Cost-Basis Reporting

The Emergency Economic Stabilization Act of 2008 requires the reporting of mutual fund cost basis and holding period information to both the Internal Revenue Service (IRS) and shareholders on Form 1099B for gross redemption proceeds from shares acquired on or after January 1, 2012 (covered shares). Beginning with the 2012 tax year, Form 1099B will provide the cost basis calculation method applicable to shares acquired after January 1, 2012 and subsequently redeemed, and the purchase date of those shares.

Consult Your Tax Adviser

We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election or redeeming shares, in order to discuss any questions you may have about your Cost Basis Reporting options.

Neither the Funds nor the Shareholder Servicing Agent are able to provide you with tax or legal advice.

Summary of Cost Basis Reporting Requirements

New Regulations Regarding Cost Basis Reporting The Emergency Economic Stabilization Act of 2008 requires the reporting of mutual fund cost basis and holding period information to both the Internal Revenue Service (IRS) and shareholders on Form 1099B for gross redemption proceeds from shares acquired on or after January 1, 2012 (covered  shares).Beginning with the 2012 tax year, Form 1099B will report the basis of all covered shares that are redeemed and the purchase date of those shares. This information will be reported to shareholders and to the IRS.

  • Cost Basis Reporting is not required by (or reported to) the IRS for shares purchased before January 1, 2012 (non-covered shares).
  • Once you have elected a Cost Basis Reporting method for covered shares, your election will apply to all future transactions in covered shares unless you either revoke or change the standing election.The taxpayer filing deadline has not changed as a result of the new Cost Basis Reporting regulations.

Consult Your Tax Adviser We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election or redeeming shares, in order to discuss any questions you may have about your Cost Basis Reporting options. Neither the Funds nor BNY Mellon, the Shareholder Servicing Agent, are able to provide you with tax or legal advice.

Default Cost Basis Reporting Method The new tax regulations require that Aquila Group of Funds elect a default Cost Basis Reporting method. Average Cost has been selected as the default Cost Basis Reporting method. Unless BNY Mellon, the Fund Shareholder Servicing Agent, receives notification of the Cost Basis Reporting method you elect either prior to or at the time of the redemption of covered shares, the Default Method, which is Average Cost, will be applied to that transaction. Once a redemption transaction has settled, the Cost Basis Reporting method applied to the shares so redeemed cannot be altered. Please note that when changing your Cost Basis Reporting method you must provide written instructions.  You may do so by completing and signing the Cost Basis Election Form (also available when you call 800-437-1000), or by sending a letter of instruction to BNY Mellon, Attn: Aquila Group of Funds, P.O. Box 9823, Providence, RI 02940 (For overnight delivery: BNY Mellon, Attn: Aquila Group of Funds, 4400 Computer Drive, Westborough, MA 01581).

Cost Basis Reporting Options Aquila Group of Funds makes the following frequently used Cost Basis Reporting and share lot depletion methods available to Fund shareholders.

  • Average Cost: Cost basis calculated as the average cost of shares based on each purchase date
  • First-In, First-Out (FIFO): The oldest shares purchased are redeemed first
  • Specific Lot: You may specify, by original trade date, the share lot(s) which you are redeeming
  • Last-In, First-Out (LIFO): The most recently purchased shares are redeemed first

Additional Cost Basis Reporting methods are available and are described on our website. To elect a Cost Basis Reporting method other than the Default Method, which is Average Cost, please complete the Cost Basis Election Form (also available when you call 800-437-1000), or provide instructions in writing toBNY Mellon, Attn: Aquila Group of Funds, P.O. Box 9823, Providence, RI 02940 (For overnight delivery: BNY Mellon, Attn: Aquila Group of Funds, 4400 Computer Drive, Westborough, MA 01581).

Opportunity to Amend Your Election Once you have elected a Cost Basis Reporting method, your election applies to all future redemption transactions unless you either revoke or change the standing election. Please note that when changing your Cost Basis Reporting method you must provide written instructions. You may change your election of a Cost Basis Reporting method by completing the Cost Basis Election Form , or by providing a letter of instruction to BNY Mellon, Attn: Aquila Group of Funds, P.O. Box 9823, Providence, RI 02940 (For overnight delivery: BNY Mellon, Attn: Aquila Group of Funds, 4400 Computer Drive, Westborough, MA 01581). We strongly encourage you to consult your professional tax adviser in order to discuss any questions you may have about changing your Cost Basis Reporting election. Neither the Funds nor BNY Mellon, the Shareholder Servicing Agent, are able to provide you with tax or legal advice.

When you Redeem Shares When you redeem covered shares from your account, the Cost Basis on those shares will be calculated according to the Cost Basis Reporting method you have elected. If you have not designated the Cost Basis Reporting method to be used prior to, or at the time of, your redemption, the trade will be processed using the Default Method, which is Average Cost. Once a redemption transaction has settled, the Cost Basis Reporting method that was applied to the shares so redeemed cannot be altered.

Transaction Confirmations and Account Statements Beginning January 1, 2012, transaction confirmations and account statements will indicate the Cost Basis Reporting method you have elected. Please refer to those documents, or call the Shareholder Servicing Agent at (800) 437-1000, to verify the Cost Basis Reporting method you have elected.

Questions Please consult your professional tax adviser prior to electing a Cost Basis Reporting method or redeeming shares. Our customer service representatives are available at (800) 437-1000 Monday through Friday between 8 a.m. and 6 p.m. Eastern Time to provide you with the Cost Basis Election Form and instructions for submitting a change of election. For your future reference, you will find the following information, along with related updates, on our website:

  • A summary of Cost Basis Reporting requirements under the Emergency Economic Stabilization Act of 2008,
  • The Cost Basis Election Form,
  • Frequently Asked Questions (FAQ) pertaining to Cost Basis Reporting under the Emergency Economic Stabilization Act of 2008,
  • A complete list of the Cost Basis Reporting methods available to shareholders,
  • Instructions to assist you in verifying or altering the Cost Basis Reporting method you have elected, and
  • Contact information for the Shareholder Servicing Agent, BNY Mellon.

Circular 230 Disclosure This document was not intended or written to be used, and cannot be used, for the purpose of avoiding any U.S. federal income tax penalties that the Internal Revenue Service may attempt to impose. Because this document might be viewed as a marketed opinion, under certain regulations, we inform you that it was written to support the promotion or marketing of shares. Each recipient of this document should seek advice based on that person particular circumstances from an independent tax adviser.

Frequently Asked Questions Regarding Cost Basis Reporting

Following are answers to common questions regarding Cost Basis Reporting under the Emergency Economic Stabilization Act of 2008. The information below is not intended to be a complete discussion of all your income tax requirements, is not written to provide you with tax advice, and does not intend to deal with all of the federal or state tax consequences that may be applicable to your investment in a Fund offered by Aquila Group of Funds.

Consult Your Tax Adviser We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election or redeeming shares, in order to discuss any questions you may have about your Cost Basis Reporting options. Neither the Funds nor the Shareholder Servicing Agent are able to provide you with tax or legal advice. See FAQ’s

Available Cost Basis Reporting Methods

The Emergency Economic Stabilization Act of 2008 requires that Aquila Group of Funds elect a Default Method for Cost Basis Reporting.

Average Cost has been selected as the Cost Basis Reporting Default Method.

The following Cost Basis Reporting methods are available to Aquila Group of Funds shareholders:

  1. Average Cost: Cost basis calculated as the average cost of shares based on each purchase date.
  2. First-In, First-Out (FIFO): The oldest shares purchased are redeemed first.
  3. Specific Lot: You may specify, by original trade date, the share lot(s) which you are redeeming.
  4. Last-In, First-Out (LIFO): The most recently purchased shares are redeemed first.
  5. Highest-In, First-Out (HIFO): The highest cost shares are redeemed first.
  6. Lowest-In, First-Out (LOFO): The lowest cost shares are redeemed first.
  7. Highest Long-Term, First-Out (HILT): The highest cost long-term shares are redeemed first.
  8. Highest Short-Term, First-Out (HIST): The highest cost short-term shares are redeemed first.
  9. Lowest Long-Term, First-Out (LILT): The lowest cost long-term shares are redeemed first.
  10. Lowest Short-Term, First-Out (LIST): The lowest cost short-term shares are redeemed first.

Consult Your Tax Adviser
We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election or redeeming shares, in order to discuss any questions you may have about your Cost Basis Reporting options.

Neither the Funds nor the Shareholder Servicing Agent are able to provide you with tax or legal advice.

To Elect or Change Your Cost Basis Reporting Method
Please note that when electing or changing your Cost Basis Reporting method you must provide written instructions. You may do so by completing and signing the Cost Basis Election Form, or by sending a letter of instruction to BNY Mellon, Attn: Aquila Group of Funds, P.O. Box 9823, Providence, RI 02940 (For overnight delivery: BNY Mellon, Attn: Aquila Group of Funds, 4400 Computer Drive, Westborough, MA 01581).

Cost Basis Glossary

The following terms may be used in account statements, tax documents or other communications.The information on this page is not intended to be a complete discussion of all your income tax requirements, is not written to provide you with tax advice, and does not intend to deal with all of the federal or state tax consequences that may be applicable to your Fund investment. Consult Your Tax Adviser We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election or redeeming shares, in order to discuss any questions you may have about your Cost Basis Reporting options. Neither Aquila Group of Funds nor the Shareholder Servicing Agent are able to provide you with tax or legal advice.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Adjusted Basis
The basis of shares after taking into account any adjustments to the original basis as required by the federal tax law. Adjusted basis is used to determine the amount of any capital gains or losses on taxable exchanges or redemptions of fund shares.For most shareholders, the original basis of mutual fund shares acquired by purchase will be based on the amount paid for the shares, including any front-end sales charges, and then adjusted for wash sales, return of capital, sales load deferral and other transactions, as applicable.

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Average Cost Method
A method used for calculating the cost basis of shares being exchanged or redeemed by taking an average cost for all shares in the account at the time of the exchange or redemption. For accounts with average cost as their cost basis method, shares will be exchanged or redeemed in a First-In-First-Out (FIFO) order. The Aquila Group of Funds has selected Average Cost as the Default Cost Basis Method.

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C

Capital Gain or Loss

Capital Gain
The amount by which the selling price of shares is greater than the adjusted basis of the shares at the time of the exchange or redemption.

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Capital Loss
The amount by which the selling price of shares is less than the adjusted basis of the shares at the time of the exchange or redemption.

There are two types of capital gains and losses:

1. long-term: shares are held for more than one year

2. short-term: shares are held for one year or less

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Cost Basis
Generally, the total price paid to purchase fund shares, including any front-end sales charges. When shares are exchanged or redeemed, the adjusted basis is compared with the sales price to determine whether there is a capital gain or loss.

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Cost Basis Reporting Methods

The order in which shares from an account will be exchanged or redeemed for cost basis purposes. The following relief orders are available:

  1. Average Cost: Cost basis calculated as the average cost of shares based on each purchase date
  2. First-In, First-Out (FIFO): The oldest shares purchased are redeemed first
  3. Specific Lot: You may specify, by original trade date, the share lot(s) which you are redeeming
  4. Last-In, First-Out (LIFO): The most recently purchased shares are redeemed first
  5. Highest-In, First-Out (HIFO): The highest cost shares are redeemed first.
  6. Lowest-In, First-Out (LOFO): The lowest cost shares are redeemed first.
  7. Highest Long-Term, First-Out (HILT): The highest cost long-term shares are redeemed first.
  8. Highest Short-Term, First-Out (HIST): The highest cost short-term shares are redeemed first.
  9. Lowest Long-Term, First-Out (LILT): The lowest cost long-term shares are redeemed first.
  10. Lowest Short-Term, First-Out (LIST): The lowest cost short-term shares are redeemed first.

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Covered Shares
Shares acquired by purchase, including dividend reinvestment, on or after January 1, 2012. Shares acquired by gift, inheritance or other transfer occurring on or after January 1, 2012, may also be considered covered shares. Please consult your tax adviser.

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D

Default Cost Basis Method
The method that will be utilized for account transactions when no method was previously elected by the shareholder either prior to or at the time of an exchange or redemption. Aquila Group of Funds has selected Average Cost as the Default Cost Basis Method.

When an investor holds shares in a brokerage firm account, that firm may select a different default cost basis method. In these cases, shareholders should contact the brokerage firm to obtain additional information regarding cost basis reporting.

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F

First-In-First-Out (FIFO)
The first shares acquired are generally the first shares exchanged or redeemed.

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G

Gain
Please refer to Capital Gain/Loss.

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Gifted Shares
Those shares that are transferred from one individual to another in the form of a gift. Special federal basis rules apply to gifts. Please consult your tax adviser.

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Gross Proceeds
The amount paid to the shareholder when shares are redeemed for cash, or the value of the transaction when shares are exchanged between funds, in a taxable exchange.

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H

Highest-In-First-Out (HIFO)
The shares purchased at the highest basis are the first shares exchanged or redeemed.

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Holding Period
The period of time that shares are held by the shareholder from the time they are acquired to the time they are exchanged or redeemed. The holding period can be short-term, where shares are held for one year or less, or long-term, where shares are held for more than one year.

Special holding period rules apply to gifted and inherited shares and other transactions. Please consult your tax adviser.

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I

Inherited Shares
Shares that are transferred from one individual to another due to the death of a shareholder.

Special federal basis rules apply to inherited shares. Please consult your tax adviser.

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L

Last-In-First-Out (LIFO)
The shares most recently acquired are generally the first shares exchanged or redeemed.

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Long-Term Capital Gain
The selling price of shares held for more than one year is greater than the adjusted basis of the shares at the time of the exchange or redemption.

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Loss
Please refer to Capital Gain/Loss.

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Lot
Please refer to Tax Lot.

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Lowest-In-First-Out (LOFO)
The shares with the lowest basis are generally the first shares exchanged or redeemed.

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N

Non-covered Shares

Shares acquired by purchase, including dividend reinvestment, before January 1, 2012.

Shares acquired by gift and inheritance after January 1, 2012 may also be considered non-covered shares. Please consult your tax adviser.

Exchanges and redemptions of non-covered shares are not subject to annual cost basis reporting by mutual fund companies to the Internal Revenue Service.

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R

Return of Capital
A return of capital occurs when a fund makes a distribution in excess of its current and accumulated earnings and profits.

A return of capital distribution which is less than the cost basis of fund shares is not currently taxable to shareholders, but reduces the cost basis of fund shares. If a return of capital is in excess of the cost basis of fund shares, the excess amount is treated as a capital gain.

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S

S Corporation
An S corporation is one that has elected to be treated as such under Subchapter S of the Internal Revenue Code. S corporations are subject to annual cost basis reporting to the Internal Revenue Service for taxable redemptions or exchanges of covered shares.

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Sales Load Deferral
An adjustment to the basis of fund shares that results when the shareholder pays a front-end sales charge at the time of purchase, redeems those shares within 90 days of purchase, then reinvests in shares of the same fund with no front-end sales charge, or a reduced front-end sales charge.

If these circumstances are met, the amount by which the front-end sales charge is reduced is applied as a basis adjustment to the shares re-acquired.

The sales load deferral rule only applies if shares are re-acquired by January 31st of the calendar year following the year of disposition of the original shares. For cost basis reporting purposes, all of these transactions must occur in the same tax account.

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Short-Term Capital Gain
The selling price of shares held for one year or less is greater than the adjusted basis of the shares at the time of the exchange or redemption.

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Specific Lot Identification (SLI)
When the shareholder selects the specific tax lots to exchange or redeem from the account.

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Specific Share Identification (SSI)
A method used by the shareholder to identify which tax lots to exchange or redeem. Shareholders may either select the specific lots for each transaction or designate a standing lot relief order on the account.

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Standing Lot Relief Order (SLRO)
An instruction elected by a shareholder for an account which will apply a selected lot relief order to any exchanges and redemptions, unless the shareholder decides to specify other shares at the time of a particular transaction, or alternatively elect the Average Cost Method (ACM).

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T

Tax Lot
A grouping of shares with the same basis and holding period, such as all shares purchased at the same time and at the same price. If separate purchases are made on the same day, then separate tax lots will be created for each purchase.

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Transfer
When shares change ownership but remain in the same fund. Transfers usually occur when the shares are gifted or inherited. Transfers may also occur in the event of divorce. Special federal basis rules may apply. Please consult your tax adviser.

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W

Wash Sale
When shares are redeemed or exchanged at a loss and all or a portion of those shares are repurchased within a 61-day period beginning 30 days before and ending 30 days after the date of the exchange or redemption. A wash sale results in a full or partial disallowance of the loss and the amount of the loss is added to the basis of the repurchased shares.

For cost basis reporting purposes, all of the above transactions must occur in the same tax account.

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1099

Form 1099-B Reporting
IRS Form 1099-B, Gross Proceeds from Broker and Barter Exchange Transactions, is used to report the gross proceeds from exchanges and redemptions of fund shares to the IRS and shareholders annually. Form 1099-B is also used to report cost basis information for covered shares.

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Cost Basis Election Form

IRS regulations require that we report cost basis on mutual fund shares purchased after January 1, 2012 and subsequently  redeemed. To elect or change your cost basis method(s) please complete this form.

If you do not elect a cost basis reporting method, Aquila Group of Funds will apply our Default Method, which is  Average Cost, to covered shares when redeemed.  We strongly recommend that you consult with your Tax Advisor and/or Financial Professional before making important
tax elections for your account(s).

Cost Basis Election Form

Contact the Shareholder Servicing Agent

You may contact BNY Mellon, the Shareholder Servicing Agent, to:

  • Submit the Cost Basis Election Form.
  • Submit written instructions to elect or change your Cost Basis Reporting method.
  • Verify the Cost Basis Reporting method currently in effect for your account(s).

Regular mail:
BNY Mellon
Attn: Aquila Group of Funds
P.O. Box 9823
Providence, RI 02940

Overnight mail:
BNY Mellon
Attn: Aquila Group of Funds
4400 Computer Drive
Westborough, MA 01581

Telephone:
BNY Mellon
(800) 437-1000