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: 3/31/18
Date of reporting period: 9/30/18
FORM N-CSRS
ITEM 1. REPORTS TO STOCKHOLDERS.
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Semi-Annual Report September 30, 2018 | |||||||||||||||||||||||||
![]() |
Please Save the Date for Your 2019 Shareholder Meeting
Wednesday, April 17, 2019
The Olmstead, Louisville
Details will be available on our website:
www.aquilafunds.com
You may also contact your financial professional.
|
ii | Aquila Churchill Tax-Free Fund of Kentucky
![]() | Aquila Churchill Tax-Free Fund of Kentucky
“Proper Asset Allocation –A Strategy For All Seasons”
Serving Kentucky investors since 1987 | ![]() |
November, 2018
Dear Fellow Shareholder:
Financial news, and the often resulting market volatility, can cause even the most seasoned investor to ask, “What should I do now?”
We believe you will generally be in a better position to weather changing economic situations, if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs? And, have you periodically revisited your portfolio structure to make sure that your allocation remains in line with your investment goals, given changing market conditions and changes in your personal circumstances, including current risk tolerance?
Asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific needs. In developing this strategy, your considerations should include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to lose during a given time frame); |
• | financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.); and |
• | goals (the financial goals you and your family would like to achieve). |
Since the three main asset classes - equities, fixed-income, and cash/cash equivalents -have different levels of risk and return, each is expected to behave differently over time. The objective of asset allocation is to create a diversified portfolio with an acceptable level of risk and the highest possible return given that level of risk.
Although there is no simple formula that can find the right asset allocation for every individual, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
The way you allocate your investment portfolio among stocks, bonds, and cash/cash equivalents will be the principal determinants of your investment results – secondary to your selection of individual securities.
NOT A PART OF THE SEMI-ANNUAL REPORT
Once you and your financial professional have developed an appropriate asset allocation for your portfolio, we believe that changes should be made based on changing needs, not on headlines.
A properly constructed portfolio based on sound asset allocation may generally help you weather all seasons.
Sincerely,
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.
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
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (4.5%) | and Fitch | Value | |||||||
Henderson County, Kentucky | ||||||||||
$ | 330,000 | 3.000%, 11/01/20 | Aa3/NR/NR | $ | 335,607 | |||||
Lexington-Fayette Urban County, | ||||||||||
Kentucky | ||||||||||
3,600,000 | 4.000%, 09/01/29 | Aa2/AA/NR | 3,793,680 | |||||||
570,000 | 4.000%, 08/01/21 Series B | Aa2/AA/NR | 599,919 | |||||||
Rowan County, Kentucky | ||||||||||
400,000 | 3.000%, 06/01/21 AGMC Insured | A1/AA/NR | 407,188 | |||||||
835,000 | 4.000%, 06/01/30 AGMC Insured | A1/AA/NR | 871,965 | |||||||
865,000 | 4.000%, 06/01/31 AGMC Insured | A1/AA/NR | 899,133 | |||||||
Warren County, Kentucky | ||||||||||
615,000 | 4.000%, 06/01/25 | Aa2/NR/NR | 642,337 | |||||||
635,000 | 4.000%, 06/01/26 | Aa2/NR/NR | 661,886 | |||||||
660,000 | 4.000%, 06/01/27 | Aa2/NR/NR | 686,037 | |||||||
Total General Obligation Bonds | 8,897,752 | |||||||||
Revenue Bonds (91.3%) | ||||||||||
State Agency (25.1%) | ||||||||||
Kentucky Asset & Liability Commission | ||||||||||
Federal Highway Notes | ||||||||||
1,000,000 | 5.000%, 09/01/22 Series A | A2/AA/A+ | 1,050,830 | |||||||
2,000,000 | 5.250%, 09/01/25 Series A | A2/AA/A+ | 2,244,920 | |||||||
2,000,000 | 5.000%, 09/01/26 Series A | A2/AA/A+ | 2,248,660 | |||||||
1,000,000 | 5.000%, 09/01/27 Series A | A2/AA/A+ | 1,138,740 | |||||||
Kentucky Rural Water Finance Corp. | ||||||||||
355,000 | 4.600%, 02/01/25 | NR/A+/NR | 355,604 | |||||||
205,000 | 4.250%, 08/01/19 NPFG Insured | Baa2/A+/NR | 205,287 | |||||||
210,000 | 4.250%, 08/01/20 NPFG Insured | Baa2/A+/NR | 210,302 | |||||||
200,000 | 4.375%, 08/01/22 NPFG Insured | Baa2/A+/NR | 200,336 | |||||||
240,000 | 4.500%, 08/01/23 NPFG Insured | Baa2/A+/NR | 240,418 | |||||||
255,000 | 4.500%, 08/01/24 NPFG Insured | Baa2/A+/NR | 255,434 | |||||||
290,000 | 4.500%, 08/01/27 NPFG Insured | Baa2/A+/NR | 287,277 | |||||||
245,000 | 4.600%, 08/01/28 NPFG Insured | Baa2/A+/NR | 245,417 | |||||||
315,000 | 4.625%, 08/01/29 NPFG Insured | Baa2/A+/NR | 315,539 |
1 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
State Agency (continued) | ||||||||||
Kentucky Rural Water Finance Corp. | ||||||||||
(continued) | ||||||||||
$ | 375,000 | 4.000%, 02/01/28 Series 2012C | NR/A+/NR | $ | 383,198 | |||||
305,000 | 4.000%, 02/01/29 Series 2012C | NR/A+/NR | 310,978 | |||||||
435,000 | 4.000%, 02/01/26 Series 2012F | NR/A+/NR | 452,178 | |||||||
450,000 | 4.000%, 02/01/27 Series 2012F | NR/A+/NR | 466,173 | |||||||
465,000 | 4.000%, 02/01/28 Series 2012F | NR/A+/NR | 480,066 | |||||||
490,000 | 4.000%, 02/01/29 Series 2012F | NR/A+/NR | 503,524 | |||||||
Kentucky State Office Building COP | ||||||||||
2,250,000 | 4.000%, 04/15/27 | A1/NR/NR | 2,378,340 | |||||||
1,640,000 | 5.000%, 06/15/34 | A1/NR/NR | 1,798,080 | |||||||
Kentucky State Property and Buildings | ||||||||||
Commission | ||||||||||
1,000,000 | 5.000%, 10/01/25 | A1/A-/A+ | 1,107,830 | |||||||
625,000 | 4.000%, 04/01/26 Project 105 | A2/A-/A+ | 653,256 | |||||||
655,000 | 4.000%, 04/01/27 Project 105 | A2/A-/A+ | 681,528 | |||||||
1,500,000 | 5.000%, 10/01/29 Project 106 | A1/A-/A+ | 1,649,220 | |||||||
770,000 | 5.000%, 08/01/23 Project 108 | A1/A-/A+ | 851,882 | |||||||
3,000,000 | 5.000%, 08/01/33 Project 108 | A1/A-/A+ | 3,315,270 | |||||||
5,000,000 | 5.000%, 08/01/32 Project 110 | A1/A-/A+ | 5,535,150 | |||||||
2,040,000 | 5.000%, 11/01/27 Project 112 | A1/A-/A+ | 2,310,463 | |||||||
1,425,000 | 5.000%, 11/01/28 Project 112 | A1/A-/A+ | 1,605,248 | |||||||
2,500,000 | 5.000%, 02/01/31 Project 112 | A1/A-/A+ | 2,759,200 | |||||||
895,000 | 3.000%, 04/01/22 Project 113 | A2/A-/A+ | 908,094 | |||||||
1,055,000 | 2.500%, 10/01/21 Project 114 | Aa3/A-/A+ | 1,058,028 | |||||||
1,510,000 | 3.000%, 10/01/22 Project 114 | Aa3/A-/A+ | 1,539,128 | |||||||
1,400,000 | 4.000%, 10/01/30 Project 114 | Aa3/A-/A+ | 1,449,448 | |||||||
1,000,000 | 5.000%, 04/01/23 Project 115 | A1/A-/A+ | 1,101,240 | |||||||
1,000,000 | 5.000%, 04/01/29 Project 115 | A1/A-/A+ | 1,119,570 | |||||||
2,000,000 | 5.000%, 05/01/30 Project 117 | A1/NR/A+ | 2,237,940 | |||||||
500,000 | 5.000%, 05/01/36 Project 117 | A1/NR/A+ | 547,785 | |||||||
1,490,000 | 5.000%, 05/01/24 Project 119 | A1/A-/A+ | 1,658,236 | |||||||
1,015,000 | 5.000%, 05/01/25 Project 119 | A1/A-/A+ | 1,139,246 |
2 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
State Agency (continued) | ||||||||||
Kentucky State Property and Buildings | ||||||||||
Commission (continued) | ||||||||||
$ | 320,000 | 5.250%, 02/01/28 AGC Insured | NR/AA/NR | $ | 323,427 | |||||
340,000 | 5.000%, 02/01/29 AGC Insured | NR/AA/NR | 343,308 | |||||||
Total State Agency | 49,665,798 | |||||||||
Airports (7.1%) | ||||||||||
Lexington-Fayette Urban County | ||||||||||
Airport Board, Kentucky | ||||||||||
1,555,000 | 5.000%, 07/01/28 2012 Series A AMT | Aa2/AA/NR | 1,683,319 | |||||||
400,000 | 5.000%, 07/01/29 2012 Series A AMT | Aa2/AA/NR | 432,860 | |||||||
1,350,000 | 5.000%, 07/01/30 2012 Series A AMT | Aa2/AA/NR | 1,460,403 | |||||||
750,000 | 5.000%, 07/01/31 2012 Series A AMT | Aa2/AA/NR | 811,058 | |||||||
260,000 | 5.000%, 07/01/29 2016 Series B AMT | Aa2/AA/NR | 276,645 | |||||||
275,000 | 5.000%, 07/01/30 2016 Series B AMT | Aa2/AA/NR | 292,454 | |||||||
300,000 | 5.000%, 07/01/32 2016 Series B AMT | Aa2/AA/NR | 318,714 | |||||||
330,000 | 5.000%, 07/01/34 2016 Series B AMT | Aa2/AA/NR | 350,315 | |||||||
365,000 | 5.000%, 07/01/36 2016 Series B AMT | Aa2/AA/NR | 387,269 | |||||||
Louisville, Kentucky Regional Airport | ||||||||||
Authority | ||||||||||
2,070,000 | 5.000%, 07/01/23 AMT | NR/A+/A+ | 2,286,543 | |||||||
2,325,000 | 5.000%, 07/01/26 AMT | NR/A+/A+ | 2,555,803 | |||||||
2,895,000 | 5.000%, 07/01/27 Series A AMT | NR/A+/A+ | 3,166,435 | |||||||
Total Airports | 14,021,818 | |||||||||
Higher Education (10.0%) | ||||||||||
Boyle County, Kentucky College | ||||||||||
Refunding & Improvement | ||||||||||
2,050,000 | 5.000%, 06/01/28 | A3/A/NR | 2,327,201 | |||||||
1,000,000 | 5.000%, 06/01/29 | A3/A/NR | 1,127,960 | |||||||
Eastern Kentucky University General | ||||||||||
Receipts | ||||||||||
1,250,000 | 4.000%, 10/01/27 | A1/A-/NR | 1,290,287 | |||||||
1,230,000 | 5.000%, 10/01/30 Series A | A1/NR/NR | 1,391,634 | |||||||
870,000 | 4.500%, 04/01/32 Series A | A1/NR/NR | 927,455 |
3 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
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 | $ | 383,887 | |||||
390,000 | 3.000%, 03/01/21 Series D | NR/A-/NR | 394,992 | |||||||
400,000 | 3.000%, 03/01/22 Series D | NR/A-/NR | 404,464 | |||||||
Lexington-Fayette, Kentucky Urban | ||||||||||
County Government (Transylvania | ||||||||||
University Project) | ||||||||||
1,390,000 | 4.500%, 03/01/29 | NR/A-/NR | 1,440,137 | |||||||
Louisville & Jefferson County, | ||||||||||
Kentucky Metropolitan Government | ||||||||||
College Improvement (Bellarmine | ||||||||||
University Project) | ||||||||||
2,270,000 | 5.000%, 05/01/33 | Baa3/NR/NR | 2,450,533 | |||||||
Morehead State University, Kentucky | ||||||||||
General Receipts | ||||||||||
1,000,000 | 5.000%, 04/01/29 Series A | A1/NR/NR | 1,109,790 | |||||||
1,000,000 | 4.000%, 04/01/31 Series A | A1/NR/NR | 1,037,080 | |||||||
Murray State University Project, | ||||||||||
Kentucky General Receipts | ||||||||||
1,850,000 | 4.500%, 03/01/30 Series A | A1/NR/NR | 1,976,244 | |||||||
Northern Kentucky University General | ||||||||||
Receipts | ||||||||||
1,095,000 | 4.000%, 09/01/21 Series B | A1/NR/NR | 1,146,837 | |||||||
1,190,000 | 4.000%, 09/01/22 Series B | A1/NR/NR | 1,261,162 | |||||||
University of Louisville, Kentucky | ||||||||||
General Receipts | ||||||||||
1,000,000 | 5.000%, 09/01/30 2011 Series A | A3/A+/NR | 1,070,980 | |||||||
Total Higher Education | 19,740,643 | |||||||||
Hospital (14.0%) | ||||||||||
City of Ashland, Kentucky, Medical | ||||||||||
Center (Ashland Hospital Corp.) | ||||||||||
2,000,000 | 5.000%, 02/01/22 Series B | Baa2/BBB-/BBB- | 2,057,000 | |||||||
2,535,000 | 5.000%, 02/01/23 Series B | Baa2/BBB-/BBB- | 2,605,574 | |||||||
805,000 | 4.000%, 02/01/32 Series 2016A | Baa2/BBB-/BBB- | 809,033 | |||||||
1,035,000 | 4.000%, 02/01/36 Series 2016A | Baa2/BBB-/BBB- | 1,022,207 |
4 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Hospital (continued) | ||||||||||
Hardin County, Kentucky, Hardin | ||||||||||
Memorial Hospital | ||||||||||
$ | 735,000 | 5.500%, 08/01/22 AGMC Insured | A2/AA/NR | $ | 820,458 | |||||
675,000 | 5.500%, 08/01/23 AGMC Insured | A2/AA/NR | 770,870 | |||||||
500,000 | 5.250%, 08/01/24 AGMC Insured | A2/AA/NR | 562,185 | |||||||
Kentucky Economic Development | ||||||||||
Finance Authority, Kings Daughter | ||||||||||
Medical Center | ||||||||||
1,000,000 | 5.000%, 02/01/30 | Baa2/BBB-/BBB- | 1,022,430 | |||||||
Louisville & Jefferson County, | ||||||||||
Kentucky Metropolitan Government | ||||||||||
Health System, Norton Healthcare, | ||||||||||
Inc. | ||||||||||
2,710,000 | 5.000%, 10/01/27 Series A | NR/A-/A+ | 2,978,263 | |||||||
3,500,000 | 5.000%, 10/01/31 Series A | NR/A-/A+ | 3,915,240 | |||||||
Louisville & Jefferson County, Kentucky | ||||||||||
Metropolitan Government, | ||||||||||
Louisville Medical Center, Laundry | ||||||||||
Facility Project | ||||||||||
695,000 | 4.250%, 05/01/23 Series 2012 | NR/BBB+/NR | 732,586 | |||||||
Louisville & Jefferson County, Kentucky | ||||||||||
Metropolitan Government, | ||||||||||
Louisville Medical Center, Steam & | ||||||||||
Chilled Water Plant Project | ||||||||||
915,000 | 4.250%, 05/01/22 Series 2012A | NR/BBB+/NR | 959,249 | |||||||
Russell, Kentucky Bon Secours Health | ||||||||||
System | ||||||||||
3,100,000 | 5.000%, 11/01/26 Series 2013 | A2/A/A | 3,389,974 | |||||||
Warren County, Kentucky, Warren | ||||||||||
County Community Hospital Corp. | ||||||||||
4,975,000 | 5.000%, 04/01/28 | NR/A+/NR | 5,421,307 | |||||||
680,000 | 4.000%, 10/01/29 | NR/A+/NR | 700,257 | |||||||
Total Hospital | 27,766,633 | |||||||||
Housing (0.6%) | ||||||||||
Kentucky Housing Multifamily | ||||||||||
Mortgage Revenue | ||||||||||
1,230,000 | 5.000%, 06/01/35 AMT | NR/NR/NR* | 1,231,673 |
5 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Local Public Property (7.0%) | ||||||||||
Boyd County, Kentucky Capital | ||||||||||
Projects Corp., Revenue Refunding, | ||||||||||
First Mortgage, Court Facilities | ||||||||||
Project | ||||||||||
$ | 655,000 | 3.000%, 08/01/21 | A1/NR/NR | $ | 666,764 | |||||
Jefferson County, Kentucky Capital | ||||||||||
Projects | ||||||||||
1,575,000 | 4.250%, 06/01/23 AGMC Insured | A1/NR/AA+ | 1,577,977 | |||||||
1,950,000 | 4.375%, 06/01/24 AGMC Insured | A1/NR/AA+ | 1,953,880 | |||||||
1,640,000 | 4.375%, 06/01/28 AGMC Insured | A1/NR/AA+ | 1,643,050 | |||||||
2,060,000 | 4.375%, 06/01/26 Series A AGMC | |||||||||
Insured | A1/NR/AA+ | 2,063,955 | ||||||||
1,070,000 | 4.375%, 06/01/27 Series A AGMC | |||||||||
Insured | A1/NR/AA+ | 1,072,044 | ||||||||
Kentucky Association of Counties | ||||||||||
Finance Corp. Financing Program | ||||||||||
515,000 | 4.000%, 02/01/25 | NR/AA-/NR | 537,511 | |||||||
100,000 | 5.375%, 02/01/27 Series A | NR/AA-/NR | 107,550 | |||||||
100,000 | 5.375%, 02/01/28 Series A | NR/AA-/NR | 107,550 | |||||||
100,000 | 4.250%, 02/01/24 Series A | |||||||||
Unrefunded Balance | NR/AA-/NR | 103,546 | ||||||||
315,000 | 3.000%, 02/01/21 Series B | NR/AA-/NR | 320,402 | |||||||
350,000 | 4.000%, 02/01/22 Series B | NR/AA-/NR | 367,927 | |||||||
345,000 | 5.000%, 02/01/24 Series B | NR/AA-/NR | 385,410 | |||||||
365,000 | 5.000%, 02/01/25 Series B | NR/AA-/NR | 413,085 | |||||||
385,000 | 5.000%, 02/01/26 Series B | NR/AA-/NR | 439,397 | |||||||
Kentucky Bond Corp. Financing | ||||||||||
Program | ||||||||||
915,000 | 5.125%, 02/01/28 | NR/AA-/NR | 979,553 | |||||||
River City Parking Authority of River City, | ||||||||||
Inc., Kentucky First Mortgage | ||||||||||
1,000,000 | 4.750%, 06/01/27 2013 Series B | Aa3/AA/NR | 1,084,210 | |||||||
Total Local Public Property | 13,823,811 | |||||||||
School Building (12.8%) | ||||||||||
Caldwell County, Kentucky School | ||||||||||
District Finance Corp. | ||||||||||
530,000 | 4.250%, 04/01/30 | A1/NR/NR | 550,749 |
6 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
School Building (continued) | ||||||||||
Campbell County, Kentucky School | ||||||||||
District Finance Corp. | ||||||||||
$ | 340,000 | 3.500%, 08/01/22 | A1/NR/NR | $ | 349,697 | |||||
Fayette County, Kentucky School | ||||||||||
District Finance Corp. | ||||||||||
3,000,000 | 5.000%, 08/01/31 | Aa3/AA-/NR | 3,348,330 | |||||||
1,000,000 | 5.000%, 10/01/27 Series A | Aa3/AA-/NR | 1,117,750 | |||||||
750,000 | 4.250%, 06/01/29 Series A | Aa3/AA-/NR | 781,822 | |||||||
Franklin County, Kentucky School | ||||||||||
District Finance Corp. | ||||||||||
1,560,000 | 4.000%, 06/01/29 | A1/NR/NR | 1,609,858 | |||||||
1,135,000 | 4.000%, 04/01/24 Second Series | A1/NR/NR | 1,214,109 | |||||||
Jefferson County, Kentucky School | ||||||||||
District Finance Corp. | ||||||||||
1,000,000 | 3.000%, 07/01/22 Series A | Aa3/AA-/NR | 1,022,800 | |||||||
805,000 | 5.000%, 04/01/28 Series A | Aa3/AA-/NR | 903,951 | |||||||
1,075,000 | 4.500%, 04/01/32 Series A | Aa3/AA-/NR | 1,140,199 | |||||||
4,000,000 | 4.000%, 07/01/26 Series B | Aa3/AA-/NR | 4,215,480 | |||||||
1,655,000 | 4.000%, 11/01/29 Series C | Aa3/AA-/NR | 1,719,744 | |||||||
Logan County, Kentucky School | ||||||||||
District Finance Corp., Energy | ||||||||||
Conservation Revenue Bonds | ||||||||||
575,000 | 4.000%, 04/01/33 Series 2016 | A1/NR/NR | 594,584 | |||||||
615,000 | 4.000%, 04/01/34 Series 2016 | A1/NR/NR | 633,487 | |||||||
Shelby County, Kentucky School District | ||||||||||
Finance Corp. School Building | ||||||||||
3,200,000 | 4.000%, 02/01/28 | A1/NR/NR | 3,419,616 | |||||||
2,440,000 | 4.000%, 02/01/29 | A1/NR/NR | 2,585,326 | |||||||
Total School Building | 25,207,502 | |||||||||
Student Loan (1.9%) | ||||||||||
Kentucky Higher Education Student Loan | ||||||||||
1,440,000 | 5.000%, 06/01/22 Senior Series A AMT | NR/A/A | 1,535,558 | |||||||
400,000 | 5.000%, 06/01/24 Senior Series A AMT | NR/A/A | 434,204 | |||||||
600,000 | 5.000%, 06/01/26 Senior Series A AMT | NR/A/A | 659,592 | |||||||
235,000 | 3.750%, 06/01/26 Senior Series A AMT | NR/A/A | 236,382 | |||||||
810,000 | 3.000%, 06/01/29 Senior Series A AMT | NR/A/A | 806,209 | |||||||
Total Student Loan | 3,671,945 |
7 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Turnpike/Highway (8.2%) | ||||||||||
Kentucky State Turnpike Authority | ||||||||||
$ | 5,000,000 | 5.000%, 07/01/29 Series A | Aa3/A-/A+ | $ | 5,438,700 | |||||
4,030,000 | 5.000%, 07/01/30 Series A | Aa3/A-/A+ | 4,547,694 | |||||||
1,000,000 | 5.000%, 07/01/30 Series A | Aa3/A-/A+ | 1,086,990 | |||||||
1,715,000 | 5.000%, 07/01/31 Series B | Aa3/A-/NR | 1,934,040 | |||||||
2,925,000 | 5.000%, 07/01/33 Series B | Aa3/A-/NR | 3,279,335 | |||||||
Total Turnpike/Highway | 16,286,759 | |||||||||
Utilities (4.6%) | ||||||||||
Campbell & Kenton Counties, | ||||||||||
Kentucky (Sanitation District) | ||||||||||
2,370,000 | 4.000%, 08/01/27 | Aa3/AA/NR | 2,418,632 | |||||||
Kentucky State Municipal Power | ||||||||||
Agency, Prairie St. Project | ||||||||||
1,000,000 | 5.000%, 09/01/23 AGMC Insured | A2/AA/NR | 1,050,250 | |||||||
Louisville & Jefferson County, | ||||||||||
Kentucky Metropolitan Sewer | ||||||||||
District | ||||||||||
500,000 | 5.000%, 05/15/28 Series A | Aa3/AA/AA- | 539,460 | |||||||
1,920,000 | 4.500%, 05/15/30 Series A | Aa3/AA/NR | 2,060,966 | |||||||
Northern Kentucky Water District | ||||||||||
1,000,000 | 5.000%, 02/01/26 | Aa3/NR/NR | 1,080,050 | |||||||
Owensboro, Kentucky Electric, Light | ||||||||||
and Power | ||||||||||
1,805,000 | 5.000%, 01/01/26 AGMC Insured | |||||||||
Series B | A2/AA/NR | 1,862,706 | ||||||||
Total Utilities | 9,012,064 | |||||||||
Total Revenue Bonds | 180,428,646 |
8 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Pre-RefundedObligationBonds (2.4%)†† | and Fitch | Value | |||||||
Pre-Refunded Revenue Bonds (2.4%) | ||||||||||
State Agency (0.1%) | ||||||||||
Kentucky State Property and Buildings | ||||||||||
Commission | ||||||||||
$ | 170,000 | 5.375%, 11/01/23 | A1/A-/NR | $ | 170,491 | |||||
85,000 | 5.500%, 11/01/28 | A1/A-/NR | 85,254 | |||||||
Total State Agency | 255,745 | |||||||||
Hospital (1.0%) | ||||||||||
Louisville & Jefferson County, Kentucky | ||||||||||
Metropolitan Government Revenue, | ||||||||||
Catholic Health Initiatives | ||||||||||
1,715,000 | 5.000%, 12/01/35 | NR/NR/NR* | 1,887,546 | |||||||
Local Public Property (0.3%) | ||||||||||
Kentucky Association of Counties | ||||||||||
Finance Corp. Financing Program | ||||||||||
215,000 | 5.375%, 02/01/27 Series A | NR/NR/NR* | 231,233 | |||||||
230,000 | 5.375%, 02/01/28 Series A | NR/NR/NR* | 247,365 | |||||||
Total Local Public Property | 478,598 | |||||||||
Turnpike/Highway (0.5%) | ||||||||||
Kentucky State Turnpike Authority | ||||||||||
1,000,000 | 5.000%, 07/01/25 | Aa3/A-/A+ | 1,022,340 | |||||||
Utilities (0.5%) | ||||||||||
Owensboro, Kentucky Electric, Light | ||||||||||
and Power | ||||||||||
1,000,000 | 5.000%, 01/01/21 AGMC Insured | A2/AA/NR | 1,037,750 | |||||||
Total Pre-Refunded Revenue Bonds | 4,681,979 | |||||||||
Total Pre-Refunded Bonds | 4,681,979 | |||||||||
Total Municipal Bonds (cost $193,638,243) | 194,008,377 |
9 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||||
Moody's, S&P | ||||||||||||
Shares | Short-Term Investment (0.8%) | and Fitch | Value | |||||||||
Dreyfus Treasury & Agency Cash | ||||||||||||
Management - Institutional Shares, | ||||||||||||
1,516,929 | 1.96%** (cost $1,516,929) | Aaa-mf/AAAm/NR | $ | 1,516,929 | ||||||||
Total Investments | ||||||||||||
(cost $195,155,172-note 4) | 99.0% | 195,525,306 | ||||||||||
Other assets less liabilities | 1.0 | 2,020,156 | ||||||||||
Net Assets | 100.0% | $ | 197,545,462 |
Percentage of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Pre-refunded bonds†† | 2.4 | % | ||
Aa of Moody's or AA of S&P or Fitch | 41.9 | |||
A of Moody's or S&P or Fitch | 49.1 | |||
Baa of Moody's or BBB of S&P | 6.0 | |||
Not Rated* | 0.6 | |||
100.0 | % |
PORTFOLIO ABBREVIATIONS |
AGC - Assured Guaranty Corp. |
AGMC - Assured Guaranty Municipal Corp. |
AMT - Alternative Minimum Tax |
COP - Certificates of Participation |
NPFG - National Public Finance Guarantee |
NR - Not Rated |
10 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (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 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 NRSROs. Percentages in this table do not include the Short-Term Investment. | |
†† | Pre-refunded bonds are bonds for which U.S. Government Obligations usually have been placed inescrow to retire the bonds at their earliest call date. |
See accompanying notes to financial statements.
11 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2018 (unaudited)
ASSETS | ||||
Investments at value (cost $195,155,172) | $ | 195,525,306 | ||
Interest recievable | 2,429,772 | |||
Receivable for Fund Shares sold | 61,348 | |||
Other assets | 15,689 | |||
Total assets | 198,032,115 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 283,405 | |||
Dividends payable | 99,626 | |||
Management fee payable | 65,511 | |||
Distribution and service fees payable | 1,309 | |||
Accrued expenses payable | 36,802 | |||
Total liabilities | 486,653 | |||
NET ASSETS . | $ | 197,545,462 | ||
Net Assets consist of: | ||||
Capital Stock – Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 189,954 | ||
Additional paid-in capital | 196,586,906 | |||
Net unrealized appreciation on investments (note 4) | 370,134 | |||
Accumulated net realized gain on investments | 327,840 | |||
Undistributed net investment income | 70,628 | |||
$ | 197,545,462 | |||
CLASS A | ||||
Net Assets | $ | 149,605,578 | ||
Capital shares outstanding | 14,386,452 | |||
Net asset value and redemption price per share | $ | 10.40 | ||
Maximum offering price per share (100/96 of $10.40) | $ | 10.83 | ||
CLASS C | ||||
Net Assets | $ | 7,887,847 | ||
Capital shares outstanding | 758,902 | |||
Net asset value and offering price per share | $ | 10.39 | ||
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) | $ | 10.39 | * | |
CLASS I | ||||
Net Assets | $ | 6,556,866 | ||
Capital shares outstanding | 630,788 | |||
Net asset value, offering and redemption price per share | $ | 10.39 | ||
CLASS Y | ||||
Net Assets | $ | 33,495,171 | ||
Capital shares outstanding | 3,219,269 | |||
Net asset value, offering and redemption price per share | $ | 10.40 |
See accompanying notes to financial statements.
12 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER, 30, 2018 (unaudited)
Investment Income | ||||||||
Interest income | $ | 3,270,621 | ||||||
Expenses | ||||||||
Management fee (note 3) | $ | 420,071 | ||||||
Distribution and service fee (note 3) | 162,834 | |||||||
Legal fees | 51,220 | |||||||
Transfer and shareholder servicing agent fees (note 3) | 49,667 | |||||||
Trustees’ fees and expenses (note 7) | 38,356 | |||||||
Fund accounting fees | 21,793 | |||||||
Shareholders’ reports | 16,061 | |||||||
Registration fees and dues | 14,920 | |||||||
Auditing and tax fees | 10,910 | |||||||
Chief compliance officer services (note 3) | 5,572 | |||||||
Custodian fees | 5,312 | |||||||
Insurance | 4,864 | |||||||
Miscellaneous | 30,858 | |||||||
Total expenses | 832,438 | |||||||
Net investment income | 2,438,183 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | 34,867 | |||||||
Change in unrealized appreciation on | ||||||||
investments | (1,546,804 | ) | ||||||
Net realized and unrealized gain (loss) | ||||||||
on investments | (1,511,937 | ) | ||||||
Net change in net assets resulting from operations | $ | 926,246 |
See accompanying notes to financial statements.
13 | 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, 2018 | Year Ended | |||||||
(unaudited) | March 31, 2018 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,438,183 | $ | 5,990,401 | ||||
Realized gain (loss) from securities transactions | 34,867 | 321,862 | ||||||
Change in unrealized appreciation on | ||||||||
investments | (1,546,804 | ) | (1,436,966 | ) | ||||
Change in net assets resulting from operations | 926,246 | 4,875,297 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (1,816,148 | ) | (4,384,286 | ) | ||||
Net realized gain on investments | — | (104,842 | ) | |||||
Class C Shares: | ||||||||
Net investment income | (63,639 | ) | (153,215 | ) | ||||
Net realized gain on investments | — | (6,009 | ) | |||||
Class I Shares: | ||||||||
Net investment income | (79,158 | ) | (186,457 | ) | ||||
Net realized gain on investments | — | (4,557 | ) | |||||
Class Y Shares: | ||||||||
Net investment income | (476,389 | ) | (1,258,038 | ) | ||||
Net realized gain on investments | — | (28,264 | ) | |||||
Change in net assets from distributions | (2,435,334 | ) | (6,125,668 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 5,276,549 | 16,092,109 | ||||||
Reinvested dividends and distributions | 1,739,774 | 4,113,013 | ||||||
Cost of shares redeemed | (28,202,078 | ) | (52,039,775 | ) | ||||
Change in net assets from capital share | ||||||||
transactions | (21,185,755 | ) | (31,834,653 | ) | ||||
Change in net assets | (22,694,843 | ) | (33,085,024 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 220,240,305 | 253,325,329 | ||||||
End of period* | $ | 197,545,462 | $ | 220,240,305 | ||||
*Includes undistributed net investment of: | $ | 70,628 | $ | 67,779 |
See accompanying notes to financial statements.
14 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018 (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. As of the date of this report, there were no Class F Shares or Class T 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 ask 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: |
15 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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, 2018: |
Valuation Inputs* | Investments in Securities | |||
Level 1 – Quoted Prices — Short-Term Investment | $ | 1,516,929 | ||
Level 2 – Other Significant Observable | ||||
Inputs — Municipal Bonds | 194,008,377 | |||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 195,525,306 |
* 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 (2015 –2017) or expected to be taken in the Fund’s 2018 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. |
16 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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, 2018, the Fund increased additional paid-in capital by $19,794, increased undistributed net investment income by $9,049, and decreased accumulated realized gain by $28,843. 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 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.
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, as amended (the “1940 Act”).
17 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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 1940 Act. 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, 2018, distribution fees on Class A Shares amounted to $116,294 of which the Distributor retained $4,172.
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, 2018, amounted to $32,169. 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, 2018, amounted to $10,723. For the six months ended September 30, 2018, the total of these payments with respect to Class C Shares amounted to $42,892 of which the Distributor retained $10,184.
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, 2018, these payments were made at the average annual rate of 0.35% of such net assets and amounted to $12,768 of which $3,648 related to the Plan and $9,120 related to the Shareholder Services Plan.
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 (“financial intermediaries”), the Fund’s shares are sold primarily through the facilities of these financial intermediaries having offices within Kentucky, with the bulk of any sales commissions inuring to such financial intermediaries. For the six months ended September 30, 2018, total commissions on sales of Class A Shares amounted to $22,568 of which the Distributor received $2,190.
18 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
c) Transfer and shareholder servicing fees:
The Fund occasionally compensates financial intermediaries in connection with the sub-transfer agency related services provided by such entities in connection with their respective Fund shareholders so long as the fees are deemed by the Board of Trustees to be reasonable in relation to (i) the value of the services and the benefits received by the Fund and certain shareholders; and (ii) the payments that the Fund would make to another entity to perform similar ongoing services to existing shareholders.
4. Purchases and Sales of Securities
During the six months ended September 30, 2018, purchases of securities and proceeds from the sales of securities aggregated $9,336,905 and $30,129,131, respectively.
At September 30, 2018, the aggregate tax cost for all securities was $195,155,172. At September 30, 2018, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $2,035,231 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $1,665,097 for a net unrealized appreciation of $370,134.
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. At September 30, 2018, the Fund had all of its net assets invested in municipal obligations of issuers within Kentucky.
19 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2018 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares sold | 192,922 | $ | 2,017,706 | 781,073 | $ | 8,316,149 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 132,137 | 1,381,543 | 320,995 | 3,411,806 | ||||||||||||
Cost of shares redeemed | (1,251,961 | ) | (13,097,303 | ) | (3,312,373 | ) | (35,245,019 | ) | ||||||||
Net change | (926,902 | ) | (9,698,054 | ) | (2,210,305 | ) | (23,517,064 | ) | ||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 34,357 | 358,164 | 209,351 | 2,220,473 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 5,359 | 55,981 | 13,314 | 141,387 | ||||||||||||
Cost of shares redeemed | (164,153 | ) | (1,714,580 | ) | (205,544 | ) | (2,175,228 | ) | ||||||||
Net change | (124,437 | ) | (1,300,435 | ) | 17,121 | 186,632 | ||||||||||
Class I Shares: | ||||||||||||||||
Proceeds from shares sold | 1,912 | 20,000 | 8,186 | 86,410 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 7,415 | 77,469 | 17,836 | 189,349 | ||||||||||||
Cost of shares redeemed | (78,552 | ) | (816,611 | ) | (122,315 | ) | (1,307,934 | ) | ||||||||
Net change | (69,225 | ) | (719,142 | ) | (96,293 | ) | (1,032,175 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold. | 276,073 | 2,880,679 | 513,865 | 5,469,077 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 21,495 | 224,781 | 34,917 | 370,471 | ||||||||||||
Cost of shares redeemed | (1,200,985 | ) | (12,573,584 | ) | (1,251,604 | ) | (13,311,594 | ) | ||||||||
Net change | (903,417 | ) | (9,468,124 | ) | (702,822 | ) | (7,472,046 | ) | ||||||||
Total transactions in Fund | ||||||||||||||||
shares | (2,023,981 | ) | $ | (21,185,755 | ) | (2,992,299 | ) | $ | (31,834,653 | ) |
7. Trustees’ Fees and Expenses
At September 30, 2018, there were 8 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, 2018 was $32,435. 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, 2018, such meeting-related expenses amounted to $5,921.
20 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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 or in cash, 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.
21 | Aquila Churchill Tax-Free Fund of Kentucky
AQUILA CHURCHILL TAX-FREE FUND OF KENTUCKY
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
The tax character of distributions was as follows:
Year Ended | Year Ended | |||||||
March 31, 2018 | March 31, 2017 | |||||||
Net tax-exempt income | $ | 5,934,332 | $ | 6,914,503 | ||||
Ordinary Income | 47,664 | 25,821 | ||||||
Capital gains | 143,672 | — | ||||||
$ | 6,125,668 | $ | 6,940,324 |
As of March 31, 2018, the components of distributable earnings on a tax basis were:
Accumulated net realized gain | $ | 292,973 | ||||||
Unrealized appreciation | 1,921,821 | |||||||
Undistributed tax-exempt income | 204,180 | |||||||
Other temporary differences | (141,284 | ) | ||||||
$ | 2,277,690 |
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 and the deduction of distributions payable.
10. Credit Facility
The Bank of New York Mellon and the Aquila Group of Funds have been parties to a $40 million credit agreement, which currently terminates on August 28, 2019 (per the August 29, 2018 amendment). In accordance with the Aquila Group of Funds Guidelines for Allocation of Committed Line of Credit (the Aquila Group of Funds is comprised of nine funds), each fund is responsible for payment of its proportionate share of
a) | a 0.17% per annum commitment fee; and, |
b) | interest on amounts borrowed for temporary or emergency purposes by the Fund (at the applicable rate selected by the Aquila Group of Funds at the time of the borrowing of either (i) the one-month Eurodollar Rate or (ii) a rate equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day, or (c) the Overnight Eurodollar Rate in effect on such day). |
There were no borrowings under the credit agreement for the six months ended September 30, 2018.
22 | 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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.48 | $ | 10.55 | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.97 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.12 | 0.26 | 0.29 | 0.32 | 0.33 | 0.34 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.08 | ) | (0.06 | ) | (0.33 | ) | (0.03 | ) | 0.26 | (0.32 | ) | |||||||||||||
Total from investment operations | 0.04 | 0.20 | (0.04 | ) | 0.29 | 0.59 | 0.02 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.26 | ) | (0.29 | ) | (0.32 | ) | (0.33 | ) | (0.34 | ) | ||||||||||||
Distributions from capital gains | — | (0.01 | ) | — | — | — | — | |||||||||||||||||
Total distributions | (0.12 | ) | (0.27 | ) | (0.29 | ) | (0.32 | ) | (0.33 | ) | (0.34 | ) | ||||||||||||
Net asset value, end of period | $ | 10.40 | $ | 10.48 | $ | 10.55 | $ | 10.88 | $ | 10.91 | $ | 10.65 | ||||||||||||
Total return (not reflecting sales charge) | 0.40 | %(3) | 1.89 | % | (0.40 | )% | 2.75 | % | 5.61 | % | 0.21 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 150 | $ | 160 | $ | 185 | $ | 189 | $ | 187 | $ | 188 | ||||||||||||
Ratio of expenses to average net assets | 0.78 | %(4) | 0.75 | % | 0.73 | % | 0.73 | % | 0.78 | % | 0.80 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.33 | %(4) | 2.48 | % | 2.69 | % | 3.00 | % | 3.07 | % | 3.18 | %(2) | ||||||||||||
Portfolio turnover rate | 5 | %(3) | 9 | % | 27 | % | 7 | % | 14 | % | 9 | % |
_______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
23 | 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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.47 | $ | 10.54 | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.96 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.08 | 0.17 | 0.20 | 0.23 | 0.24 | 0.25 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.08 | ) | (0.06 | ) | (0.33 | ) | (0.03 | ) | 0.26 | (0.32 | ) | |||||||||||||
Total from investment operations | — | 0.11 | (0.13 | ) | 0.20 | 0.50 | (0.07 | ) | ||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.17 | ) | (0.20 | ) | (0.23 | ) | (0.24 | ) | (0.25 | ) | ||||||||||||
Distributions from capital gains | — | (0.01 | ) | — | — | — | — | |||||||||||||||||
Total distributions | (0.08 | ) | (0.18 | ) | (0.20 | ) | (0.23 | ) | (0.24 | ) | (0.25 | ) | ||||||||||||
Net asset value, end of period | $ | 10.39 | $ | 10.47 | $ | 10.54 | $ | 10.87 | $ | 10.90 | $ | 10.64 | ||||||||||||
Total return (not reflecting CDSC) | (0.02 | )%(3) | 1.03 | % | (1.24 | )% | 1.88 | % | 4.72 | % | (0.64 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 8 | $ | 9 | $ | 9 | $ | 10 | $ | 10 | $ | 10 | ||||||||||||
Ratio of expenses to average net assets | 1.63 | %(4) | 1.60 | % | 1.58 | % | 1.58 | % | 1.63 | % | 1.65 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.48 | %(4) | 1.63 | % | 1.84 | % | 2.14 | % | 2.21 | % | 2.33 | %(2) | ||||||||||||
Portfolio turnover rate | 5 | %(3) | 9 | % | 27 | % | 7 | % | 14 | % | 9 | % |
_______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
24 | 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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.47 | $ | 10.54 | $ | 10.87 | $ | 10.90 | $ | 10.64 | $ | 10.97 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.11 | 0.25 | 0.27 | 0.31 | 0.32 | 0.32 | ||||||||||||||||||
Net gain on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.08 | ) | (0.07 | ) | (0.33 | ) | (0.03 | ) | 0.26 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.03 | 0.18 | (0.06 | ) | 0.28 | 0.58 | (0.01 | ) | ||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.24 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | ||||||||||||
Distributions from capital gains | — | (0.01 | ) | — | — | — | — | |||||||||||||||||
Total distributions | (0.11 | ) | (0.25 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | ||||||||||||
Net asset value, end of period | $ | 10.39 | $ | 10.47 | $ | 10.54 | $ | 10.87 | $ | 10.90 | $ | 10.64 | ||||||||||||
Total return | 0.32 | %(3) | 1.74 | % | (0.55 | )% | 2.61 | % | 5.46 | % | (0.05 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 7 | $ | 7 | $ | 8 | $ | 9 | $ | 8 | $ | 7 | ||||||||||||
Ratio of expenses to average net assets | 0.94 | %(4) | 0.90 | % | 0.87 | % | 0.87 | % | 0.92 | % | 0.96 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.17 | %(4) | 2.33 | % | 2.54 | % | 2.86 | % | 2.93 | % | 3.02 | %(2) | ||||||||||||
Portfolio turnover rate | 5 | %(3) | 9 | % | 27 | % | 7 | % | 14 | % | 9 | % |
_______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
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 Y | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.48 | $ | 10.55 | $ | 10.88 | $ | 10.91 | $ | 10.65 | $ | 10.98 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.28 | 0.31 | 0.34 | 0.35 | 0.35 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.08 | ) | (0.06 | ) | (0.34 | ) | (0.03 | ) | 0.26 | (0.33 | ) | |||||||||||||
Total from investment operations | 0.05 | 0.22 | (0.03 | ) | 0.31 | 0.61 | 0.02 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.28 | ) | (0.30 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | ||||||||||||
Distributions from capital gains | — | (0.01 | ) | — | — | — | — | |||||||||||||||||
Total distributions | (0.13 | ) | (0.29 | ) | (0.30 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | ||||||||||||
Net asset value, end of period | $ | 10.40 | $ | 10.48 | $ | 10.55 | $ | 10.88 | $ | 10.91 | $ | 10.65 | ||||||||||||
Total return | 0.48 | %(3) | 2.04 | % | (0.25 | )% | 2.92 | % | 5.77 | % | 0.27 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 33 | $ | 43 | $ | 51 | $ | 47 | $ | 32 | $ | 29 | ||||||||||||
Ratio of expenses to average net assets | 0.63 | %(4) | 0.60 | % | 0.58 | % | 0.58 | % | 0.63 | % | 0.65 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.49 | %(4) | 2.63 | % | 2.84 | % | 3.15 | % | 3.21 | % | 3.33 | %(2) | ||||||||||||
Portfolio turnover rate | 5 | %(3) | 9 | % | 27 | % | 7 | % | 14 | % | 9 | % |
_______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
26 | 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, 2018. The independent Trustees met telephonically on August 13, 2018 and in person on September 15, 2018 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. The Trustees also discussed the memorandum provided by Fund counsel that summarized the legal standards and other considerations that are relevant to the Trustees in their deliberations regarding the renewal of the Advisory Agreement.
At the meeting held on September 15, 2018, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Fund present at the meeting, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2019. 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 Messrs. Royden Durham, Tony Tanner and James Thompson as portfolio managers for the Fund and has established facilities and capabilities for credit analysis of the Fund’s portfolio securities. The Trustees noted that Mr. Tanner replaced Mr. Todd Curtis, as a portfolio manager, upon Mr. Curtis’ retirement effective April 30, 2018, and further noted that Mr. Tanner is a 30-year veteran in the financial services industry. They considered that Mr. Durham, the Fund’s lead portfolio manager, 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.
27 | 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 (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Bloomberg Barclays 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 each of the one and ten-year periods ended June 30, 2018, but lower than the average annual total return of the funds in the Peer Group for the three and five-year period ended June 30, 2018. 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 one, three, five and ten-year periods ended June 30, 2018. The Trustees further considered that the Fund outperformed its benchmark index for the one, five and ten year-periods but underperformed its benchmark index for the three-year period, all as of June 30, 2018. 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 also considered that the Fund invests primarily in municipal obligations issued by the Commonwealth of Kentucky, its counties and various other local authorities, while the funds in the Product Category for Performance invest in, and the Fund’s benchmark index includes, municipal bonds of issuers throughout the United States. The Trustees also noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees or expenses.
28 | Aquila Churchill Tax-Free Fund of Kentucky
In addition, the Trustees considered that, as reflected in the Consultant’s Report, the Fund’s standard deviation, a measure of volatility, was in the first quintile relative to the funds in the Product Category for Performance for the three and five-year periods ended June 30, 2018. The Trustees further noted that the Fund’s Sharpe ratio was in the second quintile for the three-year period and first quintile for the five-year period, both ended June 30, 2018, when compared to the funds in the Product Category for Performance. A Sharpe ratio is a measure for calculating risk-adjusted return. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance.
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 up to $5 billion). They also noted that the Fund’s actual 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.
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.
29 | Aquila Churchill Tax-Free Fund of Kentucky
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.
30 | Aquila Churchill Tax-Free Fund of Kentucky
Your Fund’s Expenses (unaudited)
As a Fund shareholder, 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 assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The 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 that 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”.
Hypothetical Example for Comparison with Other Funds
Under the heading, “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||
(actual return after expenses) | (5% annual return before expenses) | |||||
Expenses(2) | Expenses(2) | |||||
Beginning | Ending(1) | Paid During | Ending | Paid During | Net | |
Account | Account | Period | Account | Period | Annualized | |
Share | Value | Value | 4/1/18 – | Value | 4/1/18 – | Expense |
Class | 4/1/18 | 9/30/18 | 9/30/18 | 9/30/18 | 9/30/18 | Ratio |
A | $1,000 | $1,004.00 | $3.92 | $1,021.16 | $3.95 | 0.78% |
C | $1,000 | $ 999.80 | $8.17 | $1,016.90 | $8.24 | 1.63% |
I | $1,000 | $1,003.20 | $4.72 | $1,020.36 | $4.76 | 0.94% |
Y | $1,000 | $1,004.80 | $3.17 | $1,021.91 | $3.19 | 0.63% |
(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 or the applicable CDSC with respect to Class C shares. Total return is not annualized and as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio for the six-month period as indicated above - in the far right column - multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. |
31 | 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 1-800-437-1000.
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, 2018, there were no proxies related to any portfolio instruments held by the Fund. As such, 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, 2018, $5,934,332 of dividends paid by Aquila Churchill Tax-Free Fund of Kentucky, constituting 96.9% of total dividends paid, were exempt-interest dividends; $143,672 of dividends paid by the Fund constituting 2.3% of total dividends paid were capital gains distributions and the balance was ordinary income.
Prior to February 15, 2019, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2018 calendar year.
32 | 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
Thomas A. Christopher, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
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
Royden P. Durham, Vice President
and Lead Portfolio Manager
Anthony A. Tanner, Vice President
and Portfolio Manager
James T. Thompson, Vice President and
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, 2018 | |||||||||||||||||||||||||
![]() |
Please Save the Date for Your 2019 Shareholder Meeting
Tuesday, March 19, 2019
Rhode Island Convention Center
Details will be available on our website as the date approaches:
www.aquilafunds.com
You may also contact your financial professional.
|
ii | Aquila Narragansett Tax-Free Income Fund
![]() | Aquila Narragansett Tax-Free Income Fund
“Proper Asset Allocation –A Strategy For All Seasons”
Serving Rhode Island investors since 1992 | ![]() |
November, 2018
Dear Fellow Shareholder:
Financial news, and the often resulting market volatility, can cause even the most seasoned investor to ask, “What should I do now?”
We believe you will generally be in a better position to weather changing economic situations, if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs? And, have you periodically revisited your portfolio structure to make sure that your allocation remains in line with your investment goals, given changing market conditions and changes in your personal circumstances, including current risk tolerance?
Asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific needs. In developing this strategy, your considerations should include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to lose during a given time frame); |
• | financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.); and |
• | goals (the financial goals you and your family would like to achieve). |
Since the three main asset classes - equities, fixed-income, and cash/cash equivalents -have different levels of risk and return, each is expected to behave differently over time. The objective of asset allocation is to create a diversified portfolio with an acceptable level of risk and the highest possible return given that level of risk.
Although there is no simple formula that can find the right asset allocation for every individual, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
The way you allocate your investment portfolio among stocks, bonds, and cash/cash equivalents will be the principal determinants of your investment results – secondary to your selection of individual securities.
NOT A PART OF THE SEMI-ANNUAL REPORT
Once you and your financial professional have developed an appropriate asset allocation for your portfolio, we believe that changes should be made based on changing needs, not on headlines.
A properly constructed portfolio based on sound asset allocation may generally help you weather all seasons.
Sincerely,
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. Interest rates in the U.S. have begun to rise after having been at historical lows for some time, so the Fund faces a heightened risk that interest rates may continue to 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.
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.
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
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (28.1%) | and Fitch | Value | |||||||
Barrington, Rhode Island | ||||||||||
$ | 1,120,000 | 2.500%, 08/01/25 | Aa1/NR/NR | $ | 1,115,789 | |||||
Bristol, Rhode Island | ||||||||||
865,000 | 3.500%, 08/01/31 | NR/AA+/NR | 888,926 | |||||||
Coventry, Rhode Island | ||||||||||
1,605,000 | 3.625%, 03/15/27 MAC Insured | A1/AA/NR | 1,676,856 | |||||||
Cranston, Rhode Island | ||||||||||
1,325,000 | 4.000%, 07/01/28 | A1/AA-/AA+ | 1,409,336 | |||||||
750,000 | 4.300%, 07/01/30 Series 2010 A | |||||||||
AGMC Insured | A1/AA/AA+ | 766,057 | ||||||||
1,170,000 | 5.000%, 08/01/32 Series 2018 A | A1/AA-/AA+ | 1,345,313 | |||||||
1,515,000 | 4.250%, 07/15/24 Series B BAMI | |||||||||
Insured | A1/AA/AA+ | 1,642,502 | ||||||||
1,000,000 | 4.250%, 07/15/25 Series B BAMI | |||||||||
Insured | A1/AA/AA+ | 1,092,250 | ||||||||
Cumberland, Rhode Island | ||||||||||
500,000 | 4.250%, 11/01/27 Series 2011 A | NR/AA+/NR | 527,455 | |||||||
500,000 | 4.625%, 11/01/31 Series 2011 A | NR/AA+/NR | 531,000 | |||||||
700,000 | 4.500%, 03/15/32 Series 2018 A | NR/AA+/NR | 780,976 | |||||||
East Providence, Rhode Island | ||||||||||
Refunding | ||||||||||
2,500,000 | 4.550%, 05/15/30 AGMC Insured | A2/AA/NR | 2,567,525 | |||||||
Hopkinton, Rhode Island | ||||||||||
500,000 | 4.375%, 08/15/31 | Aa3/NR/NR | 522,540 | |||||||
Johnston, Rhode Island | ||||||||||
1,020,000 | 3.450%, 06/01/29 Series A | A3/AA-/NR | 1,030,057 | |||||||
1,020,000 | 3.700%, 06/01/33 Series A | A3/AA-/NR | 1,032,617 | |||||||
Lincoln, Rhode Island | ||||||||||
1,500,000 | 3.500%, 08/01/24 Series A | Aa2/NR/AAA | 1,578,375 | |||||||
2,225,000 | 3.500%, 08/01/25 Series A | Aa2/NR/AAA | 2,340,967 | |||||||
Narragansett, Rhode Island | ||||||||||
1,025,000 | 3.500%, 07/15/28 | Aa2/AA+/NR | 1,069,741 | |||||||
North Kingstown, Rhode Island | ||||||||||
1,040,000 | 3.000%, 04/15/24 Series A | Aa2/AA+/NR | 1,059,136 | |||||||
North Smithfield, Rhode Island | ||||||||||
825,000 | 3.000%, 06/15/26 Series A | Aa2/NR/NR | 842,663 |
1 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
Pawtucket, Rhode Island | ||||||||||
$ | 1,950,000 | 4.500%, 07/15/26 AGC Insured | A3/AA/NR | $ | 1,979,191 | |||||
1,500,000 | 4.750%, 07/15/29 AGC Insured | A3/AA/NR | 1,524,885 | |||||||
1,010,000 | 4.000%, 11/01/25 AGMC Insured | A2/AA/NR | 1,071,681 | |||||||
Portsmouth, Rhode Island | ||||||||||
1,140,000 | 3.750%, 02/01/31 Series A | Aa2/AAA/NR | 1,196,567 | |||||||
Providence, Rhode Island | ||||||||||
1,500,000 | 5.000%, 01/15/23 Series 2010 A | |||||||||
AGMC Insured Refunding | A2/AA/NR | 1,576,950 | ||||||||
1,500,000 | 5.000%, 01/15/26 Series 2010 A | |||||||||
AGMC Insured Refunding | A2/AA/NR | 1,569,465 | ||||||||
975,000 | 3.625%, 01/15/29 Series A AGMC | |||||||||
Insured | A2/AA/A- | 980,548 | ||||||||
2,510,000 | 3.750%, 01/15/30 Series A AGMC | |||||||||
Insured | A2/AA/A- | 2,527,695 | ||||||||
1,000,000 | 3.750%, 01/15/32 Series A AGMC | |||||||||
Insured | A2/AA/A- | 1,001,920 | ||||||||
Rhode Island State & Providence | ||||||||||
Plantations Consolidated Capital | ||||||||||
Development Loan | ||||||||||
2,000,000 | 3.750%, 11/01/23 Series A | Aa2/AA/AA | 2,130,360 | |||||||
2,110,000 | 4.250%, 10/15/25 Series A | Aa2/AA/AA | 2,293,064 | |||||||
2,000,000 | 3.000%, 05/01/31 Series A | Aa2/AA/AA | 1,874,340 | |||||||
2,000,000 | 4.000%, 04/01/32 Series A | Aa2/AA/AA | 2,110,000 | |||||||
2,000,000 | 3.000%, 05/01/32 Series A | Aa2/AA/AA | 1,867,800 | |||||||
1,150,000 | 4.000%, 10/15/24 Series B | Aa2/AA/AA | 1,220,828 | |||||||
1,750,000 | 3.250%, 10/15/31 Series B | Aa2/AA/AA | 1,709,890 | |||||||
1,500,000 | 5.000%, 11/01/34 Series B | Aa2/AA/AA | 1,671,750 | |||||||
2,000,000 | 5.000%, 08/01/23 Series D | Aa2/AA/AA | 2,244,520 | |||||||
2,000,000 | 5.000%, 08/01/24 Series D | Aa2/AA/AA | 2,278,960 | |||||||
Richmond, Rhode Island | ||||||||||
1,020,000 | 3.000%, 08/01/24 | Aa3/NR/NR | 1,050,345 | |||||||
Warren, Rhode Island | ||||||||||
1,170,000 | 4.000%, 02/15/33 Series 2018 A | Aa3/NR/NR | 1,239,381 | |||||||
Warwick, Rhode Island | ||||||||||
2,000,000 | 4.000%, 08/01/22 Series 2015 B | |||||||||
AGMC Insured | NR/AA/NR | 2,111,140 |
2 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
West Greenwich, Rhode Island | ||||||||||
$ | 1,175,000 | 3.000%, 08/15/26 | NR/AA+/NR | $ | 1,210,356 | |||||
West Warwick, Rhode Island | ||||||||||
795,000 | 5.000%, 10/01/32 Series A BAMI | |||||||||
Insured | Baa2/AA/NR | 891,489 | ||||||||
Total General Obligation Bonds | 63,153,206 | |||||||||
Revenue Bonds (61.7%) | ||||||||||
Development (4.6%) | ||||||||||
Providence, Rhode Island | ||||||||||
Redevelopment Agency Refunding | ||||||||||
Public Safety Building Project | ||||||||||
1,680,000 | 5.000%, 04/01/26 Series A AGMC | |||||||||
Insured | A2/AA/NR | 1,867,589 | ||||||||
Rhode Island Convention Center | ||||||||||
Authority Refunding | ||||||||||
8,000,000 | 4.000%, 05/15/23 Series A | A1/AA-/AA- | 8,520,240 | |||||||
Total Development | 10,387,829 | |||||||||
Higher Education (8.6%) | ||||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Bryant University | ||||||||||
1,115,000 | 4.500%, 12/01/27 Series 2011 | A2/A/NR | 1,179,603 | |||||||
1,455,000 | 4.750%, 12/01/29 Series 2011 | A2/A/NR | 1,542,998 | |||||||
1,000,000 | 5.000%, 12/01/30 Series 2011 | A2/A/NR | 1,071,460 | |||||||
1,425,000 | 5.000%, 12/01/31 Series 2011 | A2/A/NR | 1,525,933 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Higher Educational | ||||||||||
Facilities | ||||||||||
2,500,000 | 5.000%, 09/15/30 AGMC Insured | Aa3/NR/NR | 2,602,800 | |||||||
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 | 2,684,843 |
3 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
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+ | $ | 3,025,620 | |||||
2,000,000 | 4.000%, 06/01/31 Series 2012 | A1/NR/A+ | 2,048,560 | |||||||
1,000,000 | 3.500%, 08/15/30 Series B AGMC | |||||||||
Insured | A1/AA/NR | 1,009,360 | ||||||||
Rhode Island Health and Educational | ||||||||||
Building Corp., Higher Education | ||||||||||
Facility, University of Rhode Island | ||||||||||
Auxiliary Enterprise | ||||||||||
500,000 | 4.000%, 09/15/31 Series 2016 B | A1/A+/NR | 517,920 | |||||||
1,000,000 | 4.000%, 09/15/32 Series 2017 B | A1/A+/NR | 1,032,690 | |||||||
Rhode Island Health and Education | ||||||||||
Facilities Authority, Providence | ||||||||||
College | ||||||||||
1,000,000 | 4.000%, 11/01/31 | A2/A/NR | 1,019,730 | |||||||
Total Higher Education | 19,261,517 | |||||||||
Hospital (2.7%) | ||||||||||
Rhode Island Health & Education | ||||||||||
Building Corp., Hospital Financing | ||||||||||
(Care New England) | ||||||||||
500,000 | 5.000%, 09/01/23 Series 2016 B | NR/BB-/BB | 531,950 | |||||||
Rhode Island Health & Education | ||||||||||
Building Corp., Hospital Financing, | ||||||||||
Lifespan Obligated Group | ||||||||||
1,000,000 | 5.000%, 05/15/31 Series 2016 | NR/BBB+/BBB+ | 1,102,340 | |||||||
1,000,000 | 5.000%, 05/15/33 Series 2016 | NR/BBB+/BBB+ | 1,096,720 | |||||||
1,250,000 | 5.000%, 05/15/34 Series 2016 | NR/BBB+/BBB+ | 1,363,050 | |||||||
1,750,000 | 5.000%, 05/15/39 Series 2016 | NR/BBB+/BBB+ | 1,882,930 | |||||||
Total Hospital | 5,976,990 |
4 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Housing (4.9%) | ||||||||||
Rhode Island Housing & Mortgage | ||||||||||
Finance Corp. Home Funding | ||||||||||
$ | 535,000 | 4.000%, 10/01/25 Series 2010 #3 | Aa2/NR/NR | $ | 544,352 | |||||
1,500,000 | 3.450%, 04/01/35 Series 5 | Aa2/NR/NR | 1,466,700 | |||||||
Rhode Island Housing & Mortgage | ||||||||||
Finance Corp. Homeownership | ||||||||||
Opportunity | ||||||||||
1,000,000 | 3.350%, 10/01/41 Series 68-C | Aa1/AA+/NR | 943,150 | |||||||
Rhode Island Housing & Mortgage | ||||||||||
Finance Corp. Multi-Family Housing | ||||||||||
2,500,000 | 4.625%, 10/01/25 Series 2010 A | Aaa/NR/NR | 2,586,175 | |||||||
2,000,000 | 5.000%, 10/01/30 Series 2010 A | Aaa/NR/NR | 2,091,400 | |||||||
1,405,000 | 3.450%, 10/01/36 Series 2016 1B | Aa2/NR/NR | 1,353,760 | |||||||
1,000,000 | 3.250%, 10/01/27 Series 1B | Aa2/NR/NR | 1,006,720 | |||||||
1,000,000 | 3.400%, 10/01/29 Series 3B | Aa2/NR/NR | 1,000,460 | |||||||
Total Housing | 10,992,717 | |||||||||
Public School (24.1%) | ||||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program | ||||||||||
795,000 | 5.000%, 05/15/27 Series 2015 C | Aa2/NR/NR | 907,206 | |||||||
1,630,000 | 5.000%, 05/15/27 Series 2015 D | A1/NR/NR | 1,849,463 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Chariho | ||||||||||
Regional School District | ||||||||||
1,520,000 | 4.000%, 05/15/31 Series 2017 J-2 B | Aa3/NR/NR | 1,591,075 | |||||||
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 | Aa3/AA/NR | 1,021,720 | ||||||||
1,000,000 | 4.000%, 05/15/33 AGMC Insured | Aa3/AA/NR | 1,019,560 | |||||||
Rhode Island Health and Educational | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, City of Cranston | ||||||||||
1,170,000 | 4.000%, 05/15/30 Series 2015 B BAMI | |||||||||
Insured | NR/AA/NR | 1,225,400 |
5 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Public School (continued) | ||||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, East Greenwich | ||||||||||
$ | 1,150,000 | 3.125%, 05/15/28 | Aa1/AA+/NR | $ | 1,154,474 | |||||
1,000,000 | 3.250%, 05/15/29 | Aa1/AA+/NR | 1,004,050 | |||||||
1,000,000 | 3.375%, 05/15/30 | Aa1/AA+/NR | 1,002,510 | |||||||
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 | 1,001,490 | |||||||
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 | 1,737,061 | |||||||
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 | 1,039,610 | |||||||
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 | 1,540,350 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Town of North | ||||||||||
Providence | ||||||||||
750,000 | 5.000%, 05/15/31 Series 2017 G | |||||||||
AGMC Insured | Aa3/AA/NR | 850,965 | ||||||||
1,000,000 | 4.000%, 11/15/20 Series 2013 I | Aa3/AA-/NR | 1,036,000 | |||||||
1,100,000 | 4.500%, 11/15/22 Series 2013 I | Aa3/AA-/NR | 1,184,689 | |||||||
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 | Aa3/NR/NR | 1,662,269 | |||||||
1,000,000 | 4.250%, 05/15/29 Series 2017 E BAMI | |||||||||
Insured | Aa3/AA/NR | 1,080,090 | ||||||||
1,045,000 | 4.000%, 05/15/31 Series 2018 B | Aa3/NR/NR | 1,090,802 | |||||||
1,090,000 | 4.000%, 05/15/32 Series 2018 B | Aa3/NR/NR | 1,132,347 |
6 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Public School (continued) | ||||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Town of Scituate | ||||||||||
$ | 1,285,000 | 4.500%, 05/15/33 Series 2018 A | NR/AA/NR | $ | 1,418,974 | |||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Pooled Issue - | ||||||||||
Tiverton, Foster-Glocester, Cranston, | ||||||||||
East Greenwich | ||||||||||
3,000,000 | 4.000%, 05/15/28 Series A | Aa3/NR/NR | 3,179,820 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Pooled Issue - | ||||||||||
Narragansett & Scituate | ||||||||||
1,665,000 | 4.250%, 05/15/28 Series 2017 B | Aa2/NR/NR | 1,820,678 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Providence | ||||||||||
Public Buildings Authority | ||||||||||
3,000,000 | 3.500%, 05/15/24 Series 2015 A | |||||||||
AGMC Insured | Aa3/AA/NR | 3,122,700 | ||||||||
3,000,000 | 3.750%, 05/15/27 Series 2015 A | |||||||||
AGMC Insured | Aa3/AA/NR | 3,099,450 | ||||||||
3,000,000 | 4.000%, 05/15/28 Series 2015 A | |||||||||
AGMC Insured | Aa3/AA/NR | 3,149,370 | ||||||||
2,760,000 | 4.000%, 05/15/30 Series 2015 B | |||||||||
AGMC Insured | Aa3/AA/NR | 2,860,657 | ||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, Providence | ||||||||||
Public Schools | ||||||||||
1,000,000 | 4.250%, 05/15/21 Series 2007 B | |||||||||
AGMC Insured | A2/AA/NR | 1,001,380 | ||||||||
2,000,000 | 4.500%, 05/15/22 Series 2013 A | Aa3/NR/NR | 2,136,120 | |||||||
2,000,000 | 4.500%, 05/15/23 Series 2013 A | Aa3/NR/NR | 2,159,820 | |||||||
2,000,000 | 4.500%, 05/15/24 Series 2013 A | Aa3/NR/NR | 2,150,800 | |||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, City of Warwick | ||||||||||
1,000,000 | 4.000%, 05/15/32 Series 2017 I | NR/AA/NR | 1,046,000 | |||||||
800,000 | 3.500%, 05/15/26 Series B MAC | |||||||||
Insured | NR/AA/NR | 837,832 |
7 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Public School (continued) | ||||||||||
Rhode Island Health and Education | ||||||||||
Building Corp., Public School | ||||||||||
Financing Program, City of | ||||||||||
Woonsocket | ||||||||||
$ | 500,000 | 5.000%, 05/15/27 Series 2017 A | ||||||||
AGMC Insured | Aa3/AA/NR | $ | 567,715 | |||||||
500,000 | 5.000%, 05/15/28 Series 2017 A | |||||||||
AGMC Insured | Aa3/AA/NR | 564,900 | ||||||||
500,000 | 5.000%, 05/15/29 Series 2017 A | |||||||||
AGMC Insured | Aa3/AA/NR | 562,100 | ||||||||
500,000 | 3.500%, 05/15/30 Series 2017 A | |||||||||
AGMC Insured | Aa3/AA/NR | 493,870 | ||||||||
Total Public School | 54,303,317 | |||||||||
Transportation (4.6%) | ||||||||||
Rhode Island Commerce Corp., | ||||||||||
Airport | ||||||||||
635,000 | 5.000%, 07/01/36 Series D | Baa1/BBB+/BBB+ | 697,757 | |||||||
1,015,000 | 5.000%, 07/01/37 Series D | Baa1/BBB+/BBB+ | 1,108,837 | |||||||
1,500,000 | 5.000%, 07/01/30 Series 2018 | Baa1/BBB+/NR | 1,693,635 | |||||||
Rhode Island Commerce Corp., | ||||||||||
Grant Anticipation (Rhode Island | ||||||||||
Department of Transportation) | ||||||||||
1,850,000 | 4.000%, 06/15/24 | A2/AA-/NR | 1,989,453 | |||||||
1,000,000 | 5.000%, 06/15/31 | A2/AA-/NR | 1,132,190 | |||||||
Rhode Island State Economic | ||||||||||
Development Corp., Airport | ||||||||||
1,000,000 | 5.000%, 07/01/24 Series B | Baa1/BBB+/BBB+ | 1,085,070 | |||||||
2,000,000 | 4.000%, 07/01/24 Series B | Baa1/BBB+/BBB+ | 2,104,100 | |||||||
540,000 | 4.625%, 07/01/26 Series B AGC | |||||||||
Insured | A3/AA/BBB+ | 541,075 | ||||||||
Total Transportation | 10,352,117 | |||||||||
Turnpike/Highway (4.1%) | ||||||||||
Rhode Island State Turnpike & Bridge | ||||||||||
Authority | ||||||||||
500,000 | 4.125%, 12/01/23 Series 2010 A | NR/A-/A | 516,140 | |||||||
1,600,000 | 4.625%, 12/01/27 Series 2010 A | NR/A-/A | 1,670,096 | |||||||
2,000,000 | 5.125%, 12/01/35 Series 2010 A | NR/A-/A | 2,105,080 | |||||||
1,000,000 | 5.000%, 12/01/35 Series 2010 A | NR/A-/A | 1,049,930 |
8 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Turnpike/Highway (continued) | ||||||||||
Rhode Island State Turnpike & Bridge | ||||||||||
Authority, Motor Fuel Tax | ||||||||||
$ | 1,240,000 | 4.000%, 10/01/27 Series 2016 A | NR/A+/A | $ | 1,310,742 | |||||
1,500,000 | 4.000%, 10/01/34 Series 2016 A | NR/A+/A | 1,543,095 | |||||||
1,000,000 | 4.000%, 10/01/36 Series 2016 A | NR/A+/A | 1,021,460 | |||||||
Total Turnpike/Highway | 9,216,543 | |||||||||
Water and Sewer (7.1%) | ||||||||||
Narragansett, Rhode Island Bay | ||||||||||
Commission Wastewater System | ||||||||||
3,145,000 | 4.000%, 02/01/28 Series A | NR/AA-/NR | 3,321,277 | |||||||
Rhode Island Clean Water Protection | ||||||||||
Finance Agency | ||||||||||
500,000 | 4.750%, 10/01/20 1999 Series A | |||||||||
AMBAC Insured | Aaa/NR/NR | 501,150 | ||||||||
Rhode Island Clean Water Finance | ||||||||||
Agency, Water Pollution Control | ||||||||||
Bonds | ||||||||||
3,000,000 | 4.375%, 10/01/21 Series 2002 B NPFG | |||||||||
Insured | Aaa/AAA/AAA | 3,197,250 | ||||||||
Rhode Island Clean Water Protection | ||||||||||
Finance Agency Safe Drinking Water | ||||||||||
Revolving Fund | ||||||||||
1,085,000 | 3.500%, 10/01/25 | NR/AAA/AAA | 1,146,324 | |||||||
1,000,000 | 3.750%, 10/01/33 | NR/AAA/AAA | 1,019,190 | |||||||
1,000,000 | 3.750%, 10/01/34 | NR/AAA/AAA | 1,015,040 | |||||||
Rhode Island Infrastructure Bank Water, | ||||||||||
City of Pawtucket | ||||||||||
1,730,000 | 5.000%, 10/01/28 Series 2015 NPFG | |||||||||
Insured | Baa2/A/NR | 1,948,084 | ||||||||
Rhode Island Infrastructure Bank Water, | ||||||||||
Pollution Control | ||||||||||
2,575,000 | 4.000%, 10/01/29 Series A | NR/AAA/AAA | 2,776,906 | |||||||
500,000 | 4.000%, 10/01/32 Series A | NR/AAA/AAA | 530,255 | |||||||
Rhode Island Infrastructure Bank Water, | ||||||||||
Safe Drinking Water | ||||||||||
500,000 | 3.000%, 10/01/31 Series A | NR/AAA/AAA | 484,765 | |||||||
Total Water and Sewer | 15,940,241 |
9 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Other Revenue (1.0%) | ||||||||||
Providence, Rhode Island Public | ||||||||||
Building Authority (Capital | ||||||||||
Improvement Program Projects) | ||||||||||
$ | 2,000,000 | 5.000%, 09/15/31 Series A AGMC | ||||||||
Insured | A2/AA/NR | $ | 2,263,320 | |||||||
Total Revenue Bonds | 138,694,591 | |||||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Bonds (7.9%)†† | ||||||||||
Pre-Refunded General Obligation | ||||||||||
Bonds (3.2%) | ||||||||||
Bristol, Rhode Island | ||||||||||
2,200,000 | 4.000%, 02/15/26 AGC Insured | Aa2/AA+/NR | 2,217,842 | |||||||
2,000,000 | 4.375%, 02/15/29 AGC Insured | Aa2/AA+/NR | 2,018,980 | |||||||
West Warwick, Rhode Island | ||||||||||
1,900,000 | 4.625%, 04/01/26 AGC Insured | A3/AA/NR | 1,925,593 | |||||||
1,000,000 | 4.750%, 04/01/29 AGC Insured | A3/AA/NR | 1,014,090 | |||||||
Total Pre-Refunded General Obligation | ||||||||||
Bonds | 7,176,505 | |||||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Revenue Bonds (4.7%) | ||||||||||
Development (0.7%) | ||||||||||
Rhode Island Convention Center | ||||||||||
Authority Refunding | ||||||||||
1,500,000 | 5.500%, 05/15/27 Series A AGC | |||||||||
Insured | A1/AA/AA- | 1,533,525 | ||||||||
Higher Education (1.5%) | ||||||||||
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-/NR | 1,296,238 |
10 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Pre-Refunded Bonds (continued) | and Fitch | Value | |||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Revenue Bonds (continued) | ||||||||||
Higher Education (continued) | ||||||||||
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 | $ | 2,113,140 | |||||||
Total Higher Education | 3,409,378 | |||||||||
Hospital (0.5%) | ||||||||||
Rhode Island Health & Education | ||||||||||
Building Corp., Hospital Financing | ||||||||||
(Care New England) | ||||||||||
500,000 | 5.000%, 09/01/20 Series 2013 A ETM | NR/BB-/NR | 527,245 | |||||||
500,000 | 5.000%, 09/01/22 Series 2013 A ETM | NR/BB-/NR | 551,625 | |||||||
Total Hospital | 1,078,870 | |||||||||
Public School (1.1%) | ||||||||||
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- | 1,018,030 | ||||||||
500,000 | 5.625%, 04/01/29 Series C 2009 AGC | |||||||||
Insured | Aa3/AA/AA- | 509,325 | ||||||||
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 | 1,076,170 | |||||||
Total Public School | 2,603,525 | |||||||||
Transportation (0.7%) | ||||||||||
Rhode Island Economic Development | ||||||||||
Corp. (Rhode Island Department of | ||||||||||
Transportation) | ||||||||||
1,500,000 | 5.250%, 06/15/21 AGC Insured | A2/AA/NR | 1,535,295 |
11 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||||
Principal | Moody's, S&P | |||||||||||
Amount | Pre-Refunded Bonds (continued) | and Fitch | Value | |||||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||||
Revenue Bonds (continued) | ||||||||||||
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* | $ | 274,795 | |||||||||
215,000 | 6.375%, 08/01/22 Series A NPFG | |||||||||||
Insured ETM | NR/NR/NR* | 247,708 | ||||||||||
Total Other Revenue | 522,503 | |||||||||||
Total Pre-Refunded\ Escrowed to | ||||||||||||
Maturity Revenue Bonds | 10,683,096 | |||||||||||
Total Pre-Refunded\ Escrowed to | ||||||||||||
Maturity Bonds | 17,859,601 | |||||||||||
Total Municipal Bonds | ||||||||||||
(cost $218,764,394) | 219,707,398 | |||||||||||
Shares | Short-Term Investment (1.4%) | |||||||||||
Dreyfus Treasury & Agency Cash | ||||||||||||
Management - Institutional Shares, | ||||||||||||
3,179,691 | 1.96%** (cost $3,179,691) | Aaa-mf/AAAm/NR | 3,179,691 | |||||||||
Total Investments | ||||||||||||
(cost $221,944,085-note 4) | 99.1% | 222,887,089 | ||||||||||
Other assets less liabilities | 0.9 | 1,972,901 | ||||||||||
Net Assets | 100.0% | $ | 224,859,990 |
12 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Percentage of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Aaa of Moody's or AAA of S&P or Fitch | 10.1 | % | ||
Pre-refunded bonds\ ETM bonds†† | 8.1 | |||
Aa of Moody's or AA of S&P or Fitch | 63.0 | |||
A of Moody's or S&P or Fitch | 13.1 | |||
Baa of Moody's or BBB of S&P or Fitch | 5.5 | |||
BB of S&P or Fitch | 0.2 | |||
100.0 | % |
PORTFOLIO ABBREVIATIONS |
AGC - Assured Guaranty Corp. |
AGMC - Assured Guaranty Municipal Corp. |
AMBAC - American Municipal Bond Assurance Corp. |
BAMI - Build America Mutual Insurance |
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 NRSROs. Percentages in this table do not include the Short-Term Investment. | |
†† | Pre-refunded bonds are bonds for which U.S. Government Obligations usually have been placed in escrow 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. All other securities in the category are pre-refunded. |
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, 2018 (unaudited)
ASSETS | ||||
Investments at value (cost $221,944,085) | $ | 222,887,089 | ||
Interest recievable | 2,899,972 | |||
Receivable for Fund shares sold | 199,113 | |||
Other assets | 14,744 | |||
Total assets | 226,000,918 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 760,748 | |||
Dividends payable | 250,225 | |||
Management fees payable | 77,991 | |||
Distribution and service fees payable | 477 | |||
Accrued expenses payable | 51,487 | |||
Total liabilities | 1,140,928 | |||
NET ASSETS | $ | 224,859,990 | ||
Net Assets consist of: | ||||
Capital Stock – Authorized an unlimited number of shares, par value | ||||
$0.01 per share | $ | 214,838 | ||
Additional paid-in capital | 224,600,182 | |||
Net unrealized appreciation on investments (note 4) | 943,004 | |||
Accumulated net realized loss on investments | (955,010 | ) | ||
Undistributed net investment income | 56,976 | |||
$ | 224,859,990 | |||
CLASS A | ||||
Net Assets | $ | 112,492,064 | ||
Capital shares outstanding | 10,748,345 | |||
Net asset value and redemption price per share | $ | 10.47 | ||
Maximum offering price per share (100/96 of $10.47) | $ | 10.91 | ||
CLASS C | ||||
Net Assets | $ | 7,563,858 | ||
Capital shares outstanding | 722,682 | |||
Net asset value and offering price per share | $ | 10.47 | ||
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) | $ | 10.47 | * | |
CLASS I | ||||
Net Assets | $ | 204,748 | ||
Capital shares outstanding | 19,566 | |||
Net asset value, offering and redemption price per share | $ | 10.46 | ||
CLASS Y | ||||
Net Assets | $ | 104,599,320 | ||
Capital shares outstanding | 9,993,214 | |||
Net asset value, offering and redemption price per share | $ | 10.47 |
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, 2018 (unaudited)
Investment Income | ||||||||
Interest income | $ | 3,761,016 | ||||||
Expenses | ||||||||
Management fee (note 3) | $ | 571,779 | ||||||
Distribution and service fee (note 3) | 126,947 | |||||||
Transfer and shareholder servicing agent fees | 45,928 | |||||||
Trustees’ fees and expenses (note 7) | 43,553 | |||||||
Legal fees | 41,273 | |||||||
Fund accounting fees | 22,464 | |||||||
Registration fees and dues | 12,477 | |||||||
Shareholders’ reports | 11,746 | |||||||
Auditing and tax fees | 11,141 | |||||||
Chief compliance officer services (note 3) | 5,572 | |||||||
Custodian fees | 5,125 | |||||||
Insurance | 5,007 | |||||||
Miscellaneous | 29,483 | |||||||
Total expenses | 932,495 | |||||||
Management fee waived (note 3) | (91,485 | ) | ||||||
Net expenses | 841,010 | |||||||
Net investment income | 2,920,006 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities transactions | (159,731 | ) | ||||||
Change in unrealized appreciation on investments | (1,985,055 | ) | ||||||
Net realized and unrealized gain (loss) on investments | (2,144,786 | ) | ||||||
Net change in net assets resulting from operations | $ | 775,220 |
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, 2018 | Year Ended | |||||||
(unaudited) | March 31, 2018 | |||||||
OPERATIONS | ||||||||
Net investment income | $ | 2,920,006 | $ | 6,198,299 | ||||
Net realized gain (loss) from securities transactions | (159,731 | ) | 268,282 | |||||
Change in unrealized appreciation on investments | (1,985,055 | ) | (1,190,321 | ) | ||||
Change in net assets resulting from operations | 775,220 | 5,276,260 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (1,436,964 | ) | (3,112,987 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (68,679 | ) | (179,152 | ) | ||||
Class I Shares: | ||||||||
Net investment income | (2,080 | ) | (3,220 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (1,412,194 | ) | (2,898,922 | ) | ||||
Change in net assets from distributions | (2,919,917 | ) | (6,194,281 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 11,800,677 | 29,178,190 | ||||||
Reinvested dividends and distributions | 1,366,591 | 3,020,286 | ||||||
Cost of shares redeemed | (17,789,611 | ) | (43,358,401 | ) | ||||
Change in net assets from capital share transactions | (4,622,343 | ) | (11,159,925 | ) | ||||
Change in net assets | (6,767,040 | ) | (12,077,946 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 231,627,030 | 243,704,976 | ||||||
End of period* | $ | 224,859,990 | $ | 231,627,030 | ||||
*Includes undistributed net investment of: | $ | 56,976 | $ | 56,887 |
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, 2018 (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. As of the date of this report, there were no Class F Shares or Class T 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 ask 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. |
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. |
17 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018: |
Valuation Inputs* | Investments in Securities | |||
Level 1 – Quoted Prices - Short-Term Investment | $ | 3,179,691 | ||
Level 2 – Other Significant Observable | ||||
Inputs - Municipal Bonds* | 219,707,398 | |||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 222,887,089 |
* 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 (2015 –2017) or expected to be taken in the Fund’s 2018 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, 2018 (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, 2018, the Fund increased additional paid-in capital by $5,494, increased accumulated net realized loss on investments by $34,365 and increased undistributed net investment income by $28,871. 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, 2018 (unaudited)
The Manager had contractually undertaken to waive fees and/or reimburse Fund expenses so that total Fund expenses would not exceed 0.84% for Class A Shares, 1.68% for Class C Shares, 1.02% for Class I Shares and 0.69% for Class Y Shares through September 30, 2018. For the six months ended September 30, 2018, the Fund incurred management fees of $571,779 of which $91,485 was waived, which included supplemental fee waivers above and beyond the contractual expense cap.
Beginning October 1, 2018, the Manager has contractually undertaken to waive its fees so that management fees are equivalent to 0.48 of 1% of net assets of the Fund up to $400,000,000; 0.46 of 1% of net assets above $400,000,000 up to $1,000,000,000; and 0.44 of 1% of net assets above $1,000,000,000. This contractual undertaking is in effect until September 30, 2019. The Manager may not terminate the arrangement without the approval of the Board of Trustees.
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, as amended (the “1940 Act”).
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 1940 Act. 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, 2018, distribution fees on Class A Shares amounted to $85,545, of which the Distributor retained $6,057.
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, 2018, amounted to $30,985. 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, 2018, amounted to $10,329. The total of these payments with respect to Class C Shares amounted to $41,314, of which the Distributor retained $10,736.
20 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018, these payments were made at the average annual rate of 0.35% of such net assets amounting to $309 of which $88 related to the Plan and $221 related to the Shareholder Services Plan.
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 (“financial intermediaries”), the Fund’s shares are sold primarily through the facilities of these financial intermediaries having offices within Rhode Island, with the bulk of any sales commissions inuring to such financial intermediaries. For the six months ended September 30, 2018, total commissions on sales of Class A Shares amounted to $60,452, of which the Distributor received $6,295.
c) Transfer and shareholder servicing fees:
The Fund occasionally compensates financial intermediaries in connection with the sub-transfer agency related services provided by such entities in connection with their respective Fund shareholders so long as the fees are deemed by the Board of Trustees to be reasonable in relation to (i) the value of the services and the benefits received by the Fund and certain shareholders; and (ii) the payments that the Fund would make to another entity to perform similar ongoing services to existing shareholders.
4. Purchases and Sales of Securities
During the six months ended September 30, 2018, purchases of securities and proceeds from the sales of securities aggregated $9,932,922 and $15,097,686, respectively.
At September 30, 2018, the aggregate tax cost for all securities was $221,944,085. At September 30, 2018, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $3,098,281 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $2,155,277 for a net unrealized appreciation of $943,004.
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.
21 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018, the Fund had all of its net assets invested in the securities of Rhode Island issuers.
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2018 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Proceeds from shares sold | 541,144 | $ | 5,705,927 | 918,280 | $ | 9,852,667 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 94,295 | 992,808 | 197,704 | 2,118,372 | ||||||||||||
Cost of shares redeemed | (875,817 | ) | (9,227,344 | ) | (2,118,666 | ) | (22,758,789 | ) | ||||||||
Net change | (240,378 | ) | (2,528,609 | ) | (1,002,682 | ) | (10,787,750 | ) | ||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 12,582 | 132,641 | 81,382 | 873,299 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 2,897 | 30,503 | 8,029 | 86,057 | ||||||||||||
Cost of shares redeemed | (172,613 | ) | (1,818,943 | ) | (325,827 | ) | (3,491,182 | ) | ||||||||
Net change | (157,134 | ) | (1,655,799 | ) | (236,416 | ) | (2,531,826 | ) | ||||||||
Class I Shares: | ||||||||||||||||
Proceeds from shares sold | 11,079 | 116,767 | — | — | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 198 | 2,081 | 300 | 3,220 | ||||||||||||
Cost of shares redeemed | (368 | ) | (3,877 | ) | (4,478 | ) | (47,267 | ) | ||||||||
Net change | 10,909 | 114,971 | (4,178 | ) | (44,047 | ) | ||||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 554,813 | 5,845,342 | 1,717,950 | 18,452,224 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 32,407 | 341,199 | 75,886 | 812,637 | ||||||||||||
Cost of shares redeemed | (639,372 | ) | (6,739,447 | ) | (1,593,864 | ) | (17,061,163 | ) | ||||||||
Net change | (52,152 | ) | (552,906 | ) | 199,972 | 2,203,698 | ||||||||||
Total transactions in Fund | ||||||||||||||||
shares | (438,755 | ) | $ | (4,622,343 | ) | (1,043,304 | ) | $ | (11,159,925 | ) |
22 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
7. Trustees’ Fees and Expenses
At September 30, 2018, there were 8 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, 2018 was $34,690. 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, 2018, such meeting-related expenses amounted to $8,863.
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 or in cash, 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, 2018, the Fund had a capital loss carryover of $795,279 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.
23 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
The tax character of distributions was as follows:
Year Ended | Year Ended | |||||||
March 31, 2018 | March 31, 2017 | |||||||
Net tax-exempt income | $ | 6,142,535 | $ | 6,539,793 | ||||
Ordinary Income | 51,746 | 8,027 | ||||||
$ | 6,194,281 | $ | 6,547,820 |
As of March 31, 2018, the components of distributable earnings on a tax basis were:
Undistributed tax-exempt income | $ | 325,211 | ||||||
Accumulated net realized loss | (795,279 | ) | ||||||
Unrealized appreciation | 2,928,059 | |||||||
Other temporary differences | (268,324 | ) | ||||||
$ | 2,189,667 |
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 and the deduction of distributions payable.
10. Credit Facility
The Bank of New York Mellon and the Aquila Group of Funds have been parties to a $40 million credit agreement, which currently terminates on August 28, 2019 (per the August 29, 2018 amendment). In accordance with the Aquila Group of Funds Guidelines for Allocation of Committed Line of Credit (the Aquila Group of Funds is comprised of nine funds), each fund is responsible for payment of its proportionate share of
a) | a 0.17% per annum commitment fee; and, |
b) | interest on amounts borrowed for temporary or emergency purposes by the Fund (at the applicable rate selected by the Aquila Group of Funds at the time of the borrowing of either (i) the one-month Eurodollar Rate or (ii) a rate equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day, or (c) the Overnight Eurodollar Rate in effect on such day). |
There were no borrowings under the credit agreement for the six months ended September 30, 2018.
24 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.27 | 0.28 | 0.30 | 0.33 | 0.35 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.04 | ) | (0.31 | ) | 0.11 | 0.33 | (0.31 | ) | ||||||||||||||
Total from investment operations | 0.03 | 0.23 | (0.03 | ) | 0.41 | 0.66 | 0.04 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.27 | ) | (0.28 | ) | (0.30 | ) | (0.33 | ) | 0.35 | |||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.13 | ) | (0.27 | ) | (0.28 | ) | (0.30 | ) | (0.33 | ) | (0.35 | ) | ||||||||||||
Net asset value, end of period | $ | 10.47 | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | ||||||||||||
Total return (not reflecting sales charge) | 0.31 | %(3) | 2.18 | % | (0.30 | )% | 3.85 | % | 6.35 | % | 0.42 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 112 | $ | 116 | $ | 127 | $ | 133 | $ | 125 | $ | 119 | ||||||||||||
Ratio of expenses to average net assets | 0.77 | %(4) | 0.76 | % | 0.77 | % | 0.77 | % | 0.76 | % | 0.79 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.51 | %(4) | 2.53 | % | 2.58 | % | 2.78 | % | 3.07 | % | 3.34 | %(2) | ||||||||||||
Portfolio turnover rate | 4 | %(3) | 4 | % | 12 | % | 19 | % | 8 | % | 15 | % | ||||||||||||
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 | 0.85 | %(4) | 0.84 | % | 0.85 | % | 0.85 | % | 0.88 | % | 0.92 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.45 | %(4) | 2.45 | % | 2.50 | % | 2.70 | % | 2.95 | % | 3.21 | %(2) |
_______________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.09 | 0.18 | 0.19 | 0.21 | 0.24 | 0.26 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.04 | ) | (0.31 | ) | 0.11 | 0.33 | (0.31 | ) | ||||||||||||||
Total from investment operations | (0.01 | ) | 0.14 | (0.12 | ) | 0.32 | 0.57 | (0.05 | ) | |||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.18 | ) | (0.19 | ) | (0.21 | ) | (0.24 | ) | (0.26 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.09 | ) | (0.18 | ) | (0.19 | ) | (0.21 | ) | (0.24 | ) | (0.26 | ) | ||||||||||||
Net asset value, end of period | $ | 10.47 | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | ||||||||||||
Total return (not reflecting sales charge) | (0.12 | )%(3) | 1.31 | % | (1.14 | )% | 2.97 | % | 5.45 | % | (0.43 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 8 | $ | 9 | $ | 12 | $ | 14 | $ | 16 | $ | 16 | ||||||||||||
Ratio of expenses to average net assets | 1.62 | %(4) | 1.61 | % | 1.61 | % | 1.62 | % | 1.61 | % | 1.64 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.66 | %(4) | 1.68 | % | 1.72 | % | 1.93 | % | 2.22 | % | 2.49 | %(2) | ||||||||||||
Portfolio turnover rate | 4 | %(3) | 4 | % | 12 | % | 19 | % | 8 | % | 15 | % | ||||||||||||
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 | 1.70 | %(4) | 1.69 | % | 1.69 | % | 1.70 | % | 1.73 | % | 1.77 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.58 | %(4) | 1.60 | % | 1.64 | % | 1.85 | % | 2.10 | % | 2.36 | %(2) |
_______________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.56 | $ | 10.61 | $ | 10.92 | $ | 10.80 | $ | 10.47 | $ | 10.79 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.12 | 0.26 | 0.26 | 0.28 | 0.31 | 0.33 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.09 | ) | (0.05 | ) | (0.31 | ) | 0.12 | 0.33 | (0.32 | ) | ||||||||||||||
Total from investment operations | 0.03 | 0.21 | (0.05 | ) | 0.40 | 0.64 | 0.01 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.26 | ) | (0.26 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.13 | ) | (0.26 | ) | (0.26 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | ||||||||||||
Net asset value, end of period | $ | 10.46 | $ | 10.56 | $ | 10.61 | $ | 10.92 | $ | 10.80 | $ | 10.47 | ||||||||||||
Total return | 0.24 | %(3) | 1.95 | % | (0.45 | )% | 3.80 | % | 6.20 | % | 0.17 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 0.2 | $ | 0.1 | $ | 0.1 | $ | 0.2 | $ | 0.2 | $ | 0.3 | ||||||||||||
Ratio of expenses to average net assets | 0.94 | %(4) | 0.89 | % | 0.90 | % | 0.92 | % | 0.90 | % | 0.94 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.36 | %(4) | 2.41 | % | 2.43 | % | 2.63 | % | 2.93 | % | 3.18 | % | ||||||||||||
Portfolio turnover rate | 4 | %(3) | 4 | % | 12 | % | 19 | % | 8 | % | 15 | % | ||||||||||||
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 | 1.02 | %(4) | 0.97 | % | 0.98 | % | 1.00 | % | 1.02 | % | 1.07 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.28 | %(4) | 2.33 | % | 2.35 | % | 2.55 | % | 2.81 | % | 3.05 | %(2) |
_______________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
27 | Aquila Narragansett Tax-Free Income Fund
AQUILA NARRAGANSETT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | $ | 10.79 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.14 | 0.29 | 0.30 | 0.31 | 0.34 | 0.36 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.04 | ) | (0.31 | ) | 0.11 | 0.33 | (0.31 | ) | ||||||||||||||
Total from investment operations | 0.04 | 0.25 | (0.01 | ) | 0.42 | 0.67 | 0.05 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.29 | ) | (0.30 | ) | (0.31 | ) | (0.34 | ) | (0.36 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.14 | ) | (0.29 | ) | (0.30 | ) | (0.31 | ) | (0.34 | ) | (0.36 | ) | ||||||||||||
Net asset value, end of period | $ | 10.47 | $ | 10.57 | $ | 10.61 | $ | 10.92 | $ | 10.81 | $ | 10.48 | ||||||||||||
Total return | 0.38 | %(3) | 2.34 | % | (0.15 | )% | 4.01 | % | 6.51 | % | 0.56 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 105 | $ | 106 | $ | 104 | $ | 101 | $ | 93 | $ | 86 | ||||||||||||
Ratio of expenses to average net assets | 0.62 | %(4) | 0.61 | % | 0.62 | % | 0.62 | % | 0.61 | % | 0.64 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.66 | %(4) | 2.69 | % | 2.73 | % | 2.92 | % | 3.22 | % | 3.48 | %(2) | ||||||||||||
Portfolio turnover rate | 4 | %(3) | 4 | % | 12 | % | 19 | % | 8 | % | 15 | % | ||||||||||||
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 | 0.70 | %(4) | 0.69 | % | 0.70 | % | 0.70 | % | 0.73 | % | 0.77 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.58 | %(4) | 2.61 | % | 2.65 | % | 2.84 | % | 3.10 | % | 3.35 | %(2) |
_______________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
28 | 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, 2018. The independent Trustees met telephonically on August 13, 2018 and in person on September 15, 2018 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. The Trustees also discussed the memorandum provided by Fund counsel that summarized the legal standards and other considerations that are relevant to the Trustees in their deliberations regarding the renewal of the Advisory and Sub-Advisory Agreements.
At the meeting held on September 15, 2018, based on their evaluation of the information provided by the Manager, the Sub-Adviser and the independent consultant, the Trustees of the Fund present at the meeting, including the independent Trustees voting separately, unanimously approved the renewal of each of the Advisory Agreement and the Sub-Advisory Agreement until September 30, 2019. 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.
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.
29 | Aquila Narragansett Tax-Free Income Fund
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 (seven 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 (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Bloomberg Barclays 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 three and five-year periods ended June 30, 2018, but lower than the average annual total return of the funds in the Peer Group for one and ten-year periods ended June 30, 2018. 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, 2018. 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, 2018.
The Trustees noted that the Fund invests primarily in municipal obligations issued by the State of Rhode Island, its counties and various other local authorities, while the funds in the Product Category for Performance invest in, and the Fund’s benchmark index includes, municipal bonds of issuers throughout the United States. They also noted that none of the funds in the Peer Group invests primarily in Rhode Island municipal obligations. They noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees, expenses or sales charges.
30 | Aquila Narragansett Tax-Free Income Fund
In addition, the Trustees considered that, as reflected in the Consultant’s Report, the Fund’s standard deviation, a measure of volatility, was in the fourth quintile relative to the funds in the Product Category for Performance for the three and five-year periods ended June 30, 2018. The Trustees further noted that the Fund’s Sharpe ratio was in the first quintile for the three and five-year periods ended June 30, 2018, when compared to the funds in the Product Category for Performance. A Sharpe ratio is a measure for calculating risk-adjusted return. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance. The Trustees noted that the Fund was the only Rhode Island state-specific tax-free municipal bond fund in the State.
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 higher than the average and median contractual advisory fees of the funds in the Peer Group (at the Fund’s current asset level) and higher 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 various asset levels up to $5 billion). The Trustees noted that the Fund’s actual management fee was higher than the average actual management fee of the funds in both the Peer Group and Product Category for Expenses (after giving effect to fee waivers in effect for those funds), but 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).
The Trustees further noted that beginning October 1, 2018, the Manager has contractually undertaken to waive its fees so that management fees are equivalent to 0.48 of 1% of net assets of the Fund up to $400,000,000; 0.46 of 1% of net assets above $400,000,000 up to $1,000,000,000; and 0.44 of 1% of net assets above $1,000,000,000. This contractual undertaking is in effect until September 30, 2019. The Manager may not terminate these arrangements without the approval of the Board of Trustees.
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.
31 | Aquila Narragansett Tax-Free Income Fund
The Trustees considered that the Manager and, in turn, the Sub-Adviser was currently voluntarily 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 to voluntarily waive 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 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. They noted that the Manager has agreed, through a contractual advisory fee waiver, to include breakpoints in its advisory fee schedule based on the size of the Fund. 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 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.
32 | Aquila Narragansett Tax-Free Income Fund
Your Fund’s Expenses (unaudited)
As a Fund shareholder, 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 assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The 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 that 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”.
Hypothetical Example for Comparison with Other Funds
Under the heading, “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||
(actual return after expenses) | (5% annual return before expenses) | |||||
Expenses(2) | Expenses(2) | |||||
Beginning | Ending(1) | Paid During | Ending | Paid During | Net | |
Account | Account | Period | Account | Period | Annualized | |
Share | Value | Value | 4/1/18 – | Value | 4/1/18 – | Expense |
Class | 4/1/18 | 9/30/18 | 9/30/18 | 9/30/18 | 9/30/18 | Ratio |
A | $1,000 | $1,003.10 | $3.87 | $1,021.21 | $3.90 | 0.77% |
C | $1,000 | $ 998.80 | $8.12 | $1,016.95 | $8.19 | 1.62% |
I | $1,000 | $1,002.40 | $4.72 | $1,020.36 | $4.76 | 0.94% |
Y | $1,000 | $1,003.80 | $3.11 | $1,021.96 | $3.14 | 0.62% |
(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 or the applicable CDSC with respect to Class C shares. Total return is not annualized and as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio for the six-month period as indicated above - in the far right column - multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. |
33 | 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 1-800-437-1000.
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, 2018, there were no proxies related to any portfolio instruments held by the Fund. As such, 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, 2018, $6,142,535 of dividends paid by Aquila Narragansett Tax-Free Income Fund, constituting 99.2% of total dividends paid, were exempt-interest dividends; and the balance was ordinary income.
Prior to February 15, 2019, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2018 calendar year.
34 | 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
Thomas A. Christopher, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
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, 2018 | |||||||||||||||||||||||||
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Please Save the Date for Your 2019 Shareholder Meeting
Thursday, May 16, 2019
Wellshire Event Center, Denver
Details will be available on our website as the date approaches:
www.aquilafunds.com
You may also contact your financial professional.
|
ii | Aquila Tax-Free Fund of Colorado
![]() | Aquila Tax-Free Fund of Colorado
“Proper Asset Allocation –A Strategy For All Seasons”
Serving Colorado investors since 1987 | ![]() |
November, 2018
Dear Fellow Shareholder:
Financial news, and the often resulting market volatility, can cause even the most seasoned investor to ask, “What should I do now?”
We believe you will generally be in a better position to weather changing economic situations, if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs? And, have you periodically revisited your portfolio structure to make sure that your allocation remains in line with your investment goals, given changing market conditions and changes in your personal circumstances, including current risk tolerance?
Asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific needs. In developing this strategy, your considerations should include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to lose during a given time frame); |
• | financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.); and |
• | goals (the financial goals you and your family would like to achieve). |
Since the three main asset classes - equities, fixed-income, and cash/cash equivalents - have different levels of risk and return, each is expected to behave differently over time. The objective of asset allocation is to create a diversified portfolio with an acceptable level of risk and the highest possible return given that level of risk.
Although there is no simple formula that can find the right asset allocation for every individual, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
The way you allocate your investment portfolio among stocks, bonds, and cash/ cash equivalents will be the principal determinants of your investment results –secondary to your selection of individual securities.
NOT A PART OF THE SEMI- ANNUAL REPORT
Once you and your financial professional have developed an appropriate asset allocation for your portfolio, we believe that changes should be made based on changing needs, not on headlines.
A properly constructed portfolio based on sound asset allocation may generally help you weather all seasons.
Sincerely,
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.
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
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (30.6%) | and Fitch | Value | |||||||
City & County (0.4%) | ||||||||||
Englewood, Colorado | ||||||||||
$ | 1,000,000 | 5.000%, 12/01/30 | NR/AA+/NR | $ | 1,167,890 | |||||
Metropolitan District (2.9%) | ||||||||||
Denver, Colorado Urban Renewal | ||||||||||
Authority, Tax Increment Revenue, | ||||||||||
Stapleton Senior Series A-1 | ||||||||||
2,600,000 | 5.000%, 12/01/25 | NR/NR/AA- | 2,856,516 | |||||||
Denver, Colorado Urban Renewal | ||||||||||
Authority, Tax Increment Revenue, | ||||||||||
Stapleton Senior Series B-1 | ||||||||||
1,000,000 | 5.000%, 12/01/25 | Aa3/NR/NR | 1,153,800 | |||||||
Meridian Metropolitan District, | ||||||||||
Colorado Refunding Series A | ||||||||||
1,645,000 | 4.500%, 12/01/23 | NR/A-/A | 1,742,894 | |||||||
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 | 2,075,252 | |||||||
Total Metropolitan District | 7,828,462 | |||||||||
School Districts (26.8%) | ||||||||||
Adams 12 Five Star Schools, Colorado | ||||||||||
3,000,000 | 5.000%, 12/15/25 | Aa2/AA/NR | 3,452,550 | |||||||
1,000,000 | 5.000%, 12/15/25 | Aa2/AA/NR | 1,164,530 | |||||||
1,435,000 | 5.000%, 12/15/29 | Aa2/AA/NR | 1,670,598 | |||||||
Adams County, Colorado School | ||||||||||
District #50 | ||||||||||
1,000,000 | 4.000%, 12/01/23 | Aa2/AA/NR | 1,069,570 | |||||||
3,000,000 | 4.000%, 12/01/24 | Aa2/AA/NR | 3,200,100 | |||||||
Adams & Arapahoe Counties, | ||||||||||
Colorado Joint School District #28J | ||||||||||
1,000,000 | 5.000%, 12/01/30 | Aa2/NR/AA | 1,157,950 |
1 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
School Districts (continued) | ||||||||||
Adams & Weld Counties, Colorado | ||||||||||
School District #27J | ||||||||||
$ | 1,030,000 | 5.000%, 12/01/22 | Aa2/AA/NR | $ | 1,144,989 | |||||
2,000,000 | 5.000%, 12/01/24 | Aa2/AA/NR | 2,215,700 | |||||||
1,000,000 | 5.000%, 12/01/25 | Aa2/AA/NR | 1,148,730 | |||||||
1,060,000 | 5.000%, 12/01/28 | Aa2/AA/NR | 1,226,770 | |||||||
3,895,000 | 5.000%, 12/01/29 | Aa2/AA/NR | 4,483,067 | |||||||
1,150,000 | 5.000%, 12/01/29 | Aa2/AA/NR | 1,348,133 | |||||||
Arapahoe County, Colorado School | ||||||||||
District #001 Englewood | ||||||||||
1,465,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 1,692,383 | |||||||
Arapahoe County, Colorado School | ||||||||||
District #006 Littleton | ||||||||||
1,000,000 | 5.000%, 12/01/27 | Aa1/NR/NR | 1,160,480 | |||||||
Boulder, Larimer & Weld Counties, | ||||||||||
Colorado Series A | ||||||||||
2,000,000 | 5.000%, 12/15/24 | Aa2/AA+/NR | 2,296,720 | |||||||
Boulder, Larimer & Weld Counties, | ||||||||||
Colorado Series C | ||||||||||
2,000,000 | 5.000%, 12/15/28 | Aa2/AA+/NR | 2,339,560 | |||||||
Boulder, Larimer & Weld Counties, | ||||||||||
Colorado, St. Vrain Valley School | ||||||||||
District RE-1J Series C | ||||||||||
1,000,000 | 5.000%, 12/15/29 | Aa2/AA+/NR | 1,160,200 | |||||||
Denver, Colorado City & County | ||||||||||
School District No. 1 | ||||||||||
3,000,000 | 4.000%, 12/01/26 | Aa1/AA+/AA+ | 3,154,710 | |||||||
2,000,000 | 4.000%, 12/01/27 | Aa1/AA+/AA+ | 2,165,560 | |||||||
2,000,000 | 5.000%, 12/01/29 | Aa1/AA+/AA+ | 2,334,940 | |||||||
Denver, Colorado City & County | ||||||||||
School District No. 1 Series B | ||||||||||
2,000,000 | 5.000%, 12/01/25 | Aa1/AA+/AA+ | 2,296,220 | |||||||
4,000,000 | 5.000%, 12/01/27 | Aa1/AA+/AA+ | 4,567,840 | |||||||
Eagle County School District, | ||||||||||
Colorado, Eagle, Garfield & Routt | ||||||||||
School District #50J | ||||||||||
1,170,000 | 5.000%, 12/01/25 | Aa2/AA/NR | 1,319,304 | |||||||
1,000,000 | 5.000%, 12/01/29 | Aa2/AA/NR | 1,161,900 |
2 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
School Districts (continued) | ||||||||||
El Paso County, Colorado School | ||||||||||
District #20 Refunding | ||||||||||
$ | 1,945,000 | 4.375%, 12/15/23 | Aa2/NR/NR | $ | 2,075,082 | |||||
1,000,000 | 5.000%, 12/15/29 | Aa2/NR/NR | 1,165,780 | |||||||
Garfield, Pitkin, & Eagle Counties, | ||||||||||
Colorado School District #RE-1 | ||||||||||
Roaring Fork | ||||||||||
1,600,000 | 5.000%, 12/15/27 | Aa2/NR/NR | 1,850,688 | |||||||
Jefferson County, Colorado School | ||||||||||
District #R-1 Refunding | ||||||||||
2,225,000 | 5.000%, 12/15/30 | Aa2/AA/NR | 2,615,665 | |||||||
La Plata County, Colorado School | ||||||||||
District #9-R Durango Refunding | ||||||||||
3,000,000 | 4.500%, 11/01/23 | Aa2/NR/NR | 3,208,080 | |||||||
Larimer County, Colorado School | ||||||||||
District No. R 1 Poudre | ||||||||||
1,000,000 | 5.000%, 12/15/27 | Aa2/NR/NR | 1,156,680 | |||||||
1,000,000 | 5.000%, 12/15/30 | Aa2/NR/AA+ | 1,189,140 | |||||||
Larimer, Weld & Boulder Counties, | ||||||||||
Colorado School District No. R-2J, | ||||||||||
Thompson Refunding | ||||||||||
1,500,000 | 4.250%, 12/15/24 | Aa2/NR/NR | 1,614,000 | |||||||
Mesa County, Colorado Valley School | ||||||||||
District No. 051, Grand Junction | ||||||||||
Refunding | ||||||||||
3,000,000 | 5.000%, 12/01/23 | Aa2/NR/NR | 3,393,750 | |||||||
San Miguel County, Colorado School | ||||||||||
District R-1 Telluride | ||||||||||
1,055,000 | 5.000%, 12/01/25 | Aa2/AA/NR | 1,208,007 | |||||||
Summit County, Colorado School | ||||||||||
District No. RE 1 Refunding | ||||||||||
2,000,000 | 4.000%, 12/01/24 | Aa1/NR/NR | 2,102,500 | |||||||
2,000,000 | 5.000%, 12/01/28 | Aa1/NR/NR | 2,338,140 | |||||||
Total School Districts | 72,850,016 |
3 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
Water & Sewer (0.5%) | ||||||||||
Central Colorado Water Conservancy | ||||||||||
District, Adams Morgan & Weld | ||||||||||
Counties | ||||||||||
$ | 1,185,000 | 5.000%, 12/01/24 | NR/A/NR | $ | 1,317,317 | |||||
Total General Obligation Bonds | 83,163,685 | |||||||||
Revenue Bonds (45.7%) | ||||||||||
Airport (3.3%) | ||||||||||
Denver, Colorado City & County | ||||||||||
Airport Revenue System, Series A | ||||||||||
4,340,000 | 5.000%, 11/15/24 | A1/A+/AA- | 4,586,469 | |||||||
1,210,000 | 5.250%, 11/15/28 | A1/A+/AA- | 1,252,882 | |||||||
3,000,000 | 5.250%, 11/15/29 | A1/A+/AA- | 3,105,630 | |||||||
Total Airport | 8,944,981 | |||||||||
Electric (2.2%) | ||||||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue, Refunding Series A | ||||||||||
1,000,000 | 5.000%, 11/15/27 | Aa2/AA/AA | 1,155,040 | |||||||
295,000 | 4.750%, 11/15/27 | Aa2/AA/NR | 303,531 | |||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue, Refunding Series A-1 | ||||||||||
835,000 | 4.000%, 11/15/26 | Aa2/AA/AA | 864,359 | |||||||
840,000 | 4.000%, 11/15/27 | Aa2/AA/AA | 866,359 | |||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue Refunding Series B | ||||||||||
2,600,000 | 5.000%, 11/15/23 | Aa2/AA/AA | 2,884,076 | |||||||
Total Electric | 6,073,365 |
4 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (13.8%) | ||||||||||
Colorado Educational & Cultural | ||||||||||
Facility Authority, University Corp. | ||||||||||
Atmosphere Project, Refunding | ||||||||||
$ | 935,000 | 5.000%, 09/01/22 | A2/A+/NR | $ | 982,348 | |||||
Colorado Educational & Cultural | ||||||||||
Facility Authority, University of | ||||||||||
Denver Project | ||||||||||
845,000 | 4.000%, 03/01/24 | A1/NR/NR | 896,553 | |||||||
7,000,000 | 5.250%, 03/01/25 NPFG Insured | A1/A+/NR | 7,975,590 | |||||||
Colorado Educational & Cultural | ||||||||||
Facility Authority Refunding, | ||||||||||
University of Denver Project | ||||||||||
1,000,000 | 5.250%, 03/01/26 NPFG Insured | A1/A+/NR | 1,170,270 | |||||||
Colorado School of Mines Institutional | ||||||||||
Enterprise, Series B | ||||||||||
1,845,000 | 5.000%, 12/01/29 | A1/A+/NR | 2,146,694 | |||||||
Colorado State Board Community | ||||||||||
Colleges & Occupational | ||||||||||
Education, Refunding & | ||||||||||
Improvement, Araphoe Community | ||||||||||
College, Series 2017A | ||||||||||
1,000,000 | 5.000%, 11/01/30 SHEIP Insured | Aa3/NR/NR | 1,154,480 | |||||||
Colorado State Board of Governors | ||||||||||
University Enterprise System, Series C | ||||||||||
2,905,000 | 5.000%, 03/01/26 SHEIP Insured | Aa2/AA/NR | 3,334,708 | |||||||
1,250,000 | 5.000%, 03/01/28 SHEIP Insured | Aa2/AA/NR | 1,476,387 | |||||||
2,100,000 | 5.000%, 03/01/29 SHEIP Insured | Aa2/AA/NR | 2,460,360 | |||||||
University of Colorado Enterprise | ||||||||||
System, Series A | ||||||||||
2,620,000 | 5.000%, 06/01/29 | Aa1/NR/AA+ | 3,014,467 | |||||||
1,165,000 | 5.000%, 06/01/26 NPFG Insured | Aa1/NR/AA+ | 1,372,277 | |||||||
University of Colorado Enterprise | ||||||||||
System, Series A-1 | ||||||||||
2,000,000 | 5.000%, 06/01/28 | Aa1/NR/AA+ | 2,396,440 | |||||||
University of Colorado Enterprise | ||||||||||
System, Refunding, Series B | ||||||||||
1,680,000 | 4.000%, 06/01/23 | Aa1/NR/AA+ | 1,731,895 |
5 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
University of Northern Colorado | ||||||||||
Greeley Institutional Enterprise | ||||||||||
Refunding, SHEIP, Series A | ||||||||||
$ | 1,000,000 | 5.000%, 06/01/25 SHEIP Insured | Aa2/AA/NR | $ | 1,128,980 | |||||
2,810,000 | 5.000%, 06/01/26 SHEIP Insured | Aa2/AA/NR | 3,004,873 | |||||||
2,940,000 | 5.000%, 06/01/28 SHEIP Insured | Aa2/AA/NR | 3,143,889 | |||||||
Total Higher Education | 37,390,211 | |||||||||
Hospital (1.5%) | ||||||||||
Colorado Health Facility Authority, | ||||||||||
Catholic Health Initiatives, Series D | ||||||||||
1,000,000 | 6.000%, 10/01/23 | Baa1/BBB+/BBB+ | 1,002,810 | |||||||
Colorado Health Facility Authority, | ||||||||||
Sisters Leavenworth, Refunding | ||||||||||
3,000,000 | 5.250%, 01/01/25 | Aa3/AA-/AA- | 3,112,980 | |||||||
Total Hospital | 4,115,790 | |||||||||
Lease (11.5%) | ||||||||||
Arvada, Colorado COP | ||||||||||
1,190,000 | 4.000%, 12/01/29 | NR/AA+/NR | 1,266,684 | |||||||
Aurora, Colorado COP, Refunding | ||||||||||
Series A | ||||||||||
1,500,000 | 5.000%, 12/01/26 | Aa2/AA/NR | 1,550,415 | |||||||
Brighton, Colorado COP Refunding | ||||||||||
Series A | ||||||||||
1,865,000 | 5.000%, 12/01/24 AGMC Insured | Aa3/AA/NR | 1,966,195 | |||||||
Colorado State BEST COP Series H | ||||||||||
3,490,000 | 4.000%, 03/15/26 | Aa2/AA-/NR | 3,658,567 | |||||||
Colorado State BEST COP Series K | ||||||||||
2,500,000 | 5.000%, 03/15/30 | Aa2/AA-/NR | 2,886,975 | |||||||
2,500,000 | 5.000%, 03/15/31 | Aa2/AA-/NR | 2,874,850 | |||||||
Colorado State BEST COP Series M | ||||||||||
2,000,000 | 5.000%, 03/15/31 | Aa2/AA-/NR | 2,330,660 | |||||||
Colorado State Higher Education | ||||||||||
Capital Construction Lease | ||||||||||
1,690,000 | 5.000%, 11/01/26 | Aa2/AA-/NR | 1,963,797 |
6 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Lease (continued) | ||||||||||
Denver, Colorado City & County COP, | ||||||||||
Convention Center Expansion | ||||||||||
Project Series 2018A | ||||||||||
$ | 1,500,000 | 5.000%, 06/01/30 | Aa2/AA+/AA+ | $ | 1,715,025 | |||||
Denver, Colorado City & County COP | ||||||||||
(Fire Station & Library Facilities) | ||||||||||
1,065,000 | 5.000%, 12/01/25 | Aa1/AA+/AA+ | 1,240,885 | |||||||
Douglas County, Colorado COP | ||||||||||
(Libraries) | ||||||||||
1,570,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 1,783,269 | |||||||
Foothills Park and Recreation District, | ||||||||||
Colorado COP Refunding & | ||||||||||
Improvement | ||||||||||
1,380,000 | 5.000%, 12/01/26 AGMC Insured | NR/AA/NR | 1,577,713 | |||||||
Jefferson County, Colorado School | ||||||||||
District No. R-1 COP | ||||||||||
1,000,000 | 5.000%, 12/15/27 | Aa3/AA-/NR | 1,142,560 | |||||||
Rangeview Library District Project, | ||||||||||
Colorado COP | ||||||||||
2,515,000 | 5.000%, 12/15/27 AGMC Insured | Aa2/AA/NR | 2,887,698 | |||||||
Thompson School District No R2-J | ||||||||||
(Larimer, Weld And Boulder | ||||||||||
Counties, Colorado COP, Series | ||||||||||
2014 | ||||||||||
750,000 | 4.500%, 12/01/26 | Aa3/NR/NR | 823,927 | |||||||
Westminster, Colorado COP | ||||||||||
1,480,000 | 4.250%, 12/01/22 AGMC Insured | A2/AA/NR | 1,542,782 | |||||||
Total Lease | 31,212,002 | |||||||||
Sales Tax (4.2%) | ||||||||||
Boulder, Colorado General Fund | ||||||||||
Capital Improvement Projects | ||||||||||
2,235,000 | 4.000%, 10/01/25 | Aa1/AAA/NR | 2,361,769 | |||||||
Broomfield, Colorado Sales & Use Tax | ||||||||||
1,000,000 | 5.000%, 12/01/30 | Aa3/NR/NR | 1,165,270 | |||||||
Castle Rock, Colorado Sales & Use Tax | ||||||||||
1,015,000 | 4.000%, 06/01/25 | Aa3/AA/NR | 1,084,375 |
7 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Sales Tax (continued) | ||||||||||
Commerce City, Colorado Sales & Use | ||||||||||
Tax | ||||||||||
$ | 500,000 | 5.000%, 08/01/28 AGMC Insured | A2/AA/NR | $ | 574,195 | |||||
500,000 | 5.000%, 08/01/29 AGMC Insured | A2/AA/NR | 569,680 | |||||||
1,000,000 | 5.000%, 08/01/26 BAMAC Insured | A1/AA/NR | 1,139,210 | |||||||
Grand Junction, Colorado General Fund | ||||||||||
1,900,000 | 5.000%, 03/01/23 | NR/AA/NR | 2,052,114 | |||||||
Pueblo, Colorado Urban Renewal | ||||||||||
Authority, Refunding & | ||||||||||
Improvement, Series B | ||||||||||
1,250,000 | 5.250%, 12/01/28 | A2/A/NR | 1,354,300 | |||||||
Westminster, Colorado Economic | ||||||||||
Development Authority, Mandalay | ||||||||||
Gardens Urban Renewal Project | ||||||||||
1,090,000 | 4.000%, 12/01/22 | NR/A+/NR | 1,148,500 | |||||||
Total Sales Tax | 11,449,413 | |||||||||
Transportation (0.8%) | ||||||||||
Regional Transportation District, | ||||||||||
Colorado COP, Series A | ||||||||||
2,000,000 | 5.000%, 06/01/26 | Aa3/A/AA- | 2,285,300 | |||||||
Water & Sewer (8.4%) | ||||||||||
Arapahoe, Colorado Water & | ||||||||||
Wastewater Public Improvement | ||||||||||
District | ||||||||||
1,320,000 | 5.000%, 12/01/24 | NR/AA-/NR | 1,510,634 | |||||||
1,020,000 | 5.000%, 12/01/25 | NR/AA-/NR | 1,156,068 | |||||||
Broomfield, Colorado Sewer and Waste | ||||||||||
Water | ||||||||||
1,975,000 | 4.000%, 12/01/21 AGMC Insured | A2/NR/NR | 2,077,463 | |||||||
1,550,000 | 5.000%, 12/01/24 AGMC Insured | A2/AA/NR | 1,701,001 | |||||||
Broomfield, Colorado Water Activity | ||||||||||
Enterprise | ||||||||||
3,385,000 | 5.000%, 12/01/21 | A1/NR/NR | 3,674,113 |
8 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Water & Sewer (continued) | ||||||||||
Colorado Water Resource & Power | ||||||||||
Development Authority | ||||||||||
$ | 925,000 | 5.000%, 09/01/25 | Aaa/AAA/AAA | $ | 1,077,357 | |||||
Denver, Colorado City and County | ||||||||||
Board Water Commissioners Master | ||||||||||
Resolution, Refunding, Series B | ||||||||||
1,000,000 | 4.000%, 12/15/22 | Aaa/AAA/AAA | 1,059,490 | |||||||
Denver, Colorado City and County Board | ||||||||||
Water Commissioners, Series B | ||||||||||
850,000 | 5.000%, 09/15/29 | Aaa/AAA/AAA | 1,006,774 | |||||||
Greeley, Colorado Water Revenue | ||||||||||
1,705,000 | 5.000%, 08/01/28 | Aa2/AA+/NR | 1,983,972 | |||||||
North Weld County, Colorado Water | ||||||||||
District Enterprise Revenue | ||||||||||
Refunding | ||||||||||
1,465,000 | 4.000%, 11/01/22 AGMC Insured | NR/AA/NR | 1,564,986 | |||||||
Parker, Colorado Water & Sanitation | ||||||||||
District Water & Sewer Enterprise | ||||||||||
Refunding | ||||||||||
1,000,000 | 5.000%, 11/01/22 AGMC Insured | A2/AA+/NR | 1,086,530 | |||||||
Thornton, Colorado Water Enterprise | ||||||||||
Revenue, Series 2013 | ||||||||||
1,970,000 | 4.000%, 12/01/24 | Aa2/AA/NR | 2,128,152 | |||||||
Woodmoor, Colorado Water & | ||||||||||
Sanitation District #1 Enterprise | ||||||||||
2,570,000 | 4.500%, 12/01/26 | NR/AA-/NR | 2,728,569 | |||||||
Total Water & Sewer | 22,755,109 | |||||||||
Total Revenue Bonds | 124,226,171 |
9 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Bonds\Escrowed to | Moody's, S&P | ||||||||
Amount | Maturity (21.5%)†† | and Fitch | Value | |||||||
Pre-Refunded General Obligation | ||||||||||
Bonds (4.1%) | ||||||||||
Metropolitan District (0.8%) | ||||||||||
Park Creek Metropolitan District, | ||||||||||
Colorado Revenue Refunding & | ||||||||||
Improvement - Senior Property Tax | ||||||||||
Support | ||||||||||
$ | 2,000,000 | 5.500%, 12/01/21 AGC Insured | NR/AA/NR | $ | 2,081,020 | |||||
School Districts (3.3%) | ||||||||||
Arapahoe County, Colorado School | ||||||||||
District #001 Englewood | ||||||||||
3,235,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 3,525,826 | |||||||
Boulder, Larimer & Weld Counties, | ||||||||||
Colorado | ||||||||||
1,500,000 | 5.000%, 12/15/28 | Aa2/AA/NR | 1,509,765 | |||||||
Denver, Colorado City & County School | ||||||||||
District No. 1 | ||||||||||
3,000,000 | 5.250%, 12/01/27 | Aa2/AA+/NR | 3,065,700 | |||||||
Gunnison Watershed, Colorado School | ||||||||||
District | ||||||||||
1,025,000 | 5.250%, 12/01/26 | Aa2/AA/NR | 1,030,812 | |||||||
Total School Districts | 9,132,103 | |||||||||
Total Pre-Refunded General Obligation | ||||||||||
Bonds | 11,213,123 | |||||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Revenue Bonds (17.4%) | ||||||||||
Electric (1.7%) | ||||||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue, Refunding Series A | ||||||||||
1,705,000 | 4.750%, 11/15/27 | NR/NR/NR* | 1,756,423 | |||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue, Refunding Series A-1 | ||||||||||
165,000 | 4.000%, 11/15/26 | NR/NR/NR* | 171,498 | |||||||
160,000 | 4.000%, 11/15/27 | NR/NR/NR* | 166,301 | |||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue Refunding Series B | ||||||||||
865,000 | 5.250%, 11/15/23 | NR/NR/NR* | 868,581 | |||||||
420,000 | 5.250%, 11/15/23 | Aa2/AA/NR | 421,714 |
10 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Bonds\Escrowed to | Moody's, S&P | ||||||||
Amount | Maturity (continued) | and Fitch | Value | |||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Revenue Bonds (continued) | ||||||||||
Electric (continued) | ||||||||||
Colorado Springs, Colorado Utilities | ||||||||||
Revenue, Series C-2 | ||||||||||
$ | 1,060,000 | 5.000%, 11/15/23 | Aa2/AA/AA | $ | 1,178,900 | |||||
Total Electric | 4,563,417 | |||||||||
Higher Education (5.7%) | ||||||||||
Adams State College, Colorado | ||||||||||
Auxiliary Facilities Improvement | ||||||||||
Series A | ||||||||||
1,000,000 | 5.200%, 05/15/27 SHEIP Insured | Aa2/AA/NR | 1,020,200 | |||||||
Colorado Educational & Cultural | ||||||||||
Facility Authority, University Corp. | ||||||||||
Atmosphere Project, Refunding | ||||||||||
765,000 | 5.000%, 09/01/22 | NR/NR/NR* | 806,685 | |||||||
1,635,000 | 5.000%, 09/01/28 | A2/A+/NR | 1,724,091 | |||||||
Colorado School of Mines Enterprise | ||||||||||
Refunding & Improvement | ||||||||||
1,455,000 | 5.000%, 12/01/24 SHEIP Insured | Aa2/AA/NR | 1,462,653 | |||||||
Colorado State Board of Governors | ||||||||||
University Enterprise System, Series A | ||||||||||
2,300,000 | 5.000%, 03/01/25 SHEIP Insured | Aa2/AA/NR | 2,521,766 | |||||||
University of Colorado Enterprise | ||||||||||
System | ||||||||||
1,270,000 | 5.000%, 06/01/25 | Aa1/NR/AA+ | 1,448,905 | |||||||
2,000,000 | 5.000%, 06/01/27 | Aa1/NR/AA+ | 2,040,520 | |||||||
University of Colorado Enterprise | ||||||||||
System, Series A | ||||||||||
2,000,000 | 4.750%, 06/01/27 | Aa1/NR/AA+ | 2,141,400 | |||||||
Western State College, Colorado | ||||||||||
Institutional Enterprise, Series A | ||||||||||
1,160,000 | 5.000%, 05/15/24 SHEIP Insured | Aa2/AA/NR | 1,215,344 | |||||||
Western State College, Colorado | ||||||||||
1,020,000 | 5.000%, 05/15/27 SHEIP Insured | Aa2/AA/NR | 1,039,360 | |||||||
Total Higher Education | 15,420,924 |
11 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Bonds\Escrowed to | Moody's, S&P | ||||||||
Amount | Maturity (continued) | and Fitch | Value | |||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||
Revenue Bonds (continued) | ||||||||||
Hospital (0.8%) | ||||||||||
Colorado Health Facility Authority | ||||||||||
Hospital Revenue, NCMC, Inc. | ||||||||||
Project, Series A | ||||||||||
$ | 2,000,000 | 5.250%, 05/15/26 AGMC Insured | NR/AA/NR | $ | 2,041,020 | |||||
Lease (6.6%) | ||||||||||
Adams 12 Five Star Schools, Colorado | ||||||||||
COP | ||||||||||
500,000 | 5.000%, 12/01/25 | Aa3/A/NR | 502,630 | |||||||
Adams County, Colorado Corrections | ||||||||||
Facility COP, Series B | ||||||||||
1,600,000 | 5.000%, 12/01/26 | Aa2/AA/NR | 1,608,288 | |||||||
1,200,000 | 5.125%, 12/01/27 | Aa2/AA/NR | 1,206,456 | |||||||
Broomfield, Colorado COP | ||||||||||
2,000,000 | 4.500%, 12/01/28 | Aa3/NR/NR | 2,105,760 | |||||||
Colorado State BEST COP Series G | ||||||||||
3,000,000 | 4.250%, 03/15/23 | Aa2/AA-/NR | 3,161,490 | |||||||
Colorado State Higher Education | ||||||||||
Capital Construction Lease | ||||||||||
2,000,000 | 5.250%, 11/01/23 | Aa2/AA-/NR | 2,005,580 | |||||||
Douglas County, Colorado School | ||||||||||
District No. RE-1 Douglas & Elbert | ||||||||||
Counties COP | ||||||||||
3,075,000 | 5.000%, 01/15/29 | Aa2/NR/NR | 3,102,737 | |||||||
Garfield County, Colorado COP Public | ||||||||||
Library District | ||||||||||
1,000,000 | 5.375%, 12/01/27 | NR/A/NR | 1,039,080 | |||||||
Rangeview Library District Project, | ||||||||||
Colorado COP | ||||||||||
2,210,000 | 5.000%, 12/15/26 AGC Insured | Aa2/AA/NR | 2,224,387 | |||||||
1,000,000 | 5.000%, 12/15/28 AGC Insured | Aa2/AA/NR | 1,006,510 | |||||||
Total Lease | 17,962,918 |
12 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||||
Principal | Pre-Refunded Bonds\Escrowed to | Moody's, S&P | ||||||||||
Amount | Maturity (continued) | and Fitch | Value | |||||||||
Pre-Refunded\ Escrowed to Maturity | ||||||||||||
Revenue Bonds (continued) | ||||||||||||
Sales Tax (1.5%) | ||||||||||||
Denver, Colorado City & County Excise | ||||||||||||
Tax Refunding Series A | ||||||||||||
$ | 4,000,000 | 5.250%, 09/01/19 AGMC Insured ETM | NR/AA/NR | $ | 4,120,400 | |||||||
Miscellaneous Revenue (1.1%) | ||||||||||||
Colorado Educational & Cultural | ||||||||||||
Facility Authority, Independent | ||||||||||||
School Revenue Refunding, Kent | ||||||||||||
Denver School Project | ||||||||||||
1,000,000 | 5.000%, 10/01/30 | NR/A/NR | 1,029,370 | |||||||||
Colorado Educational & Cultural | ||||||||||||
Facility Authority, Independent | ||||||||||||
School Revenue Refunding, Vail | ||||||||||||
Mountain School Project | ||||||||||||
1,820,000 | 6.000%, 05/01/30 | NR/BBB-/NR | 1,931,493 | |||||||||
Total Miscellaneous Revenue | 2,960,863 | |||||||||||
Total Pre-Refunded\ Escrowed to | ||||||||||||
Maturity Revenue Bonds | 47,069,542 | |||||||||||
Total Pre-Refunded\ Escrowed to | ||||||||||||
Maturity Bonds | 58,282,665 | |||||||||||
Total Investments (cost $263,397,003- | ||||||||||||
note 4) | 97.8% | 265,672,521 | ||||||||||
Other assets less liabilities | 2.2 | 5,965,143 | ||||||||||
Net Assets | 100.0% | $ | 271,637,664 |
13 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Percentage of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Aaa of Moody's or AAA of S&P or Fitch | 2.1 | % | ||
Prerefunded bonds\ ETM bonds †† | 21.9 | |||
Aa of Moody's or AA of S&P or Fitch | 66.4 | |||
A of Moody's or S&P or Fitch | 9.2 | |||
Baa of Moody's or BBB of S&P or Fitch | 0.4 | |||
100.0 | % |
PORTFOLIO ABBREVIATIONS |
AGC - Assured Guaranty Corp. |
AGMC - Assured Guaranty Municipal Corp. |
BAMAC -Build America Mutual Assurance Company |
BEST - Building Excellent Schools Today |
COP - Certificates of Participation |
ETM - Escrowed to Maturity |
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 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 NRSROs. Percentages in this table do not include the Short-Term Investment. | ||
†† | Pre-refunded bonds are bonds for which U.S. Government Obligations usually have been placed inescrow to retire the bonds at their earliest call date. |
See accompanying notes to financial statements.
14 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2018 (unaudited)
ASSETS | ||||
Investments at value (cost $263,397,003) | $ | 265,672,521 | ||
Cash | 2,983,721 | |||
Interest receivable | 3,384,729 | |||
Receivable for Fund shares sold | 97,156 | |||
Other assets | 18,970 | |||
Total assets | 272,157,097 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 309,450 | |||
Management fee payable | 107,451 | |||
Dividends payable | 64,391 | |||
Distribution and service fees payable | 182 | |||
Accrued expenses payable | 37,959 | |||
Total liabilities | 519,433 | |||
NET ASSETS | $ | 271,637,664 | ||
Net Assets consist of: | ||||
Capital Stock – Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 265,683 | ||
Additional paid-in capital | 270,953,012 | |||
Net unrealized appreciation on investments (note 4) | 2,275,518 | |||
Accumulated net realized loss on investments | (1,871,639 | ) | ||
Undistributed net investment income | 15,090 | |||
$ | 271,637,664 | |||
CLASS A | ||||
Net Assets | $ | 190,026,502 | ||
Capital shares outstanding | 18,595,828 | |||
Net asset value and redemption price per share | $ | 10.22 | ||
Maximum offering price per share (100/96 of $10.22) | $ | 10.65 | ||
CLASS C | ||||
Net Assets | $ | 12,948,075 | ||
Capital shares outstanding | 1,270,091 | |||
Net asset value and offering price per share | $ | 10.19 | ||
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) | $ | 10.19 | * | |
CLASS Y | ||||
Net Assets | $ | 68,663,087 | ||
Capital shares outstanding | 6,702,408 | |||
Net asset value, offering and redemption price per share | $ | 10.24 |
See accompanying notes to financial statements.
15 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER, 30, 2018 (unaudited)
Investment Income | ||||||||
Interest income | $ | 4,305,224 | ||||||
Expenses | ||||||||
Management fee (note 3) | $ | 697,882 | ||||||
Distribution and service fees (note 3) | 119,076 | |||||||
Transfer and shareholder servicing agent fees | 52,355 | |||||||
Trustees’ fees and expenses (note 7) | 50,034 | |||||||
Legal fees | 43,863 | |||||||
Registration fees and dues | 15,627 | |||||||
Shareholders’ reports | 11,889 | |||||||
Auditing and tax fees | 11,505 | |||||||
Insurance | 6,331 | |||||||
Chief compliance officer services (note 3) | 5,572 | |||||||
Custodian fees | 5,250 | |||||||
Miscellaneous | 28,911 | |||||||
Total Expenses | 1,048,295 | |||||||
Management fees waived (note 3) | (27,915 | ) | ||||||
Net expenses | 1,020,380 | |||||||
Net investment income | 3,284,844 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | (133,254 | ) | ||||||
Change in unrealized appreciation on | ||||||||
investments | (2,296,840 | ) | ||||||
Net realized and unrealized gain (loss) | ||||||||
on investments | (2,430,094 | ) | ||||||
Net change in net assets resulting from operations | $ | 854,750 |
See accompanying notes to financial statements.
16 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2018 | Year Ended | |||||||
(unaudited) | March 31, 2018 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,284,844 | $ | 7,492,654 | ||||
Realized gain (loss) from securities transactions | (133,254 | ) | 191,227 | |||||
Change in unrealized appreciation on | ||||||||
investments | (2,296,840 | ) | (5,950,101 | ) | ||||
Change in net assets resulting from operations | 854,750 | 1,733,780 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,326,243 | ) | (5,097,512 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (101,418 | ) | (281,609 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (855,574 | ) | (2,103,049 | ) | ||||
Change in net assets from distributions | (3,283,235 | ) | (7,482,170 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 16,534,890 | 44,409,789 | ||||||
Reinvested dividends and distributions | 2,569,874 | 5,801,919 | ||||||
Cost of shares redeemed | (32,205,172 | ) | (69,526,366 | ) | ||||
Change in net assets from capital share | ||||||||
transactions | (13,100,408 | ) | (19,314,658 | ) | ||||
Change in net assets | (15,528,893 | ) | (25,063,048 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 287,166,557 | 312,229,605 | ||||||
End of period* | $ | 271,637,664 | $ | 287,166,557 | ||||
*Includes undistributed net investment of: | $ | 15,090 | $ | 13,481 |
See accompanying notes to financial statements.
17 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OFCOLORADO
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018 (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. As of the date of this report, there were no Class F Shares or Class T 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 ask 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. |
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. |
18 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018: |
Valuation Inputs* | Investments in Securities | |||
Level 1 – Quoted Prices | $ | — | ||
Level 2 – Other Significant Observable | ||||
Inputs — Municipal Bonds* | 265,672,521 | |||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 265,672,521 |
* | 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 (2015 –2017) or expected to be taken in the Fund’s 2018 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. |
19 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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, 2018, the Fund increased additional paid-in capital by $19,794, increased undistributed net investment income by $9,049, and decreased accumulated realized gain by $28,843. 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-today 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, 2019 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, 2018, the Fund incurred management fees of $697,882 of which $27,915 was waived under the contractual fee waiver.
20 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018 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.
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, as amended (the “1940 Act”).
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 1940 Act. 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 Fund’s Distribution Plan applicable to Class A Shares 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, 2018, distribution fees on Class A Shares amounted to $48,497 of which the Distributor retained $2,542.
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, 2018, amounted to $52,934. 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, 2018, amounted to $17,645. The total of these payments with respect to Class C Shares amounted to $70,579 of which the Distributor retained $17,493.
21 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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 (“financial intermediaries”), the Fund’s shares are sold primarily through the facilities of these financial intermediaries having offices within Colorado, with the bulk of any sales commissions inuring to such financial intermediaries. For the six months ended September 30, 2018, total commissions on sales of Class A Shares amounted to $10,477of which the Distributor received $2,200.
c) Transfer and shareholder servicing fees:
The Fund occasionally compensates financial intermediaries in connection with the sub-transfer agency related services provided by such entities in connection with their respective Fund shareholders so long as the fees are deemed by the Board of Trustees to be reasonable in relation to (i) the value of the services and the benefits received by the Fund and certain shareholders; and (ii) the payments that the Fund would make to another entity to perform similar ongoing services to existing shareholders.
4. Purchases and Sales of Securities
During the six months ended September 30, 2018, purchases of securities and proceeds from the sales of securities aggregated $6,709,841 and $17,450,789, respectively.
At September 30, 2018, the aggregate tax cost for all securities was $263,374,077. At September 30, 2018, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to 4,054,107 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $1,755,663 for a net unrealized appreciation of $2,298,444.
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. At September 30, 2018, the Fund had all of its net assets invested in the securities of Colorado issuers.
22 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
6. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2018 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares sold | 597,205 | $ | 6,140,521 | 1,596,193 | $ | 16,824,779 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 184,224 | 1,894,692 | 397,825 | 4,185,070 | ||||||||||||
Cost of shares redeemed | (1,160,886 | ) | (11,941,305 | ) | (2,843,641 | ) | (29,894,097 | ) | ||||||||
Net change | (379,457 | ) | (3,906,092 | ) | (849,623 | ) | (8,884,248 | ) | ||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 128,544 | 1,318,931 | 162,833 | 1,710,084 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 8,607 | 88,290 | 23,664 | 248,550 | ||||||||||||
Cost of shares redeemed | (354,469 | ) | (3,637,024 | ) | (672,183 | ) | (7,056,082 | ) | ||||||||
Net change | (217,318 | ) | (2,229,803 | ) | (485,686 | ) | (5,097,448 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 880,068 | 9,075,438 | 2,450,461 | 25,874,926 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 56,941 | 586,892 | 129,863 | 1,368,299 | ||||||||||||
Cost of shares redeemed | (1,611,123 | ) | (16,626,843 | ) | (3,093,046 | ) | (32,576,187 | ) | ||||||||
Net change | (674,114 | ) | (6,964,513 | ) | (512,722 | ) | (5,332,962 | ) | ||||||||
Total transactions in Fund | ||||||||||||||||
shares | (1,270,889 | ) | $ | (13,100,408 | ) | (1,848,031 | ) | $ | (19,314,658 | ) |
7. Trustees’ Fees and Expenses
At September 30, 2018, there were 8 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, 2018 was $41,727. 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, 2018, such meeting-related expenses amounted to $8,307.
23 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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 or in cash, 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, 2018, the Fund had capital loss carryover of $1,738,385 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. During the fiscal year ended March 31, 2018, the Fund utilized $191,227 of capital loss carry forward.
24 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
The tax character of distributions was as follows:
Year Ended | Year Ended | |||||||
March 31, 2018 | March 31, 2017 | |||||||
Net tax-exempt income | $ | 7,473,480 | $ | 8,130,528 | ||||
Ordinary Income | 8,690 | — | ||||||
$ | 7,482,170 | $ | 8,130,528 |
As of March 31, 2018, the components of distributable earnings on a tax basis were:
Undistributed tax-exempt income | $ | 143,918 | ||
Unrealized appreciation | 4,575,628 | |||
Accumulated net realized gain | (1,738,385 | ) | ||
Other temporary differences | (133,707 | ) | ||
$ | 2,847,454 |
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 and the deduction of distributions payable.
10. Credit Facility
The Bank of New York Mellon and the Aquila Group of Funds have been parties to a $40 million credit agreement, which currently terminates on August 28, 2019 (per the August 29, 2018 amendment). In accordance with the Aquila Group of Funds Guidelines for Allocation of Committed Line of Credit (the Aquila Group of Funds is comprised of nine funds), each fund is responsible for payment of its proportionate share of
a) | a 0.17% per annum commitment fee; and, |
b) | interest on amounts borrowed for temporary or emergency purposes by the Fund (at the applicable rate selected by the Aquila Group of Funds at the time of the borrowing of either (i) the one-month Eurodollar Rate or (ii) a rate equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day, or (c) the Overnight Eurodollar Rate in effect on such day). |
There were no borrowings under the credit agreement for the six months ended September 30, 2018.
25 | 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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.31 | $ | 10.51 | $ | 10.83 | $ | 10.80 | $ | 10.45 | $ | 10.80 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.12 | 0.26 | 0.28 | 0.31 | 0.32 | 0.32 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.09 | ) | (0.20 | ) | (0.33 | ) | 0.03 | 0.35 | (0.35 | ) | ||||||||||||||
Total from investment operations | 0.03 | 0.06 | (0.05 | ) | 0.34 | 0.67 | (0.03 | ) | ||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.26 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.12 | ) | (0.26 | ) | (0.27 | ) | (0.31 | ) | (0.32 | ) | (0.32 | ) | ||||||||||||
Net asset value, end of period | $ | 10.22 | $ | 10.31 | $ | 10.51 | $ | 10.83 | $ | 10.80 | $ | 10.45 | ||||||||||||
Total return (not reflecting sales charge) | 0.32 | %(3) | 0.55 | % | (0.44 | )% | 3.20 | % | 6.52 | % | (0.20 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 190 | $ | 196 | $ | 208 | $ | 220 | $ | 202 | $ | 209 | ||||||||||||
Ratio of expenses to average net assets | 0.70 | %(4) | 0.68 | % | 0.68 | % | 0.67 | % | 0.73 | % | 0.74 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.39 | %(4) | 2.47 | % | 2.57 | % | 2.89 | % | 3.04 | % | 3.09 | %(2) | ||||||||||||
Portfolio turnover rate | 2 | %(3) | 9 | % | 11 | % | 10 | % | 8 | % | 4 | % | ||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.72 | %(4) | 0.70 | % | 0.70 | % | 0.69 | % | 0.75 | % | 0.76 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.37 | %(4) | 2.45 | % | 2.55 | % | 2.87 | % | 3.02 | % | 3.07 | %(2) |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
26 | 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 | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.29 | $ | 10.49 | $ | 10.80 | $ | 10.78 | $ | 10.43 | $ | 10.78 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.07 | 0.16 | 0.17 | 0.21 | 0.22 | 0.22 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.20 | ) | (0.31 | ) | 0.02 | 0.35 | (0.35 | ) | ||||||||||||||
Total from investment operations | (0.03 | ) | (0.04 | ) | (0.14 | ) | 0.23 | 0.57 | (0.13 | ) | ||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.07 | ) | (0.16 | ) | (0.17 | ) | (0.21 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.07 | ) | (0.16 | ) | (0.17 | ) | (0.21 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||
Net asset value, end of period | $ | 10.19 | $ | 10.29 | $ | 10.49 | $ | 10.80 | $ | 10.78 | $ | 10.43 | ||||||||||||
Total return (not reflecting CDSC) | (0.26 | )%(3) | (0.41 | )% | (1.29 | )% | 2.18 | % | 5.52 | % | (1.15 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 13 | $ | 15 | $ | 21 | $ | 24 | $ | 26 | $ | 28 | ||||||||||||
Ratio of expenses to average net assets | 1.65 | %(4) | 1.63 | % | 1.62 | % | 1.62 | % | 1.68 | % | 1.68 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.44 | %(4) | 1.52 | % | 1.62 | % | 1.94 | % | 2.09 | % | 2.14 | %(2) | ||||||||||||
Portfolio turnover rate | 2 | %(3) | 9 | % | 11 | % | 10 | % | 8 | % | 4 | % | ||||||||||||
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 | %(4) | 1.65 | % | 1.64 | % | 1.64 | % | 1.70 | % | 1.70 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.42 | %(4) | 1.50 | % | 1.60 | % | 1.92 | % | 2.07 | % | 2.12 | %(2) |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
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 Y | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.34 | $ | 10.54 | $ | 10.86 | $ | 10.83 | $ | 10.47 | $ | 10.83 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.27 | 0.28 | 0.32 | 0.33 | 0.33 | ||||||||||||||||||
Net gain on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.20 | ) | (0.32 | ) | 0.02 | 0.36 | (0.36 | ) | ||||||||||||||
Total from investment operations | 0.03 | 0.07 | (0.04 | ) | 0.34 | 0.69 | (0.03 | ) | ||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.27 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | (0.33 | ) | ||||||||||||
Distributions from capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributions | (0.13 | ) | (0.27 | ) | (0.28 | ) | (0.31 | ) | (0.33 | ) | (0.33 | ) | ||||||||||||
Net asset value, end of period | $ | 10.24 | $ | 10.34 | $ | 10.54 | $ | 10.86 | $ | 10.83 | $ | 10.47 | ||||||||||||
Total return | 0.25 | %(3) | 0.61 | % | (0.38 | )% | 3.24 | % | 6.66 | % | (0.24 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 69 | $ | 76 | $ | 83 | $ | 79 | $ | 62 | $ | 45 | ||||||||||||
Ratio of expenses to average net assets | 0.65 | %(4) | 0.63 | % | 0.63 | % | 0.62 | % | 0.68 | % | 0.68 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.44 | %(4) | 2.52 | % | 2.62 | % | 2.94 | % | 3.08 | % | 3.14 | %(2) | ||||||||||||
Portfolio turnover rate | 2 | %(3) | 9 | % | 11 | % | 10 | % | 8 | % | 4 | % | ||||||||||||
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 | %(4) | 0.65 | % | 0.65 | % | 0.64 | % | 0.70 | % | 0.70 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.42 | %(4) | 2.50 | % | 2.60 | % | 2.92 | % | 3.06 | % | 3.12 | %(2) |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
28 | 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, 2018. The independent Trustees met telephonically on August 13, 2018 and in person on September 15, 2018 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. The Trustees also discussed the memorandum provided by Fund counsel that summarized the legal standards and other considerations that are relevant to the Trustees in their deliberations regarding the renewal of the Advisory and Sub-Advisory Agreements.
At the meeting held on September 15, 2018, based on their evaluation of the information provided by the Manager, the Sub-Adviser and the independent consultant, the Trustees of the Fund present at the meeting, including the independent Trustees voting separately, unanimously approved the renewal of each of the Advisory Agreement and the Sub-Advisory Agreement until September 30, 2019. 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.
29 | 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 (one Colorado intermediate and four 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 (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Bloomberg Barclays 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 the one, three, five and ten-year periods ended June 30, 2018. The Trustees 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 five and ten-year periods ended June 30, 2018, but lower than the average annual return of the funds in the Product Category for Performance for the one and three-year periods ended June 30, 2018. The Trustees further noted that the Fund’s average annual return was higher than the average annual total return of the benchmark index for the five-year period ended June 30, 2018, but lower than the average annual total return of the benchmark index for the one, three and ten-year periods ended June 30, 2018. The Trustees considered that the Fund invests primarily in municipal obligations issued by the State of Colorado, its counties and various other local authorities, while the funds in the Product Category for Performance invest in, and the Fund’s benchmark index includes, municipal bonds of issuers throughout the United States. The Trustees noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees, expenses or sales charges.
30 | Aquila Tax-Free Fund of Colorado
In addition, the Trustees considered that, as reflected in the Consultant’s Report, the Fund’s standard deviation, a measure of volatility, was in the first and second quintile relative to the funds in the Product Category for Performance for the three and five-year periods ended June 30, 2018, respectively. The Trustees further noted that the Fund’s Sharpe ratio was in the fourth and second quintile for the three and five-year periods ended June 30, 2018, respectively, when compared to the funds in the Product Category for Performance. A Sharpe ratio is a measure for calculating risk-adjusted return. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted 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 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 only 0.003% higher than the average, and equal to the median, contractual advisory fee of the funds in the Peer Group (at the Fund’s current asset level) and 0.011% higher than the asset-weighted average contractual advisory fee of the funds in the Product Category for Expenses (at the Fund’s current asset level). 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).
31 | Aquila Tax-Free Fund of Colorado
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.
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, through a contractual waiver of its sub-advisory fees, 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.
32 | Aquila Tax-Free Fund of Colorado
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.
33 | Aquila Tax-Free Fund of Colorado
Your Fund’s Expenses (unaudited)
As a Fund shareholder, 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 assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The 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 that 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”.
Hypothetical Example for Comparison with Other Funds
Under the heading, “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||
(actual return after expenses) | (5% annual return before expenses) | |||||
Expenses(2) | Expenses(2) | |||||
Beginning | Ending(1) | Paid During | Ending | Paid During | Net | |
Account | Account | Period | Account | Period | Annualized | |
Share | Value | Value | 4/1/18 – | Value | 4/1/18 – | Expense |
Class | 4/1/18 | 9/30/18 | 9/30/18 | 9/30/18 | 9/30/18 | Ratio |
A | $1,000 | $1,003.20 | $3.52 | $1,021.56 | $3.55 | 0.70% |
C | $1,000 | $ 997.40 | $8.26 | $1,016.80 | $8.34 | 1.65% |
Y | $1,000 | $1,002.50 | $3.26 | $1,021.81 | $3.29 | 0.65% |
(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 or the applicable CDSC with respect to Class C shares. Total return is not annualized and as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio for the six-month period as indicated above - in the far right column - multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. |
34 | 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 1-800-437-1000.
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, 2018, there were no proxies related to any portfolio instruments held by the Fund. As such, 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, 2018, $7,473,480 of dividends paid by Aquila Tax-Free Fund of Colorado, constituting 99.9% of total dividends paid, were exempt-interest dividends; and the balance was ordinary income.
Prior to February 15, 2019, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2018 calendar year.
35 | Aquila Tax-Free Fund of Colorado
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
Thomas A. Christopher, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
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.
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Semi-Annual Report September 30, 2018 | |||||||||||||||||||||||||
![]() |
![]() | Aquila Tax-Free Fund For Utah
“Proper Asset Allocation –A Strategy For All Seasons”
Serving Utah investors since 1992 | ![]() |
November, 2018
Dear Fellow Shareholder:
Financial news, and the often resulting market volatility, can cause even the most seasoned investor to ask, “What should I do now?”
We believe you will generally be in a better position to weather changing economic situations, if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs? And, have you periodically revisited your portfolio structure to make sure that your allocation remains in line with your investment goals, given changing market conditions and changes in your personal circumstances, including current risk tolerance?
Asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific needs. In developing this strategy, your considerations should include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to lose during a given time frame); |
• | financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.); and |
• | goals (the financial goals you and your family would like to achieve). |
Since the three main asset classes - equities, fixed-income, and cash/cash equivalents - have different levels of risk and return, each is expected to behave differently over time. The objective of asset allocation is to create a diversified portfolio with an acceptable level of risk and the highest possible return given that level of risk.
Although there is no simple formula that can find the right asset allocation for every individual, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
The way you allocate your investment portfolio among stocks, bonds, and cash/ cash equivalents will be the principal determinants of your investment results –secondary to your selection of individual securities.
NOT A PART OF THE SEMI- ANNUAL REPORT
Once you and your financial professional have developed an appropriate asset allocation for your portfolio, we believe that changes should be made based on changing needs, not on headlines.
A properly constructed portfolio based on sound asset allocation may generally help you weather all seasons.
Sincerely,
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. Interest rates in the U.S. have begun to rise after having been at historical lows for some time, so the Fund faces a heightened risk that interest rates may continue to 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.
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.
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
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (15.4%) | and Fitch | Value | |||||||
City and County (5.8%) | ||||||||||
Carson City, Nevada | ||||||||||
$ | 1,000,000 | 5.000%, 05/01/28 | A1/AA-/NR | $ | 1,131,360 | |||||
Clark County, Nevada, Refunding | ||||||||||
2,280,000 | 5.000%, 12/01/29 Series A | Aa1/AA+/NR | 2,355,833 | |||||||
1,000,000 | 5.000%, 07/01/23 Series B | Aa1/AA+/NR | 1,035,990 | |||||||
Henderson, Nevada Refunding Various | ||||||||||
Purpose | ||||||||||
1,000,000 | 5.000%, 06/01/33 Series B | Aa2/AA+/NR | 1,101,040 | |||||||
750,000 | 5.000%, 06/01/30 Series 2014 | Aa2/AA+/NR | 840,427 | |||||||
750,000 | 5.000%, 06/01/35 Series 2014 | Aa2/AA+/NR | 832,935 | |||||||
Miami Gardens, Florida | ||||||||||
1,000,000 | 5.000%, 07/01/29 | A1/A+/NR | 1,113,750 | |||||||
North Las Vegas, Nevada Limited Tax | ||||||||||
1,000,000 | 5.000%, 06/01/31 Series 2018 AGMC | |||||||||
Insured | A2/AA/NR | 1,140,530 | ||||||||
Port Houston Authority, Texas Harris | ||||||||||
County | ||||||||||
1,000,000 | 5.000%, 10/01/29 AMT Series A | Aaa/AAA/NR | 1,173,530 | |||||||
Port of Olympia, Washington Limited | ||||||||||
Tax | ||||||||||
1,385,000 | 5.000%, 12/01/31 AMT Series B | Aa2/NR/NR | 1,563,984 | |||||||
Provo City, Utah | ||||||||||
760,000 | 4.000%, 01/01/22 | Aa1/AA+/NR | 805,326 | |||||||
1,825,000 | 4.000%, 01/01/23 | Aa1/AA+/NR | 1,958,991 | |||||||
Reedy Creek, Florida Improvement | ||||||||||
District | ||||||||||
1,000,000 | 5.250%, 06/01/29 Series A | Aa3/AA-/AA- | 1,126,890 | |||||||
Reno, Nevada Capital Improvement | ||||||||||
Refunding | ||||||||||
1,000,000 | 5.000%, 06/01/28 | A1/A+/NR | 1,100,580 | |||||||
Salt Lake City, Utah | ||||||||||
1,000,000 | 5.000%, 06/15/22 | Aaa/NR/AAA | 1,103,510 | |||||||
Salt Lake County, Utah | ||||||||||
1,875,000 | 5.000%, 12/15/23 Series B | Aaa/AAA/AAA | 2,126,756 | |||||||
Washoe County, Nevada Refunding | ||||||||||
Reno Sparks Convention | ||||||||||
2,000,000 | 5.000%, 07/01/28 | Aa2/AA/NR | 2,148,420 | |||||||
Total City and County | 22,659,852 |
1 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
Hospital (0.3%) | ||||||||||
King County, Washington Public | ||||||||||
Hospital District No. 002, | ||||||||||
Refunding, Evergreen Healthcare | ||||||||||
$ | 1,000,000 | 5.250%, 12/01/28 | Aa3/A/NR | $ | 1,061,670 | |||||
Local Public Property (0.3%) | ||||||||||
Houston, Texas Public Improvement | ||||||||||
1,000,000 | 5.000%, 03/01/35 Series A | Aa3/AA/NR | 1,121,440 | |||||||
Public Schools (5.7%) | ||||||||||
Clark County, Nevada School District | ||||||||||
Limited Tax | ||||||||||
1,645,000 | 5.000%, 06/15/28 Series D | A1/A+/NR | 1,852,089 | |||||||
2,000,000 | 4.000%, 06/15/30 Series D | A1/A+/NR | 2,078,600 | |||||||
Davis County, Utah School District | ||||||||||
(School Board Guaranty Program) | ||||||||||
4,395,000 | 4.000%, 06/01/25 Series B | Aaa/NR/NR | 4,785,056 | |||||||
Granite School District, Utah, Salt | ||||||||||
Lake County (School Board | ||||||||||
Guaranty Program) | ||||||||||
1,000,000 | 5.000%, 06/01/26 Series B | Aaa/NR/AAA | 1,175,630 | |||||||
Lewis County, Washington School | ||||||||||
District No. 302 Chehalis (School | ||||||||||
Board Guaranty Program) | ||||||||||
1,000,000 | 5.000%, 12/01/34 | Aa1/NR/NR | 1,130,910 | |||||||
Lewis & Thurston Counties, | ||||||||||
Washington School District No. | ||||||||||
401 Centalia (School Board | ||||||||||
Guaranty Program) | ||||||||||
1,230,000 | 5.000%, 12/01/35 | Aa1/NR/NR | 1,394,525 | |||||||
Nebo School District, Utah County, | ||||||||||
Utah (School Board Guaranty | ||||||||||
Program) | ||||||||||
2,000,000 | 5.000%, 07/01/25 Series C | Aaa/NR/AAA | 2,318,020 | |||||||
Washington County, Utah School District | ||||||||||
(School Board Guaranty Program) | ||||||||||
2,880,000 | 5.000%, 03/01/30 Series B | Aaa/NR/AAA | 3,347,280 | |||||||
3,020,000 | 5.000%, 03/01/31 Series B | Aaa/NR/AAA | 3,495,288 |
2 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
Public Schools (continued) | ||||||||||
Wylie, Texas Independent School | ||||||||||
District Capital Appreciation | ||||||||||
$ | 1,000,000 | zero coupon, 08/15/32 PSF Guaranteed. | Aaa/NR/NR | $ | 600,580 | |||||
Total Public Schools | 22,177,978 | |||||||||
State (2.1%) | ||||||||||
Texas State Transportation Commission | ||||||||||
Highway Improvement | ||||||||||
1,000,000 | 5.000%, 04/01/29 | Aaa/AAA/AAA | 1,124,380 | |||||||
Texas State Transportation Commission | ||||||||||
Mobility Fund | ||||||||||
1,000,000 | 5.000%, 10/01/31 Series 2015A | Aaa/AAA/AAA | 1,138,240 | |||||||
Texas State Water Financial Assistance | ||||||||||
1,000,000 | 5.000%, 08/01/30 Series E | Aaa/AAA/AAA | 1,139,210 | |||||||
Utah State | ||||||||||
1,000,000 | 5.000%, 07/01/27 | Aaa/AAA/AAA | 1,195,290 | |||||||
1,000,000 | 5.000%, 07/01/28 | Aaa/AAA/AAA | 1,190,100 | |||||||
1,000,000 | 5.000%, 07/01/29 | Aaa/AAA/AAA | 1,184,080 | |||||||
1,000,000 | 4.000%, 07/01/30 | Aaa/AAA/AAA | 1,077,850 | |||||||
Total State | 8,049,150 | |||||||||
Water and Sewer (1.2%) | ||||||||||
Central Utah Water Conservancy | ||||||||||
District Refunding | ||||||||||
1,300,000 | 5.000%, 04/01/29 Series A | NR/AA+/AA+ | 1,385,683 | |||||||
765,000 | 5.000%, 04/01/28 Series B | NR/AA+/AA+ | 815,811 | |||||||
Las Vegas Valley, Nevada Water | ||||||||||
District Refunding | ||||||||||
1,200,000 | 5.000%, 06/01/30 Series C | Aa1/AA+/NR | 1,283,544 | |||||||
Magna Water District, Utah | ||||||||||
540,000 | 4.000%, 06/01/21 | NR/AA/NR | 567,151 | |||||||
490,000 | 4.000%, 06/01/22 | NR/AA/NR | 522,119 | |||||||
Total Water and Sewer | 4,574,308 | |||||||||
Total General Obligation Bonds | 59,644,398 |
3 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (68.4%) | and Fitch | Value | |||||||
Airport (4.7%) | ||||||||||
Brownsville, Texas Combination | ||||||||||
Tax and Airport, Certificates of | ||||||||||
Obligation | ||||||||||
$ | 500,000 | 5.000%, 02/15/28 AMT Series 2018††† | Aa3/AA/NR | $ | 558,305 | |||||
Broward County, Florida Airport | ||||||||||
System Refunding | ||||||||||
1,000,000 | 5.375%, 10/01/29 Series O | A1/A+/A+ | 1,032,150 | |||||||
Clark County, Nevada Passenger | ||||||||||
Facilities Charge Las Vegas- | ||||||||||
McCarran International Airport | ||||||||||
1,500,000 | 5.000%, 07/01/30 | Aa3/A+/NR | 1,550,775 | |||||||
Dallas/Fort Worth, Texas International | ||||||||||
Airport | ||||||||||
1,600,000 | 5.000%, 11/01/30 Series B | A1/A+/A+ | 1,679,248 | |||||||
Houston, Texas Airport System | ||||||||||
Subordinate Lien Refunding | ||||||||||
1,000,000 | 5.000%, 07/01/29 AMT Series C | A1/NR/A | 1,156,910 | |||||||
Miami-Dade County, Florida Aviation | ||||||||||
Miami International Airport | ||||||||||
1,675,000 | 5.000%, 10/01/22 Series A-1 | A2/A/A | 1,764,797 | |||||||
Salt Lake City, Utah Airport Revenue, | ||||||||||
Salt Lake City International Airport | ||||||||||
3,750,000 | 5.000%, 07/01/27 AMT Series A | A2/A+/NR | 4,316,887 | |||||||
2,100,000 | 5.000%, 07/01/30 AMT Series A | A2/A+/NR | 2,381,169 | |||||||
1,240,000 | 5.000%, 07/01/30 Series B | A2/A+/NR | 1,431,568 | |||||||
500,000 | 5.000%, 07/01/31 Series B | A2/A+/NR | 575,170 | |||||||
1,525,000 | 5.000%, 07/01/37 Series B | A2/A+/NR | 1,719,270 | |||||||
Total Airport | 18,166,249 | |||||||||
Charter Schools (9.3%) | ||||||||||
Utah State Charter School Finance | ||||||||||
Authority George Washington | ||||||||||
Academy | ||||||||||
1,500,000 | 5.000%, 04/15/35 Series 2015 | NR/AA/NR | 1,613,895 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Good Foundations | ||||||||||
Academy | ||||||||||
740,000 | 4.750%, 11/15/24 Series A 144A. | NR/NR/NR* | 739,985 | |||||||
1,655,000 | 5.550%, 11/15/34 Series A 144A. | NR/NR/NR* | 1,654,901 | |||||||
3,280,000 | 5.850%, 11/15/44 Series A 144A. | NR/NR/NR* | 3,279,639 |
4 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Charter Schools (continued) | ||||||||||
Utah State Charter School Finance | ||||||||||
Authority Hawthorn Academy | ||||||||||
Project | ||||||||||
$ | 2,165,000 | 5.000%, 10/15/29 Series 2014 | NR/AA/NR | $ | 2,369,874 | |||||
Utah State Charter School Finance | ||||||||||
Authority Lakeview Academy | ||||||||||
1,300,000 | 5.000%, 10/15/35 Series 2015 | NR/AA/NR | 1,424,059 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Legacy Preparatory | ||||||||||
Academy | ||||||||||
405,000 | 4.000%, 04/15/22 | NR/AA/NR | 423,197 | |||||||
440,000 | 4.000%, 04/15/24 | NR/AA/NR | 465,973 | |||||||
2,530,000 | 5.000%, 04/15/29 | NR/AA/NR | 2,765,062 | |||||||
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 | 1,067,620 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Ogden Preparatory | ||||||||||
Academy (School Board Guaranty | ||||||||||
Program) | ||||||||||
475,000 | 4.000%, 10/15/22 | NR/AA/NR | 498,090 | |||||||
505,000 | 4.000%, 10/15/23 | NR/AA/NR | 528,957 | |||||||
525,000 | 4.000%, 10/15/24 | NR/AA/NR | 546,840 | |||||||
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 | 1,098,540 | |||||||
1,000,000 | 5.000%, 10/15/33 Series 2013A | NR/AA/NR | 1,075,390 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Quest Academy | ||||||||||
500,000 | 5.000%, 04/15/37 | NR/AA/NR | 544,460 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Utah Charter Academies | ||||||||||
500,000 | 5.000%, 10/15/25 Series 2018 | NR/AA/NR | 563,675 | |||||||
500,000 | 5.000%, 10/15/27 Series 2018 | NR/AA/NR | 573,940 | |||||||
475,000 | 5.000%, 10/15/28 Series 2018 | NR/AA/NR | 542,830 |
5 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Charter Schools (continued) | ||||||||||
Utah State Charter School Finance | ||||||||||
Authority Venture Academy | ||||||||||
$ | 240,000 | 0.500%, 10/15/19 | NR/AA/NR | $ | 235,649 | |||||
675,000 | 4.000%, 10/15/24 | NR/AA/NR | 708,892 | |||||||
855,000 | 5.000%, 10/15/29 | NR/AA/NR | 926,162 | |||||||
1,095,000 | 5.000%, 10/15/34 | NR/AA/NR | 1,185,513 | |||||||
1,095,000 | 5.000%, 10/15/38 | NR/AA/NR | 1,171,968 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Voyage Academy | ||||||||||
1,350,000 | 5.000%, 03/15/27 144A | NR/NR/NR* | 1,356,723 | |||||||
2,440,000 | 5.500%, 03/15/37 144A | NR/NR/NR* | 2,444,636 | |||||||
4,785,000 | 5.600%, 03/15/47 144A | NR/NR/NR* | 4,751,170 | |||||||
Utah State Charter School Finance | ||||||||||
Authority Wasatch Peak Academy | ||||||||||
Project (School Board Guaranty | ||||||||||
Program) | ||||||||||
740,000 | 5.000%, 10/15/29 | NR/AA/NR | 801,672 | |||||||
700,000 | 5.000%, 10/15/36 | NR/AA/NR | 746,095 | |||||||
Total Charter Schools | 36,105,407 | |||||||||
Electric (7.7%) | ||||||||||
Consolidated Wyoming Municipalities | ||||||||||
Electric Facilities Improvement | ||||||||||
Lease, Gillette | ||||||||||
1,000,000 | 5.000%, 06/01/31 | A1/A+/NR | 1,100,690 | |||||||
Jacksonville Electric Authority, Florida | ||||||||||
Electric System Revenue | ||||||||||
35,000 | 4.500%, 10/01/32 Series Three 2012A | Aa2/A+/NR | 36,486 | |||||||
Unrefunded Balance | ||||||||||
Lehi, Utah Electric Utility Revenue | ||||||||||
520,000 | 5.000%, 06/01/29 | NR/A+/NR | 600,059 | |||||||
850,000 | 5.000%, 06/01/31 | NR/A+/NR | 972,485 | |||||||
1,000,000 | 5.000%, 06/01/35 | NR/A+/NR | 1,128,170 | |||||||
Lower Colorado River Authority, Texas | ||||||||||
1,470,000 | 5.250%, 05/15/29 | A2/A/A | 1,498,959 | |||||||
Lower Colorado River Authority, Texas | ||||||||||
Transmission Contract Revenue | ||||||||||
1,000,000 | 5.000%, 05/15/30 | NR/A/A+ | 1,116,690 |
6 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Electric (continued) | ||||||||||
San Antonio, Texas Electric & Gas | ||||||||||
Revenue System | ||||||||||
$ | 1,250,000 | 4.000%, 02/01/33 | Aa1/AA/AA+ | $ | 1,304,862 | |||||
Southeast Alaska Power | ||||||||||
Agency Electric Refunding & | ||||||||||
Improvement | ||||||||||
1,170,000 | 5.250%, 06/01/30 | NR/A-/NR | 1,314,986 | |||||||
St. George, Utah Electric Revenue | ||||||||||
1,620,000 | 4.000%, 06/01/32 AGMC Insured | A2/AA/NR | 1,692,835 | |||||||
Utah Associated Municipal Power | ||||||||||
System Revenue, Horse Butte Wind | ||||||||||
Project | ||||||||||
750,000 | 5.000%, 09/01/24 Series A | NR/A/A | 850,702 | |||||||
445,000 | 5.000%, 09/01/25 Series A | NR/A/A | 510,357 | |||||||
375,000 | 5.000%, 09/01/30 Series 2017B | NR/A/A | 429,810 | |||||||
Utah Associated Municipal Power | ||||||||||
System Revenue Refunding, Payson | ||||||||||
Power Project | ||||||||||
2,000,000 | 5.000%, 04/01/24 | NR/A-/A | 2,153,120 | |||||||
1,000,000 | 5.000%, 04/01/25 | NR/A-/A | 1,075,360 | |||||||
6,375,000 | 5.000%, 04/01/26 | NR/A-/A | 6,847,770 | |||||||
Utah Associated Municipal Power | ||||||||||
System Revenue, Veyo Heat | ||||||||||
Recovery Project | ||||||||||
795,000 | 5.000%, 03/01/30 | NR/A/A | 886,139 | |||||||
905,000 | 5.000%, 03/01/32 | NR/A/A | 1,003,183 | |||||||
745,000 | 5.000%, 03/01/34 | NR/A/A | 821,728 | |||||||
Utah State Municipal Power | ||||||||||
Agency Power Supply System | ||||||||||
Revenue | ||||||||||
330,000 | 5.000%, 07/01/23 | NR/A+/A+ | 368,739 | |||||||
3,000,000 | 5.000%, 07/01/38 Series B | NR/A+/A+ | 3,330,840 | |||||||
Wyoming Municipal Power Agency | ||||||||||
Power Supply System Revenue | ||||||||||
665,000 | 5.000%, 01/01/27 Series A BAMI | |||||||||
Insured | A2/AA/NR | 763,074 | ||||||||
Total Electric | 29,807,044 |
7 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (8.9%) | ||||||||||
Florida Higher Education Facilities | ||||||||||
Authority Revenue, Refunding, | ||||||||||
Rollins College Project | ||||||||||
$ | 1,000,000 | 5.000%, 12/01/37 Series A | A2/NR/NR | $ | 1,081,770 | |||||
Salt Lake County, Utah Westminster | ||||||||||
College Project | ||||||||||
685,000 | 5.000%, 10/01/19 | NR/BBB/NR | 702,241 | |||||||
720,000 | 5.000%, 10/01/20 | NR/BBB/NR | 753,278 | |||||||
555,000 | 5.000%, 10/01/21 | NR/BBB/NR | 590,365 | |||||||
790,000 | 5.000%, 10/01/22 | NR/BBB/NR | 851,881 | |||||||
1,970,000 | 5.000%, 10/01/25 | NR/BBB/NR | 2,168,418 | |||||||
955,000 | 5.000%, 10/01/28 | NR/BBB/NR | 1,035,296 | |||||||
1,845,000 | 5.000%, 10/01/29 | NR/BBB/NR | 2,019,094 | |||||||
1,005,000 | 5.000%, 10/01/29 | NR/BBB/NR | 1,084,053 | |||||||
1,055,000 | 5.000%, 10/01/30 | NR/BBB/NR | 1,134,832 | |||||||
South Dakota Board of Regents, | ||||||||||
Housing & Auxiliary Facilities | ||||||||||
System | ||||||||||
500,000 | 5.000%, 04/01/28 | Aa3/NR/NR | 572,545 | |||||||
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 | 1,113,540 | |||||||
University of Wyoming Facilities | ||||||||||
500,000 | 4.000%, 06/01/31 | Aa2/NR/NR | 523,165 | |||||||
Utah State Board of Regents, Dixie | ||||||||||
State University | ||||||||||
1,800,000 | 5.000%, 06/01/30 AGMC Insured | NR/AA/NR | 2,043,828 | |||||||
660,000 | 5.000%, 06/01/35 Series B AGMC | |||||||||
Insured | NR/AA/NR | 744,454 | ||||||||
690,000 | 5.000%, 06/01/36 Series B AGMC | |||||||||
Insured | NR/AA/NR | 775,526 | ||||||||
Utah State Board of Regents Lease | ||||||||||
Revenue | ||||||||||
410,000 | 4.500%, 05/01/20 AMBAC Insured | NR/AA/NR | 410,808 | |||||||
425,000 | 4.500%, 05/01/21 AMBAC Insured | NR/AA/NR | 425,854 | |||||||
450,000 | 4.625%, 05/01/22 AMBAC Insured | NR/AA/NR | 450,972 | |||||||
120,000 | 4.650%, 05/01/23 AMBAC Insured | NR/AA/NR | 120,257 |
8 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
Utah State Board of Regents, Student | ||||||||||
Building Fee, Salt Lake Community | ||||||||||
College | ||||||||||
$ | 1,295,000 | 5.000%, 03/01/26 Series 2018 | NR/AA/NR | $ | 1,484,899 | |||||
1,000,000 | 5.000%, 03/01/27 Series 2018 | NR/AA/NR | 1,141,550 | |||||||
Utah State Board of Regents, Student | ||||||||||
Facilities System Revenue, Weber | ||||||||||
State University | ||||||||||
750,000 | 5.000%, 04/01/29 AGMC Insured | NR/AA/NR | 893,903 | |||||||
200,000 | 5.000%, 04/01/30 AGMC Insured | NR/AA/NR | 239,300 | |||||||
Utah State Board of Regents, | ||||||||||
University of Utah | ||||||||||
500,000 | 5.000%, 08/01/29 Series A | Aa1/AA+/NR | 590,660 | |||||||
530,000 | 5.000%, 08/01/33 Series A | Aa1/AA+/NR | 602,016 | |||||||
600,000 | 5.000%, 08/01/35 Series A | Aa1/AA+/NR | 677,544 | |||||||
500,000 | 4.000%, 08/01/36 Series A | Aa1/AA+/NR | 519,680 | |||||||
1,000,000 | 5.000%, 08/01/35 Series B-1 | Aa1/AA+/NR | 1,134,880 | |||||||
1,500,000 | 5.000%, 08/01/36 Series B-1 | Aa1/AA+/NR | 1,694,520 | |||||||
Utah State Board of Regents, Utah | ||||||||||
State University | ||||||||||
1,105,000 | 4.000%, 12/01/30 Series B | NR/AA/NR | 1,160,438 | |||||||
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 | 3,311,841 | |||||||
Washington State Higher Education | ||||||||||
Facilities Authority Revenue, | ||||||||||
Whitman College Project | ||||||||||
2,070,000 | 5.000%, 01/01/32 | Aa3/NR/NR | 2,300,722 | |||||||
Total Higher Education | 34,354,130 | |||||||||
Hospital (1.4%) | ||||||||||
Brevard County, Florida Health | ||||||||||
Facilities Authority Health First Inc. | ||||||||||
Project | ||||||||||
750,000 | 5.000%, 04/01/30 | A2/A/NR | 825,097 |
9 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Hospital (continued) | ||||||||||
Harris County, Texas Health Facilities | ||||||||||
Development Corp., Christus | ||||||||||
Health | ||||||||||
$ | 540,000 | 4.750%, 07/01/30 AGMC Insured | A1/AA/NR | $ | 557,717 | |||||
Miami-Dade County, Florida Public | ||||||||||
Facilities, Jackson Health System | ||||||||||
1,000,000 | 5.000%, 06/01/29 Series A | Aa3/A+/AA- | 1,116,750 | |||||||
Utah County, Utah Hospital Revenue, | ||||||||||
IHC Health Services, Inc. | ||||||||||
1,205,000 | 5.000%, 05/15/25 | Aa1/AA+/NR | 1,299,351 | |||||||
880,000 | 5.000%, 05/15/28 | Aa1/AA+/NR | 947,496 | |||||||
500,000 | 5.000%, 05/15/29 | Aa1/AA+/NR | 538,085 | |||||||
Total Hospital | 5,284,496 | |||||||||
Housing (1.0%) | ||||||||||
North Dakota Housing Finance | ||||||||||
Agency, Home Mortgage Finance | ||||||||||
Program | ||||||||||
400,000 | 3.000%, 07/01/27 Series A | Aa1/NR/NR | 400,296 | |||||||
Utah Housing Corporation Single | ||||||||||
Family Mortgage | ||||||||||
45,000 | 4.950%, 01/01/32 Series A Class II | Aa2/AA/AA | 44,998 | |||||||
265,000 | 4.500%, 01/01/24 Series A Class III | Aa3/AA-/AA- | 267,231 | |||||||
75,000 | 4.625%, 07/01/32 Series B-1 Class II | Aa2/AA/AA | 75,263 | |||||||
160,000 | 4.500%, 07/01/23 Series C | Aa3/AA-/AA- | 160,627 | |||||||
1,010,000 | 4.000%, 01/01/36 Series D FHA | |||||||||
Insured | Aa3/AA-/AA- | 1,015,515 | ||||||||
Wyoming Community Development | ||||||||||
Authority Housing Revenue | ||||||||||
820,000 | 2.550%, 12/01/23 Series 1 | Aa1/AA+/NR | 819,590 | |||||||
500,000 | 3.000%, 12/01/27 Series 1 | Aa1/AA+/NR | 494,845 | |||||||
400,000 | 2.450%, 06/01/26 Series 5 | Aa1/AA+/NR | 382,176 | |||||||
Total Housing | 3,660,541 | |||||||||
Local Public Property (12.7%) | ||||||||||
Brigham, Utah Special Assessment | ||||||||||
Voluntary Assessment Area | ||||||||||
975,000 | 5.250%, 08/01/23 | A1/NR/NR | 999,151 | |||||||
90,000 | 5.500%, 08/01/29 | A1/NR/NR | 92,413 |
10 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | 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- | $ | 1,116,080 | |||||
1,000,000 | 5.000%, 09/01/29 | NR/A/AA- | 1,112,140 | |||||||
1,000,000 | 5.000%, 09/01/30 | NR/A/AA- | 1,109,520 | |||||||
Clark County, Nevada Improvement | ||||||||||
District Special Local Improvement | ||||||||||
#128 (Summerlin) | ||||||||||
490,000 | 5.000%, 02/01/21 Series A | NR/NR/NR* | 493,474 | |||||||
Downtown Redevelopment Authority, | ||||||||||
Texas Tax Increment Contract | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 09/01/30 BAMI Insured | NR/AA/NR | 1,125,350 | |||||||
Eagle Mountain, Utah Special | ||||||||||
Assessment Area | ||||||||||
345,000 | 5.250%, 05/01/28 Series 2013 | NR/A+/NR | 373,069 | |||||||
Harris County, Texas Sports Refunding | ||||||||||
Senior Lien | ||||||||||
500,000 | 5.000%, 11/15/30 Series A | A2/A-/NR | 553,450 | |||||||
Houston, Texas Hotel Occupancy Tax | ||||||||||
and Special Revenue | ||||||||||
1,000,000 | 5.000%, 09/01/31 | A2/A-/NR | 1,100,220 | |||||||
Jacksonville, Florida Special Revenue | ||||||||||
and Refunding Bonds | ||||||||||
1,015,000 | 5.250%, 10/01/32 Series A | Aa3/AA/AA- | 1,137,754 | |||||||
Mesquite, Nevada New Special | ||||||||||
Improvement District | ||||||||||
180,000 | 5.350%, 08/01/19 | NR/NR/NR* | 181,004 | |||||||
75,000 | 5.400%, 08/01/20 | NR/NR/NR* | 75,385 | |||||||
270,000 | 5.500%, 08/01/25 | NR/NR/NR* | 270,683 | |||||||
Midvale, Utah Redevelopment Agency | ||||||||||
Tax Increment & Sales Tax Revenue | ||||||||||
Refunding | ||||||||||
750,000 | 5.000%, 05/01/28 | NR/AA-/NR | 865,170 | |||||||
1,000,000 | 5.000%, 05/01/32 | NR/AA-/NR | 1,135,710 | |||||||
Orange County, Florida Tourist | ||||||||||
Development Tax Revenue | ||||||||||
Refunding | ||||||||||
1,000,000 | 5.000%, 10/01/30 | Aa3/AA-/AA | 1,131,450 |
11 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Local Public Property (continued) | ||||||||||
Orem, Utah Special Assessment | ||||||||||
$ | 140,000 | 7.750%, 11/01/25 | NR/NR/NR* | $ | 140,253 | |||||
Salt Lake City, Utah Local Building | ||||||||||
Authority Lease Revenue | ||||||||||
955,000 | 4.000%, 10/15/23 Series A | Aa1/NR/AA+ | 1,016,063 | |||||||
600,000 | 5.000%, 04/15/32 Series A | Aa1/NR/NR | 688,314 | |||||||
395,000 | 4.000%, 04/15/32 Series A | Aa1/NR/NR | 416,551 | |||||||
425,000 | 4.000%, 04/15/34 Series A | Aa1/NR/NR | 442,395 | |||||||
1,075,000 | 5.000%, 04/15/35 Series A | Aa1/NR/NR | 1,220,243 | |||||||
460,000 | 4.000%, 04/15/36 Series A | Aa1/NR/NR | 475,732 | |||||||
Salt Lake City, Utah Mosquito | ||||||||||
Abatement District Local Building | ||||||||||
Authority Lease Revenue | ||||||||||
730,000 | 5.000%, 02/15/29 | Aa3/NR/NR | 849,654 | |||||||
810,000 | 5.000%, 02/15/31 | Aa3/NR/NR | 935,574 | |||||||
South Jordan, Utah Special Assessment | ||||||||||
(Daybreak Assessment Area No. 1) | ||||||||||
1,335,000 | 4.000%, 11/01/27 | NR/AA+/NR | 1,423,230 | |||||||
1,690,000 | 4.000%, 11/01/28 | NR/AA+/NR | 1,794,222 | |||||||
1,460,000 | 4.000%, 11/01/30 | NR/AA+/NR | 1,531,934 | |||||||
St. Augustine, Florida Capital | ||||||||||
Improvement Refunding | ||||||||||
500,000 | 5.000%, 10/01/34 | Aa3/AA/A+ | 550,475 | |||||||
St. Lucie County, Florida School Board | ||||||||||
COP Master Lease Program | ||||||||||
500,000 | 5.000%, 07/01/30 Series A | A1/A/A+ | 545,305 | |||||||
Tooele County, Utah Municipal | ||||||||||
Building Authority Lease Revenue | ||||||||||
Cross-Over | ||||||||||
850,000 | 4.000%, 12/15/28 | NR/AA-/NR | 912,220 | |||||||
885,000 | 4.000%, 12/15/29 | NR/AA-/NR | 941,020 | |||||||
920,000 | 4.000%, 12/15/30 | NR/AA-/NR | 970,720 | |||||||
Unified Utah Fire Service Area Local | ||||||||||
Building Authority Lease Revenue | ||||||||||
2,350,000 | 4.000%, 04/01/32 | Aa2/NR/NR | 2,462,518 | |||||||
2,450,000 | 4.000%, 04/01/33 | Aa2/NR/NR | 2,551,700 |
12 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Local Public Property (continued) | ||||||||||
Washington County, Utah Municipal | ||||||||||
Building Authority Lease Revenue | ||||||||||
$ | 500,000 | 5.000%, 10/01/32 | Aa3/NR/NR | $ | 560,810 | |||||
500,000 | 5.000%, 10/01/37 | Aa3/NR/NR | 551,555 | |||||||
Weber County, Utah Special | ||||||||||
Assessment Summit Mountain Area | ||||||||||
1,585,000 | 5.500%, 01/15/28 | NR/AA-/NR | 1,786,691 | |||||||
4,110,000 | 5.750%, 01/15/33 | NR/AA-/NR | 4,653,137 | |||||||
West Jordan, Utah Municipal Building | ||||||||||
Authority Lease Revenue | ||||||||||
1,000,000 | 5.000%, 10/01/29 | Aa3/NR/NR | 1,130,640 | |||||||
1,000,000 | 5.000%, 10/01/34 | Aa3/NR/NR | 1,112,690 | |||||||
West Palm Beach, Florida Community | ||||||||||
Redevelopment Agency Tax | ||||||||||
Increment Revenue Refunding | ||||||||||
1,500,000 | 5.250%, 03/01/31 | NR/A/AA- | 1,703,265 | |||||||
West Valley City, Utah Municipal | ||||||||||
Building Authority Lease Revenue | ||||||||||
Refunding | ||||||||||
900,000 | 4.000%, 02/01/33 AGMC Insured | NR/AA/AA- | 930,015 | |||||||
1,000,000 | 5.000%, 02/01/34 AGMC Insured | NR/AA/AA- | 1,128,330 | |||||||
810,000 | 4.000%, 02/01/38 AGMC Insured | NR/AA/AA- | 824,402 | |||||||
West Valley City, Utah Redevelopment | ||||||||||
Agency Revenue Refunding | ||||||||||
1,885,000 | 5.000%, 11/01/36 | NR/AA-/NR | 2,092,275 | |||||||
Total Local Public Property | 49,213,956 | |||||||||
Public Schools (1.3%) | ||||||||||
Alpine, Utah Local Building Authority | ||||||||||
School District Lease Revenue | ||||||||||
985,000 | 4.000%, 03/15/28 | Aa2/NR/NR | 1,065,701 | |||||||
Ogden City, Utah Municipal Building | ||||||||||
Authority School District Lease | ||||||||||
Revenue | ||||||||||
1,125,000 | 5.000%, 01/15/30††† | A1/NR/NR | 1,290,330 | |||||||
1,315,000 | 5.000%, 01/15/31 | A1/NR/NR | 1,442,621 |
13 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Public Schools (continued) | ||||||||||
Uintah County, Utah School District | ||||||||||
Municipal Building Authority Lease | ||||||||||
Revenue Refunding | ||||||||||
$ | 1,351,000 | 2.000%, 08/01/22 | NR/NR/NR* | $ | 1,325,669 | |||||
Total Public Schools | 5,124,321 | |||||||||
Sales Tax (6.3%) | ||||||||||
Central Puget Sound, Washington | ||||||||||
Regional Transit Authority Sales & | ||||||||||
Use Tax Improvement & Refunding | ||||||||||
1,000,000 | 5.000%, 11/01/31 | Aa1/AAA/NR | 1,137,640 | |||||||
Cottonwood Heights, Utah Sales Tax | ||||||||||
Revenue | ||||||||||
2,000,000 | 5.000%, 07/01/32 Series 2014 | NR/AA-/NR | 2,217,440 | |||||||
Herriman City, Utah Sales & Franchise | ||||||||||
Tax Revenue Refunding | ||||||||||
2,040,000 | 4.000%, 08/01/25 Series B | NR/AA-/NR | 2,172,518 | |||||||
2,135,000 | 4.000%, 08/01/30 Series B | NR/AA-/NR | 2,253,749 | |||||||
1,515,000 | 5.000%, 08/01/33 Series B | NR/AA-/NR | 1,694,861 | |||||||
Miami-Dade County, Florida Transit | ||||||||||
System Sales Surtax Revenue | ||||||||||
1,000,000 | 5.000%, 07/01/34 | A1/AA/AA | 1,112,900 | |||||||
Reno, Nevada Sales Tax Revenue, First | ||||||||||
Lien, ReTRAC-Reno Transportation | ||||||||||
Rail Access Corridor Project | ||||||||||
500,000 | 5.000%, 06/01/26 | A3/NR/NR | 570,935 | |||||||
Riverton City, Utah Franchise & Sales | ||||||||||
Tax Revenue | ||||||||||
750,000 | 4.000%, 06/01/30 | NR/AA-/AAA | 784,350 | |||||||
1,000,000 | 5.250%, 12/01/36 | NR/AA-/AAA | 1,111,010 | |||||||
Salt Lake County, Utah Sales Tax | ||||||||||
Revenue | ||||||||||
2,000,000 | 5.000%, 02/01/24 Series A | NR/AAA/AAA | 2,178,160 | |||||||
1,655,000 | 4.000%, 02/01/34 Series B | NR/AAA/AAA | 1,741,192 | |||||||
South Jordan, Utah Redevelopment | ||||||||||
Agency Subordinated Sales Tax & Tax | ||||||||||
Increment Revenue | ||||||||||
1,000,000 | 5.000%, 04/01/29 | NR/AA-/AAA | 1,127,330 |
14 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Sales Tax (continued) | ||||||||||
Summit County, Utah Transportation | ||||||||||
Sales Tax Revenue | ||||||||||
$ | 1,450,000 | 4.000%, 12/15/29 Series 2018 | NR/AA-/NR | $ | 1,554,168 | |||||
Utah Transit Authority Sales Tax | ||||||||||
Revenue Subordinated | ||||||||||
1,000,000 | 4.000%, 12/15/30 | A1/A+/AA | 1,054,200 | |||||||
1,000,000 | 5.000%, 12/15/32 | A1/A+/AA | 1,150,880 | |||||||
Utah Transit Authority Sales Tax | ||||||||||
Revenue Subordinated, Capital | ||||||||||
Appreciation | ||||||||||
1,000,000 | zero coupon, 12/15/32 | A1/A+/AA | 577,450 | |||||||
West Valley City, Utah Sales Tax | ||||||||||
Revenue Capital Appreciation | ||||||||||
Bonds, Refunding | ||||||||||
3,500,000 | zero coupon, 07/15/35 | NR/AA+/NR | 1,699,145 | |||||||
Total Sales Tax | 24,137,928 | |||||||||
State Agency (1.7%) | ||||||||||
Utah Infrastructure Agency Layton City | ||||||||||
Telecommunications & Franchise Tax | ||||||||||
500,000 | 5.000%, 10/15/30 Series 2018 | NR/A+/NR | 577,195 | |||||||
Utah Infrastructure Agency | ||||||||||
Telecommunications & Franchise Tax | ||||||||||
1,660,000 | 3.000%, 10/15/20 Series A | NR/NR/BBB- | 1,675,704 | |||||||
610,000 | 5.000%, 10/15/21 Series A | NR/NR/BBB- | 650,998 | |||||||
640,000 | 5.000%, 10/15/22 Series A | NR/NR/BBB- | 692,864 | |||||||
Utah State Building Ownership | ||||||||||
Authority Lease Revenue Refunding | ||||||||||
State Facilities Master Lease | ||||||||||
Program | ||||||||||
1,000,000 | 5.000%, 05/15/24 | Aa1/AA+/NR | 1,138,710 | |||||||
905,000 | 4.000%, 05/15/29 | Aa1/AA+/NR | 989,563 | |||||||
940,000 | 4.000%, 05/15/30 | Aa1/AA+/NR | 1,019,956 | |||||||
Total State Agency | 6,744,990 |
15 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Transportation (5.5%) | ||||||||||
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 | $ | 2,245,200 | |||||
500,000 | 5.000%, 07/01/36 | Aa3/AA-/NR | 564,915 | |||||||
North Texas Tollway Authority, Texas | ||||||||||
755,000 | 6.100%, 01/01/28 Series A | A1/A+/NR | 762,195 | |||||||
Salt Lake County, Utah Excise Tax Road | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 08/15/29 Series 2017 | NR/AAA/AAA | 1,176,850 | |||||||
1,000,000 | 4.000%, 08/15/31 Series 2017 | NR/AAA/AAA | 1,070,100 | |||||||
Utah Transit Authority Sales Tax | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 06/15/31 Series A | Aa2/AAA/AA | 1,138,150 | |||||||
Utah Transit Authority Sales Tax | ||||||||||
Revenue Subordinated | ||||||||||
5,000,000 | 5.000%, 06/15/34 Series A | A1/A+/AA | 5,573,950 | |||||||
5,000,000 | 5.000%, 06/15/37 Series A | A1/A+/AA | 5,522,950 | |||||||
Utah Transit Authority Sales Tax & | ||||||||||
Transportation Revenue | ||||||||||
195,000 | 5.250%, 06/15/32 AGMC Insured | Aa2/AAA/AA | 239,300 | |||||||
Washoe County, Nevada Highway | ||||||||||
Revenue Fuel Tax | ||||||||||
1,000,000 | 5.500%, 02/01/28 | A1/A+/NR | 1,011,200 | |||||||
1,000,000 | 5.000%, 02/01/32 | A1/A+/NR | 1,008,790 | |||||||
1,000,000 | 5.000%, 02/01/38 | A1/A+/NR | 1,008,590 | |||||||
Total Transportation | 21,322,190 | |||||||||
Water and Sewer (7.9%) | ||||||||||
Central Utah Water Conservancy | ||||||||||
District Refunding, Jordanelle | ||||||||||
Hydrant | ||||||||||
1,125,000 | 4.500%, 10/01/27 Series A | NR/AA/AA+ | 1,192,590 | |||||||
Davie, Florida Water & Sewer Revenue | ||||||||||
1,000,000 | 5.000%, 10/01/32 AGMC Insured | A1/AA/NR | 1,073,560 |
16 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Water and Sewer (continued) | ||||||||||
Eagle Mountain, Utah Water & Sewer | ||||||||||
Revenue Refunding | ||||||||||
$ | 420,000 | 4.000%, 11/15/24 Series A BAMI Insured | NR/AA/NR | $ | 454,045 | |||||
El Paso, Texas Water & Sewer Revenue | ||||||||||
Refunding | ||||||||||
1,000,000 | 4.500%, 03/01/31 Series C | NR/AA+/AA+ | 1,086,900 | |||||||
Florida State Governmental Utility | ||||||||||
Authority Refunding Revenue Bonds | ||||||||||
(Lehigh Utility System) | ||||||||||
500,000 | 5.000%, 10/01/31 Series 2014 AGMC | |||||||||
Insured | A1/AA/NR | 558,585 | ||||||||
Jordan Valley, Utah Water Conservancy | ||||||||||
District Revenue | ||||||||||
1,000,000 | 5.000%, 10/01/26 Series B | NR/AA+/AA+ | 1,177,020 | |||||||
1,000,000 | 4.000%, 10/01/32 Series B | NR/AA+/AA+ | 1,059,700 | |||||||
Jordanelle, Utah Special Service District | ||||||||||
228,000 | 5.400%, 11/15/18 | NR/NR/NR* | 228,007 | |||||||
240,000 | 5.500%, 11/15/19 | NR/NR/NR* | 239,974 | |||||||
253,000 | 5.600%, 11/15/20 | NR/NR/NR* | 252,185 | |||||||
268,000 | 5.700%, 11/15/21 | NR/NR/NR* | 266,547 | |||||||
283,000 | 5.800%, 11/15/22 | NR/NR/NR* | 279,321 | |||||||
299,000 | 6.000%, 11/15/23 | NR/NR/NR* | 294,204 | |||||||
Miami-Dade County, Florida Water and | ||||||||||
Sewer Revenue System | ||||||||||
1,000,000 | 5.000%, 10/01/26 | Aa3/A+/A+ | 1,151,950 | |||||||
1,000,000 | 5.000%, 10/01/31 Series A | Aa3/A+/A+ | 1,091,750 | |||||||
Mountain Regional Water Special | ||||||||||
Service District, Utah Water Revenue | ||||||||||
Refunding | ||||||||||
3,000,000 | 5.000%, 12/15/33 AGMC Insured | NR/AA/A+ | 3,226,470 | |||||||
Ogden City, Utah Sewer & Water | ||||||||||
Revenue Bonds | ||||||||||
1,160,000 | 5.250%, 06/15/30 Series B | Aa3/AA-/NR | 1,290,860 | |||||||
Ogden City, Utah Storm Drain Revenue | ||||||||||
Bonds | ||||||||||
500,000 | 5.250%, 06/15/28 | NR/AA/NR | 561,105 | |||||||
Okaloosa County, Florida Water and | ||||||||||
Sewer Revenue | ||||||||||
1,000,000 | 5.000%, 07/01/30 | Aa3/NR/AA | 1,129,770 |
17 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Water and Sewer (continued) | ||||||||||
Pleasant Grove City, Utah Water | ||||||||||
Revenue | ||||||||||
$ | 1,000,000 | 5.250%, 12/01/29 AGMC Insured | NR/AA/NR | $ | 1,005,490 | |||||
Salt Lake & Sandy, Utah Metropolitan | ||||||||||
Water District, Water Revenue, | ||||||||||
Refunding | ||||||||||
1,100,000 | 5.000%, 07/01/37 Series A | NR/AA+/AA+ | 1,192,411 | |||||||
Salt Lake City, Utah Public Utilities | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 02/01/32 | Aa1/AAA/NR | 1,142,710 | |||||||
1,400,000 | 5.000%, 02/01/33 | Aa1/AAA/NR | 1,594,824 | |||||||
1,000,000 | 5.000%, 02/01/35 | Aa1/AAA/NR | 1,132,100 | |||||||
San Jacinto, Texas River Authority | ||||||||||
Woodlands Waste Disposal | ||||||||||
1,000,000 | 5.000%,10/01/30 BAMI Insured | NR/AA/NR | 1,108,330 | |||||||
Sarasota, Florida Utility System Revenue | ||||||||||
Refunding | ||||||||||
1,455,000 | 5.000%, 10/01/27 | NR/AA+/AA+ | 1,570,338 | |||||||
Texas Water Development Board | ||||||||||
1,000,000 | 4.000%, 08/01/19 Series 2018 | NR/AAA/AAA | 1,017,450 | |||||||
1,000,000 | 5.000%, 10/15/28 Series 2018 A | NR/AAA/AAA | 1,190,370 | |||||||
Utah Water Finance Agency Revenue | ||||||||||
1,000,000 | 5.000%, 03/01/35 | NR/AA-/AA | 1,137,360 | |||||||
Weber Basin, Utah Water Conservancy | ||||||||||
District Refunding | ||||||||||
915,000 | 4.000%, 10/01/31 Series A | NR/AA+/AAA | 952,103 | |||||||
West Harris County, Texas Regional | ||||||||||
Water Authority | ||||||||||
815,000 | 5.000%, 12/15/26 Series A | A1/AA-/A+ | 931,757 | |||||||
Total Water and Sewer | 30,589,786 | |||||||||
Total Revenue Bonds | 264,511,038 |
18 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Pre-Refunded Bonds (14.5%) †† | and Fitch | Value | |||||||
Pre-Refunded General Obligation | ||||||||||
Bonds (1.8%) | ||||||||||
Local Public Property (1.0%) | ||||||||||
Houston, Texas Public Improvement | ||||||||||
$ | 895,000 | 5.000%, 03/01/29 | NR/NR/NR* | $ | 906,143 | |||||
San Angelo, Texas Certificates of | ||||||||||
Obligation | ||||||||||
2,765,000 | 5.000%, 02/15/30 Series A | Aa2/AA/AA+ | 2,877,204 | |||||||
Total Local Public Property | 3,783,347 | |||||||||
Public Schools (0.8%) | ||||||||||
Granite School District, Utah, Salt Lake | ||||||||||
County School Building (School | ||||||||||
Board Guaranty Program) | ||||||||||
1,000,000 | 5.000%, 06/01/31 | Aaa/NR/AAA | 1,077,150 | |||||||
Washoe County, Nevada School District | ||||||||||
Refunding & School Improvement | ||||||||||
2,000,000 | 5.000%, 06/01/30 Series A | A1/AA/NR | 2,151,600 | |||||||
Total Public Schools | 3,228,750 | |||||||||
Total Pre-Refunded General Obligation | ||||||||||
Bonds | 7,012,097 | |||||||||
Pre-Refunded Revenue Bonds (12.7%) | ||||||||||
Charter Schools (0.3%) | ||||||||||
Utah State Charter School Finance | ||||||||||
Authority Davinci Academy, | ||||||||||
Refunding & Improvement | ||||||||||
1,000,000 | 7.050%, 09/15/26 Series 2011A | NR/BBB-/NR | 1,110,260 | |||||||
Electric (0.8%) | ||||||||||
Clark County, Washington Public | ||||||||||
Utility District No. 001 Generating | ||||||||||
Refunding | ||||||||||
1,000,000 | 5.000%, 01/01/24 | A1/A/AA- | 1,036,490 | |||||||
Eagle Mountain, Utah Gas & Electric | ||||||||||
325,000 | 5.000%, 06/01/24 AGMC Insured | NR/AA/NR | 349,635 |
19 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Revenue Bonds | Moody's, S&P | ||||||||
Amount | (continued) | and Fitch | Value | |||||||
Electric (continued) | ||||||||||
Jacksonville Electric Authority, Florida | ||||||||||
Electric System Revenue | ||||||||||
$ | 465,000 | 4.500%, 10/01/32 Series Three 2012A | NR/NR/NR* | $ | 493,295 | |||||
Utah Associated Municipal Power | ||||||||||
System Revenue, Horse Butte Wind | ||||||||||
Project | ||||||||||
1,005,000 | 5.000%, 09/01/32 Series A | NR/A/A | 1,108,766 | |||||||
Total Electric | 2,988,186 | |||||||||
Higher Education (1.3%) | ||||||||||
Utah State Board of Regents, University | ||||||||||
of Utah Hospital Revenue | ||||||||||
1,245,000 | 5.000%, 08/01/31 | Aa2/AA/NR | 1,311,085 | |||||||
Utah State University Student Building | ||||||||||
Fee | ||||||||||
1,285,000 | 5.000%, 12/01/29 Series B | NR/AA/NR | 1,444,828 | |||||||
1,355,000 | 5.000%, 12/01/30 Series B | NR/AA/NR | 1,523,535 | |||||||
Washington State Higher Education | ||||||||||
Facilities Authority Revenue, | ||||||||||
Refunding, Gonzaga University | ||||||||||
Project | ||||||||||
950,000 | 5.000%, 04/01/24 Series B | A3/NR/NR | 964,317 | |||||||
Total Higher Education | 5,243,765 | |||||||||
Hospital (0.9%) | ||||||||||
Campbell County, Wyoming Hospital | ||||||||||
District, Hospital Revenue, Memorial | ||||||||||
Hospital Project | ||||||||||
1,040,000 | 5.000%, 12/01/20 | NR/NR/NR* | 1,075,568 | |||||||
1,000,000 | 5.500%, 12/01/34 | NR/NR/NR* | 1,039,920 | |||||||
Harris County, Texas Health Facilities | ||||||||||
Development Corp., Christus Health | ||||||||||
260,000 | 4.750%, 07/01/30 AGMC Insured | A1/NR/NR | 272,119 | |||||||
Tarrant County, Texas Cultural Education | ||||||||||
Facilities Finance Corp. Hospital | ||||||||||
Refunding, Baylor Healthcare System | ||||||||||
930,000 | 5.250%, 08/15/25 | AA3/AA-/NR | 984,638 | |||||||
70,000 | 5.250%, 08/15/25 | NR/NR/NR* | 74,046 | |||||||
Total Hospital | 3,446,291 |
20 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Revenue Bonds | Moody's, S&P | ||||||||
Amount | (continued) | and Fitch | Value | |||||||
Local Public Property (0.7%) | ||||||||||
Herriman, Utah Special Assessment | ||||||||||
Towne Center Assessment Area | ||||||||||
$ | 1,045,000 | 4.875%, 11/01/23 | NR/AA-/NR | $ | 1,092,495 | |||||
1,150,000 | 5.000%, 11/01/25 | NR/AA-/NR | 1,204,499 | |||||||
245,000 | 5.000%, 11/01/29 | NR/AA-/NR | 256,611 | |||||||
Total Local Public Property | 2,553,605 | |||||||||
State Agency (2.5%) | ||||||||||
Utah Infrastructure Agency | ||||||||||
Telecommunications & | ||||||||||
Franchise Tax | ||||||||||
1,970,000 | 5.250%, 10/15/30 | A2/NR/NR | 2,331,475 | |||||||
1,000,000 | 5.000%, 10/15/33 | A2/NR/NR | 1,131,250 | |||||||
1,630,000 | 5.250%, 10/15/38 | A2/NR/NR | 1,863,253 | |||||||
1,000,000 | 5.500%, 10/15/30 Series A AGMC | |||||||||
Insured | A2/NR/NR | 1,101,040 | ||||||||
1,475,000 | 5.250%, 10/15/33 Series A AGMC | |||||||||
Insured | A2/NR/NR | 1,613,237 | ||||||||
Utah State Building Ownership | ||||||||||
Authority Lease Revenue | ||||||||||
Refunding State Facilities Master | ||||||||||
Lease Program | ||||||||||
1,575,000 | 5.000%, 05/15/26 | Aa1/AA+/NR | 1,604,894 | |||||||
Total State Agency | 9,645,149 | |||||||||
Transportation (1.1%) | ||||||||||
North Texas Tollway Authority, Texas | ||||||||||
3,315,000 | 6.100%, 01/01/28 Series A | NR/NR/NR* | 3,348,946 | |||||||
Utah Transit Authority Sales Tax | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 06/15/32 | A1/A+/AA | 1,103,510 | |||||||
Total Transportation | 4,452,456 |
21 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Pre-Refunded Revenue Bonds | Moody's, S&P | ||||||||
Amount | (continued) | and Fitch | Value | |||||||
Water and Sewer (5.1%) | ||||||||||
Central Weber, Utah Sewer | ||||||||||
Improvement District Revenue | ||||||||||
Refunding | ||||||||||
$ | 1,000,000 | 5.000%, 03/01/28 Series A AGMC | ||||||||
Insured | NR/AA/AA | $ | 1,041,890 | |||||||
4,000,000 | 5.000%, 03/01/33 Series A AGMC | |||||||||
Insured | NR/AA/AA | 4,167,560 | ||||||||
Jordan Valley, Utah Water Conservancy | ||||||||||
District Revenue | ||||||||||
6,000,000 | 5.000%, 10/01/35 Series B | NR/AA+/AA+ | 6,437,880 | |||||||
Laredo, Texas Waterworks Sewer System | ||||||||||
Revenue | ||||||||||
1,450,000 | 5.000%, 03/01/24 Series 2010 | Aa3/AA-/AA- | 1,509,697 | |||||||
Miami-Dade County, Florida Water and | ||||||||||
Sewer Revenue System | ||||||||||
1,500,000 | 5.000%, 10/01/29 AGC Insured | Aa3/AA/A+ | 1,587,975 | |||||||
North Slope Borough, Alaska Service | ||||||||||
Area 10 Water & Wastewater | ||||||||||
Facilities | ||||||||||
1,000,000 | 5.250%, 06/30/27 | NR/NR/NR* | 1,080,890 | |||||||
1,000,000 | 5.250%, 06/30/28 | NR/NR/NR* | 1,080,890 | |||||||
985,000 | 5.250%, 06/30/34 | NR/NR/NR* | 1,064,677 | |||||||
Salt Lake & Sandy, Utah Metropolitan | ||||||||||
Water District, Water Revenue, | ||||||||||
Refunding | ||||||||||
650,000 | 5.000%, 07/01/31 Series A | NR/AA+/AA+ | 665,009 | |||||||
South Weber City, Utah Water Revenue | ||||||||||
930,000 | 5.000%, 06/01/40 AGMC Insured | NR/AA/NR | 975,412 | |||||||
Total Water and Sewer | 19,611,880 | |||||||||
Total Pre-Refunded Revenue Bonds | 49,051,592 | |||||||||
Total Pre-Refunded Bonds. | 56,063,689 | |||||||||
Total Municipal Bonds | ||||||||||
(cost $375,673,788) | 380,219,125 |
22 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Moody's, S&P | ||||||||||
Shares | Short-Term Investment (1.1%) | and Fitch | Value | |||||||
Dreyfus Treasury & Agency Cash | ||||||||||
Management - Institutional Shares, | ||||||||||
4,150,298 | 1.96%** (cost $4,150,298) | Aaa-mf/AAAm/NR | $ | 4,150,298 | ||||||
Total Investments | ||||||||||
(cost $379,824,086-note 4) | 99.4% | 384,369,423 | ||||||||
Other assets less liabilities | 0.6 | 2,339,636 | ||||||||
Net Assets | 100.0% | $ | 386,709,059 |
Percentage of | ||||
Portfolio Distribution By Quality Rating | Investments† | |||
Aaa of Moody's or AAA of S&P and Fitch | 12.3 | % | ||
Pre-Refunded bonds †† | 14.7 | |||
Aa of Moody's or AA of S&P and Fitch | 48.2 | |||
A of Moody's or S&P and Fitch | 16.5 | |||
BBB of S&P and Fitch | 3.5 | |||
Not Rated | 4.8 | |||
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 | ||
FHA - Federal Housing Administration | ||
IHC - Intermountain Health Care | ||
NR - Not Rated | ||
PSF- Permanent School Fund |
23 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (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 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. | |
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. | ||
† | Where applicable, calculated using the highest rating of the three NRSROs. Percentages in this table do not include the Short-Term Investment. | |
†† | Pre-refunded bonds are bonds for which U.S. Government Obligations usually have been placed in escrow 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.
24 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2018 (unaudited)
ASSETS | ||||
Investments at value (cost $379,824,086) | $ | 384,369,423 | ||
Interest recievable | 5,241,371 | |||
Receivable for Fund Shares sold | 1,192,241 | |||
Other assets | 24,549 | |||
Total assets | 390,827,584 | |||
LIABILITIES | ||||
Payable for investment securities purchased | 2,984,734 | |||
Payable for Fund shares redeemed | 811,148 | |||
Management fee payable | 146,008 | |||
Dividends payable | 133,026 | |||
Distribution and service fees payable | 277 | |||
Accrued expenses payable | 43,332 | |||
Total liabilities | 4,118,525 | |||
NET ASSETS | $ | 386,709,059 | ||
Net Assets consist of: | ||||
Capital Stock – Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 382,984 | ||
Additional paid-in capital | 383,111,985 | |||
Net unrealized appreciation on investments (note 4) | 4,545,337 | |||
Accumulated net realized loss on investments | (1,561,949 | ) | ||
Undistributed net investment income | 230,702 | |||
$ | 386,709,059 | |||
CLASS A | ||||
Net Assets | $ | 202,596,645 | ||
Capital shares outstanding | 20,084,942 | |||
Net asset value and redemption price per share | $ | 10.09 | ||
Maximum offering price per share (100/96 of $10.09) | $ | 10.51 | ||
CLASS C | ||||
Net Assets | $ | 46,653,144 | ||
Capital shares outstanding | 4,629,473 | |||
Net asset value and offering price per share | $ | 10.08 | ||
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) | $ | 10.08 | * | |
CLASS Y | ||||
Net Assets | $ | 137,459,270 | ||
Capital shares outstanding | 13,584,024 | |||
Net asset value, offering and redemption price per share | $ | 10.12 |
See accompanying notes to financial statements.
25 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER, 30, 2018 (unaudited)
Investment Income | ||||||||
Interest income | $ | 6,612,146 | ||||||
Expenses | ||||||||
Management fee (note 3) | $ | 987,358 | ||||||
Distribution and service fee (note 3) | 473,366 | |||||||
Transfer and shareholder servicing agent fees | 88,120 | |||||||
Trustees’ fees and expenses (note 6) | 63,779 | |||||||
Legal fees | 62,409 | |||||||
Fund accounting fees | 27,570 | |||||||
Shareholders’ reports | 18,227 | |||||||
Registration fees and dues | 16,215 | |||||||
Auditing and tax fees | 12,401 | |||||||
Insurance | 8,341 | |||||||
Custodian fees | 7,313 | |||||||
Chief compliance officer services (note 3) | 4,848 | |||||||
Miscellaneous | 32,971 | |||||||
Total expenses | 1,802,918 | |||||||
Management fee waived (note 3) | (65,734 | ) | ||||||
Net expenses | 1,737,184 | |||||||
Net investment income | 4,874,962 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | (113,812 | ) | ||||||
Change in unrealized appreciation on | ||||||||
investments | (3,568,301 | ) | ||||||
Net realized and unrealized gain (loss) | ||||||||
on investments | (3,682,113 | ) | ||||||
Net change in net assets resulting from operations | $ | 1,192,849 |
See accompanying notes to financial statements.
26 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2018 | Year Ended | |||||||
(unaudited) | March 31, 2018 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,874,962 | $ | 10,335,860 | ||||
Realized gain (loss) from securities transactions | (113,812 | ) | (104,991 | ) | ||||
Change in unrealized appreciation on | ||||||||
investments | (3,568,301 | ) | (2,993,934 | ) | ||||
Change in net assets resulting from operations | 1,192,849 | 7,236,935 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,612,213 | ) | (5,506,631 | ) | ||||
Class C Shares: | ||||||||
Net investment income | (452,886 | ) | (1,228,887 | ) | ||||
Class Y Shares: | ||||||||
Net investment income | (1,809,594 | ) | (3,598,018 | ) | ||||
Change in net assets from distributions | (4,874,693 | ) | (10,333,536 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 7): | ||||||||
Proceeds from shares sold | 48,482,260 | 89,119,382 | ||||||
Reinvested dividends and distributions | 4,054,507 | 8,666,047 | ||||||
Cost of shares redeemed | (61,529,879 | ) | (103,190,798 | ) | ||||
Change in net assets from capital share transactions | (8,993,112 | ) | (5,405,369 | ) | ||||
Change in net assets | (12,674,956 | ) | (8,501,970 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 399,384,015 | 407,885,985 | ||||||
End of period* | $ | 386,709,059 | $ | 399,384,015 | ||||
*Includes undistributed net investment of: | $ | 230,702 | $ | 230,433 |
See accompanying notes to financial statements.
27 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018 (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. As of the date of this report, there were no Class F Shares or Class T 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 ask 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. |
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. |
28 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018: |
Valuation Inputs* | Investments in Securities | |||
Level 1 – Quoted Prices — Short-Term Investment | $ | 4,150,298 | ||
Level 2 – Other Significant Observable | 380,219,125 | |||
Inputs — Municipal Bonds* | ||||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 384,369,423 |
* | 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 (2015 – 2017) or expected to be taken in the Fund’s 2018 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. |
29 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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. On March 31, 2018, the Fund increased additional paid-in capital by $214, increased undistributed net investment income by $69,457 and increased accumulated net realized loss on investments by $69,671. 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 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 had contractually undertaken to waive fees and/or reimburse Fund expenses so that total Fund expenses would not exceed 0.84% for Class A Shares, 1.64% for Class C Shares and 0.64% for Class Y Shares through September 30, 2018. For the six months ended September 30, 2018, the Fund incurred management fees of $987,358 of which $65,734 was waived.
Beginning October 1, 2018, the Manager has contractually undertaken to waive its fees so that management fees are equivalent to 0.48 of 1% of net assets of the Fund up to $400,000,000; 0.46 of 1% of net assets above $400,000,000 up to $1,000,000,000; and 0.44 of 1% of net assets above $1,000,000,000. This contractual undertaking is in effect until September 30, 2019. The Manager may not terminate the arrangement without the approval of the Board of Trustees.
30 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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, as amended (the “1940 Act”).
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 1940 Act. 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 Septmeber 30, 2018, distribution fees on Class A Shares amounted to $208,146, of which the Distributor retained $8,197.
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, 2018, these payments amounted to $198,915. 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, 2018, amounted to $66,305. The total of these payments with respect to Class C Shares amounted to $265,220, of which the Distributor retained $64,386.
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 (“financial intermediaries”), the Fund’s shares are sold primarily through the facilities of these financial intermediaries having offices within Utah, with the bulk of any sales commissions inuring to such financial intermediaries. For the six months ended September 30, 2018, total commissions on sales of Class A Shares amounted to $55,863, of which the Distributor received $5,629.
31 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
c) Transfer and shareholder servicing fees:
The Fund occasionally compensates financial intermediaries in connection with the sub-transfer agency related services provided by such entities in connection with their respective Fund shareholders so long as the fees are deemed by the Board of Trustees to be reasonable in relation to (i) the value of the services and the benefits received by the Fund and certain shareholders; and (ii) the payments that the Fund would make to another entity to perform similar ongoing services to existing shareholders.
4. Purchases and Sales of Securities
During the six months ended September 30, 2018, purchases of securities and proceeds from the sales of securities aggregated $33,457,749 and $40,651,538, respectively.
At September 30, 2018, the aggregate tax cost for all securities was $379,824,086. At September 30, 2018, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $7,073,064 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $2,527,727, for a net unrealized appreciation of $4,545,337.
5. Portfolio Orientation
At least 50% of the Fund’s assets will always consist of obligations of Utah-based issuers. At September 30, 2018, the Fund had 70% 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
At September 30, 2018, there were 8 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 Septmeber 30, 2018 was $54,933. 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, 2018, such meeting-related expenses amounted to $8,846.
32 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
7. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2018 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares sold | 1,926,669 | $ | 19,531,512 | 3,390,998 | $ | 35,054,736 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 213,437 | 2,168,319 | 442,444 | 4,571,496 | ||||||||||||
Cost of shares redeemed | (3,005,060 | ) | (30,529,089 | ) | (3,406,909 | ) | (35,255,759 | ) | ||||||||
Net change | (864,954 | ) | (8,829,258 | ) | 426,533 | 4,370,473 | ||||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 167,810 | 1,705,540 | 911,079 | 9,428,953 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 37,882 | 384,478 | 103,008 | 1,063,919 | ||||||||||||
Cost of shares redeemed | (1,230,142 | ) | (12,481,858 | ) | (2,446,331 | ) | (25,254,799 | ) | ||||||||
Net change | (1,024,450 | ) | (10,391,840 | ) | (1,432,244 | ) | (14,761,927 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 2,672,529 | 27,245,208 | 4,301,947 | 44,635,693 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 147,396 | 1,501,710 | 292,595 | 3,030,632 | ||||||||||||
Cost of shares redeemed | (1,817,270 | ) | (18,518,932 | ) | (4,120,264 | ) | (42,680,240 | ) | ||||||||
Net change | 1,002,655 | 10,227,986 | 474,278 | 4,986,085 | ||||||||||||
Total transactions in Fund | ||||||||||||||||
shares | (886,749 | ) | $ | (8,993,112 | ) | (531,433 | ) | $ | (5,405,369 | ) |
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.
33 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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 or in cash, 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. At March 31, 2018, the Fund had a capital loss carryover of $1,258,435 which is short-term and has no expiration.
The tax character of distributions was as follows:
Year Ended | Year Ended | |||||||
March 31, 2018 | March 31, 2017 | |||||||
Net tax-exempt income | $ | 10,248,470 | $ | 10,222,326 | ||||
Ordinary Income | 85,066 | 114,924 | ||||||
Capital gains | — | 352,958 | ||||||
$ | 10,333,536 | $ | 10,690,208 |
As of March 31, 2018, the components of distributable earnings on a tax basis were:
Undistributed tax-exempt income | $ | 357,331 | ||
Accumulated net realized loss on investments | (1,258,435 | ) | ||
Unrealized appreciation | 8,126,713 | |||
Post October losses | (189,702 | ) | ||
Other temporary differences | (139,974 | ) | ||
$ | 6,895,933 |
The difference between book basis and tax basis unrealized appreciation and undistributed income is due to the timing difference, post October losses, and other temporary differences, in recognizing dividends paid, the tax treatment of market discount amortization, and the deduction of distributions payable.
34 | Aquila Tax-Free Fund For Utah
AQUILA TAX-FREE FUND FOR UTAH
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
10. Credit Facility
The Bank of New York Mellon and the Aquila Group of Funds have been parties to a $40 million credit agreement, which currently terminates on August 28, 2019 (per the August 29,2018 amendment). In accordance with the Aquila Group of Funds Guidelines for Allocation of Committed Line of Credit (the Aquila Group of Funds is comprised of nine funds), each fund is responsible for payment of its proportionate share of
a) | a 0.17% per annum commitment fee; and, |
b) | interest on amounts borrowed for temporary or emergency purposes by the Fund (at the applicable rate selected by the Aquila Group of Funds at the time of the borrowing of either (i) the one-month Eurodollar Rate or (ii) a rate equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day, or (c) the Overnight Eurodollar Rate in effect on such day). |
There were no borrowings under the credit agreement for the six months ended September 30, 2018.
35 | 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 March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.18 | $ | 10.26 | $ | 10.56 | $ | 10.50 | $ | 10.10 | $ | 10.37 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.13 | 0.27 | 0.27 | 0.29 | 0.33 | 0.33 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.09 | ) | (0.08 | ) | (0.30 | ) | 0.06 | 0.40 | (0.24 | ) | ||||||||||||||
Total from investment operations | 0.04 | 0.19 | (0.03 | ) | 0.35 | 0.73 | 0.09 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.27 | ) | (0.26 | ) | (0.28 | ) | (0.32 | ) | (0.33 | ) | ||||||||||||
Distributions from capital gains | — | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||
Total distributions | (0.13 | ) | (0.27 | ) | (0.27 | ) | (0.29 | ) | (0.33 | ) | (0.36 | ) | ||||||||||||
Net asset value, end of period | $ | 10.09 | $ | 10.18 | $ | 10.26 | $ | 10.56 | $ | 10.50 | $ | 10.10 | ||||||||||||
Total return (not reflecting sales charge) | 0.37 | %(3) | 1.84 | % | (0.26 | )% | 3.41 | % | 7.34 | % | 0.96 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 203 | $ | 213 | $ | 211 | $ | 221 | $ | 205 | $ | 204 | ||||||||||||
Ratio of expenses to average net assets | 0.84 | %(4) | 0.84 | % | 0.84 | % | 0.84 | % | 0.84 | % | 0.83 | % | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.51 | %(4) | 2.61 | % | 2.54 | % | 2.75 | % | 3.14 | % | 3.33 | % | ||||||||||||
Portfolio turnover rate | 9 | %(3) | 15 | % | 23 | % | 20 | % | 16 | % | 12 | % | ||||||||||||
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 | %(4) | 0.87 | % | 0.86 | % | 0.87 | % | 0.91 | % | 0.91 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.47 | %(4) | 2.58 | % | 2.52 | % | 2.72 | % | 3.07 | % | 3.26 | %(2) |
______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
36 | 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 March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.17 | $ | 10.25 | $ | 10.55 | $ | 10.50 | $ | 10.10 | $ | 10.37 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.09 | 0.19 | 0.18 | 0.20 | 0.24 | 0.25 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.09 | ) | (0.08 | ) | (0.29 | ) | 0.06 | 0.41 | (0.24 | ) | ||||||||||||||
Total from investment operations | — | 0.11 | (0.11 | ) | 0.26 | 0.65 | 0.01 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.19 | ) | (0.18 | ) | (0.20 | ) | (0.24 | ) | (0.25 | ) | ||||||||||||
Distributions from capital gains | — | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||
Total distributions | (0.09 | ) | (0.19 | ) | (0.19 | ) | (0.21 | ) | (0.25 | ) | (0.28 | ) | ||||||||||||
Net asset value, end of period | $ | 10.08 | $ | 10.17 | $ | 10.25 | $ | 10.55 | $ | 10.50 | $ | 10.10 | ||||||||||||
Total return (not reflecting CDSC) | (0.03 | )%(3) | 1.03 | % | (1.06 | )% | 2.55 | % | 6.49 | % | 0.15 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 47 | $ | 58 | $ | 73 | $ | 75 | $ | 81 | $ | 81 | ||||||||||||
Ratio of expenses to average net assets | 1.64 | %(4) | 1.64 | % | 1.64 | % | 1.64 | % | 1.63 | % | 1.63 | % | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.71 | %(4) | 1.81 | % | 1.74 | % | 1.95 | % | 2.34 | % | 2.53 | % | ||||||||||||
Portfolio turnover rate | 9 | %(3) | 15 | % | 23 | % | 20 | % | 16 | % | 12 | % | ||||||||||||
Expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.67 | %(4) | 1.66 | % | 1.66 | % | 1.67 | % | 1.71 | % | 1.70 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.67 | %(4) | 1.78 | % | 1.72 | % | 1.92 | % | 2.27 | % | 2.46 | %(2) |
______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
37 | 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 March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.22 | $ | 10.29 | $ | 10.59 | $ | 10.53 | $ | 10.13 | $ | 10.41 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.14 | 0.29 | 0.29 | 0.31 | 0.35 | 0.36 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.07 | ) | (0.29 | ) | 0.06 | 0.40 | (0.26 | ) | ||||||||||||||
Total from investment operations | 0.04 | 0.22 | — | 0.37 | 0.75 | 0.10 | ||||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.29 | ) | (0.29 | ) | (0.30 | ) | (0.34 | ) | (0.35 | ) | ||||||||||||
Distributions from capital gains | — | — | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||
Total distributions | (0.14 | ) | (0.29 | ) | (0.30 | ) | (0.31 | ) | (0.35 | ) | (0.38 | ) | ||||||||||||
Net asset value, end of period | $ | 10.12 | $ | 10.22 | $ | 10.29 | $ | 10.59 | $ | 10.53 | $ | 10.13 | ||||||||||||
Total return (not reflecting sales charge) | 0.37 | %(3) | 2.15 | % | (0.05 | )% | 3.61 | % | 7.54 | % | 1.07 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 137 | $ | 129 | $ | 125 | $ | 112 | $ | 100 | $ | 71 | ||||||||||||
Ratio of expenses to average net assets | 0.64 | %(4) | 0.64 | % | 0.64 | % | 0.64 | % | 0.63 | % | 0.63 | % | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.71 | %(4) | 2.81 | % | 2.75 | % | 2.95 | % | 3.33 | % | 3.53 | % | ||||||||||||
Portfolio turnover rate | 9 | %(3) | 15 | % | 23 | % | 20 | % | 16 | % | 12 | % | ||||||||||||
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 | %(4) | 0.67 | % | 0.66 | % | 0.67 | % | 0.70 | % | 0.70 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.68 | %(4) | 2.78 | % | 2.73 | % | 2.92 | % | 3.26 | % | 3.46 | %(2) |
______________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
38 | 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, 2018. The independent Trustees met telephonically on August 13, 2018 and in person on September 15, 2018 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. The Trustees also discussed the memorandum provided by Fund counsel that summarized the legal standards and other considerations that are relevant to the Trustees in their deliberations regarding the renewal of the Advisory Agreement.
At the meeting held on September 15, 2018, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Fund present at the meeting, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2019. 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 Messrs. James Thompson, Tony Tanner and Royden Durham as portfolio managers for the Fund and has established facilities and capabilities for credit analysis of the Fund’s portfolio securities. The Trustees noted that Mr. Tanner replaced Mr. Todd Curtis, as a portfolio manager, upon Mr. Curtis’ retirement effective April 30, 2018, and further noted that Mr. Tanner is a 30-year veteran in the financial services industry. They considered that Mr. Thompson, the Fund’s lead portfolio manager, 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.
39 | 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 “Product Category for Performance”) (all funds (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Fund’s benchmark index, the Bloomberg Barclays 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 each of the one, three, five and ten-year periods ended June 30, 2018. The Trustees noted 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, 2018. They also considered that the Fund’s average annual total return was higher than the average annual total return of the benchmark index for the one, three, five and ten-year periods ended June 30, 2018.
The Trustees noted that the Fund invests primarily in municipal obligations issued by the State of Utah, its counties and various other local authorities, while the funds in the Product Category for Performance invest in, and the Fund’s benchmark index includes, municipal bonds of issuers throughout the United States. They also noted that none of the funds in the Peer Group invests in Utah municipal obligations. The Trustees noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees or expenses.
In addition, the Trustees considered that, as reflected in the Consultant’s Report, the Fund’s standard deviation, a measure of volatility, was in the fourth quintile relative to the funds in the Product Category for Performance for the three and five-year periods ended June 30, 2018. The Trustees further noted that the Fund’s Sharpe ratio was in the second and first quintile for the three and five-year periods ended June 30, 2018, respectively, when compared to the funds in the Product Category for Performance. A Sharpe ratio is a measure for calculating risk-adjusted return. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance. The Trustees noted that the Fund was the only Utah state-specific tax-free municipal bond fund in the State.
40 | Aquila Tax-Free Fund For Utah
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 1-3 mutual funds are operating, with similar operating expense structures). |
The Trustees considered that the Fund’s contractual advisory fee was higher 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) and higher 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 various asset levels up to $5 billion). 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 equal to the average actual expenses of the funds in the Product Category for Expenses and only 0.008% 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 further noted that beginning October 1, 2018, the Manager has contractually undertaken to waive its fees so that management fees are equivalent to 0.48 of 1% of net assets of the Fund up to $400,000,000; 0.46 of 1% of net assets above $400,000,000 up to $1,000,000,000; and 0.44 of 1% of net assets above $1,000,000,000. This contractual undertaking is in effect until September 30, 2019. The Manager may not terminate these arrangements without the approval of the Board of Trustees.
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 voluntarily 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 to voluntarily waive 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.
41 | 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. They noted that the Manager has agreed, through a contractual advisory fee waiver, to include breakpoints in its fee schedule based on the size of the Fund. 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.
42 | Aquila Tax-Free Fund For Utah
Your Fund’s Expenses (unaudited)
As a Fund shareholder, 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 assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The 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 that 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”.
Hypothetical Example for Comparison with Other Funds
Under the heading, “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||
(actual return after expenses) | (5% annual return before expenses) | |||||
Expenses(2) | Expenses(2) | |||||
Beginning | Ending(1) | Paid During | Ending | Paid During | Net | |
Account | Account | Period | Account | Period | Annualized | |
Share | Value | Value | 4/1/18 – | Value | 4/1/18 – | Expense |
Class | 4/1/18 | 9/30/18 | 9/30/18 | 9/30/18 | 9/30/18 | Ratio |
A | $1,000 | $1,003.70 | $4.22 | $1,020.86 | $4.26 | 0.84% |
C | $1,000 | $ 999.70 | $8.22 | $1,016.85 | $8.29 | 1.64% |
Y | $1,000 | $1,003.70 | $3.21 | $1,021.86 | $3.24 | 0.64% |
(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 or the applicable CDSC with respect to Class C shares. Total return is not annualized and as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio for the six-month period as indicated above - in the far right column - multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. |
43 | 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 1-800-437-1000.
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, 2018, there were no proxies related to any portfolio instruments held by the Fund. As such, 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, 2018, $10,248,470 of dividends paid by Aquila Tax-Free Fund For Utah, constituting 99.2% of total dividends paid, were exempt-interest dividends; and the balance was ordinary income.
Prior to February 15, 2019, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2018 calendar year.
44 | Aquila Tax-Free Fund For Utah
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
Thomas A. Christopher, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
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
James T. Thompson, Vice President
and Lead Portfolio Manager
Royden P. Durham, Vice President
and Portfolio Manager
Anthony A. Tanner, Vice President
and 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, 2018 | |||||||||||||||||||||||||
![]() |
![]() | Aquila Tax-Free Trust of Arizona
“Proper Asset Allocation – A Strategy For All Seasons”
Serving Arizona investors since 1986 | ![]() |
November, 2018
Dear Fellow Shareholder:
Financial news, and the often resulting market volatility, can cause even the most seasoned investor to ask, “What should I do now?”
We believe you will generally be in a better position to weather changing economic situations, if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs? And, have you periodically revisited your portfolio structure to make sure that your allocation remains in line with your investment goals, given changing market conditions and changes in your personal circumstances, including current risk tolerance?
Asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific needs. In developing this strategy, your considerations should include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to lose during a given time frame); |
• | financial situation (your wealth, income, expenses, tax bracket, liquidity needs, etc.); and |
• | goals (the financial goals you and your family would like to achieve). |
Since the three main asset classes - equities, fixed-income, and cash/cash equivalents - have different levels of risk and return, each is expected to behave differently over time. The objective of asset allocation is to create a diversified portfolio with an acceptable level of risk and the highest possible return given that level of risk.
Although there is no simple formula that can find the right asset allocation for every individual, the consensus among most financial professionals is that asset allocation is one of the most important decisions that investors make.
NOT A PART OF THE SEMI- ANNUAL REPORT
The way you allocate your investment portfolio among stocks, bonds, and cash/ cash equivalents will be the principal determinants of your investment results –secondary to your selection of individual securities.
Once you and your financial professional have developed an appropriate asset allocation for your portfolio, we believe that changes should be made based on changing needs, not on headlines.
A properly constructed portfolio based on sound asset allocation may generally help you weather all seasons.
Sincerely,
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. Interest rates in the U.S. have begun to rise after having been at historical lows for some time, so the Fund faces a heightened risk that interest rates may continue to 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.
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.
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
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (18.9%) | and Fitch | Value | |||||||
City (5.9%) | ||||||||||
Buckeye Jackrabbit Trail Sanitary | ||||||||||
Sewer Improvement District | ||||||||||
$ | 1,123,000 | 6.250%, 01/01/29 | NR/A-/NR | $ | 1,176,758 | |||||
Casa Grande, Arizona | ||||||||||
800,000 | 4.000%, 08/01/34 | NR/AA-/AAA | 833,848 | |||||||
Gilbert, Arizona | ||||||||||
1,000,000 | 5.000%, 07/01/32 | Aaa/AA+/AAA | 1,171,290 | |||||||
Gilbert Improvement District No. 19 | ||||||||||
25,000 | 5.200%, 01/01/23 | Aa1/A+/NR | 25,065 | |||||||
Gilbert Improvement District No. 20 | ||||||||||
605,000 | 5.100%, 01/01/29 | Aa1/A+/NR | 617,911 | |||||||
Glendale, Arizona | ||||||||||
200,000 | 5.000%, 07/01/33 | NR/A+/AAA | 231,200 | |||||||
Goodyear, Arizona | ||||||||||
1,000,000 | 5.000%, 07/01/29 | Aa2/AA/NR | 1,021,580 | |||||||
400,000 | 4.000%, 07/01/33 | Aa2/AA/NR | 421,732 | |||||||
Goodyear McDowell Road | ||||||||||
Commercial Corridor Improvement | ||||||||||
District | ||||||||||
1,000,000 | 3.250%, 01/01/27 BAMAC Insured | Aa3/AA/NR | 1,013,000 | |||||||
Mesa, Arizona | ||||||||||
425,000 | 4.000%, 07/01/32 | Aa2/AA-/NR | 452,162 | |||||||
425,000 | 4.000%, 07/01/33 | Aa2/AA-/NR | 450,334 | |||||||
450,000 | 4.000%, 07/01/34 | Aa2/AA-/NR | 474,903 | |||||||
Scottsdale, Arizona | ||||||||||
200,000 | 4.000%, 07/01/28 | Aaa/AAA/AAA | 217,090 | |||||||
500,000 | 4.000%, 07/01/34 | Aaa/AAA/AAA | 527,165 | |||||||
Tempe, Arizona | ||||||||||
2,245,000 | 4.000%, 07/01/22 | Aa1/AAA/AAA | 2,320,095 | |||||||
470,000 | 5.000%, 07/01/36 | Aa1/AAA/AAA | 539,489 | |||||||
415,000 | 5.000%, 07/01/37 | Aa1/AAA/AAA | 474,303 | |||||||
Tempe Improvement District (Pier | ||||||||||
Town Lake) | ||||||||||
2,000,000 | 5.000%, 01/01/29 | Aa2/NR/NR | 2,004,760 |
1 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
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/AA/NR | $ | 778,400 | |||||
Total City | 14,751,085 | |||||||||
County (0.4%) | ||||||||||
Yuma Co. Free Library District | ||||||||||
1,000,000 | 4.000%, 07/01/29 | Aa3/NR/AAA | 1,052,510 | |||||||
School District (12.6%) | ||||||||||
Buckeye Union High School District | ||||||||||
No. 201 | ||||||||||
1,000,000 | 5.000%, 07/01/33 AGMC Insured | NR/AA/NR | 1,115,480 | |||||||
500,000 | 5.000%, 07/01/36 BAMAC Insured | NR/AA/NR | 558,865 | |||||||
Gila Co. Unified School District No. | ||||||||||
10 (Payson) | ||||||||||
1,000,000 | 5.000%, 07/01/28 | Aa3/NR/NR | 1,116,560 | |||||||
Glendale Union High School District | ||||||||||
No. 20 | ||||||||||
525,000 | 5.000%, 07/01/27 BAMAC Insured | NR/AA/NR | 579,427 | |||||||
Maricopa Co. Elementary School | ||||||||||
District No. 3 (Tempe) | ||||||||||
500,000 | 5.000%, 07/01/30 | Aa2/NR/NR | 579,330 | |||||||
Maricopa Co. Elementary School | ||||||||||
District No. 8 (Osborn) | ||||||||||
500,000 | 5.000%, 07/01/31 AGMC Insured | NR/AA/NR | 576,830 | |||||||
Maricopa Co. Elementary School | ||||||||||
District No. 28 (Kyrene Elementary) | ||||||||||
350,000 | 5.000%, 07/01/34 | Aa1/AA/NR | 393,592 | |||||||
Maricopa Co. Elementary School | ||||||||||
District No. 62 (Union) | ||||||||||
315,000 | 4.000%, 07/01/29 BAMAC Insured | NR/AA/NR | 343,114 | |||||||
580,000 | 4.000%, 07/01/32 BAMAC Insured | NR/AA/NR | 624,776 | |||||||
300,000 | 4.000%, 07/01/33 BAMAC Insured | NR/AA/NR | 321,963 | |||||||
375,000 | 4.000%, 07/01/34 BAMAC Insured | NR/AA/NR | 400,669 | |||||||
500,000 | 4.000%, 07/01/26 | Aa2/AA/AAA | 542,080 |
2 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
School District (continued) | ||||||||||
Maricopa Co. Unified School District | ||||||||||
No. 11 (Peoria) | ||||||||||
$ | 1,500,000 | 4.000%, 07/01/25 | A2/AA-/NR | $ | 1,579,410 | |||||
675,000 | 4.500%, 07/01/33 AGMC Insured | A2/AA/NR | 728,696 | |||||||
575,000 | 5.000%, 07/01/36 | NR/AA-/NR | 654,338 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 24 (Gila Bend) | ||||||||||
200,000 | 5.500%, 07/01/22 | NR/NR/NR* | 200,162 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 60 (Higley) | ||||||||||
1,615,000 | 5.000%, 07/01/29 | Aa3/A+/NR | 1,800,531 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 66 (Roosevelt) | ||||||||||
910,000 | 4.000%, 07/01/31 BAMAC Insured | A3/AA/NR | 962,280 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 69 (Paradise Valley) | ||||||||||
1,000,000 | 4.500%, 07/01/30 | Aa2/NR/AAA | 1,073,200 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 80 (Chandler) | ||||||||||
525,000 | 4.000%, 07/01/33 | Aa1/AA/NR | 550,651 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 89 (Dysart) | ||||||||||
500,000 | 4.000%, 07/01/28 | NR/A+/AAA | 524,580 | |||||||
2,185,000 | 5.500%, 07/01/22 NPFG/FGIC Insured | Baa2/A+/NR | 2,435,401 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 90 (Saddle Mountain) | ||||||||||
1,300,000 | 5.125%, 07/01/25 AGMC Insured | A2/AA/NR | 1,391,442 | |||||||
Mohave Co. Unified School District | ||||||||||
No. 1 (Lake Havasu) | ||||||||||
500,000 | 5.000%, 07/01/35 | Aa3/NR/NR | 564,915 | |||||||
Navajo Co. Unified School District | ||||||||||
No. 10 (Show Low) | ||||||||||
500,000 | 4.000%, 07/01/31 AGMC Insured | NR/AA/NR | 522,900 | |||||||
Pima Co. Unified School District | ||||||||||
No. 6 (Marana) | ||||||||||
1,250,000 | 5.000%, 07/01/25 | NR/A/NR | 1,332,425 | |||||||
950,000 | 5.250%, 07/01/25 AGMC Insured | NR/AA/NR | 1,040,003 | |||||||
1,000,000 | 4.250%, 07/01/32 MAC Insured | NR/AA/NR | 1,061,350 | |||||||
1,000,000 | 4.000%, 07/01/37 AGMC Insured | NR/AA/NR | 1,034,300 |
3 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | |||||||
School District (continued) | ||||||||||
Pima Co. Unified School District No. 8 | ||||||||||
(Flowing Wells) | ||||||||||
$ | 1,000,000 | 4.500%, 07/01/37 AGMC Insured | NR/AA/NR | $ | 1,079,440 | |||||
Pima Co. Unified School District | ||||||||||
No. 10 (Amphitheater) | ||||||||||
700,000 | 5.000%, 07/01/27 | Aa2/A+/NR | 749,049 | |||||||
Pima Co. Unified School District | ||||||||||
No. 12 (Sunnyside) | ||||||||||
500,000 | 4.000%, 07/01/25 AGMC Insured | NR/AA/NR | 523,000 | |||||||
1,050,000 | 4.000%, 07/01/28 BAMAC Insured | NR/AA/NR | 1,093,732 | |||||||
Pinal Co. Unified School District | ||||||||||
No. 21 (Coolidge) | ||||||||||
500,000 | 4.000%, 07/01/28 AGMC Insured | NR/AA/NR | 533,960 | |||||||
Tempe High School District No. 213 | ||||||||||
650,000 | 4.000%, 07/01/32 | Aa2/AA/NR | 671,840 | |||||||
Western Maricopa Education Center | ||||||||||
District No. 402 | ||||||||||
1,200,000 | 4.000%, 07/01/28 | NR/AA-/NR | 1,252,680 | |||||||
Yavapai Co. Elementary School District | �� | |||||||||
No. 6 (Cottonwood-Oak Creek) | ||||||||||
720,000 | 5.000%, 07/01/34 BAMAC Insured | A2/AA/NR | 799,898 | |||||||
Yuma Co. Elementary School District | ||||||||||
No. 1 | ||||||||||
625,000 | 4.000%, 07/01/34 AGMC Insured | NR/AA/NR | 655,075 | |||||||
Total School District | 31,967,944 | |||||||||
Total General Obligation Bonds | 47,771,539 | |||||||||
Revenue Bonds (72.7%) | ||||||||||
Airport (5.2%) | ||||||||||
Phoenix Civic Improvement Corp. | ||||||||||
Airport Bonds | ||||||||||
1,250,000 | 5.000%, 07/01/34 | A1/A+/NR | 1,393,537 | |||||||
1,000,000 | 5.000%, 07/01/36 | A1/A+/NR | 1,127,390 | |||||||
5,000,000 | 4.000%, 07/01/40 | A1/A+/NR | 5,099,750 | |||||||
1,000,000 | 5.000%, 07/01/45 | A1/A+/NR | 1,098,860 | |||||||
2,700,000 | 5.000%, 07/01/32 AMT | Aa3/AA-/NR | 2,937,168 | |||||||
1,000,000 | 5.000%, 07/01/37 AMT | Aa3/AA-/NR | 1,105,780 |
4 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Airport (continued) | ||||||||||
Phoenix-Mesa Gateway Airport | ||||||||||
Authority | ||||||||||
$ | 515,000 | 5.000%, 07/01/38 AMT | A1/AA+/NR | $ | 545,596 | |||||
Total Airport | 13,308,081 | |||||||||
Charter Schools (1.0%) | ||||||||||
Arizona Industrial Development | ||||||||||
Authority (Basis Schools) | ||||||||||
240,000 | 5.000%, 07/01/37 State Enhanced | NR/AA-/NR | 264,252 | |||||||
La Paz Co. Industrial Development | ||||||||||
Authority (Harmony Public Schools | ||||||||||
Projects) | ||||||||||
200,000 | 5.000%, 02/15/28 | NR/BBB/NR | 220,330 | |||||||
Maricopa Co. Industrial Development | ||||||||||
Authority (Great Hearts Arizona | ||||||||||
Projects) | ||||||||||
250,000 | 5.000%, 07/01/26 State Enhanced | NR/AA-/NR | 285,625 | |||||||
315,000 | 5.000%, 07/01/37 State Enhanced | NR/AA-/NR | 349,319 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Great Hearts Academies | ||||||||||
Project) | ||||||||||
500,000 | 5.000%, 07/01/41 | NR/BBB-/NR | 525,355 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Villa Montessori Inc. | ||||||||||
Project) | ||||||||||
415,000 | 5.000%, 07/01/35 | NR/BBB-/NR | 434,057 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Vista College Preparatory | ||||||||||
Projects) | ||||||||||
430,000 | 5.000%, 07/01/43 State Enhanced††† | NR/AA-/NR | 469,465 | |||||||
Total Charter Schools | 2,548,403 | |||||||||
Excise Tax (13.4%) | ||||||||||
Buckeye Excise Tax | ||||||||||
400,000 | 4.000%, 07/01/36 | NR/AA-/AA | 411,260 | |||||||
1,000,000 | 5.000%, 07/01/43 | NR/AA-/AA | 1,098,860 | |||||||
Buckeye Roosevelt Street | ||||||||||
Improvement District | ||||||||||
100,000 | 4.000%, 01/01/32 | NR/A-/NR | 99,182 | |||||||
125,000 | 4.050%, 01/01/33 | NR/A-/NR | 123,925 |
5 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Excise Tax (continued) | ||||||||||
Cottonwood Pledged Revenue | ||||||||||
Obligations | ||||||||||
$ | 500,000 | 5.000%, 07/01/30 AGMC Insured | NR/AA/NR | $ | 564,230 | |||||
El Mirage Pledged Excise Tax | ||||||||||
500,000 | 5.000%, 07/01/30 | A1/AA-/NR | 522,885 | |||||||
Flagstaff Pledged Revenue | ||||||||||
200,000 | 4.000%, 07/01/31 | NR/AA-/NR | 209,634 | |||||||
1,395,000 | 4.250%, 07/01/33 | NR/AA-/NR | 1,481,950 | |||||||
Gilbert Pledged Revenue Obligations | ||||||||||
450,000 | 4.000%, 07/01/35 | Aa1/AA+/AAA | 464,764 | |||||||
Glendale Municipal Property Corp. | ||||||||||
1,250,000 | 5.000%, 07/01/33 | A1/AA+/NR | 1,365,112 | |||||||
Goodyear Public Improvement Corp. | ||||||||||
500,000 | 5.250%, 07/01/24 | Aa3/AA-/NR | 551,700 | |||||||
1,500,000 | 5.000%, 07/01/26 | Aa3/AA-/NR | 1,634,415 | |||||||
Graham Co. Jail District Revenue | ||||||||||
Pledged Obligation | ||||||||||
1,000,000 | 5.000%, 07/01/35 | NR/A-/NR | 1,096,960 | |||||||
Marana Pledged Excise Tax | ||||||||||
275,000 | 4.000%, 07/01/30 | NR/AA/NR | 284,853 | |||||||
1,400,000 | 5.000%, 07/01/33 | NR/AA/NR | 1,543,164 | |||||||
Mesa Excise Tax | ||||||||||
250,000 | 5.000%, 07/01/32 | Aa3/AA+/NR | 271,187 | |||||||
Page Pledged Revenue Refunding | ||||||||||
1,080,000 | 5.000%, 07/01/25 | NR/AA-/NR | 1,156,270 | |||||||
Phoenix Civic Improvement Corp. | ||||||||||
(Civic Plaza) | ||||||||||
2,000,000 | 5.500%, 07/01/27 BHAC/FGIC Insured | Aa1/AA+/NR | 2,399,120 | |||||||
2,000,000 | 5.500%, 07/01/30 BHAC/FGIC Insured | Aa1/AA+/NR | 2,473,940 | |||||||
1,000,000 | 5.500%, 07/01/23 NPFG/FGIC Insured | Aa2/AA/NR | 1,132,510 | |||||||
2,300,000 | 5.500%, 07/01/33 NPFG/FGIC Insured | Aa2/AA/NR | 2,893,101 | |||||||
Phoenix Civic Improvement Corp. | ||||||||||
Transit Excise Tax (Light Rail) | ||||||||||
2,000,000 | 4.000%, 07/01/20 | Aa2/AA/NR | 2,069,000 |
6 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Excise Tax (continued) | ||||||||||
Pinal Co. Revenue Obligations | ||||||||||
Refunding | ||||||||||
$ | 1,500,000 | 5.000%, 08/01/33 | NR/AA-/AA | $ | 1,670,355 | |||||
Queen Creek Excise Tax & State | ||||||||||
Shared Revenue | ||||||||||
250,000 | 5.000%, 08/01/30 | NR/AA/AA | 277,182 | |||||||
Santa Cruz Co. Jail District | ||||||||||
1,655,000 | 5.000%, 07/01/28 AGMC Insured | NR/AA/NR | 1,899,692 | |||||||
500,000 | 5.000%, 07/01/31 AGMC Insured | NR/AA/NR | 564,505 | |||||||
Scottsdale Municipal Property Corp. | ||||||||||
1,500,000 | 5.000%, 07/01/34 | Aaa1/AAA/AAA | 1,689,750 | |||||||
1,000,000 | 5.000%, 07/01/36 Sedona Excise Tax | Aaa1/AAA/AAA | 1,150,340 | |||||||
2,605,000 | 4.500%, 07/01/26 AGMC Insured | NR/AA/NR | 2,808,581 | |||||||
Total Excise Tax | 33,908,427 | |||||||||
Higher Education (7.7%) | ||||||||||
Arizona Board of Regents (Arizona | ||||||||||
State University System) | ||||||||||
300,000 | 5.000%, 07/01/28 | Aa2/AA/NR | 343,683 | |||||||
480,000 | 5.000%, 07/01/31 | Aa2/AA/NR | 546,394 | |||||||
285,000 | 5.000%, 07/01/32 | Aa2/AA/NR | 310,753 | |||||||
115,000 | 5.000%, 07/01/32 | Aa2/AA/NR | 125,391 | |||||||
500,000 | 5.000%, 07/01/36 | Aa2/AA/NR | 558,280 | |||||||
Arizona Board of Regents (Arizona | ||||||||||
State University System) Green Bonds | ||||||||||
750,000 | 5.000%, 07/01/34 | Aa2/AA/NR | 845,370 | |||||||
1,975,000 | 5.000%, 07/01/38 | Aa2/AA/NR | 2,217,135 | |||||||
Arizona Board of Regents (Northern | ||||||||||
Arizona University System) | ||||||||||
575,000 | 5.000%, 06/01/32 | A1/A+/NR | 637,313 | |||||||
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 | 561,640 | |||||||
1,500,000 | 5.000%, 08/01/34 | Aa3/A+/NR | 1,656,780 |
7 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
Arizona Board of Regents (University | ||||||||||
of Arizona System) | ||||||||||
$ | 400,000 | 5.000%, 06/01/29 | Aa2/AA-/NR | $ | 452,040 | |||||
460,000 | 5.000%, 06/01/31 | Aa2/AA-/NR | 498,999 | |||||||
Arizona State University Speed | ||||||||||
Stimulus Plan for Economic & | ||||||||||
Educational Development | ||||||||||
625,000 | 5.000%, 08/01/34 | Aa3/AA-/NR | 695,269 | |||||||
Cochise Co. Community College | ||||||||||
District | ||||||||||
630,000 | 5.000%, 07/01/31 BAMAC Insured | A2/AA/NR | 703,156 | |||||||
Glendale Industrial Development | ||||||||||
Authority (Midwestern University) | ||||||||||
600,000 | 5.000%, 05/15/35 | NR/A/A+ | 624,036 | |||||||
McAllister Academic Village (Arizona | ||||||||||
State University Hassayampa) | ||||||||||
500,000 | 5.000%, 07/01/38 | Aa3/AA-/NR | 561,300 | |||||||
1,000,000 | 5.000%, 07/01/39 | Aa3/AA-/NR | 1,121,140 | |||||||
Northern Arizona University Speed | ||||||||||
Stimulus Plan for Economic & | ||||||||||
Educational Development | ||||||||||
1,445,000 | 5.000%, 08/01/38 | A2/A/NR | 1,567,233 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Downtown Phoenix | ||||||||||
Student Housing) | ||||||||||
200,000 | 5.000%, 07/01/26 | Baa3/NR/NR | 224,082 | |||||||
400,000 | 5.000%, 07/01/33 | Baa3/NR/NR | 442,896 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Eastern Kentucky | ||||||||||
University Project) | ||||||||||
500,000 | 5.000%, 10/01/36 | A2/BBB+/NR | 541,760 | |||||||
Phoenix Industrial Development | ||||||||||
Authority (Rowan University Project) | ||||||||||
2,000,000 | 5.250%, 06/01/34 | A3/A/NR | 2,152,800 | |||||||
Yavapai Co. Community College | ||||||||||
District | ||||||||||
1,000,000 | 4.875%, 07/01/25 AGMC Insured | A1/AA/NR | 1,063,460 |
8 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Higher Education (continued) | ||||||||||
Yuma/ La Paz Counties Community | ||||||||||
College District (Arizona Western | ||||||||||
College), Refunding | ||||||||||
$ | 1,000,000 | 4.000%, 07/01/28 2014A | Aa3/A+/NR | $ | 1,052,390 | |||||
Total Higher Education | 19,503,300 | |||||||||
Hospital (11.0%) | ||||||||||
Arizona Health Facilities Authority | ||||||||||
(Banner Health) | ||||||||||
2,000,000 | 5.000%, 01/01/44 | NR/AA-/AA- | 2,165,500 | |||||||
Arizona Health Facilities Authority | ||||||||||
(Dignity Health) | ||||||||||
1,500,000 | 5.000%, 07/01/28 | A3/A/A- | 1,526,640 | |||||||
2,175,000 | 5.250%, 03/01/39 | A3/A/A- | 2,305,283 | |||||||
Arizona Health Facilities Authority | ||||||||||
(Phoenix Children's Hospital) | ||||||||||
1,000,000 | 5.000%, 02/01/27 | NR/A-/A+ | 1,074,410 | |||||||
775,000 | 5.000%, 02/01/30 | NR/A-/A+ | 829,343 | |||||||
6,035,000 | 5.000%, 02/01/34 | NR/A-/A+ | 6,442,302 | |||||||
Arizona Health Facilities Authority | ||||||||||
(Scottsdale Lincoln Hospitals) | ||||||||||
3,000,000 | 5.000%, 12/01/34 | A2/NR/A | 3,298,020 | |||||||
1,500,000 | 5.000%, 12/01/42 | A2/NR/A | 1,631,505 | |||||||
Maricopa Co. Industrial Development | ||||||||||
Authority (Banner Health) | ||||||||||
2,000,000 | 5.000%, 01/01/38 | NR/AA-/AA- | 2,228,360 | |||||||
Scottsdale Industrial Development | ||||||||||
Authority (Scottsdale Healthcare | ||||||||||
System) | ||||||||||
1,300,000 | 5.000%, 09/01/35 AGMC Insured | A2/AA/A | 1,361,334 | |||||||
Yavapai Co. Industrial Development | ||||||||||
Authority (Northern Arizona | ||||||||||
Healthcare System) | ||||||||||
500,000 | 5.250%, 10/01/25 | NR/AA/NR | 540,070 | |||||||
500,000 | 5.250%, 10/01/26 | NR/AA/NR | 539,320 | |||||||
Yavapai Co. Industrial Development | ||||||||||
Authority (Yavapai Regional | ||||||||||
Medical Center) | ||||||||||
1,000,000 | 5.250%, 08/01/33 | A3/NR/A | 1,088,230 | |||||||
675,000 | 5.000%, 08/01/34 | A3/NR/A | 740,401 |
9 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Hospital (continued) | ||||||||||
Yuma Industrial Development | ||||||||||
Authority (Yuma Regional Medical | ||||||||||
Center) | ||||||||||
$ | 1,635,000 | 5.000%, 08/01/23 | NR/A-/NR | $ | 1,808,081 | |||||
200,000 | 5.000%, 08/01/32 | NR/A-/NR | 221,920 | |||||||
Total Hospital | 27,800,719 | |||||||||
Lease (4.1%) | ||||||||||
Arizona Board of Regents (Northern | ||||||||||
Arizona University) COP | ||||||||||
600,000 | 5.000%, 09/01/27 | A2/A/NR | 650,220 | |||||||
500,000 | 5.000%, 09/01/28 | A2/A/NR | 541,850 | |||||||
1,000,000 | 5.000%, 09/01/29 | A2/A/NR | 1,082,150 | |||||||
Arizona State Lottery Bonds | ||||||||||
3,000,000 | 5.000%, 07/01/28 AGMC Insured | A1/AA+/NR | 3,103,440 | |||||||
Cave Creek COP | ||||||||||
85,000 | 5.750%, 07/01/19 | NR/AA/NR | 85,825 | |||||||
Pinal Co. Correctional Facilities | ||||||||||
1,470,000 | 5.250%, 10/01/21 ACA Insured | NR/BBB/NR | 1,471,235 | |||||||
Prescott Municipal Property Corp. | ||||||||||
500,000 | 5.000%, 07/01/34 | Aa3/AA/NR | 557,155 | |||||||
State of Arizona COP Department | ||||||||||
Administration | ||||||||||
1,500,000 | 5.250%, 10/01/26 AGMC Insured | Aa3/AA/NR | 1,545,030 | |||||||
670,000 | 5.250%, 10/01/28 AGMC Insured | Aa3/AA/NR | 690,113 | |||||||
State of Arizona COP | ||||||||||
500,000 | 5.000%, 09/01/27 | Aa3/AA-/NR | 571,400 | |||||||
Total Lease | 10,298,418 | |||||||||
Mortgage (4.9%) | ||||||||||
Eastmark Community Facilities | ||||||||||
District No. 1 | ||||||||||
345,000 | 4.000%, 07/15/33 AGMC Insured | NR/AA/NR | 357,938 | |||||||
360,000 | 4.000%, 07/15/34 AGMC Insured | NR/AA/NR | 372,121 |
10 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Mortgage (continued) | ||||||||||
Estrella Mountain Ranch Community | ||||||||||
Facilities District | ||||||||||
$ | 1,000,000 | 5.000%, 07/15/32 AGMC Insured | NR/AA/NR | $ | 1,106,190 | |||||
Festival Ranch Community Facilities | ||||||||||
District | ||||||||||
1,000,000 | 4.000%, 07/15/36 BAMAC Insured | NR/AA/NR | 1,025,540 | |||||||
950,000 | 5.000%, 07/15/37 BAMAC Insured | NR/AA/NR | 1,043,366 | |||||||
750,000 | 5.000%, 07/15/38 BAMAC Insured | NR/AA/NR | 834,420 | |||||||
Goodyear Community Facilities | ||||||||||
Utilities District No. 1 | ||||||||||
500,000 | 4.000%, 07/15/28 | A1/A-/NR | 524,730 | |||||||
500,000 | 4.000%, 07/15/32 | A1/A-/NR | 521,045 | |||||||
Maricopa Co. Industrial Development | ||||||||||
Authority (Christian Care | ||||||||||
Retirement Apartments) | ||||||||||
1,000,000 | 5.000%, 01/01/30 | NR/A/NR | 1,111,520 | |||||||
Marley Park Community Facilities | ||||||||||
District | ||||||||||
535,000 | 4.000%, 07/15/34 BAMAC Insured | NR/AA/NR | 551,965 | |||||||
Merrill Ranch Community Facilities | ||||||||||
District #2 | ||||||||||
680,000 | 6.750%, 07/15/38 | NR/BBB/NR | 780,443 | |||||||
Pima Co. Industrial Development | ||||||||||
Authority (Christian Care Senior | ||||||||||
Living Facility) | ||||||||||
1,000,000 | 5.000%, 12/15/32 | NR/A-/NR | 1,100,930 | |||||||
Scottsdale Waterfront Community | ||||||||||
Facilities District | ||||||||||
530,000 | 6.000%, 07/15/27 144A | NR/NR/NR* | 529,989 | |||||||
930,000 | 6.050%, 07/15/32 144A | NR/NR/NR* | 929,926 | |||||||
Sundance Community Facilities | ||||||||||
District | ||||||||||
655,000 | 5.125%, 07/15/30 | A3/BBB/NR | 655,164 | |||||||
Verrado Community Facilities Utilities | ||||||||||
District No. 1 | ||||||||||
500,000 | 6.000%, 07/15/33 144A | NR/NR/NR* | 526,655 | |||||||
Vistancia Community Facilities District | ||||||||||
540,000 | 5.000%, 07/15/26 | A1/NR/A+ | 563,803 | |||||||
Total Mortgage | 12,535,745 |
11 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Pollution Control (2.7%) | ||||||||||
Apache Co. Industrial Development | ||||||||||
Authority, Pollution Control, Tucson | ||||||||||
Electric Power Co. | ||||||||||
$ | 2,955,000 | 4.500%, 03/01/30 | A3/A-/NR | $ | 3,125,326 | |||||
Coconino Co. Pollution Control, | ||||||||||
Tucson Electric Power Co. | ||||||||||
2,000,000 | 5.125%, 10/01/32 | A3/A-/NR | 2,056,780 | |||||||
Maricopa Co. Pollution Control | ||||||||||
(Southern California Edison Co.) | ||||||||||
1,500,000 | 5.000%, 06/01/35 | A1/A/NR | 1,561,440 | |||||||
Total Pollution Control | 6,743,546 | |||||||||
Resource Recovery (2.4%) | ||||||||||
Chandler Industrial Development | ||||||||||
Authority (Intel Corporation Project) | ||||||||||
3,000,000 | 2.700%, 12/01/37 AMT (Mandatory | |||||||||
Put Date 8/14/23) | A1/A+/NR | 2,986,380 | ||||||||
Maracopa Co. Industrial Development | ||||||||||
Authority, (Waste Management Inc. | ||||||||||
Project) | ||||||||||
1,500,000 | 3.375%, 12/01/31 AMT (Mandatory | |||||||||
Put Date 6/03/24) | NR/A-/NR | 1,510,815 | ||||||||
Yavapai Co. Industrial Development | ||||||||||
Authority, (Waste Management Inc. | ||||||||||
Project) | ||||||||||
1,500,000 | 2.800%, 06/01/27 AMT (Mandatory | |||||||||
Put Date 06/01/21) | NR/A-/NR | 1,506,495 | ||||||||
Total Resource Recovery | 6,003,690 | |||||||||
Transportation (2.2%) | ||||||||||
Arizona Transportation Board Revenue | ||||||||||
1,545,000 | 5.000%, 07/01/27 | Aa2/AA+/NR | 1,692,733 | |||||||
2,900,000 | 5.000%, 07/01/33 | Aa1/AAA/NR | 3,257,686 | |||||||
Pima Co. Regional Transportation | ||||||||||
Authority Excise Tax | ||||||||||
500,000 | 5.000%, 06/01/26 | NR/AA+/AA | 556,790 | |||||||
Total Transportation | 5,507,209 |
12 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Utility (11.2%) | ||||||||||
Central Arizona Water Conservation | ||||||||||
District Water Delivery (Central | ||||||||||
Arizona Project) | ||||||||||
$ | 750,000 | 5.000%, 01/01/33 | Aa2/AA+/AA | $ | 850,673 | |||||
750,000 | 5.000%, 01/01/34 | Aa2/AA+/AA | 848,063 | |||||||
Greater Arizona Development | ||||||||||
Authority Revenue | ||||||||||
1,200,000 | 5.000%, 08/01/29 | A1/A/NR | 1,226,964 | |||||||
500,000 | 5.000%, 08/01/28 AGMC Insured | A1/AA/NR | 553,840 | |||||||
Mesa Utility System | ||||||||||
1,500,000 | 4.000%, 07/01/32 | Aa2/AA-/NR | 1,583,820 | |||||||
2,100,000 | 5.000%, 07/01/35 | Aa2/AA-/NR | 2,261,091 | |||||||
Pinal Co. Electrical District No. 3, | ||||||||||
Electrical System Revenue | ||||||||||
305,000 | 4.750%, 07/01/31 | NR/A/NR | 321,272 | |||||||
Salt River Project Agricultural | ||||||||||
Improvement and Power Revenue | ||||||||||
4,280,000 | 5.000%, 12/01/28 | Aa1/AA/NR | 4,637,380 | |||||||
3,250,000 | 5.000%, 12/01/30 | Aa1/AA/NR | 3,539,803 | |||||||
5,210,000 | 5.000%, 12/01/31 | Aa1/AA/NR | 5,665,041 | |||||||
500,000 | 5.000%, 12/01/32 | Aa1/AA/NR | 567,405 | |||||||
1,000,000 | 5.000%, 01/01/33 | Aa1/AA/NR | 1,153,010 | |||||||
1,105,000 | 5.000%, 12/01/36 | Aa1/AA/NR | 1,239,666 | |||||||
Salt Verde Finance Corp. Gas Revenue | ||||||||||
3,000,000 | 5.250%, 12/01/28 | Baa1/BBB+/NR | 3,493,080 | |||||||
Surprise Utility System Senior Lien | ||||||||||
Obligations | ||||||||||
470,000 | 5.000%, 07/01/33 | NR/AA+/NR | 550,215 | |||||||
Total Utility | 28,491,323 | |||||||||
Water/Sewer (6.9%) | ||||||||||
Gilbert Water Resource Municipal | ||||||||||
Property Corp. | ||||||||||
1,190,000 | 4.000%, 07/01/34 | NR/AAA/AAA | 1,248,143 | |||||||
820,000 | 4.000%, 07/01/35 | NR/AAA/AAA | 857,212 |
13 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Water/Sewer (continued) | ||||||||||
Glendale Water & Sewer Revenue | ||||||||||
$ | 2,000,000 | 5.000%, 07/01/28 | A1/AA/NR | $ | 2,263,480 | |||||
500,000 | 5.000%, 07/01/28 | A1/AA/NR | 545,555 | |||||||
Goodyear Water and Sewer Revenue | ||||||||||
1,750,000 | 5.375%, 07/01/30 | Aa3/A+/NR | 1,843,730 | |||||||
635,000 | 5.250%, 07/01/31 AGMC Insured | Aa3/AA/NR | 684,219 | |||||||
Lake Havasu City Wastewater System | ||||||||||
Revenue | ||||||||||
1,000,000 | 5.000%, 07/01/43 AGMC Insured | A2/AA/NR | 1,095,690 | |||||||
Phoenix Civic Improvement Corp. | ||||||||||
Wastewater Revenue | ||||||||||
500,000 | 5.000%, 07/01/35 | Aa2/AA+/NR | 569,390 | |||||||
1,500,000 | 5.500%, 07/01/24 NPFG/FGIC Insured | Aa2/AAA/NR | 1,756,980 | |||||||
Phoenix Civic Improvement Corp. | ||||||||||
Water System Revenue | ||||||||||
1,100,000 | 5.000%, 07/01/38 | Aa2/AAA/NR | 1,241,295 | |||||||
Pima Co. Sewer Revenue System | ||||||||||
1,335,000 | 5.000%, 07/01/26 | NR/AA/AA- | 1,460,143 | |||||||
865,000 | 5.000%, 07/01/27 | NR/AA/AA- | 946,085 | |||||||
Tucson Water Revenue System | ||||||||||
1,000,000 | 5.000%, 07/01/32 | Aa2/AA/AA | 1,136,340 | |||||||
Yuma Municipal Property Corp. Utility | ||||||||||
System | ||||||||||
1,700,000 | 5.000%, 07/01/28 | A1/A+/AA- | 1,926,185 | |||||||
Total Water/Sewer | 17,574,447 | |||||||||
Total Revenue Bonds | 184,223,308 | |||||||||
Pre-Refunded Bonds (7.3%)†† | ||||||||||
Pre-Refunded General Obligation | ||||||||||
Bonds (2.4%) | ||||||||||
County (0.8%) | ||||||||||
Maricopa Co. Community College | ||||||||||
District | ||||||||||
2,000,000 | 4.000%, 07/01/21 | Aaa/AAA/AAA | 2,031,420 |
14 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||
Principal | Moody's, S&P | |||||||||
Amount | Pre-Refunded Bonds (continued) | and Fitch | Value | |||||||
Pre-Refunded General Obligation | ||||||||||
Bonds (continued) | ||||||||||
School District (1.6%) | ||||||||||
Coconino & Yavapai Counties Joint | ||||||||||
Unified School District No. 9 Sedona | ||||||||||
$ | 1,000,000 | 5.375%, 07/01/28 | Aa2/A+/NR | $ | 1,025,480 | |||||
Maricopa Co. Elementary School | ||||||||||
District No. 28 (Kyrene Elementary) | ||||||||||
250,000 | 5.500%, 07/01/30 | Aa1/AA/NR | 287,108 | |||||||
Maricopa Co. Unified School District | ||||||||||
No. 48 (Scottsdale) | ||||||||||
1,500,000 | 4.750%, 07/01/30 | Aa1/AA/NR | 1,609,275 | |||||||
Pima Co. Unified School District No. 8 | ||||||||||
(Flowing Wells) | ||||||||||
1,000,000 | 5.375%, 07/01/29 | NR/A+/NR | 1,057,280 | |||||||
Total School District | 3,979,143 | |||||||||
Total Pre-Refunded | ||||||||||
General Obligation Bonds | 6,010,563 | |||||||||
Pre-Refunded Revenue Bonds (4.9%) | ||||||||||
Excise Tax (1.4%) | ||||||||||
Casa Grande Excise Tax | ||||||||||
1,435,000 | 5.000%, 04/01/28 | NR/AA/AA | 1,456,984 | |||||||
Gilbert Public Facilities Municipal | ||||||||||
Property Corp. | ||||||||||
850,000 | 5.000%, 07/01/23 | Aa1/AA+/NR | 869,627 | |||||||
1,250,000 | 5.000%, 07/01/24 | Aa1/AA+/NR | 1,278,863 | |||||||
Total Excise Tax | 3,605,474 | |||||||||
Hospital (2.6%) | ||||||||||
Arizona Health Facilities Authority | ||||||||||
(Yavapai Regional Medical Center) | ||||||||||
1,500,000 | 5.375%, 12/01/30 AGMC Insured | A2/NR/NR | 1,556,850 | |||||||
Maricopa Co. Hospital Revenue (Sun | ||||||||||
Health) | ||||||||||
1,500,000 | 5.000%, 04/01/25 | NR/NR/NR* | 1,630,920 | |||||||
2,125,000 | 5.000%, 04/01/35 | NR/NR/NR* | 2,412,640 | |||||||
University Medical Center | ||||||||||
Hospital Revenue | ||||||||||
910,000 | 6.500%, 07/01/39 | NR/NR/NR* | 940,394 | |||||||
Total Hospital | 6,540,804 |
15 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Ratings | ||||||||||||
Principal | Pre-Refunded Revenue Bonds | Moody's, S&P | ||||||||||
Amount | (continued) | and Fitch | Value | |||||||||
Utility (0.1%) | ||||||||||||
Pinal Co. Electrical District No. 3, | ||||||||||||
Electrical System Revenue | ||||||||||||
Refunding | ||||||||||||
$ | 250,000 | 5.250%, 07/01/36 | NR/A/NR | $ | 271,188 | |||||||
Water/Sewer (0.8%) | ||||||||||||
Pima Co. Sewer Revenue System | ||||||||||||
2,000,000 | 5.000%, 07/01/26 | NR/AA/AA- | 2,156,200 | |||||||||
Total Pre-Refunded Revenue Bonds | 12,573,666 | |||||||||||
Total Pre-Refunded Bonds | 18,584,229 | |||||||||||
Total Municipal Bonds (cost | ||||||||||||
$245,462,630) | 250,579,076 | |||||||||||
Shares | Short-Term Investment (1.0%) | |||||||||||
Dreyfus Treasury & Agency Cash | ||||||||||||
Management - Institutional Shares, | ||||||||||||
2,527,983 | 1.96%** (cost $2,527,983) | Aaa-mf/AAAm/NR | 2,527,983 | |||||||||
Total Investments (cost $247,990,613 | ||||||||||||
note 4) | 99.9% | 253,107,059 | ||||||||||
Other assets less liabilities | 0.1 | 348,098 | ||||||||||
Net Assets | 100.0% | $ | 253,455,157 |
16 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
Percentage of | ||||
Portfolio Distribution By Quality Rating | Investments † | |||
Aaa of Moody's or AAA of S&P or Fitch | 8.4 | % | ||
Pre-refunded bonds†† | 7.4 | |||
Aa of Moody's or AA of S&P or Fitch | 55.3 | |||
A of Moody's or S&P or Fitch | 25.0 | |||
Baa of Moody's or BBB of S&P | 3.0 | |||
Not Rated* | 0.9 | |||
100.0 | % |
PORTFOLIO ABBREVIATIONS | ||
ACA - American Capital Assurance Financial Guaranty Corp. | ||
AGC - Assured Guaranty Corp. | ||
AGMC - Assured Guaranty Municipal Corp. | ||
AMT - Alternative Minimum Tax | ||
BAMAC - Build America Mutual Assurance Co. | ||
BHAC - Berkshire Hathaway Assurance Corp. | ||
COP- Certificates of Participation | ||
FGIC - Financial Guaranty Insurance Co. | ||
MAC - Municipal Assurance Corp. | ||
NPFG - National Public Finance Guarantee | ||
NR - Not Rated |
17 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2018 (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 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 NRSROs. 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. | |
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 Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2018 (unaudited)
ASSET | ||||
Investments at value (cost $247,990,613) | $ | 253,107,059 | ||
Interest recievable | 2,900,973 | |||
Receivable for Fund Shares sold | 553,426 | |||
Other assets | 17,360 | |||
Total assets | 256,578,818 | |||
LIABILITIES | ||||
Payable for Trust shares redeemed | 2,395,113 | |||
Payable for investment securities purchased | 466,916 | |||
Dividends payable | 145,480 | |||
Management fee payable | 84,613 | |||
Distribution and service fees payable | 465 | |||
Accrued expenses | 31,074 | |||
Total liabilities | 3,123,661 | |||
NET ASSETS | $ | 253,455,157 | ||
Net Assets consist of: | ||||
Capital Stock – Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 244,419 | ||
Additional paid-in capital | 247,250,721 | |||
Net unrealized appreciation on investments (note 4) | 5,116,446 | |||
Accumulated net realized gain on investments | 446,567 | |||
Undistributed net investment income | 397,004 | |||
$ | 253,455,157 | |||
CLASS A | ||||
Net Assets | $ | 205,841,386 | ||
Capital shares outstanding | 19,854,820 | |||
Net asset value and redemption price per share | $ | 10.37 | ||
Maximum offering price per share (100/96 of $10.37) | $ | 10.80 | ||
CLASS C | ||||
Net Assets | $ | 10,762,024 | ||
Capital shares outstanding | 1,038,340 | |||
Net asset value and offering price per share | $ | 10.36 | ||
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) | $ | 10.36 | * | |
CLASS Y | ||||
Net Assets | $ | 36,851,747 | ||
Capital shares outstanding | 3,548,724 | |||
Net asset value, offering and redemption price per share | $ | 10.38 |
See accompanying notes to financial statements.
19 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER, 30, 2018 (unaudited)
Investment Income | ||||||||
Interest income | $ | 4,591,587 | ||||||
Expenses | ||||||||
Investment Adviser fee (note 3) | $ | 532,932 | ||||||
Distribution and service fee (note 3) | 220,454 | |||||||
Legal fees | 49,741 | |||||||
Transfer and shareholder servicing agent fees | 47,833 | |||||||
Trustees’ fees and expenses (note 7) | 44,469 | |||||||
Registration fees and dues | 17,113 | |||||||
Shareholders’ reports | 15,377 | |||||||
Auditing and tax fees | 11,494 | |||||||
Insurance | 5,887 | |||||||
Custodian fees | 5,818 | |||||||
Chief compliance officer services (note 3) | 5,572 | |||||||
Miscellaneous | 31,432 | |||||||
Total expenses | 988,122 | |||||||
Net investment income | 3,603,465 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | (86,473 | ) | ||||||
Change in unrealized appreciation on | ||||||||
investments | (2,459,437 | ) | ||||||
Net realized and unrealized gain | ||||||||
on investments | (2,545,910 | ) | ||||||
Net change in net assets resulting from | ||||||||
operations | $ | 1,057,555 |
See accompanying notes to financial statements.
20 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||
September 30, 2018 | Year Ended | |||||||
(unaudited) | March 31, 2018 | |||||||
OPERATIONS | ||||||||
Net investment income | $ | 3,603,465 | $ | 7,878,832 | ||||
Realized gain (loss) from securities transactions | (86,473 | ) | 548,020 | |||||
Change in unrealized appreciation on investments | (2,459,437 | ) | (3,059,562 | ) | ||||
Change in net assets resulting from operations | 1,057,555 | 5,367,290 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 9): | ||||||||
Class A Shares: | ||||||||
Net investment income | (2,892,008 | ) | (6,207,823 | ) | ||||
Net realized gain on investments | — | (488,819 | ) | |||||
Class C Shares: | ||||||||
Net investment income | (118,469 | ) | (311,088 | ) | ||||
Net realized gain on investments | — | (33,758 | ) | |||||
Class Y Shares: | ||||||||
Net investment income | (561,390 | ) | (1,263,636 | ) | ||||
Net realized gain on investments | — | (95,432 | ) | |||||
Change in net assets from distributions | (3,571,867 | ) | (8,400,556 | ) | ||||
CAPITAL SHARE TRANSACTIONS (note 6): | ||||||||
Proceeds from shares sold | 16,965,019 | 35,644,624 | ||||||
Reinvested dividends and distributions | 2,712,864 | 6,952,908 | ||||||
Cost of shares redeemed | (37,041,999 | ) | (53,987,586 | ) | ||||
Change in net assets from capital share | ||||||||
transactions | (17,364,116 | ) | (11,390,054 | ) | ||||
Change in net assets | (19,878,428 | ) | (14,423,320 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 273,333,585 | 287,756,905 | ||||||
End of period* | $ | 253,455,157 | $ | 273,333,585 | ||||
*Includes undistributed net investment of: | $ | 397,004 | $ | 365,406 |
See accompanying notes to financial statements.
21 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2018 (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. As of the date of this report, there were no Class F Shares or Class T 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 ask 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. |
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. |
22 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018: |
Valuation Inputs* | Investments in Securities | |||
Level 1 – Quoted Prices — Short-Term Investment | $ | 2,527,983 | ||
Level 2 – Other Significant Observable | 250,579,076 | |||
Inputs — Municipal Bonds* | ||||
Level 3 – Significant Unobservable Inputs | — | |||
Total | $ | 253,107,059 |
* | 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 (2015 –2017) or expected to be taken in the Fund’s 2018 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. |
23 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (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, 2018, the Fund decreased accumulated net realized gain on investments $14,952 and increased undistributed net investment income by $14,952. 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 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.
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, as amended (the “1940 Act).
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 1940 Act. 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, 2018, distribution fees on Class A Shares amounted to $156,416, of which the Distributor retained $16,813.
24 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018, amounted to $48,029. 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, 2018, these payments amounted to $16,009. The total of these payments with respect to Class C Shares amounted to $64,038, of which the Distributor retained $15,899.
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 (“financial intermediaries”), the Fund’s shares are sold primarily through the facilities of these financial intermediaries having offices within Arizona, with the bulk of any sales commissions inuring to such financial intermediaries. For the six months ended September 30, 2018, total commissions on sales of Class A Shares amounted to $30,945, of which the Distributor received $6,778.
c) Transfer and shareholder servicing fees:
The Fund occasionally compensates financial intermediaries in connection with the sub-transfer agency related services provided by such entities in connection with their respective Fund shareholders so long as the fees are deemed by the Board of Trustees to be reasonable in relation to (i) the value of the services and the benefits received by the Fund and certain shareholders; and (ii) the payments that the Fund would make to another entity to perform similar ongoing services to existing shareholders.
4. Purchases and Sales of Securities
During the six months ended September 30, 2018, purchases of securities and proceeds from the sales of securities aggregated $42,191,373 and $56,933,246, respectively.
At September 30, 2018, the aggregate tax cost for all securities was $247,625,091. At September 30, 2018, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $6,987,670 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $1,505,702 for a net unrealized appreciation of $5,481,968.
25 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
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, 2018, the Fund had all of its assets invested in the securities of Arizona issuers.
6. Capital Share Transactions
Transactions in Capital Shares of the Trust were as follows:
Six Months Ended | ||||||||||||||||
September 30, 2018 | Year Ended | |||||||||||||||
(unaudited) | March 31, 2018 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Proceeds from shares sold | 881,683 | $ | 9,200,253 | 1,997,792 | $ | 21,297,733 | ||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 206,947 | 2,159,749 | 522,596 | 5,562,124 | ||||||||||||
Cost of shares redeemed | (2,099,903 | ) | (21,902,379 | ) | (3,244,027 | ) | (34,525,446 | ) | ||||||||
Net change | (1,011,273 | ) | (10,542,377 | ) | (723,639 | ) | (7,665,589 | ) | ||||||||
Class C Shares: | ||||||||||||||||
Proceeds from shares sold | 122,711 | 1,280,845 | 153,696 | 1,638,103 | ||||||||||||
Reinvested dividends and | �� | |||||||||||||||
distributions | 10,019 | 104,513 | 28,709 | 305,576 | ||||||||||||
Cost of shares redeemed | (436,126 | ) | (4,546,678 | ) | (461,728 | ) | (4,913,281 | ) | ||||||||
Net change | (303,396 | ) | (3,161,320 | ) | (279,323 | ) | (2,969,602 | ) | ||||||||
Class Y Shares: | ||||||||||||||||
Proceeds from shares sold | 620,466 | 6,483,921 | 1,191,712 | 12,708,788 | ||||||||||||
Reinvested dividends and | ||||||||||||||||
distributions | 42,922 | 448,602 | 101,862 | 1,085,208 | ||||||||||||
Cost of shares redeemed | (1,012,100 | ) | (10,592,942 | ) | (1,367,022 | ) | (14,548,859 | ) | ||||||||
Net change | (348,712 | ) | (3,660,419 | ) | (73,448 | ) | (754,863 | ) | ||||||||
Total transactions in Trust | ||||||||||||||||
shares | (1,663,381 | ) | $ | (17,364,116 | ) | (1,076,410 | ) | $ | (11,390,054 | ) |
26 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
7. Trustees’ Fees and Expenses
At September 30, 2018, there were 8 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, 2018 was $38,155. 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, 2018, such meeting-related expenses amounted to $6,314.
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 or in cash, 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.
The tax character of distributions was as follows:
Year Ended | Year Ended | |||||||
March 31, 2018 | March 31, 2017 | |||||||
Net tax-exempt income | $ | 7,663,672 | $ | 8,712,215 | ||||
Ordinary Income | 118,875 | 12,032 | ||||||
Long-term capital gains | 618,009 | 414,172 | ||||||
$ | 8,400,556 | $ | 9,138,419 |
27 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2018 (unaudited)
As of March 31, 2018, the components of distributable earnings on a tax basis were:
Undistributed tax-exempt income | $ | 432,085 | ||
Undistributed net realized gain on investments | 602,393 | |||
Unrealized appreciation | 7,636,449 | |||
Post October losses | (69,352 | ) | ||
Other temporary differences | (127,246 | ) | ||
$ | 8,474,329 |
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, the tax treatment of market discount amortization, and the deduction of distributions payable.
10. Credit Facility
The Bank of New York Mellon and the Aquila Group of Funds have been parties to a $40 million credit agreement, which currently terminates on August 28, 2019 (per the August 29, 2018 amendment). In accordance with the Aquila Group of Funds Guidelines for Allocation of Committed Line of Credit (the Aquila Group of Funds is comprised of nine funds), each fund is responsible for payment of its proportionate share of
a) | a 0.17% per annum commitment fee; and, |
b) | interest on amounts borrowed for temporary or emergency purposes by the Fund (at the applicable rate selected by the Aquila Group of Funds at the time of the borrowing of either (i) the one-month Eurodollar Rate or (ii) a rate equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day, or (c) the Overnight Eurodollar Rate in effect on such day). |
There were no borrowings under the credit agreement for the six months ended September 30, 2018.
28 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.47 | $ | 10.58 | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.14 | 0.30 | 0.32 | 0.37 | 0.38 | 0.38 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.10 | ) | (0.10 | ) | (0.36 | ) | (0.03 | ) | 0.35 | (0.34 | ) | |||||||||||||
Total from investment operations | 0.04 | 0.20 | (0.04 | ) | 0.34 | 0.73 | 0.04 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.29 | ) | (0.32 | ) | (0.35 | ) | (0.38 | ) | (0.37 | ) | ||||||||||||
Distributions from capital gains | — | (0.02 | ) | (0.01 | ) | (0.02 | ) | — | (0.01 | ) | ||||||||||||||
Total distributions | (0.14 | ) | (0.31 | ) | (0.33 | ) | (0.37 | ) | (0.38 | ) | (0.38 | ) | ||||||||||||
Net asset value, end of period | $ | 10.37 | $ | 10.47 | $ | 10.58 | $ | 10.95 | $ | 10.98 | $ | 10.63 | ||||||||||||
Total return (not reflecting sales charge) | 0.39 | %(3) | 1.93 | % | (0.42 | )% | 3.20 | % | 6.92 | % | 0.49 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 206 | $ | 218 | $ | 229 | $ | 242 | $ | 234 | $ | 229 | ||||||||||||
Ratio of expenses to average net assets | 0.72 | %(4) | 0.69 | % | 0.70 | % | 0.71 | % | 0.73 | % | 0.78 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.72 | %(4) | 2.77 | % | 2.96 | % | 3.36 | % | 3.49 | % | 0.59 | %(2) | ||||||||||||
Portfolio turnover rate | 16 | %(3) | 16 | % | 19 | % | 10 | % | 14 | % | 10 | % |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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 3.64%, respectively, for the year ended March 31, 2014. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
29 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.47 | $ | 10.58 | $ | 10.95 | $ | 10.98 | $ | 10.63 | $ | 10.97 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.10 | 0.20 | 0.23 | 0.28 | 0.29 | 0.29 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.11 | ) | (0.09 | ) | (0.37 | ) | (0.03 | ) | 0.34 | (0.34 | ) | |||||||||||||
Total from investment operations | (0.01 | ) | 0.11 | (0.14 | ) | 0.25 | 0.63 | (0.05 | ) | |||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.20 | ) | (0.22 | ) | (0.26 | ) | (0.28 | ) | (0.28 | ) | ||||||||||||
Distributions from capital gains | — | (0.02 | ) | (0.01 | ) | (0.02 | ) | — | (0.01 | ) | ||||||||||||||
Total distributions | (0.10 | ) | (0.22 | ) | (0.23 | ) | (0.28 | ) | (0.28 | ) | (0.29 | ) | ||||||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.47 | $ | 10.58 | $ | 10.95 | $ | 10.98 | $ | 10.63 | ||||||||||||
Total return (not reflecting sales charge) | (0.13 | )%(3) | 1.06 | % | (1.26 | )% | 2.34 | % | 6.02 | % | (0.36 | )% | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 11 | $ | 14 | $ | 17 | $ | 18 | $ | 18 | $ | 16 | ||||||||||||
Ratio of expenses to average net assets | 1.57 | %(4) | 1.54 | % | 1.55 | % | 1.56 | % | 1.58 | % | 1.63 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 1.87 | %(4) | 1.92 | % | 2.11 | % | 2.51 | % | 2.63 | % | 2.74 | %(2) | ||||||||||||
Portfolio turnover rate | 16 | %(3) | 16 | % | 19 | % | 10 | % | 14 | % | 10 | % |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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 1.58% and 2.79%, respectively, for the year ended March 31, 2014. |
(3) | Not annualized. |
(4) | Annualized. |
See accompanying notes to financial statements.
30 | Aquila Tax-Free Fund of Arizona
AQUILA TAX-FREE TRUST OF ARIZONA
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||
Six Months | Year Ended March 31, | |||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
9/30/18 | ||||||||||||||||||||||||
(unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net asset value, beginning of period | $ | 10.49 | $ | 10.60 | $ | 10.97 | $ | 11.00 | $ | 10.65 | $ | 10.99 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.15 | 0.31 | 0.34 | 0.38 | 0.40 | 0.40 | ||||||||||||||||||
Net gain (loss) on securities | ||||||||||||||||||||||||
(both realized and unrealized) | (0.11 | ) | �� | (0.09 | ) | (0.37 | ) | (0.02 | ) | 0.34 | (0.34 | ) | ||||||||||||
Total from investment operations | 0.04 | 0.22 | (0.03 | ) | 0.36 | 0.74 | 0.06 | |||||||||||||||||
Less distributions (note 9): | ||||||||||||||||||||||||
Dividends from net investment income | (0.15 | ) | (0.31 | ) | (0.33 | ) | (0.37 | ) | (0.39 | ) | (0.39 | ) | ||||||||||||
Distributions from capital gains | — | (0.02 | ) | (0.01 | ) | (0.02 | ) | — | (0.01 | ) | ||||||||||||||
Total distributions | (0.15 | ) | (0.33 | ) | (0.34 | ) | (0.39 | ) | (0.39 | ) | (0.40 | ) | ||||||||||||
Net asset value, end of period | $ | 10.38 | $ | 10.49 | $ | 10.60 | $ | 10.97 | $ | 11.00 | $ | 10.65 | ||||||||||||
Total return (not reflecting sales charge) | 0.37 | %(3) | 2.08 | % | (0.26 | )% | 3.38 | % | 7.07 | % | 0.64 | % | ||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 37 | $ | 41 | $ | 42 | $ | 41 | $ | 27 | $ | 20 | ||||||||||||
Ratio of expenses to average net assets | 0.58 | %(4) | 0.55 | % | 0.55 | % | 0.56 | % | 0.58 | % | 0.63 | %(2) | ||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||
average net assets | 2.87 | %(4) | 2.92 | % | 3.11 | % | 3.49 | % | 3.63 | % | 3.74 | %(2) | ||||||||||||
Portfolio turnover rate | 16 | %(3) | 16 | % | 19 | % | 10 | % | 14 | % | 10 | % |
_____________________
(1) | Per share amounts have been calculated using the daily average shares method. |
(2) | 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 0.58% and 3.79%, respectively, for the year ended March 31, 2014. |
(2) | Not annualized. |
(3) | Annualized. |
See accompanying notes to financial statements.
31 | Aquila Tax-Free Fund 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, 2018. The independent Trustees met telephonically on August 13, 2018 and in person on September 15, 2018 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. The Trustees also discussed the memorandum provided by Trust counsel that summarized the legal standards and other considerations that are relevant to the Trustees in their deliberations regarding the renewal of the Advisory Agreement.
At the meeting held on September 15, 2018, based on their evaluation of the information provided by the Manager and the independent consultant, the Trustees of the Trust present at the meeting, including the independent Trustees voting separately, unanimously approved the renewal of the Advisory Agreement until September 30, 2019. 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 Messrs. Tony Tanner, James Thompson and Royden Durham as portfolio managers for the Trust and has established facilities and capabilities for credit analysis of the Trust’s portfolio securities. The Trustees noted that Mr. Tanner replaced Mr. Todd Curtis, as the Trust’s lead portfolio manager, upon Mr. Curtis’ retirement, effective April 30, 2018, and further noted that Mr. Tanner, a 30-year veteran in the financial services industry, has worked in the Arizona wealth community for the past 15 years. They considered that Mr. Tanner, the Trust’s lead portfolio manager, 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.
32 | Aquila Tax-Free Fund 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 (five 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 (and all classes) included in the Morningstar Single-State Intermediate Municipal Bond Funds category); and |
• | the Trust’s benchmark index, the Bloomberg Barclays 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, three, five and ten-year periods ended June 30, 2018. 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, 2018, as well as the benchmark index for each of the one, three, five and ten-year periods ended June 30, 2018. The Trustees noted that the Trust invests primarily in municipal obligations issued by the State of Arizona, its counties and various other local authorities, while the funds in the Product Category for Performance invest in, and the Trust’s benchmark index includes, municipal bonds of issuers throughout the United States. The Trustees also noted that, unlike the Trust’s returns, the performance of the benchmark index did not reflect any fees or expenses.
In addition, the Trustees considered that, as reflected in the Consultant’s Report, the Trust’s standard deviation, a measure of volatility, was in the third quintile relative to the funds in the Product Category for Performance for the three and five-year periods ended June 30, 2018. The Trustees further noted that the Trust’s Sharpe ratio was in the second quintile for the three-year period and the first quintile for the five-year period, both ended June 30, 2018, when compared to the funds in the Product Category for Performance. A Sharpe ratio is a measure for calculating risk-adjusted return. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance.
33 | Aquila Tax-Free Fund of Arizona
The Trustees considered the Trust’s investment performance to be consistent with the investment objectives of the Trust. 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 4-7 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 up to $5 billion).
The Trustees noted that the Trust’s actual management fee was only 0.01% 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.
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.
34 | Aquila Tax-Free Fund of Arizona
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. TheTrustees 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 theTrust. TheTrustees 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.
35 | Aquila Tax-Free Fund of Arizona
Your Fund’s Expenses (unaudited)
As a Fund shareholder, 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 assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The 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 that 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”.
Hypothetical Example for Comparison with Other Funds
Under the heading, “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||
(actual return after expenses) | (5% annual return before expenses) | |||||
Expenses(2) | Expenses(2) | |||||
Beginning | Ending(1) | Paid During | Ending | Paid During | Net | |
Account | Account | Period | Account | Period | Annualized | |
Share | Value | Value | 4/1/18 – | Value | 4/1/18 – | Expense |
Class | 4/1/18 | 9/30/18 | 9/30/18 | 9/30/18 | 9/30/18 | Ratio |
A | $1,000 | $1,003.90 | $3.62 | $1,021.46 | $3.65 | 0.72% |
C | $1,000 | $ 998.70 | $7.87 | $1,017.20 | $7.94 | 1.57% |
Y | $1,000 | $1,003.70 | $2.91 | $1,022.16 | $2.94 | 0.58% |
(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 or the applicable CDSC with respect to Class C shares. Total return is not annualized and as such, it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio for the six-month period as indicated above - in the far right column - multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. |
36 | Aquila Tax-Free Fund 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 1-800-437-1000.
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, 2018, there were no proxies related to any portfolio instruments held by the Fund. As such, 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, 2018, $7,663,672 of dividends paid by Aquila Tax-Free Trust of Arizona, constituting 91.2% of total dividends paid, were exempt-interest dividends, and $618,009 of dividends paid by the Fund constituting 7.4% of total dividends paid were capital gains; and the balance was ordinary income.
Prior to February 15, 2019, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2018 calendar year.
37 | Aquila Tax-Free Fund 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
Thomas A. Christopher, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
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
Anthony A. Tanner, Vice President and
Lead Portfolio Manager
Royden P. Durham, Vice President and
Portfolio Manager
James T. Thompson, Vice President and
Portfolio Manager
Marie E. Aro, 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.
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 | ||
December 10, 2018 | ||
By: | /s/ Joseph P. DiMaggio | |
December 10, 2018 |
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 | ||
December 10, 2018 | ||
By: | /s/ Joseph P. DiMaggio | |
Joseph P. DiMaggio | ||
Chief Financial Officer and Treasurer | ||
December 10, 2018 |
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.