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 811-5047
Aquila Tax-Free Fund of Colorado
(formerly, Tax-Free Fund of Colorado)
(Exact name of Registrant as specified in charter)
380 Madison Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Joseph P. DiMaggio
380 Madison Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 697-6666
Date of fiscal year end: 3/31/13
Date of reporting period: 9/30/13
FORM N-CSRS
ITEM1. | REPORTS TO STOCKHOLDERS. |
Semi-Annual Report September 30, 2013 | ||||||||||||||||||||||||||
Aquila Tax-Free Fund of Colorado “Asset Allocation - A Strategy For All Seasons” Serving Colorado investors for over 25 years |
November, 2013
Dear Fellow Shareholder:
As many of our shareholders are aware, interest rates and the price of bonds (and, in turn, the share price of bond funds) are inversely related. Hence, as interest rates decline, the share price of the bond funds in the Aquila Group generally increases. And, as interest rates increase, the funds’ share price declines. This is an almost inevitable dynamic of the economic cycle. And, since your investment in one of the Aquila bond funds should be viewed as long-term in nature, you are likely to experience both the ups and downs of investing.
While we cannot control the direction in which interest rates will move, or the resulting effect such changes will have on your Fund’s share price, we do take steps that attempt to minimize the volatility of such movement. We believe that having your Fund’s portfolio constructed of high-quality securities, together with both short and long-term maturities (to gain stability from the shorter-term maturities and higher yields from the longer-term maturities), will hopefully help to lessen the fluctuations in the overall performance of your investment in the Fund. Thus, we seek to minimize the volatility of share price movements over the life of your investment – making the ups and downs less dramatic than with other types of investments.
While fluctuation in share price over the life of your investment is inevitable, we believe you will be in a better overall position to weather any particular economic situation if your portfolio is built with a strong foundation. In short, is your portfolio properly allocated based on your specific needs?
As you may know, asset allocation is an investment strategy that strives to balance risk and reward by diversifying assets according to your specific desires. These include:
• | investment time horizon (specifically your age and retirement objectives); |
• | risk threshold (how much of your investment capital you are willing to potentially 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 want 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.
NOT A PART OF THE SEMI-ANNUAL REPORT
Although there is no simple formula that can identify 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 across exposure to stocks, fixed-income, 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 need, not on headlines.
A properly constructed portfolio with sound asset allocation should be in a good position to weather all seasons.
Sincerely, Diana P. Herrmann, President |
Consideration should be given to the risks of investing, including potential loss of value, market risk, interest rate risk, credit risk, and geographic concentration. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. For certain investors, some dividends may be subject to Federal and state taxes.
NOT A PART OF THE SEMI-ANNUAL REPORT
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (25.3%) | and Fitch | Value | ||||||
Hospital (0.7%) | |||||||||
Rangely, Colorado Hospital District | |||||||||
Refunding | |||||||||
$ | 2,000,000 | 5.500%, 11/01/22 | Baa1/NR/NR | $ | 2,238,960 | ||||
Metropolitan District (4.0%) | |||||||||
Fraser Valley, Colorado Metropolitan | |||||||||
Recreational District | |||||||||
1,875,000 | 5.000%, 12/01/25 (pre-refunded) | NR/A/NR | 2,170,762 | ||||||
Hyland Hills Metro Park & Recreation | |||||||||
District, Colorado | |||||||||
875,000 | 4.375%, 12/15/26 ACA Insured | NR/NR/NR* | 818,536 | ||||||
Meridian Metropolitan District, | |||||||||
Colorado Refunding | |||||||||
1,645,000 | 4.500%, 12/01/23 Series A | NR/A-/A | 1,756,021 | ||||||
North Metro Fire Rescue District, | |||||||||
Colorado | |||||||||
1,200,000 | 4.625%, 12/01/20 AMBAC Insured | NR/AA/NR | 1,288,740 | ||||||
Park Creek Metropolitan District, | |||||||||
Colorado Revenue Refunding & | |||||||||
Improvement - Senior Property Tax | |||||||||
Support | |||||||||
2,000,000 | 5.500%, 12/01/21 AGC Insured | NR/AA-/BBB | 2,200,080 | ||||||
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 | 1,969,025 | ||||||
Stonegate Village Metropolitan District, | |||||||||
Colorado Refunding & Improvement | |||||||||
500,000 | 5.000%, 12/01/23 NPFG Insured | Baa1/A/NR | 531,635 | ||||||
900,000 | 5.000%, 12/01/24 NPFG Insured | Baa1/A/NR | 955,260 | ||||||
Total Metropolitan District | 11,690,059 | ||||||||
School Districts (19.6%) | |||||||||
Adams County, Colorado School | |||||||||
District #50 | |||||||||
1,000,000 | 4.000%, 12/01/23 | Aa2/AA-/NR | 1,076,230 | ||||||
3,000,000 | 4.000%, 12/01/24 | Aa2/AA-/NR | 3,189,180 |
1 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | ||||||
School Districts (continued) | |||||||||
Adams & Arapahoe Counties, | |||||||||
Colorado Joint School District #28J | |||||||||
$ | 2,500,000 | 5.500%, 12/01/23 (pre-refunded) | Aa2/AA-/NR | $ | 3,001,675 | ||||
1,000,000 | 5.000%, 12/01/24 | Aa2/NR/NR | 1,154,790 | ||||||
Adams & Weld Counties, Colorado | |||||||||
School District #27J | |||||||||
1,030,000 | 5.000%, 12/01/22 | Aa2/AA-/NR | 1,205,594 | ||||||
2,000,000 | 5.000%, 12/01/24 | Aa2/AA-/NR | 2,292,360 | ||||||
1,000,000 | 5.375%, 12/01/26 NPFG Insured | Aa2/AA-/NR | 1,082,700 | ||||||
Arapahoe County, Colorado School | �� | ||||||||
District #001 Englewood | |||||||||
3,235,000 | 5.000%, 12/01/27 | Aa2/NR/NR | 3,620,612 | ||||||
Boulder Larimer & Weld Counties, | |||||||||
Colorado | |||||||||
1,260,000 | 5.000%, 12/15/26 AGMC Insured | Aa2/AA-/NR | 1,357,058 | ||||||
1,500,000 | 5.000%, 12/15/28 | Aa2/AA-/NR | 1,662,435 | ||||||
Denver, Colorado City & County | |||||||||
School District No. 1 | |||||||||
3,000,000 | 4.000%, 12/01/26 | Aa2/AA-/AA+ | 3,131,580 | ||||||
3,000,000 | 5.250%, 12/01/27 | Aa2/AA-/AA+ | 3,420,960 | ||||||
Eagle County School District, Colorado, | |||||||||
Eagle, Garfield & Routt School | |||||||||
District #50J | |||||||||
1,170,000 | 5.000%, 12/01/25 | Aa2/AA-/NR | 1,350,309 | ||||||
El Paso County, Colorado School | |||||||||
District #20 | |||||||||
1,085,000 | 5.500%, 12/15/23 NPFG Insured | ||||||||
(pre-refunded) | Aa2/NR/NR | 1,096,512 | |||||||
El Paso County, Colorado School | |||||||||
District #20 | |||||||||
1,500,000 | 4.500%, 12/15/25 AGMC Insured | Aa2/NR/NR | 1,608,945 |
2 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
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 | $ | 2,154,457 | ||||
Gunnison Watershed, Colorado | |||||||||
School District | |||||||||
1,025,000 | 5.250%, 12/01/26 | Aa2/AA-/NR | 1,153,781 | ||||||
Ignacio School District, Colorado | |||||||||
Ignacio School District #11JT | |||||||||
1,780,000 | 4.000%, 12/01/23 | Aa2/AA-/NR | 1,915,956 | ||||||
Jefferson County, Colorado School | |||||||||
District #R-001 | |||||||||
3,000,000 | 5.250%, 12/15/25 AGMC Insured | ||||||||
(pre-refunded) | Aa2/AA-/NR | 3,431,160 | |||||||
La Plata County, Colorado School | |||||||||
District #9-R Durango Refunding | |||||||||
2,470,000 | 5.000%, 11/01/22 | Aa2/NR/NR | 2,866,163 | ||||||
3,000,000 | 4.500%, 11/01/23 | Aa2/NR/NR | 3,345,690 | ||||||
Larimer County, Colorado School | |||||||||
District No. R-1, Poudre Refunding | |||||||||
& Improvement | |||||||||
2,870,000 | 4.000%, 12/15/25 | Aa2/NR/NR | 3,037,522 | ||||||
Larimer, Weld & Boulder Counties, | |||||||||
Colorado School District No. R-2J, | |||||||||
Thompson Refunding | |||||||||
1,500,000 | 4.250%, 12/15/24 | Aa2/NR/NR | 1,643,385 | ||||||
Mesa County, Colorado Valley School | |||||||||
District No. 051, Grand Junction | |||||||||
Refunding | |||||||||
3,170,000 | 5.000%, 12/01/22 | Aa2/NR/NR | 3,738,413 | ||||||
Summit County, Colorado School | |||||||||
District No. RE 1 Refunding | |||||||||
2,000,000 | 4.000%, 12/01/24 | Aa2/NR/NR | 2,136,280 | ||||||
Teller County, Colorado School District | |||||||||
#2 Woodland Park | |||||||||
1,265,000 | 5.000%, 12/01/17 NPFG Insured | ||||||||
(pre-refunded) | Aa2/AA-/NR | 1,334,309 |
3 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | General Obligation Bonds (continued) | and Fitch | Value | ||||||
School Districts (continued) | |||||||||
Weld County, Colorado School | |||||||||
District #2 | |||||||||
$ | 170,000 | 5.000%, 12/01/15 AGMC Insured | Aa2/AA-/NR | $ | 170,585 | ||||
Total School Districts | 57,178,641 | ||||||||
Water & Sewer (1.0%) | |||||||||
Central Colorado Water Conservancy | |||||||||
District, Adams Morgan & Weld | |||||||||
Counties | |||||||||
1,185,000 | 5.000%, 12/01/24 | NR/A/NR | 1,341,254 | ||||||
Parker, Colorado Water & Sanitation | |||||||||
District Refunding, Douglas County, | |||||||||
Series 2012 | |||||||||
1,480,000 | 4.000%, 08/01/24 | NR/AA-/NR | 1,593,990 | ||||||
Total Water & Sewer | 2,935,244 | ||||||||
Total General Obligation Bonds | 74,042,904 | ||||||||
Revenue Bonds (72.3%) | |||||||||
Airport (3.5%) | |||||||||
Denver, Colorado City & County | |||||||||
Airport Revenue System, Series A | |||||||||
1,210,000 | 5.250%, 11/15/28 | A1/A+/A+ | 1,287,912 | ||||||
3,000,000 | 5.250%, 11/15/29 | A1/A+/A+ | 3,168,210 | ||||||
Denver, Colorado City & County | |||||||||
Airport Revenue System, Series A | |||||||||
Refunding | |||||||||
4,340,000 | 5.000%, 11/15/24 | A1/A+/A+ | 4,839,360 | ||||||
Walker Field, Colorado Public Airport | |||||||||
Authority Airport Revenue | |||||||||
1,000,000 | 5.000%, 12/01/22 | Baa2/NR/NR | 1,053,210 | ||||||
Total Airport | 10,348,692 | ||||||||
Electric (2.8%) | |||||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Refunding Series A | |||||||||
2,000,000 | 4.750%, 11/15/27 | Aa2/AA/AA | 2,145,620 |
4 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Electric (continued) | |||||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Refunding Series A-1 | |||||||||
$ | 1,000,000 | 4.000%, 11/15/26 | Aa2/AA/AA | $ | 1,035,690 | ||||
1,000,000 | 4.000%, 11/15/27 | Aa2/AA/AA | 1,020,470 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue Refunding Series B | |||||||||
1,285,000 | 5.250%, 11/15/23 | Aa2/AA/AA | 1,444,494 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue, Series C-2 | |||||||||
1,060,000 | 5.000%, 11/15/23 | Aa2/AA/AA | 1,233,480 | ||||||
Colorado Springs, Colorado Utilities | |||||||||
Revenue Subordinated Lien | |||||||||
Improvement Series B | |||||||||
1,160,000 | 5.000%, 11/15/23 (pre-refunded) | Aa2/AA/AA | 1,221,805 | ||||||
Total Electric | 8,101,559 | ||||||||
Higher Education (16.9%) | |||||||||
Adams State College, Colorado | |||||||||
Auxiliary Facilities Revenue | |||||||||
Improvement Series A | |||||||||
1,000,000 | 5.200%, 05/15/27 | Aa2/AA-/NR | 1,053,620 | ||||||
Adams State College, Colorado | |||||||||
Auxiliary Facilities Revenue | |||||||||
Refunding, Series B | |||||||||
3,000,000 | 4.500%, 05/15/29 | Aa2/AA-/NR | 3,017,610 | ||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, Regis University | |||||||||
Project | |||||||||
1,695,000 | 5.000%, 06/01/24 Radian Insured | ||||||||
(pre-refunded) | NR/NR/NR* | 1,746,189 | |||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, Student Housing - | |||||||||
Campus Village Apartments Refunding | |||||||||
2,935,000 | 5.375%, 06/01/28 | NR/A/NR | 2,995,344 |
5 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, University Corp. | |||||||||
Atmosphere Project, Refunding | |||||||||
$ | 1,700,000 | 5.000%, 09/01/22 | A2/A+/NR | $ | 1,864,033 | ||||
1,635,000 | 5.000%, 09/01/28 | A2/A+/NR | 1,697,784 | ||||||
Colorado Educational & Cultural | |||||||||
Facility Authority Revenue, | |||||||||
University of Denver Project | |||||||||
845,000 | 4.000%, 03/01/24 | A1/NR/NR | 885,518 | ||||||
Colorado Educational & Cultural Facility | |||||||||
Authority Revenue Refunding, | |||||||||
University of Denver Project | |||||||||
1,000,000 | 5.250%, 03/01/26 NPFG Insured | A1/A+/NR | 1,114,050 | ||||||
Colorado Educational & Cultural Facility | |||||||||
Authority Revenue Refunding, | |||||||||
University of Denver Project, Series B | |||||||||
3,085,000 | 5.000%, 03/01/22 NPFG/ FGIC | ||||||||
Insured (pre-refunded) | A1/A+/NR | 3,417,285 | |||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, University of | |||||||||
Denver Project, Series B Refunding | |||||||||
3,620,000 | 5.250%, 03/01/23 NPFG Insured | A1/A+/AA | 3,813,163 | ||||||
Colorado School of Mines Enterprise | |||||||||
Refunding & Improvement | |||||||||
1,455,000 | 5.000%, 12/01/24 | Aa2/AA-/NR | 1,550,099 | ||||||
Colorado State Board of Governors | |||||||||
University Enterprise System, Series A | |||||||||
2,300,000 | 5.000%, 03/01/25 | Aa2/AA-/NR | 2,583,268 | ||||||
930,000 | 5.000%, 03/01/28 AGMC Insured | Aa3/AA-/NR | 974,900 | ||||||
Colorado State COP University of | |||||||||
Colorado at Denver Health Sciences | |||||||||
Center Fitzsimons Academic | |||||||||
Projects Series B | |||||||||
3,135,000 | 5.250%, 11/01/25 NPFG | ||||||||
(pre-refunded) | Baa2/AA-/NR | 3,451,353 | |||||||
Mesa State College, Colorado Auxiliary | |||||||||
Facilities Enterprise | |||||||||
1,000,000 | 5.000%, 05/15/20 Syncora Guarantee, | ||||||||
Inc. Insured (pre-refunded) | A2/NR/NR | 1,076,080 |
6 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Higher Education (continued) | |||||||||
Mesa State College, Colorado Auxiliary | |||||||||
Facilities Enterprise (continued) | |||||||||
$ | 2,000,000 | 5.700%, 05/15/26 (pre-refunded) | NR/AA-/NR | $ | 2,383,520 | ||||
University of Colorado Enterprise System | |||||||||
2,000,000 | 5.000%, 06/01/27 | Aa2/AA-/AA+ | 2,193,660 | ||||||
2,000,000 | 4.750%, 06/01/27 Series A | Aa2/NR/AA+ | 2,143,020 | ||||||
University of Colorado Enterprise | |||||||||
System, Refunding, Series B | |||||||||
1,680,000 | 4.000%, 06/01/23 | Aa2/AA-/AA+ | 1,786,966 | ||||||
University of Colorado Enterprise | |||||||||
System, Refunding & Improvement | |||||||||
50,000 | 5.000%, 06/01/24 NPFG/ FGIC | ||||||||
Insured | Aa2/AA-/NR | 52,606 | |||||||
University of Northern Colorado | |||||||||
Greeley Institutional Enterprise | |||||||||
Refunding, SHEIP, Series A | |||||||||
2,810,000 | 5.000%, 06/01/26 | Aa2/AA-/NR | 3,065,317 | ||||||
2,940,000 | 5.000%, 06/01/28 | Aa2/AA-/NR | 3,162,323 | ||||||
University of Northern Colorado | |||||||||
Refunding | |||||||||
1,000,000 | 5.000%, 06/01/24 AGMC Insured | A1/AA-/NR | 1,049,590 | ||||||
Western State College, Colorado | |||||||||
Institutional Enterprise, SHEIP, | |||||||||
Series A | |||||||||
1,160,000 | 5.000%, 05/15/24 | Aa2/AA-/NR | 1,258,368 | ||||||
Western State College, Colorado, SHEIP | |||||||||
1,020,000 | 5.000%, 05/15/27 | Aa2/AA-/NR | 1,075,009 | ||||||
Total Higher Education | 49,410,675 | ||||||||
Hospital (10.5%) | |||||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Adventist | |||||||||
Health/Sunbelt, Refunding | |||||||||
2,500,000 | 5.125%, 11/15/29 | Aa3/AA-/AA | 2,669,150 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Catholic Health | |||||||||
1,000,000 | 4.750%, 09/01/25 AGMC Insured | Aa3/AA-/AA- | 1,055,890 |
7 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Hospital (continued) | |||||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Evangelical | |||||||||
Lutheran Project Refunding | |||||||||
$ | 1,575,000 | 5.250%, 06/01/19 | A3/A-/NR | $ | 1,668,240 | ||||
1,000,000 | 5.250%, 06/01/21 | A3/A-/NR | 1,039,140 | ||||||
2,000,000 | 5.250%, 06/01/24 | A3/A-/NR | 2,040,120 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, NCMC, Inc. | |||||||||
Project | |||||||||
2,000,000 | 5.250%, 05/15/26 Series A AGMC | ||||||||
Insured | NR/AA-/A+ | 2,086,720 | |||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Poudre Valley | |||||||||
Health Care Series F Refunding | |||||||||
4,760,000 | 5.000%, 03/01/25 | A1/A+/A+ | 4,865,910 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue Refunding, | |||||||||
Catholic Health, Series A | |||||||||
2,000,000 | 5.250%, 07/01/24 | Aa3/AA-/AA- | 2,239,100 | ||||||
Colorado Health Facility Authority | |||||||||
Hospital Revenue, Valley View | |||||||||
Hospital Association, Refunding | |||||||||
1,500,000 | 5.500%, 05/15/28 | NR/BBB+/NR | 1,547,940 | ||||||
Colorado Health Facility Authority, | |||||||||
Catholic Health Initiatives, Series D | |||||||||
2,000,000 | 5.000%, 10/01/16 | Aa3/AA-/AA- | 2,231,020 | ||||||
1,000,000 | 6.000%, 10/01/23 | Aa3/AA-/AA- | 1,144,170 | ||||||
Colorado Health Facility Authority, | |||||||||
Sisters Leavenworth, Refunding | |||||||||
3,000,000 | 5.250%, 01/01/25 | Aa3/AA/AA- | 3,272,700 | ||||||
Denver, Colorado Health & Hospital | |||||||||
Authority Healthcare, Series A | |||||||||
Refunding | |||||||||
2,000,000 | 5.000%, 12/01/18 | NR/BBB/BBB+ | 2,134,020 | ||||||
1,500,000 | 5.000%, 12/01/19 | NR/BBB/BBB+ | 1,584,195 | ||||||
Park Hospital District Larimer County, | |||||||||
Colorado Limited Tax Revenue | |||||||||
1,010,000 | 4.500%, 01/01/21 AGC Insured | A3/AA-/NR | 1,038,836 | ||||||
Total Hospital | 30,617,151 |
8 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Housing (1.3%) | |||||||||
Colorado Housing & Finance Authority | |||||||||
$ | 50,000 | 6.050%, 10/01/16 Series 1999A3 | Aa2/NR/NR | $ | 51,250 | ||||
Colorado Housing & Finance Authority, | |||||||||
Single Family Mortgage Class II | |||||||||
680,000 | 5.500%, 11/01/29 | Aaa/AAA/NR | 687,684 | ||||||
Colorado Housing Finance Authority, | |||||||||
Single Family Mortgage Class III | |||||||||
Series A-5 | |||||||||
2,495,000 | 5.000%, 11/01/34 | A2/A/NR | 2,537,415 | ||||||
Colorado Housing and Finance | |||||||||
Authority, Multi-Family Project | |||||||||
C1-II Series A-2 | |||||||||
435,000 | 5.400%, 10/01/29 | Aa2/AA/NR | 454,514 | ||||||
Total Housing | 3,730,863 | ||||||||
Lease (17.7%) | |||||||||
Adams 12 Five Star Schools, Colorado | |||||||||
COP | |||||||||
1,770,000 | 4.625%, 12/01/24 | Aa3/A+/NR | 1,858,942 | ||||||
500,000 | 5.000%, 12/01/25 | Aa3/A+/NR | 533,650 | ||||||
Adams County, Colorado Corrections | |||||||||
Facility COP, Series B | |||||||||
1,600,000 | 5.000%, 12/01/26 | Aa2/AA/NR | 1,713,920 | ||||||
1,200,000 | 5.125%, 12/01/27 | Aa2/AA/NR | 1,284,264 | ||||||
Aurora, Colorado COP, Refunding | |||||||||
Series A | |||||||||
1,500,000 | 5.000%, 12/01/26 | Aa2/AA-/NR | 1,621,065 | ||||||
Brighton, Colorado COP Refunding | |||||||||
Series A | |||||||||
1,865,000 | 5.000%, 12/01/24 AGMC Insured | A1/AA-/NR | 1,998,030 | ||||||
Broomfield, Colorado COP | |||||||||
2,000,000 | 4.500%, 12/01/28 | Aa3/NR/NR | 2,049,120 | ||||||
Colorado Educational & Cultural | |||||||||
Facilities Authority, Aurora Academy | |||||||||
Project | |||||||||
1,255,000 | 5.250%, 02/15/24 Syncora Guarantee, | ||||||||
Inc. Insured | NR/A/NR | 1,310,182 |
9 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Lease (continued) | |||||||||
Colorado Educational & Cultural | |||||||||
Facilities Authority, Ave Maria | |||||||||
School Project Refunding | |||||||||
$ | 1,000,000 | 4.850%, 12/01/25 Radian Insured | NR/NR/NR* | $ | 918,670 | ||||
Colorado Educational & Cultural | |||||||||
Facilities Authority, Charter School - | |||||||||
James, Refunding & Improvement | |||||||||
3,000,000 | 5.000%, 08/01/27 AGC Insured | NR/AA-/NR | 3,045,810 | ||||||
Colorado Educational & Cultural | |||||||||
Facilities Authority, Peak to Peak | |||||||||
Charter School, Refunding | |||||||||
1,500,000 | 5.250%, 08/15/24 Syncora Guarantee, | ||||||||
Inc. Insured | NR/A/NR | 1,520,220 | |||||||
Colorado State BEST COP Series G | |||||||||
3,000,000 | 4.250%, 03/15/23 | Aa2/AA-/NR | 3,240,330 | ||||||
Colorado State BEST COP Series H | |||||||||
3,490,000 | 4.000%, 03/15/26 | Aa2/AA-/NR | 3,583,183 | ||||||
Colorado State Higher Education | |||||||||
Capital Construction Lease | |||||||||
3,000,000 | 5.250%, 11/01/23 | Aa2/AA-/NR | 3,362,160 | ||||||
1,690,000 | 5.000%, 11/01/26 | Aa2/AA-/NR | 1,837,368 | ||||||
Denver, Colorado City and County | |||||||||
COP (Botanical Gardens) | |||||||||
2,015,000 | 5.250%, 12/01/22 | Aa2/AA+/AA+ | 2,228,167 | ||||||
Douglas County, Colorado School | |||||||||
District No. RE-1 Douglas & Elbert | |||||||||
Counties COP | |||||||||
3,075,000 | 5.000%, 01/15/29 | Aa2/NR/NR | 3,193,234 | ||||||
El Paso County, Colorado COP | |||||||||
(Judicial Complex Project) Series A | |||||||||
1,820,000 | 4.500%, 12/01/26 AMBAC Insured | NR/AA-/NR | 1,909,253 | ||||||
Fort Collins, Colorado Lease COP Series A | |||||||||
3,020,000 | 4.750%, 06/01/18 AMBAC Insured | ||||||||
(pre-refunded) | Aa1/NR/NR | 3,110,328 | |||||||
Fremont County, Colorado COP | |||||||||
Refunding & Improvement Series A | |||||||||
695,000 | 5.000%, 12/15/18 NPFG Insured | ||||||||
(pre-refunded) | Baa1/NR/NR | 701,609 |
10 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Lease (continued) | |||||||||
Fremont County, Colorado COP | |||||||||
Refunding & Improvement Series A, | |||||||||
Unrefunded Portion | |||||||||
$ | 1,380,000 | 5.000%, 12/15/18 NPFG Insured | Baa1/NR/NR | $ | 1,388,666 | ||||
Garfield County, Colorado COP Public | |||||||||
Library District | |||||||||
1,000,000 | 5.375%, 12/01/27 | NR/A/NR | 1,050,950 | ||||||
Gypsum, Colorado COP | |||||||||
1,050,000 | 5.000%, 12/01/28 | NR/A+/NR | 1,075,662 | ||||||
Pueblo, Colorado COP (Police | |||||||||
Complex Project) | |||||||||
2,170,000 | 5.500%, 08/15/22 AGC Insured | Aa3/AA-/NR | 2,406,595 | ||||||
Rangeview Library District Project, | |||||||||
Colorado COP | |||||||||
2,210,000 | 5.000%, 12/15/26 AGC Insured | Aa3/AA-/NR | 2,346,799 | ||||||
1,000,000 | 5.000%, 12/15/28 AGC Insured | Aa3/AA-/NR | 1,046,470 | ||||||
Westminster, Colorado COP | |||||||||
1,480,000 | 4.250%, 12/01/22 AGMC Insured | A2/AA-/NR | 1,591,459 | ||||||
Total Lease | 51,926,106 | ||||||||
Sales Tax (8.1%) | |||||||||
Boulder, Colorado General Fund | |||||||||
Capital Improvement Projects | |||||||||
2,435,000 | 4.000%, 10/01/24 | Aa1/AA+/NR | 2,655,806 | ||||||
2,235,000 | 4.000%, 10/01/25 | Aa1/AA+/NR | 2,390,020 | ||||||
Boulder County, Colorado Open Space | |||||||||
Capital Improvement Series A | |||||||||
1,500,000 | 5.000%, 01/01/24 AGMC Insured | ||||||||
(pre-refunded) | A2/AA/NR | 1,587,885 | |||||||
Castle Rock, Colorado Sales & Use | |||||||||
Tax Revenue | |||||||||
1,015,000 | 4.000%, 06/01/25 | Aa3/AA-/NR | 1,055,417 | ||||||
Commerce City, Colorado Sales & Use | |||||||||
Tax Revenue | |||||||||
1,000,000 | 5.000%, 08/01/21 AMBAC Insured | NR/A+/NR | 1,043,840 | ||||||
Denver, Colorado City & County Excise | |||||||||
Tax Revenue Refunding Series A | |||||||||
4,000,000 | 5.250%, 09/01/19 AGMC Insured | A1/AA-/AA- | 4,665,440 |
11 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Sales Tax (continued) | |||||||||
Grand Junction, Colorado General Fund | |||||||||
$ | 1,900,000 | 5.000%, 03/01/23 | NR/AA/NR | $ | 2,188,914 | ||||
Greeley, Colorado Sales & Use Tax | |||||||||
Refunding | |||||||||
2,170,000 | 4.000%, 10/01/22 | Aa3/AA/NR | 2,388,042 | ||||||
Gypsum County, Colorado Sales Tax | |||||||||
& General Fund Revenue | |||||||||
1,690,000 | 5.250%, 06/01/30 AGC Insured | NR/AA-/NR | 1,737,523 | ||||||
Park Meadows Business Implementation | |||||||||
District, Colorado Shared Sales Tax | |||||||||
Revenue | |||||||||
1,500,000 | 5.300%, 12/01/27 | NR/NR/NR* | 1,565,805 | ||||||
Pueblo, Colorado Urban Renewal | |||||||||
Authority, Refunding & Improvement, | |||||||||
Series B | |||||||||
1,250,000 | 5.250%, 12/01/28 | A2/A/NR | 1,326,513 | ||||||
Westminster, Colorado Economic | |||||||||
Development Authority, Mandalay | |||||||||
Gardens Urban Renewal Project | |||||||||
1,090,000 | 4.000%, 12/01/22 | NR/A/NR | 1,117,730 | ||||||
Total Sales Tax | 23,722,935 | ||||||||
Transportation (1.3%) | |||||||||
Regional Transportation District, | |||||||||
Colorado COP, Series A | |||||||||
3,500,000 | 5.000%, 06/01/25 AMBAC Insured | Aa3/A-/A+ | 3,771,145 | ||||||
Water & Sewer (9.2%) | |||||||||
Aurora, Colorado Water Improvement | |||||||||
Revenue First Lien, Series A | |||||||||
1,250,000 | 5.000%, 08/01/25 AMBAC Insured | Aa2/NR/AA+ | 1,360,487 | ||||||
Broomfield, Colorado Sewer and Waste | |||||||||
Water Revenue | |||||||||
1,975,000 | 4.000%, 12/01/21 AGMC Insured | A2/NR/NR | 2,106,634 | ||||||
1,550,000 | 5.000%, 12/01/24 AGMC Insured | A2/AA-/NR | 1,737,271 | ||||||
Broomfield, Colorado Water Activity | |||||||||
Enterprise | |||||||||
3,385,000 | 5.000%, 12/01/21 | A1/NR/NR | 3,879,616 |
12 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | |||||||||
Principal | Moody’s, S&P | ||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | ||||||
Water & Sewer (continued) | |||||||||
Colorado Water Resource & Power | |||||||||
Development Authority | |||||||||
$ | 2,675,000 | 5.000%, 09/01/16 NPFG Insured | Baa1/NR/NR | $ | 2,743,614 | ||||
1,855,000 | 5.000%, 09/01/17 NPFG Insured | Baa1/NR/NR | 1,897,498 | ||||||
Denver, Colorado City and County | |||||||||
Board Water Commissioners Master | |||||||||
Resolution, Refunding, Series B | |||||||||
1,000,000 | 4.000%, 12/15/22 | Aa1/AAA/AAA | 1,093,480 | ||||||
Erie, Colorado Water Enterprise | |||||||||
Revenue, Series A | |||||||||
1,000,000 | 5.000%, 12/01/25 AGMC Insured | A1/NR/NR | 1,061,150 | ||||||
Greeley, Colorado Water Revenue | |||||||||
1,920,000 | 4.200%, 08/01/24 NPFG Insured | NR/AA/NR | 2,005,843 | ||||||
Metro Wastewater Reclamation District, | |||||||||
Colorado Sewer Improvement Bonds | |||||||||
1,140,000 | 5.000%, 04/01/25 | Aa1/AAA/NR | 1,313,542 | ||||||
North Weld County, Colorado Water | |||||||||
District Enterprise Revenue Refunding | |||||||||
1,465,000 | 4.000%, 11/01/22 AGMC Insured | NR/AA-/NR | 1,602,578 | ||||||
Parker, Colorado Water & Sanitation | |||||||||
District Water & Sewer Enterprise | |||||||||
Refunding | |||||||||
1,000,000 | 5.000%, 11/01/22 AGMC Insured | A2/AA-/NR | 1,152,700 | ||||||
Thorton, Colorado Water Enterprise | |||||||||
Revenue, Series 2013 | |||||||||
1,970,000 | 4.000%, 12/01/24 | Aa2/AA/NR | 2,123,463 | ||||||
Woodmoor, Colorado Water & | |||||||||
Sanitation District #1 Enterprise | |||||||||
2,570,000 | 4.500%, 12/01/26 | NR/AA-/NR | 2,726,590 | ||||||
Total Water & Sewer | 26,804,466 | ||||||||
Miscellaneous Revenue (1.0%) | |||||||||
Colorado Educational & Cultural | |||||||||
Facility Authority, Independent | |||||||||
School Revenue Refunding, Kent | |||||||||
Denver School Project | |||||||||
1,000,000 | 5.000%, 10/01/30 | NR/A/NR | 1,010,830 |
13 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Rating | ||||||||||
Principal | Moody’s, S&P | |||||||||
Amount | Revenue Bonds (continued) | and Fitch | Value | |||||||
Miscellaneous Revenue (continued) | ||||||||||
Colorado Educational & Cultural | ||||||||||
Facility Authority, Independent | ||||||||||
School Revenue Refunding, Vail | ||||||||||
Mountain School Project | ||||||||||
$ | 1,820,000 | 6.000%, 05/01/30 | NR/BBB-/NR | $ | 1,861,514 | |||||
Total Miscellaneous Revenue | 2,872,344 | |||||||||
Total Revenue Bonds | 211,305,936 | |||||||||
Total Investments (cost $278,689,627 | ||||||||||
– note 4) | 97.6 | % | 285,348,840 | |||||||
Other assets less liabilities | 2.4 | 6,859,008 | ||||||||
Net Assets | 100.0 | % | $ | 292,207,848 |
* | Any security not rated (“NR”) by any of the Nationally Recognized Statistical Rating Organizations (“NRSRO” or “Credit Rating Agency”) 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. |
Percent of | ||||
Portfolio Distribution by Quality Rating | Investments1 | |||
Aaa of Moody’s or AAA of S&P or Fitch | 1.1 | % | ||
Pre-Refunded bonds2/Escrowed to Maturity bonds | 12.2 | |||
Aa of Moody’s or AA of S&P or Fitch | 62.3 | |||
A of Moody’s or S&P or Fitch | 19.6 | |||
Baa of Moody’s or BBB of S&P | 3.6 | |||
Not rated* | 1.2 | |||
100.0 | % |
1 | Where applicable, calculated using the highest rating of the three NRSROs. |
2 | Pre-refunded bonds are bonds for which U.S. Govenment Obligations usually have been placed in escrow to retire the bonds at their earliest call date. |
14 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
SCHEDULE OF INVESTMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
PORTFOLIO ABBREVIATIONS: ACA - American Capital Assurance Financial Guaranty Corp. AGC - Assured Guaranty Corp. AGMC - Assured Guaranty Municipal Corp. AMBAC - American Municipal Bond Assurance Corp. BEST - Building Excellent Schools Today COP - Certificates of Participation FGIC - Financial Guaranty Insurance Co. NCMC - Northern Colorado Medical Center NPFG - National Public Finance Guarantee NR - Not Rated SHEIP - State Higher Education Intercept Program |
See accompanying notes to financial statements.
15 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2013 (unaudited)
ASSETS | ||||
Investments at value (cost $278,689,627) | $ | 285,348,840 | ||
Cash | 3,771,639 | |||
Interest receivable | 3,884,093 | |||
Receivable for Fund shares sold | 73,953 | |||
Other assets | 17,647 | |||
Total assets | 293,096,172 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 550,474 | |||
Dividends payable | 209,180 | |||
Management fee payable | 114,556 | |||
Distribution and service fees payable | 5,682 | |||
Accrued expenses | 8,432 | |||
Total liabilities | 888,324 | |||
NET ASSETS | $ | 292,207,848 | ||
Net Assets consist of: | ||||
Capital Stock - Authorized an unlimited number of shares, | ||||
par value $0.01 per share | $ | 281,979 | ||
Additional paid-in capital | 286,289,240 | |||
Net unrealized appreciation on investments (note 4) | 6,659,213 | |||
Accumulated net realized loss on investments | (1,085,408 | ) | ||
Undistributed net investment income | 62,824 | |||
$ | 292,207,848 | |||
CLASS A | ||||
Net Assets | $ | 211,641,231 | ||
Capital shares outstanding | 20,427,031 | |||
Net asset value and redemption price per share | $ | 10.36 | ||
Maximum offering price per share (100/96 of $10.36) | $ | 10.79 | ||
CLASS C | ||||
Net Assets | $ | 30,799,539 | ||
Capital shares outstanding | 2,978,512 | |||
Net asset value and offering price per share | $ | 10.34 | ||
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) | $ | 10.34 | * | |
CLASS Y | ||||
Net Assets | $ | 49,767,078 | ||
Capital shares outstanding | 4,792,399 | |||
Net asset value, offering and redemption price per share | $ | 10.38 |
See accompanying notes to financial statements.
16 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2013 (unaudited)
Investment Income: | ||||||||
Interest income | $ | 5,866,338 | ||||||
Expenses: | ||||||||
Management fees (note 3) | $ | 780,125 | ||||||
Distribution and service fees (note 3) | 228,580 | |||||||
Legal fees | 79,212 | |||||||
Transfer and shareholder servicing agent fees | 64,701 | |||||||
Trustees’ fees and expenses (note 8) | 53,348 | |||||||
Shareholders’ reports and proxy statements | 31,243 | |||||||
Custodian fees (note 6) | 12,539 | |||||||
Auditing and tax fees | 10,463 | |||||||
Insurance | 7,845 | |||||||
Registration fees and dues | 6,780 | |||||||
Chief compliance officer services (note 3) | 2,755 | |||||||
Miscellaneous | 22,122 | |||||||
Total expenses | 1,299,713 | |||||||
Management fees waived (note 3) | (31,202 | ) | ||||||
Expenses paid indirectly (note 6) | (7 | ) | ||||||
Net expenses | 1,268,504 | |||||||
Net investment income | 4,597,834 | |||||||
Realized and Unrealized Gain (Loss) on Investments: | ||||||||
Net realized gain (loss) from securities | ||||||||
transactions | (961,619 | ) | ||||||
Change in unrealized appreciation on | ||||||||
investments | (12,530,626 | ) | ||||||
Net realized and unrealized gain (loss) on | ||||||||
investments | (13,492,245 | ) | ||||||
Net change in net assets resulting from | ||||||||
operations | $ | (8,894,411 | ) |
See accompanying notes to financial statements.
17 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended | ||||||||||||
September 30, 2013 | Three Months Ended | Year Ended | ||||||||||
(unaudited) | March 31, 2013† | December 31, 2012 | ||||||||||
OPERATIONS: | ||||||||||||
Net investment income | $ | 4,597,834 | $ | 2,338,820 | $ | 9,696,775 | ||||||
Net realized gain (loss) from | ||||||||||||
securities transactions | (961,619 | ) | 373,960 | 333,955 | ||||||||
Change in unrealized | ||||||||||||
appreciation on investments | (12,530,626 | ) | (3,083,288 | ) | 6,690,099 | |||||||
Change in net assets from | ||||||||||||
operations | (8,894,411 | ) | (370,508 | ) | 16,720,829 | |||||||
DISTRIBUTIONS TO SHAREHOLDERS (note 10): | ||||||||||||
Class A Shares: | ||||||||||||
Net investment income | (3,403,807 | ) | (1,736,579 | ) | (7,502,001 | ) | ||||||
Class C Shares: | ||||||||||||
Net investment income | (361,170 | ) | (189,076 | ) | (759,993 | ) | ||||||
Class Y Shares: | ||||||||||||
Net investment income | (833,073 | ) | (405,212 | ) | (1,426,373 | ) | ||||||
Change in net assets from | ||||||||||||
distributions | (4,598,050 | ) | (2,330,867 | ) | (9,688,367 | ) | ||||||
CAPITAL SHARE TRANSACTIONS (note 7): | ||||||||||||
Proceeds from shares sold | 16,478,146 | 17,501,367 | 69,957,056 | |||||||||
Reinvested dividends and | ||||||||||||
distributions | 3,059,421 | 1,538,987 | 6,082,235 | |||||||||
Cost of shares redeemed | (40,789,659 | ) | (17,271,098 | ) | (42,199,751 | ) | ||||||
Change in net assets from | ||||||||||||
capital share transactions | (21,252,092 | ) | 1,769,256 | 33,839,540 | ||||||||
Change in net assets | (34,744,553 | ) | (932,119 | ) | 40,872,002 | |||||||
NET ASSETS: | ||||||||||||
Beginning of period | 326,952,401 | 327,884,520 | 287,012,518 | |||||||||
End of period* | $ | 292,207,848 | $ | 326,952,401 | $ | 327,884,520 | ||||||
*Includes undistributed net | ||||||||||||
investment income of: | $ | 62,824 | $ | 63,040 | $ | 59,640 |
† Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31.
The information presented is for the period January 1, 2013 to March 31, 2013.
See accompanying notes to financial statements.
18 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2013 (unaudited)
1. Organization
Aquila Tax-Free Fund of Colorado (the “Fund”) (from inception until the close of business on October 11, 2013, the Fund operated under the name Tax-Free Fund of Colorado), a non-diversified, open-end investment company, was organized in February, 1987 as a Massachusetts business trust and commenced operations on May 21, 1987. The Fund is authorized to issue an unlimited number of shares. Class A Shares are sold at net asset value plus a sales charge of varying size (depending upon a variety of factors) paid at the time of purchase and bear a distribution fee. Class C Shares are sold at net asset value with no sales charge payable at the time of purchase but with a level charge for service and distribution fees for six years thereafter. Class C Shares automatically convert to Class A Shares after six years. Class Y Shares are sold only through authorized financial institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and are not offered directly to retail customers. Class Y Shares are sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge (“CDSC”) and no distribution fee. Class I Shares are offered and sold only through financial intermediaries and are not offered directly to retail customers. Class I Shares are sold at net asset value with no sales charge and no redemption fee or CDSC, although a financial intermediary may charge a fee for effecting a purchase or other transaction on behalf of its customers. Class I Shares carry a distribution and a service fee. As of the report date, there were no Class I Shares outstanding. All classes of shares represent interests in the same portfolio of investments and are identical as to rights and privileges but differ with respect to the effect of sales charges, the distribution and/or service fees borne by each class, expenses specific to each class, voting rights on matters affecting a single class and the exchange privileges of each class. On December 1, 2012, the Board of Trustees approved a change in the Fund’s fiscal and tax year end from December to March.
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 which have remaining maturities of more than 60 days are valued each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services. In the case of securities for which market quotations are readily available, securities are valued by the pricing service at the mean of bid and asked quotations. If a market quotation or a valuation from the pricing service is not readily available, the security is valued at fair value determined in good faith under procedures established by and under the general supervision of the Board of Trustees. Securities which mature in 60 days or less are generally valued at amortized cost if their term to maturity at purchase is 60 days or less, or by amortizing their unrealized appreciation or depreciation on the 61st day prior to maturity, if their term to maturity at purchase exceeds 60 days. |
19 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
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.
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
Valuation Inputs | Investments in Securities | ||||
Level 1 – Quoted Prices | $ | — | |||
Level 2 – Other Significant Observable | |||||
Inputs — Municipal Bonds* | 285,348,840 | ||||
Level 3 – Significant Unobservable Inputs | — | ||||
Total | $ | 285,348,840 |
* 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. |
20 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Management has reviewed the tax positions for each of the open tax years (2010-2012) or expected to be taken in the Fund’s 2013 tax returns and has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements.
f) | Multiple class allocations: All income, expenses (other than class-specific expenses), and realized and unrealized gains or losses are allocated daily to each class of shares based on the relative net assets of each class. Class-specific expenses, which include distribution and service fees and any other items that are specifically attributed to a particular class, are also charged directly to such class on a daily basis. |
g) | Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
h) | Reclassification of capital accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. On March 31, 2013, the Fund decreased undistributed net investment income by $4,550 and increased additional paid-in capital by $4,550 due primarily to differing book/tax treatment of distributions and bond amortization. These reclassifications had no effect on net assets or net asset value per share. |
3. Fees and Related Party Transactions
a) Management Arrangements:
Aquila Investment Management LLC (the “Manager”), a wholly-owned subsidiary of Aquila Management Corporation, the Fund’s founder and sponsor, serves as the Manager for the Fund under an Advisory and Administration Agreement with the Fund. The portfolio management of the Fund has been delegated to a Sub-Adviser as described below. Under the Advisory and Administration Agreement, the Manager provides all administrative services to the Fund, other than those relating to the day-to-day portfolio management. The Manager’s services include providing the office of the Fund and all related services as well as overseeing the activities of the Sub-Adviser and managing relationships with all the various support organizations to the Fund such as the shareholder servicing agent, custodian, legal counsel, auditors and distributor and additionally maintaining the Fund’s accounting books and records. For its services, the Manager is entitled to receive a fee which is payable monthly and computed as of the close of business each day at the annual rate of 0.50 of 1% of net assets of the Fund. For the six months ended September 30, 2013, the Manager contractually waived fees 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 1% of net assets of the Fund up to $400 million; 0.46 of 1% of the Fund’s net assets above that amount to $1 billion and 0.44 of 1% of the Fund’s net assets above $1 billion. For the six months ended September 30, 2013, the Fund incurred management fees of $780,125 of which $31,202 was waived.
21 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (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 of 1%. For the six months ended September 30, 2013, the Sub-Adviser agreed to waive its fee such that its annual rate of fees is at 0.18 of 1% of net assets of the Fund up to $400 million; 0.16 of 1% of net assets above $400 million up to $1 billion; and 0.14 of 1% 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.
Specific details as to the nature and extent of the services provided by the Manager and the Sub-Adviser are more fully defined in the Fund’s Prospectus and Statement of Additional Information.
b) Distribution and Service Fees:
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 (the “Rule”) under the Investment Company Act of 1940. Under one part of the Plan, with respect to Class A Shares, the Fund is authorized to make distribution fee payments to broker-dealers or others (“Qualified Recipients”) selected by Aquila Distributors, Inc. (the “Distributor”), including, but not limited to, any principal underwriter of the Fund, with which the Distributor has entered into written agreements contemplated by the Rule and which have rendered assistance in the distribution and/or retention of the Fund’s shares or servicing of shareholder accounts. While the Board of Trustees and shareholders approved an amendment to the Fund’s Distribution Plan applicable to Class A Shares which permits the Fund to make distribution fee payments at the rate of up to 0.15 of 1% 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 of 1%. For the six months ended September 30, 2013, distribution fees on Class A Shares amounted to $55,908 of which the Distributor retained $2,013.
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, 2013, amounted to $129,504. 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 1% of the Fund’s average net assets represented by Class C Shares and for the six months ended September 30, 2013, amounted to $43,168. The total of these payments with respect to Class C Shares amounted to $172,672 of which the Distributor retained $37,981.
22 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
Specific details about the Plans are more fully defined in the Fund’s Prospectus and Statement of Additional Information.
Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Fund’s shares. Through agreements between the Distributor and various brokerage and advisory firms (“intermediaries”), the Fund’s shares are sold primarily through the facilities of these intermediaries having offices within Colorado, with the bulk of any sales commissions inuring to such intermediaries. For the six months ended September 30, 2013, total commissions on sales of Class A Shares amounted to $132,541 of which the Distributor received $41,008.
4. Purchases and Sales of Securities
During the six months ended September 30, 2013, purchases of securities and proceeds from the sales of securities aggregated $6,001,412 and $27,683,163, respectively.
At September 30, 2013, the aggregate tax cost for all securities was $278,623,404. At September 30, 2013, the aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost amounted to $10,551,986 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value amounted to $3,826,550 for a net unrealized appreciation of $6,725,436.
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.
6. Expenses
The Fund has negotiated an expense offset arrangement with its custodian wherein it receives credit toward the reduction of custodian fees and other Fund expenses whenever there are uninvested cash balances. The Statement of Operations reflects the total expenses before any offset, the amount of offset and the net expenses.
23 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
7. Capital Share Transactions
Transactions in Capital Shares of the Fund were as follows:
Six Months Ended | Three Months | |||||||||||
September 30, 2013 | Ended | Year Ended | ||||||||||
(unaudited) | March 31, 2013† | December 31, 2012 | ||||||||||
SHARES | ||||||||||||
Class A Shares: | ||||||||||||
Shares sold | 787,633 | 507,580 | 2,894,074 | |||||||||
Reinvested distributions | 225,921 | 106,177 | 441,917 | |||||||||
Shares redeemed | (2,158,123 | ) | (1,045,819 | ) | (2,121,503 | ) | ||||||
Net change | (1,144,569 | ) | (432,062 | ) | 1,214,488 | |||||||
Class C Shares: | ||||||||||||
Shares sold | 243,202 | 273,200 | 1,298,658 | |||||||||
Reinvested distributions | 27,679 | 13,570 | 53,102 | |||||||||
Shares redeemed | (756,951 | ) | (343,294 | ) | (594,130 | ) | ||||||
Net change | (486,070 | ) | (56,524 | ) | 757,630 | |||||||
Class Y Shares: | ||||||||||||
Shares sold | 525,557 | 826,794 | 2,250,024 | |||||||||
Reinvested distributions | 38,974 | 22,029 | 65,822 | |||||||||
Shares redeemed | (997,252 | ) | (202,750 | ) | (1,179,280 | ) | ||||||
Net change | (432,721 | ) | 646,073 | 1,136,566 | ||||||||
Total transactions in | ||||||||||||
Fund shares | (2,063,360 | ) | 157,487 | 3,108,684 | ||||||||
DOLLARS | ||||||||||||
Class A Shares: | ||||||||||||
Proceeds from shares sold | $ | 8,310,227 | $ | 5,526,382 | $ | 31,428,019 | ||||||
Reinvested distributions | 2,360,561 | 1,152,419 | 4,791,940 | |||||||||
Cost of shares redeemed | (22,441,939 | ) | (11,355,055 | ) | (22,999,092 | ) | ||||||
Net change | (11,771,151 | ) | (4,676,254 | ) | 13,220,867 | |||||||
Class C Shares: | ||||||||||||
Proceeds from shares sold | 2,600,229 | 2,959,386 | 14,066,159 | |||||||||
Reinvested distributions | 288,782 | 147,008 | 574,611 | |||||||||
Cost of shares redeemed | (7,930,847 | ) | (3,710,789 | ) | (6,408,991 | ) | ||||||
Net change | (5,041,836 | ) | (604,395 | ) | 8,231,779 | |||||||
Class Y Shares: | ||||||||||||
Proceeds from shares sold | 5,567,690 | 9,015,599 | 24,462,878 | |||||||||
Reinvested distributions | 410,078 | 239,560 | 715,684 | |||||||||
Cost of shares redeemed | (10,416,873 | ) | (2,205,254 | ) | (12,791,668 | ) | ||||||
Net change | (4,439,105 | ) | 7,049,905 | 12,386,894 | ||||||||
Total transactions in | ||||||||||||
Fund shares | $ | (21,252,092 | ) | $ | 1,769,256 | $ | 33,839,540 |
† Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31.
The information presented is for the period January 1, 2013 to March 31, 2013.
24 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
8. Trustees’ Fees and Expenses
At September 30, 2013 there were 13 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, 2013 was $45,315. 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, 2013, such meeting-related expenses amounted to $8,033.
9. 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.
10. Income Tax Information and Distributions
The Fund declares dividends daily from net investment income and makes payments monthly. Net realized capital gains, if any, are distributed annually and are taxable. Dividends and capital gains distributions are paid in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder’s option.
The Fund intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Colorado income taxes. Due to the distribution levels maintained by the Fund and the differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Fund may not be the same as the Fund’s net investment income, and/or net realized securities gains. As a result of the passage of the Regulated Investment Company Act of 2010 (“the Act”), losses incurred in this fiscal year and beyond retain their character as short-term or long-term, have no expiration date and are utilized before capital losses incurred prior to the enactment of the Act. At March 31, 2013, the Fund had capital loss carry forwards of $123,789 of which $55,212 expires in 2017 and $68,577 has no expiration and retains its character of short-term.
25 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
NOTES TO FINANCIAL STATEMENTS (continued)
SEPTEMBER 30, 2013 (unaudited)
The tax character of distributions was as follows:
Three Months | ||||||||||||
Ended | Year Ended December 31, | |||||||||||
March 31, 2013 | 2012 | 2011 | ||||||||||
Net tax-exempt income | $ | 2,330,161 | $ | 9,687,040 | $ | 9,943,171 | ||||||
Ordinary income | 709 | 1,327 | – | |||||||||
$ | 2,330,870 | $ | 9,688,367 | $ | 9,943,171 |
As of March 31, 2013 the components of distributable earnings on a tax basis were as follows:
Undistributed tax-exempt income | $ | 143,883 | ||
Unrealized appreciation | 19,252,879 | |||
Other temporary differences | (267,672 | ) | ||
$ | 19,129,090 |
The difference between book basis and tax basis undistributed income is due to the timing difference in recognizing dividends paid and the tax treatment of market discount amortization.
11. Ongoing Development
Beginning in December 2007, the three major credit rating agencies (Standard & Poor’s, Moody’s and Fitch) downgraded or eliminated ratings of the municipal bond insurance companies due to loss of capital from investments in subprime mortgages. Only a few insurers are now deemed to be investment grade. Thus, while certain bonds have insurance, some are no longer rated based upon the ratings of their insurers. Furthermore, because the ability of many of the Fund’s insurers to pay claims has been downgraded, the protection of such insurance has been diminished, and there is no assurance that some of them may be relied upon for payment.
12. Subsequent Event
At the close of business on October 11, 2013, the Fund was reorganized into a new series of Aquila Municipal Trust. Although the organization and name of the Fund has changed, the Fund’s investment objective, principal investment strategies, and investment management team remain unchanged.
26 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Class A | ||||||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||||||
Ended | Three Months | Year Ended December 31, | ||||||||||||||||||||||||||
9/30/13 (unaudited) | Ended 3/31/13† | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.80 | $ | 10.89 | $ | 10.63 | $ | 10.14 | $ | 10.39 | $ | 9.88 | $ | 10.23 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.16 | 0.08 | 0.35 | 0.39 | 0.40 | 0.40 | 0.40 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | (0.44 | ) | (0.09 | ) | 0.26 | 0.49 | (0.25 | ) | 0.52 | (0.34 | ) | |||||||||||||||||
Total from investment operations | (0.28 | ) | (0.01 | ) | 0.61 | 0.88 | 0.15 | 0.92 | 0.06 | |||||||||||||||||||
Less distributions (note 10): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.08 | ) | (0.35 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | (0.41 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.16 | ) | (0.08 | ) | (0.35 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | (0.41 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.36 | $ | 10.80 | $ | 10.89 | $ | 10.63 | $ | 10.14 | $ | 10.39 | $ | 9.88 | ||||||||||||||
Total return(not reflecting sales charge) | (2.59 | )%(2) | (0.10 | )%(2) | 5.85 | % | 8.81 | % | 1.38 | % | 9.42 | % | 0.57 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 212 | $ | 233 | $ | 240 | $ | 221 | $ | 213 | $ | 213 | $ | 183 | ||||||||||||||
Ratio of expenses to average net assets | 0.72 | %(3) | 0.70 | %(3) | 0.71 | % | 0.75 | % | 0.73 | % | 0.77 | % | 0.80 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 3.04 | %(3) | 2.98 | %(3) | 3.27 | % | 3.75 | % | 3.81 | % | 3.94 | % | 3.90 | % | ||||||||||||||
Portfolio turnover rate | 2 | %(2) | 2 | %(2) | 15 | % | 13 | % | 14 | % | 12 | % | 25 | % | ||||||||||||||
The expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.74 | %(3) | 0.72 | %(3) | 0.73 | % | – | – | – | – | ||||||||||||||||||
Ratio of net assets income to | ||||||||||||||||||||||||||||
average net assets | 3.02 | %(3) | 2.96 | %(3) | 3.26 | % | – | – | – | – | ||||||||||||||||||
The expense ratios after giving effect to the contractual expense cap and expense offset for uninvested cash balances were: | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.72 | %(3) | 0.70 | %(3) | 0.71 | % | 0.75 | % | 0.73 | % | 0.77 | % | 0.79 | % |
_________________
(1) Per share amounts have been calculated using the daily average shares method.
(2) Not annualized.
(3) Annualized.
† Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31.
The information presented is for the period January 1, 2013 to March 31, 2013.
See accompanying notes to financial statements.
27 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class C | ||||||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||||||
Ended | Three Months | Year Ended December 31, | ||||||||||||||||||||||||||
9/30/13(unaudited) | Ended 3/31/13† | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.78 | $ | 10.87 | $ | 10.61 | $ | 10.12 | $ | 10.37 | $ | 9.86 | $ | 10.21 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.11 | 0.05 | 0.25 | 0.29 | 0.30 | 0.30 | 0.30 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | (0.44 | ) | (0.09 | ) | 0.26 | 0.49 | (0.25 | ) | 0.52 | (0.34 | ) | |||||||||||||||||
Total from investment operations | (0.33 | ) | (0.04 | ) | 0.51 | 0.78 | 0.05 | 0.82 | (0.04 | ) | ||||||||||||||||||
Less distributions (note 10): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.05 | ) | (0.25 | ) | (0.29 | ) | (0.30 | ) | (0.31 | ) | (0.31 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.11 | ) | (0.05 | ) | (0.25 | ) | (0.29 | ) | (0.30 | ) | (0.31 | ) | (0.31 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.34 | $ | 10.78 | $ | 10.87 | $ | 10.61 | $ | 10.12 | $ | 10.37 | $ | 9.86 | ||||||||||||||
Total return(not reflecting CDSC) | (3.06 | )%(2) | (0.33 | )%(2) | 4.86 | % | 7.80 | % | 0.42 | % | 8.40 | % | (0.39 | )% | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 31 | $ | 37 | $ | 38 | $ | 29 | $ | 26 | $ | 14 | $ | 8 | ||||||||||||||
Ratio of expenses to average net assets | 1.67 | %(3) | 1.65 | %(3) | 1.66 | % | 1.70 | % | 1.67 | % | 1.71 | % | 1.75 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 2.09 | %(3) | 2.03 | %(3) | 2.31 | % | 2.79 | % | 2.83 | % | 2.95 | % | 2.95 | % | ||||||||||||||
Portfolio turnover rate | 2 | %(2) | 2 | %(2) | 15 | % | 13 | % | 14 | % | 12 | % | 25 | % | ||||||||||||||
The expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.69 | %(3) | 1.67 | %(3) | 1.68 | % | – | – | – | – | ||||||||||||||||||
Ratio of net assets income to | ||||||||||||||||||||||||||||
average net assets | 2.07 | %(3) | 2.01 | %(3) | 2.30 | % | – | – | – | – | ||||||||||||||||||
The expense ratios after giving effect to the contractual expense cap and expense offset for uninvested cash balances were: | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 1.67 | %(3) | 1.65 | %(3) | 1.66 | % | 1.70 | % | 1.67 | % | 1.71 | % | 1.74 | % |
_________________
(1) Per share amounts have been calculated using the daily average shares method.
(2) Not annualized.
(3) Annualized.
† Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31.
The information presented is for the period January 1, 2013 to March 31, 2013.
See accompanying notes to financial statements.
28 | Aquila Tax-Free Fund of Colorado
AQUILA TAX-FREE FUND OF COLORADO
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
Class Y | ||||||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||||||
Ended | Three Months | Year Ended December 31, | ||||||||||||||||||||||||||
9/30/13(unaudited) | Ended 3/31/13† | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.83 | $ | 10.92 | $ | 10.66 | $ | 10.16 | $ | 10.41 | $ | 9.90 | $ | 10.25 | ||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||||||
Net investment income(1) | 0.16 | 0.08 | 0.36 | 0.39 | 0.40 | 0.41 | 0.40 | |||||||||||||||||||||
Net gain (loss) on securities (both | ||||||||||||||||||||||||||||
realized and unrealized) | (0.45 | ) | (0.09 | ) | 0.26 | 0.50 | (0.25 | ) | 0.51 | (0.33 | ) | |||||||||||||||||
Total from investment operations | (0.29 | ) | (0.01 | ) | 0.62 | 0.89 | 0.15 | 0.92 | 0.07 | |||||||||||||||||||
Less distributions (note 10): | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | (0.42 | ) | ||||||||||||||
Distributions from capital gains | – | – | – | – | – | – | – | |||||||||||||||||||||
Total distributions | (0.16 | ) | (0.08 | ) | (0.36 | ) | (0.39 | ) | (0.40 | ) | (0.41 | ) | (0.42 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.38 | $ | 10.83 | $ | 10.92 | $ | 10.66 | $ | 10.16 | $ | 10.41 | $ | 9.90 | ||||||||||||||
Total return | (2.65 | )%(2) | (0.08 | )%(2) | 5.89 | % | 8.96 | % | 1.44 | % | 9.47 | % | 0.63 | % | ||||||||||||||
Ratios/supplemental data | ||||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 50 | $ | 57 | $ | 50 | $ | 37 | $ | 34 | $ | 24 | $ | 11 | ||||||||||||||
Ratio of expenses to average net assets | 0.67 | %(3) | 0.65 | %(3) | 0.66 | % | 0.70 | % | 0.67 | % | 0.72 | % | 0.75 | % | ||||||||||||||
Ratio of net investment income to | ||||||||||||||||||||||||||||
average net assets | 3.09 | %(3) | 3.03 | %(3) | 3.31 | % | 3.80 | % | 3.85 | % | 3.97 | % | 3.96 | % | ||||||||||||||
Portfolio turnover rate | 2 | %(2) | 2 | %(2) | 15 | % | 13 | % | 14 | % | 12 | % | 25 | % | ||||||||||||||
The expense and net investment income ratios without the effect of the contractual expense cap were (note 3): | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.69 | %(3) | 0.67 | %(3) | 0.68 | % | – | – | – | – | ||||||||||||||||||
Ratio of net assets income to | ||||||||||||||||||||||||||||
average net assets | 3.07 | %(3) | 3.01 | %(3) | 3.30 | % | – | – | – | – | ||||||||||||||||||
The expense ratios after giving effect to the contractual expense cap and expense offset for uninvested cash balances were: | ||||||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.67 | %(3) | 0.65 | %(3) | 0.66 | % | 0.70 | % | 0.67 | % | 0.72 | % | 0.74 | % |
_________________
(1) Per share amounts have been calculated using the daily average shares method.
(2) Not annualized.
(3) Annualized.
† Effective December 1, 2012, the Fund changed its fiscal year end from December 31 to March 31.
The information presented is for the period January 1, 2013 to March 31, 2013.
29 | Aquila Tax-Free Fund of Colorado
Analysis of Expenses (unaudited)
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end sales charges with respect to Class A shares or contingent deferred sales charges (“CDSC”) with respect to Class C shares; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. The table below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The table below is based on an investment of $1,000 invested on April 1, 2013 and held for the six months ended September 30, 2013.
Actual Expenses
This table provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading “Expenses Paid During the Period”.
Six months ended September 30, 2013
Actual | ||||
Total Return | Beginning | Ending | Expenses | |
Without | Account | Account | Paid During | |
Sales Charges(1) | Value | Value | the Period(2) | |
Class A | (2.59)% | $1,000.00 | $974.10 | $3.56 |
Class C | (3.06)% | $1,000.00 | $969.40 | $8.24 |
Class Y | (2.65)% | $1,000.00 | $973.50 | $3.31 |
(1) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value and does not reflect the deduction of the applicable sales charges with respect to Class A shares or the applicable CDSC with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. |
(2) | Expenses are equal to the annualized expense ratio of 0.72%, 1.67% and 0.67% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
30 | Aquila Tax-Free Fund of Colorado
Analysis of Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other mutual funds. To do so, compare this 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of other mutual funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs with respect to Class A shares. The example does not reflect the deduction of CDSC with respect to Class C shares. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different mutual funds. In addition, if these transaction costs were included, your costs would have been higher.
Six months ended September 30, 2013
Hypothetical | ||||
Annualized | Beginning | Ending | Expenses | |
Total | Account | Account | Paid During | |
Return | Value | Value | the Period(1) | |
Class A | 5.00% | $1,000.00 | $1,021.46 | $3.65 |
Class C | 5.00% | $1,000.00 | $1,016.70 | $8.44 |
Class Y | 5.00% | $1,000.00 | $1,021.71 | $3.40 |
(1) | Expenses are equal to the annualized expense ratio of 0.72%, 1.67% and 0.67% for the Fund’s Class A, C and Y shares, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
31 | Aquila Tax-Free Fund of Colorado
Shareholder Meeting Results (unaudited)
A Special Meeting of Shareholders of Tax-Free Fund of Colorado was held on September 17, 2013. The holders of shares representing 60% of the total net asset value of the shares entitled to vote were present in person or by proxy. At the meeting, the following matter was voted upon and approved by the shareholders (the resulting votes are presented below).
1. To act on an Agreement and Plan of Reorganization.
Dollar Amount of Votes: | ||
For | Against | Abstain |
$165,500,194 | $18,907,154 | $6,223,911 |
32 | 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. The Fund may also disclose other portfolio holdings as of a specified date (currently the Fund discloses its five largest holdings and/or sector holdings by value as of the close of the last business day of each calendar month in a posting to its website on approximately the 5th business day following the month end). This information remains on the website until the next such posting. Whenever you wish to see a listing of your Fund’s portfolio other than in your shareholder reports, please check our website at www.aquilafunds.com or call us at 1-800-437-1020.
The Fund additionally files a complete list of its portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available free of charge on the SEC website at www.sec.gov. You may also review or, for a fee, copy the forms at the SEC’s Public Reference Room in Washington, D.C. or by calling 1-800-SEC-0330.
Proxy Voting Record (unaudited)
During the 12 month period ended June 30, 2013 the Fund did not hold any portfolio securities for which the Fund was entitled to participate in proxy voting. Applicable regulations require us to inform you that the Fund’s proxy voting information is available on the SEC website at wwwsec.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, 2013, $2,330,161 of dividends paid by Tax-Free Fund of Colorado, constituting 99.97% of total dividends paid during fiscal year 2013 were exempt-interest dividends; and the balance was ordinary income.
Prior to February 15, 2014, shareholders will be mailed the appropriate tax form(s) which will contain information on the status of distributions paid for the 2013 calendar year.
33 | 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 May and August, 2013. The independent Trustees met telephonically in August, 2013 and in person in September, 2013 to review and discuss the contract review materials. The Trustees considered, among other things, information presented by the Manager and the Sub-Adviser. They also considered information presented in a report prepared by an independent consultant with respect to the Fund’s fees, expenses and investment performance, which included comparisons of the Fund’s investment performance against peers and the Fund’s benchmark and comparisons of the advisory fee payable by the Fund under the Advisory Agreement against the advisory fees paid by the Fund’s peers, as well as information regarding the operating margins of certain investment advisory firms (the “Consultant’s Report”). In addition, the Trustees took into account the information related to the Fund provided to the Trustees at each regularly scheduled meeting. The Trustees considered the Advisory Agreement and the Sub-Advisory Agreement separately as well as in conjunction with each other to determine their combined effects on the Fund.
At a meeting held in September, 2013, based on their evaluation of the information provided by the Manager, the Sub-Adviser and the independent consultant, the Trustees of the Fund, including the independent Trustees voting separately, unanimously approved the renewal of each of the Advisory Agreement and the Sub-Advisory Agreement until September 30, 2014. 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.
34 | 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 considered that the Manager supervised and monitored the performance of the Fund’s service providers (including the Sub-Adviser). 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 that the Manager and the Sub-Adviser had provided all administrative and 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. 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, as applicable.
The investment performance of the Fund.
The Trustees reviewed the Fund’s performance and compared its performance to funds in its product category (Morningstar Single-State Intermediate Municipal Bond Funds), funds in its peer group (Morningstar Single-State Intermediate Municipal Bond Funds that are similar to the Fund in size and investment style and that charge a front-end sales charge), and its benchmark index, the Barclays Capital Quality Intermediate Municipal Bond Index. The Trustees considered that the materials included in the Consultant’s Report indicated that the Fund’s average annual total return was less than the average annual total return of the funds in its peer group for the one, three, five and ten year periods ended March 31, 2013. However, the Trustees considered that the Fund’s average annual total return was equal to or in excess of the average annual total return of the funds its product category for the one, three, five and ten year periods ended March 31, 2013 and equal to or better than the average annual return of the benchmark index for the one and three year periods ended March 31, 2013. The Trustees considered that, as reflected in the Consultant’s Report, the Fund was less volatile than the average volatility of the funds in its product category (for the five year period ended March 31, 2013) and delivered satisfactory results on a risk-adjusted basis for the three and five year periods ended March 31, 2013 (as evidenced by its Sharpe ratio) when compared to the funds in its product category.
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 its historical intermediate maturity structure. The Trustees noted that, unlike the Fund’s returns, the performance of the benchmark index did not reflect any fees, expenses or sales charges. The Trustees considered these results to be consistent with the investment objectives of the Fund. Evaluation of this factor indicated to the Trustees that renewal of the Advisory Agreement and Sub-Advisory Agreement would be appropriate.
35 | Aquila Tax-Free Fund of Colorado
Advisory and Sub-Advisory Fees and Fund Expenses.
The information provided in the Consultant’s Report contained advisory fee and expense data for the Fund, for the funds in its product category (Morningstar Single-State Intermediate Municipal Bond Funds with similar operating structures), as well as data for the funds in the Fund’s peer group (Morningstar Single-State Intermediate Municipal Bond Funds that are similar to the Fund in size and investment style and that charge a front-end sales charge). 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 compared the advisory fee and expense data for the Fund to similar data with respect to funds in its product category and peer group. The Trustees considered that the Fund’s contractual advisory fee was lower than the average contractual advisory fee of the funds in its peer group (at the Fund’s current asset level) but higher than the asset-weighted average contractual advisory fee of the funds in its product category (at the Fund’s current asset level). They also noted that the Fund’s expenses were lower than the average actual expenses of the funds in both the product category and peer group.
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 or 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 Manager and the Sub-Adviser each provided materials which showed the profitability to the Manager and the Sub-Adviser, respectively, of their services to the Fund, as well as material provided by the Manager which showed the profitability to Aquila Distributors, Inc. (the “Distributor”) of distribution services provided to the Fund.
The Trustees considered 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 noted that the Distributor did not derive profits from its relationship with the Fund. The Trustees concluded that profitability to the Manager with respect to advisory services provided to the Fund did not argue against approval of the fees to be paid under the Advisory Agreement.
The Trustees also considered information provided by the Sub-Adviser regarding the profitability of the Sub-Adviser with respect to the sub-advisory services provided by the Sub-Adviser to the Fund. The Trustees concluded that the profitability of the Sub-Adviser with respect to sub-advisory services provided to the Fund did not argue against approval of the fees to be paid under the Sub-Advisory Agreement.
36 | Aquila Tax-Free Fund of Colorado
The extent to which economies of scale would be realized as the Fund grows.
The Trustees considered the extent to which the Manager and the Sub-Adviser may realize economies of scale or other efficiencies in managing the Fund. Data provided in the Consultant’s Report to the Trustees showed that the Fund’s asset size had moderately increased during the past fiscal year. It was noted that as assets increase certain fixed costs may be spread across a larger asset base, and it was noted that any economies of scale or other efficiencies might be realized (if at all) across a variety of products and services and not only in respect of the Fund. Additionally, the Trustees noted that the Sub-Adviser has agreed waive a portion of its sub-advisory fees and to introduce breakpoints in its fee which would be realized as the Fund grows. Under the fee waiver agreement, the Manager compensates the Sub-Adviser at the annual rate of 0.18 of 1% on the Fund’s net assets up to $400 million; 0.16% on assets above that amount to $1 billion in net assets and 0.14% on net assets thereafter, rather than the contractual sub-advisory fee at the annual rate of 0.20 of 1%. The Trustees considered that the Manager agreed to similarly waive its advisory fee so long as the Sub-Adviser waives its sub-advisory fees under the fee waiver. Accordingly, the Trustees concluded that economies of scale, if any, were being appropriately shared with the Fund.
Benefits derived or to be derived by the Manager and the Sub-Adviser and their affiliates from their relationships with the Fund.
The Trustees observed that, as is generally true of most fund complexes, the Manager and Sub-Adviser and their affiliates, by providing services to a number of funds or other investment clients including the Fund, were able to spread costs as they would otherwise be unable to do. The Trustees noted that while that could produce efficiencies and increased profitability for the Manager and Sub-Adviser and their affiliates, it also makes their services available to the Fund at favorable levels of quality and cost which are more advantageous to the Fund than would otherwise have been possible.
37 | Aquila Tax-Free Fund of Colorado
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Founders
Lacy B. Herrmann (1929-2012)
Aquila Management Corporation, Sponsor
Manager
AQUILA INVESTMENT MANAGEMENT LLC
380 Madison Avenue, Suite 2300
New York, New York 10017
Investment Sub-Adviser
KIRKPATRICK PETTIS CAPITAL MANAGEMENT
1600 Broadway, Suite 1100
Denver, Colorado 80202
Board of Trustees
Anne J. Mills, Chair
Diana P. Herrmann, Vice Chair
Ernest Calderón
Thomas A. Christopher
Gary C. Cornia
David A. Duffy
Grady Gammage, Jr.
Lyle W. Hillyard
John C. Lucking
Glenn P. O’Flaherty
John J. Partridge
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, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
Transfer and Shareholder Servicing Agent
BNY MELLON
4400 Computer Drive
Westborough, Massachusetts 01581
Custodian
JPMORGAN CHASE BANK, N.A.
1111 Polaris Parkway
Columbus, Ohio 43240
Further information is contained in the Prospectus, which must precede or accompany this report.
ITEM2. | CODE OF ETHICS. |
Not applicable.
ITEM3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable.
ITEM4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable.
ITEM5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM6. | SCHEDULE OF INVESTMENTS. |
Included in Item 1 above
ITEM7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM9. | 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 TAX-FREE FUND OF COLORADO
(formerly, TAX-FREE FUND OF COLORADO)
By: | /s/ Diana P. Herrmann | |
President and Trustee December 10 , 2013 | ||
By: | /s/ Joseph P. DiMaggio | |
Chief Financial Officer and Treasurer December 10 , 2013 |
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 President and Trustee December 10 , 2013 | ||
By: | /s/ Joseph P. DiMaggio | |
Joseph P. DiMaggio Chief Financial Officer and Treasurer December 10 , 2013 |
AQUILA TAX-FREE FUND OF COLORADO
(formerly, TAX-FREE FUND OF COLORADO)
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.