01/12/2014

Our Municipal Bond Fund Strategy in 2013

by

The bond markets in 2013 were roiled by comments made in April by then Chairman of the Federal Reserve, Ben Bernanke, regarding future tapering of the Fed’s bond buying program.  Market participants responded to those comments, touching off a wave of redemptions and declining prices in the fixed income markets.  The events impacting the bond market in 2013 demonstrated the volatility that may be witnessed from time to time in an asset class often perceived as being relatively conservative.

The investment strategy implemented in managing each of the Aquila Group of Funds single-state municipal bond funds is focused on an intermediate average portfolio maturity in order to manage interest rate risk and high-quality bonds in order to manage credit risk.  Portfolio management teams located in each state, where they have an up-close perspective on the local economy and issuers, are also a hallmark of our strategy.  This is a strategy developed for investors who want the benefits of earning income that is generally exempt from federal and state income tax, and who seek to reduce their exposure to elements of risk found in the fixed income markets.  Particularly during volatile market environments, such as we witnessed in 2013, we seek to add value through our investment strategy.

The 2013 performance results show that each of the state-specific municipal bond funds offered by Aquila Group of Funds finished the year in the top quartile of the Lipper Other States Municipal Debt category for the 1-year period.  On our web site, you will find the fund prospectus and performance results of the municipal bond funds we offer for residents of Arizona, Colorado, Hawaii, Kentucky, Oregon, Rhode Island and Utah.

Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus.   The prospectus is available from your financial advisor and when you call 800-437-1020 or visit www.aquilafunds.com.

Performance data represents past performance, but does not guarantee future results.  Investment return and principal value will fluctuate; shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the data presented.

Lipper rankings are based on total return without sales charge relative to all share classes of funds with similar objectives as determined by Lipper. Lipper ratings are not intended to predict future results, and Lipper does not guarantee the accuracy of this information. Lipper category is as of the quarter-end date indicated and may not accurately represent the current composition of the portfolio.