UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-21120 |
Conestoga Funds |
(Exact name of registrant as specified in charter) |
550 E. Swedesford Road, Suite 120 Wayne, PA | 19087 |
(Address of principal executive offices) | (Zip code) |
Conestoga Capital Advisors 550 E. Swedesford Road, Suite 120 Wayne, PA 19087 |
(Name and address of agent for service) |
With Copy To: |
Josh Deringer, Esq. |
Faegre Drinker Biddle & Reath LLP |
One Logan Square, Suite 2000 |
Philadelphia, PA 19103 |
Registrant's telephone number, including area code: | (800) 320-7790 |
Date of fiscal year end: | September 30 | ||
Date of reporting period: | September 30, 2022 |
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public.
A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) |
Conestoga Funds
SMALL CAP FUND
SMID CAP FUND
MID CAP FUND
MICRO CAP FUND
M a n a g e d B y
ANNUAL REPORT
September 30, 2022
CONESTOGA FUNDS |
November 28, 2022 |
Dear Fellow Shareholders of the Conestoga Funds,
U.S. equity markets have moved sharply lower over the Conestoga Funds’ fiscal year ended September 30, 2022. Inflation has been higher and more persistent than the Federal Reserve forecasted, and they now find themselves playing catch up with increasing interest rates. Higher rates pushed the U.S. dollar significantly higher versus major currencies, and emerging markets’ currencies were hit even harder. There have been few places to hide – bonds, like stocks, have generated negative returns as interest rates move higher.
Investors’ confidence has been shaken by the combination of an uncertain economic outlook and tighter monetary policy. Earnings forecasts for the remainder of 2022 and the full year 2023 have been trimmed (and may need to be reduced further) as the likelihood of a recession rises. Further, continued inflationary pressures are expected to dampen profit margins as companies may be challenged to pass along higher prices to their customers.
The performance of the four Conestoga Funds over the last twelve months has been mixed. Relative to their respective benchmarks, our Micro Cap Fund outperformed, our Small Cap Fund modestly outperformed, and our SMid Cap Fund and Mid Cap Fund modestly underperformed. In the Managers’ Letters that follow, we discuss in detail the factors that led to the relative performance, but broadly speaking, we note that the unusual nature of this downdraft has impacted our results. Surging commodity prices have benefited the sectors that in turn sell these goods and services: Energy, Basic Materials, and Utilities. Meanwhile, the more traditional growth sectors of Technology, Health Care, and Consumer Discretionary have lagged the broad market indices.
Our Conestoga Small Cap Fund remains in soft close and is only available to shareholders and advisors with current investments in the Small Cap Fund. The Small Cap Fund has experienced modest net outflows of just over $50 million over the fiscal year ended September 30, 2022. The SMid Cap Fund received net inflows of $36 million over the fiscal year ended September 30, 2022. Our relatively new Micro Cap Fund and Mid Cap Fund have been mostly flat, with small inflows over the fiscal year ended September 30, 2022. The total net assets of the Conestoga Funds was $3.3 billion as of September 30, 2022.
While the past year has been challenging, I have every confidence in our team at Conestoga. We continue to implement our high-quality and conservative growth investment strategy, and we seek to build on our successful long-term track record.
We thank you for your investment in the Conestoga Funds, it is greatly appreciated.
Sincerely,
Robert M. Mitchell.
Robert M. Mitchell
Chairman and Chief Executive Officer
1
CONESTOGA FUNDS |
November 28, 2022 |
Dear Fellow Shareholders,
A combination of persistent inflation, rising interest rates, recessionary signals and geopolitical uncertainty has put strong downward pressure on equity markets over the Conestoga Funds’ fiscal year ended September 30, 2022. Valuations for growth equities – particularly the traditional growth sectors of Technology, Health Care and Consumer Discretionary – have fallen significantly, impacting the holdings of the Conestoga Funds. Meanwhile, the smaller-weighted Energy, Basic Materials and Utilities sectors have generally outperformed as they are more easily able to pass along the underlying commodity inflation to their customer base.
The uneven performance of small and mid capitalization stocks over the last 12 months has been accompanied by historic levels of volatility. Through the first nine months of 2022, 63% of trading days in the Russell 2000 Index were either up or down more than +/- 1%. Only 2008 has seen more days of positive/negative 1% swings in the index (source: Furey Research Partners). These elevated levels of volatility combined with an unprecedented spike in 10-year Treasury yields, narrow sector leadership, and the recent outperformance of loss-makers has made this an increasingly difficult environment to navigate. The Conestoga Funds have not been immune to this less-than-ideal backdrop for active equity managers. Our Funds have experienced higher-than-usual swings in daily relative performance as evidenced by the number of times the Funds outperform or underperform their respective indices by more than 1% in a single day. We expect this type of market volatility to persist until there is more clarity on when the Fed will pause their current tightening cycle, bond yields begin to normalize, and profitable companies assume market leadership.
While we aspire to outperform in volatile and down markets such as the past year, this has been more challenging in the current environment. Relative to their respective benchmarks, the Conestoga Micro Cap Fund (Micro Cap Fund) outperformed, the Conestoga Small Cap Fund (Small Cap Fund) modestly outperformed, and the Conestoga SMid Cap Fund (SMid Cap Fund) and the Conestoga Mid Cap Fund (Mid Cap Fund) modestly underperformed. We detail the factors behind our relative performance in the sections that follow.
SMALL CAP FUND PERFORMANCE REVIEW
For the twelve months ended September 30, 2022, the Conestoga Small Cap Fund (Investors Class Shares) modestly outperformed the Russell 2000 Growth Index. The Small Cap Fund declined -28.78% versus the Russell 2000 Growth Index decline of -29.27%. Most of the outperformance for the year was due to positive sector allocation effects while stock selection effects were mixed. The biggest contributions to relative performance came from the Technology, Telecommunications and Utilities sectors with Industrials and Energy being the largest laggards.
Stock selection was most positive in the Technology sector with our positions in Model N. Inc. (MODN), Simulations Plus, Inc. (SLP), and Paycor HCM, Inc. (PYCR) being the most additive. MODN has outperformed after noting that the strength in bookings have
2
come from new logos and cross-sells to customers, providing a nice compliment to SaaS transitions, of which there were three new signings during the year. The strategy also benefited from an underweight to the poorly performing semiconductor industry.
Our lone position in the Telecommunications sector, Vocera Communications, Inc. (VCRA), was up sharply after announcing a definitive agreement to be acquired by Stryker Corp. (SYK) in an all-cash transaction for $79.25. This price represented a 27% premium to the prior day’s close. The acquisition closed on February 23, 2022. Utilities was another bright spot in the portfolio with our positions in Casella Waste Systems, Inc. (CWST) and Evoqua Water Technologies Corp. (AQUA) both adding value to the portfolio.
The Industrials sector was the biggest detractor from relative returns with our positions in Trex Company, Inc. (TREX) and Mesa Laboratories, Inc. (MLAB) declining the most. TREX has corrected due to concerns about the housing market given higher interest rates and the pull forward in demand during the pandemic. In addition, our lack of exposure to the strong performing Energy sector was a headwind for relative results.
SMID CAP FUND PERFORMANCE REVIEW
The Conestoga SMid Cap Fund (Investors Class Shares) declined -31.46% over the twelve months ended September 30, 2022. This modestly trails the Russell 2500 Growth Index decline of -29.39%. The underperformance for the year was largely attributable to negative stock selection effects while sector allocation effects were slightly positive. The biggest detractors from relative performance came from the Energy and Health Care sectors with Industrials and Utilities being the largest contributors.
The Fund’s lack of exposure to the Energy sector continues to weigh on relative returns as it was the Index’s best performer for the trailing 12 months and now makes up more than 6% of the benchmark. The SMid Cap Fund has no holdings in the Energy sector. We typically find limited candidates for investment in the types of profitable and sustainable growth companies we seek for the Fund, and we shy away from companies that are dependent on a commodity price input (such as oil or natural gas).
Negative stock selection effects within the Health Care sector were broad-based with 9 of 12 portfolio holdings detracting from relative returns. Neogen Corp. (NEOG), CareDx, Inc. (CDNA), and Definitive Healthcare Corp. (DH) were the biggest laggards. Long-time holding Neogen Corp. (NEOG) was down significantly as earnings declined more than expected and the company continues to work through the operational issues of its food safety business merger with 3M. DH continues to be impacted by macroeconomic factors such as lengthened sales cycles, particularly when signing new business. Demand for the company’s offerings remain strong, but the near-term continues to be impacted by the increased scrutiny on each deal.
On the positive side, the Industrials sector benefited from positive stock selection, particularly from our positions in Jack Henry & Associates, Inc. (JKHY) and Fair Isaac Corp. (FICO). Casella Waste Systems, Inc. (CWST), our lone holding in the Utilities sector, was also additive over the Fund’s fiscal year.
3
MID CAP FUND PERFORMANCE REVIEW
The Conestoga Mid Cap Fund (Investors Class Shares) declined -31.33% over the 12 months ended September 30, 2022. This trailed the Russell Midcap Growth Index return of -29.50%. Sector allocations detracted from relative returns, while stock selection effects were modestly positive.
The lower growth-oriented sectors of the benchmark Russell Midcap Growth Index outperformed over the Fund’s fiscal year, led by the Energy sector, which rose over 40% during the period. While the Energy sector represents less than 5% of the Index, it contributed significantly to return in a sharply down period. The Conestoga Mid Cap Fund has no positions in this sector, which we typically underweight given its slower growth and dependence on an underlying commodity price.
The Health Care sector was the most difficult sector from a stock selection perspective. Our position in Align Technology Inc. (ALGN), maker of the Invisalign clear aligner systems, fell as demand dropped for their elective/non-essential offerings. Other positions in the Health Care sector which lagged the Index Health Care returns included Masimo Corp. (MASI), IDEXX Laboratories Inc. (IDXX), and Teleflex Inc. (TFX). A bright spot in the sector was our long-time position Repligen Corp. (RGEN), which we originally purchased in the Small Cap Fund in 2014.
Stock selection effects were most positive in the Consumer Discretionary sector, led by Rollins Inc. (ROL). The parent company of Orkin Pest Control and Western Pest Services continued to grow its revenues and earnings and benefited from a more recession-proof industry. We originally purchased ROL into the Small Cap Fund nearly 20 years ago, and we are pleased that the stock still has a home in our Mid Cap Fund. Also benefiting relative return in the Consumer Discretionary sector was Tractor Supply Co. (TSCO), a retailer that has delivered better-than-expected revenues and earnings despite a challenging macro environment.
Other better performing sectors include the Utilities, Basic Materials and Consumer Staples sectors, each of which hold companies which benefited from underlying inflation in the goods they sell and/or have more defensive positions. The Mid Cap Fund does have one position in the Utilities sector – Waste Connections Inc. (WCN) – a waste hauler with a strong competitive position.
MICRO CAP FUND PERFORMANCE REVIEW
The Conestoga Micro Cap Fund (Investors Class Shares) outperformed the Russell Microcap Growth Index over the Fund’s fiscal year ended September 30, 2022. The Micro Cap Fund (Investors Class) declined -31.88% versus the Russell Microcap Growth Index decline of -37.06%. We expect our investment strategy to outperform in down markets, and we are pleased that the Micro Cap Fund was able to achieve this goal. The outperformance was largely driven by stock selection, although sector allocations also added to relative return.
Stock selection was strongest in the Telecommunications sector, where the Fund’s two positions both experienced sharp appreciation. Vocera Communications Inc. (VCRA) was acquired by Stryker Corp. (SYK) in an all-cash transaction at a 27% premium to VCRA’s
4
closing price prior to the announcement. Digi International Inc. (DGII) rose over 40% during the third quarter of 2022 after reporting quarterly results which included higher levels of recurring revenue.
The Technology sector also provided significant positive stock selection effects, led by the Fund’s positions in SiTime Corporation (SITM) and Simulations Plus Inc. (SLP). SITM has benefited from the restructuring of the global supply chain, as many manufacturers shift from quartz to the more widely available and scalable silicon timing solutions. Partially offsetting these positive effects was the weaker performance of UserTesting Inc. (USER), which had reported revenue and earnings below investor expectations. We note that USER announced a plan to become a private company in October, after the Fund’s fiscal year-end, and the stock appreciated significantly.
Stock selection proved most challenging in the Health Care sector. Among the laggards was Alpha Teknova Inc. (TKNO) which declined on weaker-than-expected revenues and earnings as its customer base (early-stage biotechnology and pharmaceutical companies) deferred orders due to macroeconomic and funding uncertainty. Health Catalyst Inc. (HCAT), a provider of data analytics to healthcare systems, moved steadily lower over the Fund’s fiscal year as hospitals tighten their budgets. On the positive side, the Fund’s position in IntriCon Corporation (IIN) rose sharply following the announcement of an agreement to be acquired by private equity firm Altaris Capital in the first quarter of 2022.
Our position in Laird Superfood Inc. (LSF), our sole holding in the Consumer Staples sector, also detracted from relative returns over the Fund’s fiscal year. LSF’s use of cash as it seeks to grow its specialty plant-based foods business became a drag on its results and we removed the stock from the Fund in early 2022.
OUR OUTLOOK
With equity markets at multi-year lows and the outlook for the economy uncertain, we remain focused on identifying those companies that we believe can grow their earnings through the business cycle. In our opinion, there is growing reason for optimism for investing in small and mid capitalization stocks. The price-earnings ratio of the Russell 2000 Growth stands near 10-year lows. After underperforming large capitalization stocks for over ten years (largely due to the outsized performance of the mega capitalization FAANG technology stocks), small capitalization stocks’ relative valuation is also at historically low levels. While the economic outlook, inflation, and global events may cause continuing investor frustration in the near- to mid-term, we believe small capitalization stocks are beginning to look much more attractive for long-term investors.
5
On behalf of all the members of Conestoga Capital Advisors, we thank you for your investment in the Funds.
Sincerely,
Robert M. Mitchell, CFA |
Joseph F. Monahan III, CFA |
Managing Partner – Co-Portfolio Manager |
Managing Partner – Co-Portfolio Manager |
Small and SMid Cap Funds |
Small, SMid and Micro Cap Funds |
Derek S. Johnston, CFA |
David R. Neiderer, CFA |
Partner – Co-Portfolio Manager |
Partner – Co-Portfolio Manager |
SMid and Mid Cap Funds |
Micro Cap Fund |
Ted Chang |
|
Co-Portfolio Manager |
|
Mid Cap Fund |
6
CONESTOGA SMALL CAP FUND - INSTITUTIONAL CLASS |
Comparison of the Change in Value of a $250,000 Investment in
Conestoga Small Cap Fund – Institutional Class (since inception on 08/13/2014)
versus the Russell 2000® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||
1 Year |
3 Years |
5 Years |
Since |
||
Conestoga Small Cap Fund - Institutional Class |
-28.62% |
2.86% |
6.25% |
10.06% |
|
Russell 2000® Growth Index |
-29.27% |
2.94% |
3.60% |
6.29% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell 2000® Growth Index, measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® companies with higher price-to-value ratios and higher forecasted growth values. The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities in the Russell 3000® Index based on a combination of their market capitalization and current index membership.
7
CONESTOGA SMALL CAP FUND - INVESTORS CLASS |
10 Year Comparison of the Change in Value of a $10,000
Investment in Conestoga Small Cap Fund – Investors Class
versus the Russell 2000® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||||
1 Year |
3 Years |
5 Years |
10 Years |
15 Years |
Since |
||
Conestoga Small Cap Fund - Investors Class |
-28.78% |
2.65% |
6.03% |
10.98% |
9.06% |
10.74% |
|
Russell 2000® Growth Index |
-29.27% |
2.94% |
3.60% |
8.81% |
6.82% |
9.60% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell 2000® Growth Index, measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® companies with higher price-to-value ratios and higher forecasted growth values. The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities in the Russell 3000® Index based on a combination of their market capitalization and current index membership.
8
CONESTOGA SMID CAP FUND - INSTITUTIONAL CLASS |
Comparison of the Change in Value of a $250,000 Investment in
Conestoga SMid Cap Fund – Institutional Class (since inception on 12/15/2014)
versus the Russell 2500® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||
1 Year |
3 Years |
5 Years |
Since |
||
Conestoga SMid Cap Fund - Institutional Class |
-31.27% |
1.94% |
7.56% |
9.76% |
|
Russell 2500® Growth Index |
-29.39% |
4.76% |
6.30% |
8.04% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell 2500® Growth Index, measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500® companies with higher growth earnings potential as defined by Russell’s leading style methodology. The Russell 2500® Index measures the performance of the small- to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500® Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities in the Russell 3000® Index based on a combination of their market capitalization and current index membership.
9
CONESTOGA SMID CAP FUND - INVESTORS CLASS |
Comparison of the Change in Value of a $10,000 Investment in
Conestoga SMid Cap Fund – Investors Class (since inception on 01/21/2014)
versus the Russell 2500® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||
1 Year |
3 Years |
5 Years |
Since |
||
Conestoga SMid Cap Fund - Investors Class |
-31.46% |
1.67% |
7.29% |
7.04% |
|
Russell 2500® Growth Index |
-29.39% |
4.76% |
6.30% |
7.25% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell 2500® Growth Index, measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500® companies with higher growth earnings potential as defined by Russell’s leading style methodology. The Russell 2500® Index measures the performance of the small- to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. The Russell 2500® Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities in the Russell 3000® Index based on a combination of their market capitalization and current index membership.
10
CONESTOGA MID CAP FUND - INSTITUTIONAL CLASS |
Comparison of the Change in Value of a $250,000 Investment in
Conestoga Mid Cap Fund – Institutional Class (since inception on 6/29/2021)
versus the Russell Midcap® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||
1 Year |
Since |
||||
Conestoga Mid Cap Fund - Institutional Class |
-31.20% |
-23.89% |
|||
Russell Midcap® Growth Index |
-29.50% |
-25.04% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell Midcap® Growth Index, measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap® Growth Index is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap growth market.
11
CONESTOGA MID CAP FUND - INVESTORS CLASS |
Comparison of the Change in Value of a $10,000 Investment in
Conestoga Mid Cap Fund – Investors Class (since inception on 6/29/2021)
versus the Russell Midcap® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
|||||
1 Year |
Since |
||||
Conestoga Mid Cap Fund - Investors Class |
-31.33% |
-24.06% |
|||
Russell Midcap® Growth Index |
-29.50% |
-25.04% |
The Fund’s past performance does not predict its future performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell Midcap® Growth Index, measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap® Growth Index is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap growth market.
12
CONESTOGA MICRO CAP FUND - INSTITUTIONAL CLASS |
Comparison of the Change in Value of a $250,000 Investment in
Conestoga Micro Cap Fund – Institutional Class (since inception on 11/30/2018)
versus the Russell Microcap® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
||||
1 Year |
3 Years |
Since |
||
Conestoga Micro Cap Fund - Institutional Class |
-31.65% |
9.54% |
9.59% |
|
Russell Microcap® Growth Index |
-37.06% |
4.40% |
1.03% |
The Fund commenced operations as a series of Conestoga Funds on December 20, 2021, when all of the assets of Conestoga Micro Cap Fund, LP (the “Predecessor Fund”) transferred to Institutional Class and Investors Class shares of the Fund. The Fund’s investment objectives, policies, guidelines and restrictions are in all material respects equivalent to those of the Predecessor Fund, and the investment adviser and portfolio managers for the Fund are the same as those of the Predecessor Fund. Accordingly, the performance information shown for periods prior to December 20, 2021 is that of the Predecessor Fund. The Predecessor Fund was not registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the Predecessor Fund had been registered under the 1940 Act, its performance may have been adversely affected. Accordingly, future Fund performance may be different than the Predecessor Fund’s restated past performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell Microcap® Growth Index, measures the performance of those Russell Microcap® companies with higher price-to-book ratios and higher forecasted growth values.
13
CONESTOGA MICRO CAP FUND - INVESTORS CLASS |
Comparison of the Change in Value of a $10,000 Investment in
Conestoga Micro Cap Fund – Investors Class (since inception on 11/30/2018)
versus the Russell Microcap® Growth Index
Average Annual Total Returns for the Periods Ended September 30, 2022 |
||||
1 Year |
3 Years |
Since |
||
Conestoga Micro Cap Fund - Investors Class |
-31.88% |
9.23% |
9.29% |
|
Russell Microcap® Growth Index |
-37.06% |
4.40% |
1.03% |
The Fund commenced operations as a series of Conestoga Funds on December 20, 2021, when all of the assets of Conestoga Micro Cap Fund, LP (the “Predecessor Fund”) transferred to Institutional Class and Investors Class shares of the Fund. The Fund’s investment objectives, policies, guidelines and restrictions are in all material respects equivalent to those of the Predecessor Fund, and the investment adviser and portfolio managers for the Fund are the same as those of the Predecessor Fund. Accordingly, the performance information shown for periods prior to December 20, 2021 is that of the Predecessor Fund. The Predecessor Fund was not registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the Predecessor Fund had been registered under the 1940 Act, its performance may have been adversely affected. Accordingly, future Fund performance may be different than the Predecessor Fund’s restated past performance. The graph and table shown above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares but do reflect the reinvestment of all dividends and distributions. The Fund’s benchmark, the Russell Microcap® Growth Index, measures the performance of those Russell Microcap® companies with higher price-to-book ratios and higher forecasted growth values.
14
CONESTOGA SMALL CAP FUND |
Diversification*
(% of Net Assets)
Top Ten Equity Holdings
Security Description |
% of Net Assets |
|
Casella Waste Systems, Inc. - Class A |
4.5% |
|
Exponent, Inc. |
4.1% |
|
SPS Commerce, Inc. |
4.1% |
|
Descartes Systems Group, Inc. (The) |
3.9% |
|
Model N, Inc. |
3.8% |
|
Novanta, Inc. |
3.3% |
|
AAON, Inc. |
3.1% |
|
Fox Factory Holding Corporation |
3.0% |
|
FirstService Corporation |
3.0% |
|
Omnicell, Inc. |
2.8% |
* |
Industry categories represent the industry assigned at the time of purchase. See Note 7 of the Notes to Financial Statements. |
15
CONESTOGA SMALL CAP FUND |
||||||||
COMMON STOCKS — 95.9% |
Shares |
Value |
||||||
Basic Materials — 6.4% |
||||||||
Metal Fabricting — 3.8% |
||||||||
Omega Flex, Inc. |
373,109 | $ | 34,557,356 | |||||
RBC Bearings, Inc. (a) |
389,675 | 80,978,362 | ||||||
115,535,718 | ||||||||
Specialty Chemicals — 2.6% |
||||||||
Balchem Corporation |
638,560 | 77,636,125 | ||||||
Consumer Discretionary — 5.2% |
||||||||
Home Improvement Retailers — 2.2% |
||||||||
SiteOne Landscape Supply, Inc. (a) |
646,330 | 67,308,806 | ||||||
Recreational Products — 3.0% |
||||||||
Fox Factory Holding Corporation (a) |
1,146,388 | 90,656,363 | ||||||
Consumer Staples — 1.2% |
||||||||
Nondurable Household Products — 1.2% |
||||||||
WD-40 Company |
200,351 | 35,209,685 | ||||||
Financials — 0.9% |
||||||||
Financial Data Providers — 0.9% |
||||||||
Clearwater Analytics Holdings, Inc. - Class A (a) |
1,612,683 | 27,076,948 | ||||||
Health Care — 13.0% |
||||||||
Biotechnology — 0.5% |
||||||||
Vericel Corporation (a) |
703,540 | 16,322,128 | ||||||
Health Care Management Services — 0.7% |
||||||||
National Research Corporation |
503,399 | 20,035,280 | ||||||
Health Care Services — 2.8% |
||||||||
Omnicell, Inc. (a) |
956,105 | 83,209,818 | ||||||
Medical Equipment — 6.7% |
||||||||
LeMaitre Vascular, Inc. (b) |
1,275,696 | 64,652,273 | ||||||
Merit Medical Systems, Inc. (a) |
1,200,295 | 67,828,670 | ||||||
Repligen Corporation (a) |
360,810 | 67,511,159 | ||||||
199,992,102 | ||||||||
Medical Services — 0.0% (c) |
||||||||
CareDx, Inc. (a) |
5,064 | 86,189 |
16
CONESTOGA SMALL CAP FUND |
||||||||
COMMON STOCKS — 95.9% (Continued) |
Shares |
Value |
||||||
Health Care — 13.0% (Continued) |
||||||||
Medical Supplies — 2.3% |
||||||||
Neogen Corporation (a) |
2,438,566 | $ | 34,066,767 | |||||
Stevanato Group S.p.A. (b) |
2,040,000 | 34,557,600 | ||||||
68,624,367 | ||||||||
Industrials — 27.7% |
||||||||
Building Materials: Other — 3.7% |
||||||||
Simpson Manufacturing Company, Inc. |
856,790 | 67,172,336 | ||||||
Trex Company, Inc. (a) |
978,485 | 42,994,631 | ||||||
110,166,967 | ||||||||
Building: Climate Control — 3.1% |
||||||||
AAON, Inc. |
1,752,325 | 94,415,271 | ||||||
Construction — 2.6% |
||||||||
Construction Partners, Inc. - Class A (a)(b) |
3,035,866 | 79,630,765 | ||||||
Defense — 4.0% |
||||||||
Axon Enterprise, Inc. (a) |
573,110 | 66,337,482 | ||||||
Mercury Systems, Inc. (a) |
1,313,898 | 53,344,259 | ||||||
119,681,741 | ||||||||
Diversified Industrials — 1.7% |
||||||||
ESCO Technologies, Inc. |
676,430 | 49,677,019 | ||||||
Electronic Equipment: Control & Filter — 1.8% |
||||||||
Helios Technologies, Inc. |
1,068,183 | 54,050,060 | ||||||
Electronic Equipment: Gauges & Meters — 2.7% |
||||||||
Mesa Laboratories, Inc. (b) |
325,555 | 45,847,911 | ||||||
Transcat, Inc. (a)(b) |
483,824 | 36,620,639 | ||||||
82,468,550 | ||||||||
Engineering & Contracting Services — 4.1% |
||||||||
Exponent, Inc. |
1,418,105 | 124,325,265 | ||||||
Industrial Suppliers — 1.0% |
||||||||
Hillman Solutions Corporation (a) |
3,824,750 | 28,838,615 | ||||||
Machinery: Construction & Handling — 1.4% |
||||||||
Douglas Dynamics, Inc. (b) |
1,472,915 | 41,271,078 | ||||||
Machinery: Industrial — 1.6% |
||||||||
John Bean Technologies Corporation |
546,830 | 47,027,380 |
17
CONESTOGA SMALL CAP FUND |
||||||||
COMMON STOCKS — 95.9% (Continued) |
Shares |
Value |
||||||
Real Estate — 3.0% |
||||||||
Real Estate Services — 3.0% |
||||||||
FirstService Corporation |
750,235 | $ | 89,285,467 | |||||
Technology — 32.5% |
||||||||
Computer Services — 2.6% |
||||||||
Computer Services, Inc. |
765,289 | 42,664,862 | ||||||
Workiva, Inc. (a) |
465,085 | 36,183,613 | ||||||
78,848,475 | ||||||||
Consumer Digital Services — 0.7% |
||||||||
Definitive Healthcare Corporation - Class A (a) |
1,319,354 | 20,502,761 | ||||||
Shutterstock, Inc. |
5,000 | 250,850 | ||||||
20,753,611 | ||||||||
Production Technology Equipment — 4.5% |
||||||||
Azenta, Inc. |
891,215 | 38,197,475 | ||||||
Novanta, Inc. (a) |
844,165 | 97,627,682 | ||||||
135,825,157 | ||||||||
Software — 24.7% |
||||||||
Altair Engineering, Inc. - Class A (a) |
1,466,230 | 64,836,691 | ||||||
BlackLine, Inc. (a) |
969,915 | 58,097,908 | ||||||
Descartes Systems Group, Inc. (The) (a) |
1,850,196 | 117,542,952 | ||||||
Model N, Inc. (a)(b) |
3,314,719 | 113,462,831 | ||||||
Paycor HCM, Inc. (a) |
2,794,930 | 82,618,131 | ||||||
PROS Holdings, Inc. (a) |
1,829,665 | 45,192,726 | ||||||
Q2 Holdings, Inc. (a) |
1,082,765 | 34,865,033 | ||||||
Simulations Plus, Inc. (b) |
1,510,746 | 73,331,611 | ||||||
SPS Commerce, Inc. (a) |
999,180 | 124,128,131 | ||||||
Vertex, Inc. - Class A (a) |
1,869,290 | 25,553,194 | ||||||
739,629,208 |
18
CONESTOGA SMALL CAP FUND |
||||||||
COMMON STOCKS — 95.9% (Continued) |
Shares |
Value |
||||||
Utilities — 6.0% |
||||||||
Waste & Disposal Services — 4.5% |
||||||||
Casella Waste Systems, Inc. - Class A (a) |
1,755,035 | $ | 134,067,124 | |||||
Water — 1.5% |
||||||||
Evoqua Water Technologies Corporation (a) |
1,337,075 | 44,217,070 | ||||||
Total Investments at Value — 95.9% (Cost $2,237,490,138) |
$ | 2,875,872,352 | ||||||
Other Assets in Excess of Liabilities — 4.1% |
124,506,911 | |||||||
Net Assets — 100.0% |
$ | 3,000,379,263 |
(a) |
Non-income producing security. |
(b) |
The Fund owned 5% or more of the company’s outstanding voting shares thereby making the company an affiliate of the Fund as that term is defined in the Investment Company Act of 1940 (Note 5). |
(c) |
Percentage rounds to less than 0.1%. |
Schedule of Investments uses the Russell ICB Industry and Sector classification. |
|
See accompanying notes to financial statements. |
19
CONESTOGA SMID CAP FUND |
Diversification*
(% of Net Assets)
Top Ten Equity Holdings
Security Description |
% of Net Assets |
|
Casella Waste Systems, Inc. - Class A |
4.6% |
|
Exponent, Inc. |
3.6% |
|
FirstService Corporation |
3.5% |
|
Repligen Corporation |
3.4% |
|
Rollins, Inc. |
3.2% |
|
Jack Henry & Associates, Inc. |
3.2% |
|
Omnicell, Inc. |
3.0% |
|
Descartes Systems Group, Inc. (The) |
2.9% |
|
Pool Corporation |
2.8% |
|
RBC Bearings, Inc. |
2.8% |
* |
Industry categories represent the industry assigned at the time of purchase. See Note 7 of the Notes to Financial Statements. |
20
CONESTOGA SMID CAP FUND |
||||||||
COMMON STOCKS — 97.0% |
Shares |
Value |
||||||
Basic Materials — 4.5% |
||||||||
Metal Fabricating — 2.8% |
||||||||
RBC Bearings, Inc. (a) |
41,991 | $ | 8,726,150 | |||||
Specialty Chemicals — 1.7% |
||||||||
Balchem Corporation |
45,185 | 5,493,592 | ||||||
Consumer Discretionary — 12.0% |
||||||||
Consumer Services: Miscellaneous — 3.2% |
||||||||
Rollins, Inc. |
296,787 | 10,292,573 | ||||||
Education Services — 1.3% |
||||||||
Bright Horizons Family Solutions, Inc. (a) |
71,145 | 4,101,509 | ||||||
Home Improvement Retailers — 1.4% |
||||||||
SiteOne Landscape Supply, Inc. (a) |
43,665 | 4,547,273 | ||||||
Hotels & Motels — 2.0% |
||||||||
Vail Resorts, Inc. |
28,670 | 6,182,399 | ||||||
Recreational Products — 2.8% |
||||||||
Pool Corporation |
28,095 | 8,940,110 | ||||||
Leisure Goods — 1.3% |
||||||||
LCI Industries |
38,850 | 3,941,721 | ||||||
Financials — 0.9% |
||||||||
Financial Data Providers — 0.9% |
||||||||
Clearwater Analytics Holdings, Inc. - Class A (a) |
165,800 | 2,783,782 | ||||||
Health Care — 16.2% |
||||||||
Health Care Services — 3.0% |
||||||||
Omnicell, Inc. (a) |
108,520 | 9,444,496 | ||||||
Medical Equipment — 5.8% |
||||||||
Merit Medical Systems, Inc. (a) |
132,108 | 7,465,423 | ||||||
Repligen Corporation (a) |
57,440 | 10,747,598 | ||||||
18,213,021 | ||||||||
Medical Services — 0.4% |
||||||||
CareDx, Inc. (a) |
81,489 | 1,386,943 |
21
CONESTOGA SMID CAP FUND |
||||||||
COMMON STOCKS — 97.0% (Continued) |
Shares |
Value |
||||||
Health Care — 16.2% (Continued) |
||||||||
Medical Supplies — 7.0% |
||||||||
Bio-Techne Corporation |
23,110 | $ | 6,563,240 | |||||
Neogen Corporation (a) |
183,561 | 2,564,347 | ||||||
Stevanato Group S.p.A. |
191,120 | 3,237,573 | ||||||
Teleflex, Inc. |
22,190 | 4,470,397 | ||||||
West Pharmaceutical Services, Inc. |
21,589 | 5,312,621 | ||||||
22,148,178 | ||||||||
Industrials — 33.7% |
||||||||
Aerospace — 2.4% |
||||||||
HEICO Corporation - Class A |
65,430 | 7,499,587 | ||||||
Building Materials: Other — 3.2% |
||||||||
Simpson Manufacturing Company, Inc. |
50,000 | 3,920,000 | ||||||
Trex Company, Inc. (a) |
144,455 | 6,347,353 | ||||||
10,267,353 | ||||||||
Building: Climate Control — 2.3% |
||||||||
Watsco, Inc. |
28,005 | 7,210,167 | ||||||
Construction — 2.4% |
||||||||
Construction Partners, Inc. - Class A (a) |
289,140 | 7,584,142 | ||||||
Defense — 4.0% |
||||||||
Axon Enterprise, Inc. (a) |
57,720 | 6,681,090 | ||||||
Mercury Systems, Inc. (a) |
149,910 | 6,086,346 | ||||||
12,767,436 | ||||||||
Electrical Equipment: Gauges & Meters — 1.3% |
||||||||
Cognex Corporation |
100,000 | 4,145,000 | ||||||
Engineering & Contracting Services — 3.6% |
||||||||
Exponent, Inc. |
130,405 | 11,432,606 | ||||||
Industrial Suppliers — 1.2% |
||||||||
Hillman Solutions Corporation (a) |
515,895 | 3,889,848 | ||||||
Machinery: Construction & Handling — 1.6% |
||||||||
Douglas Dynamics, Inc. |
176,782 | 4,953,432 | ||||||
Machinery: Engines — 0.9% |
||||||||
Generac Holdings, Inc. (a) |
16,040 | 2,857,366 |
22
CONESTOGA SMID CAP FUND |
||||||||
COMMON STOCKS — 97.0% (Continued) |
Shares |
Value |
||||||
Industrials — 33.7% (Continued) |
||||||||
Machinery: Industrial — 2.9% |
||||||||
EVI Industries, Inc. (a) |
270,917 | $ | 4,914,434 | |||||
John Bean Technologies Corporation |
48,805 | 4,197,230 | ||||||
9,111,664 | ||||||||
Machinery: Specialty — 2.1% |
||||||||
Graco, Inc. |
112,915 | 6,769,254 | ||||||
Professional Business Support Services — 2.6% |
||||||||
Fair Isaac Corporation (a) |
20,295 | 8,361,743 | ||||||
Transaction Processing Services — 3.2% |
||||||||
Jack Henry & Associates, Inc. |
54,920 | 10,010,268 | ||||||
Real Estate — 3.5% |
||||||||
Real Estate Services — 3.5% |
||||||||
FirstService Corporation |
93,575 | 11,136,361 | ||||||
Technology — 21.6% |
||||||||
Computer Services — 3.1% |
||||||||
Gartner, Inc. (a) |
20,840 | 5,766,220 | ||||||
Workiva, Inc. (a) |
51,483 | 4,005,377 | ||||||
9,771,597 | ||||||||
Consumer Digital Services — 1.2% |
||||||||
Definitive Healthcare Corporation - Class A (a) |
257,755 | 4,005,513 | ||||||
Production Technology Equipment — 2.5% |
||||||||
Novanta, Inc. (a) |
68,645 | 7,938,794 | ||||||
Software — 14.8% |
||||||||
Altair Engineering, Inc. - Class A (a) |
84,070 | 3,717,576 | ||||||
Descartes Systems Group, Inc. (The) (a) |
145,075 | 9,216,615 | ||||||
Five9, Inc. (a) |
50,000 | 3,749,000 | ||||||
Guidewire Software, Inc. (a) |
69,445 | 4,276,423 | ||||||
Lightspeed Commerce, Inc. (a) |
110,000 | 1,933,800 | ||||||
Paycor HCM, Inc. (a) |
132,925 | 3,929,263 | ||||||
Q2 Holdings, Inc. (a) |
128,105 | 4,124,981 | ||||||
SPS Commerce, Inc. (a) |
68,334 | 8,489,133 | ||||||
Tyler Technologies, Inc. (a) |
21,205 | 7,368,738 | ||||||
46,805,529 |
23
CONESTOGA SMID CAP FUND |
||||||||
COMMON STOCKS — 97.0% (Continued) |
Shares |
Value |
||||||
Utilities — 4.6% |
||||||||
Waste & Disposal Services — 4.6% |
||||||||
Casella Waste Systems, Inc. - Class A (a) |
192,505 | $ | 14,705,457 | |||||
Total Investments at Value — 97.0% (Cost $293,305,734) |
$ | 307,424,864 | ||||||
Other Assets in Excess of Liabilities — 3.0% |
9,381,043 | |||||||
Net Assets — 100.0% |
$ | 316,805,907 |
(a) |
Non-income producing security. |
Schedule of Investments uses the Russell ICB Industry and Sector classification. |
|
See accompanying notes to financial statements. |
24
CONESTOGA MID CAP FUND |
Diversification*
(% of Net Assets)
Top Ten Equity Holdings
Security Description |
% of Net Assets |
|
Rollins, Inc. |
4.6% |
|
Waste Connections, Inc. |
4.5% |
|
CoStar Group, Inc. |
4.4% |
|
Copart, Inc. |
4.3% |
|
Tyler Technologies, Inc. |
4.1% |
|
HEICO Corporation - Class A |
4.0% |
|
Gartner, Inc. |
3.9% |
|
Jack Henry & Associates, Inc. |
3.9% |
|
Verisk Analytics, Inc. |
3.8% |
|
Pool Corporation |
3.7% |
* |
Industry categories represent the industry assigned at the time of purchase. See Note 7 of the Notes to Financial Statements. |
25
CONESTOGA MID CAP FUND |
||||||||
COMMON STOCKS — 98.7% |
Shares |
Value |
||||||
Consumer Discretionary — 18.1% |
||||||||
Consumer Services: Miscellaneous — 8.9% |
||||||||
Copart, Inc. (a) |
720 | $ | 76,608 | |||||
Rollins, Inc. |
2,395 | 83,059 | ||||||
159,667 | ||||||||
Education Services — 1.5% |
||||||||
Bright Horizons Family Solutions, Inc. (a) |
465 | 26,807 | ||||||
Hotels & Motels — 2.3% |
||||||||
Vail Resorts, Inc. |
195 | 42,050 | ||||||
Recreational Products — 3.7% |
||||||||
Pool Corporation |
210 | 66,824 | ||||||
Specialty Retail — 1.7% |
||||||||
Tractor Supply Company |
165 | 30,670 | ||||||
Financials — 2.8% |
||||||||
Financial Data Providers- 2.8% |
||||||||
FactSet Research Systems, Inc. |
125 | 50,014 | ||||||
Health Care — 20.5% |
||||||||
Health Care Services — 3.2% |
||||||||
Veeva Systems, Inc. - Class A (a) |
355 | 58,532 | ||||||
Medical Equipment — 7.6% |
||||||||
IDEXX Laboratories, Inc. (a) |
150 | 48,870 | ||||||
Repligen Corporation (a) |
320 | 59,875 | ||||||
STERIS plc |
170 | 28,268 | ||||||
137,013 | ||||||||
Medical Supplies — 9.7% |
||||||||
Align Technology, Inc. (a) |
120 | 24,853 | ||||||
Bio-Techne Corporation |
205 | 58,220 | ||||||
Teleflex, Inc. |
140 | 28,204 | ||||||
West Pharmaceutical Services, Inc. |
255 | 62,751 | ||||||
174,028 | ||||||||
Industrials — 23.7% |
||||||||
Aerospace — 4.0% |
||||||||
HEICO Corporation - Class A |
625 | 71,638 |
26
CONESTOGA MID CAP FUND |
||||||||
COMMON STOCKS — 98.7% (Continued) |
Shares |
Value |
||||||
Industrials — 23.7% (Continued) |
||||||||
Building: Climate Control — 1.7% |
||||||||
Watsco, Inc. |
120 | $ | 30,895 | |||||
Containers & Packaging — 1.5% |
||||||||
Ball Corporation |
570 | 27,542 | ||||||
Electronic Equipment: Gauges & Meters — 1.2% |
||||||||
Cognex Corporation |
540 | 22,383 | ||||||
Electrical Equipment: Pollution Control — 1.5% |
||||||||
Xylem, Inc. |
315 | 27,518 | ||||||
Machinery: Engines — 1.5% |
||||||||
Generac Holdings, Inc. (a) |
150 | 26,721 | ||||||
Machinery: Specialty — 3.1% |
||||||||
Graco, Inc. |
915 | 54,854 | ||||||
Professional Business Support Services — 5.3% |
||||||||
TransUnion |
450 | 26,771 | ||||||
Verisk Analytics, Inc. |
400 | 68,212 | ||||||
94,983 | ||||||||
Transaction Processing Services — 3.9% |
||||||||
Jack Henry & Associates, Inc. |
385 | 70,174 | ||||||
Real Estate — 4.4% |
||||||||
Real Estate Services — 4.4% |
||||||||
CoStar Group, Inc. (a) |
1,135 | 79,053 | ||||||
Technology — 24.7% |
||||||||
Computer Services — 3.9% |
||||||||
Gartner, Inc. (a) |
255 | 70,556 | ||||||
Software — 20.8% |
||||||||
ANSYS, Inc. (a) |
255 | 56,534 | ||||||
Avalara, Inc. (a) |
200 | 18,360 | ||||||
Coupa Software, Inc. (a) |
340 | 19,992 | ||||||
Five9, Inc. (a) |
275 | 20,620 | ||||||
Fortinet, Inc. (a) |
1,250 | 61,413 | ||||||
Guidewire Software, Inc. (a) |
395 | 24,324 |
27
CONESTOGA MID CAP FUND |
||||||||
COMMON STOCKS — 98.7% (Continued) |
Shares |
Value |
||||||
Technology — 24.7% (Continued) |
||||||||
Software — 20.8% (Continued) |
||||||||
Lightspeed Commerce, Inc. (a) |
1,075 | $ | 18,899 | |||||
Qualtrics International, Inc. - Class A (a) |
1,830 | 18,629 | ||||||
Roper Technologies, Inc. |
175 | 62,937 | ||||||
Tyler Technologies, Inc. (a) |
210 | 72,974 | ||||||
374,682 | ||||||||
Utilities — 4.5% |
||||||||
Waste & Disposal Services — 4.5% |
||||||||
Waste Connections, Inc. |
595 | 80,402 | ||||||
Total Investments at Value — 98.7% (Cost $2,361,572) |
$ | 1,777,006 | ||||||
Other Assets in Excess of Liabilities — 1.3% |
24,465 | |||||||
Net Assets — 100.0% |
$ | 1,801,471 |
(a) |
Non-income producing security. |
Schedule of Investments uses the Russell ICB Industry and Sector classification. |
|
See accompanying notes to financial statements. |
28
CONESTOGA MICRO CAP FUND |
Diversification*
(% of Net Assets)
Top Ten Equity Holdings
Security Description |
% of Net Assets |
|
Digi International, Inc. |
5.2% |
|
Model N, Inc. |
5.1% |
|
Palomar Holdings, Inc. |
4.8% |
|
NV5 Global, Inc. |
4.7% |
|
Transcat, Inc. |
4.6% |
|
Construction Partners, Inc. - Class A |
4.5% |
|
Computer Services, Inc. |
4.5% |
|
BioLife Solutions, Inc. |
4.2% |
|
Simulations Plus, Inc. |
3.8% |
|
OrthoPediatrics Corporation |
3.7% |
* |
Industry categories represent the industry assigned at the time of purchase. See Note 7 of the Notes to Financial Statements. |
29
CONESTOGA MICRO CAP FUND |
||||||||
COMMON STOCKS — 98.9% |
Shares |
Value |
||||||
Basic Materials — 1.9% |
||||||||
Metal Fabricating — 1.9% |
||||||||
Omega Flex, Inc. |
471 | $ | 43,624 | |||||
Consumer Discretionary — 3.4% |
||||||||
Entertainment — 3.4% |
||||||||
Thunderbird Entertainment Group, Inc. (a) |
33,801 | 75,190 | ||||||
Financials — 4.8% |
||||||||
Property & Casualty Insurance — 4.8% |
||||||||
Palomar Holdings, Inc. (a) |
1,296 | 108,501 | ||||||
Health Care — 25.1% |
||||||||
Biotechnology — 8.3% |
||||||||
Alpha Teknova, Inc. (a) |
11,311 | 37,779 | ||||||
Codexis, Inc. (a) |
4,071 | 24,670 | ||||||
NanoString Technologies, Inc. (a) |
4,230 | 54,017 | ||||||
Vericel Corporation (a) |
3,049 | 70,737 | ||||||
187,203 | ||||||||
Health Care Facilities — 3.1% |
||||||||
U.S. Physical Therapy, Inc. |
924 | 70,242 | ||||||
Health Care Services — 2.0% |
||||||||
Health Catalyst, Inc. (a) |
4,502 | 43,669 | ||||||
Medical Equipment — 10.4% |
||||||||
BioLife Solutions, Inc. (a) |
4,199 | 95,527 | ||||||
OrthoPediatrics Corporation (a) |
1,829 | 84,390 | ||||||
Semler Scientific, Inc. (a) |
1,471 | 55,236 | ||||||
235,153 | ||||||||
Medical Services — 1.3% |
||||||||
CareDx, Inc. (a) |
1,750 | 29,785 | ||||||
Industrials — 34.5% |
||||||||
Construction — 4.5% |
||||||||
Construction Partners, Inc. - Class A (a) |
3,853 | 101,064 |
30
CONESTOGA MICRO CAP FUND |
||||||||
COMMON STOCKS — 98.9% (Continued) |
Shares |
Value |
||||||
Industrials — 34.5% (Continued) |
||||||||
Electronic Equipment: Gauges & Meters — 6.9% |
||||||||
Mesa Laboratories, Inc. |
371 | $ | 52,248 | |||||
Transcat, Inc. (a) |
1,365 | 103,317 | ||||||
155,565 | ||||||||
Engineering & Contracting Services — 2.0% |
||||||||
Willdan Group, Inc. (a) |
3,061 | 45,333 | ||||||
Industrial Suppliers — 4.1% |
||||||||
CryoPort, Inc. (a) |
2,432 | 59,244 | ||||||
Hillman Solutions Corporation (a) |
4,520 | 34,081 | ||||||
93,325 | ||||||||
Machinery: Construction & Handling — 2.5% |
||||||||
Douglas Dynamics, Inc. |
2,047 | 57,357 | ||||||
Industrial Suppliers — 7.6% |
||||||||
Montrose Environmental Group, Inc. (a) |
1,940 | 65,281 | ||||||
NV5 Global, Inc. (a) |
849 | 105,123 | ||||||
170,404 | ||||||||
Security Services — 3.5% |
||||||||
ShotSpotter, Inc. (a) |
2,740 | 78,802 | ||||||
Transaction Processing Services — 3.4% |
||||||||
I3 Verticals, Inc. - Class A (a) |
3,852 | 77,156 | ||||||
Technology — 24.0% |
||||||||
Industrial Suppliers — 4.5% |
||||||||
Computer Services, Inc. |
1,807 | 100,740 | ||||||
Software — 19.5% |
||||||||
Model N, Inc. (a) |
3,363 | 115,116 | ||||||
Olo, Inc. - Class A (a) |
5,765 | 45,544 | ||||||
PROS Holdings, Inc. (a) |
3,053 | 75,409 | ||||||
Simulations Plus, Inc. |
1,753 | 85,091 | ||||||
TECSYS, Inc. |
2,925 | 61,835 | ||||||
UserTesting, Inc. (a) |
14,975 | 58,702 | ||||||
441,697 |
31
CONESTOGA MICRO CAP FUND |
||||||||
COMMON STOCKS — 98.9% (Continued) |
Shares |
Value |
||||||
Telecommunications — 5.2% |
||||||||
Telecommunications Equipment — 5.2% |
||||||||
Digi International, Inc. (a) |
3,405 | $ | 117,711 | |||||
Total Investments at Value — 98.9% (Cost $2,435,592) |
$ | 2,232,521 | ||||||
Other Assets in Excess of Liabilities — 1.1% |
25,741 | |||||||
Net Assets — 100.0% |
$ | 2,258,262 |
(a) |
Non-income producing security. |
Schedule of Investments uses the Russell ICB Industry and Sector classification. |
|
See accompanying notes to financial statements. |
32
CONESTOGA FUNDS |
||||||||
|
Conestoga |
Conestoga |
||||||
ASSETS |
||||||||
Investments in unaffiliated securities, at cost |
$ | 1,796,601,252 | $ | 293,305,734 | ||||
Investments in affiliated securities, at cost |
440,888,886 | — | ||||||
Total investments, at cost |
$ | 2,237,490,138 | $ | 293,305,734 | ||||
Investments in unaffiliated securities, at value (Note 2) |
$ | 2,386,497,644 | $ | 307,424,864 | ||||
Investments in affiliated securities, at value (Notes 2 & 5) |
489,374,708 | — | ||||||
Total investments, at value |
2,875,872,352 | 307,424,864 | ||||||
Cash (Note 2) |
131,590,372 | 12,477,770 | ||||||
Receivable for capital shares sold |
703,020 | 192,170 | ||||||
Receivable for investment securities sold |
444,209 | 2,937,438 | ||||||
Dividends and interest receivable |
377,458 | 22,210 | ||||||
Other assets |
40,665 | 14,622 | ||||||
Total assets |
3,009,028,076 | 323,069,074 | ||||||
LIABILITIES |
||||||||
Payable for capital shares redeemed |
3,332,555 | 497,503 | ||||||
Payable for investment securities purchased |
2,953,329 | 5,487,219 | ||||||
Payable to Adviser (Note 4) |
2,066,555 | 162,967 | ||||||
Accrued distribution fees (Note 4) |
116,439 | 5,911 | ||||||
Accrued Trustees’ fees (Note 4) |
50,175 | 50,175 | ||||||
Payable to administrator (Note 4) |
46,898 | 10,217 | ||||||
Other accrued expenses |
82,862 | 49,175 | ||||||
Total liabilities |
8,648,813 | 6,263,167 | ||||||
NET ASSETS |
$ | 3,000,379,263 | $ | 316,805,907 | ||||
NET ASSETS CONSIST OF: |
||||||||
Paid-in capital |
$ | 2,263,635,293 | $ | 311,985,572 | ||||
Distributable earnings |
736,743,970 | 4,820,335 | ||||||
NET ASSETS |
$ | 3,000,379,263 | $ | 316,805,907 | ||||
NET ASSET VALUE PER SHARE: |
||||||||
INSTITUTIONAL CLASS |
||||||||
Net assets applicable to Institutional Class |
$ | 2,358,873,956 | $ | 272,623,201 | ||||
Institutional Class shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) |
39,943,448 | 15,183,345 | ||||||
Net asset value, offering price and redemption price per share (Note 2) |
$ | 59.06 | $ | 17.96 | ||||
INVESTORS CLASS |
||||||||
Net assets applicable to Investors Class |
$ | 641,505,307 | $ | 44,182,706 | ||||
Investors Class shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) |
11,065,566 | 2,510,307 | ||||||
Net asset value, offering price and redemption price per share (Note 2) |
$ | 57.97 | $ | 17.60 |
See accompanying notes to financial statements. |
33
CONESTOGA FUNDS |
||||||||
|
Conestoga |
Conestoga |
||||||
ASSETS |
||||||||
Investments in unaffiliated securities, at cost |
$ | 2,361,572 | $ | 2,435,592 | ||||
Investments in unaffiliated securities, at value (Note 2) |
$ | 1,777,006 | $ | 2,232,521 | ||||
Cash (Note 2) |
80,704 | 70,694 | ||||||
Receivable due from Adviser (Note 4) |
13,995 | 9,789 | ||||||
Receivable for capital shares sold |
200 | 100 | ||||||
Receivable for investment securities sold |
32,498 | 37,653 | ||||||
Dividends and interest receivable |
94 | 257 | ||||||
Other assets |
13,624 | 4,429 | ||||||
Total assets |
1,918,121 | 2,355,443 | ||||||
LIABILITIES |
||||||||
Payable for investment securities purchased |
74,522 | 57,188 | ||||||
Accrued distribution fees (Note 4) |
2,548 | 1,371 | ||||||
Accrued Trustees’ fees (Note 4) |
483 | 594 | ||||||
Payable to administrator (Note 4) |
6,640 | 4,270 | ||||||
Other accrued expenses |
32,457 | 33,758 | ||||||
Total liabilities |
116,650 | 97,181 | ||||||
NET ASSETS |
$ | 1,801,471 | $ | 2,258,262 | ||||
NET ASSETS CONSIST OF: |
||||||||
Paid-in capital |
$ | 2,426,445 | $ | 2,514,920 | ||||
Accumulated deficit |
(624,974 | ) | (256,658 | ) | ||||
NET ASSETS |
$ | 1,801,471 | $ | 2,258,262 | ||||
NET ASSET VALUE PER SHARE: |
||||||||
INSTITUTIONAL CLASS |
||||||||
Net assets applicable to Institutional Class |
$ | 1,406,321 | $ | 2,074,576 | ||||
Institutional Class shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) |
197,957 | 293,611 | ||||||
Net asset value, offering price and redemption price per share (Note 2) |
$ | 7.10 | $ | 7.07 | ||||
INVESTORS CLASS |
||||||||
Net assets applicable to Investors Class |
$ | 395,150 | $ | 183,686 | ||||
Investors Class shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) |
55,809 | 26,046 | ||||||
Net asset value, offering price and redemption price per share (Note 2) |
$ | 7.08 | $ | 7.05 |
See accompanying notes to financial statements. |
34
CONESTOGA FUNDS |
||||||||
|
Conestoga |
Conestoga |
||||||
INVESTMENT INCOME |
||||||||
Dividend income from unaffiliated investments |
$ | 7,331,606 | $ | 1,661,860 | ||||
Dividend income from affiliated investments (Note 5) |
3,114,449 | — | ||||||
Foreign withholding taxes on dividends |
(89,173 | ) | (9,656 | ) | ||||
Interest |
232,461 | 26,946 | ||||||
Total investment income |
10,589,343 | 1,679,150 | ||||||
EXPENSES |
||||||||
Investment advisory fees (Note 4) |
34,109,594 | 3,254,573 | ||||||
Distribution fees - Investors Class (Note 4) |
2,053,133 | 146,221 | ||||||
Shareholder Servicing Fees (Note 4) |
||||||||
Institutional Class |
1,484,477 | 247,776 | ||||||
Investors Class |
410,639 | 29,245 | ||||||
Trustees’ fees and expenses (Note 4) |
199,520 | 199,520 | ||||||
Transfer agent fees (Note 4) |
331,726 | 41,230 | ||||||
Fund accounting fees (Note 4) |
265,371 | 89,266 | ||||||
Custody and bank service fees |
191,409 | 29,998 | ||||||
Registration and filing fees |
136,202 | 67,465 | ||||||
Legal fees |
92,903 | 92,903 | ||||||
Postage and supplies |
105,871 | 15,238 | ||||||
Insurance expense |
35,536 | 3,467 | ||||||
Audit and tax services fees |
16,000 | 14,500 | ||||||
Shareholder reporting expenses |
12,824 | 6,229 | ||||||
Administration fees (Note 4) |
3,000 | 3,000 | ||||||
Borrowing expenses |
633 | 1,083 | ||||||
Other expenses |
21,154 | 16,888 | ||||||
Total expenses |
39,469,992 | 4,258,602 | ||||||
Fee reductions and expense reimbursements by the Adviser (Note 4) |
(3,721,883 | ) | (857,808 | ) | ||||
Net expenses |
35,748,109 | 3,400,794 | ||||||
NET INVESTMENT LOSS |
(25,158,766 | ) | (1,721,644 | ) | ||||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS |
||||||||
Net realized gains (losses) from unaffiliated investments |
156,639,891 | (5,628,511 | ) | |||||
Net realized losses from affiliated investments (Note 5) |
(16,370,774 | ) | — | |||||
Net change in unrealized appreciation (depreciation) on unaffiliated investments |
(1,277,413,788 | ) | (133,534,114 | ) | ||||
Net change in unrealized appreciation (depreciation) on affiliated investments (Note 5) |
(75,680,351 | ) | — | |||||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS |
(1,212,825,022 | ) | (139,162,625 | ) | ||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (1,237,983,788 | ) | $ | (140,884,269 | ) |
See accompanying notes to financial statements. |
35
CONESTOGA FUNDS |
||||||||
|
Conestoga |
Conestoga |
||||||
INVESTMENT INCOME |
||||||||
Dividend income from unaffiliated investments |
$ | 7,829 | $ | 6,547 | ||||
Foreign withholding taxes on dividends |
(67 | ) | — | |||||
Interest |
439 | 520 | ||||||
Total investment income |
8,201 | 7,067 | ||||||
EXPENSES |
||||||||
Legal fees |
97,653 | 68,458 | ||||||
Fund accounting fees (Note 4) |
38,059 | 28,652 | ||||||
Registration and filing fees |
30,605 | 10,688 | ||||||
Investment advisory fees (Note 4) |
14,828 | 19,898 | ||||||
Audit and tax services fees |
14,736 | 14,000 | ||||||
Transfer agent fees (Note 4) |
12,500 | 9,550 | ||||||
Shareholder reporting expenses |
4,370 | 7,581 | ||||||
Postage and supplies |
3,629 | 2,830 | ||||||
Administration fees (Note 4) |
3,000 | 2,371 | ||||||
Trustees’ fees and expenses (Note 4) |
1,987 | 2,275 | ||||||
Custody and bank service fees |
2,456 | 1,577 | ||||||
Shareholder Servicing Fees (Note 4) |
||||||||
Institutional Class |
1,362 | 1,857 | ||||||
Investors Class |
246 | 67 | ||||||
Distribution fees - Investors Class (Note 4) |
1,229 | 333 | ||||||
Borrowing expenses |
— | 8 | ||||||
Other expenses |
15,961 | 16,600 | ||||||
Total expenses |
242,621 | 186,745 | ||||||
Fee reductions and expense reimbursements by the Adviser (Note 4) |
(226,565 | ) | (161,532 | ) | ||||
Net expenses |
16,056 | 25,213 | ||||||
NET INVESTMENT LOSS |
(7,855 | ) | (18,146 | ) | ||||
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS |
||||||||
Net realized losses from unaffiliated investments |
(34,733 | ) | (36,215 | ) | ||||
Net change in unrealized appreciation (depreciation) on unaffiliated investments |
(621,587 | ) | (854,041 | ) | ||||
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS |
(656,320 | ) | (890,256 | ) | ||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (664,175 | ) | $ | (908,402 | ) |
(a) |
Represents the period from commencement of operations (December 20, 2021) through September 30, 2022. |
See accompanying notes to financial statements. |
36
CONESTOGA SMALL CAP FUND |
||||||||
|
Year Ended |
Year Ended |
||||||
FROM OPERATIONS |
||||||||
Net investment loss |
$ | (25,158,766 | ) | $ | (29,204,414 | ) | ||
Net realized gains from investments |
140,269,117 | 229,435,633 | ||||||
Net change in unrealized appreciation (depreciation) on investments |
(1,353,094,139 | ) | 962,102,100 | |||||
Net increase (decrease) in net assets resulting from operations |
(1,237,983,788 | ) | 1,162,333,319 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 2) |
||||||||
Institutional Class |
(174,426,787 | ) | — | |||||
Investors Class |
(51,042,164 | ) | — | |||||
Decrease in net assets from distributions to shareholders |
(225,468,951 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS (Note 6) |
||||||||
Institutional Class |
||||||||
Proceeds from shares sold |
685,880,670 | 783,876,197 | ||||||
Reinvestment of distributions to shareholders |
115,710,799 | — | ||||||
Payments for shares redeemed |
(683,555,542 | ) | (470,707,498 | ) | ||||
Net increase in Institutional Class net assets from capital share transactions |
118,035,927 | 313,168,699 | ||||||
Investors Class |
||||||||
Proceeds from shares sold |
125,440,330 | 118,468,533 | ||||||
Reinvestment of distributions to shareholders |
45,633,567 | — | ||||||
Payments for shares redeemed |
(179,700,944 | ) | (248,225,990 | ) | ||||
Net decrease in Investors Class net assets from capital share transactions |
(8,627,047 | ) | (129,757,457 | ) | ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(1,354,043,859 | ) | 1,345,744,561 | |||||
|
||||||||
NET ASSETS |
||||||||
Beginning of year |
4,354,423,122 | 3,008,678,561 | ||||||
End of year |
$ | 3,000,379,263 | $ | 4,354,423,122 |
See accompanying notes to financial statements. |
37
CONESTOGA SMID CAP FUND |
||||||||
|
Year Ended |
Year Ended |
||||||
FROM OPERATIONS |
||||||||
Net investment loss |
$ | (1,721,644 | ) | $ | (1,749,829 | ) | ||
Net realized gains (losses) from investments |
(5,628,511 | ) | 7,623,945 | |||||
Net change in unrealized appreciation (depreciation) on investments |
(133,534,114 | ) | 87,198,122 | |||||
Net increase (decrease) in net assets resulting from operations |
(140,884,269 | ) | 93,072,238 | |||||
CAPITAL SHARE TRANSACTIONS (Note 6) |
||||||||
Institutional Class |
||||||||
Proceeds from shares sold |
111,657,408 | 144,722,264 | ||||||
Payments for shares redeemed |
(76,820,766 | ) | (51,920,798 | ) | ||||
Net increase in Institutional Class net assets from capital share transactions |
34,836,642 | 92,801,466 | ||||||
Investors Class |
||||||||
Proceeds from shares sold |
31,237,466 | 15,006,418 | ||||||
Payments for shares redeemed |
(30,051,109 | ) | (18,625,647 | ) | ||||
Net increase (decrease) in Investors Class net assets from capital share transactions |
1,186,357 | (3,619,229 | ) | |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS |
(104,861,270 | ) | 182,254,475 | |||||
NET ASSETS |
||||||||
Beginning of year |
421,667,177 | 239,412,702 | ||||||
End of year |
$ | 316,805,907 | $ | 421,667,177 |
See accompanying notes to financial statements. |
38
CONESTOGA MID CAP FUND |
||||||||
|
Year Ended |
Period Ended |
||||||
FROM OPERATIONS |
||||||||
Net investment loss |
$ | (7,855 | ) | $ | (2,357 | ) | ||
Net realized gains (losses) from investments |
(34,733 | ) | 95 | |||||
Net change in unrealized appreciation (depreciation) on investments |
(621,587 | ) | 37,021 | |||||
Net increase (decrease) in net assets resulting from operations |
(664,175 | ) | 34,759 | |||||
CAPITAL SHARE TRANSACTIONS (Note 6) |
||||||||
Institutional Class |
||||||||
Proceeds from shares sold |
727,504 | 1,145,200 | ||||||
Payments for shares redeemed |
(1,249 | ) | — | |||||
Net increase in Institutional Class net assets from capital share transactions |
726,255 | 1,145,200 | ||||||
Investors Class |
||||||||
Proceeds from shares sold |
49,000 | 614,658 | ||||||
Payments for shares redeemed |
(44,626 | ) | (59,600 | ) | ||||
Net increase in Investors Class net assets from capital share transactions |
4,374 | 555,058 | ||||||
TOTAL INCREASE IN NET ASSETS |
66,454 | 1,735,017 | ||||||
NET ASSETS |
||||||||
Beginning of period |
1,735,017 | — | ||||||
End of period |
$ | 1,801,471 | $ | 1,735,017 |
(a) |
Represents the period from commencement of operations (June 29, 2021) through September 30, 2021. |
See accompanying notes to financial statements. |
39
CONESTOGA MICRO CAP FUND |
||||
|
Period Ended |
|||
FROM OPERATIONS |
||||
Net investment loss |
$ | (18,146 | ) | |
Net realized losses from investments |
(36,215 | ) | ||
Net change in unrealized appreciation (depreciation) on investments |
(854,041 | ) | ||
Net decrease in net assets resulting from operations |
(908,402 | ) | ||
CAPITAL SHARE TRANSACTIONS (Note 6) |
||||
Institutional Class |
||||
Proceeds from shares sold |
148,375 | |||
Payments for shares redeemed |
(15 | ) | ||
Shares issued in connection with Fund Reorganization (Note 1) |
2,777,245 | |||
Net increase in Institutional Class net assets from capital share transactions |
2,925,605 | |||
Investors Class |
||||
Proceeds from shares sold |
97,357 | |||
Payments for shares redeemed |
(14,117 | ) | ||
Shares issued in connection with Fund Reorganization (Note 1) |
157,819 | |||
Net increase in Investors Class net assets from capital share transactions |
241,059 | |||
TOTAL INCREASE IN NET ASSETS |
2,258,262 | |||
NET ASSETS |
||||
Beginning of period |
— | |||
End of period |
$ | 2,258,262 |
(a) |
Represents the period from commencement of operations (December 20, 2021) through September 30, 2022. |
See accompanying notes to financial statements. |
40
CONESTOGA SMALL CAP FUND |
||||||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Year: |
||||||||||||||||||||
|
Year |
Year |
Year |
Year |
Year |
|||||||||||||||
Net asset value at beginning of year |
$ | 87.18 | $ | 63.19 | $ | 58.40 | $ | 61.27 | $ | 50.29 | ||||||||||
Income (loss) from investment operations: |
||||||||||||||||||||
Net investment loss (a) |
(0.45 | ) | (0.56 | ) | (0.33 | ) | (0.23 | ) | (0.19 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments |
(23.17 | ) | 24.55 | 6.39 | (1.93 | ) | 13.93 | |||||||||||||
Total from investment operations |
(23.62 | ) | 23.99 | 6.06 | (2.16 | ) | 13.74 | |||||||||||||
Less distributions from net realized gains |
(4.50 | ) | — | (1.27 | ) | (0.71 | ) | (2.76 | ) | |||||||||||
Net asset value at end of year |
$ | 59.06 | $ | 87.18 | $ | 63.19 | $ | 58.40 | $ | 61.27 | ||||||||||
Total return (b) |
(28.62 | %) | 37.96 | % | 10.53 | % | (3.39 | %) | 28.75 | % | ||||||||||
Net assets at end of year (000,000’s) |
$ | 2,359 | $ | 3,386 | $ | 2,204 | $ | 1,752 | $ | 1,648 | ||||||||||
Ratios/supplementary data: |
||||||||||||||||||||
Ratio of total expenses to average net assets |
0.98 | % | 0.98 | % | 1.00 | % | 0.99 | % | 0.99 | % | ||||||||||
Ratio of net expenses to average net assets (c) |
0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | ||||||||||
Ratio of net investment loss to average net assets (c) |
(0.62 | %) | (0.69 | %) | (0.56 | %) | (0.41 | %) | (0.37 | %) | ||||||||||
Portfolio turnover rate |
24 | % | 19 | % | 22 | % | 26 | % | 9 | % |
(a) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(b) |
Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(c) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
41
CONESTOGA SMALL CAP FUND |
||||||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Year: |
||||||||||||||||||||
|
Year |
Year |
Year |
Year |
Year |
|||||||||||||||
Net asset value at beginning of year |
$ | 85.83 | $ | 62.33 | $ | 57.74 | $ | 60.70 | $ | 49.95 | ||||||||||
Income (loss) from investment operations: |
||||||||||||||||||||
Net investment loss (a) |
(0.59 | ) | (0.70 | ) | (0.44 | ) | (0.33 | ) | (0.30 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments |
(22.77 | ) | 24.20 | 6.30 | (1.92 | ) | 13.81 | |||||||||||||
Total from investment operations |
(23.36 | ) | 23.50 | 5.86 | (2.25 | ) | 13.51 | |||||||||||||
Less distributions from net realized gains |
(4.50 | ) | — | (1.27 | ) | (0.71 | ) | (2.76 | ) | |||||||||||
Net asset value at end of year |
$ | 57.97 | $ | 85.83 | $ | 62.33 | $ | 57.74 | $ | 60.70 | ||||||||||
Total return (b) |
(28.78 | %) | 37.70 | % | 10.30 | % | (3.57 | %) | 28.47 | % | ||||||||||
Net assets at end of year (000,000’s) |
$ | 642 | $ | 968 | $ | 805 | $ | 858 | $ | 1,033 | ||||||||||
Ratios/supplementary data: |
||||||||||||||||||||
Ratio of total expenses to average net assets |
1.26 | % | 1.25 | % | 1.28 | % | 1.27 | % | 1.29 | % | ||||||||||
Ratio of net expenses to average net assets (c) |
1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | ||||||||||
Ratio of net investment loss to average net assets (c) |
(0.82 | %) | (0.89 | %) | (0.75 | %) | (0.60 | %) | (0.56 | %) | ||||||||||
Portfolio turnover rate |
24 | % | 19 | % | 22 | % | 26 | % | 9 | % |
(a) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(b) |
Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(c) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
42
CONESTOGA SMID CAP FUND |
||||||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Year: |
||||||||||||||||||||
|
Year |
Year |
Year |
Year |
Year |
|||||||||||||||
Net asset value at beginning of year |
$ | 26.13 | $ | 19.29 | $ | 17.18 | $ | 17.05 | $ | 12.80 | ||||||||||
Income (loss) from investment operations: |
||||||||||||||||||||
Net investment loss (a) |
(0.09 | ) | (0.11 | ) | (0.06 | ) | (0.03 | ) | (0.06 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments |
(8.08 | ) | 6.95 | 2.40 | 0.30 | 4.35 | ||||||||||||||
Total from investment operations |
(8.17 | ) | 6.84 | 2.34 | 0.27 | 4.29 | ||||||||||||||
Less distributions from net realized gains |
— | — | (0.23 | ) | (0.14 | ) | (0.04 | ) | ||||||||||||
Net asset value at end of year |
$ | 17.96 | $ | 26.13 | $ | 19.29 | $ | 17.18 | $ | 17.05 | ||||||||||
Total return (b) |
(31.27 | %) | 35.46 | % | 13.76 | % | 1.72 | % | 33.64 | % | ||||||||||
Net assets at end of year (000’s) |
$ | 272,623 | $ | 357,479 | $ | 188,836 | $ | 80,814 | $ | 45,210 | ||||||||||
Ratios/supplementary data: |
||||||||||||||||||||
Ratio of total expenses to average net assets |
1.07 | % | 1.10 | % | 1.26 | % | 1.39 | % | 1.62 | % | ||||||||||
Ratio of net expenses to average net assets (c) |
0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.86 | %(d) | ||||||||||
Ratio of net investment loss to average net assets (c) |
(0.41 | %) | (0.47 | %) | (0.34 | %) | (0.20 | %) | (0.37 | %) | ||||||||||
Portfolio turnover rate |
15 | % | 17 | % | 11 | % | 37 | % | 8 | % |
(a) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(b) |
Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(c) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
(d) |
Effective January 31, 2018, the Adviser has agreed to reduce its advisory fees and reimburse other expenses in order to limit annual operating expenses to 0.85% of the average daily net assets allocable to Institutional Class Shares. Between January 31, 2017 and January 31, 2018, the expense limitation had been 0.90%. |
See accompanying notes to financial statements. |
43
CONESTOGA SMID CAP FUND |
||||||||||||||||||||
Per Share Data for a Share Outstanding Throughout Each Year: |
||||||||||||||||||||
|
Year |
Year |
Year |
Year |
Year |
|||||||||||||||
Net asset value at beginning of year |
$ | 25.68 | $ | 19.01 | $ | 16.97 | $ | 16.88 | $ | 12.71 | ||||||||||
Income (loss) from investment operations: |
||||||||||||||||||||
Net investment loss (a) |
(0.15 | ) | (0.17 | ) | (0.10 | ) | (0.07 | ) | (0.09 | ) | ||||||||||
Net realized and unrealized gains (losses) on investments |
(7.93 | ) | 6.84 | 2.37 | 0.30 | 4.30 | ||||||||||||||
Total from investment operations |
(8.08 | ) | 6.67 | 2.27 | 0.23 | 4.21 | ||||||||||||||
Less distributions from net realized gains |
— | — | (0.23 | ) | (0.14 | ) | (0.04 | ) | ||||||||||||
Net asset value at end of year |
$ | 17.60 | $ | 25.68 | $ | 19.01 | $ | 16.97 | $ | 16.88 | ||||||||||
Total return (b) |
(31.46 | %) | 35.09 | % | 13.52 | % | 1.50 | % | 33.25 | % | ||||||||||
Net assets at end of year (000’s) |
$ | 44,183 | $ | 64,189 | $ | 50,577 | $ | 43,422 | $ | 38,680 | ||||||||||
Ratios/supplementary data: |
||||||||||||||||||||
Ratio of total expenses to average net assets |
1.36 | % | 1.36 | % | 1.51 | % | 1.64 | % | 1.95 | % | ||||||||||
Ratio of net expenses to average net assets (c) |
1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | %(d) | ||||||||||
Ratio of net investment loss to average net assets (c) |
(0.66 | %) | (0.71 | %) | (0.57 | %) | (0.45 | %) | (0.62 | %) | ||||||||||
Portfolio turnover rate |
15 | % | 17 | % | 11 | % | 37 | % | 8 | % |
(a) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(b) |
Total return is a measure of the change in value of an investment in the Fund over the periods covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total returns would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(c) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
(d) |
Effective January 31, 2018, the Adviser has agreed to reduce its advisory fees and reimburse other expenses in order to limit annual operating expenses to 1.10% of the average daily net assets allocable to Investors Class Shares. Between January 31, 2017 and January 31, 2018, the expense limitation had been 1.15%. |
See accompanying notes to financial statements. |
44
CONESTOGA MID CAP FUND |
||||||||
Per Share Data for a Share Outstanding Throughout Each Period: |
||||||||
|
Year |
Period |
||||||
Net asset value at beginning of period |
$ | 10.32 | $ | 10.00 | ||||
Income (loss) from investment operations: |
||||||||
Net investment loss (b) |
(0.03 | ) | (0.01 | ) | ||||
Net realized and unrealized gains (losses) on investments |
(3.19 | ) | 0.33 | |||||
Total from investment operations |
(3.22 | ) | 0.32 | |||||
Net asset value at end of period |
$ | 7.10 | $ | 10.32 | ||||
Total return (c) |
(31.20 | %) | 3.20 | %(d) | ||||
Net assets at end of period (000’s) |
$ | 1,406 | $ | 1,168 | ||||
Ratios/supplementary data: |
||||||||
Ratio of total expenses to average net assets |
12.20 | % | 16.18 | %(e) | ||||
Ratio of net expenses to average net assets (f) |
0.80 | % | 0.80 | %(e) | ||||
Ratio of net investment loss to average net assets (f) |
(0.36 | %) | (0.50 | %)(e) | ||||
Portfolio turnover rate |
18 | % | 1 | %(d) |
(a) |
Represents the period from the commencement of operations (June 29, 2021) through September 30, 2021. |
(b) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(c) |
Total return is a measure of the change in value of an investment in the Fund over the period covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total return would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(d) |
Not annualized. |
(e) |
Annualized. |
(f) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
45
CONESTOGA MID CAP FUND |
||||||||
Per Share Data for a Share Outstanding Throughout Each Period: |
||||||||
|
Year |
Period |
||||||
Net asset value at beginning of period |
$ | 10.31 | $ | 10.00 | ||||
Income (loss) from investment operations: |
||||||||
Net investment loss (b) |
(0.05 | ) | (0.02 | ) | ||||
Net realized and unrealized gains (losses) on investments |
(3.18 | ) | 0.33 | |||||
Total from investment operations |
(3.23 | ) | 0.31 | |||||
Net asset value at end of period |
$ | 7.08 | $ | 10.31 | ||||
Total return (c) |
(31.33 | %) | 3.10 | %(d) | ||||
Net assets at end of period (000’s) |
$ | 395 | $ | 567 | ||||
Ratios/supplementary data: |
||||||||
Ratio of total expenses to average net assets |
15.54 | % | 17.54 | %(e) | ||||
Ratio of net expenses to average net assets (f) |
1.05 | % | 1.05 | %(e) | ||||
Ratio of net investment loss to average net assets (f) |
(0.61 | %) | (0.73 | %)(e) | ||||
Portfolio turnover rate |
18 | % | 1 | %(d) |
(a) |
Represents the period from the commencement of operations (June 29, 2021) through September 30, 2021. |
(b) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(c) |
Total return is a measure of the change in value of an investment in the Fund over the period covered. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total return would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(d) |
Not annualized. |
(e) |
Annualized. |
(f) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
46
CONESTOGA MICRO CAP FUND |
||||
Per Share Data for a Share Outstanding Throughout the Period: |
||||
|
Period |
|||
Net asset value at beginning of period |
$ | 10.00 | ||
Loss from investment operations: |
||||
Net investment loss (b) |
(0.06 | ) | ||
Net realized and unrealized losses on investments |
(2.87 | ) | ||
Total from investment operations |
(2.93 | ) | ||
Net asset value at end of period |
$ | 7.07 | ||
Total return (c) |
(29.30 | %)(d) | ||
Net assets at end of period (000’s) |
$ | 2,075 | ||
Ratios/supplementary data: |
||||
Ratio of total expenses to average net assets |
9.08 | %(e) | ||
Ratio of net expenses to average net assets (f) |
1.25 | %(e) | ||
Ratio of net investment loss to average net assets (f) |
(0.90 | %)(e) | ||
Portfolio turnover rate |
27 | %(d) |
(a) |
Represents the period from the commencement of operations (December 20, 2021) through September 30, 2022. |
(b) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(c) |
Total return is a measure of the change in value of an investment in the Fund over the period covered. The return shown does not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total return would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(d) |
Not annualized. |
(e) |
Annualized. |
(f) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
47
CONESTOGA MICRO CAP FUND |
||||
Per Share Data for a Share Outstanding Throughout the Period: |
||||
|
Period |
|||
Net asset value at beginning of period |
$ | 10.00 | ||
Loss from investment operations: |
||||
Net investment loss (b) |
(0.07 | ) | ||
Net realized and unrealized losses on investments |
(2.88 | ) | ||
Total from investment operations |
(2.95 | ) | ||
Net asset value at end of period |
$ | 7.05 | ||
Total return (c) |
(29.50 | %)(d) | ||
Net assets at end of period (000’s) |
$ | 184 | ||
Ratios/supplementary data: |
||||
Ratio of total expenses to average net assets |
13.66 | %(e) | ||
Ratio of net expenses to average net assets (f) |
1.50 | %(e) | ||
Ratio of net investment loss to average net assets (f) |
(1.14 | %)(e) | ||
Portfolio turnover rate |
27 | %(d) |
(a) |
Represents the period from the commencement of operations (December 20, 2021) through September 30, 2022. |
(b) |
Per share net investment loss has been determined on the basis of average number of shares outstanding during the period. |
(c) |
Total return is a measure of the change in value of an investment in the Fund over the period covered. The return shown does not reflect the deduction of taxes a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. The total return would be lower if the Adviser had not reduced advisory fees and/or reimbursed expenses (Note 4). |
(d) |
Not annualized. |
(e) |
Annualized. |
(f) |
Ratio was determined after advisory fee reductions and/or expense reimbursements (Note 4). |
See accompanying notes to financial statements. |
48
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS
September 30, 2022
1. Organization
Conestoga Funds (the “Trust”) was organized as a Delaware statutory trust on February 5, 2002. The Trust consists of four series, the Conestoga Small Cap Fund (the “Small Cap Fund”), the Conestoga SMid Cap Fund (the “SMid Cap Fund”), the Conestoga Mid Cap Fund (the “Mid Cap Fund”) and the Conestoga Micro Cap Fund (the “Micro Cap Fund”) (individually, a “Fund” and collectively, the “Funds”). The Trust is registered as an open-end diversified management investment company of the series type under the Investment Company Act of 1940, as amended (the “1940 Act”). Each Fund’s investment objective is to achieve long-term growth of capital. Each Fund currently offers two classes of shares, Institutional Class and Investors Class. The Mid Cap Fund commenced operations on June 29, 2021 and the Micro Cap Fund commenced operations on December 20, 2021.
Each Fund’s two classes of shares represent interests in the same portfolio of investments, and have the same rights, but the share classes differ primarily in the expenses to which they are subject and have differing investment minimums. Institutional Class shares are sold without any sales loads or distribution fees but are subject to a shareholder servicing fee of up to 0.10% of the average daily net assets allocable to Institutional Class shares and require a $250,000 initial investment. Investors Class shares are sold without any sales loads but are subject to a distribution fee of up to 0.25% and a shareholder servicing fee of up to 0.25% of the average daily net assets allocable to Investors Class shares and require a $2,500 initial investment. The Board of Trustees of the Trust (the “Board”) has determined to limit the shareholder servicing fees paid by Investors Class shares of each Fund to 0.05% of the average daily net assets allocable to Investors Class shares until at least September 30, 2022.
The organizational costs for the Mid Cap Fund totaled $4,324 and were charged to expenses as incurred. These costs are eligible for recoupment by the Conestoga Capital Advisors, LLC (the “Adviser”) within two years of the Mid Cap Fund’s commencement date of operations. During the year ended September 30, 2022, the Adviser did not recoup any organizational costs for the Mid Cap Fund.
The Micro Cap Fund is the successor to a limited partnership, the Conestoga Micro Cap Fund, L.P. (the “Predecessor Fund”), which was organized in November 2018. Effective as of the close of business on December 17, 2021, all the assets, subject to the liabilities of the Predecessor Fund, were transferred to the Micro Cap Fund in exchange for 293,507 shares at a net asset value per share (“NAV”) of $10.00 of the Micro Cap Fund to the limited partners of the Predecessor Fund. The Micro Cap Fund is a successor to the Predecessor Fund and has substantially the same investment objectives and strategies as did the Predecessor Fund. The net assets contributed resulting from these tax-free transactions on the close of business December 17, 2021, after the reorganization, was $2,935,064, including net unrealized appreciation of $650,970 and net investment cost of $2,179,789. For financial reporting purposes, assets received and shares issued were
49
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
recorded at fair value; however, the cost basis of the investments received was carried forward to align ongoing reporting of the Micro Cap Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
2. Significant Accounting Policies
The following is a summary of the Funds’ significant accounting policies. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Funds follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services – Investment Companies.”
Securities valuation – Each Fund values its portfolio securities at market value as of the close of regular trading on the New York Stock Exchange, Inc. (the “NYSE”) (normally 4:00 p.m. Eastern time) on each business day the NYSE is open for business. The Funds value their listed securities on the basis of the security’s last sale price on the security’s primary exchange, if available, otherwise at the exchange’s most recently quoted bid price. NASDAQ-listed securities are valued at the NASDAQ Official Closing Price. Investments representing shares of other open-end investment companies, including money market funds, are valued at their net asset value (“NAV”) as reported by such companies. When using a quoted price and when the market is considered active, the security will be classified as Level 1 within the fair value hierarchy (see below). In the event that market quotations are not readily available or are considered unreliable due to market or other events, the Funds value their securities and other assets at fair value, as determined in good faith by the Trust’s officers, in accordance with procedures established by and under the general supervision of the Board. Under these procedures, the securities will be classified as Level 2 or 3 within the fair value hierarchy, depending on the inputs used. Unavailable or unreliable market quotes may be due to the following factors: a substantial bid-ask spread; infrequent sales resulting in stale prices; insufficient trading volume; small trade sizes; a temporary lapse in any reliable pricing source; and actions of the securities or futures markets, such as the suspension or limitation of trading. As a result, the prices of securities used to calculate each Fund’s NAV may differ from quoted or published prices for the same securities.
GAAP establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
Various inputs are used in determining the value of each Fund’s investments. These inputs are summarized in the three broad levels listed below:
● |
Level 1 – quoted prices in active markets for identical securities |
● |
Level 2 – other significant observable inputs |
● |
Level 3 – significant unobservable inputs |
50
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The inputs or methods used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
The following is a summary of the Funds’ investments based on the inputs used to value the investments as of September 30, 2022:
Conestoga Small Cap Fund |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Common Stocks |
$ | 2,875,872,352 | $ | — | $ | — | $ | 2,875,872,352 | ||||||||
Total |
$ | 2,875,872,352 | $ | — | $ | — | $ | 2,875,872,352 |
Conestoga SMid Cap Fund |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Common Stocks |
$ | 307,424,864 | $ | — | $ | — | $ | 307,424,864 | ||||||||
Total |
$ | 307,424,864 | $ | — | $ | — | $ | 307,424,864 |
Conestoga Mid Cap Fund |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Common Stocks |
$ | 1,777,006 | $ | — | $ | — | $ | 1,777,006 | ||||||||
Total |
$ | 1,777,006 | $ | — | $ | — | $ | 1,777,006 |
Conestoga Micro Cap Fund |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Common Stocks |
$ | 2,232,521 | $ | — | $ | — | $ | 2,232,521 | ||||||||
Total |
$ | 2,232,521 | $ | — | $ | — | $ | 2,232,521 |
Refer to each Fund’s Schedule of Investments for a listing of the common stocks by industry and sector type. The Funds did not hold any derivative instruments or any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of or during the year or period ended September 30, 2022.
New Rules to Modernize Fund Valuation Framework Take Effect
A new rule adopted by the U.S. Securities and Exchange Commission (the “SEC”) governing fund valuation practices, Rule 2a-5 under the 1940 Act, has established requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 permits fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of Section 29(a)(41) of the 1940 Act, which requires a fund to fair value a security when market quotations are not readily
51
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
available. Separately, new SEC Rule 31a-4 under the 1940 Act sets forth the recordkeeping requirements associated with fair value determinations. The Funds adopted Pricing and Valuation Guidelines conforming to the new rules, effective September 8, 2022, and there was no material impact to the Funds.
Share valuation – The NAV per share of each class of each Fund is calculated daily by dividing the total value of the assets attributable to that class, less liabilities attributable to that class, by the number of shares outstanding of that class. The offering price and redemption price per share of each class of each Fund is equal to the NAV per share of such class.
Cash – Each Fund’s cash is held in a bank account with balances which may exceed the amount covered by federal deposit insurance. As of September 30, 2022, the cash balances reflected on the Statements of Assets and Liabilities for each Fund represent the amount held in a deposit sweep account.
Investment income – Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Withholding taxes on foreign dividends have been recorded in accordance with the Funds’ understanding of the applicable country’s rules and tax rates.
Investment transactions – Investment transactions are accounted for on the trade date. Realized gains and losses on investments sold are determined on a specific identification basis.
Common expenses – Common expenses of the Trust are allocated between the Funds based on the relative net assets of each Fund or the nature of the services performed and the relative applicability to each Fund.
Distributions to shareholders – Each Fund distributes to its shareholders any net investment income dividends and net realized capital gains distributions at least once each year. The amount of such dividends and distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. Dividends and distributions to shareholders are recorded on the ex-dividend date. The tax character of distributions paid to shareholders during the years or periods ended September 30, 2022 and 2021 were as follows:
Conestoga Small Cap Fund |
Ordinary |
Long Term |
Total |
|||||||||
September 30, 2022 |
$ | — | $ | 225,468,951 | $ | 225,468,951 | ||||||
September 30, 2021 |
$ | — | $ | — | $ | — |
52
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Conestoga SMid Cap Fund |
Ordinary |
Long Term |
Total |
|||||||||
September 30, 2022 |
$ | — | $ | — | $ | — | ||||||
September 30, 2021 |
$ | — | $ | — | $ | — |
Conestoga Mid Cap Fund |
Ordinary |
Long Term |
Total |
|||||||||
September 30, 2022 |
$ | — | $ | — | $ | — | ||||||
September 30, 2021 |
$ | — | $ | — | $ | — |
Conestoga Micro Cap Fund |
Ordinary |
Long Term |
Total |
|||||||||
September 30, 2022 |
$ | — | $ | — | $ | — |
Allocation between classes – Investment income earned, realized capital gains and losses, and unrealized appreciation and depreciation are allocated daily to each class of a Fund based upon its proportionate share of total net assets of that Fund. Class-specific expenses are charged directly to the class incurring the expense. Common expenses that are not attributable to a specific class are allocated daily to each class of shares of a Fund based upon its proportionate share of total net assets.
Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of increase (decrease) in net assets from operations during the reporting period. Actual results could differ from those estimates.
Federal income tax – Each Fund intends to or has qualified and intends to continue to qualify as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). Qualification generally will relieve each Fund of liability for federal income taxes to the extent 100% of its net investment income and net realized capital gains are distributed in accordance with the Code.
In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also each Fund’s intention to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years.
53
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
The following information is computed on a tax basis for each item as of September 30, 2022:
|
Small Cap Fund |
SMid Cap Fund |
||||||
Tax cost of investments |
$ | 2,243,663,819 | $ | 295,392,947 | ||||
Gross unrealized appreciation |
$ | 902,812,901 | $ | 67,902,179 | ||||
Gross unrealized depreciation |
(270,604,368 | ) | (55,870,262 | ) | ||||
Net unrealized appreciation |
632,208,533 | 12,031,917 | ||||||
Undistributed long-term gains |
121,665,679 | — | ||||||
Accumulated capital and other losses |
(17,130,242 | ) | (7,211,582 | ) | ||||
Distributable earnings |
$ | 736,743,970 | $ | 4,820,335 |
|
Mid Cap Fund |
Micro Cap Fund |
||||||
Tax cost of investments |
$ | 2,365,148 | $ | 2,444,970 | ||||
Gross unrealized appreciation |
$ | 29,869 | $ | 454,244 | ||||
Gross unrealized depreciation |
(618,011 | ) | (666,693 | ) | ||||
Net unrealized depreciation |
(588,142 | ) | (212,449 | ) | ||||
Accumulated capital and other losses |
(36,832 | ) | (44,209 | ) | ||||
Accumulated deficit |
$ | (624,974 | ) | $ | (256,658 | ) |
The difference between the federal income tax cost of portfolio investments and the financial statement cost of portfolio investments for the Funds are due to certain timing differences in the recognition of capital gains or losses under income tax regulations and GAAP. These “book/tax” differences are temporary in nature and are primarily due to the tax deferral of losses on wash sales.
For the year or period ended September 30, 2022, the following reclassifications were made on the Statements of Assets and Liabilities for the Funds as a result of permanent differences between the financial statements and income tax reporting requirements:
|
Small Cap Fund |
SMid Cap Fund |
Mid Cap Fund |
Micro Cap Fund |
||||||||||||
Paid-in capital |
$ | (31,452,360 | ) | $ | (2,098,879 | ) | $ | (4,442 | ) | $ | (774 | ) | ||||
Distributable earnings (accumulated deficit) |
31,452,360 | 2,098,879 | 4,442 | 774 |
Such reclassifications, the result of permanent differences between financial statement and income tax reporting requirements, had no effect on each Fund’s net assets or NAV per share.
54
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Net qualified late year ordinary losses represents losses incurred after December 31, 2021. These losses are deemed to arise on the first day of the Funds’ next taxable year. For the year or period ended September 30, 2022, the Small Cap Fund, SMid Cap Fund, Mid Cap Fund and Micro Cap Fund deferred until October 1, 2022 qualified late year ordinary losses of $17,130,242, $1,166,558, $5,675 and $17,372 for federal income tax purposes, respectively.
As of September 30, 2022, the Funds had the following capital loss carryforwards (“CLCFs”) for federal income tax purposes:
|
Small Cap Fund |
SMid Cap Fund |
Mid Cap Fund |
Micro Cap Fund |
||||||||||||
Short-term capital loss carryforwards |
$ | — | $ | 5,176,877 | $ | 17,520 | $ | 26,837 | ||||||||
Long-term capital loss carryforwards |
— | 868,147 | 13,637 | — | ||||||||||||
Total |
$ | — | $ | 6,045,024 | $ | 31,157 | $ | 26,837 |
These CLCFs, which do not expire, are available to offset net realized capital gains in future years, thereby reducing future taxable gain distributions.
The Funds recognize the tax benefits or expenses of uncertain tax positions only when the position is “more likely than not” of being sustained assuming examination by tax authorities. Management has reviewed each Fund’s tax positions for all open tax years (generally, three years) and has concluded that no provision for unrecognized tax benefits or expenses is required in these financial statements. The Funds identify their major tax jurisdiction as U.S. Federal.
3. Investment Transactions
During the year or period ended September 30, 2022, the cost of purchases and proceeds from sales of investment securities, other than short-term investments, were as follows:
|
Small Cap Fund |
SMid Cap Fund |
Mid Cap Fund |
Micro Cap Fund |
||||||||||||
Purchases of investment securities |
$ | 900,145,094 | $ | 101,219,831 | $ | 1,042,411 | $ | 955,124 | ||||||||
Proceeds from sales of investment securities |
$ | 956,443,336 | $ | 55,325,789 | $ | 318,007 | $ | 663,106 |
4. Transactions with Related Parties
INVESTMENT ADVISORY AGREEMENT
The Small Cap Fund has entered into an Investment Advisory Agreement with the Adviser to provide supervision and assistance in overall management services to the Small Cap Fund. For these services, the Small Cap Fund pays the Adviser a fee, calculated daily and paid monthly, equal to an annual rate of 0.90% of its average daily net assets. The
55
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
Adviser has contractually agreed to limit the Small Cap Fund’s net annual operating expenses (excluding taxes, extraordinary expenses, reorganization expenses, brokerage commissions, interest, other expenditures that are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of such Fund’s business) to 1.10% (for the Investors Class) and 0.90% (for the Institutional Class) of average daily net assets until at least January 31, 2023. During the year ended September 30, 2022, the Adviser reduced its fees of $34,109,594 from the Small Cap Fund by $969,058 and reimbursed other operating expenses of $2,752,825 under this arrangement. In addition, if at any point during the 24 months following the date that the Adviser reduced its fees and/or made expense reimbursements, it becomes unnecessary for the Adviser to reduce its fees or make expense reimbursements, the Adviser may recapture any of its prior fee reductions or expense reimbursements to the extent such recapture does not cause the Fund’s total annual operating expenses to exceed the applicable expense limitation that was in effect at the time of the fee reduction or expense reimbursement. As of September 30, 2022, the Adviser may seek recovery of advisory fee reductions and expense reimbursements no later than the dates as stated below:
|
September 30, |
September 30, |
Total |
|||||||||
Small Cap Fund |
$ | 3,899,668 | $ | 3,721,883 | $ | 7,621,551 |
During the year ended September 30, 2022, the Adviser did not recover any previous fee reductions or expense reimbursements from the Small Cap Fund.
The SMid Cap Fund has entered into an Investment Advisory Agreement with the Adviser to provide supervision and assistance in overall management services to the SMid Cap Fund. For these services, the SMid Cap Fund pays the Adviser a fee, calculated daily and paid monthly, equal to an annual rate of 0.85% of its average daily net assets. The Adviser has contractually agreed to limit the SMid Cap Fund’s net annual operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of such Fund’s business) to 1.10% (for the Investors Class) and 0.85% (for the Institutional Class) of average daily net assets until at least January 31, 2023. During the year ended September 30, 2022, the Adviser reduced its fees of $3,254,573 from the SMid Cap Fund by $480,560 and reimbursed other operating expenses of $377,248 under this arrangement. In addition, if at any point during the 24 months following the date that the Adviser reduced its fees and/or made expense reimbursements, it becomes unnecessary for the Adviser to reduce its fees or make expense reimbursements, the Adviser may recapture any of its prior fee reductions or expense reimbursements to the extent such recapture does not cause the Fund’s total annual operating expenses to exceed the current expense limitation or the applicable expense limitation that was in effect at the time of
56
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
the fee reduction or expense reimbursement. As of September 30, 2022, the Adviser may seek recovery of advisory fee reductions and expense reimbursements no later than the dates as stated below:
|
September 30, |
September 30, |
Total |
|||||||||
SMid Cap Fund |
$ | 863,983 | $ | 857,808 | $ | 1,721,791 |
During the year ended September 30, 2022, the Adviser did not recover any previous fee reductions or expense reimbursements from the SMid Cap Fund.
The Mid Cap Fund has entered into an Investment Advisory Agreement with the Adviser to provide supervision and assistance in overall management services to the Mid Cap Fund. For these services, the Mid Cap Fund pays the Adviser a fee, calculated daily and paid monthly, equal to an annual rate of 0.80% of its average daily net assets. The Adviser has contractually agreed to limit the Mid Cap Fund’s net annual operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of such Fund’s business) to 1.05% (for the Investors Class) and 0.80% (for the Institutional Class) of average daily net assets until at least January 31, 2023. During the year ended September 30, 2022, the Adviser did not collect any of its advisory fees of $14,828 from the Mid Cap Fund and reimbursed other operating expenses of $211,737 under this arrangement. In addition, if at any point during the 24 months following the date that the Adviser reduced its fees and/or made expense reimbursements, it becomes unnecessary for the Adviser to reduce its fees or make expense reimbursements, the Adviser may recapture any of its prior fee reductions or expense reimbursements to the extent such recapture does not cause the Fund’s total annual operating expenses to exceed the current expense limitation or the applicable expense limitation that was in effect at the time of the fee reduction or expense reimbursement. As of September 30, 2022, the Adviser may seek recovery of advisory fee reductions and expense reimbursements no later than the dates as stated below:
|
September 30, |
September 30, |
Total |
|||||||||
Mid Cap Fund |
$ | 64,920 | $ | 226,565 | $ | 291,485 |
The Micro Cap Fund has entered into an Investment Advisory Agreement with the Adviser to provide supervision and assistance in overall management services to the Micro Cap Fund. For these services, the Micro Cap Fund pays the Adviser a fee, calculated daily and paid monthly, equal to an annual rate of 1.00% of its average daily net assets. The Adviser has contractually agreed to limit the Micro Cap Fund’s net annual operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized
57
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
in accordance with GAAP, and other extraordinary expenses not incurred in the ordinary course of such Fund’s business) to 1.50% (for the Investors Class) and 1.25% (for the Institutional Class) of average daily net assets until at least January 31, 2023. During the period ended September 30, 2022, the Adviser did not collect any of its advisory fees of $19,898 from the Micro Cap Fund and reimbursed other operating expenses of $141,634 under this arrangement. In addition, if at any point during the 24 months following the date that the Adviser reduced its fees and/or made expense reimbursements, it becomes unnecessary for the Adviser to reduce its fees or make expense reimbursements, the Adviser may recapture any of its prior fee reductions or expense reimbursements to the extent such recapture does not cause the Fund’s total annual operating expenses to exceed the current expense limitation or the applicable expense limitation that was in effect at the time of the fee reduction or expense reimbursement. As of September 30, 2022, the Adviser may seek recovery of advisory fee reductions and expense reimbursements no later than the date as stated below:
|
September 30, |
Total |
||||||
Micro Cap Fund |
$ | 161,532 | $ | 161,532 |
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS
The Trust, on behalf of each Fund, has adopted a distribution plan (the “Distribution Plan”), pursuant to Rule 12b-1 under the 1940 Act, which permits each Fund to pay certain expenses associated with the distribution of Investors Class shares, including, but not limited to, advertising, printing of prospectuses and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature, and payments to dealers and shareholder servicing agents who enter into agreements with the Funds. The Distribution Plan provides that each Fund may reimburse the Distributor (hereinafter defined) for distribution expenses in an amount not exceeding, on an annual basis, 0.25% of the average daily net assets allocable to Investors Class shares. During the year or period ended September 30, 2022, Investors Class shares of the Small Cap Fund, SMid Cap Fund, Mid Cap Fund and Micro Cap Fund incurred fees of $2,053,133, $146,221, $1,229 and $333, respectively, under the Distribution Plan.
The Trust, on behalf of each Fund, has adopted a Shareholder Servicing Plan under which each Fund may enter into agreements with various shareholder servicing agents, including financial institutions and securities brokers. Each Fund may pay shareholder servicing fees in an amount not exceeding, on an annual basis, 0.10% of the average daily net assets allocable to the Institutional Class shares and 0.25% of the average daily net assets allocable to the Investors Class shares. The Board has approved a limitation on the shareholder servicing fees of 0.05% of the average daily net assets attributable to Investors Class shares for the year or period ended September 30, 2022. During the year ended September 30, 2022, Institutional Class shares and Investors Class shares
58
CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
of the Small Cap Fund incurred fees of $1,484,477 and $410,639, re