(Logo of Tree, Snow-Capped Mountain and Sun)
TAX-FREE TRUST OF OREGON
ANNUAL REPORT
"CONSISTENCY IN PERFORMANCE - GETTING WHAT YOU PAID FOR"
November 24, 1995
Dear Investor:
Whenever you acquire anything - a product, service, a mutual fund, or any
number of things - you hope you get what you paid for.
We want you to know that all those associated with management of Tax-Free
Trust of Oregon have tried very hard to ensure that you DO get what you paid
for with the Trust. Through this Annual Report, we will be reviewing the
performance record of the Trust in support of this thesis over this past
fiscal year as well as since the Trust's inception in mid-1986.
OVERALL OBJECTIVE
It is very important, as an investor in any mutual fund, to read carefully
the fund's stated investment objective and to match that investment objective
with your own personal investment objective.
It is also very important for you to appreciate thoroughly your own personal
level of risk tolerance and risk aversion. Needless to say, there is a
distinct difference between what a common stock equity fund offers you in
terms of risk and reward compared with a municipal bond fund such as Tax-Free
Trust of Oregon. This difference always has to be kept firmly in mind,
particularly during changing securities market conditions.
What the Trust has attempted to provide you, as an overall objective, is
conscientious professional management FOR your investment and convenience WITH
your investment, IN ADDITION TO seeking the investment objective of double
tax-free income and a high level of capital preservation.
PROFESSIONAL MANAGEMENT
While an investor in a mutual fund may consider professional management as a
given and a simple matter of fact, we believe it is important to emphasize
the value for you of that professional management as far as Tax-Free Trust of
Oregon is concerned. Basically, what it all gets down to is someone - in
this case a whole management team - "minding the store" for you with your
investment.
This means providing all the necessary services from various support
organizations to relieve you of the burdens you would have if you tried to do
all those things yourself.
More specifically, it means picking the best possible municipal securities to
meet the Trust's objective and overseeing those securities on a continuous
basis, watching out for changing credit situations, monitoring "calls" and
maturities of the various bonds, collecting interest income payments when due
and paying you dividends every month from this income, creating various
useful features, providing you with statements of your account every month,
and safeguarding the various securities holdings. It means, in general,
doing all those various things that you would have to do yourself, if you
invested directly and had the time, information, skill, and knowledge
necessary to do it yourself. And, it means doing all these in an
operationally and cost-effective manner.
We believe that, through the Trust's experienced professional management,
this has been achieved for you and all shareholders in a desirable manner
since the Trust's inception in mid-1986.
CONVENIENCE
Hand-in-hand with what we have attempted to give you with professional
management has been convenience. With the Trust, you have had the
convenience of having the ability to invest as little as $1,000 as your
initial investment and having no minimum amount with subsequent investments.
By contract, normally, direct purchase of municipal securities requires
investments of at least $5,000, and more often, $25,000 amounts.
With the Trust, you have the opportunity to make investments by electronic
deduction from your bank account or by check, at your discretion. Further,
through "expedited redemption" you can get money from your account, if you
need it, in as quickly as one day after notification to the Trust.
And, of course, there are all sorts of other features provided to you by the
Trust which wouldn't be available with direct investing in municipal
securities.
The Trust has continuously strived to give you consistency in convenience
with your investment.
INVESTMENT CHARACTERISTICS
Of course, the "proof of the pudding" with any mutual fund is certainly
whether it meets its stated investment objective for your benefit.
Tax-Free Trust of Oregon has consistently attempted to provide you with three
specific goals in its investment performance:
*a relatively high level of double tax-free income,
*strong preservation of your invested capital, and
*a high level of share price stability.
A collective investment strategy has been utilized by management to achieve
these goals. This has involved quality, maturity, and diversification.
It takes a blend and balance of all three of these elements - quality,
maturity, and diversification - to provide you with the kind of investment
performance that we seek for you. We believe the Trust has effectively
accomplished its investment performance goals for you. Let us illustrate
this point.
QUALITY
The best way to achieve preservation of capital is to place emphasis upon
quality. This has been what the Investment Adviser, Qualivest Capital
Management, has done since the Trust's inception. And, as time has gone on
since mid-1986 when the
(Graphic of Pie Chart for: Portfolio Distribution by Quality by credit Rating)
Pie Chart Data:
AAA: 43.6%
AA: 47.9%
A: 7.2%
Below A & Not Rated*: 1.3%
*Any security not rated must be determined by the
Investment Adviser to have sufficient quality
to be ranked in the top four credit ratings if
a credit rating were to be assigned
by a rating service.
2
<PAGE>
Trust commenced operations, there has been a gradual and continuous upgrading
of quality with the Trust's investment portfolio.
We are proud to report to you that at the Annual Report date of September
30, 1995. Tax-Free Trust of Oregon had 98.7% of its investments in the TOP
THREE credit ratings - AAA, AA, AND A - from among the nine separate credit
ratings assignable to municipal securities by the major, nationally renown
rating services, Standard & Poor's and Moody's Investor Services.
Furthermore, within the Trust's investment portfolio, 91.5% of the Trust's
assets were in the top two credit ratings - AAA and AA. The accompanying
chart illustrates this portfolio quality composition. This represents an
EXCEPTIONALLY HIGH LEVEL of credit safety in achieving preservation of capital.
You should be aware that a key factor with credit ratings is quantifying the
level and consistency of cash flow to cover interest payments and principal
repayments in a timely manner when due. Credit rating services spend a
considerable amount of time and effort analyzing all aspects of the
operations of the issuers of municipal securities in the process of
determining the specific credit rating to be assigned to individual issues.
In general, the higher the credit rating, the higher the level of protection
there is for investors.
Thus, the quality configuration of the investment portfolio of Tax-Free
Trust of Oregon translates to a very high level of capital preservation for
shareholders in the Trust.
MATURITY
Another key factor in achieving the desired level of double tax-free income,
capital preservation, and share stability is the maturity composition of the
Trust's investment portfolio and its overall average maturity.
As we have previously pointed out to you, shorter-term maturities with
municipal securities produce a high level of price stability, but possess a
lesser yield level than longer maturity securities. And, while the yield
level produced by long maturity securities tends to be higher than that of
short maturities, price fluctuation of these securities is accentuated, due
to the uncertainties and risks that can occur over the longer time frame.
(Graphic of Pie Chart for: Portfolio Distribution by Maturity in Years)
Pie Chart Data:
Over 20: 10.8%
16-20: 38.5%
11-15: 35.4%
6-10: 14.2%
0-5: 1.1%
The Investment Adviser of the Trust has intentionally created a blend of
maturities which attempts to mitigate against excessive price fluctuations,
yet still produces an acceptable level of income return.
The maturity composition of the Trust's investment portfolio is illustrated
in the accompanying chart. You will note that emphasis has been placed upon
the intermediate maturity range. This has produced an average maturity for
the Trust of 15.2 years.
3
<PAGE>
(Graphic of Pie Chart for Portfolio Distribution by Project)
Pie Chart Data:
Hospitals: 5.7%
Housing: 5.1%
Education: 32.8%
Convention Center: 1.5%
Airports: 2.5%
Veterans Welfare: 6.5%
Transportation: 6.4%
Utilites: 7.6%
Water & Sewer: 10.3%
General Obligations: 10.0%
Other: 11.6%
DIVERSIFICATION
Over the years, we have tried to ensure that the investments made by the
Trust are well diversified. This helps you and other shareholders by
assisting in share price stability. It also helps the State of Oregon and
its various communities and municipal projects.
A key desire of the Trust is to help finance the municipal facilities and
projects that lead to an improved quality of life for Oregonians and enhanced
economic development within the State.
You will note from the accompanying chart the kind of diversification
engaged in by the Trust. At September 30, 1995, the Trust's investment
portfolio was comprised of 195 separate security issues. No one issue
represents more than 2.5% of the total investment portfolio. All kinds of
vital public purpose projects are being financed through the Trust all over
the entire State.
Through our diversification program, we have tried to ensure that Tax-Free
Trust of Oregon is truly an investment that both you and Oregon can count on.
INVESTMENT PERFORMANCE
Combining the various investment techniques employed by the Trust, as
indicated above, the results achieved are as follows:
YIELD
The accompanying bar chart shows the level of double tax-free income
distributed to shareholders over the period of the past fiscal year from
October 31, 1994 through September 30, 1995, as compared to the level of
taxable income one would have had to earn to equate to such tax-free income
over that same period for those persons within the various Federal income tax
brackets.
What this chart shows is that if you were in the 28% Federal income tax
bracket, you would have had to earn a taxable return of 7.87% in order to
equal the double tax-free return of 5.16% distributed by the Trust. The
level of taxable return needed to match the Trust's return rises for persons
in the higher Federal income tax brackets, as you will note from the chart.
The important point to recognize here is that one could not earn these
levels of taxable return within the market conditions that existed over this
past fiscal year without a lesser quality investment than that provided by the
Trust.
4
<PAGE>
(Graphic of Bar Chart for Tax Free Trust of Oregons's Double-Tax Free
Distribution Rate* As Compared to the Taxable Equivalent Rate An Investor Would
Have to Earn at Various Brackets)
Tax Bracket Taxable Equivalent Rate Double Tax-Free Equivalent Rate
28% 7.87% 5.16%
31% 8.33% 5.16%
36% 9.01% 5.16%
39.6% 9.58% 5.16%
CAPITAL PRESERVATION
Thus, the risks for investors with such taxable investments in fixed income
securities would be greater and the opportunity for capital preservation
would be lower, as compared the with investment portfolio characteristics of
the Trust. Remember, 98.7% of the Trust's investments are in the top three
credit ratings - AAA, AA, AND A, - making capital preservation prospects
very high.
SHARE PRICE STABILITY
The other important goal the Trust has strived to achieve for you is share
price stability.
The bar chart below illustrates the price of the Trust's shares at the end
of each six month period since the Trust commenced operations on June 16, 1986.
(Graphic of Bar Chart for Share Net Asset Value)
In Dollars:
6/16/1986 $ 9.60
9/30/1986 $ 9.82
3/31/1987 $10.12
9/30/1987 $ 9.11
3/31/1988 $ 9.56
9/30/1988 $ 9.67
3/31/1989 $ 9.61
9/30/1989 $ 9.76
3/31/1990 $ 9.76
9/30/1990 $ 9.67
3/31/1991 $ 9.93
9/30/1991 $10.15
3/31/1992 $10.19
9/30/1992 $10.48
3/31/1993 $10.70
9/30/1993 $10.95
3/31/1994 $10.35
9/30/1994 $10.20
3/30/1995 $10.37
9/30/1995 $10.55
5
<PAGE>
As you will note, there have been some price fluctuations over this period.
However, as you will further note, the share price throughout the period has
been centered around the $10.00 level, with movements above and below this
level being relatively moderate.
At September 30, 1995, the Trust's share price was $10.55. This compares
with a price of $10.20 on September 30, 1994, and $10.37 on March 31, 1995.
It is important for us to point out that Tax-Free Trust of Oregon is not
being managed as a total return type of investment. Such an approach is more
suitable to equity-type investments. We do NOT, however, believe this to be
a prudent investment approach for the Trust's investors, since we do not
control the level of interest rates in our country and municipal securities
are generally not considered capital apprecitation investments. Interest rate
changes and levels are governed by the Federal Reserve Board. We can
moderate against swings in rates and share price - and we do so - by active
portfolio management by the Investment Adviser. However, we can not dampen
completely interest rate movements, which can change the Trust's share price
down as well as up, as we witnessed in 1993 and 1994.
As we have mentioned before, as interests rates rise, the price of fixed
income securities (of the type in which the Trust invests) decline. And, as
interest rates decline, the price rises.
The Trust uses the combination of quality, maturity, and diversification to
offset extensive and excessive volatility in the Trust's share price and to
assist in providing a relatively high level of share price stability.
You should appreciate that municipal securities are used to finance long
life projects such as roads, airports, harbors, hospitals, schools, and other
vital public purpose facilities. Thus, Tax-Free Trust of Oregon should be
viewed as a long-term type investment. Over such time frame, we believe that
the record of the Trust illustrates the kind of strong share price stability
in which you can take considerable comfort.
SUMMARY
Over this past fiscal year, as well as since the inception of Tax-Free Trust
of Oregon, considerable effort has been expended to provide you with an
investment which has CONSISTENCY IN PERFORMANCE. WE WANT YOU TO GET WHAT YOU
PAID FOR. We believe we have achieved a relatively high level of success in
providing this to you.
OUR APPRECIATION
We very much value you as a shareholder and appreciate the confidence you
have placed in Tax-Free Trust of Oregon through your investment.
We pledge to you consistent effort on our part to merit your continued trust.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
6
<PAGE>
MANAGEMENT DISCUSSION OF TRUST PERFORMANCE
The graph below illustrates the value of an initial $10,000 investment in
Tax-Free Trust of Oregon at inception of the Trust in June, 1986 and
subsequently through the Trust's latest fiscal year end, September 30, 1995,
as compared with a hypothetical similar size investment in the Lehman
Brothers Municipal Bond Index (the "Index") of municipal securities over that
same period. The total return of the Trust is shown after deduction of the
maximum sales charge of 4% at the time of initial investment, and also
reflects deduction of the Trusts annual operating expenses and reinvestment
of monthly dividends and capital gains distributions without sales charge. On
the other hand, the Index does not reflect any sales charge nor operating
expenses but does reflect reinvestment of coupons.
It should also be specifically noted that the Index is nationally oriented
and consisted, over the period covered by the graph, of an unmanaged mix of
between 8,000 to 26,000 investment-grade long-term municipal securities of
issuers throughout the United States. However, the Trusts investment
portfolio consisted of a significantly lesser number of investment-grade
tax-free municipal obligations, principally of Oregon issuers, over the same
period. The maturities, market prices, and behavior of the individual
securities in the Trusts investment portfolio can be affected by local and
regional factors which might well result in variances from the market action
of the securities in the Index.
Consequently, much of the difference in performance of the Index versus
the Trust can be attributed to the lack of application of annual operating
expenses and initial sales charge to the Index. Additionally, a portion of
the difference in performance can be attributed to the different
characteristics in the single-state market of the securities in the Trusts
portfolio as compared with the national orientation of the securities in the
Index.
Since its inception, the Trust has been managed to provide as stable a
share value as possible consistent with producing a competitive income return
to shareholders. It has not been managed for maximum total return, since one
of the aims of management in structuring the portfolio of the Trust is to
reduce fluctuations in the price of the Trusts shares resulting from changes
in interest rates.
As can be observed, however, the pattern of the Trusts results and that
of the Index over the period since inception of the Trust track quite
similarly, even though they are not entirely comparable in character.
(Graphic of Performance Comparison Chart)
PERFORMANCE COMPARISON
Period Ending Lehman Index Fund Before Sales Charge Fund After Sales Charge
6/86 $10000 $0 $ 9600
9/86 $10538 $0 $ 9990
9/87 $10592 $0 $ 9931
9/88 $11966 $0 $11288
9/89 $13082 $0 $12178
9/90 $13971 $0 $12852
9/91 $15813 $0 $14386
9/92 $17467 $0 $15740
9/93 $19692 $0 $17446
9/94 $19103 $0 $17136
9/95 $21241 $0 $18767
Trust's Average annual total return
For the Period Ended September 30, 1995 1 Year 5 Years Life of Trust
Since 6/16/86
Including Sales Charge and Expenses 5.09% 6.96% 7.01%
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<PAGE>
MANAGEMENT DISCUSSION OF TRUST PERFORMANCE (continued)
September 30, 1995, ended the ninth fiscal year of the Trust and one of
its most rewarding. During the 12-month period, we saw interest rates peak in
November 1994 and then start downward. For the calendar year 1994, the Trust
continued to show excellent performance by resisting share value erosion
while interest rates were rising and then appreciating as interest rates
started to decline.
For most of 1995, municipal bond funds nationwide, including the Tax-Free
Trust of Oregon, have had only a limited amount of net new money inflow or
the flow was negative. Among the reasons for this were the following:
1. Dynamic performance of equities during 1995.
2. Concerns over possible Federal tax reform.
3. Reaction of investors to the gyrations in interest rates and bond
prices during 1993 and 1994.
As a result, the emphasis in managing the Trust has been on upgrading the
assets and reorienting the present holdings to be responsive to the changed
economic picture. For the fiscal year ended September 30, 1995, the Trust had
a total return of 9.5 percent, after subtracting annual expenses, but before
sales charges.
The economic climate in the country has been quite positive for the first
nine months of this year. Corporate America is showing a modest but steady
growth of profitability. At the same time, the rate of inflation is being
kept well under control. Economic growth is coming in at around 4 percent,
and inflation is in the process of declining below 3 percent. Interest rates,
as judged by the 30-year Treasury bond, are at their lowest level for some
time. With the possibility that Congress will be working toward a balanced
budget as it attempts to reduce spending, the prospect for lower interest
rates and lower levels of inflation remain promising. As a result, we believe
the outlook appears favorable for municipal bonds.
8
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountantsd
INDEPENDENT AUDITORS REPORT
To the Board of Trustees and Shareholders of
Tax-Free Trust of Oregon:
We have audited the accompanying statement of assets and liabilities of
Tax-Free Trust of Oregon, including the statement of investments, as of
September 30, 1995, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Trusts management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 1995, by correspondence with the custodia
n and a broker. An audit also includes assessing the accounting principles
used, and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Tax-Free Trust of Oregon as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
October 25, 1995
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<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (51.8%) S&P VALUE
City of Albany (MBIA Corporation Insured) General
Obligation Bonds,
$ 150,000 6.400%, 11/01/1999 Aaa/AAA $ 150,375
460,000 6.500%, 11/01/2000 Aaa/AAA 461,150
2,195,000 6.625%, 11/01/2009 Aaa/AAA 2,197,744
Port of Astoria (MBIA Corporation Insured)
General Obligation Bonds,
410,000 6.200%, 02/01/2004 Aaa/AAA 428,962
1,250,000 6.600%, 09/01/2011 Aaa/AAA 1,310,937
City of Beaverton General Obligation Bonds,
910,000 5.950%, 04/01/2003 Aa/AA- 971,425
520,000 6.600%, 06/01/2003 Aa/AA- 550,550
960,000 6.050%, 04/01/2004 Aa/AA- 1,024,800
560,000 6.600%, 06/01/2004 Aa/AA- 592,900
1,020,000 6.150%, 04/01/2005 Aa/AA- 1,088,850
500,000 5.000%, 06/01/2005 Aa/AA- 498,750
1,080,000 6.250%, 04/01/2006 Aa/AA- 1,150,200
Clackamas County School District #115
(AMBAC Indemnity Corporation Insured)
General Obligation Bonds,
600,000 5.600%, 06/01/2006 Aaa/AAA 626,250
615,000 5.700%, 06/01/2007 Aaa/AAA 641,906
1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,042,500
Clackamas and Washington County School
District #3J General Obligation Bonds,
2,000,000 5.850%, 08/01/2006 A1/AA- 2,120,000
5,000,000 5.875%, 08/01/2009 A1/AA- 5,168,750
1,150,000 5.875%, 10/01/2009 A1/AA- 1,197,437
Clackamas, Multnomah and Washington
County School District #7J General
Obligation Bonds,
1,000,000 7.100%, 06/15/2009 Aaa/NR 1,113,750
250,000 7.100%, 06/15/2010 Aaa/NR 278,437
1,500,000 5.700%, 06/15/2010 Aa/NR 1,524,375
Columbia Gorge Community College
District (Financial Security Assurance
Insured) General Obligation Bond,
1,200,000 5.400%, 06/01/2013 Aaa/AAA 1,170,000
Columbia River Peoples Utility District
(AMBAC Indemnity Corporation Insured)
General Obligation Bond,
2,150,000 7.250%, 05/01/2009 Aaa/AAA 2,184,937
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
Deschutes and Jefferson County School District #2J
(MBIA Corporation Insured) General Obligation Bond,
$ 3,700,000 5.600%, 06/01/2009 Aaa/AAA $ 3,755,500
Hood River County School District (AMBAC Indemnity
Corporation Insured) General Obligation Bond,
2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,067,500
Jackson County School District #549C (Financial
Security Assurance Insured) General Obligation Bond,
1,150,000 5.300%, 06/01/2008 Aaa/AAA 1,160,062
Josephine County School District #7 (Grants Pass)
(Financial Guaranty Insurance Corporation Insured)
General Obligation Bond,
2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,700,000
Jefferson County School District #509J (Financial
Security Assurance Insured) General Obligation Bond,
1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,739,062
Lane County School District #4 General Obligation Bond,
2,000,000 5.375%, 07/01/2009 Aa/NR 2,000,000
Lane County School District #52 (Financial Guaranty
Insurance Corporation Insured) General Obligation Bond,
750,000 6.400%, 12/01/2009 Aaa/AAA 815,625
Lincoln County Oregon School District (Financial
Guaranty Insurance Corporation Insured) General
Obligation Bond,
1,245,000 5.250%, 06/15/2012 Aaa/AAA 1,198,312
Lincoln County (MBIA Corporation Insured) General
Obligation Bond,
1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,003,750
Malheur County Jail Bonds (MBIA Corporation Insured)
General Obligation Bond,
1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,434,106
Marion and Clackamas County Union High School
District #7J (Financial Security Assurance Insured)
General Obligation Bond,
1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,386,900
Metropolitan Service District Refunding (Oregon
Convention Center) General Obligation Bond,
4,320,000 6.250%, 01/01/2013 Aa/AA+ 4,509,000
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
Multnomah County General Obligation Bonds,
$ 1,245,000 5.100%, 10/01/2007 Aa1/NR $ 1,251,225
1,000,000 5.200%, 10/01/2008 Aa1/NR 1,005,000
Multnomah County School District #1 General
Obligation Bonds,
3,225,000 6.500%, 12/15/2000 Aa/AA- 3,329,813
1,180,000 6.600%, 12/15/2001 Aa/AA 1,218,350
3,725,000 6.800%, 12/15/2004 Aa/AA- 3,846,063
Multnomah County School District #1J General
Obligation Bond,
1,000,000 5.000%, 03/01/2007 Aa/AA- 987,500
Multnomah County School District #4 General
Obligation Bond,
1,330,000 5.900%, 01/01/2005 A1/A+ 1,419,775
Multnomah County School District #40 Genera
Obligation Bond,
3,600,000 5.625%, 06/01/2012 NR/AA- 3,618,000
Oak Lodge Water District (AMBAC Indemnity Corporation
Insured) General Obligation Bonds,
215,000 7.300%, 12/01/2005 Aaa/AAA 256,656
215,000 7.300%, 12/01/2006 Aaa/AAA 255,581
215,000 7.400%, 12/01/2007 Aaa/AAA 256,388
State of Oregon General Obligation Bond,
5,000,000 7.000%, 12/01/2011 Aa/AA- 5,450,000
State of Oregon Alternate Energy Project General
Obligation Bonds,
1,530,000 4.900%, 01/01/2004 Aa/AA- 1,535,738
1,000,000 6.400%, 01/01/2008 Aa/AA- 1,061,250
State of Oregon Board of Higher Education General
Obligation Bonds,
900,000 6.200%, 10/15/2007 Aa/AA- 963,000
3,195,000 6.400%, 10/01/2011 Aa/AA- 3,354,750
2,000,000 6.250%, 10/15/2012 Aa/AA- 2,070,000
2,150,000 6.500%, 10/01/2017 Aa/AA- 2,244,063
2,890,000 6.000%, 10/15/2018 Aa/AA- 2,933,350
State of Oregon Elderly Housing General Obligation Bond,
725,000 6.250%, 08/01/2013 Aa/AA- 754,906
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
State of Oregon Veterans' Welfare General Obligation
Bonds,
$ 900,000 11.250%, 04/01/1998 Aa/AA- $ 1,048,500
875,000 7.500%, 03/01/2000 Aa/AA- 928,594
505,000 9.000%, 04/01/2008 Aa/AA- 629,356
700,000 9.200%, 10/01/2008 Aa/AA- 967,750
565,000 8.000%, 11/01/2012 Aa/AA- 617,969
7,150,000 6.875%, 12/01/2013 Aa/AA- 7,757,750
500,000 6.875%, 12/01/2014 Aa/AA- 542,500
1,000,000 7.000%, 12/01/2015 Aa/AA- 1,088,750
Pacific Communities Hospital District (Financial
Guaranty Insurance Corporation Insured) General
Obligation Bonds,
200,000 6.500%, 12/01/2003 Aaa/AAA 206,000
380,000 6.500%, 12/01/2005 Aaa/AAA 391,400
Polk County School District #2 (Financial Security
Assurance Insured) General Obligation Bond,
1,000,000 5.400%, 06/01/2012 Aaa/AAA 980,000
Polk, Marion, and Benton County School District
#13J (Financial Guaranty Insurance Corporation
Insured) General Obligation Bond,
1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,023,750
City of Portland General Obligation Bonds,
1,625,000 4.500%, 11/01/2004 Aaa/NR 1,594,531
1,480,000 5.100%, 10/01/2009 Aaa/NR 1,459,650
2,000,000 7.125%, 10/01/2010 Aaa/NR 2,195,000
City of Portland (Limited) General Obligation Bonds,
2,500,000 5.250%, 06/01/2015 Aa/NR 2,359,375
Portland Community College District General
Obligation Bond,
3,500,000 6.000%, 07/01/2012 A1/AA 3,574,375
Port of Portland General Obligation Bond,
1,000,000 4.500%, 03/01/2006 Aa/AA+ 961,250
City of Salem General Obligation Bond,
1,000,000 5.875%, 01/01/2007 A1/A+ 1,033,750
City of Springfield Advanced Refunding Genera;
Obligation Bond,
275,000 8.600%, 06/01/2003 A/NR 283,594
Tri-County Metropolitan Transportation District
General Obligation Bond,
6,100,000 6.000%, 07/01/2012 Aa/AA+ 6,252,500
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
Tualatin Hills Park and Recreation District (MBIA
Corporation Insured) General Obligation Bond,
$ 2,970,000 5.750%, 03/01/2012 Aaa/AAA $ 3,014,550
Umatilla County School District #8R (AMBAC Indemnity
Corporation Insured) General Obligation Bond,
700,000 6.100%, 12/01/2012 Aaa/AAA 733,250
Wasco County School District #9 (AMBAC Indemnity
Corporation Insured) General Obligation Bond,
700,000 5.500%, 06/01/2008 Aaa/AAA 714,875
Washington County General Obligation Bond,
2,500,000 6.200%, 12/01/2007 Aa/AA 2,684,375
Washington County, Oregon (Criminal Justice Facility)
General Obligation Bond,
2,110,000 6.000%, 12/01/2013 Aa/AA 2,175,938
Washington County School District #88J (Financial
Security Assurance Insured) General Obligation Bond,
2,900,000 6.100%, 06/01/2012 Aaa/AAA 3,041,375
Washington and Clackamas County School District
#23J General Obligation Bonds,
1,675,000 6.625%, 01/01/2005 A1/NR 1,815,281
1,000,000 5.650%, 06/01/2015 A1/NR 1,008,750
720,000 6.625%, 01/01/2008 A1/NR 780,300
2,000,000 5.400%, 01/01/2010 A1/NR 2,012,500
Washington & Multnomah County School District
#48J General Obligation Bonds,
1,175,000 5.500%, 06/01/2006 Aa/AA- 1,213,188
1,440,000 4.500%, 09/01/2006 Aa/AA- 1,369,800
1,130,000 5.600%, 06/01/2007 Aa/AA- 1,170,963
1,000,000 6.150%, 06/01/2008 Aa/AA- 1,057,500
1,415,000 5.700%, 06/01/2008 Aa/AA- 1,466,294
525,000 6.300%, 09/01/2009 Aa/AA- 573,563
1,440,000 6.000%, 06/01/2011 Aa/AA- 1,492,200
2,010,000 6.500%, 09/01/2011 Aa/AA- 2,216,025
250,000 5.750%, 09/01/2012 Aa/AA- 262,813
4,000,000 5.000%, 09/01/2012 Aa/AA- 3,775,000
Washington & Yamhill County School District #58J (AMBAC
Indemnity Corporation Insured) General Obligation Bonds,
70,000 6.600%, 11/01/2004 Aaa/AAA 71,400
80,000 6.600%, 11/01/2005 Aaa/AAA 81,400
90,000 6.600%, 11/01/2006 Aaa/AAA 91,575
Wolf Creek Highway Water District General Obligation
Bond,
505,000 6.900%, 12/01/2005 Aa/AA 546,663
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
Yamhill County School District #29J (Financial
Security Assurance Insured) General Obligation Bonds,
$ 2,000,000 5.350%, 06/01/2006 Aaa/AAA $ 2,020,000
500,000 6.100%, 06/01/2011 Aaa/AAA 521,250
Total State of Oregon General Obligation Bonds 160,883,382
STATE OF OREGON REVENUE BONDS (45.1%)
Airport Revenue Bonds (2.5%)
Port of Portland Airport (Financial Guaranty Insurance
Corporation Insured) Revenue Bond,
500,000 5.500%, 07/01/2006 Aaa/AAA 511,875
Port of Portland Airport (MBIA Corporation Insured)
Revenue Bonds,
600,000 6.400%, 07/01/2003 Aaa/AAA 654,750
3,530,000 6.750%, 07/01/2009 Aaa/AAA 3,847,700
2,425,000 6.750%, 07/01/2015 Aaa/AAA 2,615,969
Total Airport Revenue Bonds 7,630,294
Certificate of Participation Revenue Bonds (7.6%)
Multnomah County Certificate of Participation Health
Facilities Lease Purchase Program Revenue Bond,
1,000,000 5.200%, 07/01/2005 Aa/NR 1,023,750
Multnomah County Certificate of Participation Juvenile
Justice Center Revenue Bond,
3,100,000 6.000%, 08/01/2012 Aa/A 3,173,625
State of Oregon Certificate of Participation (AMBAC
Indemnity Corporation Insured) Revenue Bond,
3,100,000 7.500%, 09/01/2015 Aaa/AAA 3,568,875
State of Oregon Certificate of Participation (MBIA
Corporation Insured) Revenue Bonds,
2,150,000 7.050%, 01/15/2006 Aaa/AAA 2,348,875
1,250,000 5.700%, 01/15/2010 Aaa/AAA 1,262,500
2,750,000 6.200%, 11/01/2012 Aaa/AAA 2,853,125
1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,293,750
1,000,000 5.500%, 01/15/2015 Aaa/AAA 977,500
550,000 5.500%, 01/15/2015 Aaa/AAA 537,625
600,000 7.200%, 03/01/2015 Aaa/AAA 671,250
1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,007,500
2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,080,000
City of Portland Certificate of Participation Revenue Bonds,
1,100,000 7.250%, 04/01/2008 Aa/NR 1,201,750
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
Washington County Educational Services,
Certificates of Participation Revenue Bond,
$ 645,000 5.625%, 06/01/2016 A1/NR $ 636,938
Washington County Educational Services,
Certificates of Participation (MBIA Corporation
Insured) Revenue Bond,
830,000 5.750%, 06/01/2025 Aaa/AAA 813,400
Total Certificate of Participation Revenue Bonds 23,450,463
Hospital Revenue Bonds (5.3%)
Clackamas Hospital Facilities Authority (Adventist
Health System/West) (MBIA Corporation Insured)
Revenue Bond,
2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,135,000
Clackamas Hospital Facilites Authority (Kaiser
Permanente) Revenue Bond,
2,400,000 6.500%, 04/01/2011 Aa2/AA 2,517,000
Clackamas Hospital Facilites Authority (Sisters
of Providence Hospital) Revenue Bonds,
500,000 6.375%, 10/01/2004 A1/AA- 540,000
Douglas County Hospital Facilities Authority
(Catholic Health) (MBIA Corporation Insured)
Revenue Bond,
535,000 5.600%, 11/15/2005 Aaa/AAA 557,068
Medford Hosptial Facilities Authority (Rogue
Valley Health Services) (MBIA Corporation Insured)
Revenue Bonds,
500,000 6.800%, 12/01/2011 Aaa/AAA 539,375
1,685,000 6.750%, 12/01/2020 Aaa/AAA 1,802,950
Portland Hospital Facilities Authority (Legacy
Health Systems) (AMBAC Indemnity Corporation
Insured) Revenue Bonds,
900,000 6.500%, 05/01/2004 Aaa/AAA 986,625
3,000,000 6.700%, 05/01/2021 Aaa/AAA 3,236,250
Western Lane County Hospital Facilities
Authority (Sisters of St. Joseph Hospital)
(MBIA Corporation Insured) Revenue Bonds,
1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,041,250
1,450,000 7.125%, 08/01/2017 Aaa/AAA 1,616,750
1,500,000 5.750%, 08/01/2019 Aaa/AAA 1,479,375
Total Hospital Revenue Bonds 16,451,643
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
Housing, Educational, and Cultural Revenue Bonds
(7.0%)
State of Oregon Housing Finance Agency Revenue Bond,
$ 1,000,000 6.800%, 07/01/2013 A1/A+ $ 1,038,750
State of Oregon Housing and Community Services
Revenue Bonds,
1,075,000 4.900%, 07/01/2005 Aa/NR 1,050,812
1,205,000 5.100%, 07/01/2007 Aa/NR 1,174,875
500,000 5.100%, 07/01/2007 Aa/NR 483,750
1,670,000 5.200%, 07/01/2009 Aa/NR 1,607,375
955,000 6.750%, 07/01/2012 Aa/NR 1,014,687
500,000 6.700%, 07/01/2013 Aa/NR 523,750
500,000 6.350%, 07/01/2014 Aa/NR 513,125
1,145,000 6.800%, 07/01/2016 Aa/NR 1,203,681
1,980,000 6.750%, 07/01/2016 Aa/NR 2,066,625
3,500,000 6.875%, 07/01/2028 Aa/NR 3,675,000
State of Oregon Housing, Educational and Cultural
Facilities Authority (Lewis & Clark College) (MBIA
Corporation Insured) Revenue Bond,
1,130,000 7.125%, 07/01/2020 Aaa/AAA 1,278,312
State of Oregon Housing, Educational and Cultural
Facilities Authority (OMSI) Revenue Bond,
800,000 5.900%, 10/01/2006 A1/NR 817,000
State of Oregon Housing, Educational and Cultural
Facilities Authority (Reed College) Revenue Bond,
2,145,000 6.750%, 07/01/2021 NR/A+ 2,276,381
City of Salem Educational Facilities (Willamette
University) Revenue Bonds,
1,000,000 6.000%, 04/01/2010 A/NR 1,030,000
1,740,000 6.750%, 04/01/2011 A/NR 1,942,275
Total Housing, Educational, and Cultural Revenue Bonds 21,696,398
Transportation Revenue Bonds (2.8%)
Port of Morrow Revenue Bond,
2,600,000 6.375%, 04/01/2008 Aaa/NR 2,856,750
State of Oregon Department of Transportation (Light
Rail) (MBIA Corporation Insured) Revenue Bond,
2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,155,000
Port of St. Helens Revenue Bond,
95,000 7.750%, 02/01/2006 Baa1/NR 104,738
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
Tri-County Metropolitan Transportation District
Revenue Bond,
$ 3,680,000 5.700%, 08/01/2013 A1/AA $ 3,670,800
Total Transportation Revenue Bonds 8,787,288
Urban Renewal Revenue Bonds (.6%)
Keiser Urban Renewal Agency Revenue Bond,
950,000 5.400%, 07/01/2008 NR/A- 932,188
City of Portland Urban Renewal Revenue Bond,
300,000 9.000%, 12/01/2002 A/NR 308,625
City of Wilsonville Urban Renewal Revenue Bond,
500,000 5.850%, 06/01/2004 Baa1/NR 500,625
Total Urban Renewal Revenue Bonds 1,741,438
Utility Revenue Bonds (6.7%)
Emerald Peoples Utility District (AMBAC Indemnity
Corporation Insured) Revenue Bonds,
700,000 6.700%, 11/01/2005 Aaa/AAA 777,875
145,000 7.200%, 11/01/2006 Aaa/AAA 149,531
35,000 7.200%, 11/01/2006 Aaa/AAA 36,225
3,860,000 7.350%, 11/01/2013 Aaa/AAA 3,970,975
Emerald Peoples Utility District Electic Systems (Capital
Guaranty Insurance Company Insured) Revenue Bond,
1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,118,750
City of Eugene Electric Utility Revenue Bonds,
610,000 6.650%, 08/01/2009 A1/AA 648,888
660,000 6.650%, 08/01/2010 A1/AA 697,950
1,000,000 6.000%, 08/01/2011 A1/AA 1,023,750
700,000 6.700%, 08/01/2011 A1/AA 738,500
500,000 5.000%, 08/01/2017 A1/AA 451,875
1,400,000 5.800%, 08/01/2019 A1/AA 1,391,250
City of Eugene Trojan Nuclear Project Revenue Bond,
3,865,000 5.900%, 09/01/2009 Aa/AA 3,865,000
Marion County Solid Waste and Electric (AMBAC Indemnity
Corporation Insured) Revenue Bonds,
1,445,000 7.500%, 10/01/2004 Aaa/AAA 1,515,444
4,335,000 7.700%, 10/01/2009 Aaa/AAA 4,568,006
Total Utility Revenue Bonds 20,954,019
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
Water and Sewer Revenue Bonds (9.6%)
City of Canby Sewer (Capital Guaranty Insurance
Corporation Insured) Revenue Bond,
$ 500,000 6.250%, 12/01/2017 Aaa/AAA $ 516,250
City of Eugene Water Revenue Bonds,
780,000 6.550%, 08/01/2004 A1/AA- 806,325
365,000 6.600%, 08/01/2005 A1/AA- 377,319
City of Klamath Falls Water (Financial Security
Assurance Insured) Revenue Bond,
1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,137,125
City of Oregon City Sewer Revenue Bond,
750,000 6.875%, 10/01/2019 NR/NR* 795,000
City of Portland Sewer Revenue Bonds,
2,400,000 4.900%, 03/01/2005 A1/A+ 2,388,000
3,150,000 5.100%, 03/01/2007 A1/A+ 3,130,312
1,500,000 6.050%, 06/01/2009 A1/A+ 1,584,375
2,000,000 7.125%, 03/01/2010 Aaa/AAA 2,135,000
City of Portland Sewer (Financial Guaranty Insurance
Corporation Insured) Revenue Bonds,
2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,895,313
500,000 6.000%, 10/01/2012 Aaa/AAA 516,875
2,855,000 6.250%, 06/01/2015 Aaa/AAA 3,012,025
Washington County Unified Sewer Agency (AMBAC
Indemnity Corporation Insured) Revenue Bonds,
1,040,000 6.800%, 11/01/2004 Aaa/AAA 1,136,200
2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,249,850
1,115,000 5.900%, 10/01/2006 Aaa/AAA 1,183,294
2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,593,750
750,000 6.125%, 10/01/2012 Aaa/AAA 778,125
Washington County Unified Sewer Agency Revenue Bond,
2,195,000 7.000%, 11/01/2009 Aaa/AAA 2,414,500
Total Water and Sewer Revenue Bonds 29,649,638
Other Revenue Bonds (3.0%)
Baker County Pollution Control (Ash Grove Cement
West Project) (Small Business Administration
Insured) Revenue Bonds,
355,000 6.200%, 07/01/2004 Aaa/NR 370,531
380,000 6.300%, 07/01/2005 Aaa/NR 396,625
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
<C> <S> <C> <C>
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
State of Oregon Bond Bank Revenue Bonds,
$ 500,000 6.800%, 01/01/2011 Aaa/NR $ 546,250
1,000,000 6.700%, 01/01/2011 Aaa/NR 1,088,750
Oregon Economic Development Commission
(Consolidated Freightways) Revenue Bond,
1,500,000 7.000%, 04/01/2004 Baa3/BBB- 1,507,500
City of Portland Revenue Bonds,
3,160,000 4.550%, 04/01/2003 Aa/NR 3,132,350
2,465,000 4.650%, 04/01/2004 Aa/NR 2,443,431
Total Other Revenue Bonds 9,485,437
Total State of Oregon Revenue Bonds 139,846,618
Total State of Oregon 300,730,000
Puerto Rico
Puerto Rico Housing Finance Corporation (GNMA
Collateralized) Revenue Bond,
115,000 7.800%, 10/15/2021 Aaa/AAA 120,319
Total Puerto Rico 120,319
Total Municipal Bonds -96.9% (Cost - $288,717,723**) 300,850,319
Other assets in excess of liabilities -3.1% 9,703,781
Net Assets - 100%, $ 310,554,100
</TABLE>
(*) Any security not rated must be determined by the
Investment Adviser to have sufficient quality to be
ranked in the top four credit ratings if a credit rating
were to be assigned by a rating service.
(**)Aggregate cost for Federal tax purposes is $287,860,457.
See accompanying notes to financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<S> <C>
ASSETS
Investments at value (cost - $288,717,723) $ 300,850,319
Cash 4,505,715
Interest receivable 5,785,245
Receivable for securities sold 1,570,443
Receivable for Trust shares sold 146,527
Other assets 6,471
Total assets 312,864,720
LIABILITIES
Payable for securities purchased 1,601,509
Payable for Trust shares redeemed 305,618
Dividends payable 127,887
Distribution fees payable 116,669
Adviser and Administrator fees payable 98,074
Accrued expenses 60,863
Total liabilities 2,310,620
NET ASSETS (equivalent to $10.55 per share on 29,423,007 shares
outstanding) $ 310,554,100
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $0.01 per share $ 294,230
Additional paid-in capital 297,947,864
Accumulated net realized gain on investments 179,410
Net unrealized appreciation on investments 12,132,596
$ 310,554,100
Net Asset Value, redemption price per share $ 10.55
Offering price per share (100/96 of $10.55 adjusted to nearest cent) $ 10.99
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<S> <C> <C>
Investment Income:
Interest income $18,738,698
Expenses:
Investment Adviser fees (note B) $729,908
Administrator fees (note B) 729,908
Distribution fees (note B) 230,886
Transfer and shareholder servicing agent fees 192,754
Legal fees 79,754
Trustees fees and expenses (note G) 69,415
Shareholders reports and proxy statements 56,455
Custodian fees (note F) 55,156
Audit and accounting fees 27,971
Registration fees and dues 24,336
Insurance 11,481
Miscellaneous 38,343
2,246,367
Expenses paid indirectly (note F) (49,858)
Net expenses 2,196,509
Net investment income 16,542,189
Realized and unrealized gain on investments:
Net realized gain from securities transactions 301,287
Change in unrealized appreciation on investments 11,027,760
Net realized and unrealized gain on investments 11,329,047
Net increase in net assets resulting from operations $ 27,871,236
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C>
Year Ended Year Ended
September 30, September 30,
1995 1994
OPERATIONS:
Net investment income $ 16,542,189 $ 17,353,102
Net realized gain from securities
transactions 301,287 503,218
Change in unrealized appreciation
on investments 11,027,760 (23,866,367)
Net increase (decrease) in net
assets resulting from operations 27,871,236 (6,010,047)
DISTRIBUTIONS TO SHAREHOLDERS (note E):
Net investment income ($0.55 and
$0.56 per share, respectively) (16,257,162) (17,353,102)
Net realized gain from securities transactions
($0.04 and $0 per share, respectively) (1,341,034) -
Total distributions (17,598,196) (17,353,102)
Net increase (decrease) from
investment activities 10,273,040 (23,363,149)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TRUST SHARE
TRANSACTIONS:
SHARES
Year Ended Year Ended
September September
30, 1995 30, 1994
Shares sold 2,396,282 4,052,169 24,616,407 43,146,839
Shares issued through
reinvestacment of
dividends 978,995 927,419 10,024,851 9,791,610
Shares redeemed (4,963,693) (4,204,670) (50,676,823) 44,276,445)
Increase (decrease) in
shares and net assets
derived from Trust
share transactions (1,588,416) 774,918 (16,035,565) 8,662,004
Net decrease in net
assets (5,762,525) (14,701,145)
NET ASSETS:
Beginning of year 316,316,625 331,017,770
End of year $ 310,554,100 $316,316,625
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Tax-Free Trust of Oregon (the "Trust") is a separate portfolio of The
Cascades Trust. The Cascades Trust (the "Business Trust") is an open-end
investment company, which was organized on October 17, 1985, as a
Massachusetts business trust and is authorized to issue an unlimited number
of shares. The Trust is a non-diversified portfolio which commenced
operations on June 16, 1986.
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
(1) Portfolio valuation: Municipal securities which have remaining
maturities of more than 60 days are valued each business day based upon
information provided by a nationally prominent independent pricing service
and periodically verified through other pricing services; in the case of
securities for which market quotations are readily available, securities are
valued at the mean of bid and asked quotations and, in the case of other
securities, at fair value determined under procedures established by and
under the general supervision of the Board of Trustees. Securities which
mature in 60 days or less are valued at amortized cost if their term to
maturity at purchase was 60 days or less, or by amortizing their unrealized
appreciation or depreciation on the 61st day prior to maturity, if their term
to maturity at purchase exceeded 60 days.
(2) Securities transactions and related investment income: Securities
transactions are recorded on the trade date. Realized gains and losses from
securities transactions are reported on the identified cost basis. Interest
income is recorded daily on the accrual basis and is adjusted for
amortization of premiums and accretion of discounts of securities purchased
at other than par with less than 60 days to maturity.
(3) Federal income taxes: It is the policy of the Trust to qualify as a
regulated investment company by complying with the provisions of the Internal
Revenue Code applicable to certain investment companies. The Trust intends to
make distributions of income and securities profits sufficient to relieve it
from all, or substantially all, Federal income and excise taxes.
NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH
AFFILIATES:
Management affairs of the Trust are conducted through two separate
management arrangements.
Qualivest Capital Management, Inc. (the "Adviser") became Investment Adviser
to the Trust in June, 1986. In this role, under an Investment Advisory
Agreement, the Adviser supervises the Trusts investments and provides various
services to the Trust, including maintenance of the Trusts accounting books
and records, for which it is entitled to receive a fee which is payable
monthly and computed at the annual rate of 0.20% of the Trusts average daily
net assets. Prior to the increase in the service fee payment on July 1, 1995,
as described below, the fee was at the annual rate of 0.25%.
The Trust also has an Administration Agreement with its founder and
sponsor, Aquila Management Corporation (the "Administrator"). Under this
Agreement, the Administrator provides all administrative services, other than
those relating to the management of the Trusts investments. This includes
providing the office of the Trust and all related services as well as
overseeing the activities of all the various support organizations to the
Trust such as the shareholder servicing agent, custodian, legal counsel,
auditors and distributor. For its services, the Administrator is entitled to
receive a fee which is payable monthly and computed at the annual rate of
0.20% of the Trusts average daily net assets. Prior to
24
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the increase in the service fee payment on July 1, 1995, as described below,
the fee was at the annual rate of 0.25%.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Trusts
Prospectus and Statement of Additional Information.
The Adviser and the Administrator each agrees that the above fees shall be
reduced, but not below zero, by an amount equal to its pro-rata portion
(determined on the basis of the respective fees computed as described above)
of the amount, if any, by which the total expenses of the Trust in any fiscal
year, exclusive of taxes, interest and brokerage fees, shall exceed the
lesser of (i) 2.5% of the first $30 million of average annual net assets of
the Trust plus 2% of the next $70 million of such assets and 1.5% of its
average annual net assets in excess of $100 million, or (ii) 25% of the
Trusts total annual investment income. The payment of the above fees at the
end of any month will be reduced or postponed so that at no time will there
be any accrued but unpaid liability under this expense limitation. No such
reduction in fees was required during the year ended September 30, 1995.
For the year ended September 30, 1995, the Trust incurred fees under the
Advisory Agreement and Administration Agreement of $729,908 and $729,908,
respectively.
Under a Distribution Agreement, Aquila Distributors, Inc. (the "Distributor")
serves as the exclusive distributor of the Trusts shares. Through agreements
between the Distributor and various broker-dealer firms (dealers), the Trusts
shares are sold primarily through the facilities of these dealers having
offices within Oregon, with the bulk of sales commissions inuring to such
dealers. However, for the year ended September 30, 1995, the Distributor
received sales commissions in the amount of $85,550.
Effective June 1, 1994 the Trust adopted a Distribution Plan (the "Plan")
pursuant to Rule 12bb1 (the Rule) under the Investment Company Act of 1940.
The Plan authorizes the Trust to make service fee payments to broker-dealers
or others selected by the Distributor, including, but not limited to, any
principal underwriter of the Trust, with which the Distributor has entered
into written agreements contemplated by the Rule and which have rendered
assistance in the distribution and/or retention of the Trusts shares or
servicing of shareholder accounts. On July 1, 1994, the Trust commenced
payment of this service fee, which until July 1, 1995, was paid at the annual
rate of 0.05% of the Trusts average net assets. On July 1, 1995, as approved
by shareholders on May 1, 1995, this fee was increased to 0.15% of the Trusts
average net assets with a simultaneous reduction in the annual rate of each
of the Advisory fee and the Administration fee from 0.25% to 0.20%.
Accordingly, these fee reductions offset the increase in the rate of the
service fee and resulted in no increase in overall expenses of the Trust.
During the year ended September 30, 1995, service fees amounted to $230,886,
of which the Distributor received $4,260. Specific details about the Plan are
more fully defined in the Trusts Prospectus and Statement of Additional
Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the year ended September 30, 1995, purchases of securities and
proceeds from the sales of securities aggregated $38,148,973 and $60,229,780,
respectively.
At September 30, 1995, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $13,441,794 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to
$451,932 for a net unrealized appreciation of $12,989,862.
25
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D - PORTFOLIO ORIENTATION:
Since the Trust invests principally and may invest entirely in double
tax-free municipal obligations of issuers within Oregon, it is subject to
possible risks associated with economic, political, or legal developments or
industrial or regional matters specifically affecting Oregon and whatever
effects these may have upon Oregon issuers ability to meet their obligations.
One such development, Measure 5, a 1990 amendment to the Oregon Constitution,
limits the taxing and spending authority of certain Oregon governmental
entities. Although it may have an adverse effect on the general financial
condition of these entities and may impair the ability of certain Oregon
issuers to pay interest and principal on their obligations, experience over
the history of the amendment would indicate a low probability of this
happening.
NOTE E - DISTRIBUTIONS:
The Trust declares dividends daily from net investment income and makes
payments monthly in additional shares at the net asset value per share or in
cash, at the shareholders option. Net realized capital gains, if any, are
distributed annually.
The Trust intends to maintain, to the maximum extent possible, the
tax-exempt status of interest payments received from portfolio municipal
securities in order to allow dividends paid to shareholders from net
investment income to be exempt from regular Federal and State of Oregon
income taxes. However, due to differences between financial reporting and
Federal income tax reporting requirements, distributions made by the Trust
may not be the same as the Trusts net investment income, and/or net realized
securities gains. Further, a small portion of the dividends may, under some
circumstances, be subject to ordinary income taxes. Also, annual capital
gains distributions, if any, are taxable.
NOTE F - CUSTODIAN FEES:
The Trust has negotiated an expense offset arrangement with its custodian
wherein it receives credit toward the reduction of custodian fees whenever
there are uninvested cash balances. During the year ended September 30, 1995,
the Trusts custodian fees amounted to $55,156, of which $49,858 was offset by
such credits. The Trust could have invested its cash balances in an
income-producing asset if it had not agreed to a reduction in fees under the
expense offset arrangement with the custodian.
NOTE G - TRUSTEES FEES AND EXPENSES:
During the fiscal year from October 1, 1994 through September 30, 1995,
there were eight Trustees. Trustees fees paid during the year were at the
annual rate of $5,000 for carrying out their responsibilities and attendance
at regularly scheduled Board Meetings. If additional or special meetings are
scheduled for the Trust, separate meeting fees are paid for each such meeting
to those Trustees in attendance. The Trust also reimburses Trustees for
expenses such as travel, accommodations, and meals incurred in connection
with attendance at regularly scheduled or special Board Meetings and at the
Annual Meeting and outreach meetings of Shareholders. For the fiscal year
ended September 30, 1995, such reimbursements averaged approximately $5,500
per Trustee. Two of the Trustees, who are affiliated with the Administrator,
are not paid any Trustee fees.
26
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year
<TABLE>
<CAPTION>
Year ended September 30,
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Net Asset Value, Beginning of Year $10.20 $10.95 $10.48 $10.15 $9.67
Income from Investment Operations:
Net investment income 0.55 0.56 0.58 0.65 0.62
Net gain (loss) on securities
(both realized and unrealized) 0.39 (0.75) 0.50 0.29 0.49
Total from Investment Operations 0.94 (0.19) 1.08 0.94 1.11
Less Distributions:
Dividends from net investment income (0.55) (0.56) (0.58) (0.61) (0.63)
Distributions from capital gains (0.04) - (0.03) - -
Total Distributions (0.59) (0.56) (0.61) (0.61) (0.63)
Net Asset Value, End of Year $10.55 $10.20 $10.95 $10.48 $10.15
Total Return (not reflecting sales
load) 9.52% (1.77)% 10.64% 9.51% 11.83%
Ratios/Supplemental Data
Net Assets, End of Year
(in thousands) $310,554 $316,317 $331,018 $249,953 $189,734
Ratio of Expenses to Average
Net Assets 0.71% 0.68% 0.66% 0.66% 0.71%
Ratio of Net Investment Income
to Average Net Assets 5.38% 5.28% 5.46% 5.87% 6.30%
Portfolio Turnover Rate 13% 11% 8% 11% 21%
Net investment income per share and
the ratios of income and expenses
to average net assets before expense
offset in custodian fees for uninvested
cash balances would have been:
Net Investment Income $0.55 $0.56 $0.58 $0.65 $0.62
Ratio of Expenses to Average
Net Assets 0.73% 0.70% 0.68% 0.66% 0.73%
Ratio of Net Investment Income to
Average Net Assets 5.37% 5.26% 5.44% 5.87% 6.28%
</TABLE>
27
<PAGE>
REPORT OF THE ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
The Annual Meeting of Shareholders of the Trust was held on May 1, 1995.
At the meeting, the following matters were submitted to a shareholder vote*
and approved by a vote of a majority of the Trusts outstanding voting
securities:
(1) the election of Lacy B. Herrmann, Vernon R. Alden, Warren C. Coloney,
James A. Gardner, Diana P. Herrmann, Ann R. Leven, Raymond H. Lung, and
Richard C. Ross as Trustees to hold office until the next annual meeting of
the Trusts shareholders or until his or her successor is duly elected (each
Trustee received at least 19,450,820 affirmative votes (98.11%); no more than
375,310 votes were withheld for any Trustee (1.89%)),
(2) the ratification of the selection of KPMG Peat Marwick LLP as the
Trusts independent auditors for the fiscal year ending September 30, 1995
(votes for: 18,855,683 (95.11%); votes against: 96,006 (0.48%); abstentions:
862,786 (4.35%)),
(3) the approval of a new Amended and Restated Investment Advisory
Agreement (votes for: 17,705,405 (89.30%); votes against: 264,365 (1.33%);
abstentions: 1,646,754 (8.31%)), and
(4) the approval of an Amendment to the Trusts Distribution Plan to permit
payments to be made from the assets of the Trust, which will not increase the
expenses of the Trust (votes for: 17,725,826 (89.41%); votes against: 297,794
(1.50%); abstentions: 1,592,902 (8.03%)).
- - ---------------------
* On the record date for this meeting, 30,060,142 shares of the Trust were
outstanding and entitled to vote. The holders of 19,826,130 shares (65.95%)
entitled to vote were present in person or by proxy at the meeting.
Federal Tax Status of Distributions (unaudited)
This information is presented in order to comply with a requirement of the
Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF SHAREHOLDERS IS
REQUIRED.
For the fiscal year ended September 30, 1995, of the total amount of
dividends paid by TaxbFree Trust of Oregon, 98.98% was exempt-interest
dividends and the balance was ordinary dividend income
The Fund hereby designates $16,091,233 as an exempt-interest dividend for
its fiscal year ended September 30, 1995. The Fund also designates $1,341,034
as a capital gain dividend for Federal income tax purposes, for its fiscal
year ended September 30, 1995 which is taxable as a long-term capital gain.
Prior to January 31, 1996, shareholders will be mailed IRS Form 1099-DIV
which will contain information on the status of distributions paid for the 199
5 CALENDAR YEAR.
28
<PAGE>
(left Hand Column)
INVESTMENT ADVISER
QUALIVEST CAPITAL MANAGEMENT, INC.
A subsidiary of U.S. Bancorp and its subsidiary,
United States National Bank of Oregon
111 S.W. Fifth Avenue
U.S. Bancorp Tower
Portland, Oregon 97204
ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
James A. Gardner
Diana P. Herrmann
Ann R. Leven
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
W. Dennis Cheroutes, Senior Vice President
Sally Wilson Church, Vice President
Nancy Kayani, Vice President
Rose F. Marotta, Chief Financial Officer
Richard F. West, Treasurer
Edward M.W. Hines, Secretary
DISTRIBUTOR
AQUILA DISTRIBUTORS, INC.
380 Madison Avenue, Suite 2300
New York, New York 10017
TRANSFER AND SHAREHOLDER
SERVICING AGENT
ADMINISTRATIVE DATA
MANAGEMENT CORP.
581 Main Street
Woodbridge, New Jersey 07095-1198
CUSTODIAN
BANK ONE TRUST COMPANY, N.A.
100 East Broad Street
Columbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
345 Park Avenue
New York, New York 10154
Further information is contained in the Prospectus,
which must precede or accompany this report.
(Right Hand Column)
ANNUAL
REPORT
SEPTEMBER 30, 1995
TAX-FREE TRUST OF
OREGON
A tax-free income investment
(Logo of Tree, Snow-Capped Mountain and Sun)
(Logo of Eagle)
One of the
AQUILAsm Group of Funds
