) | (0.37 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.15 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | (0.08 | ) | (0.34 | ) | (0.37 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.88 | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.97 | $ | 11.07 | $ | 10. 83 | ||||||||||||||
Total return | 1.43 | %(2) | 2.61 | % | 5.46 | % | (0.05 | )% | (0.18 | )%(2) | 5.47 | % | 9.48 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 9 | $ | 9 | $ | 8 | $ | 7 | $ | 7 | $ | 7 | $ | 7 | ||||||||||||||
Ratio of expenses to average net assets | 0.87 | %(3) | 0.87 | % | 0.92 | % | 0.96 | %(4) | 0.94 | %(3) | 0.91 | % | 0.92 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.69 | %(3) | 2.86 | % | 2.93 | % | 3.02 | %(4) | 2.94 | %(3) | 3.15 | % | 3.58 | % | ||||||||||||||
Portfolio turnover rate | 15 | %(2) | 7 | % | 14 | % | 9 | % | 2 | %(2) | 12 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.92% and 3.06%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
27 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months Ended | Year | Year | Year | Three Months | Year Ended December 31, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.98 | $ | 11.08 | $ | 10.84 | $ | 10.26 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.16 | 0.34 | 0.35 | 0.35 | 0.09 | 0.38 | 0.41 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.01 | (0.03 | ) | 0.26 | (0.33 | ) | (0.10 | ) | 0.24 | 0.58 | ||||||||||||||||||
Total from investment operations | 0.17 | 0.31 | 0.61 | 0.02 | (0.01 | ) | 0.62 | 0.99 | ||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | (0.09 | ) | (0.38 | ) | (0.41 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.16 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | (0.09 | ) | (0.38 | ) | (0.41 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.89 | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.98 | $ | 11.08 | $ | 10.84 | ||||||||||||||
Total return | 1. .58 | %. (2) | 2.92 | % | 5.77 | % | 0.27 | % | (0.10 | )%(2) | 5.78 | % | 9.81 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 46 | $ | 47 | $ | 32 | $ | 29 | $ | 35 | $ | 34 | $ | 33 | ||||||||||||||
Ratio of expenses to average net assets | 0.58 | %(3) | 0.58 | % | 0.63 | % | 0.65 | %(4) | 0.62 | %(3) | 0.61 | % | 0.62 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.99 | (3)% | 3.15 | % | 3.21 | % | 3.33 | %(4) | 3.26 | %(3) | 3.45 | % | 3.89 | % | ||||||||||||||
Portfolio turnover rate | 15 | %. (2) | 7 | % | 14 | % | 9 | % | 2 | %(2) | 12 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.61% and 3.37%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
28 | Aquila Churchill Tax-Free Fund of Kentucky
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution (12b-1) and/or service fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2016 and held for the six months ended September 30, 2016.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2016
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | 1.41% | $1,000.00 | $1,014.10 | $3.69 |
Class C | 1.07% | $1,000.00 | $1,010.70 | $8.01 |
Class I | 1.43% | $1,000.00 | $1,014.30 | $4.39 |
Class Y | 1.58% | $1,000.00 | $1,015.80 | $2.93 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized; as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.73%, 1.59%, 0.87% and 0.58% for the Fund’s Class A, C, I and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
29 | Aquila Churchill Tax-Free Fund of Kentucky
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2016
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,021.41 | $3.70 |
Class C | 5.00% | $1,000.00 | $1,017.10 | $8.04 |
Class I | 5.00% | $1,000.00 | $1,020.71 | $4.41 |
Class Y | 5.00% | $1,000.00 | $1,022.16 | $2.94 |
(1) | Expenses are equal to the annualized expense ratio of 0.73%, 1.59%, 0.87% and 0.58% for the Fund’s Class A, C, I and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
30 | Aquila Churchill Tax-Free Fund of Kentucky
Information Available (unaudited)
Much of the information that the funds in the Aquila Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent your Fund’s entire list of portfolio securities twice a year in the semi-annual and annual reports you receive. Additionally, under Fund policies, the Manager publicly discloses the complete schedule of the Fund’s portfolio holdings, as of each calendar quarter, generally by the 15th day after the end of each calendar quarter. Such information remains accessible until the next schedule is made publicly available. You may obtain a copy of the Fund’s portfolio holdings schedule for the most recently completed period by visiting the Fund’s website at www.aquilafunds.com. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2016, the Fund did not vote any proxies. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at www.sec.gov.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the Internal Revenue Code. No action on the part of shareholders is required.
For the fiscal year ended March 31, 2016, $7,178,304 of dividends paid by Aquila Churchill Tax-Free Fund of Kentucky, constituting 99.6% of total dividends paid, were exempt-interest dividends; and the balance was ordinary income.
Prior to February 15, 2017, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2016 calendar year.
31 | Aquila Churchill Tax-Free Fund of Kentucky
Additional Information (unaudited)
Renewal of the Advisory and Administration Agreement
Aquila Investment Management LLC (the “Manager”) serves as the investment adviser to the Fund pursuant to an Advisory and Administration Agreement (the “Advisory Agreement”). In order for the Manager to remain the investment adviser of the Fund, the Trustees of the Fund must determine annually whether to renew the Advisory Agreement for the Fund.
In considering whether to approve the renewal of the Advisory Agreement, the Trustees requested and obtained such information as they deemed reasonably necessary. Contract review materials were provided to the Trustees in August, 2016. The independent Trustees met telephonically on August 30, 2016 and in person on September 18, 2016 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager. They also considered information presented in a report prepared by an independent consultant with respect to the Fund’s fees, expenses and investment performance, which included comparisons of the Fund’s investment performance against peers and the Fund’s benchmark and comparisons of the advisory fee payable under the Advisory Agreement against the advisory fees paid by the Fund’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Fund provided to the Trustees at each regularly scheduled meeting.
At the meeting held on September 18, 2016, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Fund, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2017. In considering the renewal of the Advisory Agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the renewal of the Advisory Agreement.
The nature, extent, and quality of the services provided by the Manager
The Trustees considered the nature, extent and quality of the services that had been provided by the Manager to the Fund, taking into account the investment objectives and strategies of the Fund. The Trustees reviewed the terms of the Advisory Agreement.
The Trustees reviewed the Manager’s investment approach for the Fund and its research process. The Trustees considered that the Manager had provided all advisory and administrative services to the Fund that the Trustees deemed necessary or appropriate, including the specific services that the Trustees have determined are required for the Fund, given that it seeks to provide shareholders with as high a level of current income exempt from Kentucky state and regular Federal income taxes as is consistent with preservation of capital. The Trustees considered the personnel of the Manager who provide investment management services to the Fund. The Manager has employed Mr. Royden Durham and Mr. Todd Curtis as co-portfolio managers for the Fund and has established facilities and capabilities for credit analysis of the Fund’s portfolio securities. The Trustees noted the extensive experience of the co-portfolio managers. They considered that Mr. Durham is based in Louisville, Kentucky and that he has a comprehensive understanding regarding the economy of the State of Kentucky and the securities in which the Fund invests, including those securities with less than the highest ratings from the rating agencies. The Trustees also noted that the Fund did not own any Puerto Rico municipal bonds during the review period.
32 | Aquila Churchill Tax-Free Fund of Kentucky
The Trustees noted that the Manager has additionally provided all administrative services to the Fund and provided the Fund with personnel (including Fund officers) and other resources that are necessary for the Fund’s business management and operations. The Trustees considered the nature and extent of the Manager’s supervision of third-party service providers, including the Fund’s fund accountant, shareholder servicing agent and custodian.
Based on these considerations, the Trustees concluded that the nature, extent and quality of services that had been provided by the Manager to the Fund were satisfactory and consistent with the terms of the Advisory Agreement.
The investment performance of the Fund
The Trustees reviewed the Fund’s performance (Class A shares) and compared its performance to the performance of:
• | the funds in the Fund’s peer group (the “Peer Group”), as selected by the independent consultant (four Kentucky intermediate and long municipal bond funds, as classified by Morningstar; three of the funds charge a front-end sales charge and one fund is a no-load fund); |
• | the funds in the Fund’s product category for performance (the “Product Category for Performance”) (all funds in the Peer Group and, without duplication, all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. |
The Trustees considered that the materials included in the Consultant’s Report indicated that the Fund’s average annual total return was lower than the average annual total return of the funds in the Peer Group for each of the one, three, five and ten-year periods ended June 30, 2016. The Trustees also considered that, as reflected in the Consultant’s Report, the Fund’s average annual total return was higher than the average annual total return of the funds in the Product Category for Performance for each of the five and ten-year periods ended June 30, 2016, but lower than the average annual total return of the funds in the Product Category for Performance for each of the one and three-year periods ended June 30, 2016. The Trustees further considered that the Fund outperformed its benchmark index for the three and five year-periods but underperformed its benchmark index for the one and ten-year periods, all as of June 30, 2016. The Trustees noted that a no-load fund was included in the Peer Group and considered the impact of the inclusion of such fund in the average annual return of the funds in the Peer Group. The Trustees considered that, as reflected in the Consultant’s Report, the Fund was in the first quintile on a risk-adjusted basis for the three and five year periods ended June 30, 2016 (as evidenced by its Sharpe ratio) when compared to the funds in the Product Category for Performance. The Trustees also noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees or expenses.
33 | Aquila Churchill Tax-Free Fund of Kentucky
The Trustees discussed the Fund’s performance record with the Manager and considered the Manager’s view that the Fund’s performance, as compared to its peer group, was explained in part by the Fund’s generally higher-quality portfolio and lower duration. The Trustees also considered the surge in refunding of portfolio securities during the period and the Manager’s current goal to seek to slightly lengthen the average maturity of the Fund’s portfolio.
The Trustees considered the Fund’s investment performance to be consistent with the investment objectives of the Fund. Evaluation of the investment performance of the Fund indicated to the Trustees that renewal of the Advisory Agreement would be appropriate.
Advisory Fees and Fund Expenses
The Trustees reviewed the Fund’s advisory fees and expenses and compared them to the advisory fee and expense data for:
• | the funds in the Peer Group (as defined above); and |
• | the funds in the product category for expenses (the “Product Category for Expenses”) (Morningstar Single-State Intermediate Municipal Bond Funds and Morningstar Single State Long Municipal Bond Funds from states within which 4-7 mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Fund’s contractual advisory fee was less than the average and median contractual advisory fees of the funds in the Peer Group (at the Fund’s current asset level) and lower than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses (at various asset levels). They also noted that the Fund’s management fee and expenses (for Class A shares) were lower than the average actual management fee and expenses, respectively, of the funds in both the Product Category for Expenses and the Peer Group, respectively (after giving effect to fee waivers and expense reimbursements in effect for those funds).
The Trustees reviewed management fees charged by the Manager to its other clients. It was noted that the Manager does not have any other clients except for other funds in the Aquila Group of Funds. The Trustees noted that in most instances the fee rates for those clients were comparable to the fees paid to the Manager with respect to the Fund. In evaluating the fees associated with the other funds, the Trustees took into account the respective demands, resources and complexity associated with the Fund and those funds.
The Trustees concluded that the advisory fee and expenses of the Fund were reasonable in relation to the nature and quality of the services provided by the Manager to the Fund.
34 | Aquila Churchill Tax-Free Fund of Kentucky
Profitability
The Trustees received materials from the Manager and the independent consultant related to profitability. The Manager provided information which showed the profitability to the Manager of its services to the Fund, as well as the profitability of Aquila Distributors LLC of distribution services provided to the Fund. The independent consultant provided publicly available data regarding the profitability of other asset managers in comparison to the overall profitability of the Manager.
The Trustees considered the information provided by the Manager regarding the profitability of the Manager with respect to the advisory services provided by the Manager to the Fund, including the methodology used by the Manager in allocating certain of its costs to the management of the Fund. The Trustees also considered information regarding the profitability of the Manager provided to the Trustees by the independent consultant. The Trustees concluded that profitability to the Manager with respect to the advisory services provided to the Fund did not argue against approval of the fees to be paid under the Advisory Agreement.
The extent to which economies of scale would be realized as the Fund grows
The Trustees considered the extent to which the Manager may realize economies of scale or other efficiencies in managing the Fund. The Trustees considered that the materials indicated that the Fund’s fees are already generally lower than those of its peers, including those funds with breakpoints. The Trustees noted that the Manager’s profitability also may be an indicator of the availability of any economies of scale. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Fund.
Benefits derived or to be derived by the Manager and its affiliate from the relationship with the Fund
The Trustees observed that, as is generally true of most fund complexes, the Manager and its affiliates, by providing services to a number of funds including the Fund, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that produces efficiencies and increased profitability for the Manager and its affiliates, it also makes their services available to the Fund at favorable levels of quality and cost which are more advantageous to the Fund than would otherwise have been possible.
35 | Aquila Churchill Tax-Free Fund of Kentucky
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Board of Trustees
John C. Lucking, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
Grady Gammage, Jr.
Glenn P. O’Flaherty
James R. Ramsey
Laureen L. White
Officers
Diana P. Herrmann, President
Charles E. Childs, III, Executive Vice President and Secretary
Marie E. Aro, Senior Vice President
Paul G. O’Brien, Senior Vice President
Todd W. Curtis, Senior Vice President
and Co-Portfolio Manager
Royden P. Durham, Vice President
and Co-Portfolio Manager
Brandon M. Moody, Vice President
Randall S. Fillmore, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer and Treasurer
Distributor
AQUILA DISTRIBUTORS LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Transfer and Shareholder Servicing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
THE BANK OF NEW YORK MELLON
225 Liberty Street
New York, New York 10286
Further information is contained in the Prospectus,
which must precede or accompany this report.
![]() | ||||||||||||||||||||||||||
Semi-Annual Report September 30, 2016 | ||||||||||||||||||||||||||
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Please Save the Date for Your 2017 Shareholder Meeting Wednesday, April 26, 2017 Providence, Rhode Island Convention Center Details will be available on our website as the date approaches: www.aquilafunds.com or through your financial professional |
![]() | Aquila Narragansett Tax-Free Income Fund “The Role of Trustees” Serving Rhode Island investors since 1992 | ![]() |
November, 2016
Dear Fellow Shareholder:
As you may be aware, the Investment Company Act of 1940 (the “1940 Act”) is the primary federal law governing the structure and operation of mutual funds. It is enforced and regulated by the U.S. Securities and Exchange Commission (the “SEC”) and defines, among other things, certain responsibilities of Trustees.
Under applicable state law, Trustees are charged, as their primary responsibility, with safeguarding the interests of shareholders. As such, your Trustees seek to act in your best interests, putting your interests ahead of their own interests and those of anyone else, in overseeing the policies and procedures of Aquila Narragansett Tax-Free Income Fund (your “Fund”), as well as the services provided by your Fund’s key service providers.
Your Trustees’ key role is to be alert and sensitive to any conflicts of interest. By law, a substantial number of the Trustees must be “independent,” meaning that they have no affiliation with any sponsoring or support organization of the Fund. This requirement is in place in an effort to enhance Trustee impartiality. In order to ensure that your Board of Trustees continually maintains adequate independence, your Trustees complete a questionnaire on an annual basis which is, in turn, reviewed by your Fund’s legal counsel. It is also worthy to note that, at all times, a significant percentage of the Trustees must have been elected by you, the shareholders.
The 1940 Act requires your Board of Trustees to review certain of your Fund’s contracts on at least an annual basis, at which time, the majority of your Trustees, including a majority of the independent Trustees, must be present in person. Moreover, in their review of the contracts with your Fund’s adviser and sub-adviser, the Trustees seek to consider certain factors and their conclusions are disclosed to you in your Fund’s next annual or semi-annual report (as is the case with this semi-annual report). Your Trustees’ other key responsibilities include oversight of your Fund’s compliance policies and procedures, valuation and risk management.
Your Board of Trustees oversees the business of your Fund through regular quarterly and ad hoc board meetings, committee meetings (which focus on specific subject matters) and frequent communications. These meetings allow Trustees to be brought up-to-date on the affairs of your Fund, ask questions, and deliberate and vote on issues important to your Fund and its shareholders.
Selection and nomination of independent Trustees is by the existing independent Trustees. As detailed in the Nominating Committee Charter which is available on your Fund’s website (www.aquilafunds.com), your Board of Trustees seeks to develop and maintain a board of high quality, independence and integrity to best serve your interests. The Trustees associated with the Aquila Group of Funds are additionally selected on the basis of being accomplished individuals of diverse backgrounds from various parts of the United States, including Rhode Island. Through this diversity, we strive to provide your Fund with a broad breadth and balance of knowledge and experience. Biographical and other information on your Board of Trustees is available on our website and, by law, is included in your Fund’s annual report and Statement of Additional Information.
NOT A PART OF THE SEMI-ANNUAL REPORT
Although, not required, Trustees in the Aquila Group of Funds self-impose some additional criteria.
• | In addition to overseeing your Fund, all Trustees are also fellow shareholders. While Trustees, like any investor, must consider, among other things, their own personal investment objectives (including tax benefits afforded the investment by their state of residence) when deciding upon the size of their investment in Aquila Narragansett Tax-Free Income Fund, we believe it is important that each Trustee has “some skin the game.” |
• | Consideration is given to including local residents as Trustees. In this way, the Fund can benefit from their hands-on insight and knowledge of their State. |
In short, your Board of Trustees are your “watchdogs,” looking over operations of Aquila Narragansett Tax-Free Income Fund.
It has been our experience that those who have undertaken to serve as Trustees diligently devote their energies, talents and experience to furthering the interests of you, our shareholders.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsigb.jpg)
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsig2b.jpg)
Diana P. Herrmann, Vice Chair and President
Any information in this Shareholder Letter regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
NOT A PART OF THE SEMI-ANNUAL REPORT
Mutual fund investing involves risk and loss of principal is possible.
The market prices of the Fund’s securities may rise or decline in value due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. When market prices fall, the value of your investment may go down. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
The value of your investment may go down when interest rates rise. A rise in interest rates tends to have a greater impact on the prices of longer term securities. Conversely, when interest rates fall, the value of your investment may rise. Interest rates in the U.S. recently have been historically low, so the Fund faces a heightened risk that interest rates may rise. A general rise in interest rates may cause investors to move out of fixed income securities and could also result in increased redemptions from the Fund.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of underlying securities and their inability to meet their debt obligations.
The value of municipal securities can be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory developments, legislative actions, and by uncertainties and public perceptions concerning these and other factors. The Fund may be affected significantly by adverse economic, political or other events affecting state and other municipal issuers in which it invests, and may be more volatile than a more geographically diverse fund.
If interest rates fall, an issuer may exercise its right to prepay its securities, and the Fund could be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security.
A portion of income may be subject to local, state, Federal and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax.
These risks may result in share price volatility.
Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
Any information in this Semi-Annual Report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes.
NOT A PART OF THE SEMI-ANNUAL REPORT
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (27.9%) | Rating Moody’s, S&P and Fitch | Value | ||||||
Barrington, Rhode Island | |||||||||
$ | 1,120,000 | 2.500%, 08/01/25 | Aa1/NR/NR | $ | 1,183,493 | ||||
Bristol, Rhode Island | |||||||||
2,200,000 | 4.000%, 02/15/26 AGC Insured | Aa2/AA+/NR | 2,340,822 | ||||||
2,000,000 | 4.375%, 02/15/29 AGC Insured | Aa2/AA+/NR | 2,143,480 | ||||||
Coventry, Rhode Island | |||||||||
500,000 | 3.375%, 11/01/21 AGMC Insured | A1/NR/NR | 542,050 | ||||||
1,605,000 | 3.625%, 03/15/27 MAC Insured | A1/AA/NR | 1,771,246 | ||||||
Cranston, Rhode Island | |||||||||
1,325,000 | 4.000%, 07/01/28 | A1/AA-/AA+ | 1,527,990 | ||||||
750,000 | 4.300%, 07/01/30 AGMC Insured | ||||||||
Series 2010 A | A1/AA/AA+ | 819,765 | |||||||
1,515,000 | 4.250%, 07/15/24 BAMI Insured | ||||||||
Series B | A1/AA/AA+ | 1,761,733 | |||||||
1,570,000 | 4.250%, 07/15/25 BAMI Insured | ||||||||
Series B | A1/AA/AA+ | 1,840,637 | |||||||
Cumberland, Rhode Island | |||||||||
1,000,000 | 4.250%, 08/01/17 AGMC Insured | Aa3/AA/NR | 1,027,120 | ||||||
600,000 | 4.250%, 08/01/18 AGMC Insured | Aa3/AA/NR | 635,454 | ||||||
500,000 | 4.250%, 11/01/27 Series 2011 A | NR/AA/NR | 569,010 | ||||||
500,000 | 4.625%, 11/01/31 Series 2011 A | NR/AA/NR | 573,925 | ||||||
East Providence, Rhode Island Refunding | |||||||||
2,500,000 | 4.550%, 05/15/30 AGMC Insured | A2/AA/NR | 2,746,650 | ||||||
Hopkinton, Rhode Island | |||||||||
500,000 | 4.375%, 08/15/31 | Aa3/NR/NR | 559,660 | ||||||
Johnston, Rhode Island | |||||||||
1,020,000 | 3.450%, 06/01/29 Series A | A3/AA-/NR | 1,084,199 | ||||||
1,020,000 | 3.700%, 06/01/33 Series A | A3/AA-/NR | 1,084,291 | ||||||
Lincoln, Rhode Island | |||||||||
2,245,000 | 3.500%, 08/01/24 Series A | Aa2/NR/AA | 2,539,768 | ||||||
2,225,000 | 3.500%, 08/01/25 Series A | Aa2/NR/AA | 2,530,292 | ||||||
Narragansett, Rhode Island | |||||||||
1,025,000 | 3.500%, 07/15/28 | Aa2/AA+/NR | 1,153,299 | ||||||
North Kingstown, Rhode Island | |||||||||
1,040,000 | 3.000%, 04/15/24 Series A | Aa2/AA+/NR | 1,123,876 | ||||||
North Smithfield, Rhode Island | |||||||||
825,000 | 3.000%, 06/15/26 Series A | Aa2/NR/NR | 912,698 | ||||||
Pawtucket, Rhode Island | |||||||||
1,950,000 | 4.500%, 07/15/26 AGC Insured | A3/NR/NR | 2,108,535 |
1 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Pawtucket, Rhode Island (continued) | |||||||||
$ | 1,500,000 | 4.750%, 07/15/29 AGC Insured | A3/NR/NR | $ | 1,627,410 | ||||
1,010,000 | 4.000%, 11/01/25 AGMC Insured | A2/AA/NR | 1,130,978 | ||||||
Providence, Rhode Island | |||||||||
1,500,000 | 5.000%, 01/15/23 Series 2010 A | ||||||||
AGMC Insured Refunding | A2/AA/NR | 1,664,055 | |||||||
1,500,000 | 5.000%, 01/15/26 Series 2010 A | ||||||||
AGMC Insured Refunding | A2/AA/NR | 1,653,750 | |||||||
975,000 | 3.625%, 01/15/29 Series A | ||||||||
AGMC Insured | A2/AA/BBB- | 1,014,136 | |||||||
2,510,000 | 3.750%, 01/15/30 Series A | ||||||||
AGMC Insured | A2/AA/BBB- | 2,619,838 | |||||||
1,000,000 | 3.750%, 01/15/32 Series A | ||||||||
AGMC Insured | A2/AA/BBB- | 1,036,790 | |||||||
500,000 | 4.000%, 07/15/19 Series A Refunding | Baa1/BBB/NR | 536,420 | ||||||
Rhode Island State & Providence | |||||||||
Plantations Consolidated Capital | |||||||||
Development Loan | |||||||||
2,000,000 | 3.750%, 11/01/23 Series A | Aa2/AA/AA | 2,306,660 | ||||||
2,110,000 | 4.250%, 10/15/25 Series A | Aa2/AA/AA | 2,487,943 | ||||||
2,000,000 | 3.000%, 05/01/31 Series A | Aa2/AA/AA | 2,035,040 | ||||||
2,000,000 | 3.000%, 05/01/32 Series A | Aa2/AA/AA | 2,016,580 | ||||||
1,150,000 | 4.000%, 10/15/24 Series B | Aa2/AA/AA | 1,322,971 | ||||||
1,750,000 | 3.250%, 10/15/31 Series B | Aa2/AA/AA | 1,807,137 | ||||||
1,500,000 | 5.000%, 11/01/34 Series B | Aa2/AA/AA | 1,780,995 | ||||||
2,000,000 | 5.000%, 08/01/23 Series D | Aa2/AA/AA | 2,456,640 | ||||||
2,000,000 | 5.000%, 08/01/24 Series D | Aa2/AA/AA | 2,501,400 | ||||||
Richmond, Rhode Island | |||||||||
1,020,000 | 3.000%, 08/01/24 . | Aa3/NR/NR | 1,113,738 | ||||||
Warwick, Rhode Island | |||||||||
1,015,000 | 4.000%, 08/01/17 AGMC Insured | ||||||||
Series 2008 | A1/AA/NR | 1,039,604 | |||||||
2,000,000 | 4.000%, 08/01/22 AGMC Insured | ||||||||
Series 2015 B | NR/AA/NR | 2,275,340 | |||||||
West Greenwich, Rhode Island | |||||||||
1,175,000 | 3.000%, 08/15/26 | NR/AA+/NR | 1,305,249 | ||||||
West Warwick, Rhode Island | |||||||||
1,900,000 | 4.625%, 04/01/26 AGC Insured | A3/NR/NR | 2,055,192 | ||||||
1,000,000 | 4.750%, 04/01/29 AGC Insured | A3/NR/NR | 1,076,300 |
2 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
West Warwick, Rhode Island (continued) | |||||||||
$ | 795,000 | 5.000%, 10/01/32 BAMI Series A | Baa2/AA/NR | $ | 943,562 | ||||
Total General Obligation Bonds | 72,387,721 | ||||||||
Revenue Bonds (61.3%) | |||||||||
Development (5.3%) | |||||||||
Providence, Rhode Island Redevelopment | |||||||||
Agency Refunding Public Safety | |||||||||
Building Project | |||||||||
1,680,000 | 5.000%, 04/01/26 AGMC Insured | ||||||||
Series A | A2/AA/NR | 2,023,678 | |||||||
Rhode Island Certificates of Participation | |||||||||
(Central Power Plant) | |||||||||
1,000,000 | 4.000%, 10/01/20 Series D | ||||||||
AGMC Insured | Aa3/AA/AA- | 1,029,950 | |||||||
Rhode Island Convention Center | |||||||||
Authority Refunding | |||||||||
8,000,000 | 4.000%, 05/15/23 Series A | A1/AA/AA- | 9,156,640 | ||||||
1,500,000 | 5.500%, 05/15/27 AGC Insured | ||||||||
Series A | A1/AA-/AA- | 1,669,410 | |||||||
Total Development | 13,879,678 | ||||||||
Higher Education (9.5%) | |||||||||
Rhode Island Health and Education | |||||||||
Building Corp., Bryant University | |||||||||
1,115,000 | 4.500%, 12/01/27 Series 2011 | A2/A/NR | 1,272,605 | ||||||
1,455,000 | 4.750%, 12/01/29 Series 2011 | A2/A/NR | 1,658,467 | ||||||
1,000,000 | 5.000%, 12/01/30 Series 2011 | A2/A/NR | 1,155,790 | ||||||
1,425,000 | 5.000%, 12/01/31 Series 2011 | A2/A/NR | 1,644,721 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Higher Educational | |||||||||
Facilities | |||||||||
2,500,000 | 5.000%, 09/15/30 AGMC Insured | Aa3/NR/NR | 2,812,425 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Johnson & Wales | |||||||||
University | |||||||||
785,000 | 5.500%, 04/01/17 Series 1999 A | ||||||||
NPFG Insured | NR/AA-/NR | 801,634 |
3 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Rhode Island Health and Educational | |||||||||
Building Corp., Higher Education | |||||||||
Facility, New England Institute of | |||||||||
Technology | |||||||||
$ | 1,250,000 | 4.750%, 03/01/30 Series 2010 A | NR/A-/A+ | $ | 1,372,562 | ||||
Rhode Island Health and Educational | |||||||||
Building Corp., Higher Education | |||||||||
Facility, Providence College | |||||||||
2,490,000 | 4.000%, 11/01/24 Series 2015 | A2/A/NR | 2,855,507 | ||||||
Rhode Island Health and Educational | |||||||||
Building Corp., Higher Education | |||||||||
Facility, Rhode Island School of Design | |||||||||
3,000,000 | 3.500%, 06/01/29 Series 2012 | A1/NR/A+ | 3,129,840 | ||||||
2,000,000 | 4.000%, 06/01/31 Series 2012 | A1/NR/A+ | 2,146,320 | ||||||
1,000,000 | 3.500%, 08/15/30 AGMC Insured | ||||||||
Series B | A1/AA/NR | 1,044,180 | |||||||
Rhode Island Health and Educational | |||||||||
Building Corp., Higher Education | |||||||||
Facility, University of Rhode Island | |||||||||
Auxiliary Enterprise | |||||||||
2,000,000 | 5.000%, 09/15/30 Series 2010 B | ||||||||
AGMC Insured | A1/AA/NR | 2,261,360 | |||||||
500,000 | 4.000%, 09/15/31 | ||||||||
Series 2016 B ††† | A1/A+/NR | 551,595 | |||||||
Rhode Island Health and Educational | |||||||||
Building Corp., University of | |||||||||
Rhode Island | |||||||||
1,000,000 | 4.500%, 09/15/26 Series 2005 | ||||||||
G Refunding AMBAC Insured | Aa3/A+/NR | 1,002,840 | |||||||
Rhode Island Health and Education | |||||||||
Facilities Authority, Providence College | |||||||||
1,000,000 | 4.000%, 11/01/31 | A2/A/NR | 1,082,930 | ||||||
Total Higher Education | 24,792,776 | ||||||||
Hospital (1.7%) | |||||||||
Rhode Island Health & Education | |||||||||
Building Corp., Hospital Financing | |||||||||
(Care New England) | |||||||||
500,000 | 5.000%, 09/01/23 Series 2016 B | NR/BB/BBB- | 559,295 |
4 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Hospital (continued) | |||||||||
Rhode Island Health & Education | |||||||||
Building Corp., Hospital Financing, | |||||||||
Lifespan Obligated Group | |||||||||
$ | 1,000,000 | 5.000%, 05/15/31 Series 2016 | NR/BBB+/BBB+ | $ | 1,200,090 | ||||
1,250,000 | 5.000%, 05/15/34 Series 2016 | NR/BBB+/BBB+ | 1,483,763 | ||||||
1,000,000 | 5.000%, 05/15/33 Series 2016 | NR/BBB+/BBB+ | 1,191,660 | ||||||
Total Hospital | 4,434,808 | ||||||||
Housing (8.4%) | |||||||||
Rhode Island Housing & Mortgage | |||||||||
Finance Corp. Home Funding | |||||||||
2,485,000 | 4.000%, 10/01/25 Series 2010 #3 | Aa2/NR/NR | 2,637,852 | ||||||
115,000 | 4.100%, 04/01/28 Series 2010 #3 | Aa2/NR/NR | 115,000 | ||||||
1,500,000 | 4.050%, 10/01/26 2011 Series 4 | Aa2/NR/NR | 1,600,110 | ||||||
1,250,000 | 3.050%, 10/01/28 Series 5 | Aa2/NR/NR | 1,284,087 | ||||||
985,000 | 3.350%, 10/01/33 Series 5 | Aa2/NR/NR | 1,015,683 | ||||||
2,185,000 | 3.450%, 04/01/35 Series 5 | Aa2/NR/NR | 2,257,345 | ||||||
Rhode Island Housing & Mortgage | |||||||||
Finance Corp. Home Ownership | |||||||||
Opportunity | |||||||||
3,500,000 | 3.350%, 10/01/41 Series 68-C††† | Aa2/AA+/NR | 3,482,360 | ||||||
Rhode Island Housing & Mortgage | |||||||||
Finance Corp. Multi-Family Housing | |||||||||
2,500,000 | 4.625%, 10/01/25 Series 2010 A | Aaa/NR/NR | 2,719,650 | ||||||
2,000,000 | 5.000%, 10/01/30 Series 2010 A | Aaa/NR/NR | 2,169,200 | ||||||
985,000 | 3.150%, 10/01/31 Series 2016 1B | Aa2/NR/NR | 1,010,137 | ||||||
1,405,000 | 3.450%, 10/01/36 Series 2016 1B | Aa2/NR/NR | 1,443,033 | ||||||
1,000,000 | 3.250%, 10/01/27 Series 1B | Aa2/NR/NR | 1,046,870 | ||||||
1,000,000 | 3.400%, 10/01/29 Series 3B | Aa2/NR/NR | 1,033,020 | ||||||
Total Housing | 21,814,347 | ||||||||
Public School (19.8%) | |||||||||
Rhode Island Certificates of Participation | |||||||||
(School for the Deaf Project) | |||||||||
1,000,000 | 5.500%, 04/01/27 Series C 2009 | ||||||||
AGC Insured | Aa3/AA/AA- | 1,106,430 | |||||||
500,000 | 5.625%, 04/01/29 Series C 2009 | ||||||||
AGC Insured | Aa3/AA/AA- | 554,485 | |||||||
5 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Public School (continued) | |||||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program | |||||||||
$ | 10,000 | 5.000%, 05/15/20 AGM Insured | |||||||
unrefunded balance | Aa3/NR/NR | $ | 10,261 | ||||||
55,000 | 5.000%, 05/15/24 unrefunded balance | A1/NR/NR | 58,397 | ||||||
1,000,000 | 4.250%, 05/15/21 Series 2007 B | ||||||||
AGMC Insured | A2/AA/NR | 1,021,230 | |||||||
500,000 | 5.000%, 05/15/17 Series 2008 A | ||||||||
AGMC Insured | Aa3/NR/NR | 512,430 | |||||||
795,000 | 5.000%, 05/15/27 Series 2015 C | Aa2/NR/NR | 981,372 | ||||||
1,630,000 | 5.000%, 05/15/27 Series 2015 D | A1/NR/NR | 1,989,073 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, Chariho Regional School | |||||||||
District | |||||||||
1,000,000 | 5.000%, 05/15/26 Series 2011 B | Aa3/NR/NR | 1,156,810 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, Town of Coventry | |||||||||
1,000,000 | 3.750%, 05/15/28 Series 2013 B | ||||||||
AGMC Insured | A1/AA/NR | 1,063,960 | |||||||
1,000,000 | 4.000%, 05/15/33 AGMC Insured | A1/AA/NR | 1,067,240 | ||||||
Rhode Island Health and Educational | |||||||||
Building Corp., Public School | |||||||||
Financing Program, City of Cranston | |||||||||
1,170,000 | 4.000%, 05/15/30 BAMI Series 2015 B | NR/AA/NR | 1,302,304 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, East Greenwich | |||||||||
1,150,000 | 3.125%, 05/15/28 | Aa1/AA+/NR | 1,202,751 | ||||||
1,000,000 | 3.250%, 05/15/29 | Aa1/AA+/NR | 1,049,190 | ||||||
1,000,000 | 3.375%, 05/15/30 | Aa1/AA+/NR | 1,051,960 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, City of | |||||||||
East Providence | |||||||||
1,000,000 | 3.625%, 05/15/32 Series B | Aa3/NR/NR | 1,042,540 |
6 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Public School (continued) | |||||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Town of | |||||||||
Little Compton | |||||||||
$ | 1,620,000 | 4.000%, 05/15/25 Series 2013 H | NR/AAA/NR | $ | 1,885,064 | ||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, City of Newport | |||||||||
1,000,000 | 4.000%, 05/15/27 Series 2013 C | NR/AA+/NR | 1,119,170 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Town of | |||||||||
North Kingstown | |||||||||
1,500,000 | 3.750%, 05/15/28 Series 2013 A | Aa2/AA+/NR | 1,620,420 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Town of | |||||||||
North Providence | |||||||||
1,000,000 | 4.000%, 11/15/20 Series 2013 I | A1/A/NR | 1,098,880 | ||||||
1,100,000 | 4.500%, 11/15/22 Series 2013 I | A1/A/NR | 1,280,125 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, City of Pawtucket | |||||||||
1,570,000 | 4.000%, 05/15/26 Series 2014 C | A1/NR/NR | 1,775,246 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Pooled Issue | |||||||||
3,000,000 | 4.000%, 05/15/28 Series A | Aa3/NR/NR | 3,429,120 | ||||||
1,270,000 | 3.250%, 05/15/29 Series A | Aa3/NR/NR | 1,355,395 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Providence Public | |||||||||
Buildings Authority | |||||||||
3,000,000 | 3.500%, 05/15/24 AGMC Insured | ||||||||
Series 2015 A | A1/AA/NR | 3,289,530 | |||||||
3,000,000 | 3.750%, 05/15/27 AGMC Insured | ||||||||
Series 2015 A | A1/AA/NR | 3,308,400 |
7 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Public School (continued) | |||||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program, Providence Public | |||||||||
Buildings Authority (continued) | |||||||||
$ | 3,000,000 | 4.000%, 05/15/28 AGMC Insured | |||||||
Series 2015 A | A1/AA/NR | $ | 3,354,030 | ||||||
2,760,000 | 4.000%, 05/15/30 AGMC Insured | ||||||||
Series 2015 B | A1/AA/NR | 3,049,607 | |||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, Providence Public Schools | |||||||||
2,000,000 | 4.500%, 05/15/22 Series 2013 A | A1/NR/NR | 2,290,380 | ||||||
2,000,000 | 4.500%, 05/15/23 Series 2013 A | A1/NR/NR | 2,327,000 | ||||||
2,000,000 | 4.500%, 05/15/24 Series 2013 A | A1/NR/NR | 2,309,500 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, City of Warwick | |||||||||
800,000 | 3.500%, 05/15/26 Series B MAC Insured. | NR/AA/NR | 888,496 | ||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School Financing | |||||||||
Program, Town of West Warwick | |||||||||
935,000 | 4.000%, 05/15/21 | A1/NR/NR | 1,023,881 | ||||||
745,000 | 3.000%, 11/15/21 | A1/NR/NR | 783,241 | ||||||
Total Public School | 51,357,918 | ||||||||
Transportation (5.2%) | |||||||||
Rhode Island Commerce Corp., Airport | |||||||||
635,000 | 5.000%, 07/01/36 Series D | Baa1/BBB+/BBB+ | 747,408 | ||||||
1,015,000 | 5.000%, 07/01/37 Series D | Baa1/BBB+/BBB+ | 1,189,742 | ||||||
Rhode Island State Commerce Corp., | |||||||||
Grant Anticipation (Rhode Island | |||||||||
Department of Transportation) | |||||||||
1,850,000 | 4.000%, 06/15/24 | A2/AA-/NR | 2,142,633 | ||||||
Rhode Island State Economic | |||||||||
Development Corp., Airport | |||||||||
1,000,000 | 5.000%, 07/01/24 Series B | Baa1/BBB+/BBB+ | 1,173,080 | ||||||
2,000,000 | 4.000%, 07/01/24 Series B | Baa1/BBB+/BBB+ | 2,218,980 | ||||||
540,000 | 4.625%, 07/01/26 AGC | ||||||||
Insured Series B | A3/AA/BBB+ | 569,705 |
8 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Transportation (continued) | |||||||||
Rhode Island State Economic | |||||||||
Development Corp., Airport (continued) | |||||||||
$ | 1,000,000 | 5.000%, 07/01/18 AGC Insured | |||||||
Series C | A3/AA/BBB+ | $ | 1,052,400 | ||||||
Rhode Island State Economic | |||||||||
Development Corp., Motor Fuel Tax | |||||||||
(Rhode Island Department of | |||||||||
Transportation) | |||||||||
2,385,000 | 4.700%, 06/15/23 Series 2003 A | ||||||||
AMBAC Insured | A3/A+/A | 2,392,489 | |||||||
1,000,000 | 4.000%, 06/15/18 Series 2006 A | ||||||||
AMBAC Insured | A3/A+/A | 1,002,200 | |||||||
Rhode Island State Economic | |||||||||
Development Corp., | |||||||||
(Rhode Island Airport Corp. Intermodal | |||||||||
Facility Project) | |||||||||
1,000,000 | 4.250%, 07/01/17 CIFG Assurance | ||||||||
North America, Inc. Insured | A3/AA/NR | 1,002,390 | |||||||
Total Transportation | 13,491,027 | ||||||||
Turnpike/Highway (3.8%) | |||||||||
Rhode Island State Turnpike & Bridge | |||||||||
Authority | |||||||||
500,000 | 4.125%, 12/01/23 Series 2010 A | NR/A-/A | 548,650 | ||||||
1,600,000 | 4.625%, 12/01/27 Series 2010 A | NR/A-/A | 1,789,024 | ||||||
2,000,000 | 5.125%, 12/01/35 Series 2010 A | NR/A-/A | 2,263,360 | ||||||
1,000,000 | 5.000%, 12/01/35 Series 2010 A | NR/A-/A | 1,126,690 | ||||||
Rhode Island State Turnpike & Bridge | |||||||||
Authority, Motor Fuel Tax | |||||||||
1,240,000 | 4.000%, 10/01/27 Series 2016 A | NR/A+/A | 1,426,769 | ||||||
1,500,000 | 4.000%, 10/01/34 Series 2016 A | NR/A+/A | 1,660,950 | ||||||
1,000,000 | 4.000%, 10/01/36 Series 2016 A | NR/A+/A | 1,099,390 | ||||||
Total Turnpike/Highway | 9,914,833 | ||||||||
Water and Sewer (7.6%) | |||||||||
Narragansett, Rhode Island Bay | |||||||||
Commission Wastewater System | |||||||||
3,145,000 | 4.000%, 02/01/28 Series A | NR/AA-/NR | 3,568,160 |
9 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Water and Sewer (continued) | |||||||||
Rhode Island Clean Water Protection | |||||||||
Finance Agency | |||||||||
$ | 1,545,000 | 4.750%, 10/01/18 Series A AMBAC | |||||||
Insured | Aaa/NR/NR | $ | 1,549,975 | ||||||
500,000 | 4.750%, 10/01/20 1999 Series A | ||||||||
AMBAC Insured | Aaa/NR/NR | 501,590 | |||||||
Rhode Island Clean Water Finance | |||||||||
Agency, Water Pollution Control Bonds | |||||||||
310,000 | 5.000%, 10/01/18 Series B NPFG | ||||||||
Insured | Aaa/AAA/NR | 311,063 | |||||||
4,765,000 | 4.375%, 10/01/21 Series 2002 B NPFG | ||||||||
Insured | Aaa/AAA/AAA | 4,778,866 | |||||||
Rhode Island Clean Water Protection | |||||||||
Finance Agency Safe Drinking Water | |||||||||
Revolving Fund | |||||||||
1,085,000 | 3.500%, 10/01/25 | NR/AAA/AAA | 1,219,095 | ||||||
1,000,000 | 3.750%, 10/01/33 | NR/AAA/AAA | 1,076,370 | ||||||
1,000,000 | 3.750%, 10/01/34 | NR/AAA/AAA | 1,073,060 | ||||||
Rhode Island Infrastructure Bank Water, | |||||||||
City of Pawtucket | |||||||||
1,730,000 | 5.000%, 10/01/28 NPFG Insured | ||||||||
Series 2015 | A3/AA-/NR | 2,087,072 | |||||||
Rhode Island Infrastructure Bank Water, | |||||||||
Pollution Control | |||||||||
2,575,000 | 4.000%, 10/01/29 Series A | NR/AAA/AAA | 2,948,890 | ||||||
Rhode Island Infrastructure Bank Water, | |||||||||
Safe Drinking Water | |||||||||
500,000 | 3.000%, 10/01/31 Series A | NR/AAA/AAA | 532,040 | ||||||
Total Water and Sewer | 19,646,181 | ||||||||
Total Revenue Bonds | 159,331,568 | ||||||||
Pre-Refunded\ | |||||||||
Escrowed to Maturity Bonds (9.2%)†† | |||||||||
Pre-Refunded | |||||||||
General Obligation Bonds (1.4%) | |||||||||
Cranston, Rhode Island | |||||||||
2,455,000 | 4.625%, 07/01/25 AGMC Insured | A1/AA/NR | 2,613,274 |
10 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded | |||||||||
General Obligation Bonds (continued) | |||||||||
Cranston, Rhode Island (continued) | |||||||||
$ | 990,000 | 4.750%, 07/01/28 AGMC Insured | A1/AA/NR | $ | 1,055,954 | ||||
Total Pre-Refunded General Obligation Bonds | 3,669,228 | ||||||||
Pre-Refunded Escrowed to Maturity | |||||||||
Revenue Bonds (7.8%) | |||||||||
Hospital (0.5%) | |||||||||
Rhode Island Health & Education | |||||||||
Building Corp., Hospital Financing | |||||||||
(Care New England) | |||||||||
500,000 | 5.000%, 09/01/20 Series 2013 A | NR/BB/BBB- | 574,960 | ||||||
500,000 | 5.000%, 09/01/22 Series 2013 A | NR/BB/BBB- | 606,730 | ||||||
Total Hospital | 1,181,690 | ||||||||
Public School (6.1%) | |||||||||
Providence, Rhode Island Public Building | |||||||||
Authority, School Projects | |||||||||
3,000,000 | 4.500%, 05/15/27 Series 2007 B | ||||||||
AGMC Insured | A2/AA/NR | 3,066,390 | |||||||
2,000,000 | 4.500%, 05/15/28 Series 2007 C | ||||||||
AGMC Insured | A2/AA/NR | 2,044,260 | |||||||
Rhode Island Health and Education | |||||||||
Building Corp., Public School | |||||||||
Financing Program | |||||||||
1,070,000 | 5.000%, 05/15/24 | .NR/NR/NR | 1,139,646 | ||||||
465,000 | 5.000%, 05/15/20 Series A | ||||||||
AGMC Insured | Aa3/NR/NR | 476,848 | |||||||
1,500,000 | 4.250%, 05/15/21 Series A | ||||||||
AGMC Insured | Aa3/NR/NR | 1,580,925 | |||||||
2,000,000 | 4.375%, 05/15/22 Series A | ||||||||
AGMC Insured | Aa3/NR/NR | 2,111,900 | |||||||
3,000,000 | 4.500%, 05/15/25 Series A | ||||||||
AGMC Insured | Aa3/NR/NR | 3,173,820 | |||||||
2,000,000 | 4.750%, 05/15/29 Series A | ||||||||
AGMC Insured | Aa3/NR/NR | 2,123,860 | |||||||
25,000 | 5.000%, 05/15/20 Series 2007 A | ||||||||
AGMC Insured | Aa3/NR/NR | 25,637 | |||||||
Total Public School | 15,743,286 |
11 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | and Fitch | Value | ||||||
Pre-Refunded Escrowed to Maturity | |||||||||
Revenue Bonds (continued) | |||||||||
Transportation (0.6%) | |||||||||
Rhode Island Economic Development | |||||||||
Corp. (Rhode Island Department of | |||||||||
Transportation) | |||||||||
$ | 1,500,000 | 5.250%, 06/15/21 AGC Insured | A2/AA/NR | $ | 1,672,020 | ||||
Water and Sewer (0.4%) | |||||||||
Narragansett, Rhode Island Bay | |||||||||
Commission Wastewater System | |||||||||
1,000,000 | 5.000%, 02/01/32 Series 2007 A | ||||||||
NPFG Insured | NR/AA-/NR | 1,013,480 | |||||||
Other Revenue (0.2%) | |||||||||
State of Rhode Island Depositors | |||||||||
Economic Protection Corp. | |||||||||
250,000 | 5.750%, 08/01/21 Series A AGMC | ||||||||
Insured ETM | NR/NR/NR* | 301,963 | |||||||
215,000 | 6.375%, 08/01/22 Series A NPFG | ||||||||
Insured ETM | NR/AA-/NR | 274,878 | |||||||
Total Other Revenue | 576,841 | ||||||||
Total Pre-Refunded\ Escrowed to Maturity | |||||||||
Revenue Bonds | 20,187,317 | ||||||||
Total Pre-Refunded\ | |||||||||
Escrowed to Maturity Bonds | 23,856,545 | ||||||||
Total Municipal Bonds | |||||||||
(cost $242,233,087) | 255,575,834 | ||||||||
Shares Short-Term Investment (2.0%) | |||||||||
5,157,549 | Dreyfus Tax Exempt Cash Management, | ||||||||
Institutional Shares, 0.55%** | |||||||||
(cost $5,157,549) | NR/Aaam/NR | 5,157,549 | |||||||
Total Investments | |||||||||
(cost $247,390,636-note 4) | 100.4% | 260,733,383 | |||||||
Other assets less liabilities | (0.4) | (970,783 | ) | ||||||
Net Assets | 100.0% | $ | 259,762,600 |
12 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Percent of | ||||||
Portfolio Distribution by Quality Rating | Investments† | |||||
Aaa of Moody’s or AAA of S&P or Fitch | 8.1 | % | ||||
Pre-refunded bonds\ ETM bonds†† | 9.3 | |||||
Aa of Moody’s or AA of S&P or Fitch | 58.0 | |||||
A of Moody’s or S&P or Fitch | 20.6 | |||||
Baa of Moody’s or BBB of S&P or Fitch | 4.0 | |||||
100.0 | % |
PORTFOLIO ABBREVIATIONS: | ||||||
AGC - Assured Guaranty Corp. | ||||||
AGMC - Assured Guaranty Municipal Corp. | ||||||
AMBAC - American Municipal Bond Assurance Corp. | ||||||
BAMI - Build America Mutual Insurance | ||||||
CIFG - CDC IXIS Financial Guaranty | ||||||
ETM - Escrowed to Maturity | ||||||
MAC - Municipal Assurance Corp. | ||||||
NPFG - National Public Finance Guarantee | ||||||
NR - Not Rated | ||||||
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) has been determined by the Investment Sub-Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a NRSRO. | |||||
** | The rate is an annualized seven-day yield at period end. | |||||
† | Where applicable, calculated using the highest rating of the three NRSRO. Percentages in this table do not include the Short-Term Investment. | |||||
†† | Pre-refunded bonds are bonds secured by an escrow account, comprised of U.S. Government Obligations (unless otherwise noted), to retire the bonds at their earliest call date. Escrowed to Maturity bonds are bonds where money has been placed in the escrow account which is used to pay principal and interest through the bond’s originally scheduled maturity date. Escrowed to Maturity are shown as ETM. All other securities in the category are pre-refunded. | |||||
††† | Security purchased on a delayed delivery or when-issued basis. |
See accompanying notes to financial statements.
13 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2016 (unaudited)
ASSETS | ||||
Investments at value (cost $247,390,636) | $ | 260,733,383 | ||
Interest receivable | 3,298,369 | |||
Receivable for Fund shares sold | 322,753 | |||
Other assets | 18,725 | |||
Total assets | 264,373,230 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 4,052,500 | |||
Dividends payable | 243,785 | |||
Payable for Fund shares redeemed | 134,719 | |||
Management fees payable | 95,284 | |||
Distribution and service fees payable | 2090 | |||
Accrued expenses payable | 82,252 | |||
Total liabilities | 4,610,630 | |||
NET ASSETS | $ | 259,762,600 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of shares, par value | ||||
$0.01 per share | $ | 236,317 | ||
Additional paid-in capital | 247,320,126 | |||
Net unrealized appreciation on investments (note 4) | 13,342,747 | |||
Accumulated net realized loss on investments | (1,195,414 | ) | ||
Undistributed net investment income | 58,824 | |||
$ | 259,762,600 | |||
CLASS A | ||||
Net Assets | $ | 136,014,030 | ||
Capital shares outstanding | 12,374,021 | |||
Net asset value and redemption price per share | $ | 10.99 | ||
Maximum offering price per share (100/96 of $10.99) | $ | 11.45 | ||
CLASS C | ||||
Net Assets | $ | 14,101,255 | ||
Capital shares outstanding | 1,283,106 | |||
Net asset value and offering price per share | $ | 10.99 | ||
Redemption price per share (*a charge of 1% is imposed on the | ||||
redemption proceeds, or on the original price, whichever is | ||||
lower, if redeemed during the first 12 months after purchase) | $ | 10.99 | * | |
CLASS I | ||||
Net Assets | $ | 196,106 | ||
Capital shares outstanding | 17,849 | |||
Net asset value, offering and redemption price per share | $ | 10.99 | ||
CLASS Y | ||||
Net Assets | $ | 109,451,209 | ||
Capital shares outstanding | 9,956,699 | |||
Net asset value, offering and redemption price per share | $ | 10.99 |
See accompanying notes to financial statements.
14 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 4,302,704 | ||||||
Expenses: | ||||||||
Management fees (note 3) | $ | 649,199 | ||||||
Distribution and service fees (note 3) | 176,345 | |||||||
Transfer and shareholder servicing | ||||||||
agent fees (note 3) | 78,106 | |||||||
Trustees’ fees and expenses (note 7) | 46,856 | |||||||
Legal fees | 37,756 | |||||||
Fund accounting fees | 19,972 | |||||||
Registration fees and dues | 13,222 | |||||||
Shareholders’ reports | 11,910 | |||||||
Auditing and tax fees | 10,687 | |||||||
Insurance | 5,576 | |||||||
Chief compliance officer services (note 3) | 4,492 | |||||||
Custodian fees | 4,091 | |||||||
Miscellaneous | 23,550 | |||||||
Total expenses | 1,081,762 | |||||||
Management fees waived (note 3) | (103,872 | ) | ||||||
Net expenses | 977,890 | |||||||
Net investment income 3,324,814 | ||||||||
| ||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 115,116 | |||||||
Change in unrealized appreciation on | ||||||||
investments | 1,440,843 | |||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | 1,555,959 | |||||||
Net change in net assets resulting from | ||||||||
$ | 4,880,773 |
See accompanying notes to financial statements.
15 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2016 | Year Ended | |||||||
(unaudited) | March 31, 2016 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,324,814 | $ | 6,586,523 | ||||
Net realized gain (loss) from | ||||||||
securities transactions | 115,116 | 705,921 | ||||||
Change in unrealized appreciation | ||||||||
on investments | 1,440,843 | 1,916,904 | ||||||
Change in net assets from | ||||||||
operations | 4,880,773 | 9,209,348 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (1,745,090 | ) | (3,513,312 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (124,495 | ) | (288,359 | ) | ||||
Class I Shares: | ||||||||
Net investment income | (2,554 | ) | (6,095 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (1,448,819 | ) | (2,772,540 | ) | ||||
Change in net assets from | ||||||||
distributions | (3,320,958 | ) | (6,580,306 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 23,783,250 | 34,649,255 | ||||||
Reinvested dividends and | ||||||||
distributions | 1,566,731 | 3,058,596 | ||||||
Cost of shares redeemed | (15,670,396 | ) | (26,365,615 | ) | ||||
Change in net assets from | ||||||||
capital share transactions | 9,679,585 | 11,342,236 | ||||||
Change in net assets | 11,239,400 | 13,971,278 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 248,523,200 | 234,551,922 | ||||||
End of period* | $ | 259,762,600 | $ | 248,523,200 | ||||
* Includes undistributed net investment income of: | $ | 58,824 | $ | 54,968 |
See accompanying notes to financial statements.
16 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (unaudited)
1. Organization
Aquila Narragansett Tax-Free Income Fund (the “Fund”), a series of Aquila Municipal Trust and a non-diversified, open-end investment company, was organized on January 22, 1992 as a Massachusetts business trust and commenced operations on September 10, 1992. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. 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: Municipal securities are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. |
b) | Fair value measurements: The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy: |
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
17 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities
The following is a summary of the valuation inputs, representing 100% of the Fund’s investments, used to value the Fund’s net assets as of September 30, 2016:
Valuation Inputs* | Investments in Securities | ||||
Level 1 – Quoted Prices - Short-Term Investment | $ | 5,157,549 | |||
Level 2 – Other Significant Observable | |||||
Inputs – Municipal Bonds | 255,575,834 | ||||
Level 3 – Significant Unobservable Inputs | – | ||||
Total | $ | 260,733,383 |
*See schedule of investments for a detailed listing of securities.
c) | Subsequent events: In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date these financial statements were issued. |
d) | 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. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. |
e) | Federal income taxes: It is the policy of the Fund to continue 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. |
Management has reviewed the tax positions for each of the open tax years (2013–2015) or expected to be taken in the Fund’s 2016 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
f) | 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 also charged directly to such class on a daily basis. |
18 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
g) | 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. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. On March 31, 2016, the Fund decreased additional paid-in capital by $73,498 and increased accumulated net realized loss on investments by $73,498. These reclassifications had no effect on net assets or net asset value per share. |
i) | The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies”. |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser as described below. Under the Advisory and Administration Agreement, the Manager provides all administrative services to the Fund, other than those relating to the day-to-day portfolio management. The Manager’s services include providing the office of the Fund and all related services as well as overseeing the activities of the Sub-Adviser and managing relationships with all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, fund accounting agent, auditor and distributor. 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 at the annual rate of 0.50% on the Fund’s net assets.
Citizens Investment Advisors, a department of Citizens Bank, N.A. (the “Sub-Adviser”), serves as the Investment Sub-Adviser for the Fund under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides, subject to oversight of the Manager and the Board of Trustees of the Fund, the investment program 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. For its services, the Sub-Adviser is entitled to receive a fee from the Manager which is payable monthly and computed as of the close of business each day at the annual rate of 0.23% on the Fund’s net assets.
19 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
The Manager has contractually undertaken to waive fees and/or reimburse Fund expenses so that total Fund expenses will not exceed 0.84% for Class A Shares, 1.69% for Class C Shares, 0.98% for Class I Shares and 0.69% for Class Y Shares through September 30, 2017. The Manager may not terminate the arrangement without the approval of the Board of Trustees. For the six months ended September 30, 2016, the Fund incurred management fees of $649,199 of which $103,872 was waived, which included supplemental fee waivers above and beyond the contractual expense cap.
Under a Compliance Agreement with the Manager, the Manager is compensated by the Fund for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
Specific details as to the nature and extent of the services provided by the Manager and the Sub-Adviser 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 distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors LLC (“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 distribution fee at the annual rate of 0.15% of the Fund’s average net assets represented by Class A Shares. For the six months ended September 30, 2016, distribution fees on Class A Shares amounted to $102,822, of which the Distributor retained $6,593.
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 September 30, 2016, amounted to $55,062. 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 September 30, 2016, amounted to $18,354 The total of these payments with respect to Class C Shares amounted to $73,416, of which the Distributor retained $17,927.
Under another part of the Plan, the Fund is authorized to make payments with respect to Class I Shares to Qualified Recipients. Class I payments, under the Plan, may not exceed, for any fiscal year of the Fund a rate (currently 0.10%) set from time to time by the Board of Trustees of not more than 0.25% of the average annual net assets represented by the Class I Shares. In addition, the Fund has a Shareholder Services Plan under which it may pay service fees (currently 0.25%) of not more than 0.25% of the average annual net assets of the Fund represented by Class I Shares. That is, the total payments under both plans will not exceed 0.50% of such net assets. For the six months ended September 30, 2016, these payments were made at the average annual rate of 0.35% of such net assets amounting to $373 of which $107 related to the Plan and $266 related to the Shareholder Services Plan.
20 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
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 brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Rhode Island, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2016, total commissions on sales of Class A Shares amounted to $175,070, of which the Distributor received $22,412.
4. Purchases and Sales of Securities
During the six months ended September 30, 2016, purchases of securities and proceeds from the sales of securities aggregated $28,935,980 and $15,060,976, respectively.
At September 30, 2016, the aggregate tax cost for all securities was $247,365,246. At September 30, 2016, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $13,446,826 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $78,689 for a net unrealized appreciation of $13,368,137.
5. Portfolio Orientation
Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Rhode Island, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Rhode Island and whatever effects these may have upon Rhode Island issuers’ ability to meet their obligations.
The Fund is also permitted to invest in U.S. territorial municipal obligations meeting comparable quality standards and providing income which is exempt from both regular Federal and Rhode Island income taxes. The general policy of the Fund is to invest in such securities only when comparable securities of Rhode Island issuers are not available in the market. At September 30, 2016, the Fund had all of its net assets invested in the securities of Rhode Island issuers.
21 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2016 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 741,224 | $ | 8,165,078 | 1,715,927 | $ | 18,478,923 | ||||||||||
Reinvested distributions | 100,830 | 1,108,920 | 200,947 | 2,161,609 | ||||||||||||
Cost of shares redeemed | (638,278 | ) | (7,039,128 | ) | (1,319,865 | ) | (14,154,270 | ) | ||||||||
Net change | 203,776 | 2,234,870 | 597,009 | 6,486,262 | ||||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 219,981 | 2,420,065 | 307,844 | 3,302,093 | ||||||||||||
Reinvested distributions | 5,205 | 57,226 | 14,299 | 153,694 | ||||||||||||
Cost of shares redeemed | (237,477 | ) | (2,617,187 | ) | (533,097 | ) | (5,721,400 | ) | ||||||||
Net change | (12,291 | ) | (139,896 | ) | (210,954 | ) | (2,265,613 | ) | ||||||||
Class I Shares: | ||||||||||||||||
Proceeds from shares sold | — | — | — | — | ||||||||||||
Reinvested distributions | 230 | 2,529 | 567 | 6,095 | ||||||||||||
Cost of shares redeemed | (2,920 | ) | (32,171 | ) | (1,801 | ) | (19,554 | ) | ||||||||
Net change | (2,690 | ) | (29,642 | ) | (1,234 | ) | (13,459 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 1,198,992 | 13,198,107 | 1,194,410 | 12,868,239 | ||||||||||||
Reinvested distributions | 36,124 | 398,056 | 68,471 | 737,198 | ||||||||||||
Cost of shares redeemed | (542,735 | ) | (5,981,910 | ) | (601,631 | ) | (6,470,391 | ) | ||||||||
Net change | 692,381 | 7,614,253 | 661,250 | 7,135,046 | ||||||||||||
Total transactions in Fund | ||||||||||||||||
shares | 881,176 | $ | 9,679,585 | 1,046,071 | $ | 11,342,236 |
7. Trustees’ Fees and Expenses
For the six months ended September 30, 2016, there were 9 Trustees, one of whom is affiliated with the Manager and is not paid any fees. The total amount of Trustees’ service fees (for carrying out their responsibilities) and attendance fees paid during the six months ended September 30, 2016 was $37,034. Attendance fees are paid to those in attendance at regularly scheduled quarterly Board Meetings and meetings of the Independent Trustees held prior to each quarterly Board Meeting, as well as additional meetings (such as Audit, Nominating, Shareholder and special meetings). Trustees are reimbursed for their expenses such as travel, accommodations and meals incurred in connection with attendance at Board Meetings and the Annual Meeting of Shareholders. For the six months ended September 30, 2016, such meeting-related expenses amounted to $9,822.
22 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
8. Securities Traded on a When-Issued Basis
The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
9. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. These distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Rhode Island income taxes. Due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income rates. As a result of the passage of the Regulated Investment Company Act of 2010 (“the Act”), losses incurred in this fiscal year and beyond retain their character as short-term or long-term, have no expiration date and are utilized before capital losses incurred prior to the enactment of the Act.
At March 31, 2016, the Fund had a capital loss carryover of $1,310,603 which is short-term and has no expiration. This carryover is available to offset future net realized gains on securities transactions to the extent provided for in the Internal Revenue Code.
The tax character of distributions was as follows:
Year | Year | |||||||
Ended | Ended | |||||||
March 31, 2016 | March 31, 2015 | |||||||
Net tax-exempt income | $ | 6,580,306 | $ | 6,990,708 | ||||
Ordinary Income | — | 11,570 | ||||||
$ | 6,580,306 | $ | 7,002,278 |
23 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
As of March 31, 2016, the components of distributable earnings on a tax basis were as follows:
Undistributed tax-exempt income | $ | 215,929 | ||||||
Accumulated net realized loss | (1,310,603 | ) | ||||||
Unrealized appreciation | 11,940,021 | |||||||
Other temporary differences | (199,005 | ) | ||||||
$ | 10,646,342 |
The difference between book basis and tax basis unrealized appreciation and undistributed income is due to the timing difference, and other temporary differences, in recognizing dividends paid and the amortization of discount securities.
24 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months Ended 9/30/16 | Year Ended | Year Ended | Year Ended | Nine Months Ended | Year Ended June 30, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13 † | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | $ | 10.64 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.14 | 0.30 | 0.33 | 0.35 | 0.26 | 0.37 | 0.39 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.11 | 0.33 | (0.31 | ) | 0.02 | 0.27 | (0.13 | ) | |||||||||||||||||||
Total from investment operations | 0.21 | 0.41 | 0.66 | 0.04 | 0.28 | 0.64 | 0.26 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.30 | ) | (0.33 | ) | (0.35 | ) | (0.27 | ) | (0.37 | ) | (0.39 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.14 | ) | (0.30 | ) | (0.33 | ) | (0.35 | ) | (0.27 | ) | (0.37 | ) | (0.39 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.99 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | ||||||||||||||
Total return (not reflecting sales charge) | 1.93 | %(2) | 3.85 | % | 6.35 | % | 0.42 | % | 2.53 | %(2) | 6.15 | % | 2.48 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 136 | $ | 133 | $ | 125 | $ | 119 | $ | 143 | $ | 146 | $ | 150 | ||||||||||||||
Ratio of expenses to average net assets | 0.78 | %(3) | 0.77 | % | 0.76 | % | 0.79 | %(4) | 0.77 | %(3) | 0.71 | % | 0.62 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.57 | %(3) | 2.78 | % | 3.07 | % | 3.34 | %(4) | 3.22 | %(3) | 3.45 | % | 3.68 | % | ||||||||||||||
Portfolio turnover rate | 6 | %(2) | 19 | % | 8 | % | 15 | % | 8 | %(2) | 11 | % | 9 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap and additional voluntary fee waivers were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.86 | %(3) | 0.85 | % | 0.88 | % | 0.92 | %(4) | 0.90 | %(3) | 0.87 | % | 0.84 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.49 | %(3) | 2.70 | % | 2.95 | % | 3.21 | %(4) | 3. 09 | %(3) | 3.29 | % | 3.46 | % |
__________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.88% and 3.25%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
25 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months Ended9/30/16 | Year Ended | Year Ended | Year Ended | Nine Months Ended | Year Ended June 30, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | $ | 10.64 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.10 | 0.21 | 0.24 | 0.26 | 0.19 | 0.28 | 0.30 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.11 | 0.33 | (0.31 | ) | 0.02 | 0.27 | (0.13 | ) | |||||||||||||||||||
Total from investment operations | 0.17 | 0.32 | 0.57 | (0.05 | ) | 0.21 | 0.55 | 0.17 | ||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.21 | ) | (0.24 | ) | (0.26 | ) | (0.20 | ) | (0.28 | ) | (0.30 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.10 | ) | (0.21 | ) | (0.24 | ) | (0.26 | ) | (0.20 | ) | (0.28 | ) | (0.30 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.99 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | ||||||||||||||
Total return (not reflecting sales charge) | 1.50 | %(2) | 2.97 | % | 5.45 | % | (0.43 | )% | 1.88 | %(2) | 5.25 | % | 1.62 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 14 | $ | 14 | $ | 16 | $ | 16 | $ | 22 | $ | 21 | $ | 24 | ||||||||||||||
Ratio of expenses to average net assets | 1.63 | %(3) | 1.62 | % | 1.61 | % | 1.64 | %(4) | 1.62 | %(3) | 1.57 | % | 1.47 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.72 | %(3) | 1.93 | % | 2.22 | % | 2.49 | %(4) | 2.37 | %(3) | 2.60 | % | 2.83 | % | ||||||||||||||
Portfolio turnover rate | 6 | %(2) | 19 | % | 8 | % | 15 | % | 8 | %(2) | 11 | % | 9 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap and additional voluntary fee waivers were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.71 | %(3) | 1.70 | % | 1.73 | % | 1.77 | %(4) | 1.75 | %(3) | 1.72 | % | 1.69 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.63 | %(3) | 1.85 | % | 2.10 | % | 2.36 | %(4) | 2.24 | %(3) | 2.45 | % | 2.61 | % |
__________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.73% and 2.40%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
26 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class I | ||||||||||||||||||||||||||||
Six Months Ended 9/30/16 | Year Ended | Year Ended | Year Ended | Nine Months Ended | Year Ended June 30, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.92 | $ | 10.80 | $ | 10.47 | $ | 10.79 | $ | 10.78 | $ | 10.51 | $ | 10.63 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.28 | 0.31 | 0.33 | 0.25 | 0.35 | 0.37 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.12 | 0.33 | (0.32 | ) | 0.01 | 0.27 | (0.12 | ) | |||||||||||||||||||
Total from investment operations | 0.20 | 0.40 | 0.64 | 0.01 | 0.26 | 0.62 | 0.25 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | (0.25 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.13 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | (0.25 | ) | (0.35 | ) | (0.37 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.99 | $ | 10.92 | $ | 10.80 | $ | 10.47 | $ | 10.79 | $ | 10.78 | $ | 10.51 | ||||||||||||||
Total return | 1.86 | % (2) | 3.80 | % | 6.20 | % | 0.17 | % | 2.41 | %(2) | 5.99 | % | 2.42 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.3 | $ | 0.3 | $ | 0.3 | $ | 0.3 | ||||||||||||||
Ratio of expenses to average net assets | 0.92 | %(3) | 0.92 | % | 0.90 | % | 0.94 | %(4) | 0.93 | %(3) | 0.87 | % | 0.78 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.43 | %(3) | 2.63 | % | 2.93 | % | 3.18 | %(4) | 3.07 | %(3) | 3.29 | % | 3.25 | % | ||||||||||||||
Portfolio turnover rate | 6 | %(2) | 19 | % | 8 | % | 15 | % | 8 | %(2) | 11 | % | 9 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap and additional voluntary fee waivers were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.00 | %(3) | 1.00 | % | 1.02 | % | 1.07 | %(4) | 1.06 | %(3) | 1.02 | % | 1.00 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.35 | %. (3) | 2.55 | % | 2.81 | % | 3.05 | %(4) | 2.94 | %(3) | 3.14 | % | 3.30 | % |
__________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.03% and 3.09%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
27 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL ENDED HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||||||
Ended 9/30/16 | Year Ended | Year Ended | Year Ended | Nine Months Ended | Year Ended June 30, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | $ | 10.64 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.15 | 0.31 | 0.34 | 0.36 | 0.28 | 0.38 | 0.40 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.11 | 0.33 | (0.31 | ) | – | 0.27 | (0.13 | ) | |||||||||||||||||||
Total from investment operations | 0.22 | 0.42 | 0.67 | 0.05 | 0.28 | 0.65 | 0.27 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.31 | ) | (0.34 | ) | (0.36 | ) | (0.27 | ) | (0.38 | ) | (0.40 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.15 | ) | (0.31 | ) | (0.34 | ) | (0.36 | ) | (0.27 | ) | (0.38 | ) | (0.40 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.99 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | $ | 10.78 | $ | 10.51 | ||||||||||||||
Total return | 2.01 | %(2) | 4.01 | % | 6.51 | % | 0.56 | % | 2.65 | %(2) | 6.31 | % | 2.64 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 109 | $ | 101 | $ | 93 | $ | 86 | $ | 93 | $ | 82 | $ | 67 | ||||||||||||||
Ratio of expenses to average net assets | 0.62 | %(3) | 0.62 | % | 0.61 | % | 0.64 | %(4) | 0.62 | %(3) | 0.57 | % | 0.47 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.73 | %(3) | 2.92 | % | 3.22 | % | 3.48 | %(4) | 3.37 | %(3) | 3.59 | % | 3.83 | % | ||||||||||||||
Portfolio turnover rate | 6 | %(2) | 19 | % | 8 | % | 15 | % | 8 | %(2) | 11 | % | 9 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap and additional voluntary fee waivers were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.71 | %(3) | 0.70 | % | 0.73 | % | 0.77 | %(4) | 0.75 | %(3) | 0.72 | % | 0.69 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.65 | %(3) | 2.84 | % | 3.10 | % | 3.35 | %(4) | 3.24 | %(3) | 3.43 | % | 3.61 | % |
__________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.73% and 3.39%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
28 | Aquila Narragansett Tax-Free Income Fund
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution (“12b-1”) and/or service fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2016 and held for the six months ended September 30, 2016.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2016
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | 1.93% | $1,000.00 | $1,019.30 | $3.95 |
Class C | 1.50% | $1,000.00 | $1,015.00 | $8.23 |
Class I | 1.86% | $1,000.00 | $1,018.60 | $4.66 |
Class Y | 2.01% | $1,000.00 | $1,020.10 | $3.14 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized; as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.78%, 1.63%, 0.92% and 0.62% for the Fund’s Class A, C, I and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
29 | Aquila Narragansett Tax-Free Income Fund
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2016
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,021.16 | $3.95 |
Class C | 5.00% | $1,000.00 | $1,016.90 | $8.24 |
Class I | 5.00% | $1,000.00 | $1,020.46 | $4.66 |
Class Y | 5.00% | $1,000.00 | $1,021.96 | $3.14 |
(1) | Expenses are equal to the annualized expense ratio of 0.78%, 1.63%, 0.92% and 0.62% for the Trust’s Class A, C, I and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
30 | Aquila Narragansett Tax-Free Income Fund
Information Available (unaudited)
Much of the information that the funds in the Aquila Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent your Fund’s entire list of portfolio securities twice a year in the semi-annual and annual reports you receive. Additionally, under Fund policies, the Manager publicly discloses the complete schedule of the Fund’s portfolio holdings, as of each calendar quarter, generally by the 15th day after the end of each calendar quarter. Such information remains accessible until the next schedule is made publicly available. You may obtain a copy of the Fund’s portfolio holdings schedule for the most recently completed period by visiting the Fund’s website at www.aquilafunds.com. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2016, the Fund did not vote any proxies. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at www.sec.gov.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the Internal Revenue Code. No action on the part of shareholders is required.
For the fiscal year ended March 31, 2016, $6,580,306 of dividends paid by Aquila Narragansett Tax-Free Income Fund, constituting 100% of total dividends paid, were exempt-interest dividends.
Prior to February 15, 2017, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2016 calendar year.
31 | Aquila Narragansett Tax-Free Income Fund
Additional Information (unaudited)
Renewal of the Advisory and Administration Agreement and the Sub-Advisory Agreement
Aquila Investment Management LLC (the “Manager”) serves as the investment adviser to the Fund pursuant to an Advisory and Administration Agreement (the “Advisory Agreement”). The Manager has retained Citizens Investment Advisors, a department of Citizens Bank, N.A. (the “Sub-Adviser”) to serve as the sub-adviser to the Fund pursuant to a Sub-Advisory Agreement between the Manager and the Sub-Adviser (the “Sub-Advisory Agreement”). In order for the Manager and the Sub-Adviser to continue to serve in their respective roles, the Trustees of the Fund must determine annually whether to renew the Advisory Agreement and the Sub-Advisory Agreement for the Fund.
In considering whether to approve the renewal of the Advisory Agreement and the Sub-Advisory Agreement, the Trustees requested and obtained such information as they deemed reasonably necessary. Contract review materials were provided to the Trustees in August, 2016. The independent Trustees met telephonically on August 30, 2016 and in person on September 18, 2016 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager and the Sub-Adviser. They also considered information presented in a report prepared by an independent consultant with respect to the Fund’s fees, expenses and investment performance, which included comparisons of the Fund’s investment performance against peers and the Fund’s benchmark and comparisons of the advisory fee payable by the Fund under the Advisory Agreement against the advisory fees paid by the Fund’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Fund provided to the Trustees at each regularly scheduled meeting. The Trustees considered the Advisory Agreement and the Sub-Advisory Agreement separately as well as in conjunction with each other to determine their combined effects on the Fund.
At the meeting held on September 18, 2016, based on their evaluation of the information provided by the Manager, the Sub-Adviser and the independent consultant, the Trustees of the Fund, including the independent Trustees voting separately, unanimously approved the renewal of each of the Advisory Agreement and the Sub-Advisory Agreement until September 30, 2017. In considering the renewal of the Advisory Agreement and the Sub-Advisory Agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the renewal of the Advisory Agreement or the Sub-Advisory Agreement.
The nature, extent, and quality of the services provided by the Manager and the Sub-Adviser.
The Trustees considered the nature, extent and quality of the services that had been provided by the Manager and the Sub-Adviser to the Fund, taking into account the investment objectives and strategies of the Fund. The Trustees reviewed the terms of the Advisory Agreement and the Sub-Advisory Agreement.
32 | Aquila Narragansett Tax-Free Income Fund
The Manager has retained the Sub-Adviser to provide investment management of the Fund’s portfolio. The Trustees reviewed the Sub-Adviser’s investment approach for the Fund. The Trustees considered the personnel of the Sub-Adviser who provide investment management services to the Fund. The Trustees noted the extensive experience of the Sub-Adviser’s portfolio manager, Mr. Jeffrey Hanna. They considered that Mr. Hanna is based in Providence, Rhode Island and that he has a comprehensive understanding regarding the economy of the State of Rhode Island and the securities in which the Fund invests, including those securities with less than the highest ratings from the rating agencies. The Trustees also noted that the Fund did not own any Puerto Rico municipal bonds during the review period.
The Trustees considered that the Manager supervised and monitored the performance of the Sub-Adviser. The Trustees also considered that the Manager and the Sub-Adviser had provided all advisory services to the Fund that the Trustees deemed necessary or appropriate, including the specific services that the Trustees have determined are required for the Fund, given that it seeks to provide shareholders with as high a level of current income exempt from Rhode Island state and regular Federal income taxes as is consistent with preservation of capital.
The Trustees also noted that the Manager has additionally provided all administrative services to the Fund and provided the Fund with personnel (including Fund officers) and other resources that are necessary for the Fund’s business management and operations. The Trustees considered the nature and extent of the Manager’s supervision of third-party service providers, including the Fund’s fund accountant, shareholder servicing agent and custodian.
Based on these considerations, the Trustees concluded that the nature, extent and quality of services that had been provided by the Manager and the Sub-Adviser to the Fund were satisfactory and consistent with the terms of the Advisory Agreement and Sub-Advisory Agreement, respectively.
The investment performance of the Fund.
The Trustees reviewed the Fund’s performance (Class A shares) and compared its performance to the performance of:
• | the funds in the Fund’s peer group (the “Peer Group”), as selected by the independent consultant (six single-state intermediate and single-state long municipal bond funds, as classified by Morningstar, that are similar to the Fund in size and that charge a front-end sales charge); |
• | the funds in the Fund’s product category for performance (the “Product Category for Performance”) (all funds in the Peer Group and, without duplication, all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. |
The Trustees considered that the materials included in the Consultant’s Report indicated that the Fund’s average annual total return was higher than the average annual total return of the funds in the Peer Group for the one, three and five-year periods but 0.01% lower than the average annual total return of the funds in the Peer Group for the ten-year period ended June 30, 2016. They also considered that the Fund’s average annual total return was higher than the average annual total return of the funds in the Product Category for Performance for the one, three, five and ten-year periods ended June 30, 2016. The Trustees noted that the Fund’s average annual return was higher than that of its benchmark index for the one, three and five-year periods but was lower than the average annual return of the benchmark index for the ten-year period ended June 30, 2016. The Trustees further determined that, as reflected in the Consultant’s Report, the Fund delivered above-average results on a risk-adjusted basis for the three and five year periods ended June 30, 2016 (as evidenced by its Sharpe ratio) when compared to the funds in the Product Category for Performance. The Trustees noted that the Fund was the only Rhode Island state-specific tax-free municipal bond fund. They also noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees, expenses or sales charges.
33 | Aquila Narragansett Tax-Free Income Fund
The Trustees considered the Fund’s investment performance to be consistent with the investment objectives of the Fund. Evaluation of the investment performance of the Fund indicated to the Trustees that renewal of the Advisory Agreement and Sub-Advisory Agreement would be appropriate.
Advisory Fees and Sub-Advisory Fees and Fund Expenses.
The Trustees evaluated the fee payable under the Advisory Agreement. They noted that the Manager, and not the Fund, paid the Sub-Adviser under the Sub-Advisory Agreement. The Trustees evaluated both the fee under the Sub-Advisory Agreement and the portion of the advisory fee paid under the Advisory Agreement and retained by the Manager. The Trustees reviewed the Fund’s advisory fees and expenses and compared them to the advisory fee and expense data for:
• | the funds in the Peer Group (as defined above); and |
• | the funds in the product category for expenses (the “Product Category for Expenses”) (Morningstar Single-State Intermediate Municipal Bond Funds and Morningstar Single State Long Municipal Bond Funds from states within which 1-3 mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Fund’s contractual advisory fee was equal to the median, but higher than the average, contractual advisory fees of the funds in the Peer Group (at the Fund’s current asset level). They also considered that the Fund’s contractual advisory fee was lower than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses at the Fund’s current asset level and up to $1 billion in assets.
The Trustees noted that the Fund’s actual management fee was higher than the average actual management fee of the funds in the Peer Group (after giving effect to fee waivers in effect for those funds) but lower than the average actual management fee of the funds in the Product Category for Expenses (after giving effect to fee waivers in effect for those funds). They noted, however, that the Fund’s actual expenses (for Class A shares) were lower than the average actual expenses of the funds in both the Product Category for Expenses and the Peer Group (after giving effect to fee waivers and expense reimbursements in effect for those funds).
34 | Aquila Narragansett Tax-Free Income Fund
The Trustees reviewed management fees charged by each of the Manager and the Sub-Adviser to its other clients. It was noted that the Manager does not have any other clients except for other funds in the Aquila Group of Funds. The Trustees noted that, in most instances, the fee rates for those clients were comparable to the fees paid to the Manager by the Fund. With respect to the Sub-Adviser, the Trustees noted that the fee rates for its other clients were generally lower than the fees paid to the Sub-Adviser with respect to the Fund. In evaluating the fees associated with the client accounts, the Trustees took into account the respective demands, resources and complexity associated with the Fund and those client accounts.
The Trustees considered that the Manager and, in turn, the Sub-Adviser was currently waiving a portion of its fees and had been since the Fund’s inception. Additionally, it was noted that the Manager had indicated that it intended to continue waiving fees as necessary for the Fund to remain competitive.
The Trustees concluded that the advisory and sub-advisory fees were reasonable in relation to the nature and quality of the services provided to the Fund by the Manager and the Sub-Adviser.
Profitability
The Trustees received materials from the Manager and from the independent consultant related to profitability. The Manager provided information which showed the profitability to the Manager of its services to the Fund, as well as the profitability of Aquila Distributors LLC of distribution services provided to the Fund. The independent consultant provided publicly available data regarding the profitability of other asset managers in comparison to the overall profitability of the Manager.
The Trustees considered the information provided by the Manager regarding the lack of profitability of the Manager with respect to the advisory services provided by the Manager to the Fund, including the methodology used by the Manager in allocating certain of its costs to the management of the Fund. The Trustees also considered information regarding the profitability of the Manager provided to the Trustees by the independent consultant. The Trustees concluded that profitability to the Manager with respect to advisory services provided to the Fund did not argue against approval of the fees to be paid under the Advisory Agreement.
The Trustees also considered information provided by the Sub-Adviser regarding the profitability of the Sub-Adviser with respect to the sub-advisory services provided by the Sub-Adviser to the Fund. The Trustees concluded that the profitability of the Sub-Adviser with respect to sub-advisory services provided to the Fund did not argue against approval of the fees to be paid under the Sub-Advisory Agreement.
The extent to which economies of scale would be realized as the Fund grows.
The Trustees considered the extent to which the Manager and the Sub-Adviser may realize economies of scale or other efficiencies in managing the Fund. The Trustees considered that the materials indicated that the Fund’s fees, after fee waivers, were generally comparable to those of its peers, including those funds with breakpoints in the advisory fee schedule. Additionally, the Trustees noted that the Manager continued to waive a portion of its fees. The Trustees noted that the Manager’s profitability also may be an indicator of the availability of any economies of scale. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Fund.
35 | Aquila Narragansett Tax-Free Income Fund
Benefits derived or to be derived by the Manager and the Sub-Adviser and their affiliates from their relationships with the Fund.
The Trustees observed that, as is generally true of most fund complexes, the Manager and Sub-Adviser and their affiliates, by providing services to a number of funds or other investment clients including the Fund, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that could produce efficiencies and increased profitability for the Manager and Sub-Adviser and their affiliates, it also makes their services available to the Fund at favorable levels of quality and cost which are more advantageous to the Fund than would otherwise have been possible.
See accompanying notes to financial statements.
36 | Aquila Narragansett Tax-Free Income Fund
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC 120
West 45th Street, Suite 3600
New York, New York 10036
Investment Sub-Adviser
CITIZENS INVESTMENT ADVISORS,
A DEPARTMENT OF CITIZENS BANK, N. A.
One Citizens Plaza
Providence, Rhode Island 02903
Board of Trustees
John C. Lucking, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
Grady Gammage, Jr.
Glenn P. O’Flaherty
James R. Ramsey
Laureen L. White
Officers
Diana P. Herrmann, President
Charles E. Childs, III, Executive Vice President
and Secretary
Marie E. Aro, Senior Vice President
Stephen J. Caridi, Senior Vice President
Paul G. O’Brien, Senior Vice President
Randall S. Fillmore, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer
and Treasurer
Distributor
AQUILA DISTRIBUTORS LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Transfer and Shareholder Servicing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
THE BANK OF NEW YORK MELLON
225 Liberty Street
New York, New York 10286
Further information is contained in the Prospectus,
which must precede or accompany this report.
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Semi-Annual Report September 30, 2016 | ||||||||||||||||||||||||||
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Please Save the Date for Your 2017 Shareholder Meeting Wednesday, May 17, 2017 Wellshire Event Center, Denver Details will be available on our website as the date approaches: www.aquilafunds.com or through your financial professional |
![]() | Aquila Tax-Free Fund of Colorado “The Role of Trustees” Serving Colorado investors since 1987 | ![]() |
November, 2016
Dear Fellow Shareholder:
As you may be aware, the Investment Company Act of 1940 (the “1940 Act”) is the primary federal law governing the structure and operation of mutual funds. It is enforced and regulated by the U.S. Securities and Exchange Commission (the “SEC”) and defines, among other things, certain responsibilities of Trustees.
Under applicable state law, Trustees are charged, as their primary responsibility, with safeguarding the interests of shareholders. As such, your Trustees seek to act in your best interests, putting your interests ahead of their own interests and those of anyone else, in overseeing the policies and procedures of Aquila Tax-Free Fund of Colorado (your “Fund”), as well as the services provided by your Fund’s key service providers.
Your Trustees’ key role is to be alert and sensitive to any conflicts of interest. By law, a substantial number of the Trustees must be “independent,” meaning that they have no affiliation with any sponsoring or support organization of the Fund. This requirement is in place in an effort to enhance Trustee impartiality. In order to ensure that your Board of Trustees continually maintains adequate independence, your Trustees complete a questionnaire on an annual basis which is, in turn, reviewed by your Fund’s legal counsel. It is also worthy to note that, at all times, a significant percentage of the Trustees must have been elected by you, the shareholders.
The 1940 Act requires your Board of Trustees to review certain of your Fund’s contracts on at least an annual basis, at which time, the majority of your Trustees, including a majority of the independent Trustees, must be present in person. Moreover, in their review of the contracts with your Fund’s adviser and sub-adviser, the Trustees seek to consider certain factors and their conclusions are disclosed to you in your Fund’s next annual or semi-annual report (as is the case with this semi-annual report). Your Trustees’ other key responsibilities include oversight of your Fund’s compliance policies and procedures, valuation and risk management.
Your Board of Trustees oversees the business of your Fund through regular quarterly and ad hoc board meetings, committee meetings (which focus on specific subject matters) and frequent communications. These meetings allow Trustees to be brought up-to-date on the affairs of your Fund, ask questions, and deliberate and vote on issues important to your Fund and its shareholders.
Selection and nomination of independent Trustees is by the existing independent Trustees. As detailed in the Nominating Committee Charter which is available on your Fund’s website (www.aquilafunds.com), your Board of Trustees seeks to develop and maintain a board of high quality, independence and integrity to best serve your interests. The Trustees associated with the Aquila Group of Funds are additionally selected on the basis of being accomplished individuals of diverse backgrounds from various parts of the United States, including Colorado. Through this diversity, we strive to provide your Fund with a broad breadth and balance of knowledge and experience. Biographical and other information on your Board of Trustees is available on our website and, by law, is included in your Fund’s annual report and Statement of Additional Information.
NOT A PART OF THE SEMI-ANNUAL REPORT
Although, not required, Trustees in the Aquila Group of Funds self-impose some additional criteria.
• | In addition to overseeing your Fund, all Trustees are also fellow shareholders. While Trustees, like any investor, must consider, among other things, their own personal investment objectives (including tax benefits afforded the investment by their state of residence) when deciding upon the size of their investment in Aquila Tax-Free Fund of Colorado, we believe it is important that each Trustee has “some skin the game.” |
• | Consideration is given to including local residents as Trustees. In this way, the Fund can benefit from their hands-on insight and knowledge of their State. |
In short, your Board of Trustees are your “watchdogs,” looking over operations of Aquila Tax-Free Fund of Colorado.
It has been our experience that those who have undertaken to serve as Trustees diligently devote their energies, talents and experience to furthering the interests of you, our shareholders.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsigd.jpg)
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsig2d.jpg)
Diana P. Herrmann, Vice Chair and President
Any information in this Shareholder Letter regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
NOT A PART OF THE SEMI-ANNUAL REPORT
Mutual fund investing involves risk and loss of principal is possible.
The market prices of the Fund’s securities may rise or decline in value due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. When market prices fall, the value of your investment may go down. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
The value of your investment may go down when interest rates rise. A rise in interest rates tends to have a greater impact on the prices of longer term securities. Conversely, when interest rates fall, the value of your investment may rise. Interest rates in the U.S. recently have been historically low , so the Fund faces a heightened risk that interest rates may rise. A general rise in interest rates may cause investors to move out of fixed income securities and could also result in increased redemptions from the Fund.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of underlying securities and their inability to meet their debt obligations.
The value of municipal securities can be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory developments, legislative actions, and by uncertainties and public perceptions concerning these and other factors. The Fund may be affected significantly by adverse economic, political or other events affecting state and other municipal issuers in which it invests, and may be more volatile than a more geographically diverse fund.
If interest rates fall, an issuer may exercise its right to prepay its securities, and the Fund could be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security.
A portion of income may be subject to local, state, Federal and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax.
These risks may result in share price volatility.
Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
Any information in this Semi-Annual Report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes.
NOT A PART OF THE SEMI-ANNUAL REPORT
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (22.6%) | Rating Moody’s, S&P | Value | ||||||
Hospital (0.7%) | |||||||||
Rangely, Colorado Hospital | |||||||||
District Refunding | |||||||||
$ | 2,000,000 | 5.500%, 11/01/22 | Baa1/NR/NR | $ | 2,336,020 | ||||
Metropolitan District (2.6%) | |||||||||
Denver, Colorado Urban Renewal Authority, | |||||||||
Tax Increment Revenue, | |||||||||
Stapleton Senior Series A-1 | |||||||||
2,600,000 | 5.000%, 12/01/25 | NR/NR/A- | 3,099,382 | ||||||
Denver, Colorado Urban Renewal | |||||||||
Authority, Tax Increment Revenue, | |||||||||
Stapleton Senior Series B-1 | |||||||||
1,000,000 | 5.000%, 12/01/25 | Aa3/NR/NR | 1,269,940 | ||||||
Meridian Metropolitan District, | |||||||||
Colorado Refunding Series A | |||||||||
1,645,000 | 4.500%, 12/01/23 | NR/A-/A | 1,867,059 | ||||||
Poudre Tech Metropolitan District, | |||||||||
Colorado Unlimited Property Tax | |||||||||
Supported Revenue Refunding & | |||||||||
Improvement, Series B | |||||||||
1,990,000 | 5.000%, 12/01/28 AGMC Insured | NR/AA/NR | 2,254,929 | ||||||
Total Metropolitan District . | 8,491,310 | ||||||||
School Districts (18.9%) | |||||||||
Adams 12 Five Star Schools, Colorado | |||||||||
3,000,000 | 5.000%, 12/15/25 | Aa2/AA-/NR | 3,759,420 | ||||||
1,000,000 | 5.000%, 12/15/25 | Aa2/AA-/NR | 1,276,840 | ||||||
Adams County, Colorado School | |||||||||
District #50 | |||||||||
1,000,000 | 4.000%, 12/01/23 | Aa2/AA-/NR | 1,166,300 | ||||||
3,000,000 | 4.000%, 12/01/24 | Aa2/AA-/NR | 3,479,580 | ||||||
Adams & Weld Counties, Colorado | |||||||||
School District #27J | |||||||||
1,030,000 | 5.000%, 12/01/22 | Aa2/AA-/NR | 1,252,686 | ||||||
2,000,000 | 5.000%, 12/01/24 | Aa2/AA-/NR | 2,425,820 | ||||||
1,000,000 | 5.000%, 12/01/25 | Aa2/AA-/NR | 1,271,230 | ||||||
1,060,000 | 5.000%, 12/01/28 | Aa2/AA-/NR | 1,336,946 | ||||||
3,895,000 | 5.000%, 12/01/29 | Aa2/AA-/NR | 4,875,449 |
1 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
School Districts (continued) | |||||||||
Arapahoe County, Colorado School | |||||||||
District #001 Englewood | |||||||||
$ | 1,465,000 | 5.000%, 12/01/27 | Aa2/NR/NR | $ | 1,859,041 | ||||
Arapahoe County, Colorado School | |||||||||
District #006 Littleton | |||||||||
1,000,000 | 5.000%, 12/01/27 | Aa1/NR/NR | 1,282,430 | ||||||
Boulder Larimer & Weld Counties, | |||||||||
Colorado | |||||||||
2,000,000 | 5.000%, 12/15/27 | Aa2/AA/NR | 2,553,680 | ||||||
Boulder Larimer & Weld Counties, | |||||||||
Colorado Series A | |||||||||
2,000,000 | 5.000%, 12/15/24 | Aa2/AA/NR | 2,560,880 | ||||||
Denver, Colorado City & County | |||||||||
School District No. 1 | |||||||||
3,000,000 | 4.000%, 12/01/26 | Aa2/AA/AA+ | 3,404,220 | ||||||
2,000,000 | 4.000%, 12/01/27 | Aa2/AA/AA+ | 2,373,540 | ||||||
Denver, Colorado City & County | |||||||||
School District No. 1 Series B | |||||||||
2,000,000 | 5.000%, 12/01/25 | Aa2/AA/AA+ | 2,535,420 | ||||||
4,000,000 | 5.000%, 12/01/27 | Aa2/AA/AA+ | 5,025,440 | ||||||
Eagle County School District, Colorado, | |||||||||
Eagle, Garfield & Routt School | |||||||||
District #50J | |||||||||
1,170,000 | 5.000%, 12/01/25 | Aa2/AA-/NR | 1,437,029 | ||||||
El Paso County, Colorado School | |||||||||
District #20 Refunding | |||||||||
1,945,000 | 4.375%, 12/15/23 | Aa2/NR/NR | 2,244,452 | ||||||
Garfield, Pitkin, & Eagle Counties, | |||||||||
Colorado School District | |||||||||
#RE-1 Roaring Fork | |||||||||
1,600,000 | 5.000%, 12/15/27 | Aa2/NR/NR | 2,047,632 | ||||||
La Plata County, Colorado School | |||||||||
District #9-R Durango Refunding | |||||||||
3,000,000 | 4.500%, 11/01/23 . | Aa2/NR/NR | 3,469,710 | ||||||
Larimer County, Colorado School | |||||||||
District No. R 1 Poudre | |||||||||
1,000,000 | 5.000%, 12/15/27 | Aa2/NR/NR | 1,279,770 |
2 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&Pand Fitch | Value | ||||||
School Districts (continued) | |||||||||
Larimer, Weld & Boulder Counties, | |||||||||
Colorado School District No. R-2J, | |||||||||
Thompson Refunding | |||||||||
$ | 1,500,000 | 4.250%, 12/15/24 | Aa2/NR/NR | $ | 1,759,590 | ||||
750,000 | 4.500%, 12/01/26 | Aa3/NR/NR | 896,663 | ||||||
Mesa County, Colorado Valley School | |||||||||
District No. 051, Grand Junction | |||||||||
Refunding | |||||||||
3,000,000 | 5.000%, 12/01/23 | Aa2/NR/NR | 3,716,730 | ||||||
San Miguel County, Colorado School | |||||||||
District R-1 Telluride | |||||||||
1,055,000 | 5.000%, 12/01/25 | Aa2/AA/NR | 1,343,004 | ||||||
Summit County, Colorado School | |||||||||
District No. RE 1 Refunding | |||||||||
2,000,000 | 4.000%, 12/01/24 | Aa1/NR/NR | 2,254,560 | ||||||
Total School Districts | 62,888,062 | ||||||||
Water & Sewer (0.4%) | |||||||||
Central Colorado Water Conservancy | |||||||||
District, Adams Morgan & Weld Counties | |||||||||
1,185,000 | 5.000%, 12/01/24 | NR/A/NR | 1,442,050 | ||||||
Total General Obligation Bonds | 75,157,442 | ||||||||
Revenue Bonds (52.7%) | |||||||||
Airport (3.3%) | |||||||||
Denver, Colorado City & County | |||||||||
Airport Revenue System, Series A | |||||||||
4,340,000 | 5.000%, 11/15/24 | A1/A+/A+ | 5,014,696 | ||||||
1,210,000 | 5.250%, 11/15/28 | A1/A+/A+ | 1,356,035 | ||||||
3,000,000 | 5.250%, 11/15/29 | A1/A+/A+ | 3,363,060 | ||||||
Walker Field, Colorado Public Airport | |||||||||
Authority Airport Revenue | |||||||||
1,000,000 | 5.000%, 12/01/22 | Baa2/NR/NR | 1,041,750 | ||||||
Total Airport | 10,775,541 |
3 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
City & County (1.0%) | |||||||||
Boulder, Colorado Open Space Capital | |||||||||
Improvement Trust Fund | |||||||||
$ | 2,530,000 | 5.000%, 12/15/27 | NR/AA/NR | $ | 3,227,926 | ||||
Electric (3.0%) | |||||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Refunding Series A | |||||||||
1,000,000 | 5.000%, 11/15/27 | Aa2/AA/AA | 1,267,780 | ||||||
295,000 | 4.750%, 11/15/27 | Aa2/AA/NR | 326,692 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Refunding Series A-1 | |||||||||
1,000,000 | 4.000%, 11/15/26 | Aa2/AA/AA | 1,103,090 | ||||||
1,000,000 | 4.000%, 11/15/27 | Aa2/AA/AA | 1,097,200 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue Refunding Series B | |||||||||
2,600,000 | 5.000%, 11/15/23 | Aa2/AA/AA | 3,228,940 | ||||||
420,000 | 5.250%, 11/15/23 (unrefunded portion). | Aa2/AA/NR | 457,838 | ||||||
Colorado Springs, Colorado | |||||||||
Utilities Revenue, Series C-2 | |||||||||
1,060,000 | 5.000%, 11/15/23 | Aa2/AA/AA | 1,316,414 | ||||||
Platte River Power Authority, | |||||||||
Colorado Power | |||||||||
1,000,000 | 4.000%, 06/01/26 | NR/AA/AA | 1,208,940 | ||||||
Total Electric | 10,006,894 | ||||||||
Higher Education (12.8%) | |||||||||
Colorado Educational & Cultural Facility | |||||||||
Authority, Student Housing - Campus | |||||||||
Village Apartments Refunding | |||||||||
2,935,000 | 5.375%, 06/01/28 | NR/A/NR | 3,124,366 | ||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, University Corp. | |||||||||
Atmosphere Project, Refunding | |||||||||
1,700,000 | 5.000%, 09/01/22 | A2/A+/NR | 1,931,098 | ||||||
1,635,000 | 5.000%, 09/01/28 | A2/A+/NR | 1,848,613 | ||||||
Colorado Educational & Cultural Facility | |||||||||
Authority, University of Denver Project | |||||||||
845,000 | 4.000%, 03/01/24 | A1/NR/NR | 979,144 | ||||||
7,000,000 | 5.250%, 03/01/25 NPFG Insured | A1/AA-/NR | 8,838,340 |
4 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Colorado Educational & Cultural Facility | |||||||||
Authority Refunding, University of | |||||||||
Denver Project | |||||||||
$ | 1,000,000 | 5.250%, 03/01/26 NPFG Insured | A1/AA-/NR | $ | 1,295,260 | ||||
Colorado State Board of Governors | |||||||||
University Enterprise System, Series A | |||||||||
2,300,000 | 5.000%, 03/01/25 | Aa2/AA-/NR | 2,734,861 | ||||||
Colorado State Board of Governors | |||||||||
University Enterprise System, Series C | |||||||||
2,905,000 | 5.000%, 03/01/26 | Aa2/AA-/NR | 3,665,849 | ||||||
University of Colorado Enterprise System | |||||||||
1,270,000 | 5.000%, 06/01/25 | Aa2/NR/AA+ | 1,588,237 | ||||||
University of Colorado Enterprise | |||||||||
System Series A | |||||||||
2,620,000 | 5.000%, 06/01/29 | Aa2/NR/AA+ | 3,265,358 | ||||||
1,165,000 | 5.000%, 06/01/26 NPFG Insured | Aa2/NR/AA+ | 1,513,207 | ||||||
University of Colorado Enterprise | |||||||||
System, Refunding, Series B | |||||||||
1,680,000 | 4.000%, 06/01/23 | Aa2/NR/AA+ | 1,842,658 | ||||||
1,500,000 | 5.000%, 06/01/26 | Aa2/NR/AA+ | 1,948,335 | ||||||
University of Northern Colorado Greeley | |||||||||
Institutional Enterprise Refunding, | |||||||||
SHEIP, Series A | |||||||||
1,000,000 | 5.000%, 06/01/25 | Aa2/AA-/NR | 1,248,940 | ||||||
2,810,000 | 5.000%, 06/01/26 | Aa2/AA-/NR | 3,257,464 | ||||||
2,940,000 | 5.000%, 06/01/28 | Aa2/AA-/NR | 3,395,259 | ||||||
Total Higher Education | 42,476,989 | ||||||||
Hospital (3.9%) | |||||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Evangelical | |||||||||
Lutheran Project | |||||||||
450,000 | 5.250%, 06/01/19 (unrefunded portion) | Baa1/BBB+/NR | 451,489 | ||||||
290,000 | 5.250%, 06/01/21 (unrefunded portion) | Baa1/BBB+/NR | 290,913 | ||||||
575,000 | 5.250%, 06/01/24 (unrefunded portion) | Baa1/BBB+/NR | 576,633 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Valley View | |||||||||
Hospital Association, Refunding | |||||||||
1,500,000 | 5.500%, 05/15/28 | NR/A-/NR | 1,607,100 |
5 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Hospital (continued) | |||||||||
Colorado Health Facility Authority, | |||||||||
Catholic Health Initiatives, Series D | |||||||||
$ | 2,000,000 | 5.000%, 10/01/16 | A3/A-/BBB+ | $ | 2,000,000 | ||||
1,000,000 | 6.000%, 10/01/23 | A3/A-/BBB+ | 1,106,600 | ||||||
Colorado Health Facility Authority, | |||||||||
Sisters Leavenworth, Refunding | |||||||||
3,000,000 | 5.250%, 01/01/25 | Aa3/AA-/AA- | 3,389,910 | ||||||
Denver, Colorado Health & Hospital | |||||||||
Authority Healthcare, Series A Refunding | |||||||||
2,000,000 | 5.000%, 12/01/18 | NR/BBB/BBB+ | 2,013,100 | ||||||
1,500,000 | 5.000%, 12/01/19 | NR/BBB/BBB+ | 1,509,870 | ||||||
Total Hospital | 12,945,615 | ||||||||
Housing (0.2%) | |||||||||
Colorado Housing Finance Authority, | |||||||||
Single Family Mortgage Class III | |||||||||
Series A-5 | |||||||||
590,000 | 5.000%, 11/01/34 | A2/A/NR | 607,334 | ||||||
Colorado Housing and Finance Authority, | |||||||||
Multi-Family Project C1-II Series A-2 | |||||||||
115,000 | 5.400%, 10/01/29 | Aa2/AA/NR | 117,299 | ||||||
Total Housing | 724,633 | ||||||||
Lease (12.2%) | �� | ||||||||
Adams 12 Five Star Schools, | |||||||||
Colorado COP | |||||||||
2,070,000 | 5.000%, 12/15/26 | Aa3/NR/NR | 2,659,909 | ||||||
1,030,000 | 5.000%, 12/15/27 | Aa3/NR/NR | 1,338,516 | ||||||
Arvada, Colorado COP | |||||||||
1,190,000 | 4.000%, 12/01/29 | NR/AA+/NR | 1,379,269 | ||||||
Aurora, Colorado COP, Refunding | |||||||||
Series A | |||||||||
1,500,000 | 5.000%, 12/01/26 | Aa2/AA-/NR | 1,671,015 | ||||||
Brighton, Colorado COP Refunding | |||||||||
Series A | |||||||||
1,865,000 | 5.000%, 12/01/24 AGMC Insured | A1/AA/NR | 2,120,524 | ||||||
Broomfield, Colorado COP | |||||||||
2,000,000 | 4.500%, 12/01/28 | Aa3/NR/NR | 2,233,100 | ||||||
Colorado Educational & Cultural |
6 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Lease (continued) | |||||||||
Facilities Authority, Ave Maria School | |||||||||
Project Refunding | |||||||||
$ | 1,000,000 | 4.850%, 12/01/25 AGC Insured | A3/AA/NR | $ | 1,036,110 | ||||
Colorado State BEST COP Series G | |||||||||
3,000,000 | 4.250%, 03/15/23 | Aa2/AA-/NR | 3,338,370 | ||||||
Colorado State BEST COP Series H | |||||||||
3,490,000 | 4.000%, 03/15/26 | Aa2/AA-/NR | 3,873,062 | ||||||
Colorado State Higher Education | |||||||||
Capital Construction Lease | |||||||||
1,690,000 | 5.000%, 11/01/26 | Aa2/AA-/NR | 2,173,543 | ||||||
Denver, Colorado City and County | |||||||||
COP (Botanical Gardens) | |||||||||
2,015,000 | 5.250%, 12/01/22 | Aa2/AA+/AA+ | 2,193,972 | ||||||
Denver, Colorado City & County COP | |||||||||
(Fire Station & Library Facilities) | |||||||||
1,065,000 | 5.000%, 12/01/25 | Aa1/AA+/AA+ | 1,357,651 | ||||||
Douglas County, Colorado COP | |||||||||
(Libraries) | |||||||||
1,570,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 1,905,650 | ||||||
El Paso County, Colorado COP | |||||||||
(Judicial Complex Project) | |||||||||
1,085,000 | 4.500%, 12/01/26 AMBAC Insured | ||||||||
(unrefunded portion) | NR/AA/NR | 1,126,338 | |||||||
Foothills Park and Recreation District, | |||||||||
Colorado COP Refunding & | |||||||||
Improvement | |||||||||
1,380,000 | 5.000%, 12/01/26 AGMC Insured | NR/AA/NR | 1,723,441 | ||||||
Garfield County, Colorado COP | |||||||||
Public Library District | |||||||||
1,000,000 | 5.375%, 12/01/27 | NR/A/NR | 1,120,290 | ||||||
Gypsum, Colorado COP | |||||||||
1,050,000 | 5.000%, 12/01/28 | NR/A+/NR | 1,093,407 | ||||||
Jefferson County, Colorado School | |||||||||
District No. R-1 COP | |||||||||
1,000,000 | 5.000%, 12/15/27 | Aa3/A+/NR | 1,245,080 | ||||||
Pueblo, Colorado COP | |||||||||
(Police Complex Project) | |||||||||
2,170,000 | 5.500%, 08/15/22 AGC Insured | Aa3/AA/NR | 2,337,437 |
7 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Lease (continued) | |||||||||
Rangeview Library District Project, | |||||||||
Colorado COP | |||||||||
$ | 2,515,000 | 5.000%, 12/15/27 AGMC Insured | Aa3/AA/NR | $ | 3,074,789 | ||||
Westminster, Colorado COP | |||||||||
1,480,000 | 4.250%, 12/01/22 AGMC Insured | A2/AA/NR | 1,654,122 | ||||||
Total Lease | 40,655,595 | ||||||||
Sales Tax (4.9%) | |||||||||
Boulder, Colorado General Fund | |||||||||
Capital Improvement Projects | |||||||||
2,235,000 | 4.000%, 10/01/25 | Aa1/AA+/NR | 2,558,025 | ||||||
Castle Rock, Colorado Sales & Use Tax | |||||||||
1,015,000 | 4.000%, 06/01/25 | Aa3/AA/NR | 1,159,932 | ||||||
Commerce City, Colorado Sales & | |||||||||
Use Tax | |||||||||
500,000 | 5.000%, 08/01/28 AGMC Insured | A2/AA/NR | 628,075 | ||||||
500,000 | 5.000%, 08/01/29 AGMC Insured | A2/AA/NR | 624,550 | ||||||
1,000,000 | 5.000%, 08/01/26 BAMAC Insured | A1/AA/NR | 1,259,000 | ||||||
Denver, Colorado City & County | |||||||||
Dedicated Tax Refunding & | |||||||||
Improvement, Series A | |||||||||
1,350,000 | 5.000%, 08/01/26 | Aa3/AA-/AA | 1,747,156 | ||||||
1,500,000 | 5.000%, 08/01/27 | Aa3/AA-/AA | 1,913,280 | ||||||
Grand Junction, Colorado General Fund | |||||||||
1,900,000 | 5.000%, 03/01/23 | NR/AA/NR | 2,235,996 | ||||||
Park Meadows Business Implementation | |||||||||
District, Colorado Shared Sales Tax | |||||||||
1,500,000 | 5.300%, 12/01/27 | NR/NR/NR* | 1,544,715 | ||||||
Pueblo, Colorado Urban Renewal | |||||||||
Authority, Refunding & Improvement, | |||||||||
Series B | |||||||||
1,250,000 | 5.250%, 12/01/28 | A2/A/NR | 1,432,850 | ||||||
Westminster, Colorado Economic | |||||||||
Development Authority, Mandalay | |||||||||
Gardens Urban Renewal Project | |||||||||
1,090,000 | 4.000%, 12/01/22 | NR/A+/NR | 1,221,683 | ||||||
Total Sales Tax | 16,325,262 |
8 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Transportation (0.7%) | |||||||||
Regional Transportation District, | |||||||||
Colorado COP, Series A | |||||||||
$ | 2,000,000 | 5.000%, 06/01/26 | Aa3/A/A | $ | 2,492,640 | ||||
Water & Sewer (9.8%) | |||||||||
Arapahoe, Colorado Water & Wastewater | |||||||||
Public Improvement District | |||||||||
1,320,000 | 5.000%, 12/01/24 | NR/AA-/NR | 1,678,024 | ||||||
1,020,000 | 5.000%, 12/01/25 | NR/AA-/NR | 1,286,812 | ||||||
Aurora, Colorado Water Revenue | |||||||||
Refunding, First Lien, Green Bonds | |||||||||
1,000,000 | 5.000%, 08/01/28 | NR/AA+/AA+ | 1,280,670 | ||||||
1,000,000 | 5.000%, 08/01/29 | NR/AA+/AA+ | 1,271,410 | ||||||
Broomfield, Colorado Sewer and | |||||||||
Waste Water | |||||||||
1,975,000 | 4.000%, 12/01/21 AGMC Insured | A2/NR/NR | 2,208,642 | ||||||
1,550,000 | 5.000%, 12/01/24 AGMC Insured | A2/AA/NR | 1,856,729 | ||||||
Broomfield, Colorado Water | |||||||||
Activity Enterprise | |||||||||
3,385,000 | 5.000%, 12/01/21 | A1/NR/NR | 3,994,571 | ||||||
Castle Rock, Colorado Water & Sewer | �� | ||||||||
Enterprise, Revenue Refunding | |||||||||
1,000,000 | 5.000%, 12/01/28 | Aa3/AA+/NR | 1,284,000 | ||||||
Colorado Water Resource & Power | |||||||||
Development Authority | |||||||||
925,000 | 5.000%, 09/01/25 | Aaa/AAA/AAA | 1,194,822 | ||||||
1,000,000 | 5.000%, 09/01/27 | Aaa/AAA/AAA | 1,294,380 | ||||||
1,855,000 | 5.000%, 09/01/17 NPFG Insured | A3/AA-/NR | 1,860,417 | ||||||
Denver, Colorado City and County | |||||||||
Board Water Commissioners Master | |||||||||
Resolution, Refunding, Series B | |||||||||
1,000,000 | 4.000%, 12/15/22 | Aaa/AAA/AAA | 1,145,470 | ||||||
Erie, Colorado Water Enterprise | |||||||||
Revenue, Series A | |||||||||
265,000 | 5.000%, 12/01/25 AGMC Insured | ||||||||
(unrefunded portion) | A1/NR/NR | 276,893 | |||||||
Greeley, Colorado Water Revenue | |||||||||
1,705,000 | 5.000%, 08/01/28 | Aa2/AA+/NR | 2,176,501 |
9 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Water & Sewer (continued) | |||||||||
North Weld County, Colorado Water | |||||||||
District Enterprise Revenue Refunding | |||||||||
$ | 1,465,000 | 4.000%, 11/01/22 AGMC Insured | NR/AA/NR | $ | 1,689,672 | ||||
Parker, Colorado Water & Sanitation | |||||||||
District Water & Sewer | |||||||||
Enterprise Refunding | |||||||||
1,000,000 | 5.000%, 11/01/22 AGMC Insured | A2/AA/NR | 1,200,040 | ||||||
Thorton, Colorado Water Enterprise | |||||||||
Revenue, Series 2013 | |||||||||
1,970,000 | 4.000%, 12/01/24 | Aa2/AA/NR | 2,308,781 | ||||||
Westminster, Colorado Water & | |||||||||
Wastewater Utility Enterprise | |||||||||
1,160,000 | 5.000%, 12/01/28 | NR/AAA/AA+ | 1,498,105 | ||||||
Woodmoor, Colorado Water & | |||||||||
Sanitation District #1 Enterprise | |||||||||
2,570,000 | 4.500%, 12/01/26 | NR/AA-/NR | 2,944,218 | ||||||
Total Water & Sewer | 32,450,157 | ||||||||
Miscellaneous Revenue (0.9%) | |||||||||
Colorado Educational & Cultural Facility | |||||||||
Authority, Independent School Revenue | |||||||||
Refunding, Kent Denver School Project | |||||||||
1,000,000 | 5.000%, 10/01/30 | NR/A/NR | 1,101,930 | ||||||
Colorado Educational & Cultural Facility | |||||||||
Authority, Independent School Revenue | |||||||||
Refunding, Vail Mountain School Project | |||||||||
1,820,000 | 6.000%, 05/01/30 | NR/BBB-/NR | 2,008,152 | ||||||
Total Miscellaneous Revenue | 3,110,082 | ||||||||
Total Revenue Bonds | 175,191,334 | ||||||||
Pre-Refunded Bonds (22.5%)†† | |||||||||
Pre-Refunded | |||||||||
General Obligation Bonds (8.2%) | |||||||||
Metropolitan District (2.3%) | |||||||||
Fraser Valley, Colorado Metropolitan | |||||||||
Recreational District | |||||||||
1,875,000 | 5.000%, 12/01/25 | NR/A/NR | 1,964,494 |
10 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds†† (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Metropolitan District (continued) | |||||||||
Hyland Hills Metro Park & Recreation | |||||||||
District, Colorado | |||||||||
$ | 875,000 | 4.375%, 12/15/26 ACA Insured | NR/NR/NR* | $ | 911,138 | ||||
North Metro Fire Rescue District, | |||||||||
Colorado | |||||||||
1,200,000 | 4.625%, 12/01/20 AMBAC Insured | NR/AA/NR | 1,207,128 | ||||||
Park Creek Metropolitan District, | |||||||||
Colorado Revenue Refunding & | |||||||||
Improvement - Senior Property | |||||||||
Tax Support | |||||||||
2,000,000 | 5.500%, 12/01/21 AGC Insured | NR/AA/BBB | 2,282,200 | ||||||
Stonegate Village Metropolitan District, | |||||||||
Colorado Refunding & Improvement | |||||||||
325,000 | 5.000%, 12/01/23 NPFG Insured | A3/AA-/NR | 327,119 | ||||||
175,000 | 5.000%, 12/01/23 NPFG Insured | A3/AA-/NR | 176,141 | ||||||
585,000 | 5.000%, 12/01/24 NPFG Insured | A3/AA-/NR | 588,814 | ||||||
315,000 | 5.000%, 12/01/24 NPFG Insured | A3/AA-/NR | 317,054 | ||||||
Total Metropolitan District | 7,774,088 | ||||||||
School Districts (5.9%) | |||||||||
Adams & Arapahoe Counties, Colorado | |||||||||
Joint School District #28J | |||||||||
2,500,000 | 5.500%, 12/01/23 | Aa2/AA-/NR | 2,744,350 | ||||||
Adams & Weld Counties, Colorado | |||||||||
School District #27J | |||||||||
1,000,000 | 5.375%, 12/01/26 NPFG Insured | Aa2/AA-/NR | 1,007,100 | ||||||
Arapahoe County, Colorado School | |||||||||
District #001 Englewood | |||||||||
3,235,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 3,863,819 | ||||||
Boulder Larimer & Weld Counties, | |||||||||
Colorado | |||||||||
1,260,000 | 5.000%, 12/15/26 AGMC Insured | Aa2/AA/NR | 1,270,269 | ||||||
1,500,000 | 5.000%, 12/15/28 | Aa2/AA/NR | 1,631,265 | ||||||
Denver, Colorado City & County | |||||||||
School District No. 1 | |||||||||
3,000,000 | 5.250%, 12/01/27 | Aa2/AA/NR | 3,339,120 | ||||||
El Paso County, Colorado School | |||||||||
District #20 | |||||||||
1,500,000 | 4.500%, 12/15/25 AGMC Insured | Aa2/NR/NR | 1,565,100 |
11 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
School Districts (continued) | |||||||||
Gunnison Watershed, Colorado | |||||||||
School District | |||||||||
$ | 1,025,000 | 5.250%, 12/01/26 | Aa2/AA-/NR | $ | 1,119,731 | ||||
Jefferson County, Colorado School | |||||||||
District #R-001 | |||||||||
3,000,000 | 5.250%, 12/15/25 AGMC Insured | Aa2/AA/NR | 3,025,890 | ||||||
Total School Districts | 19,566,644 | ||||||||
Total Pre-Refunded General | |||||||||
Obligation Bonds | 27,340,732 | ||||||||
Pre-Refunded Revenue Bonds (14.3%) | |||||||||
Electric (0.9%) | |||||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Refunding Series A | |||||||||
1,705,000 | 4.750%, 11/15/27 . | NR/NR/NR* | 1,900,359 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue Refunding Series B | |||||||||
865,000 | 5.250%, 11/15/23 . | NR/NR/NR* | 942,547 | ||||||
Total Electric | 2,842,906 | ||||||||
Higher Education (3.8%) | |||||||||
Adams State College, Colorado Auxiliary | |||||||||
Facilities Improvement Series A | |||||||||
1,000,000 | 5.200%, 05/15/27 | Aa2/AA-/NR | 1,110,160 | ||||||
Colorado School of Mines Enterprise | |||||||||
Refunding & Improvement | |||||||||
1,455,000 | 5.000%, 12/01/24 | Aa2/AA-/NR | 1,581,716 | ||||||
Colorado State Board of Governors | |||||||||
University Enterprise System, Series A | |||||||||
930,000 | 5.000%, 03/01/28 AGMC Insured | Aa3/AA/NR | 982,861 | ||||||
Mesa State College, Colorado Auxiliary | |||||||||
Facilities Enterprise | |||||||||
2,000,000 | 5.700%, 05/15/26 | NR/AA-/NR | 2,107,260 | ||||||
University of Colorado Enterprise System | |||||||||
2,000,000 | 5.000%, 06/01/27 | Aa2/NR/AA+ | 2,213,000 | ||||||
University of Colorado Enterprise | |||||||||
System Series A | |||||||||
2,000,000 | 4.750%, 06/01/27 | Aa2/NR/AA+ | 2,338,320 |
12 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Western State College, Colorado | |||||||||
Institutional Enterprise, SHEIP, Series A | |||||||||
$ | 1,160,000 | 5.000%, 05/15/24 | Aa2/AA-/NR | $ | 1,325,045 | ||||
Western State College, Colorado, SHEIP | |||||||||
1,020,000 | 5.000%, 05/15/27 | Aa2/AA-/NR | 1,127,120 | ||||||
Total Higher Education | 12,785,482 | ||||||||
Hospital (1.7%) | |||||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Adventist | |||||||||
Health/Sunbelt, Refunding | |||||||||
2,500,000 | 5.125%, 11/15/29 . | Aa2/NR/NR | 2,512,050 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Catholic Health | |||||||||
1,000,000 | 4.750%, 09/01/25 AGMC Insured | A2/AA/BBB+ | 1,060,450 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, NCMC, Inc. Project | |||||||||
2,000,000 | 5.250%, 05/15/26 Series A AGM | ||||||||
Insured | NR/AA/A+ | 2,222,900 | |||||||
Total Hospital | 5,795,400 | ||||||||
Lease (5.9%) | |||||||||
Adams 12 Five Star Schools, Colorado | |||||||||
COP | |||||||||
1,770,000 | 4.625%, 12/01/24 | Aa3/A+/NR | 1,910,025 | ||||||
500,000 | 5.000%, 12/01/25 | Aa3/A+/NR | 543,545 | ||||||
Adams County, Colorado Corrections | |||||||||
Facility COP, Series B | |||||||||
1,600,000 | 5.000%, 12/01/26 | Aa2/AA/NR | 1,739,344 | ||||||
1,200,000 | 5.125%, 12/01/27 | Aa2/AA/NR | 1,307,712 | ||||||
Colorado Educational & Cultural Facilities | |||||||||
Authority, Charter School - James, | |||||||||
Refunding & Improvement | |||||||||
3,000,000 | 5.000%, 08/01/27 AGC Insured | A3/AA/NR | 3,102,270 | ||||||
Colorado State Higher Education Capital | |||||||||
Construction Lease | |||||||||
3,000,000 | 5.250%, 11/01/23 | Aa2/AA-/NR | 3,267,300 | ||||||
Douglas County, Colorado School District | |||||||||
No. RE-1 Douglas & Elbert Counties COP | |||||||||
3,075,000 | 5.000%, 01/15/29 | Aa2/NR/NR | 3,357,838 |
13 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Lease (continued) | |||||||||
El Paso County, Colorado COP | |||||||||
(Judicial Complex Project) | |||||||||
$ | 735,000 | 4.500%, 12/01/26 AMBAC Insured | NR/NR/NR* | $ | 765,429 | ||||
Rangeview Library District Project, | |||||||||
Colorado COP | |||||||||
2,210,000 | 5.000%, 12/15/26 AGC Insured | Aa3/AA/NR | 2,405,917 | ||||||
1,000,000 | 5.000%, 12/15/28 AGC Insured | Aa3/AA/NR | 1,088,650 | ||||||
Total Lease | 19,488,030 | ||||||||
Sales Tax (1.4%) | |||||||||
Denver, Colorado City & County | |||||||||
Excise Tax Refunding Series A | |||||||||
4,000,000 | 5.250%, 09/01/19 AGMC Insured | A1/AA/NR | 4,497,880 | ||||||
Water & Sewer (0.6%) | |||||||||
Aurora, Colorado Water Improvement | |||||||||
First Lien, Series A | |||||||||
1,250,000 | 5.000%, 08/01/25 AMBAC Insured | Aa2/NR/AA+ | 1,292,612 | ||||||
Erie, Colorado Water Enterprise | |||||||||
Revenue, Series A | |||||||||
735,000 | 5.000%, 12/01/25 AGMC Insured | A1/NR/NR | 769,641 | ||||||
Total Water & Sewer | 2,062,253 | ||||||||
Total Pre-Refunded Revenue Bonds | 47,471,951 | ||||||||
Total Pre-Refunded Bonds | 74,812,683 | ||||||||
Total Investments | |||||||||
(cost $305,156,225-note 4) | 97.8% | 325,161,459 | |||||||
Other assets less liabilities | 2.2 | 7,368,731 | |||||||
Net Assets | 100.0% | $ | 332,530,190 |
14 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Percent of | ||||||
Portfolio Distribution by Quality Rating | Investments† | |||||
Aaa of Moody’s or AAA of S&P or Fitch | 1.6 | % | ||||
Pre-Refunded bonds†† | 23.0 | |||||
Aa of Moody’s or AA of S&P or Fitch | 58.9 | |||||
A of Moody’s or S&P or Fitch | 12.9 | |||||
Baa of Moody’s or BBB of S&P | 3.1 | |||||
Not Rated* | 0.5 | |||||
100.0 | % |
PORTFOLIO ABBREVIATIONS: | ||||||
ACA - American Capital Assurance Financial Guaranty Corp. | ||||||
AGC - Assured Guaranty Corp. | ||||||
AGMC - Assured Guaranty Municipal Corp. | ||||||
AMBAC - American Municipal Bond Assurance Corp. | ||||||
BAMAC - Build America Mutual Assurance Co. | ||||||
BEST - Building Excellent Schools Today | ||||||
COP - Certificates of Participation | ||||||
NCMC - Northern Colorado Medical Center | ||||||
NPFG - National Public Finance Guarantee | ||||||
NR - Not Rated | ||||||
SHEIP - State Higher Education Intercept Program | ||||||
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) has been determined by the Investment Sub-Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a NRSRO. | |||||
† | Where applicable, calculated using the highest rating of the three NRSRO. | |||||
†† | Pre-refunded bonds are bonds secured by an escrow account, comprised of U.S. Government Obligations (unless otherwise noted), to retire the bonds at their earliest call date. |
See accompanying notes to financial statements.
15 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2016 (unaudited)
ASSETS | ||||
Investments at value (cost $305,156,225) | $ | 325,161,459 | ||
Cash | 4,955,801 | |||
Interest receivable | 4,090,719 | |||
Receivable for Fund shares sold | 2,171,608 | |||
Other assets | 22,846 | |||
Total assets | 336,402,433 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 2,211,622 | |||
Payable for investment securities purchased | 1,289,427 | |||
Dividends payable | 174,730 | |||
Management fee payable | 140,199 | |||
Distribution and service fees payable | 1,964 | |||
Accrued expenses payable | 54,301 | |||
Total liabilities | 3,872,243 | |||
NET ASSETS | $ | 332,530,190 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 306,716 | ||
Additional paid-in capital | 313,660,734 | |||
Net unrealized appreciation on investments (note 4) | 20,005,234 | |||
Accumulated net realized loss on investment | (1,546,181 | ) | ||
Undistributed net investment income | 103,687 | |||
$ | 332,530,190 | |||
CLASS A | ||||
Net Assets | $ | 221,159,664 | ||
Capital shares outstanding | 20,409,241 | |||
Net asset value and redemption price per share | $ | 10.84 | ||
Maximum offering price per share (100/96 of $10.84) | $ | 11.29 | ||
CLASS C | ||||
Net Assets | $ | 23,721,249 | ||
Capital shares outstanding | 2,194,248 | |||
Net asset value and offering price per share | $ | 10.81 | ||
Redemption price per share (*a charge of 1% is imposed on the | ||||
redemption proceeds, or on the original price, whichever is | ||||
lower, if redeemed during the first 12 months after purchase) | $ | 10.81 | * | |
CLASS Y | ||||
Net Assets | $ | 87,649,277 | ||
Capital shares outstanding | 8,068,106 | |||
Net asset value, offering and redemption price per share | $ | 10.86 |
See accompanying notes to financial statements.
16 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 5,437,417 | ||||||
Expenses: | ||||||||
Management fees (note 3) | $ | 837,394 | ||||||
Distribution and service fees (note 3) | 180,217 | |||||||
Transfer and shareholder servicing agent fees | 63,874 | |||||||
Trustees’ fees and expenses (note 7) | 52,530 | |||||||
Legal fees | 46,316 | |||||||
Shareholders’ reports | 11,224 | |||||||
Auditing and tax fees | 10,910 | |||||||
Registration fees and dues | 10,773 | |||||||
Insurance | 6,944 | |||||||
Custodian fees | 5,008 | |||||||
Chief compliance officer services (note 3) | 4,492 | |||||||
Miscellaneous | 20,837 | |||||||
Total expenses | 1,250,519 | |||||||
Management fees waived (note 3) | (33,496 | ) | ||||||
Net expenses | 1,217,023 | |||||||
Net investment income | 4,220,394 | |||||||
| ||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 2,877 | |||||||
Change in unrealized appreciation on | ||||||||
investments | 172,683 | |||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | 175,560 | |||||||
Net change in net assets resulting from | ||||||||
$ | 4,395,954 |
See accompanying notes to financial statements.
17 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2016 | Year Ended | |||||||
(unaudited) | March 31, 2016 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,220,394 | $ | 8,405,799 | ||||
Net realized gain (loss) from | ||||||||
securities transactions | 2,877 | 339,917 | ||||||
Change in unrealized | ||||||||
appreciation on investments | 172,683 | 554,701 | ||||||
Change in net assets from | ||||||||
operations | 4,395,954 | 9,300,417 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,896,288 | ) | (5,981,983 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (199,660 | ) | (503,546 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (1,100,133 | ) | (1,897,203 | ) | ||||
Change in net assets from | ||||||||
distributions | (4,196,081 | ) | (8,382,732 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 27,726,730 | 59,605,647 | ||||||
Reinvested dividends and | ||||||||
distributions | 3,218,027 | 6,530,907 | ||||||
Cost of shares redeemed | (22,799,880 | ) | (32,403,313 | ) | ||||
Change in net assets from | ||||||||
capital share transactions | 8,144,877 | 33,733,241 | ||||||
Change in net assets | 8,344,750 | 34,650,926 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 324,185,440 | 289,534,514 | ||||||
End of period* | $ | 332,530,190 | $ | 324,185,440 | ||||
*Includes undistributed net investment income of: | $ | 103,687 | $ | 79,374 |
See accompanying notes to financial statements.
18 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (unaudited)
1. Organization
Aquila Tax-Free Fund of Colorado (the “Fund”), a series of Aquila Municipal Trust (prior to October 12, 2013, the Fund operated under the name Tax-Free Fund of Colorado), a non-diversified, open-end investment company, was organized in February, 1987 as a Massachusetts business trust and commenced operations on May 21, 1987. The Fund is authorized to issue an unlimited number of shares. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. 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: Municipal securities are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. |
b) | Fair value measurements: The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy: |
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
19 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the valuation inputs, representing 100% of the Fund’s investments, used to value the Fund’s net assets as of September 30, 2016:
Valuation Inputs | Investments in Securities | |||
Level 1 – Quoted Prices | $ | — | ||
Level 2 – Other Significant Observable | ||||
Inputs — Municipal Bonds* | 325,161,459 | |||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 325,161,459 |
* See schedule of investments for a detailed listing of securities.
c) | Subsequent events: In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date these financial statements were issued. |
d) | 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. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. |
e) | Federal income taxes: It is the policy of the Fund to continue 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. |
Management has reviewed the tax positions for each of the open tax years (2013–2015) or expected to be taken in the Fund’s 2016 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
f) | 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 also charged directly to such class on a daily basis. |
20 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
g) | 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. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended March 31, 2016, there were no items identified that have been reclassified among components of net assets. |
i) | The Fund is an investment company and accordingly follows the investment company accounting reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies”. |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser as described below. Under the Advisory and Administration Agreement, the Manager provides all administrative services to the Fund, other than those relating to the day-to-day portfolio management. The Manager’s services include providing the office of the Fund and all related services as well as overseeing the activities of the Sub-Adviser and 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 at the annual rate of 0.50% of net assets of the Fund. The Manager has contractually agreed to waive fees through September 30, 2017 to the extent necessary in order to pass savings through to the shareholders with respect to the Sub-Advisory Agreement such that its fees are as follows: the annual rate shall be equivalent to 0.48% of net assets of the Fund up to $400 million; 0.46% of the Fund’s net assets above that amount to $1 billion and 0.44% of the Fund’s net assets above $1 billion. For the six months ended September 30, 2016, the Fund incurred management fees of $837,394 of which $33,496 was waived under the contractual fee waiver.
Kirkpatrick Pettis Capital Management (the “Sub-Adviser”) serves as the Investment Sub-Adviser for the Fund under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides, subject to oversight of the Manager and the Board of Trustees of the Fund, the investment program 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. For its services, the Sub-Adviser is entitled to receive a fee from the Manager which is payable monthly and computed as of the close of business each day at the annual rate of 0.20%. The Sub-Adviser has contractually agreed to waive its fee through September 30, 2017 such that its annual rate of fees is at 0.18% of net assets of the Fund up to $400 million; 0.16% of net assets above $400 million up to $1 billion; and 0.14% of net assets above $1 billion.
21 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Under a Compliance Agreement with the Manager, the Manager is compensated by the Fund for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
Specific details as to the nature and extent of the services provided by the Manager and the Sub-Adviser 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 distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors LLC (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. While the Board of Trustees and shareholders approved an amendment to the Fund’s Distribution Plan applicable to Class A Shares which permits the Fund to make distribution fee payments at the rate of up to 0.15% on the entire net assets represented by Class A Shares, the Fund currently makes payment of this distribution fee at the annual rate of 0.05%. For the six months ended September 30, 2016, distribution fees on Class A Shares amounted to $56,446 of which the Distributor retained $2,289.
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 September 30, 2016, amounted to $92,828. 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 September 30, 2016, amounted to $30,943. The total of these payments with respect to Class C Shares amounted to $123,771 of which the Distributor retained $29,789.
22 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
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 brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Colorado, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2016, total commissions on sales of Class A Shares amounted to $141,871 of which the Distributor received $29,176.
4. Purchases and Sales of Securities
During the six months ended September 30, 2016, purchases of securities and proceeds from the sales of securities aggregated $26,764,391 and $11,376,961, respectively.
At September 30, 2016, the aggregate tax cost for all securities was $305,140,836. At September 30, 2016, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $20,076,217 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $55,594 for a net unrealized appreciation of $20,020,623.
5. Portfolio Orientation
Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Colorado, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Colorado and whatever effects these may have upon Colorado issuers’ ability to meet their obligations.
23 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2016 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 946,838 | $ | 10,300,181 | 2,467,976 | $ | 26,498,182 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 216,530 | 2,351,914 | 456,384 | 4,900,410 | ||||||||||||
Cost of shares redeemed | (1,096,771 | ) | (11,918,202 | ) | (1,251,198 | ) | (13,435,529 | ) | ||||||||
Net change | 66,597 | 733,893 | 1,673,162 | 17,963,063 | ||||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 253,387 | 2,750,253 | 431,842 | 4,626,003 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 15,701 | 170,178 | 40,239 | 430,976 | ||||||||||||
Cost of shares redeemed | (335,365 | ) | (3,642,140 | ) | (653,770 | ) | (6,995,823 | ) | ||||||||
Net change | 66,277 | ) | (721,709 | ) | (181,689 | ) | (1,938,844 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 1,346,867 | 14,676,296 | 2,642,307 | 28,481,462 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 63,816 | 695,935 | 111,340 | 1,199,521 | ||||||||||||
Cost of shares redeemed | (664,183 | ) | (7,239,538 | ) | (1,112,765 | ) | (11,971,961 | ) | ||||||||
Net change | 746,500 | 8,132,693 | 1,640,882 | 17,709,022 | ||||||||||||
Total transactions in Fund | ||||||||||||||||
shares | 746,820 | $ | 8,144,877 | 3,132,355 | $ | 33,733,241 |
7. Trustees’ Fees and Expenses
For the six months ended September 30, 2016, there were 9 Trustees, one of whom is affiliated with the Manager and is not paid any fees. The total amount of Trustees’ service fees (for carrying out their responsibilities) and attendance fees paid during the six months ended September 30, 2016 was $46,130. Attendance fees are paid to those in attendance at regularly scheduled quarterly Board Meetings and meetings of the independent Trustees held prior to each quarterly Board Meeting, as well as additional meetings (such as Audit, Nominating, Shareholder and special meetings). Trustees are reimbursed for their expenses such as travel, accommodations and meals incurred in connection with attendance at Board Meetings and the Annual Meeting of Shareholders. For the six months ended September 30, 2016, such meeting-related expenses amounted to $6,400.
24 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
8. Securities Traded on a When-Issued Basis
The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
9. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. Dividends and capital gains distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Colorado income taxes. Due to the distribution levels maintained by the Fund and the differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. As a result of the passage of the Regulated Investment Company Act of 2010 (the “Act”), losses incurred in this fiscal year and beyond retain their character as short-term or long-term, have no expiration date and are utilized before capital losses incurred prior to the enactment of the Act. At March 31, 2016, the Fund had capital loss carry forwards of $1,549,058 of which $55,212 expires in 2017 and $1,493,846 has no expiration and retains its character of short-term. This carryover is available to offset future net realized gains on securities transactions to the extent provided for in the Internal Revenue Code.
25 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
The tax character of distributions was as follows:
Year | Year | |||||||
Ended | Ended | |||||||
March 31, 2016 | March 31, 2015 | |||||||
Net tax-exempt income | $ | 8,382,732 | $ | 8,416,080 | ||||
Ordinary income | – | – | ||||||
$ | 8,382,732 | $ | 8,416,080 |
As of March 31, 2016 the components of distributable earnings on a tax basis were as follows:
Undistributed tax-exempt income | $ | 113,323 | ||||||
Unrealized appreciation | 19,912,209 | |||||||
Accumulated net loss on investments | (1,549,058 | ) | ||||||
Other temporary differences | (113,607 | ) | ||||||
$ | 18,362,867 |
The difference between book basis and tax basis undistributed income is due to the timing difference, and other temporary differences, in recognizing dividends paid and the tax treatment of market discount amortization.
26 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months Ended | Year | Year | Year | Three Months | Year Ended | |||||||||||||||||||||||
9/30/16 | Ended | Ended | Ended | Ended | December 31, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.83 | $ | 10.80 | $ | 10.45 | $ | 10.80 | $ | 10.89 | $ | 10.63 | $ | 10.14 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.14 | 0.31 | 0.32 | 0.32 | 0.08 | 0.35 | 0.39 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.01 | 0.03 | 0.35 | (0.35 | ) | (0.09 | ) | 0.26 | 0.49 | |||||||||||||||||||
Total from investment operations | 0.15 | 0.34 | 0.67 | (0.03 | ) | (0.01 | ) | 0.61 | 0.88 | |||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | (0.08 | ) | (0.35 | ) | (0.39 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.14 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | (0.08 | ) | (0.35 | ) | (0.39 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.84 | $ | 10.83 | $ | 10.80 | $ | 10.45 | $ | 10.80 | $ | 10.89 | $ | 10.63 | ||||||||||||||
Total return (not reflecting sales charge) | 1.39 | %(2) | 3.20 | % | 6.52 | % | (0.20 | )% | (0.10 | )%(2) | 5.85 | % | 8.81 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 221 | $ | 220 | $ | 202 | $ | 209 | $ | 233 | $ | 240 | $ | 221 | ||||||||||||||
Ratio of expenses to average net assets | 0.68 | %(3) | 0.67 | % | 0.73 | % | 0.74 | %(4) | 0.70 | %(3) | 0.71 | % | 0.75 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.61 | %(3) | 2.89 | % | 3.04 | % | 3.09 | %(4) | 2.98 | %(3) | 3.27 | % | 3.75 | % | ||||||||||||||
Portfolio turnover rate | 4 | %(2) | 10 | % | 8 | % | 4 | % | 2 | %(2) | 15 | % | 13 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.70 | %(3) | 0.69 | % | 0.75 | % | 0.76 | %(4) | 0.72 | %(3) | 0.73 | % | – | |||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.59 | %(3) | 2.87 | % | 3.02 | % | 3.07 | %(4) | 2.96 | %(3) | 3.26 | % | – |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.72% and 3.11%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
27 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months | Three | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Months | Year Ended | |||||||||||||||||||||||
9/30/16 | Ended | Ended | Ended | Ended | December 31, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.80 | $ | 10.78 | $ | 10.43 | $ | 10.78 | $ | 10.87 | $ | 10.61 | $ | 10.12 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.09 | 0.21 | 0.22 | 0.22 | 0.05 | 0.25 | 0.29 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.01 | 0.02 | 0.35 | (0.35 | ) | (0.09 | ) | 0.26 | 0.49 | |||||||||||||||||||
Total from investment operations | 0.10 | 0.23 | 0.57 | (0.13 | ) | (0.04 | ) | 0.51 | 0.78 | |||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.21 | ) | (0.22 | ) | (0.22 | ) | (0.05 | ) | (0.25 | ) | (0.29 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.09 | ) | (0.21 | ) | (0.22 | ) | (0.22 | ) | (0.05 | ) | (0.25 | ) | (0.29 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.81 | $ | 10.80 | $ | 10.78 | $ | 10.43 | $ | 10.78 | $ | 10.87 | $ | 10.61 | ||||||||||||||
Total return (not reflecting CDSC) | 0.91 | %(2) | 2.18 | % | 5.52 | % | (1.15 | )% | (0.33 | )%(2) | 4.86 | % | 7.80 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 24 | $ | 24 | $ | 26 | $ | 28 | $ | 37 | $ | 38 | $ | 29 | ||||||||||||||
Ratio of expenses to average net assets | 1.64 | %(3) | 1.62 | % | 1.68 | % | 1.68 | %(4) | 1.65 | %(3) | 1.66 | % | 1.70 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.64 | %(3) | 1.94 | % | 2.09 | % | 2.14 | %(4) | 2.03 | %(3) | 2.31 | % | 2.79 | % | ||||||||||||||
Portfolio turnover rate | 4 | %(2) | 10 | % | 8 | % | 4 | % | 2 | %(2) | 15 | % | 13 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.66 | %(3) | 1.64 | % | 1.70 | % | 1.70 | %(4) | 1.67 | %(3) | 1.68 | % | – | |||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.62 | %(3) | 1.92 | % | 2.07 | % | 2.12 | %(4) | 2.01 | %(3) | 2.30 | % | – |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.67% and 2.16%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
28 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months | Three | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Months | Year Ended | |||||||||||||||||||||||
9/30/16 | Ended | Ended | Ended | Ended | December 31, | |||||||||||||||||||||||
(unaudited) | 3/31/16 | 3/31/15 | 3/31/14 | 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.86 | $ | 10.83 | $ | 10.47 | $ | 10.83 | $ | 10.92 | $ | 10.66 | $ | 10.16 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.15 | 0.32 | 0.33 | 0.33 | 0.08 | 0.36 | 0.39 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | (0.01 | ) | 0.02 | 0.36 | (0.36 | ) | (0.09 | ) | 0.26 | 0.50 | ||||||||||||||||||
Total from investment operations | 0.14 | 0.34 | 0.69 | (0.03 | ) | (0.01 | ) | 0.62 | 0.89 | |||||||||||||||||||
Less distributions (note 10): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.31 | ) | (0.33 | ) | (0.33 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.14 | ) | (0.31 | ) | (0.33 | ) | (0.33 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.86 | $ | 10.86 | $ | 10.83 | $ | 10.47 | $ | 10.83 | $ | 10.92 | $ | 10.66 | ||||||||||||||
Total return | 1.32 | %(2) | 3.24 | % | 6.66 | % | (0.24 | )% | (0.08 | )%(2) | 5.89 | % | 8.96 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 88 | $ | 79 | $ | 62 | $ | 45 | $ | 57 | $ | 50 | $ | 37 | ||||||||||||||
Ratio of expenses to average net assets | 0.63 | %(3) | 0.62 | % | 0.68 | % | 0.68 | %(4) | 0.65 | %(3) | 0.66 | % | 0.70 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.66 | %(3) | 2.94 | % | 3.08 | % | 3.14 | %(4) | 3.03 | %(3) | 3.31 | % | 3.80 | % | ||||||||||||||
Portfolio turnover rate | 4 | %(2) | 10 | % | 8 | % | 4 | % | 2 | %(2) | 15 | % | 13 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.65 | %(3) | 0.64 | % | 0.70 | % | 0.70 | %(4) | 0.67 | %(3) | 0.68 | % | – | |||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.64 | %(3) | 2.92 | % | 3.06 | % | 3.12 | %(4) | 3.01 | %(3) | 3.30 | % | – | |||||||||||||||
Expense ratios after giving effect to the contractual expense cap and expense offset for uninvested cash balances were: | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.63 | %(3) | 0.62 | % | 0.68 | % | 0.68 | %(4) | 0.65 | %(3) | 0.66 | % | 0.70 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.66% and 3.16%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31. The information presented is for the period January 1, 2013 to March 31, 2013. |
See accompanying notes to financial statements.
29 | Aquila Tax-Free Fund of Colorado
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution (“12b-1”) and/or service fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2016 and held for the six months ended September 30, 2016.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2016
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | 1.39% | $1,000.00 | $1,013.90 | $3.43 |
Class C | 0.91% | $1,000.00 | $1,009.10 | $8.26 |
Class Y | 1.32% | $1,000.00 | $1,013.20 | $3.18 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized; as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.68%, 1.64% and 0.63% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
30 | Aquila Tax-Free Fund of Colorado
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2016
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,021.66 | $3.45 |
Class C | 5.00% | $1,000.00 | $1,016.85 | $8.29 |
Class Y | 5.00% | $1,000.00 | $1,021.91 | $3.19 |
(1) | Expenses are equal to the annualized expense ratio of 0.68%, 1.64% and 0.63% for the Trust’s Class A, C and Y shares, respectively, multiplied by the average by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
31 | Aquila Tax-Free Fund of Colorado
Information Available (unaudited)
Much of the information that the funds in the Aquila Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent your Fund’s entire list of portfolio securities twice a year in the semi-annual and annual reports you receive. Additionally, under Fund policies, the Manager publicly discloses the complete schedule of the Fund’s portfolio holdings, as of each calendar quarter, generally by the 15th day after the end of each calendar quarter. Such information remains accessible until the next schedule is made publicly available. You may obtain a copy of the Fund’s portfolio holdings schedule for the most recently completed period by visiting the Fund’s website at www.aquilafunds.com. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2016, the Fund did not vote any proxies. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at www.sec.gov.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the Internal Revenue Code. No action on the part of shareholders is required.
For the fiscal year ended March 31, 2016, $8,382,732 of dividends paid by Aquila Tax-Free Fund of Colorado, constituting 100% of total dividends paid, were exempt-interest dividends.
Prior to February 15, 2017, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2016 calendar year.
32 | Aquila Tax-Free Fund of Colorado
Additional Information (unaudited)
Renewal of the Advisory and Administration Agreement and the Sub-Advisory Agreement
Aquila Investment Management LLC (the “Manager”) serves as the investment adviser to the Fund pursuant to an Advisory and Administration Agreement (the “Advisory Agreement”). The Manager has retained Davidson Fixed Income Management, Inc., doing business as Kirkpatrick Pettis Capital Management (the “Sub-Adviser”), to serve as the sub-adviser to the Fund pursuant to a Sub-Advisory Agreement between the Manager and the Sub-Adviser (the “Sub-Advisory Agreement”). In order for the Manager and the Sub-Adviser to continue to serve in their respective roles, the Trustees of the Fund must determine annually whether to renew the Advisory Agreement and the Sub-Advisory Agreement for the Fund.
In considering whether to approve the renewal of the Advisory Agreement and the Sub-Advisory Agreement, the Trustees requested and obtained such information as they deemed reasonably necessary. Contract review materials were provided to the Trustees in August, 2016. The independent Trustees met telephonically on August 30, 2016 and in person on September 18, 2016 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager and the Sub-Adviser. They also considered information presented in a report prepared by an independent consultant with respect to the Fund’s fees, expenses and investment performance, which included comparisons of the Fund’s investment performance against peers and the Fund’s benchmark and comparisons of the advisory fee payable by the Fund under the Advisory Agreement against the advisory fees paid by the Fund’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Fund provided to the Trustees at each regularly scheduled meeting. The Trustees considered the Advisory Agreement and the Sub-Advisory Agreement separately as well as in conjunction with each other to determine their combined effects on the Fund.
At the meeting held on September 18, 2016, based on their evaluation of the information provided by the Manager, the Sub-Adviser and the independent consultant, the Trustees of the Fund, including the independent Trustees voting separately, unanimously approved the renewal of each of the Advisory Agreement and the Sub-Advisory Agreement until September 30, 2017. In considering the renewal of the Advisory Agreement and the Sub-Advisory Agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the renewal of the Advisory Agreement or the Sub-Advisory Agreement.
The nature, extent, and quality of the services provided by the Manager and the Sub-Adviser
The Trustees considered the nature, extent and quality of the services that had been provided by the Manager and the Sub-Adviser to the Fund, taking into account the investment objectives and strategies of the Fund. The Trustees reviewed the terms of the Advisory Agreement and the Sub-Advisory Agreement.
33 | Aquila Tax-Free Fund of Colorado
The Manager has retained the Sub-Adviser to provide investment management of the Fund’s portfolio. The Trustees reviewed the Sub-Adviser’s investment approach for the Fund. The Trustees considered the personnel of the Sub-Adviser who provide investment management services to the Fund. The Trustees noted the extensive experience of the Sub-Adviser’s portfolio manager, Mr. Christopher Johns. They considered that Mr. Johns is based in Denver, Colorado and that he has a comprehensive understanding regarding the economy of the State of Colorado and the securities in which the Fund invests, including those securities with less than the highest ratings from the rating agencies. The Trustees also noted that the Fund did not own any Puerto Rico municipal bonds during the review period.
The Trustees considered that the Manager supervised and monitored the performance of the Sub-Adviser. The Trustees also considered that the Manager and the Sub-Adviser had provided all advisory services to the Fund that the Trustees deemed necessary or appropriate, including the specific services that the Trustees have determined are required for the Fund, given that it seeks to provide shareholders with as high a level of current income exempt from Colorado state and regular Federal income taxes as is consistent with preservation of capital.
The Trustees also noted that the Manager has additionally provided all administrative services to the Fund and provided the Fund with personnel (including Fund officers) and other resources that are necessary for the Fund’s business management and operations. The Trustees considered the nature and extent of the Manager’s supervision of third-party service providers, including the Fund’s fund accountant, shareholder servicing agent and custodian.
Based on these considerations, the Trustees concluded that the nature, extent and quality of services that had been provided by the Manager and the Sub-Adviser to the Fund were satisfactory and consistent with the terms of the Advisory Agreement and Sub-Advisory Agreement, respectively.
The investment performance of the Fund
The Trustees reviewed the Fund’s performance (Class A Shares) and compared its performance to the performance of:
• | the funds in the Fund’s peer group (the “Peer Group”), as selected by the independent consultant (four Colorado intermediate and long municipal bond funds, as classified by Morningstar, that charge a front-end sales charge); |
• | the funds in the Fund’s product category for performance (the “Product Category for Performance”) (all funds in the Peer Group and, without duplication, all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. |
34 | Aquila Tax-Free Fund of Colorado
The Trustees considered that the materials included in the Consultant’s Report indicated that the Fund’s average annual total return was lower than the average annual total return of the funds in the Peer Group for the one, three, five and ten-year periods ended June 30, 2016. However, the Trustees considered that the Fund’s average annual total return was higher than the average annual total return of the funds in the Product Category for Performance for the three, five and ten-year periods ended June 30, 2016 and higher than the average annual return of the benchmark index for the one, three and five-year periods ended June 30, 2016, but lower than the average annual total return of the funds in the Product Category for Performance for the one year period ended June 30, 2016. The Trustees determined that, as reflected in the Consultant’s Report, the Fund delivered satisfactory results on a risk-adjusted basis for the three and five year periods ended June 30, 2016 (as evidenced by its Sharpe ratio) when compared to the funds in the Product Category for Performance.
The Trustees discussed the Fund’s performance record with the Manager and the Sub-Adviser and considered the Manager’s and Sub-Adviser’s view that the Fund’s performance, as compared to its peer group, was explained in part by the Fund’s somewhat higher-quality portfolio and lower duration. The Trustees noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees, expenses or sales charges.
The Trustees considered the Fund’s investment performance to be consistent with the investment objectives of the Fund. Evaluation of the investment performance of the Fund indicated to the Trustees that renewal of the Advisory Agreement and Sub-Advisory Agreement would be appropriate.
Advisory and Sub-Advisory Fees and Fund Expenses
The Trustees evaluated the fee payable under the Advisory Agreement. They noted that the Manager, and not the Fund, paid the Sub-Adviser under the Sub-Advisory Agreement. The Trustees evaluated both the fee under the Sub-Advisory Agreement and the portion of the advisory fee paid under the Advisory Agreement and retained by the Manager. The Trustees reviewed the Fund’s advisory fees and expenses and compared them to the advisory fee and expense data for:
• | the funds in the Peer Group (as defined above); and |
• | the funds in the product category for expenses (the “Product Category for Expenses”) (Morningstar Single-State Intermediate Municipal Bond Funds and Morningstar Single State Long Municipal Bond Funds from states within which 4-7 mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Fund’s contractual advisory fee was lower than the average and median contractual advisory fee of the funds in the Peer Group (at the Fund’s current asset level). They also considered that the Fund’s contractual advisory fee was lower than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses at the Fund’s current asset level and up to $5 billion in assets.
35 | Aquila Tax-Free Fund of Colorado
The Trustees noted that the Fund’s actual management fee (after giving effect to the fee waiver) was higher than the average actual management fee of the funds in both the Product Category for Expenses and the Peer Group (after giving effect to fee waivers in effect for those funds). They noted, however that the Fund’s actual expenses (for Class A shares), after giving effect to fee waivers and expense reimbursements) were lower than the average actual expenses of the funds in both the Product Category for Expenses and the Peer Group (after giving effect to fee waivers and expense reimbursements in effect for those funds).
The Trustees reviewed management fees charged by each of the Manager and the Sub-Adviser to its other clients. It was noted that the Manager does not have any other clients except for other funds in the Aquila Group of Funds. The Trustees noted that, in most instances, the fee rates for those clients were comparable to the fees paid to the Manager by the Fund. With respect to the Sub-Adviser, the Trustees noted that the fee rates for its other clients were generally lower than the fees paid to the Sub-Adviser with respect to the Fund. In evaluating the fees associated with the client accounts, the Trustees took into account the respective demands, resources and complexity associated with the Fund and those client accounts.
The Trustees concluded that the advisory and sub-advisory fees were reasonable in relation to the nature and quality of the services provided to the Fund by the Manager and the Sub-Adviser.
Profitability
The Trustees received materials from the Manager and the independent consultant related to profitability. The Manager provided information which showed the profitability to the Manager of its services to the Fund, as well as the profitability of Aquila Distributors LLC of distribution services provided to the Fund. The independent consultant provided publicly available data regarding the profitability of other asset managers in comparison to the overall profitability of the Manager.
The Trustees considered the information provided by the Manager regarding the profitability of the Manager with respect to the advisory services provided by the Manager to the Fund, including the methodology used by the Manager in allocating certain of its costs to the management of the Fund. The Trustees also considered information regarding the profitability of the Manager provided to the Trustees by the independent consultant. The Trustees concluded that profitability to the Manager with respect to advisory services provided to the Fund did not argue against approval of the fees to be paid under the Advisory Agreement.
The Trustees also considered information provided by the Sub-Adviser regarding the profitability of the Sub-Adviser with respect to the sub-advisory services provided by the Sub-Adviser to the Fund. The Trustees concluded that the profitability of the Sub-Adviser with respect to sub-advisory services provided to the Fund did not argue against approval of the fees to be paid under the Sub-Advisory Agreement.
36 | Aquila Tax-Free Fund of Colorado
The extent to which economies of scale would be realized as the Fund grows
The Trustees considered the extent to which the Manager and the Sub-Adviser may realize economies of scale or other efficiencies in managing the Fund. They noted that the Sub-Adviser has agreed to waive a portion of its sub-advisory fees and to include breakpoints in its fee schedule based on the size of the Fund. In addition, it was noted that the Manager had contractually agreed to waive its fees to the extent necessary in order to pass the benefits of the breakpoints in the sub-advisory fee schedule and the Sub-Adviser’s fee waiver under the Sub-Advisory Agreement to the shareholders of the Fund. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Fund.
Benefits derived or to be derived by the Manager and the Sub-Adviser and their affiliates from their relationships with the Fund
The Trustees observed that, as is generally true of most fund complexes, the Manager and Sub-Adviser and their affiliates, by providing services to a number of funds or other investment clients including the Fund, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that could produce efficiencies and increased profitability for the Manager and Sub-Adviser and their affiliates, it also makes their services available to the Fund at favorable levels of quality and cost which are more advantageous to the Fund than would otherwise have been possible.
37 | Aquila Tax-Free Fund of Colorado
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Investment Sub-Adviser
KIRKPATRICK PETTIS CAPITAL MANAGEMENT
1550 Market Street, Suite 300
Denver, Colorado 80202
Board of Trustees
John C. Lucking, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
Grady Gammage, Jr.
Glenn P. O’Flaherty
James R. Ramsey
Laureen L. White
Officers
Diana P. Herrmann, President
Charles E. Childs, III, Executive Vice President and Secretary
Marie E. Aro, Senior Vice President
Paul G. O’Brien, Senior Vice President
Craig T. DiRuzzo, Vice President
Randall S. Fillmore, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer
and Treasurer
Distributor
AQUILA DISTRIBUTORS LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Transfer and Shareholder Servicing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
THE BANK OF NEW YORK MELLON
225 Liberty Street
New York, New York 10286
Further information is contained in the Prospectus,
which must precede or accompany this report.
![]() | ||||||||||||||||||||||||||
Semi-Annual Report September 30, 2016 | ||||||||||||||||||||||||||
![]() |
Please plan to join us for your 2017 shareholder meeting. Details will be available on our website as the date approaches: www.aquilafunds.com or through your financial professional. |
![]() | Aquila Tax-Free Fund For Utah “The Role of Trustees” Serving Utah investors since 1992 | ![]() |
November, 2016
Dear Fellow Shareholder:
As you may be aware, the Investment Company Act of 1940 (the “1940 Act”) is the primary federal law governing the structure and operation of mutual funds. It is enforced and regulated by the U.S. Securities and Exchange Commission (the “SEC”) and defines, among other things, certain responsibilities of Trustees.
Under applicable state law, Trustees are charged, as their primary responsibility, with safeguarding the interests of shareholders. As such, your Trustees seek to act in your best interests, putting your interests ahead of their own interests and those of anyone else, in overseeing the policies and procedures of Aquila Tax-Free Fund For Utah (your “Fund”), as well as the services provided by your Fund’s key service providers.
Your Trustees’ key role is to be alert and sensitive to any conflicts of interest. By law, a substantial number of the Trustees must be “independent,” meaning that they have no affiliation with any sponsoring or support organization of the Fund. This requirement is in place in an effort to enhance Trustee impartiality. In order to ensure that your Board of Trustees continually maintains adequate independence, your Trustees complete a questionnaire on an annual basis which is, in turn, reviewed by your Fund’s legal counsel. It is also worthy to note that, at all times, a significant percentage of the Trustees must have been elected by you, the shareholders.
The 1940 Act requires your Board of Trustees to review certain of your Fund’s contracts on at least an annual basis, at which time, the majority of your Trustees, including a majority of the independentTrustees, must be present in person. Moreover, in their review of the contract with your Fund’s adviser, the Trustees seek to consider certain factors and their conclusions are disclosed to you in your Fund’s next annual or semi-annual report (as is the case with this semi-annual report). Your Trustees’ other key responsibilities include oversight of your Fund’s compliance policies and procedures, valuation and risk management.
Your Board of Trustees oversees the business of your Fund through regular quarterly and ad hoc board meetings, committee meetings (which focus on specific subject matters) and frequent communications. These meetings allow Trustees to be brought up-to-date on the affairs of your Fund, ask questions, and deliberate and vote on issues important to your Fund and its shareholders.
Selection and nomination of independent Trustees is by the existing independent Trustees. As detailed in the Nominating Committee Charter which is available on your Fund’s website (www.aquilafunds.com), your Board of Trustees seeks to develop and maintain a board of high quality, independence and integrity to best serve your interests. The Trustees associated with the Aquila Group of Funds are additionally selected on the basis of being accomplished individuals of diverse backgrounds from various parts of the United States, including Utah. Through this diversity, we strive to provide your Fund with a broad breadth and balance of knowledge and experience. Biographical and other information on your Board of Trustees is available on our website and, by law, is included in your Fund’s annual report and Statement of Additional Information.
NOT A PART OF THE SEMI-ANNUAL REPORT
Although, not required, Trustees in the Aquila Group of Funds self-impose some additional criteria.
• | In addition to overseeing your Fund, all Trustees are also fellow shareholders. While Trustees, like any investor, must consider, among other things, their own personal investment objectives (including tax benefits afforded the investment by their state of residence) when deciding upon the size of their investment in Aquila Tax-Free Fund For Utah, we believe it is important that each Trustee has “some skin the game.” |
• | Consideration is given to including local residents as Trustees. In this way, the Fund can benefit from their hands-on insight and knowledge of their State. |
In short, your Board of Trustees are your “watchdogs,” looking over operations of Aquila Tax-Free Fund For Utah.
It has been our experience that those who have undertaken to serve as Trustees diligently devote their energies, talents and experience to furthering the interests of you, our shareholders.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsigc.jpg)
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsig2c.jpg)
Diana P. Herrmann, Vice Chair and President
Any information in this Shareholder Letter regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
NOT A PART OF THE SEMI-ANNUAL REPORT
Mutual fund investing involves risk and loss of principal is possible.
The market prices of the Fund’s securities may rise or decline in value due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. When market prices fall, the value of your investment may go down. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
The value of your investment may go down when interest rates rise. A rise in interest rates tends to have a greater impact on the prices of longer term securities. Conversely, when interest rates fall, the value of your investment may rise. Interest rates in the U.S. recently have been historically low, so the Fund faces a heightened risk that interest rates may rise. A general rise in interest rates may cause investors to move out of fixed income securities and could also result in increased redemptions from the Fund.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of underlying securities and their inability to meet their debt obligations.
The value of municipal securities can be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory developments, legislative actions, and by uncertainties and public perceptions concerning these and other factors. The Fund may be affected significantly by adverse economic, political or other events affecting state and other municipal issuers in which it invests, and may be more volatile than a more geographically diverse fund.
If interest rates fall, an issuer may exercise its right to prepay its securities, and the Fund could be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security.
A portion of income may be subject to local, state, Federal and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax.
These risks may result in share price volatility.
Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
Any information in this Semi-Annual Report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes.
NOT A PART OF THE SEMI-ANNUAL REPORT
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (20.8%) | Rating Moody’s, S&P and Fitch | Value | ||||||
City & County (6.7%) | |||||||||
Bexar County, Texas | |||||||||
$ | 2,000,000 | 4.000%, 06/15/31 | Aaa/AAA/AAA | $ | 2,243,040 | ||||
Bexar County, Texas Certificates of | |||||||||
Obligation | |||||||||
1,000,000 | 4.000%, 06/15/34 | Aaa/AAA/AAA | 1,124,730 | ||||||
Carson City, Nevada | |||||||||
1,000,000 | 5.000%, 05/01/28 | A1/AA-/NR | 1,219,390 | ||||||
Clark County, Nevada, Refunding | |||||||||
2,280,000 | 5.000%, 12/01/29 Series A | Aa1/AA/NR | 2,548,219 | ||||||
1,000,000 | 5.000%, 07/01/23 Series B | Aa1/AA/NR | 1,126,470 | ||||||
2,000,000 | 5.000%, 11/01/28 AGMC/AMBAC | ||||||||
Insured | Aa1/AA/AA | 2,006,160 | |||||||
1,000,000 | 4.000%, 11/01/32 Series 2016B | Aa1/AA/NR | 1,142,390 | ||||||
Fort Bend County, Texas | |||||||||
1,000,000 | 4.500%, 03/01/35 Series B | Aa1/NR/AA+ | 1,160,320 | ||||||
Henderson, Nevada Refunding | |||||||||
Various Purpose | |||||||||
1,000,000 | 5.000%, 06/01/33 Series B | Aa2/AA+/NR | 1,195,000 | ||||||
750,000 | 5.000%, 06/01/30 Series 2014 | Aa2/AA+/NR | 908,955 | ||||||
750,000 | 5.000%, 06/01/35 Series 2014 | Aa2/AA+/NR | 894,862 | ||||||
Houston, Texas Public Improvement | |||||||||
1,000,000 | 5.000%, 03/01/29 | Aa3/AA/NR | 1,088,590 | ||||||
1,000,000 | 5.000%, 03/01/33 | Aa3/AA/NR | 1,216,780 | ||||||
Miami Gardens, Florida | |||||||||
1,000,000 | 5.000%, 07/01/29 | A1/A+/NR | 1,202,160 | ||||||
Orem, Utah Refunding | |||||||||
690,000 | 0.250%, 12/01/16 | NR/AA/AA+ | 689,193 | ||||||
900,000 | 0.250%, 12/01/17 | NR/AA/AA+ | 894,114 | ||||||
Reedy Creek, Florida Improvement | |||||||||
District | |||||||||
1,000,000 | 5.250%, 06/01/29 Series A | Aa3/AA-/AA- | 1,233,810 | ||||||
Reno, Nevada, Capital Improvement | |||||||||
Refunding | |||||||||
1,000,000 | 5.000%, 06/01/28 | A1/A-/NR | 1,181,270 | ||||||
San Angelo, Texas Certificates of | |||||||||
Obligation | |||||||||
2,765,000 | 5.000%, 02/15/30 Series A | Aa2/AA/AA+ | 3,111,482 |
1 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
City & County (continued) | |||||||||
San Antonio, Texas Refunding & | |||||||||
General Improvement | |||||||||
$ | 1,000,000 | 4.000%, 02/01/34 | Aaa/AAA/AAA | $ | 1,123,410 | ||||
Washoe County, Nevada Refunding | |||||||||
Reno Sparks Convention | |||||||||
2,000,000 | 5.000%, 07/01/28 | Aa2/AA/NR | 2,328,980 | ||||||
Total City and County | 29,639,325 | ||||||||
Hospital (0.7%) | |||||||||
Bexar County, Texas Hospital | |||||||||
District Limited Tax | |||||||||
1,855,000 | 4.000%, 02/15/34 | Aa1/AA+/AA+ | 2,058,104 | ||||||
King County, Washington Public | |||||||||
Hospital District No. 002, | |||||||||
Refunding, Evergreen Healthcare | |||||||||
1,000,000 | 5.250%, 12/01/28 | Aa3/A+/NR | 1,154,880 | ||||||
Total Hospital | 3,212,984 | ||||||||
Local Public Property (0.6%) | |||||||||
Houston, Texas Public Improvement | |||||||||
1,000,000 | 5.000%, 03/01/35 Series A | Aa3/AA/NR | 1,208,360 | ||||||
Missouri City, Texas Refunding | |||||||||
1,235,000 | 4.000%, 06/15/32 | Aa2/NR/NR | 1,366,651 | ||||||
Total Local Public Property | 2,575,011 | ||||||||
Public Schools (10.2%) | |||||||||
Aldine, Texas Independent School | |||||||||
District | |||||||||
1,000,000 | 4.000%, 02/15/37 PSF Guaranteed | Aaa/AAA/NR | 1,097,480 | ||||||
Austin, Texas Community College | |||||||||
District Limited Tax | |||||||||
1,000,000 | 4.000%, 08/01/33 | Aa1/AA+/AA+ | 1,131,760 | ||||||
Chisum, Texas Independent School | |||||||||
District | |||||||||
1,025,000 | 4.000%, 08/15/34 PSF Guaranteed | Aaa/NR/NR | 1,144,361 | ||||||
Clark County, Nevada School District | |||||||||
Limited Tax | |||||||||
2,000,000 | 4.000%, 06/15/30 Series D | A1/AA-/NR | 2,264,320 |
2 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Public Schools (continued) | |||||||||
Cleburne, Texas Independent School | |||||||||
District | |||||||||
$ | 1,000,000 | 5.000%, 02/15/26 PSF Guaranteed | Aaa/NR/NR | $ | 1,171,670 | ||||
Crowley, Texas Independent School | |||||||||
District | |||||||||
1,000,000 | 4.000%, 08/01/35 Series A PSF | ||||||||
Guaranteed | Aaa/NR/NR | 1,115,550 | |||||||
Davis County, Utah School District | |||||||||
School Board Guaranty Program | |||||||||
4,395,000 | 4.000%, 06/01/25 Series B | Aaa/NR/NR | 5,224,293 | ||||||
Duchesne County, Utah School | |||||||||
District School Building, School | |||||||||
Board Guaranty Program | |||||||||
6,250,000 | 4.000%, 06/01/32 | Aaa/NR/NR | 7,078,375 | ||||||
Eagle Pass, Texas Independent | |||||||||
School District | |||||||||
2,580,000 | 4.000%, 08/15/35 PSF Guaranteed | NR/AAA/AAA | 2,840,425 | ||||||
2,685,000 | 4.000%, 08/15/36 PSF Guaranteed | NR/AAA/AAA | 2,946,331 | ||||||
Forney, Texas Independent School | |||||||||
District Capital Appreciation Refunding | |||||||||
1,000,000 | zero coupon, 08/15/39 AGMC | ||||||||
Insured | NR/AA/NR | 355,330 | |||||||
Frisco, Texas Independent School | |||||||||
District | |||||||||
1,000,000 | 4.000%, 08/15/34 Series A PSF | ||||||||
Guaranteed | Aaa/AAA/NR | 1,118,280 | |||||||
Grant & Douglas Counties, Washington | |||||||||
School District No. 144 Quincy | |||||||||
School Board Guaranty Program | |||||||||
1,500,000 | 4.000%, 12/01/35 | Aa1/AA+/NR | 1,679,625 | ||||||
Jefferson County, Washington School | |||||||||
District No. 50 Port Townsend School | |||||||||
Board Guaranty Program | |||||||||
1,000,000 | 5.000%, 12/01/35 | Aa1/NR/NR | 1,216,200 | ||||||
King County, Washington School District | |||||||||
No. 414 Lake Washington, School | |||||||||
Board Guaranty Program | |||||||||
1,000,000 | 4.000%, 12/01/35 | Aaa/AA+/NR | 1,134,370 |
3 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Public Schools (continued) | |||||||||
Kitsap County, Washington School | |||||||||
District No. 401 Central Kitsap School | |||||||||
Board Guaranty Program | |||||||||
$ | 1,000,000 | 4.000%, 12/01/35 | Aa1/AA+/NR | $ | 1,118,840 | ||||
Lewis County, Washington School District | |||||||||
No. 302 Chehalis School Board | |||||||||
Guaranty Program | |||||||||
1,000,000 | 5.000%, 12/01/34 | Aa1/NR/NR | 1,192,610 | ||||||
Liberty Hill, Texas Independent School | |||||||||
District | |||||||||
935,000 | 4.000%, 02/01/36 PSF Guaranteed | Aaa/NR/NR | 1,030,155 | ||||||
San Antonio, Texas Independent | |||||||||
School District | |||||||||
1,000,000 | 4.000%, 08/15/33 PSF Guaranteed | Aaa/NR/AAA | 1,126,630 | ||||||
San Benito, Texas Consolidated | |||||||||
Independent School District | |||||||||
1,760,000 | 4.000%, 02/15/34 PSF Guaranteed | NR/AAA/NR | 1,968,173 | ||||||
Snohomish County, Washington School | |||||||||
District No. 15 Edmonds School Board | |||||||||
Guaranty Program | |||||||||
1,500,000 | 4.000%, 12/01/35 | Aa1/AA+/NR | 1,655,325 | ||||||
Taylor, Texas Consolidated Independent | |||||||||
School District | |||||||||
1,000,000 | 4.000%, 02/15/34 PSF Guaranteed | NR/AAA/NR | 1,129,830 | ||||||
Washoe County, Nevada School District | |||||||||
Refunding & School Improvement | |||||||||
2,000,000 | 5.000%, 06/01/30 Series A | Aa3/AA/NR | 2,303,860 | ||||||
Willis, Texas Independent School District | |||||||||
1,000,000 | 4.000%, 02/15/34 PSF Guaranteed | Aaa/NR/NR | 1,113,000 | ||||||
Wylie, Texas Independent School | |||||||||
District Capital Appreciation | |||||||||
1,000,000 | zero coupon, 08/15/32 PSF | ||||||||
Guaranteed | Aaa/NR/NR | 604,510 | |||||||
Total Public Schools | 44,761,303 |
4 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | General Obligation Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
State (1.2%) | |||||||||
Texas State Transportation Commission | |||||||||
Highway Improvement | |||||||||
$ | 1,000,000 | 5.000%, 04/01/29 | Aaa/AAA/AAA | $ | 1,227,180 | ||||
Texas State Transportation Commission | |||||||||
Mobility Fund | |||||||||
1,000,000 | 5.000%, 10/01/31 Series 2015A | Aaa/AAA/AAA | 1,245,690 | ||||||
Texas State Water Financial Assistance | |||||||||
1,000,000 | 5.000%, 08/01/30 Series E | Aaa/AAA/AAA | 1,246,080 | ||||||
State of Washington | |||||||||
1,500,000 | zero coupon, 01/01/18 Series S-2 | ||||||||
AGMC Insured | Aa1/AA+/AA+ | 1,481,580 | |||||||
Total State | 5,200,530 | ||||||||
Water and Sewer (1.4%) | |||||||||
Central Utah Water Conservancy | |||||||||
District Refunding | |||||||||
765,000 | 5.000%, 04/01/28 Series B | NR/AA+/AAA | 886,222 | ||||||
Las Vegas Valley, Nevada Water | |||||||||
District Refunding | |||||||||
1,000,000 | 5.000%, 06/01/30 Series C | Aa1/AA/NR | 1,163,160 | ||||||
Las Vegas Valley, Nevada Water District | |||||||||
Refunding & Water Improvement | |||||||||
2,600,000 | 5.000%, 02/01/38 Series A | Aa1/AA/NR | 2,723,188 | ||||||
Las Vegas Valley, Nevada Water District | |||||||||
Refunding, Limited Tax & Water | |||||||||
Improvement | |||||||||
1,000,000 | 5.000%, 06/01/36 Series A | Aa1/AA/NR | 1,212,300 | ||||||
Total Water and Sewer | 5,984,870 | ||||||||
Total General Obligation Bonds | 91,374,023 | ||||||||
Revenue Bonds (60.8%) | |||||||||
Airport (1.5%) | |||||||||
Broward County, Florida Airport System | |||||||||
Revenue Refunding | |||||||||
1,000,000 | 5.375%, 10/01/29 Series O | A1/A+/A | 1,119,710 |
5 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Airport (continued) | |||||||||
Clark County, Nevada Passenger Facilities | |||||||||
Charge Revenue Las Vegas-McCarran | |||||||||
International Airport | |||||||||
$ | 1,500,000 | 5.000%, 07/01/30 | A1/A+/NR | $ | 1,673,415 | ||||
Jacksonville, Florida Aviation Authority | |||||||||
1,895,000 | 5.000%, 10/01/26 AMBAC | ||||||||
Insured AMT | A2/A/NR | 1,895,000 | |||||||
Miami-Dade County, Florida Aviation | |||||||||
Revenue Miami International Airport | |||||||||
1,675,000 | 5.000%, 10/01/22 Series A-1 | A2/A/A | 1,913,738 | ||||||
Total Airport | 6,601,863 | ||||||||
Charter Schools (8.2%) | |||||||||
Utah County, Utah Charter School | |||||||||
Revenue Renaissance Academy | |||||||||
50,000 | 5.350%, 07/15/17 Series A 144A | NR/NR/NR* | 50,513 | ||||||
Utah State Charter School Finance | |||||||||
Authority American Leadership Academy | |||||||||
1,400,000 | 5.000%, 10/15/35 | NR/AA/NR | 1,616,398 | ||||||
Utah State Charter School Finance | |||||||||
Authority George Washington Academy | |||||||||
500,000 | 1.000%, 04/15/18 Series 2015 | NR/AA/NR | 498,940 | ||||||
1,500,000 | 5.000%, 04/15/35 Series 2015 | NR/AA/NR | 1,699,710 | ||||||
Utah State Charter School Finance | |||||||||
Authority Good Foundations Academy | |||||||||
915,000 | 4.750%, 11/15/24 Series A 144A | NR/NR/NR* | 921,359 | ||||||
1,655,000 | 5.550%, 11/15/34 Series A 144A | NR/NR/NR* | 1,666,221 | ||||||
3,280,000 | 5.850%, 11/15/44 Series A 144A | NR/NR/NR* | 3,302,173 | ||||||
Utah State Charter School Finance | |||||||||
Authority Hawthorn Academy Project | |||||||||
2,165,000 | 5.000%, 10/15/29 Series 2014 | NR/AA/NR | 2,544,416 | ||||||
1,280,000 | 4.000%, 10/15/31††† | NR/AA/NR | 1,406,131 | ||||||
Utah State Charter School Finance | |||||||||
Authority Lakeview Academy | |||||||||
1,300,000 | 5.000%, 10/15/35 Series 2015 | NR/AA/NR | 1,547,299 |
6 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Charter Schools (continued) | |||||||||
Utah State Charter School Finance | |||||||||
Authority Legacy Preparatory Academy | |||||||||
$ | 405,000 | 4.000%, 04/15/22 | NR/AA/NR | $ | 452,583 | ||||
440,000 | 4.000%, 04/15/24 | NR/AA/NR | 501,213 | ||||||
2,530,000 | 5.000%, 04/15/29 | NR/AA/NR | 2,973,383 | ||||||
1,635,000 | 5.000%, 04/15/34 | NR/AA/NR | 1,884,370 | ||||||
Utah State Charter School Finance | |||||||||
Authority Monticello Academy | |||||||||
(School Board Guaranty Program) | |||||||||
1,000,000 | 5.000%, 04/15/37 Series 2014 | NR/AA/NR | 1,135,310 | ||||||
Utah State Charter School Finance | |||||||||
Authority Ogden Preparatory Academy | |||||||||
(School Board Guaranty Program) | |||||||||
475,000 | 4.000%, 10/15/22 | NR/AA/NR | 540,550 | ||||||
505,000 | 4.000%, 10/15/23 | NR/AA/NR | 571,584 | ||||||
525,000 | 4.000%, 10/15/24 | NR/AA/NR | 587,192 | ||||||
Utah State Charter School Finance | |||||||||
Authority Providence Hall Elementary | |||||||||
School (School Board Guaranty Program) | |||||||||
1,000,000 | 5.250%, 10/15/28 Series 2013A | NR/AA/NR | 1,196,150 | ||||||
1,000,000 | 5.000%, 10/15/33 Series 2013A | NR/AA/NR | 1,142,890 | ||||||
Utah State Charter School Finance | |||||||||
Authority Davinci Academy, | |||||||||
Refunding & Improvement | |||||||||
1,000,000 | 7.050%, 09/15/26 Series 2011A | NR/BBB-/NR | 1,138,300 | ||||||
Utah State Charter School Finance | |||||||||
Authority Venture Academy | |||||||||
480,000 | 0.500%, 10/15/19 | NR/AA/NR | 472,718 | ||||||
675,000 | 4.000%, 10/15/24 | NR/AA/NR | 753,833 | ||||||
855,000 | 5.000%, 10/15/29 | NR/AA/NR | 1,004,839 | ||||||
1,095,000 | 5.000%, 10/15/34 | NR/AA/NR | 1,263,707 | ||||||
1,095,000 | 5.000%, 10/15/38 | NR/AA/NR | 1,278,248 | ||||||
2,115,000 | 5.000%, 10/15/44 | NR/AA/NR | 2,413,152 |
7 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Charter Schools (continued) | |||||||||
Utah State Charter School Finance | |||||||||
Authority Wasatch Peak Academy | |||||||||
Project, School Board Guaranty Program | |||||||||
$ | 740,000 | 5.000%, 10/15/29 | NR/AA/NR | $ | 858,999 | ||||
700,000 | 5.000%, 10/15/36 | NR/AA/NR | 787,290 | ||||||
Total Charter Schools | 36,209,471 | ||||||||
Electric (6.7%) | |||||||||
Clark County, Washington Public Utility | |||||||||
District No. 001 Electric Revenue | |||||||||
Refunding | |||||||||
880,000 | 5.000%, 01/01/30 | A1/A/A+ | 1,058,103 | ||||||
Consolidated Wyoming Municipalities | |||||||||
Electric Facilities Improvement Lease, | |||||||||
Gillette | |||||||||
1,000,000 | 5.000%, 06/01/31 . | A1/A+/NR | 1,164,840 | ||||||
Cowlitz County, Washington Public | |||||||||
Utility District No. 001 | |||||||||
90,000 | 4.500%, 09/01/26 NPFG Insured | ||||||||
(unrefunded balance) | A1/NR/NR | 90,242 | |||||||
Jacksonville Electric Authority, Florida | |||||||||
Electric System Revenue | |||||||||
500,000 | 4.500%, 10/01/32 Series Three 2012A | Aa2/AA-/AA | 559,340 | ||||||
Lower Colorado River Authority, Texas | |||||||||
1,470,000 | 5.250%, 05/15/29 (unrefunded balance). | A2/A/A | 1,620,572 | ||||||
1,000,000 | 5.000%, 05/15/36 Series A | ||||||||
(unrefunded balance) | A2/A/A | 1,166,550 | |||||||
Lower Colorado River Authority, Texas | |||||||||
Transmission Contract Revenue | |||||||||
1,000,000 | 5.000%, 05/15/30 | NR/A/A+ | 1,206,340 | ||||||
San Antonio, Texas Electric & Gas | |||||||||
Revenue System | |||||||||
2,000,000 | 4.000%, 02/01/33 | Aa1/AA/AA+ | 2,244,500 | ||||||
Santa Clara, Utah Electric Revenue | |||||||||
1,005,000 | 4.250%, 08/01/26 AGC Insured | A3/NR/NR | 1,005,603 |
8 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Electric (continued) | |||||||||
Southeast Alaska Power Agency Electric | |||||||||
Refunding & Improvement | |||||||||
$ | 1,170,000 | 5.250%, 06/01/30 | NR/A-/NR | $ | 1,373,943 | ||||
St. George, Utah Electric Revenue | |||||||||
1,820,000 | 4.000%, 06/01/32 AGMC Insured | A2/AA/NR | 2,122,484 | ||||||
Utah Associated Municipal Power System | |||||||||
Revenue, Horse Butte Wind Project | |||||||||
1,005,000 | 5.000%, 09/01/32 Series A | NR/A/A | 1,179,468 | ||||||
Utah Associated Municipal Power System | |||||||||
Revenue Refunding, Payson Power Project | |||||||||
2,000,000 | 5.000%, 04/01/24 | NR/A-/A | 2,340,520 | ||||||
1,000,000 | 5.000%, 04/01/25 | NR/A-/A | 1,167,630 | ||||||
6,375,000 | 5.000%, 04/01/26 | NR/A-/A | 7,426,939 | ||||||
Utah Associated Municipal Power System | |||||||||
Revenue, Veyo Heat Recovery Project | |||||||||
795,000 | 5.000%, 03/01/30 | NR/A/A | 934,276 | ||||||
905,000 | 5.000%, 03/01/32 | NR/A/A | 1,054,651 | ||||||
745,000 | 5.000%, 03/01/34 | NR/A/A | 859,141 | ||||||
Wyoming Municipal Power Agency | |||||||||
Power Supply System Revenue | |||||||||
720,000 | 5.500%, 01/01/28 Series A | A2/A-/NR | 757,483 | ||||||
Total Electric | 29,332,625 | ||||||||
Higher Education (6.1%) | |||||||||
Florida Higher Education Facilities | |||||||||
Authority Revenue, Refunding, | |||||||||
Rollins College Project | |||||||||
1,000,000 | 5.000%, 12/01/37 Series A | A2/NR/NR | 1,162,840 | ||||||
Lone Star College System, Texas | |||||||||
1,190,000 | 4.000%, 08/15/34 | NR/AA/NR | 1,318,092 | ||||||
Salt Lake County, Utah Westminster | |||||||||
College Project | |||||||||
280,000 | 1.000%, 10/01/17 | NR/BBB/NR | 279,149 | ||||||
685,000 | 5.000%, 10/01/19 | NR/BBB/NR | 744,958 | ||||||
720,000 | 5.000%, 10/01/20 | NR/BBB/NR | 798,617 | ||||||
825,000 | 4.750%, 10/01/20 | NR/BBB/NR | 838,497 | ||||||
870,000 | 4.750%, 10/01/21 | NR/BBB/NR | 883,807 |
9 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Salt Lake County, Utah Westminster | |||||||||
College Project (continued) | |||||||||
$ | 790,000 | 5.000%, 10/01/22 | NR/BBB/NR | $ | 896,397 | ||||
600,000 | 5.000%, 10/01/27 | NR/BBB/NR | 608,622 | ||||||
955,000 | 5.000%, 10/01/28 | NR/BBB/NR | 1,105,728 | ||||||
1,005,000 | 5.000%, 10/01/29 | NR/BBB/NR | 1,151,408 | ||||||
1,055,000 | 5.000%, 10/01/30 | NR/BBB/NR | 1,204,451 | ||||||
University of South Florida Financing Corp., | |||||||||
Florida COP Refunding Master Lease | |||||||||
Program | |||||||||
1,000,000 | 5.000%, 07/01/31 Series A | A1/A+/NR | 1,196,860 | ||||||
Utah State Board of Regents, Dixie State | |||||||||
University | |||||||||
1,800,000 | 5.000%, 06/01/30 AGMC Insured | NR/AA/NR | 2,174,706 | ||||||
Utah State Board of Regents Lease | |||||||||
Revenue | |||||||||
410,000 | 4.500%, 05/01/20 AMBAC Insured | NR/AA/NR | 411,144 | ||||||
425,000 | 4.500%, 05/01/21 AMBAC Insured | NR/AA/NR | 426,182 | ||||||
450,000 | 4.625%, 05/01/22 AMBAC Insured | NR/AA/NR | 451,292 | ||||||
120,000 | 4.650%, 05/01/23 AMBAC Insured | NR/AA/NR | 120,347 | ||||||
Utah State Board of Regents, University | |||||||||
of Utah | |||||||||
530,000 | 5.000%, 08/01/33 Series A | Aa1/AA+/NR | 652,213 | ||||||
600,000 | 5.000%, 08/01/35 Series A | Aa1/AA+/NR | 733,494 | ||||||
500,000 | 4.000%, 08/01/36 Series A | Aa1/AA+/NR | 551,120 | ||||||
Utah State Board of Regents, | |||||||||
Utah State University | |||||||||
1,105,000 | 4.000%, 12/01/30 Series B | NR/AA/NR | 1,260,241 | ||||||
Utah State Board of Regents, Utah Valley | |||||||||
University Student Center Building Fee | |||||||||
And Unified System Revenue | |||||||||
3,005,000 | 5.000%, 11/01/28 Series 2012A | NR/AA/NR | 3,609,336 | ||||||
Utah State University Student Building Fee | |||||||||
1,285,000 | 5.000%, 12/01/29 Series B | NR/AA/NR | 1,546,266 | ||||||
1,355,000 | 5.000%, 12/01/30 Series B | NR/AA/NR | 1,627,680 |
10 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P | Value | ||||||
Higher Education (continued) | |||||||||
Washington State Higher Education | |||||||||
Facilities Authority Revenue, Refunding, | |||||||||
Gonzaga University Project | |||||||||
$ | 950,000 | 5.000%, 04/01/24 Series B | A3/NR/NR | $ | 1,033,857 | ||||
Total Higher Education | 26,787,304 | ||||||||
Hospital (2.8%) | |||||||||
Brevard County, Florida Health Facilities | |||||||||
Authority Health First Inc. Project | |||||||||
890,000 | 5.000%, 04/01/18 | A2/A/NR | 896,177 | ||||||
750,000 | 5.000%, 04/01/30 | A2/A/NR | 889,148 | ||||||
Campbell County, Wyoming Hospital | |||||||||
District, Hospital Revenue, Memorial | |||||||||
Hospital Project | |||||||||
1,040,000 | 5.000%, 12/01/20 | NR/A-/NR | 1,159,943 | ||||||
1,000,000 | 5.500%, 12/01/34 | NR/A-/NR | 1,120,180 | ||||||
Harris County, Texas Health Facilities | |||||||||
Development Corp., Christus Health | |||||||||
540,000 | 4.750%, 07/01/30 AGMC Insured | ||||||||
(unrefunded balance) | A1/AA/NR | 590,776 | |||||||
Henderson, Nevada Health Care Facilities, | |||||||||
Dignity Health | |||||||||
1,350,000 | 5.250%, 07/01/31 Series B | A3/A/A | 1,394,455 | ||||||
Indiana Finance Authority Hospital | |||||||||
Revenue, Parkview Health System | |||||||||
300,000 | 5.875%, 05/01/29 | Aa3/A+/NR | 300,999 | ||||||
Miami-Dade County, Florida Public | |||||||||
Facilities, Jackson Health System | |||||||||
1,000,000 | 5.000%, 06/01/29 Series A | Aa3/A+/AA- | 1,216,040 | ||||||
Reno, Nevada Hospital Revenue, | |||||||||
Washoe Medical Center | |||||||||
65,000 | 5.000%, 06/01/23 AGMC Insured | ||||||||
(unrefunded balance) | A2/AA/NR | 69,058 | |||||||
70,000 | 5.000%, 06/01/23 AGMC Insured | ||||||||
(unrefunded balance) | A2/AA/NR | 74,334 |
11 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Hospital (continued) | |||||||||
Riverton, Utah Hospital Revenue, | |||||||||
Intermountain Health Care | |||||||||
Health Services, Inc. | |||||||||
$ | 940,000 | 5.000%, 08/15/36 | Aa1/AA+/NR | $ | 1,028,463 | ||||
Utah County, Utah Hospital Revenue, | |||||||||
IHC Health Services, Inc. | |||||||||
1,205,000 | 5.000%, 05/15/25 | Aa1/AA+/NR | 1,413,345 | ||||||
880,000 | 5.000%, 05/15/28 | Aa1/AA+/NR | 1,023,114 | ||||||
500,000 | 5.000%, 05/15/29 | Aa1/AA+/NR | 577,920 | ||||||
Washington State Health Care Facilities | |||||||||
Authority Revenue, Refunding, | |||||||||
Fred Hutchinson Cancer | |||||||||
595,000 | 5.000%, 01/01/18 | A3/A/NR | 623,465 | ||||||
Total Hospital | 12,377,417 | ||||||||
Housing (0.5%) | |||||||||
Utah Housing Corporation Single | |||||||||
Family Mortgage | |||||||||
85,000 | 4.950%, 01/01/32 Series A Class II | Aa2/AA/AA | 88,593 | ||||||
635,000 | 4.500%, 01/01/24 Series A Class III | Aa3/AA-/AA- | 660,083 | ||||||
95,000 | 4.625%, 07/01/32 Series B-1 Class II | Aa2/AA/AA | 99,423 | ||||||
310,000 | 4.500%, 07/01/23 Series C | Aa3/AA-/AA- | 325,506 | ||||||
1,000,000 | 4.000%, 01/01/36 Series D FHA Insured | Aa3/AA-/AA- | 1,078,880 | ||||||
Total Housing | 2,252,485 | ||||||||
Local Public Property (9.9%) | |||||||||
Bluffdale, Utah Local Building Authority | |||||||||
Lease Revenue | |||||||||
1,215,000 | 4.000%, 03/01/35 | A1/NR/NR | 1,306,526 | ||||||
Brigham, Utah Special Assessment | |||||||||
Voluntary Assessment Area | |||||||||
1,140,000 | 5.250%, 08/01/23 | A1/NR/NR | 1,266,038 | ||||||
376,000 | 5.500%, 08/01/29 | A1/NR/NR | 419,838 | ||||||
Brownsville, Texas Navigation District - | |||||||||
Senior Lien | |||||||||
1,220,000 | 5.000%, 03/01/30 AGMC Insured AMT | A2/AA/NR | 1,441,662 |
12 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Local Public Property (continued) | |||||||||
Civicventures, Alaska Revenue Refunding, | |||||||||
Anchorage Convention Center | |||||||||
$ | 1,000,000 | 5.000%, 09/01/28 | NR/A/AA- | $ | 1,194,940 | ||||
1,000,000 | 5.000%, 09/01/29 | NR/A/AA- | 1,185,310 | ||||||
1,000,000 | 5.000%, 09/01/30 | NR/A/AA- | 1,180,960 | ||||||
Clark County, Nevada Improvement | |||||||||
District Special Local Improvement | |||||||||
#128 (Summerlin) | |||||||||
490,000 | 5.000%, 02/01/21 Series A | NR/NR/NR* | 491,622 | ||||||
Downtown Redevelopment Authority | |||||||||
Texas Tax Increment Contract Revenue | |||||||||
1,000,000 | 5.000%, 09/01/30 BAMI Insured | NR/AA/NR | 1,172,320 | ||||||
Eagle Mountain, Utah Special | |||||||||
Assessment Area | |||||||||
405,000 | 5.250%, 05/01/28 Series 2013 | NR/A+/NR | 466,803 | ||||||
Harris County, Texas Sports Refunding | |||||||||
Senior Lien | |||||||||
500,000 | 5.000%, 11/15/30 Series A | A2/A-/NR | 594,475 | ||||||
Herriman, Utah Special Assessment | |||||||||
Towne Center Assessment Area | |||||||||
1,975,000 | 5.000%, 11/01/29 | NR/AA-/NR | 2,253,021 | ||||||
Houston, Texas Hotel Occupancy Tax | |||||||||
and Special Revenue | |||||||||
1,000,000 | 5.000%, 09/01/31 | A2/A-/NR | 1,190,150 | ||||||
Jacksonville, Florida Special Revenue | |||||||||
and Refunding Bonds | |||||||||
1,015,000 | 5.250%, 10/01/32 Series A | Aa3/AA-/AA- | 1,239,528 | ||||||
Mesquite, Nevada New Special | |||||||||
Improvement District | |||||||||
95,000 | 5.250%, 08/01/17 | NR/NR/NR* | 95,612 | ||||||
220,000 | 5.350%, 08/01/19 | NR/NR/NR* | 221,558 | ||||||
95,000 | 5.400%, 08/01/20 | NR/NR/NR* | 95,630 | ||||||
340,000 | 5.500%, 08/01/25 | NR/NR/NR* | 341,669 | ||||||
New Albany, Indiana Development | |||||||||
Authority | |||||||||
500,000 | 4.250%, 02/01/22 | NR/A+/NR | 504,555 |
13 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Local Public Property (continued) | |||||||||
Orange County, Florida Tourist | |||||||||
Development Tax Revenue Refunding | |||||||||
$ | 1,000,000 | 5.000%, 10/01/30 | Aa3/AA-/AA | $ | 1,223,580 | ||||
Orem, Utah Special Assessment | |||||||||
165,000 | 7.750%, 11/01/25 | NR/NR/NR* | 165,381 | ||||||
Salt Lake City, Utah Local Building | |||||||||
Authority Lease Revenue | |||||||||
955,000 | 4.000%, 10/15/23 Series A | Aa1/NR/AA+ | 1,090,266 | ||||||
395,000 | 4.000%, 04/15/32 Series A | Aa1/NR/NR | 440,694 | ||||||
425,000 | 4.000%, 04/15/34 Series A | Aa1/NR/NR | 470,386 | ||||||
460,000 | 4.000%, 04/15/36 Series A | Aa1/NR/NR | 505,880 | ||||||
South Jordan, Utah Special Assessment | |||||||||
(Daybreak Assessment Area No. 1) | |||||||||
1,370,000 | 4.000%, 11/01/27 | NR/AA+/NR | 1,567,705 | ||||||
1,735,000 | 4.000%, 11/01/28 | NR/AA+/NR | 1,958,850 | ||||||
1,500,000 | 4.000%, 11/01/30 | NR/AA+/NR | 1,668,135 | ||||||
Springville, Utah Special Assessment | |||||||||
Revenue | |||||||||
38,000 | 5.500%, 01/15/17 | NR/NR/NR* | 38,010 | ||||||
40,000 | 5.650%, 01/15/18 | NR/NR/NR* | 40,007 | ||||||
43,000 | 5.800%, 01/15/19 | NR/NR/NR* | 43,003 | ||||||
37,000 | 5.900%, 01/15/20 | NR/NR/NR* | 36,997 | ||||||
St. Augustine, Florida Capital | |||||||||
Improvement Refunding | |||||||||
500,000 | 5.000%, 10/01/34 | Aa3/A+/A+ | 593,440 | ||||||
St. Lucie County, Florida School Board | |||||||||
COP Master Lease Program | |||||||||
500,000 | 5.000%, 07/01/30 Series A | A1/A/A+ | 587,225 | ||||||
Unified Utah Fire Service Area Local | |||||||||
Building Authority Lease Revenue | |||||||||
2,350,000 | 4.000%, 04/01/32 | Aa2/NR/NR | 2,650,353 | ||||||
2,450,000 | 4.000%, 04/01/33 | Aa2/NR/NR | 2,748,410 | ||||||
Washington County/St. George Interlocal | |||||||||
Agency, Utah Lease Revenue Refunding | |||||||||
1,365,000 | 0.500%, 12/01/16 Series A | A1/A+/NR | 1,363,471 | ||||||
Weber County, Utah Special Assessment | |||||||||
Summit Mountain Area | |||||||||
1,590,000 | 5.500%, 01/15/28 | NR/AA-/NR | 1,955,732 | ||||||
4,120,000 | 5.750%, 01/15/33 | NR/AA-/NR | 5,114,980 |
14 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Local Public Property (continued) | |||||||||
West Valley City, Utah Municipal Building | |||||||||
Authority Lease Revenue Refunding | |||||||||
$ | 900,000 | 4.000%, 02/01/33 AGMC Insured | NR/AA/AA- | $ | 996,615 | ||||
1,310,000 | 4.000%, 02/01/38 AGMC Insured | NR/AA/AA- | 1,426,931 | ||||||
Total Local Public Property | 43,348,268 | ||||||||
Public Schools (1.3%) | |||||||||
Ogden City, Utah Municipal Building | |||||||||
Authority School District Lease Revenue | |||||||||
1,315,000 | 5.000%, 01/15/31 | Aa3/NR/NR | 1,525,821 | ||||||
Uintah County, Utah School District | |||||||||
Municipal Building Authority Lease | |||||||||
Revenue Refunding | |||||||||
2,327,000 | 2.000%, 08/01/22 | NR/NR/NR* | 2,326,977 | ||||||
Warsaw, Indiana Multi-School | |||||||||
Building Corp., First Mortgage | |||||||||
1,800,000 | 5.450%, 01/15/28 Series B | NR/AA+/NR | 1,898,802 | ||||||
Total Public Schools | 5,751,600 | ||||||||
Sales Tax (4.8%) | |||||||||
Bountiful City, Utah Sales Tax | |||||||||
Refunding Bond | |||||||||
220,000 | 4.000%, 06/01/17 | NR/AA/NR | 224,607 | ||||||
Central Puget Sound, Washington | |||||||||
Regional Transit Authority Sales & | |||||||||
Use Tax Improvement & Refunding | |||||||||
1,000,000 | 5.000%, 11/01/31 | Aa2/AAA/NR | 1,246,820 | ||||||
Cottonwood Heights, Utah Sales Tax | |||||||||
Revenue | |||||||||
2,000,000 | 5.000%, 07/01/32 Series 2014 | NR/AA-/NR | 2,383,880 | ||||||
Draper, Utah Sales Tax Revenue | |||||||||
1,000,000 | 5.000%, 05/01/32 Series A | NR/AA/NR | 1,194,090 | ||||||
Herriman City, Utah Sales & Franchise | |||||||||
Tax Revenue Refunding | |||||||||
350,000 | 1.000%, 08/01/19 Series B | NR/AA-/NR | 348,159 | ||||||
2,040,000 | 4.000%, 08/01/25 Series B | NR/AA-/NR | 2,395,470 | ||||||
2,135,000 | 4.000%, 08/01/30 Series B | NR/AA-/NR | 2,394,253 | ||||||
1,515,000 | 5.000%, 08/01/33 Series B | NR/AA-/NR | 1,829,135 |
15 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Sales Tax (continued) | |||||||||
Miami-Dade County, Florida Transit | |||||||||
System Sales Surtax Revenue | |||||||||
$ | 1,000,000 | 5.000%, 07/01/34 | A1/AA/AA- | $ | 1,196,860 | ||||
Riverton City, Utah Franchise & Sales | |||||||||
Tax Revenue | |||||||||
750,000 | 4.000%, 06/01/30 | NR/AA-/AA | 828,442 | ||||||
1,000,000 | 5.250%, 12/01/36 | NR/AA-/AA | 1,205,710 | ||||||
South Jordan, Utah Redevelopment | |||||||||
Agency Subordinated Sales Tax & Tax | |||||||||
Increment Revenue | |||||||||
1,000,000 | 5.000%, 04/01/29 | NR/AA-/AA+ | 1,201,160 | ||||||
Spanish Fork City, Utah Sales Tax | |||||||||
Revenue Refunding | |||||||||
1,115,000 | 0.750%, 04/15/18 Series 2014 | NR/AA-/NR | 1,112,636 | ||||||
Utah Transit Authority Sales Tax Revenue | |||||||||
1,000,000 | 4.000%, 12/15/30 | A1/A+/AA | 1,135,770 | ||||||
Utah Transit Authority Sales Tax Revenue | |||||||||
Subordinated, Capital Appreciation | |||||||||
1,000,000 | zero coupon, 12/15/32 | A1/A+/AA | 596,860 | ||||||
West Valley City, Utah Sales Tax Revenue | |||||||||
Capital Appreciation Bonds, Refunding | |||||||||
3,500,000 | zero coupon, 07/15/35 | NR/AA+/NR | 1,655,920 | ||||||
Total Sales Tax | 20,949,772 | ||||||||
State Agency (2.3%) | |||||||||
Utah Infrastructure Agency | |||||||||
Telecommunications & Franchise Tax | |||||||||
635,000 | 1.000%, 10/15/19 | A2/AA-/NR | 627,494 | ||||||
1,970,000 | 5.250%, 10/15/30 | A2/AA-/NR | 2,430,468 | ||||||
1,000,000 | 5.000%, 10/15/33 | A2/AA-/NR | 1,182,820 | ||||||
1,630,000 | 5.250%, 10/15/38 | A2/AA-/NR | 1,953,245 | ||||||
1,000,000 | 5.500%, 10/15/30 Series A | ||||||||
AGMC Insured | A2/AA/NR | 1,185,550 | |||||||
1,475,000 | 5.250%, 10/15/33 Series A | ||||||||
AGMC Insured | A2/AA/NR | 1,721,650 | |||||||
16 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
State Agency (continued) | |||||||||
Utah State Building Ownership Authority | |||||||||
Lease Revenue Refunding State Facilities | |||||||||
Master Lease Program | |||||||||
$ | 1,000,000 | 5.000%, 05/15/24 | Aa1/AA+/NR | $ | 1,254,930 | ||||
Total State Agency | 10,356,157 | ||||||||
Transportation (5.4%) | |||||||||
Clark County, Nevada Highway | |||||||||
Improvement Revenue Indexed Fuel | |||||||||
Tax & Subordinate Motor Vehicle | |||||||||
Fuel Tax | |||||||||
2,000,000 | 5.000%, 07/01/31 | Aa3/AA-/NR | 2,432,300 | ||||||
North Texas Tollway Authority, Texas | |||||||||
755,000 | 6.100%, 01/01/28 Series A | ||||||||
(unrefunded balance) | A1/A/NR | 838,775 | |||||||
Utah Transit Authority Sales Tax | |||||||||
Revenue | |||||||||
1,000,000 | 5.000%, 06/15/31 Series A | Aa2/AAA/AA | 1,244,620 | ||||||
2,000,000 | 5.000%, 06/15/38 Series A | Aa2/AAA/AA | 2,440,900 | ||||||
Utah Transit Authority Sales | |||||||||
Tax Revenue Subordinated | |||||||||
5,000,000 | 5.000%, 06/15/34 Series A | A1/A+/AA | 6,023,200 | ||||||
5,000,000 | 5.000%, 06/15/37 Series A | A1/A+/AA | 5,971,200 | ||||||
Utah Transit Authority Sales Tax | |||||||||
Revenue Refunding | |||||||||
1,000,000 | 5.000%, 06/15/32 | A1/A+/AA | 1,192,130 | ||||||
Utah Transit Authority Sales Tax & | |||||||||
Transportation Revenue | |||||||||
195,000 | 5.250%, 06/15/32 AGMC Insured | Aa2/AAA/AA | 263,732 | ||||||
Washoe County, Nevada Highway | |||||||||
Revenue Fuel Tax | |||||||||
1,000,000 | 5.500%, 02/01/28 | A1/A+/NR | 1,103,760 | ||||||
1,000,000 | 5.000%, 02/01/32 | A1/A+/NR | 1,085,310 | ||||||
1,000,000 | 5.000%, 02/01/38 | A1/A+/NR | 1,082,190 | ||||||
Total Transportation | 23,678,117 | ||||||||
17 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Water and Sewer (11.3%) | |||||||||
Central Utah Water Conservancy | |||||||||
District Refunding, Jordanelle Hydrant | |||||||||
$ | 1,125,000 | 4.500%, 10/01/27 Series A | NR/AA/AA | $ | 1,288,395 | ||||
Central Weber, Utah Sewer Improvement | |||||||||
District Revenue Refunding | |||||||||
1,000,000 | 5.000%, 03/01/28 Series A | ||||||||
AGMC Insured | NR/AA/AA | 1,116,120 | |||||||
4,000,000 | 5.000%, 03/01/33 Series A | ||||||||
AGMC Insured | NR/AA/AA | 4,443,320 | |||||||
Davie, Florida Water & Sewer Revenue | |||||||||
1,000,000 | 5.000%, 10/01/32 AGMC Insured | Aa3/AA/NR | 1,150,480 | ||||||
El Paso, Texas Water & Sewer Revenue | |||||||||
Refunding | |||||||||
1,000,000 | 4.500%, 03/01/31 Series C | NR/AA+/AA+ | 1,162,280 | ||||||
Florida State Governmental Utility | |||||||||
Authority Refunding Revenue Bonds | |||||||||
(Lehigh Utility System) | |||||||||
500,000 | 5.000%, 10/01/31 Series 2014 | ||||||||
AGMC Insured | A2/AA/NR | 593,995 | |||||||
Jordan Valley, Utah Water Conservancy | |||||||||
District Revenue | |||||||||
6,000,000 | 5.000%, 10/01/35 Series B | NR/AA+/AA+ | 6,871,800 | ||||||
Jordanelle, Utah Special Service District | |||||||||
206,000 | 5.200%, 11/15/16 | NR/NR/NR* | 206,078 | ||||||
216,000 | 5.300%, 11/15/17 | NR/NR/NR* | 216,127 | ||||||
228,000 | 5.400%, 11/15/18 | NR/NR/NR* | 228,135 | ||||||
240,000 | 5.500%, 11/15/19 | NR/NR/NR* | 240,113 | ||||||
253,000 | 5.600%, 11/15/20 | NR/NR/NR* | 253,063 | ||||||
268,000 | 5.700%, 11/15/21 | NR/NR/NR* | 268,054 | ||||||
283,000 | 5.800%, 11/15/22 | NR/NR/NR* | 283,062 | ||||||
299,000 | 6.000%, 11/15/23 | NR/NR/NR* | 299,063 | ||||||
Kane County, Utah Water Conservancy | |||||||||
District Revenue Refunding | |||||||||
945,000 | 4.000%, 08/15/29 AGMC Insured | NR/AA/NR | 1,078,793 | ||||||
Miami-Dade County, Florida Water | |||||||||
and Sewer Revenue System | |||||||||
1,000,000 | 5.000%, 10/01/26 | Aa3/A+/A+ | 1,268,280 |
18 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Water and Sewer (continued) | |||||||||
Miami-Dade County, Florida Water | |||||||||
and Sewer Revenue System (continued) | |||||||||
$ | 1,500,000 | 5.000%, 10/01/29 AGC Insured | Aa3/AA/A+ | $ | 1,701,915 | ||||
1,000,000 | 5.000%, 10/01/31 Series A | Aa3/A+/A+ | 1,191,540 | ||||||
Mountain Regional Water Special | |||||||||
Service District, Utah Water | |||||||||
Revenue Refunding | |||||||||
3,000,000 | 5.000%, 12/15/33 AGMC Insured | NR/AA/A+ | 3,475,560 | ||||||
North Slope Borough, Alaska Service | |||||||||
Area 10 Water & Wastewater Facilities | |||||||||
1,000,000 | 5.250%, 06/30/27 | NR/A-/NR | 1,151,450 | ||||||
1,000,000 | 5.250%, 06/30/28 | NR/A-/NR | 1,150,970 | ||||||
1,000,000 | 5.250%, 06/30/34 | NR/A-/NR | 1,144,240 | ||||||
Ogden City, Utah Sewer & Water | |||||||||
Revenue Bonds | |||||||||
1,160,000 | 5.250%, 06/15/30 Series B | Aa3/AA-/NR | 1,417,856 | ||||||
750,000 | 4.625%, 06/15/38 AGMC Insured | Aa3/NR/NR | 788,535 | ||||||
Ogden City, Utah Storm Drain | |||||||||
Revenue Bonds | |||||||||
500,000 | 5.250%, 06/15/28 | NR/AA/NR | 615,050 | ||||||
Okaloosa County, Florida Water and | |||||||||
Sewer Revenue | |||||||||
1,000,000 | 5.000%, 07/01/30 | Aa3/NR/AA- | 1,222,360 | ||||||
Orem, Utah Water & Storm Sewer | |||||||||
Revenue | |||||||||
1,000,000 | 5.000%, 07/15/26 | NR/AA+/AA+ | 1,070,660 | ||||||
1,250,000 | 5.250%, 07/15/28 | NR/AA+/AA+ | 1,343,825 | ||||||
Pleasant Grove City, Utah Water Revenue | |||||||||
1,000,000 | 5.250%, 12/01/29 AGMC Insured | NR/AA/NR | 1,088,820 | ||||||
Salt Lake & Sandy, Utah Metropolitan | |||||||||
Water District, Water Revenue, | |||||||||
Refunding | |||||||||
1,100,000 | 5.000%, 07/01/37 Series A | NR/AA+/AA+ | 1,297,659 | ||||||
San Jacinto, Texas River Authority | |||||||||
Woodlands Waste Disposal | |||||||||
1,000,000 | 5.000%,10/01/30 BAMI Insured | NR/AA/NR | 1,192,610 |
19 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Revenue Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Water and Sewer (continued) | |||||||||
Sarasota, Florida Utility System | |||||||||
Revenue Refunding | |||||||||
$ | 1,455,000 | 5.000%, 10/01/27 | NR/AA+/AA+ | $ | 1,713,466 | ||||
South Weber City, Utah Water Revenue | |||||||||
930,000 | 5.000%, 06/01/40 AGMC Insured | NR/AA/NR | 1,031,323 | ||||||
Texas Water Development Board State | |||||||||
Water Implementation Fund | |||||||||
3,000,000 | 4.000%, 10/15/33††† | NR/AAA/AAA | 3,418,980 | ||||||
Utah Water Finance Agency Revenue | |||||||||
1,645,000 | 4.500%, 10/01/28 AMBAC Insured | Aa3/NR/NR | 1,698,693 | ||||||
Weber Basin, Utah Water Conservancy | |||||||||
District Refunding | |||||||||
915,000 | 4.000%, 10/01/31 Series A | NR/AA+/AAA | 1,007,552 | ||||||
Total Water and Sewer | 49,690,222 | ||||||||
Total Revenue Bonds | 267,335,301 | ||||||||
Pre-Refunded \ | |||||||||
Escrowed to Maturity Bonds (15.9%)†† | |||||||||
Pre-Refunded | |||||||||
General Obligation Bonds (1.6%) | |||||||||
City and County (0.4%) | |||||||||
Miami-Dade County, Florida Building | |||||||||
Better Communities Program | |||||||||
1,605,000 | 5.625%, 07/01/38 | Aa2/AA/NR | 1,736,112 | ||||||
Public Schools (0.4%) | |||||||||
Clark County, Nevada School District | |||||||||
500,000 | 5.000%, 06/15/28 Series A | A1/AA-/A+ | 535,090 | ||||||
Granite School District, Utah, Salt Lake | |||||||||
County School Building School Board | |||||||||
Guaranty Program | |||||||||
1,000,000 | 5.000%, 06/01/31 | Aaa/NR/AAA | 1,180,500 | ||||||
Total Public Schools | 1,715,590 |
20 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded | |||||||||
General Obligation Bonds (continued) | |||||||||
State (0.6%) | |||||||||
Texas State Transportation Commission | |||||||||
Mobility Fund | |||||||||
$ | 1,140,000 | 5.000%, 04/01/27 Series A | Aaa/AAA/NR | $ | 1,163,541 | ||||
Washington State Various Purpose | |||||||||
1,405,000 | 5.000%, 07/01/30 Series A | Aa1/AA+/NR | 1,448,162 | ||||||
Total State | 2,611,703 | ||||||||
Water and Sewer (0.2%) | |||||||||
Virgin Valley, Nevada Water District | |||||||||
955,000 | 5.000%, 03/01/34 AGC Insured | A1/NR/NR | 1,009,970 | ||||||
Total Pre-Refunded General | |||||||||
Obligation Bonds | 7,073,375 | ||||||||
Pre-Refunded\Escrowed to Maturity | |||||||||
Revenue Bonds (14.3%) | |||||||||
Charter Schools (0.5%) | |||||||||
Utah County, Utah Charter School | |||||||||
Revenue, Ronald Wilson Reagan | |||||||||
Academy | |||||||||
875,000 | 5.750%, 02/15/22 Series A | NR/BB+/NR | 920,518 | ||||||
1,000,000 | 6.000%, 02/15/38 Series A | NR/BB+/NR | 1,068,540 | ||||||
Total Charter Schools | 1,989,058 | ||||||||
Electric (1.5%) | |||||||||
Clark County, Washington Public | |||||||||
Utility District No. 001 Generating | |||||||||
Refunding | |||||||||
1,000,000 | 5.000%, 01/01/24 | A1/A/A+ | 1,128,520 | ||||||
Eagle Mountain, Utah Gas & Electric | |||||||||
325,000 | 5.000%, 06/01/24 AGMC Insured | NR/AA/NR | 382,850 | ||||||
St. George, Utah Electric Revenue | |||||||||
3,750,000 | 5.000%, 06/01/38 AGMC Insured | A2/NR/NR | 4,003,987 | ||||||
Lower Colorado River Authority, Texas | |||||||||
60,000 | 5.250%, 05/15/29 | NR/NR/NR* | 66,605 | ||||||
5,000 | 5.250%, 05/15/29 | NR/NR/NR* | 5,537 |
21 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded\Escrowed to Maturity | |||||||||
Revenue Bonds (continued) | |||||||||
Electric (continued) | |||||||||
San Antonio, Texas Electric & Gas | |||||||||
Revenue System | |||||||||
$ | 1,000,000 | 5.000%, 02/01/32 | Aa1/AA/AA+ | $ | 1,053,480 | ||||
Total Electric | 6,640,979 | ||||||||
Higher Education (1.6%) | |||||||||
Texas State University System | |||||||||
Financing Revenue | |||||||||
2,000,000 | 5.250%, 03/15/25 | Aa2/NR/NR | 2,123,960 | ||||||
Utah State Board of Regents, University | |||||||||
of Utah- Auxiliary and Campus Facilities | |||||||||
2,980,000 | 4.500%, 04/01/29 Series 2012A | Aa2/AA+/NR | 3,511,274 | ||||||
Utah State Board of Regents, | |||||||||
University of Utah Hospital Revenue | |||||||||
1,245,000 | 5.000%, 08/01/31 | Aa2/AA/NR | 1,430,779 | ||||||
Total Higher Education | 7,066,013 | ||||||||
Hospital (0.7%) | |||||||||
Harris County, Texas Health Facilities | |||||||||
Development Corp., Christus Health | |||||||||
260,000 | 4.750%, 07/01/30 AGMC Insured | A1/NR/NR | 295,690 | ||||||
Reno, Nevada Hospital Revenue, | |||||||||
Washoe Medical Center | |||||||||
615,000 | 5.000%, 06/01/23 AGMC Insured | ||||||||
(prerefunded) | A2/AA/NR | 655,596 | |||||||
655,000 | 5.000%, 06/01/23 AGMC Insured | ||||||||
(prerefunded) | A2/AA/NR | 699,363 | |||||||
Richmond, Indiana Hospital Authority, | |||||||||
Reid Hospital Project | |||||||||
155,000 | 5.000%, 01/01/19 Series A ETM | NR/A/A | 162,252 | ||||||
Tarrant County, Texas Cultural Education | |||||||||
Facilities Finance Corp. Hospital | |||||||||
Refunding, Baylor Healthcare System | |||||||||
930,000 | 5.250%, 08/15/25 | AA3/AA-/NR | 1,078,940 | ||||||
70,000 | 5.250%, 08/15/25 | NR/NR/NR* | 81,211 | ||||||
Total Hospital | 2,973,052 |
22 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded\Escrowed to Maturity | |||||||||
Revenue Bonds (continued) | |||||||||
Local Public Property (2.7%) | |||||||||
Herriman, Utah Special Assessment | |||||||||
Towne Center Assessment Area | |||||||||
$ | 1,045,000 | 4.875%, 11/01/23 | NR/AA-/NR | $ | 1,187,538 | ||||
1,150,000 | 5.000%, 11/01/25 | NR/AA-/NR | 1,311,885 | ||||||
Salt Lake Valley, Utah Fire Service | |||||||||
District Lease Revenue | |||||||||
500,000 | 5.000%, 04/01/22 | Aa2/NR/AA- | 530,480 | ||||||
2,645,000 | 5.200%, 04/01/28 | Aa2/NR/AA- | 2,814,042 | ||||||
1,000,000 | 5.250%, 04/01/30 | Aa2/NR/AA- | 1,064,650 | ||||||
Uintah County, Utah Municipal | |||||||||
Building Authority Lease Revenue | |||||||||
500,000 | 5.000%, 06/01/24 | NR/A+/NR | 534,290 | ||||||
2,000,000 | 5.300%, 06/01/28 | NR/A+/NR | 2,147,020 | ||||||
1,005,000 | 5.500%, 06/01/37 | NR/A+/NR | 1,082,174 | ||||||
1,120,000 | 5.500%, 06/01/40 | NR/A+/NR | 1,206,005 | ||||||
Total Local Public Property | 11,878,084 | ||||||||
Public Schools (0.2%) | |||||||||
Tooele County, Utah Municipal | |||||||||
Building Authority School District | |||||||||
Lease Revenue | |||||||||
1,000,000 | 5.000%, 06/01/28 | NR/A+/NR | 1,067,730 | ||||||
Sales Tax (0.5%) | |||||||||
Riverton City, Utah Franchise & Sales | |||||||||
Tax Revenue | |||||||||
750,000 | 5.000%, 06/01/24 AMBAC Insured | NR/AA-/AA | 770,445 | ||||||
Riverton City, Utah Franchise & Sales | |||||||||
Tax Revenue | |||||||||
1,585,000 | 5.000%, 06/01/31 AMBAC Insured | NR/AA-/AA | 1,628,207 | ||||||
Total Sales Tax | 2,398,652 | ||||||||
State Agency (0.4%) | |||||||||
Utah State Building Ownership Authority | |||||||||
Lease Revenue Refunding State Facilities | |||||||||
Master Lease Program | |||||||||
1,575,000 | 5.000%, 05/15/26 | Aa1/AA+/NR | 1,740,407 |
23 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded\Escrowed to Maturity | |||||||||
Revenue Bonds (continued) | |||||||||
Transportation (3.6%) | |||||||||
Dallas, Texas Area Rapid Transit Sales | |||||||||
Tax Revenue Refunding Senior Lien | |||||||||
$ | 1,435,000 | 5.000%, 12/01/36 AMBAC Insured | Aa2/NR/NR | $ | 1,444,356 | ||||
North Texas Tollway Authority, Texas | |||||||||
3,315,000 | 6.100%, 01/01/28 Series A | NR/NR/NR* | 3,687,540 | ||||||
Utah Transit Authority Sales | |||||||||
Tax Revenue | |||||||||
2,000,000 | 5.000%, 06/15/27 Series A | Aa2/AAA/NR | 2,138,600 | ||||||
1,000,000 | 5.000%, 06/15/28 Series A | Aa2/AAA/NR | 1,069,300 | ||||||
6,920,000 | 5.000%, 06/15/36 AGMC Insured | ||||||||
Series A | Aa2/AAA/NR | 7,399,556 | |||||||
Total Transportation | 15,739,352 | ||||||||
Water and Sewer (2.6%) | |||||||||
Cape Coral, Florida Water & Sewer | |||||||||
Revenue | |||||||||
1,000,000 | 5.000%, 10/01/36 AGMC-AMBAC | ||||||||
Insured | A1/AA/A | 1,000,000 | |||||||
King County, Washington Sewer Revenue | |||||||||
660,000 | 5.000%, 01/01/33 AGMC Insured | Aa2/AA+/NR | 680,275 | ||||||
Laredo, Texas Waterworks Sewer | |||||||||
System Revenue | |||||||||
1,450,000 | 5.000%, 03/01/24 Series 2010 | A1/AA-/AA- | 1,642,661 | ||||||
Pleasant Grove City, Utah | |||||||||
Water Revenue | |||||||||
450,000 | 4.300%, 12/01/20 NPFG Insured | A3/AA-/NR | 452,448 | ||||||
1,370,000 | 5.000%, 12/01/31 Series B NPFG | ||||||||
Insured | A3/AA-/NR | 1,378,932 | |||||||
Salt Lake & Sandy, Utah Metropolitan | |||||||||
Water District, Water Revenue, | |||||||||
Refunding | |||||||||
650,000 | 5.000%, 07/01/31 Series A | NR/AA+/AA+ | 721,181 | ||||||
Tacoma, Washington Solid Waste | |||||||||
Utility Revenue | |||||||||
1,000,000 | 5.000%, 12/01/23 Syncora Guarantee, Inc. | ||||||||
Insured | A1/AA/AA- | 1,006,440 |
24 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Principal Amount | Pre-Refunded \Escrowed to Maturity Bonds (continued) | Rating Moody’s, S&P and Fitch | Value | ||||||
Pre-Refunded\Escrowed to Maturity | |||||||||
Revenue Bonds (continued) | |||||||||
Water and Sewer (continued) | |||||||||
Tampa Bay, Florida Regional Water | |||||||||
Refunding & Improvement | |||||||||
$ | 885,000 | 4.750%, 10/01/33 NPFG Insured | Aa1/AA+/AA+ | $ | 885,000 | ||||
Uintah Water Conservancy District, | |||||||||
Utah, Water Conservancy Revenue | |||||||||
1,400,000 | 5.250%, 01/15/27 Series 2009A | NR/NR/NR* | 1,534,974 | ||||||
White City, Utah Water Improvement | |||||||||
District Revenue | |||||||||
500,000 | 5.000%, 02/01/23 AGMC Insured | A2/NR/NR | 506,740 | ||||||
700,000 | 5.000%, 02/01/25 AGMC Insured | A2/NR/NR | 709,436 | ||||||
840,000 | 5.000%, 02/01/27 AGMC Insured | A2/NR/NR | 851,323 | ||||||
Total Water and Sewer | 11,369,410 | ||||||||
Total Pre-Refunded\ Escrowed to | |||||||||
Maturity Revenue Bonds | 62,862,737 | ||||||||
Total Pre-Refunded\ | |||||||||
Escrowed to Maturity Bonds | 69,936,112 | ||||||||
Total Municipal Bonds | |||||||||
(cost $403,932,126) | 428,645,436 | ||||||||
Shares | Short-Term Investment (2.5%) | ||||||||
11,232,298 | Dreyfus Tax Exempt Cash Management, | ||||||||
Institutional Shares, 0.55%** | |||||||||
(cost $11,232,298) | NR/Aaam/NR | 11,232,298 | |||||||
Total Investments | |||||||||
(cost $415,164,424-note 4) | 100.0% | 439,877,734 | |||||||
Other assets less liabilities | (0.0) | (96,290 | ) | ||||||
Net Assets | 100.0% | $ | 439,781,444 |
25 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Percent of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Aaa of Moody’s or AAA of S&P and Fitch | 11.8 | % | ||
Pre-Refunded bonds\ ETM bonds†† | 16.3 | |||
Aa of Moody’s or AA of S&P and Fitch | 53.3 | |||
A of Moody’s or S&P and Fitch | 13.6 | |||
BBB of S&P | 2.2 | |||
Not Rated* | 2.8 | |||
100.0 | % | |||
PORTFOLIO ABBREVIATIONS: | ||||
AGC - Assured Guaranty Corp. | ||||
AGMC - Assured Guaranty Municipal Corp. | ||||
AMBAC - American Municipal Bond Assurance Corp. | ||||
AMT - Alternative Minimum Tax | ||||
BAMI - Build America Mutual Insurance | ||||
COP - Certificates of Participation | ||||
ETM - Escrowed to Maturity | ||||
FHA - Federal Housing Administration | ||||
IHC - Intermountain Health Care | ||||
NPFG - National Public Finance Guarantee | ||||
NR - Not Rated | ||||
PSF- Permanent School Fund |
26 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) has been determined by the Investment Adviser to have sufficient quality to be ranked in the top credit four ratings if a credit rating were to be assigned by a NRSRO. | |
** | The rate is an annualized seven-day yield at period end. | |
Note: 144A – Private placement subject to SEC rule 144A, which modifies a two-year holding period requirement to permit qualified institutional buyers to trade these securities among themselves, thereby significantly improving the liquidity of these securities. | ||
† | Calculated using the highest rating of the three NRSRO. Percentages in this table do not include the Short-Term Investment. | |
†† | Pre-refunded bonds are bonds secured by an escrow account, comprised of U.S. Government Obligations (unless otherwise noted), to retire the bonds at their earliest call date. Escrowed to Maturity bonds are bonds where money has been placed in the escrow account which is used to pay principal and interest through the bond’s originally scheduled maturity date. Escrowed to Maturity are shown as ETM. All other securities in the category are pre-refunded. | |
††† | Security purchased on a delayed delivery or when-issued basis. |
See accompanying notes to financial statements.
27 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2016 (unaudited)
ASSETS | ||||
Investments at value (cost $415,164,424) | $ | 439,877,734 | ||
Interest receivable | 5,703,777 | |||
Receivable for Fund shares sold | 955,756 | |||
Other assets | 28,550 | |||
Total assets | 446,565,817 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 4,801,091 | |||
Payable for Fund shares redeemed | 1,487,372 | |||
Management fee payable | 183,009 | |||
Dividends payable | 173,974 | |||
Distribution and service fees payable | 9,686 | |||
Accrued expenses payable | 129,241 | |||
Total liabilities | 6,784,373 | |||
NET ASSETS | $ | 439,781,444 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 413,382 | ||
Additional paid-in capital | 413,916,885 | |||
Net unrealized appreciation on investments (note 4) | 24,713,310 | |||
Accumulated net realized gain on investments | 466,915 | |||
Undistributed net investment income | 270,952 | |||
$ | 439,781,444 | |||
CLASS A | ||||
Net Assets | $ | 231,361,347 | ||
Capital shares outstanding | 21,763,485 | |||
Net asset value and redemption price per share | $ | 10.63 | ||
Maximum offering price per share (100/96 of $10.63) | $ | 11.07 | ||
CLASS C | ||||
Net Assets | $ | 80,866,113 | ||
Capital shares outstanding | 7,613,929 | |||
Net asset value and offering price per share | $ | 10.62 | ||
Redemption price per share (*a charge of 1% is imposed | ||||
on the redemption proceeds, or on the original price, | ||||
whichever is lower, if redeemed during the first 12 | ||||
months after purchase) | $ | 10.62 | * | |
CLASS Y | ||||
Net Assets | $ | 127,553,984 | ||
Capital shares outstanding | 11,960,786 | |||
Net asset value, offering and redemption price per share | $ | 10.66 |
See accompanying notes to financial statements.
28 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 7,165,422 | ||||||
Expenses: | ||||||||
Management fee (note 3) | $ | 1,073,347 | ||||||
Distribution and service fees (note 3) | 624,211 | |||||||
Transfer and shareholder servicing agent fees | 111,498 | |||||||
Trustees’ fees and expenses (note 6) | 64,520 | |||||||
Legal fees | 54,026 | |||||||
Fund accounting fees | 28,832 | |||||||
Shareholders’ reports | 15,370 | |||||||
Registration fees and dues | 15,155 | |||||||
Auditing and tax fees | 11,544 | |||||||
Insurance | 8,900 | |||||||
Custodian fees | 6,680 | |||||||
Chief compliance officer services (note 3) | 6,500 | |||||||
Miscellaneous | 20,446 | |||||||
Total expenses | 2,041,029 | |||||||
Management fee waived (note 3) | (48,963 | ) | ||||||
Net expenses | 1,992,066 | |||||||
Net investment income | 5,173,356 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 120,562 | |||||||
Change in unrealized appreciation on | ||||||||
investments | 2,491,930 | |||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | 2,612,492 | |||||||
Net change in net assets resulting from operations | $ | 7,785,848 |
See accompanying notes to financial statements.
29 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2016 | Year Ended | |||||||
(unaudited) | March 31, 2016 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 5,173,356 | $ | 10,172,024 | ||||
Net realized gain (loss) from | ||||||||
securities transactions | 120,562 | 346,871 | ||||||
Change in unrealized appreciation | ||||||||
on investments | 2,491,930 | 1,989,435 | ||||||
Change in net assets from | ||||||||
operations | 7,785,848 | 12,508,330 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,850,766 | ) | (5,745,329 | ) | ||||
Net realized gain on investments | –– | (124,358 | ) | |||||
Class C Shares: | ||||||||
Net investment income | (663,994 | ) | (1,524,152 | ) | ||||
Net realized gain on investments | –– | (42,845 | ) | |||||
Class Y Shares: | ||||||||
Net investment income | (1,622,601 | ) | (2,869,555 | ) | ||||
Net realized gain on investments | –– | (58,908 | ) | |||||
Change in net assets from | ||||||||
distributions | (5,137,361 | ) | (10,365,147 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 7): | ||||||||
Proceeds from shares sold | 58,481,591 | 86,226,199 | ||||||
Reinvested dividends and | ||||||||
distributions | 4,184,098 | 8,497,616 | ||||||
Cost of shares redeemed | (32,288,753 | ) | (76,235,434 | ) | ||||
Change in net assets from | ||||||||
capital share transactions | 30,376,936 | 18,488,381 | ||||||
Change in net assets | 33,025,423 | 20,631,564 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 406,756,021 | 386,124,457 | ||||||
End of period* | $ | 436,781,444 | $ | 406,756,021 | ||||
*Includes undistributed net investment income of: | $ | 270,952 | $ | 234,957 |
See accompanying notes to financial statements.
30 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (unaudited)
1. Organization
Aquila Tax-Free Fund For Utah (the “Fund”), a series of Aquila Municipal Trust (prior to October 12, 2013, the Fund operated under the name Tax-Free Fund For Utah), a non-diversified, open-end investment company, was organized on December 12, 1990 as a Massachusetts business trust and commenced operations on July 24, 1992. The Fund is authorized to issue an unlimited number of shares. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. 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: Municipal securities are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. |
b) | Fair value measurements: The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy: |
31 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities
The following is a summary of the valuation inputs, representing 100% of the Fund’s investments, used to value the Fund’s net assets as of September 30, 2016:
Valuation Inputs* | Investments in Securities | ||||
Level 1 – Quoted Prices — Short-Term Investment | $ | 11,232,298 | |||
Level 2 – Other Significant Observable | |||||
Inputs — Municipal Bonds* | 428,645,436 | ||||
Level 3 – Significant Unobservable Inputs | — | ||||
Total | $ | 439,877,734 |
*See schedule of investments for a detailed listing of securities.
c) | Subsequent events: In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date these financial statements were issued. |
d) | 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. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. |
e) | Federal income taxes: It is the policy of the Fund to continue 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. |
Management has reviewed the tax positions for each of the open tax years (2013–2015) or expected to be taken in the Fund’s 2016 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
32 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
f) | 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 also charged directly to such class on a daily basis. |
g) | 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. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended March 31, 2016, there were no items identified that have been reclassified among components of net assets. |
i) | The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies” |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. Under the Advisory and Administration Agreement, the Manager provides all investment management and administrative services to the Fund. The Manager’s services include 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, fund accounting agent, auditors and distributor. 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 at the annual rate of 0.50% on the Fund’s net assets.
The Manager has contractually undertaken to waive fees and/or reimburse Fund expenses so that total Fund expenses will not exceed 0.84% for a Class A Shares, 1.64% for Class C Shares, 0.96% for Class I Shares and 0.63% for Class Y Shares through September 30, 2017. The Manager may not terminate the arrangement without the approval of the Board of Trustees. For the six months ended September 30, 2016, the Fund incurred management fees of $1,073,347 of which $48,963 was waived.
33 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Under a Compliance Agreement with the Manager, the Manager is compensated by the Fund for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
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 distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors LLC (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 distribution fee at the annual rate of 0.20% of the Fund’s average net assets represented by Class A Shares. For the six months ended September 30, 2016, distribution fees on Class A Shares amounted to $229,490, of which the Distributor retained $8,035.
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. For the six months ended September 30, 2016, these payments amounted to $296,041. 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 September 30, 2016, amounted to $98,680. The total of these payments with respect to Class C Shares amounted to $394,721, of which the Distributor retained $93,070.
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 brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Utah, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2016, total commissions on sales of Class A Shares amounted to $311,705, of which the Distributor received $27,723.
34 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
4. Purchases and Sales of Securities
During the six months ended September 30, 2016, purchases of securities and proceeds from the sales of securities aggregated $63,058,327 and $29,992,536, respectively.
At September 30, 2016, the aggregate tax cost for all securities was $415,077,123. At September 30, 2016, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $24,915,637 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $115,026, for a net unrealized appreciation of $24,800,611.
5. Portfolio Orientation
At least 50% of the Fund’s assets will always consist of obligations of Utah-based issuers. At September 30, 2016, the Fund had 58% of its net assets invested in municipal obligations of issuers within Utah. The Fund is also permitted to invest in tax-free municipal obligations of non-Utah-based issuers that are exempt from regular Federal income taxes and, pursuant to an administrative determination of the Utah State Tax Commission issued under statutory authority, the interest on which is currently exempt from Utah individual income taxes. Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Utah, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Utah and whatever effects these may have upon Utah issuers’ ability to meet their obligations.
6. Trustees’ Fees and Expenses
For the six months ended September 30, 2016 there were 9 Trustees, one of whom is affiliated with the Manager and is not paid any fees. The total amount of Trustees’ service fees (for carrying out their responsibilities) and attendance fees paid during the six months ended September 30, 2016 was $55,931. Attendance fees are paid to those in attendance at regularly scheduled quarterly Board Meetings and meetings of the Independent Trustees held prior to each quarterly Board Meeting, as well as additional meetings (such as Audit, Nominating, Shareholder and special meetings). Trustees are reimbursed for their expenses such as travel, accommodations and meals incurred in connection with attendance at Board Meetings and the Annual Meeting of Shareholders. For the six months ended September 30, 2016, such meeting-related expenses amounted to $8,589.
35 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
7. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2016 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 1,923,748 | $ | 20,509,806 | 3,462,768 | $ | 36,146,607 | ||||||||||
Reinvested distributions | 213,053 | 2,267,712 | 454,744 | 4,748,096 | ||||||||||||
Cost of shares redeemed | (1,262,447 | ) | (13,450,089 | ) | (2,597,503 | ) | (27,064,233 | ) | ||||||||
Net change | 874,354 | 9,327,429 | 1,320,009 | 13,830,470 | ||||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 1,389,724 | 14,807,640 | 1,742,925 | 18,193,813 | ||||||||||||
Reinvested distributions | 51,944 | 552,370 | 126,090 | 1,314,676 | ||||||||||||
Cost of shares redeemed | (891,968 | ) | (9,497,997 | ) | (2,486,917 | ) | (25,912,264 | ) | ||||||||
Net change | 549,700 | 5,862,013 | (617,902 | ) | (6,403,775 | ) | ||||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 2,165,807 | 23,164,145 | 3,037,344 | 31,885,779 | ||||||||||||
Reinvested distributions | 127,516 | 1,364,016 | 232,358 | 2,434,844 | ||||||||||||
Cost of shares redeemed | (873,227 | ) | (9,340,667 | ) | (2,224,581 | ) | (23,258,937 | ) | ||||||||
Net change | 1,420,096 | 15,187,494 | 1,045,121 | 11,061,686 | ||||||||||||
Total transactions in Fund | ||||||||||||||||
shares | 2,844,150 | $ | 30,376,936 | 1,747,228 | $ | 18,488,381 |
8. Securities Traded on a When-Issued Basis
The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
9. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. These distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Utah income taxes. Due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income rates. For certain shareholders some dividend income may, under some circumstances, be subject to the alternative minimum tax.
36 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
The tax character of distributions was as follows:
Year | Year | |||||||
Ended | Ended | |||||||
March 31, 2016 | March 31, 2015 | |||||||
Net tax-exempt income | $ | 10,090,965 | $ | 10,981,022 | ||||
Ordinary Income | 48,071 | 16,940 | ||||||
Capital Gains | 226,111 | 279,359 | ||||||
$ | 10,365,147 | $ | 11,277,321 |
As of March 31, 2016, the components of distributable earnings on a tax basis were:
Undistributed tax-exempt income | $ | 182,571 | ||||||
Accumulated net realized gain | 352,958 | |||||||
Unrealized appreciation | 22,363,346 | |||||||
Other temporary differences | (96,185 | ) | ||||||
$ | 22,802,690 |
The difference between book basis and tax basis unrealized appreciation and undistributed income is due to the timing difference, and other temporary differences, in recognizing dividends paid and market discount.
37 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.56 | $ | 10.50 | $ | 10.10 | $ | 10.37 | $ | 10.27 | $ | 9.74 | $ | 9.80 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.29 | 0.33 | 0.33 | 0.26 | 0.38 | 0.42 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.06 | 0.40 | (0.24 | ) | 0.10 | 0.53 | (0.05 | ) | |||||||||||||||||||
Total from investment operations | 0.20 | 0.35 | 0.73 | 0.09 | 0.36 | 0.91 | 0.37 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.28 | ) | (0.32 | ) | (0.33 | ) | (0.26 | ) | (0.38 | ) | (0.43 | ) | ||||||||||||||
Distributions from capital gains | – | (0.01 | ) | (0.01 | ) | (0.03 | ) | – | – | – | ||||||||||||||||||
Total distributions | (0.13 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | (0.26 | ) | (0.38 | ) | (0.43 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.63 | $ | 10.56 | $ | 10.50 | $ | 10.10 | $ | 10.37 | $ | 10.27 | $ | 9.74 | ||||||||||||||
Total return (not reflecting sales charge) | 1.92 | %(2) | 3.41 | % | 7.34 | % | 0.96 | % | 3.48 | %(2) | 9.49 | % | 3.87 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 231 | $ | 221 | $ | 205 | $ | 204 | $ | 257 | $ | 255 | $ | 212 | ||||||||||||||
Ratio of expenses to average net assets | 0.85 | %(3) | 0.84 | % | 0.84 | % | 0.83 | % | 0.83 | %(3) | 0.83 | % | 0.83 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.53 | %(3) | 2.75 | % | 3.14 | % | 3.33 | % | 3.28 | %(3) | 3.79 | % | 4.31 | % | ||||||||||||||
Portfolio turnover rate | 7 | %(3) | 20 | % | 16 | % | 12 | % | 20 | %(2) | 17 | % | 25 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.87 | %(3) | 0.87 | % | 0.91 | % | 0.91 | %(4) | 0.88 | %(3) | 0.88 | % | 0.87 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.51 | % (3) | 2.72 | % | 3.07 | % | 3.26 | %(4) | 3.23 | %(3) | 3.74 | % | 4.28 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.86% and 3.31%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
38 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30, | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.55 | $ | 10.50 | $ | 10.10 | $ | 10.37 | $ | 10.27 | $ | 9.74 | $ | 9.79 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.09 | 0.20 | 0.24 | 0.25 | 0.19 | 0.30 | 0.34 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.07 | 0.06 | 0.41 | (0.24 | ) | 0.11 | 0.53 | (0.04 | ) | |||||||||||||||||||
Total from investment operations | 0.16 | 0.26 | 0.65 | 0.01 | 0.30 | 0.83 | 0.30 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.20 | ) | (0.24 | ) | (0.25 | ) | (0.20 | ) | (0.30 | ) | (0.35 | ) | ||||||||||||||
Distributions from capital gains | – | (0.01 | ) | (0.01 | ) | (0.03 | ) | – | – | – | ||||||||||||||||||
Total distributions | (0.09 | ) | (0.21 | ) | (0.25 | ) | (0.28 | ) | (0.20 | ) | (0.30 | ) | (0.35 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.62 | $ | 10.55 | $ | 10.50 | $ | 10.10 | $ | 10.37 | $ | 10.27 | $ | 9.74 | ||||||||||||||
Total return (not reflecting CDSC) | 1.52 | %(2) | 2.55 | % | 6.49 | % | 0.15 | % | 2.86 | %(2) | 8.62 | % | 3.15 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 81 | $ | 75 | $ | 81 | $ | 81 | $ | 106 | $ | 96 | $ | 83 | ||||||||||||||
Ratio of expenses to average net assets | 1.66 | %(3) | 1.64 | % | 1.63 | % | 1.63 | % | 1.63 | %(3) | 1.63 | % | 1.63 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.72 | %(3) | 1.95 | % | 2.34 | % | 2.53 | % | 2.47 | %(3) | 2.98 | % | 3.51 | % | ||||||||||||||
Portfolio turnover rate | 7 | % (2) | 20 | % | 16 | % | 12 | % | 20 | %(2) | 17 | % | 25 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.68 | %(3) | 1.67 | % | 1.71 | % | 1.70 | %(4) | 1.67 | %(3) | 1.68 | % | 1.67 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 1.70 | % (3) | 1.92 | % | 2.27 | % | 2.46 | %(4) | 2.42 | %(3) | 2.93 | % | 3.48 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.66% and 2.50%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
39 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30, | |||||||||||||||||||||||
9/30/16(unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.59 | $ | 10.53 | $ | 10.13 | $ | 10.41 | $ | 10.30 | $ | 9.77 | $ | 9.83 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.15 | 0.31 | 0.35 | 0.36 | 0.27 | 0.40 | 0.44 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.06 | 0.06 | 0.40 | (0.26 | ) | 0.11 | 0.53 | (0.05 | ) | |||||||||||||||||||
Total from investment operations | 0.21 | 0.37 | 0.75 | 0.10 | 0.38 | 0.93 | 0.39 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.30 | ) | (0.34 | ) | (0.35 | ) | (0.27 | ) | (0.40 | ) | (0.45 | ) | ||||||||||||||
Distributions from capital gains | – | (0.01 | ) | (0.01 | ) | (0.03 | ) | – | – | – | ||||||||||||||||||
Total distributions | (0.14 | ) | (0.31 | ) | (0.35 | ) | (0.38 | ) | (0.27 | ) | (0.40 | ) | (0.45 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.66 | $ | 10.59 | $ | 10.53 | $ | 10.13 | $ | 10.41 | $ | 10.30 | $ | 9.77 | ||||||||||||||
Total return | 2.03 | %(2) | 3.61 | % | 7.54 | % | 1.07 | % | 3.83 | %(2) | 9.69 | % | 4.08 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 128 | $ | 112 | $ | 100 | $ | 71 | $ | 88 | $ | 76 | $ | 56 | ||||||||||||||
Ratio of expenses to average net assets | 0.64 | %(3) | 0.64 | % | 0.63 | % | 0.63 | % | 0.63 | %(3) | 0.63 | % | 0.63 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.74 | %(3) | 2.95 | % | 3.33 | % | 3.53 | % | 3.47 | %(3) | 3.98 | % | 4.51 | % | ||||||||||||||
Portfolio turnover rate | 7 | %(2) | 20 | % | 16 | % | 12 | % | 20 | %(2) | 17 | % | 25 | % | ||||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.67 | % | 0.67 | % | 0.70 | % | 0.70 | %(4) | 0.68 | %(3) | 0.68 | % | 0.67 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.71 | %(3) | 2.92 | % | 3.26 | % | 3.46 | %(4) | 3.43 | %(3) | 3.93 | % | 4.47 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Fund into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.66% and 3.50%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
40 | Aquila Tax-Free Fund For Utah
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution (“12b-1”) and/or service fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2016 and held for the six months ended September 30, 2016.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2016
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | 1.92% | $1,000.00 | $1,019.20 | $4.30 |
Class C | 1.52% | $1,000.00 | $1,015.20 | $8.39 |
Class Y | 2.03% | $1,000.00 | $1,020.30 | $3.24 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized; as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.85%, 1.66% and 0.64% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
41 | Aquila Tax-Free Fund For Utah
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2016
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,020.81 | $4.31 |
Class C | 5.00% | $1,000.00 | $1,016.75 | $8.39 |
Class Y | 5.00% | $1,000.00 | $1,021.86 | $3.24 |
(1) | Expenses are equal to the annualized expense ratio of 0.85%, 1.66% and 0.64% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
42 | Aquila Tax-Free Fund For Utah
Information Available (unaudited)
Much of the information that the funds in the Aquila Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent your Fund’s entire list of portfolio securities twice a year in the semi-annual and annual reports you receive. Additionally, under Fund policies, the Manager publicly discloses the complete schedule of the Fund’s portfolio holdings, as of each calendar quarter, generally by the 15th day after the end of each calendar quarter. Such information remains accessible until the next schedule is made publicly available. You may obtain a copy of the Fund’s portfolio holdings schedule for the most recently completed period by visiting the Fund’s website at www.aquilafunds.com. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2016, the Fund did not vote any proxies. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at www.sec.gov.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the Internal Revenue Code. No action on the part of shareholders is required.
For the fiscal year ended March 31, 2016, $10,090,965 of dividends paid by Aquila Tax-Free Fund For Utah, constituting 97.4% of total dividends paid, were exempt-interest dividends; $226,111 of dividends paid by the Fund constituting 2.2% of total dividends paid were capital gains distributions; and the balance was ordinary income.
Prior to February 15, 2017, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2016 calendar year.
43 | Aquila Tax-Free Fund For Utah
Additional Information (unaudited)
Renewal of the Advisory and Administration Agreement
Aquila Investment Management LLC (the “Manager”) serves as the investment adviser to the Fund pursuant to an Advisory and Administration Agreement (the “Advisory Agreement”). In order for the Manager to remain the investment adviser of the Fund, the Trustees of the Fund must determine annually whether to renew the Advisory Agreement for the Fund.
In considering whether to approve the renewal of the Advisory Agreement, the Trustees requested and obtained such information as they deemed reasonably necessary. Contract review materials were provided to the Trustees in August, 2016. The independent Trustees met telephonically on August 30, 2016 and in person on September 18, 2016 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager. They also considered information presented in a report prepared by an independent consultant with respect to the Fund’s fees, expenses and investment performance, which included comparisons of the Fund’s investment performance against peers and the Fund’s benchmark and comparisons of the advisory fee payable under the Advisory Agreement against the advisory fees paid by the Fund’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Fund provided to the Trustees at each regularly scheduled meeting.
At the meeting held on September 18, 2016, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Fund, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2017. In considering the renewal of the Advisory Agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the renewal of the Advisory Agreement.
The nature, extent, and quality of the services provided by the Manager
The Trustees considered the nature, extent and quality of the services that had been provided by the Manager to the Fund, taking into account the investment objectives and strategies of the Fund. The Trustees reviewed the terms of the Advisory Agreement.
The Trustees reviewed the Manager’s investment approach for the Fund and its research process. The Trustees considered that the Manager had provided all advisory and administrative services to the Fund that the Trustees deemed necessary or appropriate, including the specific services that the Trustees have determined are required for the Fund, given that it seeks to provide shareholders with as high a level of current income exempt from Utah state and regular Federal income taxes as is consistent with preservation of capital. The Trustees considered the personnel of the Manager who provide investment management services to the Fund. The Manager has employed Mr. James Thompson and Mr. Todd Curtis as co-portfolio managers for the Fund and has established facilities and capabilities for credit analysis of the Fund’s portfolio securities. The Trustees noted the extensive experience of the co-portfolio managers. They considered that Mr. Thompson is based in Salt Lake City, Utah and that he has a comprehensive understanding regarding the economy of the State of Utah and the securities in which the Fund invests, including non-rated securities and those securities with less than the highest ratings from the rating agencies. The Trustees also noted that the Fund did not own any Puerto Rico municipal bonds during the review period.
44 | Aquila Tax-Free Fund For Utah
The Trustees noted that the Manager has additionally provided all administrative services to the Fund and provided the Fund with personnel (including Fund officers) and other resources that are necessary for the Fund’s business management and operations.
The Trustees considered the nature and extent of the Manager’s supervision of third-party service providers, including the Fund’s fund accountant, shareholder servicing agent and custodian.
Based on these considerations, the Trustees concluded that the nature, extent and quality of services that had been provided by the Manager to the Fund were satisfactory and consistent with the terms of the Advisory Agreement.
The investment performance of the Fund
The Trustees reviewed the Fund’s performance (Class A shares) and compared its performance to the performance of:
• | the funds in the Fund’s peer group (the “Peer Group”), as selected by the independent consultant (four single-state intermediate and single-state long municipal bond funds, as classified by Morningstar, that are similar to the Fund in size and that charge a front-end sales charge); |
• | the funds in the Fund’s product category for performance (the “ProductCategory for Performance”) (all funds in the Peer Group and, without duplication, all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. |
The Trustees considered that the materials included in the Consultant’s Report indicated that the Fund’s average annual total return was higher than the average annual total return of the funds in the Peer Group and the funds in the Product Category for Performance, in each case for the one, three, five and ten--year periods ended June 30, 2016. They also considered that the Fund’s average annual total return was higher than the average annual total return of the benchmark index for each of those periods. The Trustees further considered that, as reflected in the Consultant’s Report, the Fund delivered above-average results on a risk-adjusted basis for the three and five-year periods ended June 30, 2016 (as evidenced by its Sharpe ratio) when compared to the funds in the Product Category for Performance. The Trustees noted that the Fund was the only Utah state-specific tax-free municipal bond fund. The Trustees also noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees or expenses.
The Trustees considered the Fund’s investment performance to be consistent with the investment objectives of the Fund. Evaluation of the investment performance of the Fund indicated to the Trustees that renewal of the Advisory Agreement would be appropriate.
45 | Aquila Tax-Free Fund For Utah
Advisory Fees and Fund Expenses
The Trustees reviewed the Fund’s advisory fees and expenses and compared them to the advisory fee and expense data for:
• | the funds in the Peer Group (as defined above); and |
• | the funds in the product category for expenses (the “Product Category for Expenses”) (Morningstar Single-State Intermediate Municipal Bond Funds and Morningstar Single State Long Municipal Bond Funds from states within which 1-3 mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Fund’s contractual advisory fee was less than the average contractual advisory fee, and equal to the median contractual advisory fee, of the funds in the Peer Group (at the Fund’s current asset level). They also considered that the Fund’s contractual advisory fee was lower than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses at the Fund’s current asset level and up to $1 billion in assets.
The Trustees noted that the Fund’s actual management fee (after giving effect to the fee waiver) was higher than the average actual management fee of the funds in both the Product Category for Expenses and the Peer Group (after giving effect to fee waivers in effect for those funds). They noted, however, that the Fund’s actual expenses (for Class A shares), after giving effect to fee waivers and expense reimbursements, were lower than the average actual expenses of the funds in the Product Category for Expenses and only 0.002% higher than the average actual expenses of the funds in the Peer Group (after giving effect to fee waivers and expense reimbursements in effect for those funds).
The Trustees reviewed management fees charged by the Manager to its other clients. It was noted that the Manager does not have any other clients except for other funds in the Aquila Group of Funds. The Trustees noted that, in most instances, the fee rates for those clients were comparable to the fees paid to the Manager with respect to the Fund. In evaluating the fees associated with the other funds, the Trustees took into account the respective demands, resources and complexity associated with the Fund and those funds.
The Trustees considered that the Manager was currently waiving a portion of its fees and had been since the Fund’s inception. Additionally, it was noted that the Manager had indicated that it intended to continue waiving fees as necessary for the Fund to remain competitive. The Trustees concluded that the advisory fee was reasonable in relation to the nature and quality of the services provided by the Manager to the Fund.
Profitability
The Trustees received materials from the Manager and the independent consultant related to profitability. The Manager provided information which showed the profitability to the Manager of its services to the Fund, as well as the profitability of Aquila Distributors LLC of distribution services provided to the Fund. The independent consultant provided publicly available data regarding the profitability of other asset managers in comparison to the overall profitability of the Manager.
46 | Aquila Tax-Free Fund For Utah
The Trustees considered the information provided by the Manager regarding the profitability of the Manager with respect to the advisory services provided by the Manager to the Fund, including the methodology used by the Manager in allocating certain of its costs to the management of the Fund. The Trustees also considered information regarding the profitability of the Manager provided to the Trustees by the independent consultant. The Trustees concluded that profitability to the Manager with respect to the advisory services provided to the Fund did not argue against approval of the fees to be paid under the Advisory Agreement.
The extent to which economies of scale would be realized as the Fund grows
The Trustees considered the extent to which the Manager may realize economies of scale or other efficiencies in managing the Fund. The Trustees noted that the Manager continued to waive a portion of its fees and had been since the Fund’s inception. The Trustees noted that the Manager’s profitability also may be an indicator of the availability of any economies of scale. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Fund.
Benefits derived or to be derived by the Manager and its affiliate from the relationship with the Fund
The Trustees observed that, as is generally true of most fund complexes, the Manager and its affiliates, by providing services to a number of funds including the Fund, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that produces efficiencies and increased profitability for the Manager and its affiliates, it also makes their services available to the Fund at favorable levels of quality and cost which are more advantageous to the Fund than would otherwise have been possible.
47 | Aquila Tax-Free Fund For Utah
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Board of Trustees
John C. Lucking, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
Grady Gammage, Jr.
Glenn P. O’Flaherty
James R. Ramsey
Laureen L. White
Officers
Diana P. Herrmann, President
Charles E. Childs, III, Executive Vice President
and Secretary
Marie E. Aro, Senior Vice President
Paul G. O’Brien, Senior Vice President
Todd W. Curtis, Senior Vice President
and Co-Portfolio Manager
James T. Thompson, Vice President
and Co-Portfolio Manager
M. Kayleen Willis, Vice President
Randall S. Fillmore, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer
and Treasurer
Distributor
AQUILA DISTRIBUTORS LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Transfer and Shareholder Servicing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
THE BANK OF NEW YORK MELLON
225 Liberty Street
New York, New York 10286
Further information is contained in the Prospectus,
which must precede or accompany this report.
![]() | ||||||||||||||||||||||||||
Semi-Annual Report September 30, 2016 | ||||||||||||||||||||||||||
![]() |
Please plan to join us for your 2017 shareholder meeting. Details will be available on our website as the date approaches: www.aquilafunds.com or through your financial professional. |
![]() | Aquila Tax-Free Trust of Arizona “The Role of Trustees” Serving Arizona investors since 1986 | ![]() |
November, 2016
Dear Fellow Shareholder:
As you may be aware, the Investment Company Act of 1940 (the “1940 Act”) is the primary federal law governing the structure and operation of mutual funds. It is enforced and regulated by the U.S. Securities and Exchange Commission (the “SEC”) and defines, among other things, certain responsibilities of Trustees.
Under applicable state law, Trustees are charged, as their primary responsibility, with safeguarding the interests of shareholders. As such, your Trustees seek to act in your best interests, putting your interests ahead of their own interests and those of anyone else, in overseeing the policies and procedures of Aquila Tax-Free Trust of Arizona (your “Fund”), as well as the services provided by your Fund’s key service providers.
Your Trustees’ key role is to be alert and sensitive to any conflicts of interest. By law, a substantial number of the Trustees must be “independent,” meaning that they have no affiliation with any sponsoring or support organization of the Fund. This requirement is in place in an effort to enhance Trustee impartiality. In order to ensure that your Board of Trustees continually maintains adequate independence, your Trustees complete a questionnaire on an annual basis which is, in turn, reviewed by your Fund’s legal counsel. It is also worthy to note that, at all times, a significant percentage of the Trustees must have been elected by you, the shareholders.
The 1940 Act requires your Board of Trustees to review certain of your Fund’s contracts on at least an annual basis, at which time, the majority of your Trustees, including a majority of the independent Trustees, must be present in person. Moreover, in their review of the contract with your Fund’s adviser, the Trustees seek to consider certain factors and their conclusions are disclosed to you in your Fund’s next annual or semi-annual report (as is the case with this semi-annual report). Your Trustees’ other key responsibilities include oversight of your Fund’s compliance policies and procedures, valuation and risk management.
Your Board of Trustees oversees the business of your Fund through regular quarterly and ad hoc board meetings, committee meetings (which focus on specific subject matters) and frequent communications. These meetings allow Trustees to be brought up-to-date on the affairs of your Fund, ask questions, and deliberate and vote on issues important to your Fund and its shareholders.
Selection and nomination of independent Trustees is by the existing independent Trustees. As detailed in the Nominating Committee Charter which is available on your Fund’s website (www.aquilafunds.com), your Board of Trustees seeks to develop and maintain a board of high quality, independence and integrity to best serve your interests. The Trustees associated with the Aquila Group of Funds are additionally selected on the basis of being accomplished individuals of diverse backgrounds from various parts of the United States, including Arizona. Through this diversity, we strive to provide your Fund with a broad breadth and balance of knowledge and experience. Biographical and other information on your Board of Trustees is available on our website and, by law, is included in your Fund’s annual report and Statement of Additional Information.
NOT A PART OF THE SEMI- ANNUAL REPORT
Although, not required, Trustees in the Aquila Group of Funds self-impose some additional criteria.
• | In addition to overseeing your Fund, all Trustees are also fellow shareholders. While Trustees, like any investor, must consider, among other things, their own personal investment objectives (including tax benefits afforded the investment by their state of residence) when deciding upon the size of their investment in Aquila Tax-Free Trust of Arizona, we believe it is important that each Trustee has “some skin the game.” |
• | Consideration is given to including local residents as Trustees. In this way, the Fund can benefit from their hands-on insight and knowledge of their State. |
In short, your Board of Trustees are your “watchdogs,” looking over operations of Aquila Tax-Free Trust of Arizona.
It has been our experience that those who have undertaken to serve as Trustees diligently devote their energies, talents and experience to furthering the interests of you, our shareholders.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsige.jpg)
![](https://capedge.com/proxy/N-CSRS/0000784056-17-000002/dsig2e.jpg)
Diana P. Herrmann, Vice Chair and President
Any information in this Shareholder Letter regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes. Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
NOT A PART OF THE SEMI- ANNUAL REPORT
Mutual fund investing involves risk and loss of principal is possible.
The market prices of the Fund’s securities may rise or decline in value due to general market conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. When market prices fall, the value of your investment may go down. In the past several years, financial markets have experienced increased volatility, depressed valuations, decreased liquidity and heightened uncertainty. These conditions may continue, recur, worsen or spread.
The value of your investment may go down when interest rates rise. A rise in interest rates tends to have a greater impact on the prices of longer term securities. Conversely, when interest rates fall, the value of your investment may rise. Interest rates in the U.S. recently have been historically low, so the Fund faces a heightened risk that interest rates may rise. A general rise in interest rates may cause investors to move out of fixed income securities and could also result in increased redemptions from the Fund.
Investments in the Fund are subject to possible loss due to the financial failure of the issuers of underlying securities and their inability to meet their debt obligations.
The value of municipal securities can be adversely affected by changes in the financial condition of one or more individual municipal issuers or insurers of municipal issuers, regulatory developments, legislative actions, and by uncertainties and public perceptions concerning these and other factors. The Fund may be affected significantly by adverse economic, political or other events affecting state and other municipal issuers in which it invests, and may be more volatile than a more geographically diverse fund.
If interest rates fall, an issuer may exercise its right to prepay its securities, and the Fund could be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security.
A portion of income may be subject to local, state, Federal and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax.
These risks may result in share price volatility.
Past performance is no guarantee of future results, and there is no guarantee that any market forecasts discussed will be realized.
Any information in this Semi-Annual Report regarding market or economic trends or the factors influencing the Fund’s historical or future performance are statements of opinion as of the date of this report. These statements should not be relied upon for any other purposes.
NOT A PART OF THE SEMI- ANNUAL REPORT
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE SCHEDULE OF INVESTMENTS(continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (18.8%) | and Fitch | Value | ||||||
City (7.1%) | |||||||||
Buckeye Jackrabbit Trail Sanitary Sewer | |||||||||
Improvement District | |||||||||
$ | 1,320,000 | 6.250%, 01/01/29 | NR/A-/NR | $ | 1,519,280 | ||||
Casa Grande, Arizona | |||||||||
800,000 | 4.000%, 08/01/34 | NR/AA-/AA | 898,728 | ||||||
Chandler, Arizona | |||||||||
1,500,000 | 4.000%, 07/01/25 | Aaa/AAA/AAA | 1,756,275 | ||||||
1,000,000 | 5.000%, 07/01/26 | Aaa/AAA/AAA | 1,258,970 | ||||||
Flagstaff, Arizona | |||||||||
200,000 | 4.000%, 07/01/35 | Aa2/AA/NR | 222,490 | ||||||
Flagstaff Improvement District | |||||||||
(Aspen Place Sawmill) | |||||||||
360,000 | 5.000%, 01/01/32 | Aa3/NR/NR | 360,594 | ||||||
Gilbert Improvement District No. 19 | |||||||||
25,000 | 5.200%, 01/01/23 | Aa1/A+/NR | 25,063 | ||||||
Gilbert Improvement District No. 20 | |||||||||
635,000 | 5.100%, 01/01/29 | Aa1/A+/NR | 697,541 | ||||||
Goodyear, Arizona Refunding | |||||||||
1,000,000 | 5.000%, 07/01/29 | Aa2/AA/NR | 1,102,070 | ||||||
Goodyear McDowell Road Commercial | |||||||||
Corridor Improvement District | |||||||||
3,000,000 | 5.250%, 01/01/32 AMBAC Insured | A1/A/NR | 3,029,490 | ||||||
Phoenix, Arizona | |||||||||
1,240,000 | 6.250%, 07/01/17 | Aa1/AA+/NR | 1,289,860 | ||||||
Queen Creek Improvement District | |||||||||
No. 1 | |||||||||
1,280,000 | 5.000%, 01/01/26 | A3/A-/A- | 1,285,939 | ||||||
1,280,000 | 5.000%, 01/01/32 | A3/A-/A- | 1,284,531 | ||||||
Scottsdale, Arizona | |||||||||
200,000 | 4.000%, 07/01/28 | Aaa/AAA/AAA | 233,316 | ||||||
Tempe, Arizona | |||||||||
2,245,000 | 4.000%, 07/01/22 | Aa1/AAA/AAA | 2,475,000 | ||||||
1,000,000 | 4.000%, 07/01/24 | Aa1/AAA/AAA | 1,187,630 | ||||||
1,000,000 | 4.000%, 07/01/29 | Aa1/AAA/AAA | 1,158,890 | ||||||
Tempe Improvement District | |||||||||
(Pier Town Lake) | |||||||||
2,000,000 | 5.000%, 01/01/29 | Aa3/NR/NR | 2,093,900 |
1 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | ||||||
City (continued) | |||||||||
Tubac Fire District | |||||||||
$ | 760,000 | 5.500%, 07/01/28 AGC Insured | A1/NR/NR | $ | 846,252 | ||||
Total City | 22,725,819 | ||||||||
County (0.4%) | |||||||||
Yuma Co. Free Library District | |||||||||
1,000,000 | 4.000%, 07/01/29 | Aa3/NR/AA+ | 1,126,270 | ||||||
School District (11.3%) | |||||||||
Buckeye Union High School District | |||||||||
No. 201 | |||||||||
1,000,000 | 5.000%, 07/01/33 AGMC Insured | NR/AA/NR | 1,188,220 | ||||||
Gila Co. Unified School District | |||||||||
No. 10 (Payson) | |||||||||
350,000 | 5.000%, 07/01/26 | Aa3/NR/NR | 432,555 | ||||||
1,000,000 | 5.000%, 07/01/28 | Aa3/NR/NR | 1,221,290 | ||||||
Glendale Union High School District | |||||||||
No. 205 | |||||||||
525,000 | 5.000%, 07/01/27 BAMAC Insured | NR/AA/NR | 630,047 | ||||||
980,000 | 4.000%, 07/01/32 BAMAC Insured | NR/AA/NR | 1,093,768 | ||||||
Maricopa Co. Elementary School | |||||||||
District No. 3 (Tempe) | |||||||||
250,000 | 4.000%, 07/01/25 | Aa2/NR/NR | 295,838 | ||||||
Maricopa Co. Elementary School | |||||||||
District No. 8 (Osborn) | |||||||||
920,000 | 6.250%, 07/01/22 | NR/A/NR | 950,314 | ||||||
Maricopa Co. Elementary School | |||||||||
District No. 28 (Kyrene Elementary) | |||||||||
250,000 | 5.500%, 07/01/30 | Aa1/AA/NR | 312,045 | ||||||
350,000 | 5.000%, 07/01/34 | Aa1/AA/NR | 419,205 | ||||||
Maricopa Co. High School District | |||||||||
No. 210 (Phoenix) | |||||||||
500,000 | 4.000%, 07/01/26 | Aa2/AA/NR | 582,415 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 11 (Peoria) | |||||||||
1,500,000 | 4.000%, 07/01/25 | A2/AA-/NR | 1,696,620 | ||||||
2,000,000 | 4.000%, 07/01/35 | NR/AA-/NR | 2,239,480 | ||||||
675,000 | 4.500%, 07/01/33 AGMC Insured | A2/AA/NR | 786,706 |
2 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | ||||||
School District (continued) | |||||||||
Maricopa Co. Unified School District | |||||||||
No. 24 (Gila Bend) | |||||||||
$ | 305,000 | 5.500%, 07/01/22 | NR/NR/NR* | $ | 309,075 | ||||
Maricopa Co. Unified School District | |||||||||
No. 48 (Scottsdale) | |||||||||
1,500,000 | 4.750%, 07/01/30 | Aa1/AA/NR | 1,716,255 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 60 (Higley) | |||||||||
1,000,000 | 5.000%, 07/01/24 AGMC Insured | A1/AA/NR | 1,244,060 | ||||||
1,615,000 | 5.000%, 07/01/29 | A1/A+/NR | 1,942,764 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 69 (Paradise Valley) | |||||||||
1,000,000 | 4.500%, 07/01/30 | Aa2/NR/AA | 1,165,080 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 80 (Chandler) | |||||||||
525,000 | 4.000%, 07/01/33 | Aa1/AA/NR | 591,712 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 89 (Dysart) | |||||||||
2,185,000 | 5.500%, 07/01/22 NPFG/FGIC Insured | A3/AA-/NR | 2,684,076 | ||||||
500,000 | 4.000%, 07/01/28 | NR/A+/AA- | 565,610 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 90 (Saddle Mountain) | |||||||||
1,300,000 | 5.125%, 07/01/25 AGMC Insured | A2/AA/NR | 1,499,303 | ||||||
Mohave Co. Unified School District | |||||||||
No. 20 (Kingman) | |||||||||
1,000,000 | 5.000%, 07/01/26 BAMAC Insured | A2/AA/NR | 1,236,310 | ||||||
Navajo Co. Unified School District | |||||||||
No. 2 (Joseph City) | |||||||||
1,250,000 | 5.000%, 07/01/18 | A2/NR/NR | 1,310,312 | ||||||
Pima Co. Unified School District | |||||||||
No. 6 (Marana) | |||||||||
1,250,000 | 5.000%, 07/01/25 | NR/A+/NR | 1,446,900 | ||||||
950,000 | 5.250%, 07/01/25 AGMC Insured | NR/AA/NR | 1,140,541 | ||||||
1,000,000 | 4.250%, 07/01/32 MAC Insured | NR/AA/NR | 1,136,580 | ||||||
Pima Co. Unified School District | |||||||||
No. 10 (Amphitheater) | |||||||||
700,000 | 5.000%, 07/01/27 | Aa2/A+/NR | 807,835 |
3 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | ||||||
School District (continued) | |||||||||
Pima Co. Unified School District | |||||||||
No. 12 (Sunnyside) | |||||||||
$ | 1,050,000 | 4.000%, 07/01/28 BAMAC Insured | NR/AA/NR | $ | 1,167,747 | ||||
Pinal Co. Elementary School District | |||||||||
No. 4 (Casa Grande) | |||||||||
925,000 | 4.250%, 07/01/18 AGMC Insured | A1/AA/NR | 975,690 | ||||||
Pinal Co. Unified School District | |||||||||
No. 21 (Coolidge) | |||||||||
500,000 | 4.000%, 07/01/28 AGMC Insured | NR/AA/NR | 578,495 | ||||||
Tempe High School District No. 213 | |||||||||
650,000 | 4.000%, 07/01/32 | Aa2/AA/NR | 720,310 | ||||||
Western Maricopa Education Center | |||||||||
District No. 402 | |||||||||
1,200,000 | 4.000%, 07/01/28 | NR/AA-/NR | 1,348,968 | ||||||
Yavapai Co. Elementary School District | |||||||||
No. 6 (Cottonwood-Oak Creek) | |||||||||
720,000 | 5.000%, 07/01/34 BAMAC Insured | A2/AA/NR | 848,729 | ||||||
Total School District | 36,284,855 | ||||||||
Total General Obligation Bonds | 60,136,944 | ||||||||
Revenue Bonds (63.0%) | |||||||||
Airport (3.3%) | |||||||||
Phoenix Civic Improvement Corp. | |||||||||
Airport Bonds | |||||||||
1,000,000 | 5.250%, 07/01/18 AMT | Aa3/AA-/NR | 1,073,430 | ||||||
1,000,000 | 5.250%, 07/01/19 AMT | Aa3/AA-/NR | 1,070,010 | ||||||
2,700,000 | 5.000%, 07/01/32 AMT | Aa3/AA-/NR | 3,148,929 | ||||||
1,000,000 | 5.250%, 07/01/33 | A1/A+/NR | 1,135,440 | ||||||
1,200,000 | 5.000%, 07/01/33 | Aa3/AA-/NR | 1,275,852 | ||||||
1,250,000 | 5.000%, 07/01/34 | A1/A+/NR | 1,500,425 | ||||||
1,000,000 | 5.000%, 07/01/45 | A1/A+/NR | 1,180,500 | ||||||
Total Airport | 10,384,586 | ||||||||
Charter Schools (0.3%) | |||||||||
Phoenix Industrial Development Authority | |||||||||
(Great Hearts Academies Project) | |||||||||
500,000 | 5.000%, 07/01/41 | NR/BBB-/NR | 568,930 |
4 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | �� | and Fitch | Value | |||||
Charter Schools (continued) | |||||||||
Phoenix Industrial Development Authority | |||||||||
(Villa Montessori Inc. Project) | |||||||||
$ | 415,000 | 5.000%, 07/01/35 | NR/BBB-/NR | $ | 452,682 | ||||
Total Charter Schools | 1,021,612 | ||||||||
Excise Tax (12.1%) | |||||||||
Buckeye Excise Tax | |||||||||
400,000 | 4.000%, 07/01/36 | NR/AA-/AA- | 434,960 | ||||||
1,000,000 | 5.000%, 07/01/43 | NR/AA-/AA- | 1,161,040 | ||||||
Casa Grande Excise Tax | |||||||||
1,435,000 | 5.000%, 04/01/28 | NR/AA/AA | 1,573,521 | ||||||
Cottonwood Pledged Revenue | |||||||||
Obligations | |||||||||
500,000 | 4.000%, 07/01/27 BAMAC Insured | NR/AA/NR | 587,595 | ||||||
500,000 | 5.000%, 07/01/30 AGMC Insured | NR/AA/NR | 615,650 | ||||||
El Mirage Pledged Excise Tax | |||||||||
500,000 | 5.000%, 07/01/30 | A2/AA-/NR | 565,920 | ||||||
Flagstaff Pledged Revenue | |||||||||
200,000 | 4.000%, 07/01/31 | NR/AA-/NR | 224,864 | ||||||
Gilbert Pledged Revenue Obligations | |||||||||
450,000 | 4.000%, 07/01/35 | Aa2/AA+/AA+ | 491,954 | ||||||
Gilbert Public Facilities Municipal | |||||||||
Property Corp. | |||||||||
850,000 | 5.000%, 07/01/23 | Aa1/AA+/NR | 942,837 | ||||||
1,250,000 | 5.000%, 07/01/24 | Aa1/AA+/NR | 1,386,175 | ||||||
Glendale Senior Excise Tax | |||||||||
1,000,000 | 5.000%, 07/01/32 | A2/AA+/NR | 1,220,680 | ||||||
Goodyear Public Improvement Corp. | |||||||||
1,500,000 | 5.000%, 07/01/26 | Aa3/AA-/NR | 1,781,265 | ||||||
1,310,000 | 6.000%, 07/01/31 | Aa3/AA-/NR | 1,421,900 | ||||||
Graham Co. Jail District Revenue | |||||||||
Pledged Obligation | |||||||||
1,000,000 | 5.000%, 07/01/35 | NR/A-/NR | 1,131,340 | ||||||
Marana Pledged Excise Tax | |||||||||
275,000 | 4.000%, 07/01/30 | NR/AA/NR | 300,251 | ||||||
1,400,000 | 5.000%, 07/01/33 | NR/AA/NR | 1,676,192 | ||||||
Page Pledged Revenue Refunding | |||||||||
1,080,000 | 5.000%, 07/01/25 | NR/AA-/NR | 1,255,489 |
5 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Excise Tax (continued) | |||||||||
Phoenix Civic Improvement Corp. | |||||||||
(Civic Plaza) | |||||||||
$ | 2,000,000 | 5.500%, 07/01/27 BHAC/FGIC Insured | Aa1/AA+/NR | $ | 2,652,920 | ||||
2,000,000 | 5.500%, 07/01/30 BHAC/FGIC Insured | Aa1/AA+/NR | 2,733,160 | ||||||
1,000,000 | 5.500%, 07/01/23 NPFG/FGIC Insured | Aa2/AA/NR | 1,235,220 | ||||||
2,300,000 | 5.500%, 07/01/33 NPFG/FGIC Insured | Aa2/AA/NR | 3,189,065 | ||||||
Phoenix Civic Improvement Corp. | |||||||||
Transit Excise Tax (Light Rail) | |||||||||
2,000,000 | 4.000%, 07/01/20 | Aa2/AA/NR | 2,218,080 | ||||||
Pinal Co. Revenue Obligations Refunding | |||||||||
1,755,000 | 4.000%, 08/01/17 | NR/AA/NR | 1,800,911 | ||||||
1,500,000 | 5.000%, 08/01/33 | NR/AA-/AA | 1,786,005 | ||||||
Queen Creek Excise Tax & State | |||||||||
Shared Revenue | |||||||||
1,250,000 | 5.000%, 08/01/31 | NR/AA/AA | 1,547,650 | ||||||
1,000,000 | 5.000%, 08/01/32 | NR/AA/AA | 1,233,170 | ||||||
Scottsdale Municipal Property Corp. | |||||||||
1,500,000 | 5.000%, 07/01/34 | Aaa1/AAA/AAA | 1,824,225 | ||||||
Show Low Improvement District No. 6 | |||||||||
250,000 | 6.000%, 01/01/18 ACA Insured | NR/NR/NR* | 250,900 | ||||||
Tempe Excise Tax | |||||||||
245,000 | 5.000%, 07/01/30 | Aa2/AAA/NR | 308,259 | ||||||
1,000,000 | 5.000%, 07/01/33 | Aa2/AAA/NR | 1,064,470 | ||||||
Total Excise Tax | 38,615,668 | ||||||||
Higher Education (8.4%) | |||||||||
Arizona Board of Regents - Arizona State | |||||||||
University System | |||||||||
300,000 | 5.000%, 07/01/28 | Aa3/AA/NR | 377,298 | ||||||
300,000 | 5.000%, 07/01/29 | Aa3/AA/NR | 375,096 | ||||||
200,000 | 5.000%, 07/01/30 | Aa3/AA/NR | 248,788 | ||||||
480,000 | 5.000%, 07/01/31 | Aa3/AA/NR | 592,315 | ||||||
1,000,000 | 5.000%, 07/01/32 | Aa3/AA/NR | 1,179,690 | ||||||
1,000,000 | 5.000%, 07/01/32 | Aa3/AA/NR | 1,179,690 | ||||||
1,000,000 | 5.000%, 07/01/38 | Aa3/AA/NR | 1,216,810 | ||||||
200,000 | 5.000%, 07/01/41 | Aa3/AA/NR | 239,720 |
6 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Arizona Board of Regents - | |||||||||
Northern Arizona University System | |||||||||
$ | 575,000 | 5.000%, 06/01/32 | A1/A+/NR | $ | 693,697 | ||||
250,000 | 5.000%, 06/01/38 | A1/A+/NR | 303,312 | ||||||
1,000,000 | 5.000%, 06/01/31 BAMAC Insured | A1/AA/NR | 1,205,560 | ||||||
1,000,000 | 5.000%, 06/01/36 BAMAC Insured | A1/AA/NR | 1,181,510 | ||||||
1,115,000 | 5.000%, 06/01/22 NPFG/FGIC Insured | A1/AA-/NR | 1,143,533 | ||||||
Arizona Board of Regents - | |||||||||
University of Arizona System Speed | |||||||||
Stimulus Plan for Economic & | |||||||||
Educational Development | |||||||||
500,000 | 5.000%, 08/01/27 | Aa3/A+/NR | 621,605 | ||||||
1,500,000 | 5.000%, 08/01/34 | Aa3/A+/NR | 1,796,685 | ||||||
Arizona Board of Regents | |||||||||
(University of Arizona System) | |||||||||
400,000 | 5.000%, 06/01/29 | Aa2/AA-/NR | 487,632 | ||||||
460,000 | 5.000%, 06/01/31 | Aa2/AA-/NR | 548,076 | ||||||
1,215,000 | 5.000%, 06/01/33 | Aa2/AA-/NR | 1,515,445 | ||||||
2,000,000 | 5.000%, 06/01/38 | Aa2/AA-/NR | 2,459,280 | ||||||
Arizona State University Speed Stimulus | |||||||||
Plan for Economic & Educational | |||||||||
Development | |||||||||
625,000 | 5.000%, 08/01/34 | A1/AA-/NR | 733,431 | ||||||
Cochise Co. Community College | |||||||||
District | |||||||||
630,000 | 5.000%, 07/01/31 BAMAC Insured | A2/AA/NR | 751,836 | ||||||
Glendale Industrial Development | |||||||||
Authority (Midwestern University) | |||||||||
600,000 | 5.000%, 05/15/35 | NR/A/A+ | 667,716 | ||||||
McAllister Academic Village (Arizona | |||||||||
State University Hassayampa) | |||||||||
500,000 | 5.000%, 07/01/38 | A1/AA-/NR | 604,075 | ||||||
Northern Arizona University Speed | |||||||||
Stimulus Plan for Economic & | |||||||||
Educational Development | |||||||||
1,445,000 | 5.000%, 08/01/38 | A2/A/NR | 1,681,070 | ||||||
Phoenix Industrial Development Authority | |||||||||
(Eastern Kentucky University Project) | |||||||||
500,000 | 5.000%, 10/01/36 | A2/A-/NR | 585,290 |
7 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Phoenix Industrial Development Authority | |||||||||
(Rowan University Project) | |||||||||
$ | 2,000,000 | 5.250%, 06/01/34 | A3/A/NR | $ | 2,348,240 | ||||
Yavapai Co. Community College District | |||||||||
1,000,000 | 4.875%, 07/01/25 AGMC Insured | A1/AA/NR | 1,141,990 | ||||||
Yuma/ La Paz Counties Community | |||||||||
College District (Arizona Western | |||||||||
College), Refunding | |||||||||
1,000,000 | 4.000%, 07/01/28 2014A | Aa3/A+/NR | 1,119,110 | ||||||
Total Higher Education | 26,998,500 | ||||||||
Hospital (11.8%) | |||||||||
Arizona Health Facilities Authority | |||||||||
(Banner Health) | |||||||||
300,000 | 5.125%, 01/01/29 | NR/AA-/AA- | 315,462 | ||||||
3,100,000 | 5.375%, 01/01/32 | NR/AA-/AA- | 3,268,113 | ||||||
1,750,000 | 5.000%, 01/01/43 | NR/AA-/AA- | 1,998,605 | ||||||
3,500,000 | 5.000%, 01/01/44 | NR/AA-/AA- | 4,083,555 | ||||||
Arizona Health Facilities Authority | |||||||||
(Dignity Health) | |||||||||
1,500,000 | 5.000%, 07/01/28 | A3/A/A | 1,647,555 | ||||||
2,000,000 | 5.250%, 03/01/39 | A3/A/A | 2,236,020 | ||||||
Arizona Health Facilities Authority | |||||||||
(Phoenix Children’s Hospital) | |||||||||
2,950,000 | 5.000%, 02/01/34 | NR/BBB+/NR | 3,349,932 | ||||||
Arizona Health Facilities Authority | |||||||||
(Scottsdale Lincoln Hospitals) | |||||||||
3,000,000 | 5.000%, 12/01/34 | A2/NR/A | 3,564,750 | ||||||
435,000 | 5.000%, 12/01/39 | A2/NR/A | 511,612 | ||||||
3,500,000 | 5.000%, 12/01/42 | A2/NR/A | 4,107,985 | ||||||
Arizona Health Facilities Authority | |||||||||
(Yavapai Regional Medical Center) | |||||||||
1,500,000 | 5.375%, 12/01/30 AGMC Insured | A2/NR/NR | 1,704,330 | ||||||
Maricopa Co. Industrial Development | |||||||||
Authority (Dignity Health) | |||||||||
3,000,000 | 5.250%, 07/01/32 | A3/A/A | 3,096,300 | ||||||
Scottsdale Industrial Development | |||||||||
Authority (Scottsdale Healthcare System) | |||||||||
1,000,000 | 5.000%, 09/01/18 | A2/NR/A | 1,074,120 |
8 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Hospital (continued) | |||||||||
Authority (Scottsdale Healthcare System) | |||||||||
(continued) | |||||||||
$ | 750,000 | 5.000%, 09/01/35 AGMC Insured | A2/AA/A | $ | 841,620 | ||||
Yavapai Co. Industrial Development | |||||||||
Authority (Northern Arizona Healthcare | |||||||||
System) | |||||||||
500,000 | 5.250%, 10/01/25 | NR/AA/NR | 591,650 | ||||||
500,000 | 5.250%, 10/01/26 | NR/AA/NR | 590,860 | ||||||
Yavapai Co. Industrial Development | |||||||||
Authority (Yavapai Regional | |||||||||
Medical Center) | |||||||||
1,000,000 | 5.250%, 08/01/33 | Baa1/NR/BBB+ | 1,145,140 | ||||||
1,250,000 | 5.625%, 08/01/37 | Baa1/NR/BBB+ | 1,321,175 | ||||||
Yuma Industrial Development Authority | |||||||||
(Yuma Regional Medical Center) | |||||||||
1,635,000 | 5.000%, 08/01/23 | NR/A-/NR | 1,939,437 | ||||||
200,000 | 5.000%, 08/01/32 | NR/A-/NR | 232,386 | ||||||
Total Hospital | 37,620,607 | ||||||||
Lease (4.0%) | |||||||||
Arizona Board of Regents | |||||||||
Northern Arizona University COP | |||||||||
600,000 | 5.000%, 09/01/27 | A2/A/NR | 706,368 | ||||||
500,000 | 5.000%, 09/01/28 | A2/A/NR | 587,110 | ||||||
1,000,000 | 5.000%, 09/01/29 | A2/A/NR | 1,171,770 | ||||||
Arizona State Lottery Bonds | |||||||||
3,000,000 | 5.000%, 07/01/28 AGMC Insured | A1/AA/NR | 3,331,680 | ||||||
Cave Creek COP | |||||||||
245,000 | 5.750%, 07/01/19 | NR/AA/NR | 247,999 | ||||||
Mohave Co. Industrial Development | |||||||||
Authority Correctional Facilities | |||||||||
1,000,000 | 8.000%, 05/01/25 | NR/BBB+/NR | 1,005,160 | ||||||
Nogales, Arizona Municipal | |||||||||
Development Authority | |||||||||
500,000 | 4.000%, 06/01/36 | NR/AA/NR | 543,815 | ||||||
Pinal Co. Correctional Facilities | |||||||||
1,470,000 | 5.250%, 10/01/21 ACA Insured | NR/BBB/NR | 1,473,219 |
9 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Lease (continued) | |||||||||
Prescott Municipal Property Corp. | |||||||||
$ | 500,000 | 5.000%, 07/01/34 | Aa3/AA/NR | $ | 592,460 | ||||
State of Arizona COP Department | |||||||||
Administration | |||||||||
1,500,000 | 5.250%, 10/01/26 AGMC Insured | Aa3/AA/NR | 1,682,535 | ||||||
670,000 | 5.250%, 10/01/28 AGMC Insured | Aa3/AA/NR | 751,110 | ||||||
State of Arizona COP | |||||||||
500,000 | 5.000%, 09/01/27 | Aa3/AA-/NR | 619,495 | ||||||
Total Lease | 12,712,721 | ||||||||
Mortgage (2.2%) | |||||||||
Festival Ranch Community Facilities | |||||||||
District | |||||||||
1,000,000 | 4.000%, 07/15/36 BAMAC Insured | NR/AA/NR | 1,089,480 | ||||||
Goodyear Community Facilities | |||||||||
Utilities District No. 1 | |||||||||
500,000 | 4.000%, 07/15/28 | A1/A-/NR | 556,065 | ||||||
500,000 | 4.000%, 07/15/32 | A1/A-/NR | 550,095 | ||||||
Marley Park Community Facilities District | |||||||||
535,000 | 4.000%, 07/15/34 BAMAC Insured††† | NR/AA/NR | 583,332 | ||||||
Merrill Ranch Community Facilities | |||||||||
District #2 | |||||||||
680,000 | 6.750%, 07/15/38 | NR/BBB-/NR | 813,634 | ||||||
Scottsdale Waterfront Community | |||||||||
Facilities District | |||||||||
530,000 | 6.000%, 07/15/27 144A | NR/NR/NR* | 532,539 | ||||||
930,000 | 6.050%, 07/15/32 144A | NR/NR/NR* | 933,683 | ||||||
Sundance Community Facilities District | |||||||||
655,000 | 5.125%, 07/15/30 | A3/BBB/NR | 655,517 | ||||||
Verrado Community Facilities Utilities | |||||||||
District No. 1 | |||||||||
500,000 | 6.000%, 07/15/33 144A | NR/NR/NR* | 559,135 | ||||||
Vistancia Community Facilities District | |||||||||
540,000 | 5.000%, 07/15/26 | A1/NR/A- | 618,575 | ||||||
Total Mortgage | 6,892,055 |
10 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Pollution Control (2.5%) | |||||||||
Apache Co. Industrial Development | |||||||||
Authority, Pollution Control, Tucson | |||||||||
Electric Power Co. | |||||||||
$ | 2,700,000 | 4.500%, 03/01/30 | A3/BBB+/NR | $ | 3,020,652 | ||||
Coconino Co. Pollution Control, Tucson | |||||||||
Electric Power Co. | |||||||||
2,000,000 | 5.125%, 10/01/32 | A3/BBB+/NR | 2,190,220 | ||||||
Maricopa Co. Pollution Control | |||||||||
(Southern California Edison Co.) | |||||||||
1,000,000 | 5.000%, 06/01/35 | Aa3/A/NR | 1,121,370 | ||||||
Phoenix Industrial Development Authority | |||||||||
Solid Waste Disposal (Vieste Project) | |||||||||
400,000 | 4.500%, 04/01/33 AMT*** | NR/D/NR | 120,000 | ||||||
Pima Co. Industrial Development Authority, | |||||||||
Pollution Control, | |||||||||
Tucson Electric Power Co. | |||||||||
1,500,000 | 4.950%, 10/01/20 | A3/BBB+/NR | 1,678,620 | ||||||
Total Pollution Control | 8,130,862 | ||||||||
Transportation (3.3%) | |||||||||
Arizona State Transportation Board Excise | |||||||||
Tax Revenue (Maricopa Co. Regional | |||||||||
Area Road Fund) | |||||||||
500,000 | 5.000%, 07/01/25 | Aa1/AA+/NR | 626,990 | ||||||
Arizona Transportation Board Revenue | |||||||||
1,675,000 | 5.000%, 07/01/28 | Aa1/AAA/NR | 2,099,026 | ||||||
4,800,000 | 5.000%, 07/01/33 | Aa1/AAA/NR | 5,897,088 | ||||||
1,000,000 | 5.000%, 07/01/36††† | Aa1/AAA/NR | 1,235,270 | ||||||
Pima Co. Regional Transportation Authority | |||||||||
Excise Tax | |||||||||
500,000 | 5.000%, 06/01/26 | NR/AA+/AA | 609,380 | ||||||
Total Transportation | 10,467,754 | ||||||||
Utility (9.7%) | |||||||||
Arizona Power Authority | |||||||||
(Hoover Dam Project) | |||||||||
3,500,000 | 5.250%, 10/01/16 | Aa2/AA/NR | 3,500,000 | ||||||
1,220,000 | 5.250%, 10/01/17 | Aa2/AA/NR | 1,273,241 |
11 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Utility (continued) | |||||||||
Central Arizona Water Conservation | |||||||||
District Water Delivery | |||||||||
(Central Arizona Project) | |||||||||
$ | 750,000 | 5.000%, 01/01/33 | Aa2/AA+/AA | $ | 927,510 | ||||
750,000 | 5.000%, 01/01/34 | Aa2/AA+/AA | 923,978 | ||||||
Greater Arizona Development | |||||||||
Authority Revenue | |||||||||
505,000 | 5.000%, 08/01/22 NPFG Insured | A1/AA-/NR | 506,596 | ||||||
700,000 | 5.000%, 08/01/24 | NR/A/NR | 747,663 | ||||||
500,000 | 5.000%, 08/01/28 AGMC Insured | A1/AA/NR | 592,700 | ||||||
1,200,000 | 5.500%, 08/01/29 | A1/A/NR | 1,200,000 | ||||||
1,200,000 | 5.000%, 08/01/29 | A1/A/NR | 1,316,664 | ||||||
Mesa Utility System | |||||||||
250,000 | 4.000%, 07/01/32 | Aa2/AA-/NR | 284,315 | ||||||
2,100,000 | 5.000%, 07/01/35 | Aa2/AA-/NR | 2,418,318 | ||||||
Pinal Co. Electrical District No. 3, | |||||||||
Electrical System Revenue Refunding | |||||||||
250,000 | 5.250%, 07/01/36 | NR/A/NR | 288,387 | ||||||
Salt River Project Agricultural | |||||||||
Improvement and Power Revenue | |||||||||
910,000 | 5.000%, 01/01/25 | Aa1/AA/NR | 957,129 | ||||||
1,500,000 | 5.000%, 12/01/28 | Aa1/AA/NR | 1,772,580 | ||||||
5,000,000 | 5.000%, 12/01/31 | Aa1/AA/NR | 5,996,450 | ||||||
1,975,000 | 5.000%, 01/01/33 | Aa1/AA/NR | 2,073,513 | ||||||
1,105,000 | 5.000%, 12/01/36 | Aa1/AA/NR | 1,345,658 | ||||||
1,000,000 | 5.000%, 12/01/45 | Aa1/AA/NR | 1,206,430 | ||||||
Salt Verde Finance Corp. Gas Revenue | |||||||||
3,000,000 | 5.250%, 12/01/28 | Baa1/BBB+/NR | 3,749,220 | ||||||
Total Utility | 31,080,352 | ||||||||
Water/Sewer (5.4%) | |||||||||
Avondale Water & Sewer Revenue | |||||||||
565,000 | 4.000%, 07/01/36 | Aa2/AA/NR | 628,026 | ||||||
Gilbert Water Resource Municipal | |||||||||
Property Corp. | |||||||||
820,000 | 4.000%, 07/01/35 | NR/AAA/AA+ | 922,697 | ||||||
Glendale Water & Sewer Revenue | |||||||||
2,000,000 | 5.000%, 07/01/28 | A1/AA/NR | 2,457,220 | ||||||
500,000 | 5.000%, 07/01/28 | A1/AA/NR | 598,915 |
12 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Water/Sewer (continued) | |||||||||
Goodyear Water and Sewer Revenue | |||||||||
$ | 1,750,000 | 5.375%, 07/01/30 | A2/A+/NR | $ | 1,996,313 | ||||
635,000 | 5.250%, 07/01/31 AGMC Insured | A2/AA/NR | 736,575 | ||||||
500,000 | 5.000%, 07/01/35 AGMC Insured | A2/AA/NR | 606,955 | ||||||
775,000 | 5.000%, 07/01/45 AGMC Insured | A2/AA/NR | 927,458 | ||||||
Lake Havasu City Wastewater | |||||||||
System Revenue | |||||||||
1,075,000 | 5.000%, 07/01/33 AGMC Insured | Aa3/AA/NR | 1,305,459 | ||||||
1,000,000 | 5.000%, 07/01/43 AGMC Insured | A2/AA/NR | 1,187,350 | ||||||
Phoenix Civic Improvement Corp. | |||||||||
Wastewater Revenue | |||||||||
1,500,000 | 5.500%, 07/01/24 NPFG/FGIC Insured | Aa2/AAA/NR | 1,961,085 | ||||||
500,000 | 5.000%, 07/01/37 NPFG Insured | Aa2/AA+/NR | 513,965 | ||||||
Tucson Water Revenue System | |||||||||
1,000,000 | 5.000%, 07/01/32 | Aa2/AA/AA | 1,226,820 | ||||||
Yuma Municipal Property Corp. | |||||||||
Utility System | |||||||||
1,700,000 | 5.000%, 07/01/28 | A1/A+/AA- | 2,087,107 | ||||||
Total Water/Sewer | 17,155,945 | ||||||||
Total Revenue Bonds | 201,080,662 | ||||||||
Pre-Refunded\Escrowed to | |||||||||
Maturity Bonds (17.8%)†† | |||||||||
Pre-Refunded General | |||||||||
Obligation Bonds (4.4%) | |||||||||
City (0.3%) | |||||||||
Tempe, Arizona | |||||||||
1,000,000 | 4.500%, 07/01/24 | Aa1/AAA/AAA | 1,027,420 | ||||||
County (0.7%) | |||||||||
Maricopa Co. Community College | |||||||||
District | |||||||||
2,000,000 | 4.000%, 07/01/21 | Aaa/AAA/AAA | 2,167,900 | ||||||
School District (3.4%) | |||||||||
Coconino & Yavapai Counties Joint | |||||||||
Unified School District No. 9 Sedona | |||||||||
1,000,000 | 5.375%, 07/01/28 | Aa2/A+/NR | 1,119,630 |
13 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Pre-Refunded\ Escrowed to Maturity Bonds (continued) | and Fitch | Value | ||||||
School District (continued) | |||||||||
Gila Co. Unified School District | |||||||||
No. 10 (Payson) | |||||||||
$ | 400,000 | 5.250%, 07/01/27 AMBAC Insured | Aa3/NR/NR | $ | 413,020 | ||||
1,000,000 | 5.750%, 07/01/28 | Aa3/NR/NR | 1,083,840 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 89 (Dysart) | |||||||||
1,500,000 | 6.000%, 07/01/28 | NR/A+/NR | 1,630,845 | ||||||
Maricopa Co. Unified School District | |||||||||
No. 95 (Queen Creek) | |||||||||
500,000 | 5.000%, 07/01/27 AGMC Insured | Aa3/NR/NR | 535,465 | ||||||
Mohave Co. Unified School District | |||||||||
No. 20 (Kingman) | |||||||||
1,175,000 | 5.250%, 07/01/24 AGMC Insured | A2/AA/NR | 1,262,338 | ||||||
Pima Co. Unified School District No. 1 | |||||||||
(Tucson) | |||||||||
1,500,000 | 5.000%, 07/01/27 AGMC Insured | Aa3/AA/NR | 1,606,395 | ||||||
Pima Co. Unified School District | |||||||||
No. 8 (Flowing Wells) | |||||||||
1,000,000 | 5.375%, 07/01/29 | NR/A+/NR | 1,160,150 | ||||||
Pinal Co. High School District | |||||||||
No. 82 (Casa Grande) | |||||||||
640,000 | 5.000%, 07/01/24 | NR/A+/NR | 684,819 | ||||||
Pinal Co. Unified School District | |||||||||
No. 1 (Florence) | |||||||||
1,500,000 | 5.000%, 07/01/27 NPFG/FGIC | ||||||||
Insured | A3/AA-/NR | 1,546,080 | |||||||
Total School District | 11,042,582 | ||||||||
Total Pre-Refunded General | |||||||||
Obligation Bonds | 14,237,902 | ||||||||
Pre-Refunded\Escrowed to | |||||||||
Maturity Revenue Bonds (13.4%) | |||||||||
Excise Tax (2.2%) | |||||||||
Rio Nuevo Facilities District (Tucson) | |||||||||
1,500,000 | 6.500%, 07/15/24 AGC Insured | A2/AA/NR | 1,648,350 | ||||||
Scottsdale Municipal Property Corp. | |||||||||
3,000,000 | 4.500%, 07/01/20 AMBAC Insured | Aa1/AAA/AAA | 3,081,120 |
14 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Pre-Refunded\ Escrowed to Maturity Revenue Bonds (continued) | and Fitch | Value | ||||||
Excise Tax (continued) | |||||||||
Scottsdale Municipal Property Corp. | |||||||||
Water & Sewer Project | |||||||||
$ | 2,000,000 | 5.000%, 07/01/28 | Aa1/AAA/AAA | $ | 2,143,660 | ||||
Total Excise Tax | 6,873,130 | ||||||||
Higher Education (0.6%) | |||||||||
Cochise Co. Community College District | |||||||||
1,825,000 | 5.125%, 07/01/28 AGC Insured | A2/NR/NR | 1,956,729 | ||||||
Hospital (1.9%) | |||||||||
Maricopa Co. Hospital Revenue | |||||||||
(Sun Health) | |||||||||
1,500,000 | 5.000%, 04/01/25 | NR/NR/NR* | 1,787,160 | ||||||
2,125,000 | 5.000%, 04/01/35 | NR/NR/NR* | 2,667,087 | ||||||
University Medical Center | |||||||||
Hospital Revenue | |||||||||
910,000 | 6.500%, 07/01/39 | NR/NR/NR* | 1,045,135 | ||||||
500,000 | 6.000%, 07/01/39 | NR/NR/NR* | 608,165 | ||||||
Total Hospital | 6,107,547 | ||||||||
Lease (2.0%) | |||||||||
Arizona School Facilities Board COP | |||||||||
1,000,000 | 5.125%, 09/01/21 AGC Insured | Aa3/AA/NR | 1,079,840 | ||||||
3,000,000 | 5.500%, 09/01/23 | Aa3/AA-/NR | 3,260,700 | ||||||
State of Arizona COP | |||||||||
2,000,000 | 5.000%, 09/01/26 AGMC Insured | Aa3/AA/NR | 2,113,680 | ||||||
Total Lease | 6,454,220 | ||||||||
Mortgage (1.3%) | |||||||||
Maricopa Co. Industrial Development | |||||||||
Authority Multi-Family Mortgage | |||||||||
Revenue (National Health Project) | |||||||||
430,000 | 5.500%, 01/01/18 AGMC | ||||||||
Insured ETM | A2/AA/NR | 443,162 | |||||||
Maricopa Co. Industrial Development | |||||||||
Authority Single Family Mortgage Revenue | |||||||||
3,715,000 | zero coupon, 12/31/16 ETM | Aaa/AA+/NR | 3,706,678 | ||||||
Total Mortgage | 4,149,840 |
15 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Pre-Refunded\ Escrowed to Maturity Revenue Bonds (continued) | and Fitch | Value | ||||||
Transportation (2.3%) | |||||||||
Arizona Transportation Board Revenue | |||||||||
$ | 1,900,000 | 5.250%, 07/01/24 | Aa2/AA+/AA | $ | 2,195,583 | ||||
2,550,000 | 5.000%, 07/01/28 | Aa1/AAA/NR | 2,733,167 | ||||||
550,000 | 5.250%, 07/01/32 | Aa2/AA+/NR | 655,666 | ||||||
1,500,000 | 5.000%, 07/01/33 | Aa1/AAA/NR | 1,607,745 | ||||||
Total Transportation | 7,192,161 | ||||||||
Utility (1.2%) | |||||||||
Arizona Water Infrastructure | |||||||||
Finance Authority | |||||||||
3,500,000 | 5.000%, 10/01/28 | Aaa/AAA/NR | 3,782,240 | ||||||
Water/Sewer (1.9%) | |||||||||
Gilbert Water Resource Municipal | |||||||||
Property Corp. | |||||||||
2,000,000 | 5.000%, 10/01/29 NPFG Insured | A3/AA+/AA | 2,081,960 | ||||||
Glendale Water & Sewer Revenue | |||||||||
1,670,000 | 4.750%, 07/01/24 AGMC Insured | A1/AA/NR | 1,749,642 | ||||||
Pima Co. Sewer Revenue System | |||||||||
2,000,000 | 5.000%, 07/01/26 | NR/AA/AA- | 2,361,200 | ||||||
Total Water/Sewer | 6,192,802 | ||||||||
Total Pre-Refunded\Escrowed to | |||||||||
Maturity Revenue Bonds | 42,708,669 | ||||||||
Total Pre-Refunded\ Escrowed to | |||||||||
Maturity Bonds | 56,946,571 | ||||||||
Total Municipal Bonds | |||||||||
(cost $296,431,715) | 318,164,177 | ||||||||
Shares | Short-Term Investment (0.8%) | ||||||||
2,601,473 | Dreyfus Tax Exempt Cash Management, | ||||||||
Institutional Shares, 0.55%** | |||||||||
(cost $2,601,473) | NR/Aaam/NR | 2,601,473 | |||||||
Total Investments | |||||||||
(cost $299,033,188-note 4) | 100.4% | 320,765,650 | |||||||
Other assets less liabilities | (0.4) | (1,184,637 | ) | ||||||
Net Asset | 100.0% | $ | 319,581,013 |
16 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Percent of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Aaa of Moody’s or AAA of S&P or Fitch | 8.0 | % | ||
Pre-refunded bonds\ ETM bonds†† | 17.2 | |||
Aa of Moody’s or AA of S&P or Fitch | 50.0 | |||
A of Moody’s or S&P or Fitch | 19.6 | |||
Baa of Moody’s or BBB of S&P or Fitch | 4.3 | |||
D of S&P | 0.1 | |||
Not Rated* | 0.8 | |||
100.0 | % |
PORTFOLIO ABBREVIATIONS | ||
ACA - American Capital Assurance Financial Guaranty Corp. | ||
AGC - Assured Guaranty Corp. | ||
AGMC - Assured Guaranty Municipal Corp. | ||
AMBAC - American Municipal Bond Assurance Corp. | ||
AMT - Alternative Minimum Tax | ||
BAMAC - Build America Mutual Assurance Co. | ||
BHAC - Berkshire Hathaway Assurance Corp. | ||
COP- Certificates of Participation | ||
ETM - Escrowed to Maturity | ||
FGIC - Financial Guaranty Insurance Co. | ||
MAC - Municipal Assurance Corp. | ||
NPFG - National Public Finance Guarantee | ||
NR - Not Rated | ||
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) has been determined by the Investment Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a NRSRO. | |
** | The rate is an annualized seven-day yield at period end. | |
*** | Illiquid security: This security represents 0.04% of net assets. Security is in default and is non-income producing. | |
† | Where applicable, calculated using the highest rating of the three NRSRO. Percentages in this table do not include the Short-Term Investment. | |
See accompanying notes to financial statements.
17 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
†† | Pre-refunded bonds are bonds secured by an escrow account, comprised of U.S. Government Obligations (unless otherwise noted), to retire the bonds at their earliest call date. Escrowed to Maturity bonds are bonds where money has been placed in the escrow account which is used to pay principal and interest through the bond’s originally scheduled maturity date. Escrowed to Maturity are shown as ETM. All other securities in the category are pre-refunded. | |
††† | Security purchased on a delayed delivery or when-issued basis. | |
Note: | 144A – Private placement subject to SEC rule 144A, which modifies a two-year holding period requirement to permit qualified institutional buyers to trade these securities among themselves, thereby significantly improving the liquidity of these securities. | |
See accompanying notes to financial statements.
18 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2016 (unaudited)
ASSETS | ||||
Investments at value (cost $299,033,188) | $ | 320,765,650 | ||
Interest receivable | 3,700,707 | |||
Receivable for Fund shares sold | 355,139 | |||
Other assets | 21,385 | |||
Total assets | 324,842,881 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 4,661,746 | |||
Payable for Fund shares redeemed | 219,605 | |||
Dividends payable | 165,144 | |||
Management fee payable | 112,115 | |||
Distribution and service fees payable | 3,785 | |||
Accrued expenses | 99,473 | |||
Total liabilities | 5,261,868 | |||
NET ASSETS | $ | 319,581,013 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of | ||||
shares, par value $0.01 per share | $ | 290,516 | ||
Additional paid-in capital | 295,812,417 | |||
Net unrealized appreciation on investments (note 4) | 21,732,462 | |||
Accumulated net realized gain on investments | 541,925 | |||
Undistributed net investment income | 1,203,693 | |||
$ | 319,581,013 | |||
CLASS A | ||||
Net Assets | $ | 250,518,313 | ||
Capital shares outstanding | 22,779,324 | |||
Net asset value and redemption price per share | $ | 11.00 | ||
Maximum offering price per share (100/96 of $11.00) | $ | 11.46 | ||
CLASS C | ||||
Net Assets | $ | 18,429,681 | ||
Capital shares outstanding | 1,676,091 | |||
Net asset value and offering price per share | $ | 11.00 | ||
Redemption price per share (*a charge of 1% is imposed | ||||
on the redemption proceeds, or on the original price, | ||||
whichever is lower, if redeemed during the first 12 | ||||
months after purchase) | $ | 11.00 | * | |
CLASS Y | ||||
Net Assets | $ | 50,633,019 | ||
Capital shares outstanding | 4,596,225 | |||
Net asset value, offering and redemption price per share | $ | 11.02 |
See accompanying notes to financial statements.
19 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2016 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 5,813,864 | ||||||
Expenses: | ||||||||
Management fee (note 3) | $ | 635,427 | ||||||
Distribution and service fees (note 3) | 282,976 | |||||||
Transfer and shareholder servicing agent fees | 63,782 | |||||||
Trustees’ fees and expenses (note 7) | 50,451 | |||||||
Legal fees | 44,767 | |||||||
Registration fees and dues | 15,675 | |||||||
Shareholders’ reports | 12,771 | |||||||
Auditing and tax fees | 10,989 | |||||||
Insurance | 6,690 | |||||||
Custodian fees | 5,100 | |||||||
Chief compliance officer services (note 3) | 4,492 | |||||||
Miscellaneous | 22,499 | |||||||
Total expenses | 1,155,619 | |||||||
Net investment income | 4,658,245 | |||||||
| ||||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 153,025 | |||||||
Change in unrealized appreciation on | ||||||||
investments | 826,232 | |||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | 979,257 | |||||||
Net change in net assets resulting from | ||||||||
operations | $ | 5,637,502 |
See accompanying notes to financial statements.
20 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2016 | Year Ended | |||||||
(unaudited) | March 31, 2016 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,658,245 | $ | 9,446,407 | ||||
Net realized gain (loss) from | ||||||||
securities transactions | 153,025 | 414,127 | ||||||
Change in unrealized | ||||||||
appreciation on investments | 826,232 | (788,850 | ) | |||||
Change in net assets resulting | ||||||||
from operations | 5,637,502 | 9,071,684 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (3,605,518 | ) | (7,510,140 | ) | ||||
Net realized gain on investments | — | (468,730 | ) | |||||
Class C Shares: | ||||||||
Net investment income | (192,296 | ) | (425,741 | ) | ||||
Net realized gain on investments | — | (35,574 | ) | |||||
Class Y Shares: | ||||||||
Net investment income | (719,803 | ) | (1,154,185 | ) | ||||
Net realized gain on investments | — | (77,892 | ) | |||||
Change in net assets from | ||||||||
distributions | (4,517,617 | ) | (9,672,262 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 32,478,783 | 46,981,416 | ||||||
Reinvested dividends and | ||||||||
distributions | 3,599,649 | 7,909,123 | ||||||
Cost of shares redeemed | (19,318,629 | ) | (31,848,006 | ) | ||||
Change in net assets from | ||||||||
capital share transactions | 16,759,803 | 23,042,533 | ||||||
Change in net assets | 17,879,688 | 22,441,955 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 301,701,325 | 279,259,370 | ||||||
End of period* | $ | 319,581,013 | $ | 301,701,325 | ||||
*Includes undistributed net investment income of: | $ | 1,203,693 | $ | 1,063,065 |
See accompanying notes to financial statements.
21 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (unaudited)
1. Organization
Aquila Tax-Free Trust of Arizona (the “Fund”), a series of Aquila Municipal Trust (prior to October 12, 2013, the Fund operated under the name Tax-Free Trust of Arizona), a non-diversified, open-end investment company, was organized on October 17, 1985, as a Massachusetts business Trust and commenced operations on March 13, 1986. The Fund is authorized to issue an unlimited number of shares. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. 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: Municipal securities are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. |
b) | Fair value measurements: The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s investments and are summarized in the following fair value hierarchy: |
22 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, based on the best information available.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities The following is a summary of the valuation inputs, representing 100% of the Fund’s investments, used to value the Fund’s net assets as of September 30, 2016:
Valuation Inputs* | Investments in Securities | ||||
Level 1 – Quoted Prices - Short-Term Investment | $ | 2,601,473 | |||
Level 2 – Other Significant Observable | |||||
Inputs — Municipal Bonds* | 318,164,177 | ||||
Level 3 – Significant Unobservable Inputs | — | ||||
Total | $ | 320,765,650 |
* See schedule of investments for a detailed listing of securities.
c) | Subsequent events: In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date these financial statements were issued. |
d) | 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. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. |
e) | Federal income taxes: It is the policy of the Fund to continue 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. |
23 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Management has reviewed the tax positions for each of the open tax years (2013–2015) or expected to be taken in the Fund’s 2016 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
f) | 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 also charged directly to such class on a daily basis. |
g) | 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. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended March 31, 2016, there were no items identified that have been reclassified among components of net assets. |
i) | The Trust is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 “Financial Services-Investment Companies”. |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. Under the Advisory and Administration Agreement, the Manager provides all investment management and administrative services to the Fund. The Manager’s services include 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. 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 at the annual rate of 0.40% on the Fund’s net assets.
24 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
Under a Compliance Agreement with the Manager, the Manager is compensated by the Fund for Chief Compliance Officer related services provided to enable the Fund to comply with Rule 38a-1 of the Investment Company Act of 1940.
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 distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors LLC (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 distribution fee at the annual rate of 0.15% of the Fund’s average net assets represented by Class A Shares. For the six months ended September 30, 2016, distribution fees on Class A Shares amounted to $187,857, of which the Distributor retained $13,451.
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 September 30, 2016, amounted to $71,339. 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 September 30, 2016, these payments amounted to $23,780. The total of these payments with respect to Class C Shares amounted to $95,119, of which the Distributor retained $22,565.
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 brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Arizona, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2016, total commissions on sales of Class A Shares amounted to $140,451, of which the Distributor received $26,890.
25 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
4. Purchases and Sales of Securities
During the six months ended September 30, 2016, purchases of securities and proceeds from the sales of securities aggregated $34,370,776 and $9,642,702, respectively.
At September 30, 2016, the aggregate tax cost for all securities was $298,784,126. At September 30, 2016, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $22,445,622 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $464,098 for a net unrealized appreciation of $21,981,524.
5. Portfolio Orientation
Since the Fund invests principally and may invest entirely in double tax-free municipal obligations of issuers within Arizona, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Arizona and whatever effects these may have upon Arizona issuers’ ability to meet their obligations. The Fund is also permitted to invest in U.S. territorial municipal obligations meeting comparable quality standards and providing income which is exempt from both regular Federal and Arizona income taxes. The general policy of the Fund is to invest in such securities only when comparable securities of Arizona issuers are not available in the market. At September 30, 2016, the Fund had all of its assets invested in the securities of Arizona issuers.
26 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2016 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 1,585,913 | $ | 17,513,500 | $ | 2,203,807 | 24,006,382 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 264,045 | 2,910,796 | 601,856 | 6,547,939 | ||||||||||||
Cost of shares redeemed | (1,166,083 | ) | (12,860,452 | ) | (2,048,997 | ) | (22,286,916 | ) | ||||||||
Net change | 683,875 | 7,563,844 | 756,666 | 8,267,405 | ||||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 239,125 | 2,640,324 | 434,763 | 4,729,665 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 14,746 | 162,506 | 37,177 | 404,309 | ||||||||||||
Cost of shares redeemed | (253,487 | ) | (2,800,761 | ) | (408,504 | ) | (4,439,895 | ) | ||||||||
Net change | 384 | 2,069 | 63,436 | 694,079 | ||||||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 1,114,160 | 12,324,959 | 1,674,677 | 18,245,369 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 47,594 | 526,347 | 87,751 | 956,875 | ||||||||||||
Cost of shares redeemed | (330,595 | ) | (3,657,416 | ) | (468,711 | ) | (5,121,195 | ) | ||||||||
Net change | 831,159 | 9,193,890 | 1,293,717 | 14,081,049 | ||||||||||||
Total transactions in Fund | ||||||||||||||||
shares | 1,515,418 | $ | 16,759,803 | $ | 2,113,819 | 23,042,533 |
27 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
7. Trustees’ Fees and Expenses
For the six months ended September 30, 2016, there were 9 Trustees, one of whom is affiliated with the Manager and is not paid any fees. The total amount of Trustees’ service fees (for carrying out their responsibilities) and attendance fees paid during the six months ended September 30, 2016 was $42,047. Attendance fees are paid to those in attendance at regularly scheduled quarterly Board Meetings and meetings of the Independent Trustees held prior to each quarterly Board Meeting, as well as additional meetings (such as Audit, Nominating, Shareholder and special meetings). Trustees are reimbursed for their expenses such as travel, accommodations and meals incurred in connection with attendance at Board Meetings and the Annual and Outreach Meetings of Shareholders. For the six months ended September 30, 2016, such meeting-related expenses amounted to $8,404.
8. Securities Traded on a When-Issued Basis
The Fund may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction. Beginning on the date the Fund enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities.
9. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. These distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Arizona income taxes. Due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax.
28 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2016 (unaudited)
The tax character of distributions was as follows:
Year | Year | |||||||
Ended | Ended | |||||||
March 31, 2016 | March 31, 2015 | |||||||
Net tax-exempt income | $ | 9,000,717 | $ | 9,294,735 | ||||
Ordinary Income | 89,349 | 48,403 | ||||||
Long-term capital gains | 582,196 | – | ||||||
$ | 9,672,262 | $ | 9,343,138 |
As of March 31, 2016, the components of distributable earnings on a tax basis were as follows:
Undistributed tax-exempt income | $ | 271,388 | ||||||
Undistributed net realized gain on investments | 413,920 | |||||||
Unrealized appreciation | 21,757,281 | |||||||
Other temporary differences | (84,394 | ) | ||||||
$ | 22,358,195 |
The difference between book basis and tax basis unrealized appreciation and undistributed income is due to the timing difference, and other temporary differences, in recognizing dividends paid and the amortization of discount securities.
29 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30 | |||||||||||||||||||||||
9/30/16(unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | $ | 10.92 | $ | 10.37 | $ | 10.50 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.17 | 0.37 | 0.38 | 0.38 | 0.29 | 0.41 | 0.42 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.04 | (0.03 | ) | 0.35 | (0.34 | ) | 0.05 | 0.54 | (0.13 | ) | ||||||||||||||||||
Total from investment operations | 0.21 | 0.34 | 0.73 | 0.04 | 0.34 | 0.95 | 0.29 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.35 | ) | (0.38 | ) | (0.37 | ) | (0.29 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||
Distributions from capital gains | — | (0.02 | ) | — | (0.01 | ) | — | — | — | |||||||||||||||||||
Total distributions | (0.16 | ) | (0.37 | ) | (0.38 | ) | (0.38 | ) | (0.29 | ) | (0.40 | ) | (0.42 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.00 | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | $ | 10.92 | $ | 10.37 | ||||||||||||||
Total return (not reflecting sales charge) | 1.91 | %(2) | 3.20 | % | 6.92 | % | 0.49 | % | 3.08 | %(2) | 9.29 | % | 2.80 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 251 | $ | 242 | $ | 234 | $ | 229 | $ | 265 | $ | 274 | $ | 260 | ||||||||||||||
Ratio of expenses to average net assets | 0.71 | %(3) | 0.71 | % | 0.73 | % | 0.78 | %(4) | 0.73 | %(3) | 0.73 | % | 0.73 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.99 | %(3) | 3.36 | % | 3.49 | % | 3.59 | %(4) | 3.50 | %(3) | 3.78 | % | 4.07 | % | ||||||||||||||
Portfolio turnover rate | 3 | %.(2) | 10 | % | 14 | % | 10 | % | 8 | %(2) | 17 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Trust into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.73% and 3.64%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
30 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30 | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | $ | 10.92 | $ | 10.37 | $ | 10.50 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.12 | 0.28 | 0.29 | 0.29 | 0.22 | 0.31 | 0.33 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.04 | (0.03 | ) | 0.34 | (0.34 | ) | 0.05 | 0.55 | (0.13 | ) | ||||||||||||||||||
Total from investment operations | 0.16 | 0.25 | 0.63 | (0.05 | ) | 0.27 | 0.86 | 0.20 | ||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.26 | ) | (0.28 | ) | (0.28 | ) | (0.22 | ) | (0.31 | ) | (0.33 | ) | ||||||||||||||
Distributions from capital gains | — | (0.02 | ) | – | (0.01 | ) | – | – | – | |||||||||||||||||||
Total distributions | (0.11 | ) | (0.28 | ) | (0.28 | ) | (0.29 | ) | (0.22 | ) | (0.31 | ) | (0.33 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.00 | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | $ | 10.92 | $ | 10.37 | ||||||||||||||
Total return (not reflecting CDSC) | 1.48 | %(2) | 2.34 | % | 6.02 | % | (0.36 | )% | 2.43 | %(2) | 8.36 | % | 1.93 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 18 | $ | 18 | $ | 18 | $ | 16 | $ | 24 | $ | 21 | $ | 15 | ||||||||||||||
Ratio of expenses to average net assets | 1.57 | %(3) | 1.56 | % | 1.58 | % | 1.63 | %(4) | 1.57 | %(3) | 1.58 | % | 1.57 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.13 | %(3) | 2.51 | % | 2.63 | % | 2.74 | %(4) | 2.64 | %(3) | 2.91 | % | 3.21 | % | ||||||||||||||
Portfolio turnover rate | 3 | %(2) | 10 | % | 14 | % | 10 | % | 8 | %(2) | 17 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Trust into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 1.58% and 2.79%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
31 | Aquila Tax-Free Trust of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months | Year Ended | |||||||||||||||||||||||||||
Ended | Year | Year | Year | Nine Months | June 30 | |||||||||||||||||||||||
9/30/16 (unaudited) | Ended 3/31/16 | Ended 3/31/15 | Ended 3/31/14 | Ended 3/31/13† | 2012 | 2011 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.97 | $ | 11.00 | $ | 10.65 | $ | 10. 99 | $ | 10. 94 | $ | 10. 39 | $ | 10. 52 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.17 | 0.38 | 0.40 | 0.40 | 0.30 | 0.42 | 0.44 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | 0.05 | (0.02 | ) | 0.34 | (0.34 | ) | 0.05 | 0.55 | (0.14 | ) | ||||||||||||||||||
Total from investment operations | 0.22 | 0.36 | 0.74 | 0.06 | 0.35 | 0.97 | 0.30 | |||||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.17 | ) | (0.37 | ) | (0.39 | ) | (0.39 | ) | (0.30 | ) | (0.42 | ) | (0.43 | ) | ||||||||||||||
Distributions from capital gains | — | (0.02 | ) | – | (0.01 | ) | – | – | – | |||||||||||||||||||
Total distributions | (0.17 | ) | (0.39 | ) | (0.39 | ) | (0.40 | ) | (0.30 | ) | (0.42 | ) | (0.43 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.02 | $ | 10.97 | $ | 11.00 | $ | 10.65 | $ | 10.99 | $ | 10.94 | $ | 10.39 | ||||||||||||||
Total return | 1.99 | %(2) | 3.38 | % | 7.07 | % | 0.64 | % | 3.20 | %(2) | 9.44 | % | 2.95 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 51 | $ | 41 | $ | 27 | $ | 20 | $ | 24 | $ | 16 | $ | 11 | ||||||||||||||
Ratio of expenses to average net assets | 0.56 | %(3) | 0.56 | % | 0.58 | % | 0.63 | %(4) | 0.58 | %(3) | 0.58 | % | 0.58 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 3.15 | %(3) | 3.49 | % | 3.63 | % | 3.74 | %(4) | 3.64 | %(3) | 3.92 | % | 4.22 | % | ||||||||||||||
Portfolio turnover rate | 3 | %(2) | 10 | % | 14 | % | 10 | % | 8 | %(2) | 17 | % | 12 | % |
_________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | Not annualized. |
(3) | Annualized. |
(4) | Includes expenses incurred in connection with the reorganization of the Trust into a series of Aquila Municipal Trust. Without these expenses, the expense ratio and the net investment income ratio would have been 0.58% and 3.79%, respectively, for the year ended March 31, 2014. |
† | Effective December 1, 2012, the Fund changed its fiscal year end from June 30 to March 31. The information presented is for the period July 1, 2012 to March 31, 2013. |
See accompanying notes to financial statements.
32 | Aquila Tax-Free Trust of Arizona
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution (“12b-1”) and/or service fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2016 and held for the six months ended September 30, 2016.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2016
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | 1.91% | $1,000.00 | $1,019.10 | $3.59 |
Class C | 1.48% | $1,000.00 | $1,014.80 | $7.93 |
Class Y | 1.99% | $1,000.00 | $1,019.90 | $2.84 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized; as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.71%, 1.57% and 0.56% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
33 | Aquila Tax-Free Trust of Arizona
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2016
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,021. 51 | $3.60 |
Class C | 5.00% | $1,000.00 | $1,017. 20 | $7.94 |
Class Y | 5.00% | $1,000.00 | $1,022. 26 | $2.84 |
(1) | Expenses are equal to the annualized expense ratio of 0.71%, 1.57% and 0.56% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
34 | Aquila Tax-Free Trust of Arizona
Information Available (unaudited)
Much of the information that the funds in the Aquila Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent your Fund’s entire list of portfolio securities twice a year in the semi-annual and annual reports you receive. Additionally, under Fund policies, the Fund publicly discloses the complete schedule of the Fund’s portfolio holdings, as of each calendar quarter, generally by the 15th day after the end of each calendar quarter. Such information remains accessible until the next schedule is made publicly available. You may obtain a copy of the Fund’s portfolio holdings schedule for the most recently completed period by visiting the Fund’s website at www.aquilafunds.com. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarter ends of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2016, the Fund did not vote any proxies. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at www.sec.gov.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the Internal Revenue Code. No action on the part of shareholders is required.
For the fiscal year ended March 31, 2016, $9,000,717 of dividends paid by Aquila Tax-Free Trust of Arizona, constituting 93% of total dividends paid, were exempt-interest dividends, and $582,196 of dividends paid by the Fund constituting 6% of total dividends paid were capital gains: and the balance was ordinary income.
Prior to February 15, 2017, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2016 calendar year.
35 | Aquila Tax-Free Trust of Arizona
Additional Information (unaudited)
Renewal of the Advisory and Administration Agreement
Aquila Investment Management LLC (the “Manager”) serves as the investment adviser to the Trust pursuant to an Advisory and Administration Agreement (the “Advisory Agreement”). In order for the Manager to remain the investment adviser of the Trust, the Trustees of the Trust must determine annually whether to renew the Advisory Agreement for the Trust.
In considering whether to approve the renewal of the Advisory Agreement, the Trustees requested and obtained such information as they deemed reasonably necessary. Contract review materials were provided to the Trustees in August, 2016. The independent Trustees met telephonically on August 30, 2016 and in person on September 18, 2016 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager. They also considered information presented in a report prepared by an independent consultant with respect to the Trust’s fees, expenses and investment performance, which included comparisons of the Trust’s investment performance against peers and the Trust’s benchmark and comparisons of the advisory fee payable under the Advisory Agreement against the advisory fees paid by the Trust’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Trust provided to the Trustees at each regularly scheduled meeting.
At the meeting held on September 18, 2016, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Trust, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2017. In considering the renewal of the Advisory Agreement, the Trustees considered various factors that they determined were relevant, including the factors described below. The Trustees did not identify any single factor as the controlling factor in determining to approve the renewal of the Advisory Agreement.
The nature, extent, and quality of the services provided by the Manager
The Trustees considered the nature, extent and quality of the services that had been provided by the Manager to the Trust, taking into account the investment objectives and strategies of the Trust. The Trustees reviewed the terms of the Advisory Agreement.
The Trustees reviewed the Manager’s investment approach for the Trust and its research process. The Trustees considered that the Manager had provided all advisory and administrative services to the Trust that the Trustees deemed necessary or appropriate, including the specific services that the Trustees have determined are required for the Trust, given that it seeks to provide shareholders with as high a level of current income exempt from Arizona state and regular Federal income taxes as is consistent with preservation of capital. The Trustees considered the personnel of the Manager who provide investment management services to the Trust. The Manager has employed Mr. Todd Curtis as portfolio manager for the Trust and has established facilities and capabilities for credit analysis of the Trust’s portfolio securities. The Trustees noted the extensive experience of the portfolio manager. They considered that Mr. Curtis is based in Phoenix, Arizona and that he has a comprehensive understanding regarding the economy of the State of Arizona and the securities in which the Trust invests, including those securities with less than the highest ratings from the rating agencies. The Trustees also noted that the Trust did not own any Puerto Rico municipal bonds during the review period.
36 | Aquila Tax-Free Trust of Arizona
The Trustees noted that the Manager has additionally provided all administrative services to the Trust and provided the Trust with personnel (including Trust officers) and other resources that are necessary for the Trust’s business management and operations. The Trustees considered the nature and extent of the Manager’s supervision of third-party service providers, including the Trust’s fund accountant, shareholder servicing agent and custodian.
Based on these considerations, the Trustees concluded that the nature, extent and quality of services that had been provided by the Manager to the Trust were satisfactory and consistent with the terms of the Advisory Agreement.
The investment performance of the Trust
The Trustees reviewed the Trust’s performance (Class A shares) and compared its performance to the performance of:
• | the funds in the Trust’s peer group (the “Peer Group”), as selected by the independent consultant (six Arizona intermediate and long municipal bond funds, as classified by Morningstar, that charge a front-end sales charge); |
• | the funds in the Trust’s product category for performance (the “Product Category for Performance”) (all funds in the Peer Group and, without duplication, all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Trust’s benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. |
The Trustees considered that the materials included in the Consultant’s Report indicated that the Trust’s average annual total return was lower than the average annual total return of the funds in the Peer Group for each of the one and five-year periods ended June 30, 2016 but equal to or 0.01% lower than the average annual total return of the funds in the Peer Group for the three and ten-year periods ended June 30, 2016, respectively. The Trustees also considered that, as reflected in the Consultant’s Report, the Trust’s average annual total return was higher than the average annual total return of the funds in the Product Category for Performance for the one, three, five and ten-year periods ended June 30, 2016, as well as the benchmark index for each of the one, three and five year periods ended June 30, 2016. The Trustees determined that, as reflected in the Consultant’s Report, the Trust delivered above-average results on a risk-adjusted basis for the three and five year periods ended June 30, 2016 (as evidenced by its Sharpe ratio) when compared to the funds in the Product Category for Performance. The Trustees noted that, unlike the Trust’s returns, the performance of the benchmark index did not reflect any fees or expenses.
37 | Aquila Tax-Free Trust of Arizona
The Trustees discussed the Trust’s performance record with the Manager and considered the Manager’s view that the Fund’s performance, as compared to its peer group, was explained in part by the Fund’s generally higher-quality portfolio and lower duration.
The Trustees considered the Fund’s investment performance to be consistent with the investment objectives of the Fund. Evaluation of the investment performance of the Trust indicated to the Trustees that renewal of the Advisory Agreement would be appropriate.
Advisory Fees and Trust Expenses
The Trustees reviewed the Trust’s advisory fees and expenses and compared them to the advisory fee and expense data for:
• | the funds in the Peer Group (as defined above); and |
• | the funds in the product category for expenses (the “Product Category for Expenses”) (Morningstar Single-State Intermediate Municipal Bond Funds and Morningstar Single State Long Municipal Bond Funds from states within which eight or more mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Trust’s contractual advisory fee was lower than the average and median contractual advisory fee of the funds in the Peer Group (at the Trust’s current asset level) and lower than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses (at various asset levels).
The Trustees noted that the Trust’s actual management fee was higher than the average actual management fee of the funds in the Peer Group (after giving effect to fee waivers in effect for those funds) but lower than the average actual management fee of the funds in the Product Category for Expenses (after giving effect to fee waivers in effect for those funds). They noted that the Trust’s expenses were less than the average actual expenses of the funds in both the Product Category for Expenses and the Peer Group (after giving effect to fee waivers in effect for those funds).
The Trustees reviewed management fees charged by the Manager to its other clients. It was noted that the Manager does not have any other clients except for other funds in the Aquila Group of Funds. The Trustees noted that, in most instances, the fee rates for those clients were comparable to the fees paid to the Manager with respect to the Trust. In evaluating the fees associated with the other funds, the Trustees took into account the respective demands, resources and complexity associated with the Trust and those funds.
The Trustees concluded that the advisory fee and expenses of the Trust were reasonable in relation to the nature and quality of the services provided by the Manager to the Trust.
38 | Aquila Tax-Free Trust of Arizona
Profitability
The Trustees received materials from each of the Manager and the independent consultant related to profitability. The Manager provided information which showed the profitability to the Manager of its services to the Trust, as well as the profitability of Aquila Distributors LLC of distribution services provided to the Trust. The independent consultant provided publicly available data regarding the profitability of other asset managers in comparison to the overall profitability of the Manager.
The Trustees considered the information provided by the Manager regarding the profitability of the Manager with respect to the advisory services provided by the Manager to the Trust, including the methodology used by the Manager in allocating certain of its costs to the management of the Trust. The Trustees also considered information regarding the profitability of the Manager provided to the Trustees by the independent consultant. The Trustees concluded that profitability to the Manager with respect to the advisory services provided to the Trust did not argue against approval of the fees to be paid under the Advisory Agreement.
The extent to which economies of scale would be realized as the Trust grows
The Trustees considered the extent to which the Manager may realize economies of scale or other efficiencies in managing the Trust. The Trustees considered that the materials indicated that the Trust’s fees are already generally lower than those of its peers, including those with breakpoints. The Trustees noted that the Manager’s profitability also may be an indicator of the availability of any economies of scale. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Trust.
Benefits derived or to be derived by the Manager and its affiliate from the relationship with the Trust
The Trustees observed that, as is generally true of most fund complexes, the Manager and its affiliate, by providing services to a number of funds including the Trust, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that produces efficiencies and increased profitability for the Manager and its affiliate, it also makes their services available to the Trust at favorable levels of quality and cost which are more advantageous to the Trust than would otherwise have been possible.
39 | Aquila Tax-Free Trust of Arizona
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC 120
West 45th Street, Suite 3600
New York, New York 10036
Board of Trustees
John C. Lucking, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
Grady Gammage, Jr.
Glenn P. O’Flaherty
James R. Ramsey
Laureen L. White
Officers
Diana P. Herrmann, President
Charles E. Childs, III, Executive Vice President
and Secretary
Todd W. Curtis, Senior Vice President
and Portfolio Manager
Marie E. Aro, Senior Vice President
Paul G. O’Brien, Senior Vice President
Craig T. DiRuzzo, Vice President
Randall S. Fillmore, Chief Compliance Officer
Joseph P. DiMaggio, Chief Financial Officer
and Treasurer
Distributor
AQUILA DISTRIBUTORS LLC
120 West 45th Street, Suite 3600
New York, New York 10036
Transfer and Shareholder Servicing Agent
BNY MELLON INVESTMENT SERVICING (US) INC.
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
THE BANK OF NEW YORK MELLON
225 Liberty
Street New York, New York 10286
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. | SCHEDULE OF INVESTMENTS. |
Included in Item 1 above
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
The Board of Directors of the Registrant has adopted a Nominating Committee Charter which provides that the Nominating Committee (the 'Committee') may consider and evaluate nominee candidates properly submitted by shareholders if a vacancy among the Independent Trustees of the Registrant occurs and if, based on the Board's then current size, composition and structure, the Committee determines that the vacancy should be filled. The Committee will consider candidates submitted by shareholders on the same basis as it considers and evaluates candidates recommended by other sources. A copy of the qualifications and procedures that must be met or followed by shareholders to properly submit a nominee candidate to the Committee may be obtained by submitting a request in writing to the Secretary of the Registrant.
ITEM 11. | 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 filing 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 12. | EXHIBITS. |
(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 MUNICIPAL TRUST
By: | /s/ Diana P. Herrmann | |
Vice Chair, President and Trustee February 3, 2017 | ||
By: | /s/ Joseph P. DiMaggio | |
February 3, 2017 |
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/ Diana P. Herrmann | |
Diana P. Herrmann Vice Chair, President and Trustee February 3, 2017 | ||
By: | /s/ Joseph P. DiMaggio | |
Joseph P. DiMaggio Chief Financial Officer and Treasurer February 3, 2017 |
AQUILA MUNICIPAL TRUST
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.