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
CHAIRMAN’S LETTER (Unaudited)

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

 

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CONESTOGA FUNDS
MANAGER’S LETTER (Unaudited)

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

 

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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.

 

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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.

 

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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

 

 

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CONESTOGA SMALL CAP FUND - INSTITUTIONAL CLASS
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(8/13/2014)

 

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.

 

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CONESTOGA SMALL CAP FUND - INVESTORS CLASS
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(10/1/2002)

 

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
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(12/15/2014)

 

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
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(1/21/2014)

 

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
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(06/29/2021)

 

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
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(06/29/2021)

 

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.

 

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CONESTOGA MICRO CAP FUND - INSTITUTIONAL CLASS
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(11/30/2018)

 

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.

 

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CONESTOGA MICRO CAP FUND - INVESTORS CLASS
PERFORMANCE INFORMATION
September 30, 2022 (Unaudited)

 

 

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
Inception
(11/30/2018)

 

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.    

 

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CONESTOGA SMALL CAP FUND
PORTFOLIO HOLDINGS
September 30, 2022 (Unaudited)

 

 

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.

 

 

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CONESTOGA SMALL CAP FUND
SCHEDULE OF INVESTMENTS
September 30, 2022

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
PORTFOLIO HOLDINGS
September 30, 2022 (Unaudited)

 

 

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
SCHEDULE OF INVESTMENTS
September 30, 2022

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
PORTFOLIO HOLDINGS
September 30, 2022 (Unaudited)

 

 

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
SCHEDULE OF INVESTMENTS
September 30, 2022

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
PORTFOLIO HOLDINGS
September 30, 2022 (Unaudited)

 

 

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
SCHEDULE OF INVESTMENTS
September 30, 2022

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
SCHEDULE OF INVESTMENTS (Continued)

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
SCHEDULE OF INVESTMENTS (Continued)

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
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2022

 

 

Conestoga
Small Cap Fund

   

Conestoga
SMid Cap Fund

 

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
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2022 (Continued)

 

 

Conestoga
Mid Cap Fund

   

Conestoga
Micro Cap Fund

 

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
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2022

 

 

Conestoga
Small Cap Fund

   

Conestoga
SMid Cap Fund

 

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
STATEMENTS OF OPERATIONS
For the Year or Period Ended September 30, 2022 (Continued)

 

 

Conestoga
Mid Cap Fund

   

Conestoga
Micro Cap Fund
(a)

 

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
STATEMENTS OF CHANGES IN NET ASSETS

 

 

Year Ended
September 30,
2022

   

Year Ended
September 30,
2021

 

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
STATEMENTS OF CHANGES IN NET ASSETS

 

 

Year Ended
September 30,
2022

   

Year Ended
September 30,
2021

 

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
STATEMENTS OF CHANGES IN NET ASSETS

 

 

Year Ended
September 30,
2022

   

Period Ended
September 30,
2021
(a)

 

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
STATEMENT OF CHANGES IN NET ASSETS

 

 

Period Ended
September 30,
2022
(a)

 

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
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Year:

 

 

Year
Ended
Sept. 30,
2022

   

Year
Ended
Sept. 30,
2021

   

Year
Ended
Sept. 30,
2020

   

Year
Ended
Sept. 30,
2019

   

Year
Ended
Sept. 30,
2018

 

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
INVESTORS CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Year:

 

 

Year
Ended
Sept. 30,
2022

   

Year
Ended
Sept. 30,
2021

   

Year
Ended
Sept. 30,
2020

   

Year
Ended
Sept. 30,
2019

   

Year
Ended
Sept. 30,
2018

 

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
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Year:

 

 

Year
Ended
Sept. 30,
2022

   

Year
Ended
Sept. 30,
2021

   

Year
Ended
Sept. 30,
2020

   

Year
Ended
Sept. 30,
2019

   

Year
Ended
Sept. 30,
2018

 

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
INVESTORS CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Year:

 

 

Year
Ended
Sept. 30,
2022

   

Year
Ended
Sept. 30,
2021

   

Year
Ended
Sept. 30,
2020

   

Year
Ended
Sept. 30,
2019

   

Year
Ended
Sept. 30,
2018

 

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
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Period:

 

 

Year
Ended
Sept. 30,
2022

   

Period
Ended
Sept. 30,
2021
(a)

 

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
INVESTORS CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout Each Period:

 

 

Year
Ended
Sept. 30,
2022

   

Period
Ended
Sept. 30,
2021
(a)

 

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
INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout the Period:

 

 

Period
Ended
Sept. 30,
2022
(a)

 

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
INVESTORS CLASS
FINANCIAL HIGHLIGHTS

Per Share Data for a Share Outstanding Throughout the Period:

 

 

Period
Ended
Sept. 30,
2022
(a)

 

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

 

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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

 

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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
Income

   

Long Term
Capital Gain

   

Total
Distributions

 

September 30, 2022

  $     $ 225,468,951     $ 225,468,951  

September 30, 2021

  $     $     $  

 

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CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)

 

 

Conestoga SMid Cap Fund

 

Ordinary
Income

   

Long Term
Capital Gain

   

Total

 

September 30, 2022

  $     $     $  

September 30, 2021

  $     $     $  

 

Conestoga Mid Cap Fund

 

Ordinary
Income

   

Long Term
Capital Gain

   

Total

 

September 30, 2022

  $     $     $  

September 30, 2021

  $     $     $  

 

Conestoga Micro Cap Fund

 

Ordinary
Income

   

Long Term
Capital Gain

   

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,
2023

   

September 30,
2024

   

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

 

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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,
2023

   

September 30,
2024

   

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,
2023

   

September 30,
2024

   

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

 

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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,
2024

   

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

 

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CONESTOGA FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)

 

 

of the Small Cap Fund incurred fees of $1,484,477 and $410,639, re