FAQs Regarding Cost Basis Reporting

The objective of the regulation is to help ensure that all investors accurately report realized investment capital gains or losses on their annual tax returns.

The new regulation does not require cost basis reporting for certain accounts including retirement accounts.

Covered shares generally refer to mutual fund shares that were acquired by purchase, including dividend reinvestment, on or after January 1, 2012, and are subject to the new mandatory cost basis reporting regulation.

Non-covered shares generally refer to mutual fund shares acquired by purchase, including dividend reinvestment, prior to January 1, 2012, and are not covered by the new cost basis reporting regulation.

If shares are received in a transfer from a brokerage firm to an account with Aquila Group of Funds, those shares will be considered non-covered shares unless the brokerage firm provides cost basis information at the time of the transfer or states that the shares being transferred are non-covered.

The cost basis of mutual fund shares is usually the cost paid for the shares when they were initially purchased. When these shares are sold, you may realize a gain or a loss on that transaction, and you may be required to pay taxes on any gains earned from the transaction. The capital gain or loss is based on the amount realized on the sale, minus the cost basis of the shares sold, and must be reported to the IRS on your tax return.

There are a number of methods for calculating cost basis. As a shareholder, you may choose the method you feel is appropriate given your personal tax situation. We strongly encourage you to consult your professional tax adviser prior to making a Cost Basis Reporting election of redeeming shares.

Aquila Group of Funds shareholders may choose any of the following cost basis reporting methods:

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.

Aquila Group of Funds has selected average cost as our Default Method.

If you sell covered shares after January 1, 2012, and would like to select a cost basis method other than the Default Method, which is Average Cost, you can do so at the time that you request the redemption of shares.

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.

You may elect 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).

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.

If you elect the Average Cost method or you do not elect another method, regulations may allow you to retroactively revoke your election or elect another method at any time prior to a redemption of covered shares subject to the Average Cost method. After such a redemption, any revocation of an Average Cost method election or election of a method other than the Average Cost method will generally apply only to shares purchased after the redemption.

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.

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.

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 election currently in effect for your account(s).

You may send regular or overnight mail 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). The telephone number is 800-437-1000.

Beginning with tax year 2012, if you sell covered shares, you will receive a Form 1099-B reporting the cost basis of those shares, which will be mailed to you prior to February 15th of the following calendar year. The Form 1099-B will also include the gross proceeds received from the sale and whether the gain or loss was short-term or long-term. This information will also be reported to the Internal Revenue Service (IRS).

Yes, you are required to report the cost basis of any shares sold, as well as capital gains and losses on your transactions, for both covered and non-covered mutual fund shares on your individual tax return.

Information regarding the cost basis election applicable to your account(s) will be displayed on your statements and confirmations. You may also verify the information with BNY, the Shareholder Servicing Agent, by calling (800) 437-1000.

Cost basis for non-covered shares may not be calculated for some accounts due to the lack of data for certain past transactions. If this applies to your account, you should consult your tax adviser prior to redeeming non-covered shares.