Registration Nos. 33-4382 & 811-4626
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 17 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 17 [ X ]
THE CASCADES TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer, Brady, Smith, Troxell,
Barrett, Rockett, Hines & Mone
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
___
[___] immediately upon filing pursuant to paragraph (b)
[_X_] on January 31, 1996 pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[___] on (date) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) prusuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new effec-
tive date for a previous post-effective amendment.
Registrant hereby declares, pursuant to Section (a)(1) of Rule
24f-2 under the Investment Company Act of 1940, that Registrant has
registered an indefinite number of its shares under the Securities
Act of 1933 pursuant to that Section and that the Rule 24f-2 Notice
for Registrant's fiscal year ended September 30, 1995 was filed in
November 1995.
<PAGE>
TAX-FREE TRUST OF OREGON
a portfolio of
THE CASCADES TRUST
CROSS REFERENCE SHEET
Part A of
Form N-1A
Item No. Prospectus Caption(s)
1..............Cover Page
2..............Table of Expenses
3..............Financial Highlights
4..............Introduction; Investment of the Trust's
Assets; Investment Restrictions;
General Information
5..............Management Arrangements
5A.............**
6..............General Information; Dividend and Tax
Information
7..............Net Asset Value per Share; How to Invest in
the Trust; Exchange Privilege
8..............How to Redeem Your Investment; Automatic
Withdrawal Plan; Exchange Privilege
9..............*
Part B of
Form N-1A Statement of Additional Information
Item No. or Prospectus Caption(s)_
10.............Cover Page
11.............Cover Page
12.............*
13.............Investment of the Trust's Assets; Investment
Restrictions; Municipal Bonds
14.............Trustees and Officers
15.............General Information (Prospectus caption);
Trustees and Officers
16.............Additional Information as to Management
Arrangements; Distribution Plan; General
Information
17.............Additional Information as to Management
Arrangements
18.............General Information
19.............Limitations of Redemptions in Kind;
Computation of Net Asset Value;
Automatic Withdrawal Plan
20.............Additional Tax Information
21.............How to Invest in the Trust (Prospectus
caption); General Information
22.............Performance
* Not applicable or negative answer.
** Included in the Annual Report of the Registrant.
<PAGE>
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300
New York, New York 10017
800-USA-OREG (800-872-6734)
212-697-6666
Prospectus January 31, 1996
The Trust is a mutual fund whose objective is to seek to
provide as high a level of current income exempt from Oregon and
regular Federal income taxes as is consistent with preservation of
capital by investing in municipal obligations which pay interest
exempt from Oregon State and Federal income taxes. These municipal
obligations must, at the time of purchase, either be rated within
the four highest credit ratings (considered as investment grade)
assigned by Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or, if unrated, be determined to be of comparable
quality by the Trust's Adviser, Qualivest Capital Management, Inc.,
a subsidiary of U.S. Bancorp.
This Prospectus concisely states information about the
Trust that you should know before investing. A Statement of
Additional Information about the Trust (the "Additional Statement")
dated January 31, 1996, has been filed with the Securities and
Exchange Commission and is available without charge upon written
request to Administrative Data Management Corp., the Trust's
Shareholder Servicing Agent, at the address given below, or by
calling the telephone number(s) given below. The Additional
Statement contains information about the Trust and its management
not included in this Prospectus. The Additional Statement is
incorporated by reference in its entirety in this Prospectus. Only
when you have read both the Prospectus and the Additional Statement
are all material facts about the Trust available to you.
Shares of the Trust are not deposits in, obligations of or
guaranteed or endorsed by, Qualivest Capital Management, Inc., (the
"Adviser"), United States National Bank of Oregon, any of their
affiliates or any other bank. Shares of the Trust are not insured
or guaranteed by the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other governmental agency or
government sponsored agency of the Federal Government or any
State.
An investment in the Trust involves investment risks,
including possible loss of the principal amount invested.
For Purchase, Redemption or Account inquiries contact
The Trust's Transfer Agent: Administrative Data Management Corp.
10 Woodbridge Center Drive, Woodbridge, NJ 07095-1198
Call 800-872-6735 toll free or 908-855-5731
For General Inquiries & Yield Information,
Call 800-872-6734 toll free or 212-697-6666
This Prospectus Should Be Read and Retained For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
HIGHLIGHTS
Tax-Free Trust of Oregon, founded by Aquila Management
Corporation in 1985 and one of the Aquilasm Group of Funds, is an
open-end mutual fund which invests in tax-free municipal bonds,
the kind of obligations issued by the State of Oregon, its
counties and various other local authorities to finance such
long-term projects as schools, airports, roads, hospitals , water
facilities and other vital public purpose projects throughout
Oregon. (See "Introduction.")
Tax-Free Income - The municipal obligations in which the
Trust invests pay interest which is exempt from both regular
Federal and State of Oregon income taxes. Dividends paid by the
Trust from this income are likewise free of both such taxes. It
is, however, possible that in certain circumstances a small
portion of the dividends paid by the Trust will be subject to
income taxes. The Federal alternative minimum tax may apply to
some investors, but its impact will be limited since not more
than 20% of the Trust's net assets can be invested in obligations
paying interest which is subject to this tax. The receipt of
exempt-interest dividends from the Trust may result in some
portion of social security payments or railroad retirement
benefits being included in taxable income. Capital gains
distributions, if any, are taxable. (See "Dividend and Tax
Information".)
Investment Grade - The Trust will acquire only those
municipal obligations will be acquired which, at the time of
purchase, are within the four highest credit ratings assigned by
Moody's Investors Service, Inc. or Standard and Poor's
Corporation, or are determined by the Adviser to be of comparable
quality. In general there are nine separate credit ratings,
ranging from the highest to the lowest credit ratings for
municipal obligations. Obligations within the top four ratings
are considered "investment grade", but those in the fourth rating
may have speculative characteristics as well. (See "Investment of
the Trust's Assets.")
Initial Investment - You may open your account with any
purchase of $1,000 or more or by opening an Automatic Investment
Program which makes purchases of $100 or more each month. See the
Application, which is in the back of the Prospectus. (See "How to
Invest in the Trust," which includes applicable sales charge
information.)
Monthly Income - Dividends are declared daily and paid
monthly. At your choice, dividends are paid by check mailed to
you, directly deposited into your financial institution account
or automatically reinvested without sales charge in additional
shares of the Trust at the then-current net asset value. (See
"Dividend and Tax Information.")
Additional Investments - You may make additional
investments at any time and in any amount directly, or if in an
amount of $50 or more, through the convenience of having your
investment electronically transferred from your financial
institution account into the Trust by Automatic Investment or
Telephone Investment. (See "How to Invest in the Trust.")
Many Different Issues - You have the advantages of a
portfolio which consists of over 195 issues with different
maturities. (See "Investment of the Trust's Assets.")
Distribution Plan - The Trust's Distribution Plan
authorizes the payment by the Trust of an asset retention service
fee of at an annual rate of 0.15 of 1% of all of the Trust's
average annual net assets. Before July 1, 1995, payments were
authorized at the rate of 0.05 of 1% of average annual net assets
up to $360 million of assets and payments at that rate began July
1, 1994. The increased distribution payments were accompanied by
matching reductions in fees payable to the Adviser and
Administrator under the Advisory Agreement and Administration
Agreement from 0.25 of 1% to 0.20 of 1% of the Trust's average
annual net assets. The combined payments of these fees will
accordingly remain at the current level of 0.55 of 1% of the
Trust's average annual net assets with respect to all of the
Trust's net assets. (See "Distribution Plan.")
Local Portfolio Management - Qualivest Capital
Management, Inc., a subsidiary of U.S. Bancorp ("Bancorp") and
its subsidiary, United States National Bank of Oregon ("USNB"),
serves as the Trust's Investment Adviser, providing experienced
local professional management. The Trust pays fees at a rate of
0.20% of 1% of average annual net assets to its Adviser and fees
at the same rate to its Administrator (for total fees at a rate
of 0.40 of 1% of average annual net assets). (See "Table of
Expenses," "Distribution Plan" and "Management Arrangements.")
Bancorp is a $21 billion superregional financial services holding
company organized under the laws of Oregon in 1968. USNB,
headquartered in Portland, is a national banking association
chartered in 1891. Other services of Bancorp and its subsidiaries
include consumer financing, commercial finance, international
banking, investment advisory, discount brokerage and venture
capital.
Redemptions - Liquidity - You may redeem any amount of
your account on any business day at the next determined net
asset value by telephone, FAX or mail request, with proceeds
being sent to a predesignated financial institution, if you have
elected Expedited Redemption. Proceeds will be wired or
transferred through the facilities of the Automated Clearing
House, wherever possible, upon request, if in an amount of $1,000
or more, or will be mailed. For these and other redemption
procedures see "How to Redeem Your Investment." There is a
contingent deferred sales charge with respect to certain shares
which have been purchased in amounts of $1 million or more (see
"Purchases of $1 Million or More"). Otherwise, there are no
penalties or redemption fees.
Certain Stabilizing Measures - The Trust will employ
such traditional measures as varying maturities, upgrading credit
standards for portfolio purchases, broadening diversification and
increasing its position in cash, in an attempt to protect against
declines in the value of its investments and other market risks.
(See "Certain Stabilizing Measures.")
Exchanges - You may Shares of the Trust into shares of
other Aquila sponsored tax-free municipal bond mutual funds or
an equity fund. You may also exchange them into shares of certain
Aquila sponsored money market funds. The exchange prices will be
the respective net asset values of the shares. (See "Exchange
Privilege.")
Risks and Special Considerations - The share price,
determined on each business day, varies with the market prices of
the Trust's portfolio securities, which fluctuate with market
conditions including prevailing interest rates. Accordingly, when
shares are redeemed the proceeds may be more or less than
original cost. (See "Factors Which May Affect the Value of the
Trust's Investments and Their Yields.") The Trust's assets, being
primarily or entirely Oregon issues, are subject to economic and
other conditions affecting Oregon. (See "Risks and Special
Considerations Regarding Investment in Oregon Obligations.")
Moreover, the Trust is classified as a "non-diversified"
investment company, because it may choose to invest in the
obligations of a relatively limited number of issuers. (See
"Investment of the Trust's Assets.") The Trust may also, to a
limited degree, buy and sell futures contracts and options on
futures contracts, although since inception the Trust has not
done so and has no present intention to do so. There may be risks
associated with these practices. (See "Certain Stabilizing
Measures.")
Statements and Reports - You will receive statements of
your account monthly as well as each time you add to your account
or take money out. Additionally, you will receive a Semi-Annual
Report and an audited Annual Report.
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
TABLE OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
<S> <C>
Maximum Sales Charge Imposed on Purchases 4.00%
Maximum Sales Charge Imposed on Reinvested Dividends .0%
Deferred Sales Charge++ .0%
Redemption Fees^ .0%
Exchange Fee .0%
ANNUAL TRUST OPERATING EXPENSES*
(as a percentage of average net assets)
<S> <C>
Investment Advisory Fee 0.20%
12b-1 Fee (Service fee) 0.15%
All Other Expenses+ 0.36%
Administration Fee 0.20%
Other Expenses+ 0.16%
Total Trust Operating Expenses+ 2.0.71%
<S> <C> <C> <C> <C>
Example# 1 year 3 years 5 years 10 years
You would pay the
following expenses on
a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period $47 $62 $78 $125
<FN>
*Based on amounts incurred during the most recent fiscal year of
the Trust, restated to reflect new arrangements.
</FN>
<FN>
+Absent expense offset in custodian fees for uninvested cash
balances, other expenses would have been incurred at the rate of
0.18% of average net assets and all other expenses would have
been 0.38%. Absent this offset, total Trust operating expenses
would have been incurred at the annual rate of 0.73%.
</FN>
<FN>
++Certain Shares purchased in transactions of $1 million or more
without a sales charge, may be subject to a contingent deferred
sales charge. See "Purchases of $1 million or More" on page 14.
</FN>
<FN>
^Certain Shares purchased before July 1, 1995 in transactions of
$1 million or more may be subject to a redemption fee. (See
"Purchases of $1 Million or More.")
</FN>
<FN>
#The expense example is based upon the above shareholder
transaction expenses (a sales charge of $40 for a $1,000
investment) and annual Trust operating expenses (0.71% of average
net assets). It is also based upon an amount at the beginning of
each year which includes the prior years assumed results. A
year's results consist of an assumed 5% annual return less
expenses at a 0.71% annual rate; the expense ratio was applied to
an assumed average balance (the year's starting investment plus
one-half the year's results). Each column represents the
cumulative expenses so determined for the period specified.
</FN>
</TABLE>
THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN. THE SECURITIES AND EXCHANGE COMMISSION
SPECIFIES THAT ALL MUTUAL FUNDS USE THE 5% RATE FOR PURPOSES OF
PREPARING THE ABOVE EXAMPLE. THE EXAMPLE ALSO REFLECTS THE
MAXIMUM SALES CHARGE. IN GENERAL, DECREASING SALES CHARGE RATES
APPLY AS INVESTMENT SIZE INCREASES. (SEE "HOW TO INVEST IN THE
TRUST").
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in
the Trust will bear directly or indirectly. (See "Management
Arrangements" for a more complete description of the various
investment advisory and administration fees.) Nor should the
assumed 5% annual return be interpreted as a prediction of an
actual return, which may be higher or lower.
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following table of Financial Highlights as it relates to the five
years ended September 30, 1995 has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon is included in the Trust's
financial statements contained in its Annual Report, which are incorporated
by reference into the Additional Statement. The information provided in the
table should be read in conjunction with the financial statments and related
notes. On April 23, 1990, Aquila Management Corporation, originally the
Trust's Sub-Adviser and Administrator, became Administrator only.
Year ended September 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Period $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 Period $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 Period (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%
<CAPTION>
1990 1989 1988 1987 1986<F*>
<C> <C> <C> <C> <C>
$9.76 $9.67 $9.11 $9.85 $9.60
0.66 0.73 0.61 0.65 0.17
(0.11) 0.01 0.60 (0.71) 0.25
0.55 0.74 1.21 (0.06) 0.42
(0.64) (0.65) (0.65) (0.68) (0.17)
- - - - -
(0.64) (0.65) (0.65) (0.68) (0.17)
$9.67 $9.76 $9.67 $9.11 $9.85
5.76% 7.83% 13.66% (0.59)% 4.06%<F1>
$140,713 $122,096 $102,361 $92,990 $36,117
0.71% 0.76% 0.80% 0.55% 0.61%<F2>
6.55% 6.61% 6.77% 6.88% 6.33%<F2>
25% 45% 24% 17% None
$0.66 $0.73 $0.61 $0.62 $0.16
0.73% 0.78% 0.82% 0.83% 1.21%<F2>
6.53% 6.59% 6.75% 6.60% 5.73%<F2>
<FN>
<F*> For the period from June 16, 1986 (commencement of operations) to
September 30, 1986.
</FN>
<FN>
<F1> Not annualized.
</FN>
<FN>
<F2> Annualized.
</FN>
</TABLE>
<PAGE>
INTRODUCTION
The Trust's shares are designed to be a suitable investment
for investors who seek income exempt from Oregon State and regular
Federal income taxes.
You may invest in shares of the Trust as an alternative to
direct investments in Oregon Obligations, as defined below, which
may include obligations of certain non-Oregon issuers. The Trust
offers you the opportunity to keep assets fully invested in a
vehicle that provides a professionally managed portfolio of Oregon
Obligations which may, but not necessarily will, be more
diversified, higher yielding or more stable and more liquid than
you might be able to obtain on an individual basis by direct
purchase of Oregon Obligations. Through the convenience of a single
security consisting of shares of the Trust, you are also relieved
of the inconvenience associated with direct investments of fixed
denominations, including the selecting, purchasing, handling,
monitoring call provisions and safekeeping of Oregon Obligations.
Oregon Obligations are a type of municipal obligation.
Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities to obtain
funds for various public purposes. The two principal
classifications of municipal obligations are "notes" and "bonds."
Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less
while municipal bonds have extended maturities. Municipal notes
include: project notes, which sometimes carry a U.S. Government
guarantee; tax anticipation notes; revenue anticipation notes; bond
anticipation notes; construction loan notes and floating and
variable rate demand notes. Municipal obligations include municipal
lease/purchase agreements which are similar to installment purchase
contracts for property or equipment. The purposes for which
municipal obligations such as bonds are issued include the
construction of a wide range of public facilities such as airports,
highways, bridges, schools, hospitals, housing, mass
transportation, streets and water and sewer works. Other public
purposes for which municipal obligations may be issued include the
refunding of outstanding obligations, the obtaining of funds for
general operating expenses and the obtaining of funds to lend to
other public institutions and facilities. The Trust is the only
active portfolio of the Cascades Trust.
INVESTMENT OF THE TRUST'S ASSETS
In seeking its objective of providing as high a level of
current income which is exempt from both Oregon State and regular
Federal income taxes as is consistent with the preservation of
capital, the Trust will invest in Oregon Obligations (as defined
below). There is no assurance that the Trust will achieve its
objective, which is a fundamental policy of the Trust. (See
"Investment Restrictions.")
As used in this Prospectus and the Additional Statement, the
term "Oregon Obligations" means obligations, including those of
certain non-Oregon issuers, of any maturity which pay interest
which, in the opinion of bond counsel or other appropriate counsel,
is exempt from regular Federal income taxes and not subject to
Oregon income taxes. Although exempt from regular Federal income
tax, interest paid on certain types of Oregon Obligations, and
dividends which the Trust might pay from this interest, are
preference items as to the Federal alternative minimum tax; for
further information, see "Dividend and Tax Information." As a
fundamental policy, at least 80% of the Trust's net assets will be
invested in Oregon Obligations the income paid upon which will not
be subject to the alternative minimum tax; accordingly, the Trust
can invest up to 20% of its net assets in obligations which are
subject to the Federal alternative minimum tax. The Trust may
refrain entirely from purchasing these types of Oregon Obligations.
The non-Oregon bonds or other obligations the interest on
which is exempt under present law from regular Federal and Oregon
income taxes are those issued by or under the authority of Guam,
the Northern Mariana Islands, Puerto Rico and the Virgin Islands.
The Trust will not purchase Oregon Obligations of non-Oregon
issuers unless Oregon Obligations of Oregon issuers of the desired
quality, maturity and interest rate are not available. As an
Oregon-oriented fund, at least 65% of the Trust's total assets will
be invested in Oregon Obligations of Oregon issuers. The Trust
invests only in Oregon Obligations and, possibly, in Futures and
options on Futures (see below) for protective (hedging) purposes.
In general, there are nine separate credit ratings ranging
from the highest to the lowest quality standards for municipal
obligations. So that the Trust will have a portfolio of quality
oriented (investment grade) securities, the Oregon Obligations
which the Trust will purchase must, at the time of purchase, either
(i) be rated within the four highest credit ratings assigned by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P"); or (ii) if unrated, be determined to be of
comparable quality to municipal obligations so rated, by Qualivest
Capital Management, Inc., the Trust's investment adviser (the
"Adviser"), subject to the direction and control of the Trust's
Board of Trustees. Municipal obligations rated in the fourth
highest credit rating are considered by such rating agencies to be
of medium quality and thus may present investment risks not present
in more highly rated obligations. Such bonds lack outstanding
investment characteristics and may in fact have speculative
characteristics as well; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case for higher
grade bonds. If after purchase the rating of any rated Oregon
Obligation is downgraded such that it could not then be purchased
by the Trust, or, in the case of an unrated Oregon Obligation, if
the Adviser determines that the unrated obligation is no longer of
comparable quality to those rated obligations which the Trust may
purchase, it is the current policy of the Trust to cause any such
obligation to be sold as promptly thereafter as the Adviser in its
discretion determines to be consistent with the Trust's objectives;
such obligation remains in the Trust's portfolio until it is sold.
In addition, because a downgrade often results in a reduction in
the market price of a downgraded obligation, sale of such an
obligation may result in a loss. See Appendix A to the Additional
Statement for further information as to these ratings. The Trust
can purchase industrial development bonds only if they meet the
definition of Oregon Obligations, i.e., the interest on them is
exempt from Oregon State and regular Federal income taxes.
The Trust is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940 Act").
The Trust also intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code (the "Code").
One of the tests for such qualification under the Code is, in
general, that at the end of each fiscal quarter of the Trust, at
least 50% of its assets must consist of (i) cash; and (ii)
securities which, as to any one issuer, do not exceed 5% of the
value of the Trust's assets. If the Trust had elected to register
under the 1940 Act as a "diversified" investment company, it would
have to meet the same test as to 75% of its assets. The Trust may
therefore not have as much diversification among securities, and
thus diversification of risk, as if it had made this election under
the 1940 Act. In general, the more the Trust invests in the
securities of specific issuers, the more the Trust is exposed to
risks associated with investments in those issuers. The Trust's
assets, being primarily or entirely Oregon issues, are accordingly
subject to economic and other conditions affecting Oregon. (See
"Risk Factors and Special Considerations Regarding Investment in
Oregon Obligations.")
Certain Stabilizing Measures
The Trust will employ such traditional measures as varying
maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash and
cash equivalents in attempting to protect against declines in the
value of its investments and other market risks. There can,
however, be no assurance that these will be successful. Although
the Trust has no current intention of using futures and options,
to the limited degree described below, these may be used to
attempt to hedge against changes in the market price of the Trust's
Oregon Obligations caused by interest rate fluctuations. Futures
and options could also provide a hedge against increases in the
cost of securities the Trust intends to purchase.
Although it does not currently do so, and since inception
has not done so, the Trust may buy and sell futures contracts
relating to indices on municipal bonds ("Municipal Bond Index
Futures") and to U.S. government securities ("U.S. Government
Securities Futures"); both kinds of futures contracts are
"Futures." The Trust may also write and purchase put and call
options on Futures.
As a matter of fundamental policy the Trust will not buy or
sell a Future or an option on a Future if thereafter more than 10%
of its net assets would be in initial or variation margin on such
Futures and options on them, and in premiums on such options. Under
an applicable regulatory rule, the Trust will not enter into
Futures or options for which the aggregate initial margins and
premiums paid for options exceed 5% of the fair market value of the
Trust's assets. (See the Additional Statement.)
The primary risks associated with the use of Futures and
options are: (i) imperfect correlation between the change in the
market value of the securities held in the Trust's portfolio and
the prices of Futures or options purchased or sold by the Trust;
(ii) incorrect forecasts by the Adviser concerning interest rates
which may result in the hedge being ineffective; and (iii) possible
lack of a liquid secondary market for a Future or option; the
resulting inability to close a Futures or options position could
adversely affect the Trust's hedging ability.
For a hedge to be completely effective, the price change of
the hedging instrument should equal the price change of the
security being hedged. The risk of imperfect correlation of these
price changes is increased as the composition of the Trust's
portfolio is divergent from the debt securities underlying the
hedging instrument. To date, the Adviser has had no experience in
the use of Futures or options on them.
The liquidity of a secondary market in a Future may be
adversely affected by "daily price fluctuation limits" established
by commodity exchanges which restrict the amount of change in the
contract price allowed during a single trading day. Thus, once a
daily limit is reached, no further trades may be entered into
beyond the limit, thereby preventing the liquidation of open
positions. Prices have in the past reached the daily limit on a
number of consecutive trading days. For further information about
Futures and options, see the Additional Statement.
When and if the Trust determines to use futures and options,
the Prospectus will be supplemented.
Floating and Variable Rate Demand Notes
Floating and variable rate demand notes are tax-exempt
obligations which may have a stated maturity in excess of one year,
but permit the holder to demand payment of principal at any time,
or at specified intervals not exceeding one year, in each case upon
not more than 30-days' notice. The issuer of such notes normally
has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the note plus
accrued interest upon a specified number of days' notice to the
noteholders. The interest rate on a floating rate demand note is
based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand note is adjusted
automatically at specified intervals.
Participation Interests
The Trust may purchase from financial institutions
participation interests in Oregon Obligations (such as industrial
development bonds and municipal lease/purchase agreements). A
participation interest gives the Trust an undivided interest in the
underlying Oregon Obligations in the proportion that the Trust's
participation interest bears to the total amount of the underlying
Oregon Obligations. All such participation interests must meet the
Trust's credit requirements. See "Limitation to 10% as to Certain
Investments."
When-Issued and Delayed Delivery Purchases
The Trust may buy Oregon Obligations on a when-issued or
delayed delivery basis when it has the intention of acquiring them.
The Oregon Obligations so purchased are subject to market
fluctuation and no interest accrues to the Trust until delivery and
payment take place; their value at the delivery date may be less
than the purchase price. The Trust cannot enter into when-issued
commitments exceeding in the aggregate 15% of the market value of
the Trust's total assets, less liabilities other than the
obligations created by when-issued commitments. If the Trust
chooses to dispose of the right to acquire a when-issued obligation
prior to its acquisition, it could, as with the disposition of any
other portfolio holding, incur a gain or loss due to market
fluctuation; any such gain would be a taxable short-term gain. The
Trust places an amount of assets equal in value to the amount due
on the settlement date for the when-issued or delayed delivery
securities being purchased in a segregated account with the
Custodian, which is marked to market every business day. See the
Additional Statement for further information.
Limitation to 10% as to Certain Investments
The Trust cannot purchase Oregon Obligations that are not
readily marketable if thereafter more than 10% of its net assets
would consist of such investments. However, this 10% limit does not
include any Oregon Obligations as to which the Trust can exercise
the right to demand payment in full within three days and as to
which there is a secondary market. Floating and variable rate
demand notes and participation interests (including municipal
lease/purchase obligations) are considered illiquid unless
determined by the Board of Trustees to be readily marketable. (See
the Additional Statement.)
Current Policy as to Certain Obligations
The Trust will not invest more than 25% of its total assets in
(i) Oregon Obligations the interest on which is paid from revenues
of similar type projects or (ii) industrial development bonds,
unless this Prospectus and/or the Additional Statement are
supplemented to reflect the change and to give additional
information.
Factors Which May Affect the Value of the Trust's
Investments and Their Yields
The value of the Oregon Obligations in which the Trust invests
will fluctuate depending in large part on changes in prevailing
interest rates. If the prevailing interest rates go up after the
Trust buys Oregon Obligations, the value of these obligations may
go down; if these rates go down, the value of these obligations may
go up. Changes in value and yield based on changes in prevailing
interest rates may have different effects on short-term Oregon
Obligations than on long-term obligations. Long-term obligations
(which often have higher yields) may fluctuate in value more than
short-term ones. For this reason, the Trust may, to achieve a
defensive position, shorten the average maturity of its portfolio.
Risks and Special Considerations Regarding
Investment in Oregon Obligations
The following is a discussion of the general factors that
might influence the ability of Oregon issuers to repay principal
and interest when due on the Oregon Obligations contained in the
portfolio of the Trust. Such information is derived from sources
that are generally available to investors and is believed by the
Trust to be accurate, but has not been independently verified and
may not be complete.
Oregon's economy is substantially diversified among many
industries. The lumber and forest products industry, an industry
highly susceptible to recessionary cycles, has long been a
significant component of the State's economy. However, a political
environment supporting the reduction of logging on public lands has
taken its toll on this industry and the pursuit of protection for
the spotted owl and wild salmon runs have severely curtailed
logging in certain areas.
As employment in the lumber and forest products industries has
declined, other industries have been picking up the slack. 1994 saw
many manufacturing plants lured to the State. The ultimate decision
of whether to locate in the State depends on a company's ability to
secure property tax breaks from the county in which its plant will
be located. A relatively new State property tax exemption program
grants counties the right to offer property tax breaks for new
plants costing more than $100 million to build. The principal
sources of State tax revenues are the personal income and corporate
income taxes; Oregon does not have a sales tax. Recent attempts to
institute a sales tax have been unsuccessful. A recent attempt to
introduce a "transaction tax" was unsuccessful. As a result, State
tax revenues are particularly sensitive to economic recessions.
In addition to general obligation bonds, the State and its
political subdivisions issue revenue obligations payable from
specific projects or sources, including lease rentals. There can be
no assurance that a material downturn in the State's economy, with
the resulting impact on the financial strength of State and local
entities, will not adversely affect obligors of the obligations
held in the Trust's portfolio to make the required payments on
these obligations, and consequently, the market value of such
obligations.
Additionally, certain municipal securities held by the Trust
may rely in whole or in part for repayment on ad valorem property
taxes. There are existing limits under Oregon State law on the
issuance of bonds supported by such taxes. In recent years several
voter initiatives have sought to amend the State Constitution to
"freeze" or roll back such taxes. On November 6, 1990, Oregon
voters approved a property tax limitation measure. The adoption of
the tax limitation measure may have an adverse effect on the
general financial condition of cities, counties, school districts
and other districts and may in some cases impair their ability to
pay principal and interest on obligations. The tax limitation
measure does permit tax levies to pay interest and principal on
bonds issued on or before November 6, 1990, as well as indebtedness
authorized by the Oregon Constitution (bonds issued by the State of
Oregon under specific constitutional provisions), and general
obligation bonds approved by the voters for capital construction or
improvements. (See the Additional Statement for information about
the tax limitation measure.)
At present, it is difficult to assess the impact of the tax
limitation measure, in part, because it will not be fully phased in
until 1995-1996. In addition, the effect of this measure is also
dependent on whether alternative revenue sources are obtained and,
if so, the type and amount of such revenues. The adoption of the
tax limitation measure may have an adverse effect on the general
financial condition of affected cities, counties, school districts
and other districts, and may, in some cases, impair their ability
to pay obligations other than general obligation bonds. In
addition, the adoption of the tax limitation measure will require
the Legislature to provide funds from its general fund to replace
tax revenues lost by the public school system through fiscal year
1995-96. This could have an adverse effect on the State's credit
rating, particularly if alternative revenue sources are not
obtained. Moreover, the tax limitation measure might contract the
overall size of the Oregon municipal bond market and might have
some adverse effect on the value of the Trust's portfolio. See the
Additional Statement.
The Oregon Constitution reserves to the people of the State
initiative and referendum powers pursuant to which measures
designed to amend the State Constitution or enact legislation can
be placed on the statewide general election ballot for
consideration by the voters. Over the past decade Oregon has
witnessed increasing activity in the number of initiative petitions
that have qualified for statewide general elections. From the 1988
elections through those of 1994, both the number of such petitions
that qualified and the number of such petitions that were approved
by the voters have increased. It is not possible to predict what
petitions will qualify for submission to the voters in 1996 nor
which will be approved.
There is a relatively inactive market for municipal bonds of
Oregon issuers other than the general obligations of the State
itself. Consequently, the market price of such other bonds may be
changeable. If the Trust were forced to sell a large volume of
these bonds for any reason, such as redemptions of a large number
of its shares, there is a risk that the large sale itself might
adversely affect the value of the Trust's portfolio.
INVESTMENT RESTRICTIONS
The Trust has a number of policies about what it can and
cannot do. Certain of these policies, identified in the Prospectus
and Additional Statement as "fundamental policies," cannot be
changed unless the holders of a "majority," as defined in the 1940
Act, of the Trust's outstanding shares vote to change them. (See
the Additional Statement for a definition of such a majority.) All
other policies can be changed from time to time by the Board of
Trustees without shareholder approval. Some of the more important
of the Trust's fundamental policies, not otherwise identified in
the Prospectus, are set forth below; others are listed in the
Additional Statement.
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than the Oregon
Obligations meeting the standards stated under "Investment of the
Trust's Assets"; the Trust can also purchase and sell Futures and
options on them within the limits there discussed.
2. The Trust has industry investment requirements.
The Trust cannot buy the obligations of issuers in any one
industry if more than 25% of its total assets would then be
invested in securities of issuers of that industry; the Trust will
consider that a non-governmental user of facilities financed by
industrial development bonds is an issuer in an industry.
3. The Trust cannot make loans.
The Trust can buy those Oregon Obligations which it is
permitted to buy (see "Investment of the Trust's Assets"); this is
investing, not making a loan. The Trust cannot lend its portfolio
securities.
4. The Trust can borrow only in limited amounts for special
purposes.
The Trust can borrow from banks for temporary or emergency
purposes but only up to 10% of its total assets. It can mortgage or
pledge its assets only in connection with such borrowing and only
up to the lesser of the amounts borrowed or 5% of the value of its
total assets. However, this shall not prohibit margin arrangements
in connection with the purchase or sale of Municipal Bond Index
Futures, U.S. Government Securities Futures or options on them, or
the payment of premiums on those options. The Trust will not borrow
to purchase Oregon Obligations or to increase its income, but only
to meet redemptions so that it will not have to sell Oregon
Obligations to pay for redemptions. Interest on borrowings would
reduce the Trust's income. Except in connection with borrowings,
the Trust will not issue senior securities. The Trust will not
purchase any Oregon Obligations, Futures or options on Futures
while it has any outstanding borrowings which exceed 5% of the
value of its total assets.
NET ASSET VALUE PER SHARE
The Trust's net asset value and offering price per share
are determined as of 4:00 p.m. New York time on each day that the
New York Stock Exchange is open (a "business day"). However,
Futures and options on them are valued at the close of the
principal commodities exchange on which they are traded, which may
be later than 4:00 p.m. New York time. The net asset value per
share is determined by dividing the value of the net assets of the
Trust (i.e., the value of the assets less liabilities) by the total
number of shares outstanding. Determination of the value of the
Trust's assets is subject to the direction and control of the
Trust's Board of Trustees. In general, it is based on market value,
except that Oregon Obligations maturing in 60 days or less are
generally valued at amortized cost; see the Additional Statement
for further information.
HOW TO INVEST IN THE TRUST
The Trust's shares may be purchased through any investment
broker or dealer (a "selected dealer") which has a sales agreement
with Aquila Distributors, Inc. (the "Distributor") or through the
Distributor. There are two ways to make an initial investment: (i)
order the shares through your investment broker or dealer, if it is
a selected dealer; or (ii) mail the Application with payment to
Administrative Data Management Corp. (the "Agent") at the address
on the Application. The applicable sales charge will apply in
either instance. Subsequent investments are also subject to the
applicable sales charges. You are urged to complete an Application
and send it to the Agent so that expedited shareholder services can
be established at the time of your investment.
The minimum initial investment is $1,000, except as
otherwise stated in this Prospectus or the Additional Statement .
You may also make an initial investment of at least $100 by
establishing an Automatic Investment Program for Automatic
investments of at least $100 per month and paying $100. (See below
and "Automatic Investment Program" in the Application.) Such
investment must be drawn in United States dollars on a United
States commercial or savings bank, credit union or a United States
branch of a foreign commercial bank (each of which is a "Financial
Institution"). You may make subsequent investments in any amount
(unless you have an Automatic Withdrawal Plan). Your subsequent
investment may be made through a selected dealer or by forwarding
payment to the Agent, with the name(s) of account owner(s), the
account number and the name of the Trust. With subsequent
investments, please send the pre-printed stub attached to the
Trust's confirmations.
Subsequent investments of $50 or more can be made by
electronic funds transfer from your demand account at a Financial
Institution. To use electronic funds transfer for your purchases,
your Financial Institution must be a member of the Automated
Clearing House and the Agent must have received your completed
Application designating this feature, or, after your account has
been opened, a Ready Access Features form available from the
Distributor or the Agent. A pre-determined amount can be regularly
transferred for investment ("Automatic Investment"), or single
investments can be made upon receipt by the Agent of telephone
instructions from anyone ("Telephone Investment"). The maximum
amount of each Telephone Investment is $50,000. Upon 30 days'
written notice to shareholders, the Trust may modify or terminate
these investment methods at any time or charge a service fee,
although no such fee is currently contemplated.
The offering price is the net asset value per share plus a
sales charge. The offering price determined on any day applies to
all purchase orders received by the Agent from selected dealers
that day, except that orders received by it after 4:00 p.m. New
York time will receive that day's offering price only if such
orders were received by selected dealers from customers prior to
such time and transmitted to the Distributor prior to its close of
business that day (normally 5:00 p.m. New York time); if not so
transmitted, such orders will be filled at the next determined
offering price. Selected dealers are required to transmit orders
promptly. Investments by mail are made at the offering price next
determined after receipt of the purchase order by the Agent.
Purchase orders received on other than a business day will be
executed on the next succeeding business day. Purchases by
Automatic Investment and Telephone Investment will be executed on
the first business day occurring on or after the date an order is
considered received by the Agent at the price determined on that
day. In the case of Automatic Investment your order will be
executed on the date you specified for investment at the price
determined on that day. If that day is not a business day your
order will be executed at the price determined on the next business
day. In the case of Telephone Investment your order will be filled
at the next determined offering price. If your order is placed
after the time for determining the net asset value of the Trust
shares for any day it will be executed at the price determined on
the following business day. The sale of shares will be suspended
during any period when the determination of net asset value is
suspended and may be suspended by the Distributor when the
Distributor judges it in the Trust's best interest to do so.
The following table shows the amount of the sales charges to
a "single purchaser" (defined below) together with the dealer
discounts paid to dealers and the agency commissions paid to
brokers (collectively called the "commissions"):
<TABLE>
<CAPTION>
Sales Sales Commis-
Charge Charge sions
as as as
Percentage Approximate Percentage
of Public Percentage of
Amount of Offering of Amount Offering
Purchase Price Invested Price
<S> <C> <C> <C>
Less than $25,000...... 4.00% 4.17% 3.00%
$25,000 but less
than $50,000........ 3.75% 3.90% 3.00%
$50,000 but less
than $100,000....... 3.50% 3.63% 2.75%
$100,000 but less
than $250,000....... 3.25% 3.36% 2.75%
$250,000 but less
than $500,000....... 3.00% 3.09% 2.50%
$500,000 but less
than $1,000,000..... 2.50% 2.56% 2.25%
For purchase of $1 million or more see "Purchase of $1 Million or
More," below.
</TABLE>
The above schedule of sales charges is applicable to
purchases by a "single purchaser," i.e.: (a) an individual; (b) an
individual together with his or her spouse and their children
under the age of 21 purchasing shares for his or her own accounts;
(c) a trustee or other fiduciary purchasing shares for a single
trust estate or a single fiduciary account; and (d) tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of the
Code.
Upon notice to all selected dealers, the Distributor may
reallow up to the full amount of the applicable sales charge as
shown in the above schedule during periods specified in such
notice. During periods when all or substantially all of the entire
sales charge is reallowed, such selected dealers may be deemed to
be underwriters as that term is defined in the Securities Act of
1933.
The Distributor, at its own expense, may also provide
additional compensation to dealers in connection with sales of
shares of the Trust. Additional compensation may include payment or
partial payment for advertising of the Trust's shares, payment of
travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of
their families to locations within or outside of the United States,
other prizes or financial assistance to securities dealers in
offering their own seminars or conferences. In some instances, such
compensation may be made available only to certain dealers whose
representatives have sold or are expected to sell significant
amounts of such shares. Dealers may not use sales of the Trust's
shares to qualify for the incentives to the extent such may be
prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. Except
as set forth below under "Purchases of $1 Million or More," the
cost to the Distributor of such promotional activities and such
payments to participating dealers will not exceed the amount of the
sales charges in respect of sales of shares of the Trust effected
through such participating dealers, whether retained by the
Distributor or reallowed to participating dealers. No such
additional compensation to dealers in connection with sales of
shares of the Trust will affect the price you pay for shares or the
amount that the Trust will receive from such sales. Any of the
foregoing payments to be made by the Distributor may be made
instead by the Administrator out of its own funds, directly or
through the Distributor.
Purchase of $1 Million or More
Shares issued in purchases of $1 million or more by a
single purchaser are called "CDSC Shares." CDSC shares also
include certain shares issued in purchases of $1 million or more
under the program captioned "Other Investment Companies" - "Special
Dealer Arrangements," below. (CDSC Shares do not include (i) shares
purchased without sales charge pursuant to the terms described
under "General," below and (ii) shares purchased in transactions of
less than $1 million and when certain special dealer arrangements
are not in effect under "Certain Investment Companies" set forth
under "Reduced Sales Charges," below.)
When you purchase CDSC Shares you will not pay a sales
charge at the time of purchase, and the Distributor will pay to any
dealer effecting such a purchase an amount equal to 1% of the sales
price of the shares purchased for purchases of $1 million but less
than $2.5 million, 0.50 of 1% for purchases of $2.5 million but
less than $5 million, and 0.25 of 1% for purchases of $5 million
or more, if the CDSC Shares remain outstanding for a period of at
least one year. A pro-rata portion of this fee will be payable for
each day the CDSC Shares are outstanding in the one-year period
following issuance of such shares. The fee payable for each
calendar quarter will be made within fifteen days of the end of
that quarter.
If you redeem all or part of your CDSC Shares during the
four years after your purchase of such shares, at the time of
redemption you will be required to pay to the Distributor a special
contingent deferred sales charge based on the lesser of (i) the net
asset value of your redeemed CDSC Shares at the time of purchase or
(ii) the net asset value of your CDSC Shares at the time of
redemption (the "Redemption Value"). The special charge will be an
amount equal to 1% of the Redemption Value if the redemption occurs
within the first two years after purchase, and 0.50 of 1% of the
Redemption Value if the redemption occurs within the third or
fourth year after purchase. The special charge will apply to
redemptions of CDSC shares purchased without a sales charge
pursuant to a Letter of Intent, as described below under "Reduced
Sales Charges." The special charge does not apply to shares
acquired through the reinvestment of dividends on CDSC Shares or to
any CDSC Shares held for more than four years after purchase. In
determining whether the special charge is applicable, it will be
assumed that the CDSC Shares you have held the longest are the
first CDSC Shares to be redeemed, unless you instruct the Agent
otherwise. It will also be assumed that if you have both CDSC
Shares and non-CDSC Shares the non-CDSC Shares will be redeemed
first.
The exchange privilege described below (see "Exchange
Privilege") is not available for CDSC Shares of the Trust until
four years after the date of issuance of such shares.
If you have purchased shares of the Trust in the amount of
$1 million or more without a sales charge pursuant to the
provisions relating to such purchases before July 1, 1995, the
following provisions continue to apply to such shares:
If you redeem all or part of such shares before the shares
have been outstanding for two years, you will be required to pay to
the Trust a special redemption fee in an amount equal to 1% if the
redemption occurs within the first year, and 0.50 of 1% if the
redemption occurs within the second year, of the lesser of the net
asset value of the shares at the time of purchase or the net asset
value of the shares at the time of redemption. This fee will apply
to redemptions of shares purchased without a sales charge pursuant
to a Letter of Intent as described below under "Reduced Sales
Charges." The exchange privilege described below (see "Exchange
Privilege" ) is not available for such share until two years after
the date of issuance of such shares.
Systematic Payroll Investments
If your employer has established with the Trust a Systematic
Payroll Investment Plan ("Payroll Plan") you may arrange for
systematic investments into the Trust through a Payroll Plan. In
order to participate in a Payroll Plan, you should make
arrangements with your own employer's payroll department, and you
must complete and sign any special application forms which may be
required by your employer. You must also complete the Application
included in the Prospectus. Once your application is received and
put into effect, under a Payroll Plan the employer will make a
deduction from payroll checks in an amount you determine, and will
remit the proceeds to the Trust. An investment in the Trust will be
made for you at the offering price, which includes applicable sales
charges determined as described above, when the Trust receives the
funds from your employer. The Trust will send a confirmation of
each transaction to you. To change the amount of or to terminate
the payroll investment program (which could take up to ten days),
you must notify your employer.
Reduced Sales Charges
Right of Accumulation: If you are a "Single purchaser" you
may benefit from a reduction of the sales charge in accordance
with the above schedule for subsequent purchases of shares if the
cumulative value (at cost or current net asset value, whichever is
higher) of the shares you have previously purchased with a sales
charge, together with the shares of your subsequent purchase with
such a charge, amounts to $25,000 or more.
Letters of Intent: The foregoing schedule of reduced sales
charges will also be available to "single purchasers" who enter
into a written Letter of Intent (included in the Application)
providing for the purchase, within a thirteen-month period, of
shares of the Trust through a single selected dealer or through the
Distributor. Shares of the Trust which you previously purchased
during a 90-day period prior to the date of receipt by the
Distributor of your Letter of Intent and which you still own may
also be included in determining the applicable reduction. For
further details, including escrow provisions, see the Letter of
Intent provisions of the Application.
General: Shares may be purchased at the next determined net
asset value by the Trust's Trustees and officers, by the directors,
officers and certain employees, retired employees and
representatives of the Adviser and its parent and affiliates, the
Administrator and the Distributor, by selected dealers and brokers
and their officers and employees, by certain persons connected with
firms providing legal, advertising or public relations assistance,
by certain family members of, and plans for the benefit of, the
foregoing, and for the benefit of trust or similar clients of
banking institutions over which these institutions have full
investment authority if the Distributor has entered into an
agreement relating to such purchases. Except for the last category,
purchasers must give written assurance that the purchase is for
investment and that the shares will not be resold except through
redemption. There may be tax consequences of these purchases. Such
purchasers should consult their own tax counsel. Shares may also be
issued at net asset value in a merger, acquisition or exchange
offer made pursuant to a plan of reorganization to which the Trust
is a party.
The Trust permits the sale of its shares at prices that
reflect the reduction or elimination of the sales charge to
investors who are members of certain qualified groups meeting the
following requirements. A qualified group (i) is a group or
association, or a category of purchasers who are represented by a
fiduciary, professional or other representative (other than a
registered broker-dealer), which (ii) satisfies uniform criteria
which enable the Distributor to realize economies of scale in its
costs of distributing shares; (iii) gives its endorsement or
authorization (if it is a group or association) to an investment
program to facilitate solicitation of its membership by a broker or
dealer; and (iv) complies with the conditions of purchase that are
set forth in any agreement entered into between the Trust and the
group, representative or broker or dealer. At the time of purchase,
you must furnish the Distributor with information sufficient to
permit verification that the purchase qualifies for a reduced sales
charge, either directly or through a broker or dealer.
Certain Investment Companies: Shares of the Trust may be
purchased at net asset value without sales charge (except as set
forth below under "Special Dealer Arrangements") to the extent that
the aggregate net asset value of such shares does not exceed the
proceeds from a redemption (a "Qualified Redemption"), made within
120 days prior to such purchase, of shares of another investment
company on which a sales charge , including a contingent deferred
sales charge , has been paid. Additional information is available
from the Distributor.
To qualify, the following special procedures must be followed:
1. A completed Application (included in the Prospectus)
and payment for the shares to be purchased must be sent to the
Distributor, Aquila Distributors, Inc., 380 Madison Avenue,
Suite 2300, New York, NY 10017 and should not be sent to the
Shareholder Servicing Agent of the Trust, Administrative Data
Management Corp. (This instruction replaces the mailing
address contained on the Application.)
2. The Application must be accompanied by evidence
satisfactory to the Distributor that the prospective
shareholder has made a Qualified Redemption in an amount at
least equal to the net asset value of the shares to be
purchased. Satisfactory evidence includes a confirmation of
the date and the amount of the redemption from the investment
company, its transfer agent or the investor's broker or
dealer, or a copy of the investor's account statement with
the investment company reflecting the redemption
transaction.
3. You must complete and return to the Distributor a
Transfer Request Form, which is available from the
Distributor.
The Trust reserves the right to alter or terminate this
privilege at any time without notice. The Prospectus will be
supplemented to reflect such alteration or termination.
Special Dealer Arrangements: During certain periods
determined by the Distributor, the Distributor (not the Trust) will
pay to any dealer effecting a purchase of shares of the Trust of $1
million or more using the proceeds of a Qualified Redemption the
same amounts described under "Purchases of $1 Million or More,"
above on the same terms and conditions. Shares of the Trust issued
in such a transaction will be CDSC shares and if you thereafter
redeem all or part of such shares during the four-year period from
the date of purchase you will be subject to the contingent deferred
sales charge described under "Purchases of $1 Million or More,"
above, on the same terms and conditions. The Exchange Privilege
described below is not available during the four year period from
the date of purchase with respect to CDSC shares. Whenever the
Special Dealer Arrangements are in effect the Prospectus will be
supplemented.
Confirmations and Share Certificates
All purchases of shares will be confirmed and credited to you
in an account maintained for you at the Agent in full and
fractional shares of the Trust (rounded to the nearest 1/1000th of
a share). Share certificates will not be issued unless you so
request in writing to the Agent. If certificates are issued at your
request, Expedited Redemption Methods described below will not be
available. In addition, you may incur delay and expense if you lose
the certificates. No certificates will be issued for fractional
shares or to shareholders who have elected Automatic Investment or
Telephone Investment (see "How to Invest in the Trust" above) or
Expedited Redemption (see "How to Redeem Your Investment" below).
The Trust and the Distributor reserve the right to reject any
order for the purchase of shares. In addition, the offering of
shares may be suspended at any time and resumed at any time
thereafter.
Distribution Plan
The Trust has adopted a Distribution Plan under Rule 12b-1
(the "Rule") under the 1940 Act. The Rule provides in substance
that an investment company may not engage directly or indirectly in
financing any activity which is primarily intended to result in the
sale of its shares except pursuant to a written plan adopted under
the Rule.
Under the Distribution Plan, in effect at the date of this
prospectus, subject to the direction and control of the Board of
Trustees, the Trust is authorized to make payments ("Permitted
Payments") to Qualified Recipients, which Permitted Payments shall
be made directly, or through the Distributor as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as adjusted
for any part or parts of a fiscal year during which payments under
the Plan are not accruable or for any fiscal year which is not a
full fiscal year) of 0.15 of 1% of average annual net assets of
the Trust "Qualified Recipients" means 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 and which have rendered assistance
(whether direct, administrative, or both) in the distribution
and/or retention of the Trust's shares or servicing of shareholder
accounts. After July 1, 1995 whenever the Trust makes the
Permitted Payments the advisory fee and administration fee
otherwise payable by the Trust will be reduced to an aggregate
annual rate of 0.40 of 1% of the Trust's average annual net assets.
(See "Management Arrangements.")
Payments under the Plan commenced as of July 1, 1994.
During the fiscal year ended September 30, 1995, $230,866 was paid
under the Plan to Qualified Recipients, of which $4,260 was paid
to the Distributor. (See the Additional Statement for a
description of the Distribution Plan.)
Another part of the Distribution Plan is designed to protect
against any claim against or involving the Trust that some of the
expenses which might be considered to be sales-related which the
Trust pays or may pay come within the purview of the Rule. The
Trust believes that except for Permitted Payments it is not
financing any such activity and does not consider any payment
enumerated in this part of the Plan as so financing any such
activity. However, it might be claimed that some of the expenses
the Trust pays come within the purview of the Rule. If and to the
extent that any payment as specifically listed in the Plan (see the
Additional Statement) is considered to be primarily intended to
result in or as indirect financing of any activity which is
primarily intended to result in the sale of Trust shares, these
payments are authorized under the Plan. In addition, if the
Administrator, out of its own funds, makes payment for distribution
expenses such payments are authorized.
HOW TO REDEEM YOUR INVESTMENT
You may redeem all or any part of your shares at the net asset
value next determined after acceptance of your redemption request
at the Agent (subject to any applicable contingent deferred sales
charge for redemptions of CDSC Shares). Redemptions can be made by
the various methods described below. There is no minimum period
for any investment in the Trust, except for shares recently
purchased by check, Automatic Investment or Telephone Investment as
discussed below. Except for CDCS Shares (see "Purchases of $1
Million or More") there are no redemption fees or withdrawal
penalties. A redemption may result in a transaction taxable to you.
If a selected dealer or other financial institution serves
as shareholder of record for your shares, you must redeem through
that institution, which is responsible for the prompt transmission
of redemption requests. If your shares are registered in your name
at the Trust and a selected dealer or other institution maintains
records of your account, that institution can assist you with your
redemption; in some cases, you must redeem through that
institution. In all other cases, you may make a redemption request
directly to the Agent using the procedures described below.
For your convenience the Trust offers expedited redemption to
provide you with a high level of liquidity for your investment.
Expedited Redemption Methods
(Non-Certificate Shares)
You have the flexibility of two expedited methods of
initiating redemptions. They are available as to shares not
represented by certificates.
1. By Telephone. The Agent will accept instructions by
telephone from anyone to redeem shares and make payments
a) to a Financial Institution account you have
predesignated or
b) by check in the amount of $50,000 or less, mailed to
you, if your shares are registered in your name and the
check is sent to your address of record, provided that
there has not been a change of your address of record
during the 30 days preceding your redemption request. You
can make only one request for telephone redemption by
check in any 7-day period.
See "Redemption Payments", below for payment methods. Your
name , account number and address of record must be supplied.
To redeem an investment by this method, telephone:
800-872-6735 toll free or 908-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number,
name of the caller, the social security number registered to the
account and personal identification. The Agent may also record
calls. You should verify the accuracy of confirmation statements
immediately upon receipt.
2. By FAX or Mail. You may also request redemption payments
to a predesignated Financial Institution account by a letter
of instruction sent to: Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, by FAX at 908-855-5730 or by
mail at 581 Main Street, Woodbridge, NJ 07095-1198,
indicating account name(s), account number, amount to be
redeemed, and any payment directions, signed by the registered
holder(s). Signature guarantees are not required. See
"Redemption Payments", below for payment methods.
If you wish to use the above procedures you should so elect on
the Expedited Redemption section of the Application or the Ready
Access Features form and provide the required information
concerning your Financial Institution account number. The Financial
Institution account must be in the exclusive name(s) of the
shareholder(s) as registered with the Trust. You may change the
designated Financial Institution account at any time by completing
and returning a Ready Access Features form. For protection of your
assets, this form requires signature guarantees and possible
additional documentation.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
1. Certificate Shares. Certificates representing shares to
be redeemed should be sent in blank (unsigned) to the Trust's
Shareholder Servicing Agent: Administrative Data Management Corp.,
Attn: Aquilasm Group of Funds, 581 Main Street, Woodbridge, NJ
07095-1198, with payment instructions. A stock assignment form
signed by the registered shareholder(s) exactly as the account is
registered must also be sent to the Shareholder Servicing Agent.
For your own protection, it is essential that certificates
be mailed separately from signed redemption documentation. Because
of possible mail problems, it is also recommended that certificates
be sent by registered mail, return receipt requested.
For a redemption request to be in "proper form," the
signature or signatures must be the same as in the registration of
the account. In a joint account, the signatures of both
shareholders are necessary. Additional documentation may be
required where shares are held by certain types of shareholders
such as corporations, partnerships, trustees or executors, or if
redemption is requested by other than the shareholder of record. If
redemption proceeds of $50,000 or less are payable to the record
holder and are to be sent to the record address, no signature
guarantee is required. In all other cases, signatures must be
guaranteed by a member of a national securities exchange, a U.S.
bank or trust company, a state-chartered savings bank, a federally
chartered savings and loan association, a foreign bank having a
U.S. correspondent bank, a participant in the Securities Transfer
Association Medallion Program (STAMP), The Stock Exchanges
Medallion Program (SEMP) or The New York Stock Exchange, Inc.
Medallion Signature Program (MSP). A notary public is not an
acceptable signature guarantor.
2. Non-Certificate Shares. If you own non-certificate
shares registered on the books of the Trust, and you have not
elected Expedited Redemption to a predesignated Financial
Institution account, you must use the Regular Redemption Method.
Under this redemption method you should send a letter of
instruction to: Administrative Data Management Corp., Attn:
Aquilasm Group of Funds, 581 Main Street, Woodbridge, NJ
07095-1198, containing:
Account Name(s);
Account Number;
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed;
Payment instructions (normally redemption proceeds will
be mailed to your address as registered with the Trust);
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above.
Redemption Payments
Redemption payments will ordinarily be mailed to you at
your address of record. If you so request and the amount of your
redemption proceeds is $1,000 or more, the proceeds will, wherever
possible, be wired or transferred through the facilities of the
Automated Clearing House to the Financial Institution account
specified in the Expedited Redemption section of your Application
or Ready Access Features form. The Trust may impose a charge, not
exceeding $5.00 per wire redemption, after written notice to
shareholders who have elected this redemption procedure. The Trust
has no present intention of making this charge. Upon 30 days'
written notice to shareholders, the Trust may modify or terminate
the use of the Automated Clearing House to make redemption payments
at any time or charge a service fee, although no such fee is
presently contemplated. If you use a dealer to arrange for a
redemption, it may charge you a fee for this service.
The Trust will normally make payment for all shares redeemed
on the next business day (see "Net Asset Value Per Share")
following acceptance of the redemption request made in compliance
with one of the redemption methods specified above. Except as set
forth below, in no event will payment be made more than seven days
after acceptance of such a redemption request. However, the right
of redemption may be suspended or the date of payment postponed (i)
during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is
restricted as determined by the Securities and Exchange Commission
by rule or regulation; (ii) during periods in which an emergency,
as determined by the Securities and Exchange Commission, exists
which causes disposal of, or valuation of the net asset value of,
the portfolio securities to be unreasonable or impracticable; or
(iii) for such other periods as the Securities and Exchange
Commission may permit. Payment for redemption of shares recently
purchased by check (irrespective of whether the check is a regular
check or a certified, cashier's or official bank check) or by
Automatic Investment or Telephone Investment may be delayed up to
15 days or until (i) the purchase check or Automatic Investment or
Telephone Investment has been honored or (ii) the Agent has
received assurances by telephone or in writing from the Financial
Institution on which the purchase check was drawn or from which the
funds for Automatic Investment or Telephone Investment were
transferred, satisfactory to the Agent and the Trust, that the
purchase check or Automatic Investment or Telephone Investment will
be honored. Possible delays in payment of redemption proceeds can
be eliminated by using wire payments or Federal Reserve drafts to
pay for purchases.
If the Trustees determine that it would be detrimental to the
best interests of the remaining shareholders of the Trust to make
payment wholly or partly in cash, the Trust may pay the redemption
price in whole or in part by the distribution in kind of securities
from the portfolio of the Trust, in lieu of cash, in conformity
with applicable rules of the Securities and Exchange Commission.
See the Additional Statement for details.
The Trust has the right to compel the redemption of shares
held in any account if the aggregate net asset value of such shares
is less than $500 as a result of shareholder redemptions or
failure to meet the minimum investment level under an Automatic
Purchase Program. If the Board elects to do this, shareholders who
are affected will receive prior written notice and will be
permitted 60 days to bring their accounts up to the minimum before
this redemption is processed.
Reinvestment Privilege
You may reinvest without payment of any additional sales
charge all or part of any redemption proceeds within 120 days of
a redemption of shares on which a sales charge was paid, or which
were received in exchange for shares on which a sales charge was
paid, in shares of the Trust at the net asset value next determined
after the Agent's receipt of the reinvestment order. This
reinvestment privilege may be exercised only once a year. If you
have realized a gain on the redemption of your shares, the
redemption transaction is taxable, and reinvestment will not alter
any capital gains tax payable. If there has been a loss on the
redemption, some or all of the loss may be tax deductible,
depending on the amount reinvested and the length of time between
the redemption and the reinvestment.
AUTOMATIC WITHDRAWAL PLAN
You may establish an Automatic Withdrawal Plan if you own or
purchase shares of the Trust having a net asset value of at least
$5,000. Under an Automatic Withdrawal Plan you will receive a
monthly or quarterly check in a stated amount, not less than $50.
If such a plan is established, all dividends and distributions must
be reinvested in your shareholder account. Redemption of shares to
make payments under the Automatic Withdrawal Plan will give rise to
a gain or loss for tax purposes. See the Automatic Withdrawal Plan
provisions of the Application included in this Prospectus, the
Additional Statement under "Automatic Withdrawal Plan," and
"Dividend and Tax Information" below.
Purchase of additional shares concurrently with withdrawals
are undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain an Automatic Withdrawal
Plan while simultaneously making regular purchases. While an
occasional lump sum investment may be made, such investment should
normally be an amount at least equal to three times the annual
withdrawal or $5,000, whichever is less.
MANAGEMENT ARRANGEMENTS
The Board of Trustees
The business and affairs of the Trust are managed under the
direction and control of its Board of Trustees. The Additional
Statement lists the Trust's Trustees and officers and provides
further information about them.
The Advisory Agreement
Qualivest Capital Management, Inc. (the "Adviser"), a
subsidiary of U.S. Bancorp, supervises the investment program of
the Trust and the composition of its portfolio. The principal
subsidiary of U.S. Bancorp is United States National Bank of
Oregon.
The services of the Adviser are rendered under an Investment
Advisory Agreement (the "Advisory Agreement") which provides,
subject to the control of the Board of Trustees, for investment
supervision and for either keeping the accounting records of the
Trust, including the computation of the net asset value per share
and the dividends, or, at the Adviser's expense and responsibility,
delegating these accounting duties in whole or in part to a company
satisfactory to the Trust. The Advisory Agreement states that the
Adviser shall, at its expense, provide to the Trust all office
space and facilities, equipment and clerical personnel necessary
for the carrying out of the Adviser's duties under the Advisory
Agreement.
Under the Advisory Agreement, the Adviser pays all
compensation of those officers and employees of the Trust and of
those Trustees, if any, who are affiliated with the Adviser. Under
the Advisory Agreement, the Trust bears the cost of preparing and
setting in type its prospectuses, statements of additional
information, and reports to shareholders and the costs of printing
or otherwise producing and distributing those copies of such
prospectuses, statements of additional information and reports as
are sent to its shareholders. Under the Advisory Agreement, all
costs and expenses not expressly assumed by the Adviser or by the
Administrator under the Administration Agreement or by the Trust's
Distributor (principal underwriter) are paid by the Trust. The
Advisory Agreement lists examples of such expenses borne by the
Trust, the major categories of such expenses being: legal and audit
expenses, custodian and or shareholder servicing agent fees and
expenses, stock issuance and redemption costs, certain printing
costs, registration costs of the Trust and its shares under Federal
and State securities laws, interest, taxes and brokerage
commissions, and non-recurring expenses, including litigation.
Under the Advisory Agreement, the Trust agrees to pay the
Adviser, and the Adviser agrees to accept as full compensation for
all services rendered by the Adviser as such, an annual fee payable
monthly and computed on the net asset value of the Trust as of the
close of business each business day at the annual rate of 0.25 of
1% of such net asset value provided, however, that for any day that
the Trust pays or accrues a fee under the Distribution Plan of the
Trust based upon the assets of the Trust, such annual fee is
payable at the rate of 0.20 of 1% of all of the Trust's average
annual net assets. (Since the Administrator also receives a fee
from the Trust under the Administration Agreement, the total
investment advisory and administration fees which the Trust pays
are at the annual rate of 0.50 of 1% of such net assets, or, for
any day that the Trust pays or accrues a fee under the Distribution
Plan of the Trust based upon the assets of the Trust above the Base
Amount, at 0.40 of 1% of such net asset value; see below.)
Effective July 1, 1995, such combined annual fees are payable at
the rate of 0.40 of 1% of all of the Trust's average annual net
assets for any day that the Trust pays or accrues a fee under the
Distribution Plan of the Trust based upon the assets of the Trust.
The Adviser and the Administrator may, in order to attempt to
achieve a competitive yield on the shares of the Trust, each waive
all or part of any such fee.
Under the Advisory Agreement, the Adviser agrees that the
above fee shall be reduced, but not below zero, by an amount equal
to one-half 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 Trust's
total annual investment income.
The Advisory Agreement contains provisions as to the
allocation of the portfolio transactions of the Trust; see the
Additional Statement. Under these provisions, the Adviser is
authorized to consider sales of shares of the Trust or of any other
investment company or companies having the same investment adviser,
sub-adviser, administrator or principal underwriter as the Trust.
The Administration Agreement
Under an Administration Agreement (the "Administration
Agreement"), Aquila Management Corporation as Administrator, at its
own expense, provides office space, personnel, facilities and
equipment for the performance of its functions thereunder and as is
necessary in connection with the maintenance of the headquarters of
the Trust and pays all compensation of the Trust's Trustees,
officers and employees who are affiliated persons of the
Administrator. Prior to April 23, 1990, Aquila Management
Corporation acted as sub-adviser and administrator under a
sub-advisory and administration agreement, performing substantially
the same functions for the same compensation.
Under the Administration Agreement, subject to the control of
the Trust's Board of Trustees, the Administrator provides all
administrative services to the Trust other than those relating to
its investment portfolio and the maintenance of its accounting
books and records. Such administrative services include but are not
limited to maintaining books and records (other than accounting
books and records) of the Trust, and overseeing all relationships
between the Trust and its shareholder servicing agent, custodian,
legal counsel, auditors and principal underwriter, including the
negotiation of agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary or
desirable for effective operation of the Trust and for the sale,
servicing, or redemption of the Trust's shares. See the Additional
Statement for a further description of functions listed in the
Administration Agreement as part of such duties.
Under the Administration Agreement, the Trust pays a fee
payable monthly and computed on the net asset value of the Trust at
the end of each business day at the annual rate of 0.25 of 1% of
such net asset value provided, however, that for any day that the
Trust pays or accrues a fee under the Distribution Plan of the
Trust based upon the assets of the Trust , such annual fee is
payable at the rate of 0.20 of 1% of all of the Trust's average
annual net assets. The Administrator has agreed that the above fee
shall be reduced, but not below zero, by an amount equal to
one-half of the amount, if any, by which the total expenses of the
Trust in any fiscal year, exclusive of taxes, interest and
brokerage fees, 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 Trust's total
annual investment income.
Information as to the Adviser,
the Administrator and the Distributor
The Adviser is a subsidiary of U.S. Bancorp ("Bancorp") and
its subsidiary, United States National Bank of Oregon ("USNB").
Bancorp is a $21 billion superregional financial services holding
company organized under the laws of Oregon in 1968. USNB,
headquartered in Portland, is a national banking association,
chartered in 1891. It offers a wide variety of full-service and
commercial banking operations in over 200 locations in Oregon.
Other services of Bancorp and it subsidiaries include mortgage
banking, lease financing, consumer financing, commercial finance,
international banking, investment advisory, insurance agency and
credit life insurance services, discount brokerage and venture
capital. As of September 30, 1994, the Adviser had under management
nearly $5.2 billion in assets. See the Additional Statement as to
the legality, under the Glass-Steagall Act, of the Adviser acting
as the Trust's investment adviser. In general, under that Act, the
Adviser will not, among other things, be involved in the promotion
or distribution of shares of the Trust.
Mr. Edgar M. Potts, with the position of Fixed-Income Manager,
is the officer of the Adviser who manages the Trust's portfolio. He
has served as such since the Trust's inception in 1986. He has been
employed by the Adviser since 1977, before that by the Adviser's
parent company, U.S. National Bank. He has 35 years of investment
experience in those positions and in other financial institutions.
He has a B.S. in economics from Georgetown University.
Mr. Stephen J. Galiani is the backup portfolio manager. Mr.
Galiani has been employed by the Adviser since 1994. He was
president of Galiani Asset Management, a private investment
advisory firm from 1990 to 1994. Prior to owning his own firm, Mr.
Galiani was Vice President and Senior Portfolio Manager of the
municipal bond mutual funds for the Keystone family of mutual funds
with over $2 billion in municipal debt assets. Before managing
Keystone mutual funds, Mr. Galiani was Vice President and Portfolio
Manager of municipal bond portfolios for the Eaton Vance
Corporation. Mr. Galiani has an MBA from Boston University, School
of Management.
The Trust's Administrator is founder and administrator to
the Aquilasm Group of Funds, which consists of tax-free municipal
bond funds , money market funds and an equity fund. As of
September 30, 1995, these funds had aggregate assets of
approximately $2.6 billion, of which approximately $1.9 billion
consisted of assets of tax-free municipal bond funds. The
Administrator, which was founded in 1984, is controlled by Mr. Lacy
B. Herrmann (directly, through a trust and through share ownership
by his wife). See the Additional Statement for information on Mr.
Herrmann .
For the fiscal year of the Trust ended September 30,
1995, fees of $729,908 were paid or accrued to each of the Adviser
and the Administrator.
The Distributor currently handles the distribution of the
shares of fourteen funds (seven tax-free municipal bond funds, six
money market funds and an equity fund), including the Trust. Under
the Distribution Agreement, the Distributor is responsible for the
payment of certain printing and distribution costs relating to
prospectuses and reports as well as the costs of supplemental sales
literature, advertising and other promotional activities.
At the date of this Prospectus, there is a proposed
transaction whereby all of the shares of the Distributor, which are
currently owned by Mr. Herrmann, will be owned by certain directors
and/or officers of the Administrator and/or the Distributor
including Mr. Herrmann.
DIVIDEND AND TAX INFORMATION
Dividends and Distributions
The Trust will declare all of its net income, as defined
below, as dividends on every day, including weekends and holidays,
on those shares outstanding for which payment was received by the
close of business on the preceding business day. Net income for
dividend purposes includes all interest income accrued by the Trust
since the previous dividend declaration, including accretion of any
original issue discount, less expenses paid or accrued . As such
net income will vary, the Trust's dividends will also vary.
It is the Trust's present policy to pay dividends so that
they will be received or credited by approximately the first day of
each month. Shareholders may elect to have dividends deposited
without charge by electronic funds transfers into an account at a
Financial Institution which is a member of the Automated Clearing
House by completing a Ready Access Features form.
Redeemed shares continue to earn dividends through and
including the day which is the earlier of (i) the day before the
day on which the redemption proceeds are mailed, wired or
transferred by the facilities of the Automated Clearing House by
the Agent or paid by the Agent to a selected dealer; or (ii) the
day which is the third on which the New York Stock Exchange is
open after the day on which the net asset value of the redeemed
shares has been determined (see "How To Redeem Your
Investment").
Net investment income includes amounts of income from the
Oregon Obligations in the Trust's portfolio which are allocated as
"exempt-interest dividends" (see below) and is therefore exempt
from regular Federal income tax. This allocation will be made by
the use of one designated percentage applied uniformly to all
income dividends declared during the Trust's tax year. Such
designation will normally be made in the first month after the end
of each of the Trust's fiscal years as to income dividends paid in
the prior year. It is possible that in certain circumstances, a
small portion of the dividends paid by the Trust will be subject to
income taxes. During the Trust's fiscal year ended September 30,
1995, ***% of the Trust's dividends were "exempt-interest
dividends." For the calendar year 1995, 0.74 of 1% of the total
dividends paid were taxable as ordinary income and 1.76% were
taxable as long-term capital gains. The percentage of income
designated as tax-exempt for any particular dividend may be
different from the percentage of the Trust's income that was
tax-exempt during the period covered by the dividend.
Distributions ("short-term gains distributions") from net
realized short-term gains, if any, and distributions ("long-term
gains distributions"), if any, from the excess of net long-term
capital gains over net short-term capital losses realized through
October 31st of each year and not previously paid out will be paid
out after that date; the Trust may also pay supplemental
distributions after the end of its fiscal year. If net capital
losses are realized in any year, they are charged against capital
and not against net investment income which is distributed
regardless of gains or losses. The Trust may be required to impose
backup withholding at a rate of 31% upon payment of redemptions to
shareholders, and from short- and long-term gains distributions (if
any), if shareholders do not comply with provisions of the law
relating to the furnishing of taxpayer identification numbers and
reporting of dividends.
Unless you request otherwise by letter addressed to the Agent
or by filing an appropriate application prior to a given
ex-dividend date, dividends and distributions will be automatically
reinvested in full and fractional shares of the Trust at net asset
value on the record date for the dividend or distribution or other
date fixed by the Board of Trustees. An election to receive cash
will continue in effect until written notification of a change is
received by the Agent. All shareholders, whether their dividends
are received in cash or are being reinvested, will receive a
monthly account summary indicating the current status of their
investment. There is no fixed dividend rate. Corporate shareholders
of the Trust are not entitled to any deduction for dividends
received from the Trust.
Tax Information
The Trust qualified during its last fiscal year as a
"regulated investment company" under the Code, and intends to
continue to so qualify. If it does so qualify, it will not be
liable for Federal income taxes on amounts paid by it as dividends
and distributions. However, the Code contains a number of complex
tests relating to such qualification and it is possible although
not likely that the Trust might not meet one or more of these tests
in any particular year. If it does not so qualify, it would be
treated for tax purposes as an ordinary corporation, would receive
no tax deduction for payments made to shareholders and would be
unable to pay dividends or distributions which would qualify as
"exempt-interest dividends" or "capital gains dividends," as
discussed below.
The Trust intends to qualify during each fiscal year under the
Code to pay "exempt-interest dividends" to its shareholders.
Exempt-interest dividends which are derived from net income earned
by the Trust on Oregon Obligations will be excludable from gross
income of the shareholders for regular Federal income tax purposes.
Capital gains dividends are not included in exempt-interest
dividends. Although tax-exempt dividends are not taxed, each
taxpayer must report the total amount of tax-exempt interest
(including exempt-interest dividends from the Trust) received or
acquired during the year.
The Omnibus Budget Reconciliation Act of 1993 requires that
either gains realized by the Trust on the sale of municipal
obligations acquired after April 30, 1993 at a price which is less
than face or redemption value be included as ordinary income to the
extent such gains do not exceed such discount or that the discount
be amortized and included ratably in taxable income. There is an
exception to the foregoing treatment if the amount of the discount
is less than 0.25% of face or redemption value multiplied by the
number of years from acquisition to maturity. The Trust will
report such ordinary income in the years of sale or redemption
rather than amortize the discount and report it ratably. To the
extent the resultant ordinary taxable income is distributed to
shareholders, it will be taxable to them as ordinary income.
Capital gains dividends (net long-term gains over net
short-term losses which the Trust distributes and so designates)
are reportable by shareholders as long-term capital gains. This is
the case whether the shareholder takes the distribution in cash or
elects to have the distribution reinvested in Trust shares and
regardless of the length of time the shareholder has held his or
her shares. Capital gains are taxed at the same rates as ordinary
income, except that for individuals, trusts and estates the maximum
tax rate on capital gains distributions is 28% even if the
applicable rate on ordinary income for such taxpayers is higher
than 28%.
Short-term gains, when distributed, are taxed to shareholders
as ordinary income. Capital losses of the Trust are not distributed
but carried forward by the Trust to offset gains in later years and
thereby lessen the later-year capital gains distributions and
amounts taxed to shareholders.
The Trust's gains or losses on sales of Oregon Obligations
will be long-term or short-term depending upon the length of time
the Trust has held such obligations. Capital gains and losses of
the Trust will also include gains and losses on Futures and
options, if any, including gains and losses actually realized on
sales and exchanges and gains and losses deemed to be realized.
Those deemed to be realized are on Futures and options held by the
Trust at year-end, which are "marked to the market," that is,
deemed sold for fair market value. Net gains or losses realized and
deemed realized on Futures and options will be reportable by the
Trust as long-term to the extent of 60% of the gains or losses and
short-term to the extent of 40% regardless of the actual holding
period of such investments.
Information as to the tax status of the Trust's dividends and
distributions will be mailed to shareholders annually.
Under the Code, interest on loans incurred by shareholders to
enable them to purchase shares of the Trust may not be deducted for
regular Federal tax purposes. In addition, under rules used by the
Internal Revenue Service for determining when borrowed funds are
deemed used for the purpose of purchasing or carrying particular
assets, the purchase of shares of the Trust may be considered to
have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares. The receipt
of exempt-interest dividends from the Trust by an individual
shareholder may result in some portion of any social security
payments or railroad retirement benefits received by the
shareholder or the shareholder's spouse being included in taxable
income. Persons who are "substantial users" (or persons related
thereto) of facilities financed by industrial development bonds or
private activity bonds should consult their own tax advisers before
purchasing shares.
While interest from all Oregon Obligations is tax-exempt for
purposes of computing the shareholder's regular tax, interest from
so-called private activity bonds issued after August 7, 1986,
constitutes a tax preference for both individuals and corporations
and thus will enter into a computation of the alternative minimum
tax. Whether or not that computation will result in a tax will
depend on the entire content of the taxpayer's return. The Trust
will not invest in the types of Oregon Obligations which would give
rise to interest that would be subject to alternative minimum
taxation if more than 20% of its net assets would be so invested,
and may refrain from investing in that type of bond completely. The
20% limit is a fundamental policy of the Trust.
Corporate shareholders must add to or subtract from
alternative minimum taxable income, as calculated before taking
into consideration this adjustment, 75% of the difference between
what is called adjusted current earnings (essentially current
earnings and profits) and alternative minimum taxable income, as
previously calculated. Since tax-exempt bond interest is included
in earnings and profits and therefore in adjusted current earnings,
this adjustment will tend to make it more likely that corporate
shareholders will be subject to the alternative minimum tax.
As of the date of the Prospectus, Congress is considering
a number of changes affecting taxation. It is not possible to
predict which, if any, of such changes will become law.
Tax Effects of Redemptions
Normally, when you redeem shares of the Trust you will
recognize capital gain or loss measured by the difference between
the proceeds received in the redemption and the amount you paid for
the shares. The gain or loss will be long-term if you held the
redeemed shares for over a year, and short-term, if for a year or
less. However, if shares held for six months or less are redeemed
and you have a loss, two special rules apply: the loss is reduced
by the amount of exempt-interest dividends, if any, which you
received on the redeemed shares, and any loss over and above the
amount of such exempt-interest dividends is treated as a long-term
loss to the extent you have received capital gains dividends on the
redeemed shares.
Oregon Tax Information
Individual shareholders of the Trust, resident in Oregon, will
not be subject to Oregon personal income tax on distributions
received from the Trust to the extent such distributions are
attributable to interest on tax-exempt obligations of the State of
Oregon and its political subdivisions and authorities or on
obligations issued by or under the authority of the governments of
Puerto Rico, the Virgin Islands, Guam and the Northern Mariana
Islands, provided that the Trust complies with the requirement of
the Code that at least 50% of its assets at the close of each
quarter of its taxable year is invested in state, municipal or
other obligations the interest on which is exempt from federal
income tax under Section 103(a) thereof.
Other distributions from the Trust, including all long-term
and short-term capital gains, will generally not be exempt from
Oregon income tax.
Trust distributions are expected to be fully includable in
income in determining the Oregon excise tax on corporations.
Shares of the Trust will not be subject to the Oregon property
tax.
Shareholders of the Trust should consult their tax advisers
about other state and local tax consequences of their investment in
the Trust.
EXCHANGE PRIVILEGE
There is an exchange privilege as set forth below among
this Trust and certain tax-free municipal bond funds and an equity
fund (the "Bond or Equity Funds") and certain money market funds
(the "Money-Market Funds"), all of which are sponsored by Aquila
Management Corporation and Aquila Distributors, Inc., and have the
same Administrator and Distributor as the Trust. All exchanges are
subject to certain conditions described below. As of the date of
the Prospectus, the Aquila-sponsored Bond or Equity Funds are this
Trust, Aquila Rocky Mountain Equity Fund, Hawaiian Tax-Free Trust,
Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund For Utah and Narragansett
Insured Tax-Free Income Fund; the Aquila-sponsored Money-Market
Funds are Capital Cash Management Trust, Pacific Capital Cash
Assets Trust (Original Shares), Pacific Capital Tax-Free Cash
Assets Trust (Original Shares), Pacific Capital U.S. Treasuries
Cash Assets Trust (Original Shares), Prime Cash Fund and Churchill
Cash Reserves Trust.
The exchange privilege is not available for shares of the
Trust purchased in the amount of $1 million or more without a sales
charge until four years after the date of issuance of such shares,
for such shares purchased after July 1, 1995 and for two years for
such shares purchased before that date. (See "Purchase of $1
Million or More.")
Under the exchange privilege, once any applicable sales charge
has been paid on shares of any Bond or Equity Fund, those shares
(and any shares acquired as a result of reinvestment of dividends
and/or distributions) may be exchanged any number of times between
Money-Market Funds and Bond or Equity Funds without the payment of
any additional sales charge.
The "Eligible Shares" of any Bond or Equity Fund are those
shares which were (a) acquired by direct purchase with payment of
any applicable sales charge, or which were received in exchange for
shares of another Bond or Equity Fund on which any applicable sales
charge was paid; (b) acquired by exchange for shares of a
Money-Market Fund with payment of the applicable sales charge; (c)
acquired in one or more exchanges between shares of a Money-Market
Fund and a Bond or Equity Fund so long as the shares of the Bond or
Equity Fund were originally purchased as set forth in (a) or (b);
or (d) acquired as a result of reinvestment of dividends and/or
distributions on otherwise Eligible Shares.
If you own Eligible Shares of any Bond or Equity Fund, you may
exchange them for shares of any Money-Market Fund or the shares of
any other Bond or Equity Fund without payment of any sales charge.
If you own shares of a Money-Market Fund which you have
acquired by exchange for Eligible Shares of any Bond or Equity
Fund, you may exchange these shares, and any shares acquired as a
result of reinvestment of dividends and/or distributions on these
shares, for shares of any Bond or Equity Fund without payment of
any sales charge.
Shares of a Money-Market Fund may be exchanged for shares of
another Money-Market Fund or of a Bond or Equity Fund; however, if
the shares of a Money-Market Fund were not acquired by exchange of
Eligible Shares of a Bond or Equity Fund or of shares of a
Money-Market Fund acquired in such an exchange, they may be
exchanged for shares of a Bond or Equity Fund only upon payment of
the applicable sales charge. The shares of the Bond or Equity Fund
so acquired are then Eligible Shares.
This Trust, as well as the other Money-Market Funds and Bond
or Equity Funds, reserves the right to reject any exchange into its
shares, if shares of the fund into which exchange is desired are
not available for sale in your state of residence. The Trust may
also modify or terminate this exchange privilege at any time. In
the case of termination, this Prospectus will be appropriately
supplemented. No such modification or termination shall take effect
on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the
conditions that (i) the shares being acquired are available for
sale in your state of residence; (ii) the aggregate net asset value
of the shares surrendered for exchange are at least equal to the
minimum investment requirements of the investment company whose
shares are being acquired and (iii) the ownership of the accounts
from which and to which the exchange is made are identical.
If a selected dealer or other financial institution serves as
shareholder of record for your shares, you must effect an exchange
through that institution, which is responsible for the prompt
transmission of your request. If your shares are registered in your
name at the Trust and a selected dealer or other institution
maintains records of your account, that institution can assist you
with your exchange; in some cases, you must effect exchanges
through that institution. In all other cases, you may make an
exchange request directly to the Agent using the procedures
described below.
If you have elected the Telephone Exchange feature on the
Application, the Agent will accept telephone exchange instructions
from anyone. To make a telephone exchange telephone:
800-872-6735 toll free or 908-855-5731
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to
verify the identity of the caller. The Agent will request some or
all of the following information: account name(s) and number, name
of the caller, the social security number registered to the account
and personal identification. The Agent may also record calls. You
should verify the accuracy of confirmation statements immediately
upon receipt.
If you have not elected the Telephone Exchange feature, you
must complete and return a form which is available from the
Distributor.
Exchanges will be effected at the relative exchange prices
of the shares being exchanged next determined after receipt by the
Agent of your exchange request. The exchange prices will be the
respective net asset values of the shares, unless a sales charge is
to be deducted in connection with an exchange of shares, in which
case the exchange price of shares of a Bond or Equity Fund will
be their public offering price. Prices for exchanges are
determined in the same manner as for purchases of the Trust's
shares. See "How to Invest in the Trust".
An exchange is treated for Federal tax purposes as a
redemption and purchase of shares and may result in the realization
of a capital gain or loss, depending on the cost or other tax basis
of the shares exchanged and the holding period (see the Additional
Statement); no representation is made as to the deductibility of
any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable,
except to the extent that a portion or all of the dividends paid by
Pacific Capital Tax-Free Cash Assets Trust (a tax-free Money-Market
Fund) are exempt from regular Federal income tax, and to the extent
that a portion or all of the dividends paid by Pacific Capital U.S.
Treasuries Cash Assets Trust (which invests in U.S. Treasury
obligations) are exempt from state income taxes. Dividends paid by
Aquila Rocky Mountain Equity Fund are taxable. If your state of
residence is not the same as that of the issuers of obligations in
which a tax-free municipal Bond Fund or a tax-free Money-Market
Fund invests, the dividends from that fund may be subject to
income tax of the state in which you reside. Accordingly, you
should consult your tax adviser before acquiring shares of such a
Bond Fund or a tax-free Money-Market Fund under the exchange
privilege arrangement.
If you are considering an exchange into one of the funds
listed above, you should send for and carefully read its
Prospectus.
GENERAL INFORMATION
Performance
Advertisements, sales literature and communications to
shareholders may contain various measures of the Trust's
performance including current yield, taxable equivalent yield,
various expressions of total return, current distribution rate and
taxable equivalent distribution rate.
Average annual total return figures, as prescribed by the
Securities and Exchange Commission, represent the average annual
percentage change in value of a hypothetical $1,000 purchase,
invested at the maximum public offering price (offering price
includes sales charge) for 1- and 5-year periods and for a period
since the inception of the Trust, to the extent applicable, through
the end of such periods, assuming reinvestment (without sales
charge) of all distributions. The Trust may also furnish total
return quotations for other periods or based on investments at
various sales charge levels or at net asset value. For such
purposes total return equals the total of all income and capital
gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the
original investment, expressed as a percentage of the purchase
price. See the Additional Statement.
Current yield reflects the income per share earned by each of
the Trust's portfolio investments; it is calculated by (i) dividing
the Trust's net investment income per share during a recent 30-day
period by (ii) the maximum public offering price on the last day of
that period and by (iii) annualizing the result. Taxable equivalent
yield shows the yield from a taxable investment that would be
required to produce an after-tax yield equivalent to that of the
Trust, which invests in tax-exempt obligations. It is computed by
dividing the tax-exempt portion of the Trust's yield (calculated as
indicated) by one minus a stated income tax rate and by adding the
product to the taxable portion (if any) of the Trust's yield. See
the Additional Statement.
Current yield and taxable equivalent yield, which are
calculated according to a formula prescribed by the Securities and
Exchange Commission (see the Additional Statement), are not
indicative of the dividends or distributions which were or will be
paid to the Trust's shareholders. Dividends or distributions paid
to shareholders are reflected in the current distribution rate or
taxable equivalent distribution rate which may be quoted to
shareholders. The current distribution rate is computed by (i)
dividing the total amount of dividends per share paid by the Trust
during a recent 30-day period by (ii) the current maximum offering
price and by (iii) annualizing the result. A taxable equivalent
distribution rate shows the taxable distribution rate that would be
required to produce an after-tax distribution rate equivalent to
the Trust's distribution rate (calculated as indicated above). The
current distribution rate, unlike yield figures, is not limited to
investment performance, but takes into account expenses as well; it
also differs from the current yield computation because it could
include distributions to shareholders from sources, if any, other
than dividends and interest, such as short-term capital gains or
return of capital. If distribution rates are quoted in advertising,
they will be accompanied by calculations of current yield in
accordance with the formula of the Securities and Exchange
Commission.
In each case performance figures are based upon past
performance, reflect as appropriate all recurring charges against
Trust income net of fee waivers and reimbursement of expenses, if
any, and will assume the payment of the maximum sales charge on the
purchase of shares, but not on reinvestment of income dividends for
which the Trust does not impose a sales charge. The investment
results of the Trust, like all other investment companies, will
fluctuate over time; thus, performance figures should not be
considered to represent what an investment may earn in the future
or what the Trust's yield, tax equivalent yield, distribution rate,
taxable equivalent distribution rate or total return may be in any
future period. The annual report of the Trust contains additional
performance information that will be made available upon request
and without charge.
Description of the Trust and its Shares
The Trust is a series of The Cascades Trust (the "Business
Trust") formed in 1985 under the name Tax-Free Trust of Oregon. On
August 10, 1989, the name of the Business Trust was changed to The
Cascades Trust. The Business Trust presently has only one active
series, the original series, which continues to be called Tax-Free
Trust of Oregon.
The Business Trust is an open-end, non-diversified management
investment company organized as a Massachusetts business trust.
(See "Investment of the Trust Assets" above for further information
about the Trust's status as "non-diversified").
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares and to divide or
combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in
the Business Trust. Each share represents an equal proportionate
interest in the Trust with each other share. Income, direct
liabilities and direct operating expenses of each series will be
allocated directly to each series, and general liabilities and
expenses, if any, of the Business Trust will be allocated among the
series in a manner acceptable to the Board of Trustees. Upon
liquidation of a series, shareholders of the series are entitled to
share pro-rata in the net assets of that series available for
distribution to shareholders and upon liquidation of the Business
Trust, the respective series are entitled to share proportionately
in the assets available to the Business Trust after allocation to
the various series. All shares are presently of the same class;
however, if they deem it advisable and in the best interests of
shareholders, the Board of Trustees of the Business Trust may
create additional classes of shares which may differ from each
other only as to dividends (subject to rules and regulations of the
Securities and Exchange Commission or by exemptive order) or the
Board of Trustees may, at its own discretion, create additional
series of shares, each of which may have separate assets and
liabilities (in which case any such series will have a designation
including the word "Series"). See the Additional Statement for
further information about possible additional series. Shares are
fully paid and non-assessable, except as set forth under the
caption "General Information" in the Additional Statement; the
holders of shares have no pre-emptive or conversion rights.
As of January 2, 1996, Merrill Lynch, Pierce, Fenner &
Smith, Inc., P.O. Box 30561, New Brunswick, NJ held of record
2,664,986 shares (9.5%) of the Trust and BHC Securities, Inc.,
2005 Market Street, Philadelphia, PA held of record 2,781,768
shares (9.5%) of the Trust. The Trust's management is not aware of
any other person owning of record or beneficially 5% or more of the
Trust's outstanding shares as of that date. On the basis of
information received from those record owners, the Trust's
management believes that all of such shares are held for the
benefit of brokerage clients.
Additional Classes
The Trust believes it would be desirable to offer additional
classes of shares (the "Multiple-Class System") in order to
accommodate, in a cost-effective manner, the service desires and
requirements of a variety of investors. The creation of other
classes will have no effect upon the shares of the Trust now
outstanding or those which would be outstanding at such time as the
Trust begins offering shares of other classes.
It is anticipated that the Trust will offer three classes of
shares: Front-Payment Class Shares ("Class A"), Level-Payment Class
Shares ("Class C"), and Institutional Class Shares ("Class Y").
Retail investors will be entitled to purchase Front-Payment Shares
or Level-Payment Shares or both. Institutional Class Shares will be
offered only to institutions acting for investors in a fiduciary,
advisory, agency custodial or similar capacity, and will not be
offered directly to retail customers.
The Trust believes that such Multiple-Class System might
enhance the scope and depth of its services to existing and
potential shareholders and permit it to facilitate the distribution
of its securities to a further degree. The Multiple-Class System
offers the flexibility of tailoring the payment for shares of the
Trust to the needs and circumstances of the clients of
broker-dealer firms, financial institutions and other
organizations. Moreover, to the extent that assets increase in the
Trust due to sale of shares through the Multiple-Class System,
owners of all classes of shares might benefit from the spreading of
the Trust's fixed operating costs over the larger asset base to a
greater extent than might otherwise be the case. There is, of
course, no assurance that any of these desired results will be
achieved.
Implementation of a Multiple-Class System is subject to a
number of conditions. These include: a favorable ruling from the
Internal Revenue Service that implementation of the Multiple-Class
System will not affect the Trust's status as a regulated investment
company under the applicable provisions of the Internal Revenue
Code; the filing and effectiveness of a post-effective amendment to
the Trust's Registration Statement to register with the Securities
and Exchange Commission shares of such classes for sale to
investors; and registration with various state securities
authorities of the shares of the Trust. While it is anticipated
that each of these conditions will be accomplished, there is no
assurance that this will be the case.
Shares of the new classes ("Class C Shares and Class Y
Shares") will not be available for purchase unless and until the
foregoing conditions are met. At such time, all shareholders of the
Trust will be advised as to the availability of shares in the new
classes. It is anticipated that the Trust will be able to offer
shares of the new classes in the Spring of 1996.
Voting Rights
At any meeting of shareholders, shareholders of the Trust are
entitled to one (1) vote for each dollar of net asset value
(determined as of the record date for such meeting) for each full
share held (and fractional votes for fractional shares held).
Rule 18f-2 under the Investment Company Act of 1940 provides
that matters submitted to shareholders affecting any series must be
approved by a majority of the outstanding voting securities of such
series, voting separately from the other series, unless it is clear
that the interests of each series in the matter are identical or
the matter does not affect a series. However, the rule exempts the
selection of accountants and the election of Trustees from the
separate voting requirement.
Except that the Board of Trustees may change the name of the
Business Trust, no other amendment may be made to the Declaration
of Trust without the affirmative vote of the holders of the
outstanding shares of the Business Trust having a majority of its
net asset value, and if the amendment affects any series of the
Business Trust, the affirmative vote of the holders of the
outstanding shares with a majority of the net asset value of that
series. The Business Trust may be terminated (i) upon the sale of
its assets to another issuer, or (ii) upon liquidation and
distribution of the assets of the Business Trust, in either case if
such action is approved by the vote of the holders of the
outstanding shares of the Business Trust having a majority of its
net asset value and by the holders of the outstanding shares of
each series having a majority of the net asset value of such
series. If not so terminated, the Business Trust will continue
indefinitely.
<PAGE>
[LOGO] APPLICATION FOR TAX-FREE TRUST OF OREGON
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
ADM, ATTN: AQUILA SM GROUP OF FUNDS
581 MAIN STREET, WOODBRIDGE, NJ 07095-1198
1-800-872-6735
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1 & 2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.________________________________________________________________
Custodians First Name Middle Initial Last Name
Custodian for ____________________________________________________
Minors First Name Middle Initial Last Name
Under the ___________UGTMA** _____________________________________
Name of State Minors Social Security Number
4. ____________________________________________________
____________________________________________________
(Name of Corporation or Partnership. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust may
be registered in the name of the Plan or Trust itself.)
___________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
____________________________________________________
Street or PO Box City
_______________________________(______)______________
State Zip Daytime Phone Number
Occupation:________________________Employer:________________________
Employers Address:__________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you
are a non-U.S. Citizen or resident andnot subject to back-up
withholding (See certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
_______________________ _____________________________
Dealer Name Branch Number
_______________________ _____________________________
Street Address Rep. Number/Name
_______________________ (_______)_____________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
Make check payable to: TAX-FREE TRUST OF OREGON
Amount of investment $ _________________ Minimum initial
investment $1,000
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like
you to deposit the dividend.
(A Financial Institution is a commercial bank, savings bank or
credit union.)
___ Mail check to my/our address listed in Step 1.
C. LETTER OF INTENT
(Check appropriate box)
See Terms of Letter of Intent and Escrow at the end of this application
___ Yes ___ No
I/We intend to invest in shares of the Trust during the 13-month period
from the date of my/our first purchase pursuant to this Letter (which
purchase cannot be more than 90 days prior to the date of this Letter), an
aggregate amount (excluding any reinvestment of dividends or distributions)
of at least $25,000 which, together with my/our present holdings of Trust
shares (at public offering price on date of this Letter), will equal or
exceed the minimum amount checked below:
___ $25,000 ___ $50,000 ___ $100,000 ___ $250,000
___ $500,000 ___ $1,000,000 ___ $2,500,000 ___ $5,000,000
<PAGE>
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Tax-Free Trust of Oregon Account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or on the
first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply calling
the Trust toll-free at 1-800-872-6735. To establish this program, please
complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to 1st
actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, Administrative Data
Management Corp. (the Agent) is authorized to redeem sufficient shares
from this account at the then current Net Asset Value, in accordance
with the terms below:
Dollar Amount of each withdrawal $ ______________beginning_______________ .
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is payable
to a Financial Institution for your account, indicate Financial Institution
name, address and your account number.
_______________________________ ______________________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ______________________________________
Street Financial Institution Street Address
_______________________________ ______________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your name
within the Aquila SM Group of Funds by telephone.
TO MAKE A TELEPHONE EXCHANGE, CALL THE AGENT AT 1-800-872-6735
The Agent is authorized to accept and act upon my/our or any other
persons telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorneys fees, resulting
from acceptance of, or acting or failure to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution account listed.
TO MAKE AN EXPEDITED REDEMPTION, CALL THE AGENT AT 1-800-872-6735
Cash proceeds in any amount from the redemption of shares will be mailed
or wired, whenever possible, upon request, if in an amount of $1,000 or more
to my/our account at a Financial Institution. The Financial Institution
account must be in the same name(s) as this Trust account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ ____________________________________
Account Registration Financial Institution Account Number
_______________________________ ____________________________________
Financial Institution Name Financial Institution Transit/Routing Number
_______________________________ ____________________________________
Street City State Zip
<PAGE>
STEP 4 Section A
DEPOSITORS AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to my/our
account any drafts or debits drawn on my/our account initiated by the Agent,
Administrative Data Management Corp., and to pay such sums in accordance
therewith, provided my/our account has sufficient funds to cover such drafts
or debits. I/We further agree that your treatment of such orders will be the
same as if I/we personally signed or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you receive
my/our written instructions to cancel this service. I/We also agree that if
any such drafts or debits are dishonored, for any reason, you shall have no
liabilities.
Financial Institution Account Number _______________________________________
Name and Address where my/our account is maintained
Name of Financial Institution______________________________________________
Street Address_____________________________________________________________
City___________________________________________State _________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account is
registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant to
the above authorization shall be subject to the provisions of the Operating
Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit in the
normal course of business initiated by the Agent (except any loss due to
your payment of any amount drawn against insufficient or uncollected
funds), provided that you promptly notify us in writing of any claim
against you with respect to the same, and further provided that you will
not settle or pay or agree to settle or pay any such claim without the
written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and expenses
in the event that you dishonor, with or without cause, any such electronic
debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of legal age
to purchase shares of the Trust and has received and read a current
Prospectus of the Trust and agrees to its terms.
- - I/We authorize the Trust and its agents to act upon these instructions for
the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution has
insufficient funds, the Trust and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Trust account to make up any deficiency resulting
from any decline in the net asset value of shares so purchased and any
dividends paid on those shares. I/We authorize the Trust and its agents to
correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Trust account and to charge the account for any
related charges. I/We acknowledge that shares purchased either through
Automatic Investment or Telephone Investment are subject to applicable
sales charges.
- - The Trust, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify the identity of the caller. The
Agent will request some or all of the following information: account name
and number; name(s) and social security number registered to the account
and personal identification; the Agent may also record calls. Shareholders
should verify the accuracy of confirmation statements immediately upon
receipt. Under penalties of perjury, the undersigned whose Social Security
(Tax I.D.) Number is shown above certifies (i) that Number is my correct
taxpayer identification number and (ii) currently I am not under IRS
notification that I am subject to backup withholding (line out (ii) if
under notification). If no such Number is shown, the undersigned further
certifies, under penalties of perjury, that either (a) no such Number has
been issued, and a Number has been or will soon be applied for; if a Number
is not provided to you within sixty days, the undersigned understands that
all payments (including liquidations) are subject to 31% withholding under
federal tax law, until a Number is provided and the undersigned may be
subject to a $50 I.R.S. penalty; or (b) that the undersigned is not a
citizen or resident of the U.S.; and either does not expect to be in the
U.S. for 183 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Trust, or is
exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST, ALL
TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trust, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
<PAGE>
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
- - You may cancel any feature at any time, effective 3 days after the Agent
receives written notice from you.
- - Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by the
terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a Ready
Access features form which may be obtained from Aquila Distributors at
1-800-872-6734 and send it to the Agent together with a "voided" check or
pre-printed deposit slip from the new account. The new Financial
Institution change is effective in 15 days after this form is received
in good order by the Trust's Agent.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 2c and signing the Application, the investor is
entitled to make each purchase at the public offering price applicable to a
single transaction of the dollar amount checked above, and agrees to be
bound by the terms and conditions applicable to Letters of Intent appearing
below.
The investor is making no commitment to purchase shares, but if the
investor's purchases within thirteen months from the date of the investor's
first purchase do not aggregate $25,000, or, if such purchases added to the
investor's present holdings do not aggregate the minimum amount specified
above, the investor will pay the increased amount of sales charge prescribed
in the terms of escrow below.
The commission to the dealer or broker, if any, named herein shall be
at the rate applicable to the minimum amount of the investor's specified
intended purchases checked above. If the investor's actual purchases do not
reach this minimum amount, the commissions previously paid to the dealer will
be adjusted to the rate applicable to the investor's total purchases. If the
investor's purchases exceed the dollar amount of the investor's intended
purchases and pass the next commission break-point, the investor shall
receive the lower sales charge, provided that the dealer returns to the
Distributor the excess of commissions previously allowed or paid to him over
that which would be applicable to the amount of the investor's total
purchases.
The investor's dealer or broker shall refer to this Letter of Intent in
placing any future purchase orders for the investor while this Letter is in
effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary), 3% of
the dollar amount specified in the Letter of Intent (computed to the
nearest full share) shall be held in escrow in shares of the Trust by the
Agent. All dividends and any capital distributions on the escrowed shares
will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within a thirteen-month period, the escrowed shares will be promptly
released to the investor. However, shares disposed of prior to completion
of the purchase requirement under the Letter will be deducted from the
amount required to complete the investment commitment.
3. If the total purchases pursuant to the Letter are less than the amount
specified in the Letter as the intended aggregate purchases, the investor
must remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of
sales charges which would have been paid if the total amount purchased
had been made at a single time. If such difference in sales charges is
not paid within twenty days after receipt of a request from the
Distributor or the dealer, the Distributor will, within sixty days after
the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full shares and
any cash proceeds for a fractional share remaining after such redemption
will be released to the investor. The escrow of shares will not be
released until any additional sales charge due has been paid as stated in
this section.
4. By checking Box 2c and signing the Application, the investor irrevocably
constitutes and appoints the Agent or the Distributor as his attorney to
surrender for redemption any or all escrowed shares on the books of the
Trust.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to the
terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan") as
agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Trust purchased for and
held under the Plan, but the Agent will credit all such shares to the
Planholder on the records of the Trust. Any share certificates now held
by the Planholder may be surrendered unendorsed to the Agent with the
application so that the shares represented by the certificate may be held
under the Plan.
3. Dividends and distributions will be reinvested in shares of the Trust at
Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of business
on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Trust) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with
the Trust's usual redemption procedures and will mail a check for the
proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Trust. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the Trust,
shares remaining unredeemed will be held in an uncertificated account in
the name of the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper instructions
are received from the Planholder, his executor or guardian, or as
otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action taken
or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for the
Trust, the Planholder will be deemed to have appointed any successor
transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made. Accordingly,
a Planholder may not maintain this Plan while simultaneously making
regular purchases. While an occasional lump sum investment may be made,
such investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
<PAGE>
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
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
COUNSEL
Hollyer Brady Smith Troxell
Barret Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
TABLE OF CONTENTS
Highlights 2
Table Of Expenses 4
Financial Highlights 5
Introduction 6
Investment Of The Trusts Assets 6
Investment Restrictions 11
Net Asset Value Per Share 12
How To Invest In The Trust 12
How To Redeem Your Investment 18
Automatic Withdrawal Plan 21
Management Arrangements 21
Dividend And Tax Information 24
Exchange Privilege 28
General Information 30
Application and Letter of Intent
AQUILA
[EAGLE LOGO]
TAX-FREE TRUST
OF OREGON
[LOGO]
A tax-free
income investment
A Series of The Cascades Trust
PROSPECTUS
One of The
Aquilasm Group of Funds
<PAGE>
Tax-Free Trust of Oregon
380 Madison Avenue Suite 2300
New York, New York 10017
800-USA-OREG (800-872-6734)
212-697-6666
Statement of Additional Information
January 31, 1996
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. The Additional Statement should be
read in conjunction with the Prospectus (the "Prospectus") dated
January 31, 1996, of Tax-Free Trust of Oregon (the "Trust"), which
may be obtained from the Trust's Shareholder Servicing Agent,
Administrative Data Management Corp. by writing to it at: 581 Main
Street, Woodbridge, NJ 07095-1198 or by calling the following
numbers:
800-872-6735 toll free or 908-855-5731
or from Aquila Distributors, Inc., the Trust's Distributor, by
writing to it at 380 Madison Avenue, Suite 2300, New York, New York
10017; or by calling:
800-872-6734 toll free or 212-697-6666
The Annual Report of the Trust for the fiscal year ended
September 30, 1995, will be delivered with the Additional
Statement.
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . . .2
Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . .7
Performance . . . . . . . . . . . . . . . . . . . . . . . . . .9
Investment Restrictions . . . . . . . . . . . . . . . . . . . 12
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . 13
Limitation of Redemptions in Kind . . . . . . . . . . . . . . 16
Trustees and Officers . . . . . . . . . . . . . . . . . . . . 16
Additional Information as to Management Arrangements . . . . . 23
Computation of Net Asset Value . . . . . . . . . . . . . . . . 26
Automatic Withdrawal Plan . . . . . . . . . . . . . . . . . . 27
Additional Tax Information . . . . . . . . . . . . . . . . . . 28
General Information . . . . . . . . . . . . . . . . . . . . . 28
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . 30
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The investment objective and policies of the Trust are
described in the Prospectus, which refers to the matters described
below. See the Prospectus for the definition of "Oregon
Obligations."
Ratings
The ratings assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P") represent
their respective opinions of the quality of the municipal bonds and
notes which they undertake to rate. It should be emphasized,
however, that ratings are general and not absolute standards of
quality. Consequently, obligations with the same maturity, stated
interest rate and rating may have different yields, while
obligations of the same maturity and stated interest rate with
different ratings may have the same yield. See Appendix A to this
Additional Statement for further information about the ratings of
Moody's and S&P as to the various rated Oregon Obligations which
the Trust may purchase.
The table below gives information as to the percentage of
Trust net assets invested, as of September 30, 1995, in Oregon
Obligations in the various rating categories:
Highest rating (1) 43.6%
Second highest rating (2) 47.9%
Third highest rating (3) 7.2%
Fourth highest rating (4) 0.2%
Not rated: 1.2%
100.0%
(1) Aaa of Moody's or AAA of S&P.
(2) Aa of Moody's or AA of S&P.
(3) A of Moody's or A of S&P.
(4) Baa of Moody's or BBB of S&P.
When-Issued and Delayed Delivery Obligations
The Trust may buy Oregon Obligations on a when-issued or
delayed delivery basis. The purchase price and the interest rate
payable on the Oregon Obligations are fixed on the transaction
date. At the time the Trust makes the commitment to purchase Oregon
Obligations on a when-issued or delayed delivery basis, it will
record the transaction and thereafter reflect the value each day of
such Oregon Obligations in determining its net asset value. The
Trust will make commitments for such when-issued transactions only
when it has the intention of actually acquiring the Oregon
Obligations. The Trust places an amount of assets equal in value to
the amount due on the settlement date for the when-issued or
delayed delivery securities being purchased in a segregated account
with the Custodian, which is marked to market every business day.
On delivery dates for such transactions, the Trust will meet its
commitments by selling the Oregon Obligations held in the separate
account and/or from cash flow.
Determination of the Marketability of Certain Securities
In determining marketability of floating and variable rate
demand notes and participation interests (including municipal
lease/purchase obligations) the Board of Trustees will consider the
following factors, not all of which may be applicable to any
particular issue: the quality, maturity and coupon rate of the
issue, ratings received from the nationally recognized statistical
rating organizations and any changes or prospective changes in such
ratings, the likelihood that the issuer will continue to
appropriate the required payments for the issue, recent purchases
and sales of the same or similar issues, the general market for
municipal securities of the same or similar quality, the Adviser's
opinion as to marketability of the issue and other factors that may
be applicable to any particular issue.
Futures Contracts and Options
The Trust is permitted to buy and sell futures contracts
relating to municipal bond indices ("Municipal Bond Index Futures")
and to U.S. Government securities ("U.S. Government Securities
Futures," together referred to as "Futures"), and exchange traded
options based on Futures as a possible means to protect the asset
value of the Trust during periods of changing interest rates,
although in fact the Trust may never do so. The following
discussion is intended to explain briefly the workings of Futures
and options on them.
Unlike when the Trust purchases or sells an Oregon Obligation,
no price is paid or received by the Trust upon the purchase or sale
of a Future. Initially, however, when such transactions are entered
into, the Trust will be required to deposit with the futures
commission merchant ("broker") an amount of cash or Oregon
Obligations equal to a varying specified percentage of the contract
amount. This amount is known as initial margin. Subsequent
payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying index or
security fluctuates, making the Future more or less valuable, a
process known as marking to market. Insolvency of the broker may
make it more difficult to recover initial or variation margin.
Changes in variation margin are recorded by the Trust as unrealized
gains or losses. Margin deposits do not involve borrowing by the
Trust and may not be used to support any other transactions. At any
time prior to expiration of the Future, the Trust may elect to
close the position by taking an opposite position which will
operate to terminate the Trust's position in the Future. A final
determination of variation margin is then made. Additional cash is
required to be paid by or released to the Trust and it realizes a
gain or a loss. Although Futures by their terms call for the actual
delivery or acceptance of cash, in most cases the contractual
obligation is fulfilled without having to make or take delivery.
All transactions in the futures markets are subject to commissions
payable by the Trust and are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts
are traded. Although the Trust intends to buy and sell Futures
only on an exchange where there appears to be an active secondary
market, there is no assurance that a liquid secondary market will
exist for any particular Future at any particular time. In such
event, or in the event of an equipment failure at a clearing house,
it may not be possible to close a futures position.
Municipal Bond Index Futures currently are based on a
long-term municipal bond index developed by the Chicago Board of
Trade ("CBT") and The Bond Buyer (the "Municipal Bond Index").
Financial futures contracts based on the Municipal Bond Index began
trading on June 11, 1985. The Municipal Bond Index is comprised of
40 tax-exempt municipal revenue and general obligation bonds. Each
bond included in the Municipal Bond Index must be rated A or higher
by Moody's or S&P and must have a remaining maturity of 19 years or
more. Twice a month new issues satisfying the eligibility
requirements are added to, and an equal number of old issues are
deleted from, the Municipal Bond Index. The value of the Municipal
Bond Index is computed daily according to a formula based on the
price of each bond in the Municipal Bond Index, as evaluated by six
dealer-to-dealer brokers.
The Municipal Bond Index futures contract is traded only on
the CBT. Like other contract markets, the CBT assures performance
under futures contracts through a clearing corporation, a nonprofit
organization managed by the exchange membership which is also
responsible for handling daily accounting of deposits or
withdrawals of margin.
There are at present U.S. Government financial futures
contracts based on long-term Treasury bonds, Treasury notes, GNMA
Certificates and three-month Treasury bills. U.S. Government
Securities Futures have traded longer than Municipal Bond Index
Futures, and the depth and liquidity available in the trading
markets for them are in general greater.
Call Options on Futures Contracts. The Trust may also purchase
and sell exchange related call and put options on Futures. The
purchase of a call option on a Future is analogous to the purchase
of a call option on an individual security. Depending on the
pricing of the option compared to either the Future upon which it
is based, or upon the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures contract
or underlying debt securities. Like the purchase of a futures
contract, the Trust may purchase a call option on a Future to hedge
against a market advance when the Trust is not fully invested.
The writing of a call option on a Future constitutes a partial
hedge against declining prices of the securities which are
deliverable upon exercise of the Future. If the price at expiration
of the Future is below the exercise price, the Trust will retain
the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Trust's
portfolio holdings.
Put Options on Futures Contracts. The purchase of put options
on a Future is analogous to the purchase of protective put options
on portfolio securities. The Trust may purchase a put option on a
Future to hedge the Trust's portfolio against the risk of rising
interest rates.
The writing of a put option on a Future constitutes a partial
hedge against increasing prices of the securities which are
deliverable upon exercise of the Future. If the Future price at
expiration is higher than the exercise price, the Trust will retain
the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the
Trust intends to purchase.
The writer of an option on a Future is required to deposit
initial and variation margin pursuant to requirements similar to
those applicable to Futures. Premiums received from the writing of
an option will be included in initial margin. The writing of an
option on a Future involves risks similar to those relating to
Futures.
Risk Factors in Futures Transactions and Options
One risk in employing Futures or options on them to attempt to
protect against the price volatility of the Trust's Oregon
Obligations is that the Adviser could be incorrect in its
expectations as to the extent of various interest rate movements or
the time span within which the movements take place. For example,
if the Trust sold a Future in anticipation of an increase in
interest rates, and then interest rates went down instead, the
Trust would lose money on the sale.
Another risk as to Futures or options on them arises because
of the imperfect correlation between movement in the price of the
Future and movements in the prices of the Oregon Obligations which
are the subject of the hedge. The risk of imperfect correlation
increases as the composition of the Trust's portfolio diverges from
the municipal bonds included in the applicable index or from the
security underlying the U.S. Government Securities Futures. The
price of the Future or option may move more than or less than the
price of the Oregon Obligations being hedged. If the price of the
Future or option moves less than the price of the Oregon
Obligations which are the subject of the hedge, the hedge will not
be fully effective but, if the price of the Oregon Obligations
being hedged has moved in an unfavorable direction, the Trust would
be in a better position than if it had not hedged at all. If the
price of the Oregon Obligations being hedged has moved in a
favorable direction, this advantage will be partially offset by the
Future or option. If the price of the Future or option has moved
more than the price of the Oregon Obligations, the Trust will
experience either a loss or gain on the Future or option which will
not be completely offset by movements in the price of the Oregon
Obligations which are the subject of the hedge. To compensate for
the imperfect correlation of movements in the price of the Oregon
Obligations being hedged and movements in the price of the Futures
or options, the Trust may buy or sell Futures or options in a
greater dollar amount than the dollar amount of the Oregon
Obligations being hedged if the historical volatility of the prices
of the Oregon Obligations being hedged is less than the historical
volatility of the debt securities underlying the hedge. It is also
possible that, where the Trust has sold Futures or options to hedge
its portfolio against decline in the market, the market may advance
and the value of the Oregon Obligations held in the Trust's
portfolio may decline. If this occurred the Trust would lose money
on the Future or option and also experience a decline in value of
its portfolio securities.
Where Futures or options are purchased to hedge against a
possible increase in the price of Oregon Obligations before the
Trust is able to invest in them in an orderly fashion, it is
possible that the market may decline instead; if the Trust then
concludes not to invest in them at that time because of concern as
to possible further market decline or for other reasons, the Trust
will realize a loss on the Futures or options that is not offset by
a reduction in the price of the Oregon Obligations which it had
anticipated purchasing.
The particular municipal bonds comprising the index underlying
Municipal Bond Index Futures will vary from the bonds held by the
Trust. The correlation of the hedge with such bonds may be affected
by disparities in the average maturity, ratings, geographical mix
or structure of the Trust's investments as compared to those
comprising the Index, and general economic or political factors. In
addition, the correlation between movements in the value of the
Municipal Bond Index may be subject to change over time, as
additions to and deletions from the Municipal Bond Index alter its
structure. The correlation between U.S. Government Securities
Futures and the municipal bonds held by the Trust may be adversely
affected by similar factors and the risk of imperfect correlation
between movements in the prices of such Futures and the prices of
Municipal Bonds held by the Trust may be greater.
Trading in Municipal Bond Index Futures may be less liquid
than that in other Futures. The trading of Futures and options is
also subject to certain market risks, such as inadequate trading
activity and limits on upward or downward price movement which
could at times make it difficult or impossible to liquidate
existing positions.
Regulatory Aspects of Futures and Options
The Trust will, due to requirements under the Investment
Company Act of 1940 (the "1940 Act"), deposit in a segregated
account with its custodian bank Oregon Obligations maturing in one
year or less or cash, in an amount equal to the fluctuating market
value of long Futures or options it has purchased, less any margin
deposited on long positions.
The Trust must operate within certain restrictions as to its
long and short positions in Futures under a rule (the "CFTC Rule")
adopted by the Commodity Futures Trading Commission ("CFTC") under
the Commodity Exchange Act (the "CEA") to be eligible for the
exclusion provided by the CFTC Rule as a "commodity pool operator"
(as defined under the CEA), and must represent to the CFTC that the
Trust will operate within such restrictions. Under these
restrictions the Trust will not, as to any positions, whether long,
short or a combination thereof, enter into Futures or options for
which the aggregate initial margins and premiums paid for options
exceed 5% of the fair market value of its assets. Under the
restrictions, the Trust also must, as to its short positions, use
Futures and options solely for bona-fide hedging purposes within
the meaning and intent of the applicable provisions under the CEA.
As to the Trust's long positions which are used as part of its
portfolio strategy and are incidental to its activities in the
underlying cash market, the "underlying commodity value" (see
below) of its Futures must not exceed the sum of (i) cash set aside
in an identifiable manner, or short-term U.S. debt obligations or
other U.S. dollar-denominated high quality short-term money market
instruments so set aside, plus any funds deposited as margin; (ii)
cash proceeds from existing investments due in 30 days and (iii)
accrued profits held at the futures commission merchant. (There is
described above the segregated account which the Trust must
maintain with its custodian bank as to its Futures and options
activities due to requirements other than those of the CFTC Rule;
the Trust will, as to long positions, be required to abide by the
more restrictive of this other requirement or the above
requirements of the CFTC Rule.) The "underlying commodity value" of
a Future or option is computed by multiplying the size of the
Future by the daily settlement price of the Future or option.
The "sale" of a Future means the acquisition by the Trust of
an obligation to deliver an amount of cash equal to a specified
dollar amount times the difference between the value of the index
or government security at the close of the last trading day of the
Future and the price at which the Future is originally struck
(which the Trust anticipates will be lower because of a subsequent
rise in interest rates and a corresponding decline in the index
value). This is referred to as having a "short" Futures position.
The "purchase" of a Future means the acquisition by the Trust of an
obligation to take delivery of such an amount of cash. In this
case, the Trust anticipates that the closing value will be higher
than the price at which the Future is originally struck. This is
referred to as having a "long" Futures position. No physical
delivery of the bonds making up the index or the U.S. government
securities, as the case may be, is made as to either a long or a
short Futures position.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage
computed by taking the lesser of purchases or sales of portfolio
securities for a year and dividing it by the monthly average value
of such securities during the year, excluding certain short-term
securities. Since the turnover rate of the Trust will be affected
by a number of factors, the Trust is unable to predict what rate
the Trust will have in any particular period or periods, although
such rate is not expected to exceed 100%. However, the rate could
be substantially higher or lower in any particular period.
MUNICIPAL BONDS
The two principal classifications of municipal bonds are
"general obligation" bonds and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit
and unlimited taxing power for the payment of principal and
interest. Revenue or special tax bonds are payable only from the
revenues derived from a particular facility or class of facilities
or projects or, in a few cases, from the proceeds of a special
excise or other tax, but are not supported by the issuer's power to
levy unlimited general taxes. There are, of course, variations in
the security of municipal bonds, both within a particular
classification and between classifications, depending on numerous
factors. The yields of municipal bonds depend on, among other
things, general financial conditions, general conditions of the
municipal bond market, size of a particular offering, the maturity
of the obligation and rating of the issue.
Since the Trust may invest in industrial development bonds or
private activity bonds, the Trust may not be an appropriate
investment for entities which are "substantial users" of facilities
financed by those bonds or for investors who are "related persons"
of such users. Generally, an individual will not be a "related
person" under the Internal Revenue Code unless such investor or his
or her immediate family (spouse, brothers, sisters and lineal
descendants) own directly or indirectly in the aggregate more than
50 percent of the equity of a corporation or is a partner of a
partnership which is a "substantial user" of a facility financed
from the proceeds of those bonds. A "substantial user" of such
facilities is defined generally as a "non-exempt person who
regularly uses a part of [a] facility" financed from the proceeds
of industrial development or private activity bonds.
As indicated in the Prospectus, there are certain Oregon
Obligations the interest on which is subject to the Federal
alternative minimum tax on individuals. While the Trust may
purchase these obligations, it may, on the other hand, refrain from
purchasing particular Oregon Obligations due to this tax
consequence. Also, as indicated in the Prospectus, the Trust will
not purchase obligations of Oregon issuers the interest on which is
subject to regular Federal income tax. The foregoing may reduce the
number of issuers of obligations which are available to the Trust.
Oregon Property Tax Restrictions
On November 6, 1990, Oregon voters approved a property tax
limitation measure. When the tax limitation measure is fully phased
in, it limits the amount of taxes which may be imposed by local
governments upon property to $15 per $1,000 of real market value.
Property taxes to fund the public school system decrease from a
maximum of $15 per $1,000 in fiscal year 1991-92 to $5 per $1,000
in 1995-96 and thereafter. Property taxes to fund government
operations other than the public school system are limited to $10
per $1,000 in fiscal year 1991-92 and thereafter. Property taxes
are categorized as those revenues raised to fund the public school
system (defined as educational or support services by any
government from pre-kindergarten through post-graduate training)
and those used to fund all government operations other than the
public school system.
The State Legislature is required to replace from the
State's general fund the revenues lost by the public school system
during the fiscal years 1991-92 through 1995-96. The amount of each
year's replacement revenue is calculated by using the loss of
school property tax revenue in each prior year plus six percent.
The State is obliged to replace funds lost from property taxes;
however, it is under no obligation to maintain levels of State
school support from other sources at previous levels. Therefore the
total amount of funding available to school districts for
operations is expected to be reduced. The impact on each school
district will vary.
At present, it is difficult to assess the impact of the tax
limitation measure, in part, because it will not be fully phased in
until fiscal year 1995-1996. In addition, the effect of the measure
is also dependent on whether alternative revenue sources are
obtained and, if so, the type and amount of such revenues. The
adoption of the tax limitation measure may have an adverse effect
on the general financial condition of affected cities, counties,
school districts and other districts, and may, in some cases,
impair their ability to pay obligations other than general
obligation bonds. In addition, the adoption of the tax limitation
measure will require the Legislature to provide funds from its
general fund to replace tax revenues lost by the public school
system through fiscal year 1995-96. This could have an adverse
effect on the State's credit rating, particularly if alternative
revenue sources are not obtained. Moreover, the tax limitation
measure might contract the overall size of the Oregon municipal
bond market and might have some adverse effect the value of the
Trust's portfolio.
PERFORMANCE
As noted in the Prospectus, the Trust may from time to time
quote various performance figures to illustrate its past
performance.
Performance quotations by investment companies are subject to
rules of the Securities and Exchange Commission ("SEC"). These
rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation
furnished by the Trust be accompanied by certain standardized
performance information computed as required by the SEC. Current
yield and average annual compounded total return quotations used by
the Trust are based on these standardized methods. Each of these
and other methods that may be used by the Trust are described in
the following material.
Total Return
Average annual total return is determined by finding the
average annual compounded rates of return over 1- and 5-year
periods and a period since the inception of the operations of the
Trust (on June 16, 1986) that would equate an initial hypothetical
$1,000 investment to the value such an investment would have if it
were completely redeemed at the end of each such period. The
calculation assumes the maximum sales charge is deducted from the
hypothetical initial $1,000 purchase, that on each reinvestment
date during each such period any capital gains are reinvested at
net asset value, and all income dividends are reinvested at net
asset value, without sales charge (because the Trust does not
impose any sales charge on reinvestment of dividends). The
computation further assumes that the entire hypothetical account
was completely redeemed at the end of each such period.
Investors should note that the maximum sales charge (4%) of
the offering price, reflected in the following quotations is a one
time charge, paid at the time of initial investment. The greatest
impact of this charge is during the early stages of an investment
in the Trust. Actual performance will be affected less by this one
time charge the longer an investment remains in the Trust.
The average annual compounded rates of return for the Trust
for the 1- and 5-year periods ended September 30, 1995, were
5.09% and 6.96%, respectively. The average annual compounded rate
of return for the Trust from inception to September 30, 1995, was
7.01%.
These figures were calculated according to the following SEC
formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1- and 5-year periods or the
period since inception, at the end of each such period.
As discussed in the Prospectus, the Trust may quote total
rates of return in addition to its average annual total return.
Such quotations are computed in the same manner as the Trust's
average annual compounded rate, except that such quotations will be
based on the Trust's actual return for a specified period as
opposed to its average return over the periods described above. The
total returns for the Trust for the 1- and 5-year periods ended
September 30, 1995 were 5.09% and 39.98%, respectively. The
total return for the Trust from inception to September 30, 1995,
was 87.67%. In general, actual total rate of return will be lower
than average annual rate of return because the average annual rate
of return reflects the effect of compounding. See discussion of the
impact of the sales charge on quotations of rates of return,
above.
Yield
Current yield reflects the income per share earned by the
Trust's portfolio investments. Current yield is determined by
dividing the net investment income per share earned during a 30-day
base period by the maximum offering price per share on the last day
of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base
period net of fee waivers and reimbursements of expenses, if any.
The yield for the Trust for the 30-day period ended on September
30, 1995, (the date of the Trust's most recent audited financial
statements, which are included in the Trust's Annual Report for the
year ended September 30, 1995) was 4.24%.
These figures were obtained using the Securities and Exchange
Commission formula:
6
Yield = 2 [(a-b + 1) -1]
----
cd
where
a = interest earned during the period
b = expenses accrued for the period (net of waivers and
reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the period
Taxable Equivalent Yield
The Trust may also quote a taxable equivalent yield which
shows the taxable yield that would be required to produce an
after-tax yield equivalent to that of a fund which invests in
tax-exempt obligations. Such yield is computed by dividing that
portion of the yield of the Trust (computed as indicated above)
which is tax-exempt by one minus the highest applicable combined
federal and Oregon income tax rate (and adding the result to that
portion of the yield of the Trust that is not tax-exempt, if any).
The taxable equivalent yield for the Trust for the 30-day period
ended on September 30, 1995 (the date of the Trust's most recent
audited financial statements, which are included in the Trust's
annual report for the year ended September 30, 1995) was
7.83%.
The Oregon and the combined Oregon and Federal income tax
rates upon which the Trust's tax equivalent yield quotations are
based are 9.0% and 46.12%, respectively. From time to time, as any
changes to such rates become effective, tax equivalent yield
quotations advertised by the Trust will be updated to reflect such
changes. Any tax rate increases will tend to make a tax- free
investment, such as the Trust, relatively more attractive than
taxable investments. Therefore, the details of specific tax
increases may be used in Trust sales material.
Current Distribution Rate
Current yield and tax equivalent yield, which are calculated
according to a formula prescribed by the SEC, are not indicative of
the amounts which were or will be paid to the Trust's shareholders.
Amounts paid to shareholders are reflected in the quoted current
distribution rate or taxable equivalent distribution rate. The
current distribution rate is computed by (i) dividing the total
amount of dividends per share paid by the Trust during a recent
30-day period by (ii) the current maximum offering price and by
(iii) annualizing the result. A taxable equivalent distribution
rate shows the taxable distribution rate that would be required to
produce an after-tax distribution rate equivalent to the Trust's
current distribution rate (calculated as indicated above). The
current distribution rate can differ from the current yield
computation because it could include distributions to shareholders
from additional sources (i.e., sources other than dividends and
interest), such as short-term capital gains. If distribution rates
are published, they will be accompanied by calculations of current
yield in accordance with the formula of the Securities and Exchange
Commission.
Other Performance Quotations
With respect to those categories of investors who are
permitted to purchase shares of the Trust at net asset value, the
Trust may quote a "Current Distribution for Net Asset Value
Investments." This rate is computed by (i) dividing the total
amount of dividends per share paid by the Trust during a recent
30-day period by (ii) the current net asset value of the Trust and
by (iii) annualizing the result. Figures for yield, total return
and other measures of performance for Net Asset Value Investments
may also be quoted. These will be derived as described above with
the substitution of net asset value for public offering price.
Regardless of the method used, past performance is not
necessarily indicative of future results, but is an indication of
the return to shareholders only for the limited historical period
used.
INVESTMENT RESTRICTIONS
The Trust has a number of policies concerning what it can and
cannot do. Those that are called fundamental policies cannot be
changed unless the holders of a "majority" (as defined in the 1940
Act) of the Trust's outstanding shares vote to change them. Under
that Act, the vote of the holders of a "majority" of the Trust's
outstanding shares means the vote of the holders of the lesser of
(a) 67% or more of the Trust's shares present at a meeting or
represented by proxy if the holders of more than 50% of its shares
are so present or represented; or (b) more than 50% of the Trust's
outstanding shares. Those fundamental policies not set forth in the
Prospectus are set forth below:
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than Oregon
Obligations (discussed under "Investment of the Trust's Assets" in
the Prospectus), Municipal Bond Index Futures, U.S. Government
Securities Futures and options on Futures; therefore the Trust
cannot buy any voting securities, any commodities or commodity
contracts other than Municipal Bond Index Futures and U.S.
Government Securities Futures, any mineral related programs or
leases, any shares of other investment companies or any warrants,
puts, calls or combinations thereof other than on Futures.
The Trust cannot purchase or hold the securities of any issuer
if, to its knowledge, Trustees, Directors or officers of the Trust
or its Adviser individually owning beneficially more than 0.5 of 1%
of the securities of that issuer together own in the aggregate more
than 5% of such securities.
The Trust cannot buy real estate or any non-liquid interests
in real estate investment trusts; however, it can buy any
securities which it can otherwise buy even though the issuer
invests in real estate or has interests in real estate.
2. The Trust does not buy for control.
The Trust cannot invest for the purpose of exercising control
or management of other companies.
3. The Trust does not sell securities it does not own or borrow
from brokers to buy securities.
Thus, it cannot sell short or buy on margin; however, the
Trust can make margin deposits in connection with the purchase or
sale of Municipal Bond Index Futures, U.S. Government Securities
Futures and options on them, and can pay premiums on these options.
4. The Trust is not an underwriter.
The Trust cannot engage in the underwriting of securities,
that is, the selling of securities for others. Also, it cannot
invest in restricted securities. Restricted securities are
securities which cannot freely be sold for legal reasons.
DISTRIBUTION PLAN
As used in the Trust's Distribution Plan (the "Plan")
"Qualified Recipients" means 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 ("Related Agreements") contemplated by the
Rule and which have rendered assistance (whether direct,
administrative, or both) in the distribution and/or retention of
the Trust's shares or servicing of shareholder accounts.
"Qualified Holdings" means, as to any Qualified Recipient, all
Trust shares beneficially owned by such Qualified Recipient, or
beneficially owned by its brokerage customers, other customers,
other contacts, investment advisory clients, or other clients, if
the Qualified Recipient was, in the sole judgment of the
Distributor, instrumental in the purchase and/or retention of such
Trust shares and/or in providing administrative assistance in
relation thereto.
At the present time most of the outstanding shares of the
Trust would be considered Qualified Holdings of various
broker-dealers unaffiliated with the Distributor, including a
broker-dealer affiliated with the Adviser. The Distributor will
consider shares which are not Qualified Holdings of such unrelated
broker-dealers to be Qualified Holdings of the Distributor and will
authorize Permitted Payments to the Distributor with respect to
such shares whenever Permitted Payments are being made under the
Plan, except that shares representing investment in the Trust by
the Adviser of assets over which it has control will not be
considered Qualified Holdings of any person.
Under the Plan, subject to the direction and control of the
Trustees, through June 30, 1995, the Trust was authorized to make
payments ("Permitted Payments") to Qualified Recipients, which
Permitted Payments shall be made directly, or through the
Distributor as disbursing agent, which may not exceed, for any
fiscal year of the Trust (as adjusted for any part or parts of a
fiscal year during which payments under the Plan are not accruable
or for any fiscal year which is not a full fiscal year) of 0.05
of 1% of average annual net assets of the Trust with respect to
net assets of the Trust up to $360 million and at an annual rate of
0.15 of 1% with respect to such assets above $360 million;
effective July 1, 1995 such payments will be made at the rate of
0.15 of 1% of all such net assets. Amounts within the above limits
accrued to a Qualified Recipient but not paid during a fiscal year
may be paid thereafter; if less than the full amount is accrued to
all Qualified Recipients, the difference will not be carried over
to subsequent years.
Under the Plan the Distributor will have sole authority (i) as
to the selection of any Qualified Recipient or Recipients; (ii) not
to select any Qualified Recipient; and (iii) the amount of
Permitted Payments, if any, to each Qualified Recipient provided
that the total Permitted Payments to all Qualified Recipients do
not exceed the amount set forth above.
The Distributor is authorized under the Plan, but not
directed, to take into account, in addition to any other factors
deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient; (b) the extent to
which the Qualified Recipient has, at its expense, taken steps in
the shareholder servicing area, including without limitation, any
or all of the following activities: answering customer inquiries
regarding account status and history, and the manner in which
purchases and redemptions of shares of the Trust may be effected;
assisting shareholders in designating and changing dividend
options, account designations and addresses; providing necessary
personnel and facilities to establish and maintain shareholder
accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with customer
orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts;
furnishing (either alone or together with other reports sent to a
shareholder by such person) monthly and year end statements and
confirmations of purchases and redemptions; transmitting, on behalf
of the Trust, proxy statements, annual reports, updating
prospectuses and other communications from the Trust to its
shareholders; receiving, tabulating and transmitting to the Trust
proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and providing such other related
services as the Administrator or a shareholder may request from
time to time; and (c) the possibility that the Qualified Holdings
of the Qualified Recipient would be redeemed in the absence of its
selection or continuance as a Qualified Recipient. Notwithstanding
the foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified Recipient.
Another part of the plan states that if and to the extent that
any of the payments listed below are considered to be "primarily
intended to result in the sale of" shares issued by the Trust
within the meaning of Rule 12b-1, such payments are authorized
under the Plan: (i) the costs of the preparation of all reports and
notices to shareholders and the costs of printing and mailing such
reports and notices to existing shareholders, irrespective of
whether such reports or notices contain or are accompanied by
material intended to result in the sale of shares of the Trust or
other funds or other investments; (ii) the costs of the preparation
and setting in type of all prospectuses and statements of
additional information, and the costs of printing and mailing of
all prospectuses and statements of additional information to
existing shareholders; (iii) the costs of preparation, setting in
type, printing and mailing of any proxy statements and proxies,
irrespective of whether any such proxy statement includes any item
relating to, or directed toward, the sale of the Trust's shares;
(iv) all legal and accounting fees relating to the preparation of
any such reports, prospectuses, statements of additional
information, proxies and proxy statements; (v) all fees and
expenses relating to the registration or qualification of the Trust
and/or its shares under the securities or "Blue-Sky" laws of any
jurisdiction; (vi) all fees under the Securities Act of 1933 and
the 1940 Act, including fees in connection with any application for
exemption relating to or directed toward the sale of the Trust's
shares; (vii) all fees and assessments of the Investment Company
Institute or any successor organization, irrespective of whether
some of its activities are designed to provide sales assistance;
(viii) all costs of the preparation and mailing of confirmations of
shares sold or redeemed or share certificates, and reports of share
balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
The Plan states that whenever, the Administrator (i) makes any
payment directly or through the Distributor for additional
compensation to dealers in connection with sales of shares of the
Trust which additional compensation may include payment or partial
payment for advertising of the Trust's shares, payment of travel
expenses, including lodging, incurred in connection with trips
taken by qualifying registered representatives and members of their
families to locations within or outside of the United States, other
prizes or financial assistance to securities dealers in offering
their own seminars or conferences, or other items described in the
Trust's prospectus, in amounts that will not exceed the amount of
the sales charges in respect of sales of shares of the Trust
effected through such participating dealers whether retained by the
Distributor or reallowed to participating dealers, or (ii) bears
the costs, not borne by the Trust's Distributor, of printing and
distributing all copies of the Trust's prospectuses, statements of
additional information and reports to shareholders which are not
sent to the Trust's shareholders, or the costs of supplemental
sales literature and advertising, such payments are authorized.
The Plan states that it is recognized that, in view of the
bearing by the Administrator of certain distribution expenses, the
profits, if any, of the Administrator are dependent primarily on
the administration fees paid by the Trust to the Administrator and
that its profits, if any, would be less, or losses, if any, would
be increased due to the bearing by it of such expenses. If and to
the extent that any such administration fees paid by the Trust
might, in view of the foregoing, be considered as indirectly
financing any activity which is primarily intended to result in the
sale of shares issued by the Trust, the payment of such fees is
authorized by the Plan.
The purpose of these provisions are to allow the Administrator
to assist in marketing of the Trust's shares to the extent it
determines that it is desirable to do so; the Administrator is not
obligated to make any of the foregoing payments and may choose not
to do so.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of the Trust who are not "interested
persons" of the Trust shall be committed to the discretion of such
disinterested Trustees but that nothing in the Plan shall prevent
the involvement of others in such selection and nomination if the
final decision on any such selection and nomination is approved by
a majority of such disinterested Trustees.
The Plan states that while it is in effect, the Trust's
Administrator shall report at least quarterly to the Trust's Board
of Trustees in writing all costs of each item specified in the
second preceding paragraph (making estimates of such costs where
necessary or desirable) during the preceding calendar or fiscal
quarter.
The Plan defines as the Trust's Independent Trustees those
Trustees who are not "interested persons" of the Business Trust as
defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plan or in any
agreements related to the Plan. The Plan, unless terminated as
hereinafter provided, continues in effect from year to year only so
long as such continuance is specifically approved at least annually
by the Trust's Board of Trustees and its Independent Trustees with
votes cast in person at a meeting called for the purpose of voting
on such continuance. In voting on the implementation or continuance
of the Plan, those Trustees who vote to approve such implementation
or continuance must conclude that there is a reasonable likelihood
that the Plan will benefit the Trust and its shareholders. The Plan
may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority"
(as defined in the 1940 Act) of the outstanding voting securities
of the Trust. The Plan may not be amended to increase materially
the amount of payments to be made without shareholder approval and
all amendments must be approved in the manner set forth above as to
continuance of the Plan.
LIMITATION OF REDEMPTIONS IN KIND
The Trust has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which the Trust is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1 percent of the net
asset value of the Trust during any 90-day period for any one
shareholder. Should redemptions by any shareholder exceed such
limitation, the Trust will have the option of redeeming the excess
in cash or in kind. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets
into cash. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing
portfolio securities described under "Net Asset Value Per Share" in
the Prospectus, and such valuation will be made as of the same time
the redemption price is determined.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, their affiliations, if
any, with the Administrator or the Distributor, and their principal
occupations during at least the past five years are set forth
below. None of the Trustees or officers of the Trust is affiliated
with the Adviser, except as indicated.
As of January 2, ***, 1996, all of the Trustees and
officers as a group owned less than 1% of its outstanding
shares.
Mr. Herrmann is an "interested person" of the Trust as that
term is defined in the Investment Company Act of 1940 (the "1940
Act") as an officer of the Trust and a Director, officer and
shareholder of the Distributor. Ms. Herrmann is an interested
person as a member of his immediate family. Mr. Lung is an
interested person as a security holder of the Adviser's parent.
Interested persons are so designated by an asterisk.
Lacy B. Herrmann*, President and Chairman of the Board of Trustees,
380 Madison Avenue, New York, New York 10017
Founder of the Trust and President and a Director of the
Administrator since 1984; Founder, President and Chairman of the
Board of Trustees of Hawaiian Tax-Free Trust since 1984, of
Tax-Free Trust of Arizona since 1986, of Churchill Tax-Free Fund of
Kentucky and Tax-Free Fund of Colorado since 1987 and of Tax-Free
Fund For Utah and Narragansett Insured Tax-Free Income Fund since
1992, all of which are tax-free municipal bond funds, and an equity
fund, Aquila Rocky Mountain Equity Fund since 1993, to all of which
the Administrator is administrator and which are referred to as the
"Bond and Equity Funds"; Chairman and President, Chief Executive
Officer (Chairman of the Board of Trustees and/or President) and
Trustee of Capital Cash Management Trust ("CCMT"), since 1981 and
Founder and executive officer (since 1974) of CCMT and its
predecessor; Founder, President and Chairman of the Board of
Trustees of Prime Cash Fund since 1982, of Short Term Asset
Reserves and Pacific Capital Cash Assets Trust since 1984, of
Churchill Cash Reserves Trust since 1985, of Pacific Capital
Tax-Free Cash Assets Trust and of Pacific Capital U.S. Treasuries
Cash Assets Trust since 1988 and of Cascades Cash Fund, 1989-1994,
all of which are money market funds to which the Administrator is
administrator and which are referred to as the "Money Funds"; Vice
President, a Director and Secretary since 1981 (formerly Treasurer)
of the Distributor, which is distributor (i.e., principal
underwriter) for the Money Funds and the Bond and Equity Funds;
President and a Director of STCM Management Company, Inc., Adviser
to CCMT; Chairman, President and a Director since 1984 of InCap
Management Corporation, formerly sub-adviser and administrator of
Prime Cash Fund and Short Term Asset Reserves; Director or Trustee
of the various Quest for Value Funds, a group of stock, bond and
money market mutual funds, since 1983; Director of Saratoga
Advantage Trust, a group of mutual funds, since 1994; Trustee of
Brown University since 1990; actively involved for many years in
leadership roles with university, school and charitable
organizations.
Vernon R. Alden, Trustee, 420 Boylston Street, Suite 403, Boston,
Massachusetts 02116
Director of Augat Inc., a manufacturing corporation, since 1979,
Colgate Palmolive Company since 1974, Digital Equipment
Corporation, a computer manufacturing corporation, since 1959,
Intermet Corporation, an independent foundry, since 1986, and
Sonesta International Hotels Corporation since 1978; Chairman of
the Board and Executive Committee of The Boston Company, Inc., a
financial services company, 1969-1978; Trustee of Hawaiian Tax-Free
Trust, Pacific Capital Cash Assets Trust, Pacific Capital Tax-Free
Cash Assets Trust and Pacific Capital U.S. Treasuries Cash Assets
Trust since 1989, of Cascades Cash Fund, 1989-1994 and of
Narragansett Insured Tax-Free Income Fund since 1992; Associate
Dean and member of the faculty of Harvard University Graduate
School of Business Administration, 1951-1962; member of the faculty
and Program Director of Harvard Business School - University of
Hawaii Advanced Management Program, summer of 1959 and 1960;
President of Ohio University, 1962-1969; Chairman of The Japan
Society of Boston, Inc., and member of several Japan-related
advisory councils; Chairman of the Massachusetts Business
Development Council and the Massachusetts Foreign Business Council,
1978-1983; Trustee of the Boston Symphony Orchestra since 1975;
Chairman of the Massachusetts Council on the Arts and Humanities,
1972-1984; Member of the Board of Fellows of Brown University,
1969-1986; Trustee and member of the Executive Committee, Plymouth
Plantation; trustee of various other cultural and educational
organizations; Honorary Consul General of the Royal Kingdom of
Thailand.
Warren C. Coloney, Trustee, 7304 Millwood Road, Bethesda, Maryland
20817
Consultant to top management and governing boards on issues of
corporate governance, strategy, organization and human resource
management; Director of the Washington, D.C. office of Management
Practice, Inc., since 1992; President of Coloney & Company, Inc.,
since 1984; Managing Director-Europe of Towers, Perrin, Forster &
Crosby, Inc., 1974-1984; President of Coloney, Cannon, Main &
Pursell, Inc., 1968-1974; Registered Professional Engineer;
Founding Member of the Institute of Management Consultants; Trustee
of Cascades Cash Fund, 1989-1994; active in a number of
professional, social, church, and community service organizations
in England and the United States.
James A. Gardner, Trustee, Vandervert Ranch, Vandervert Road, Bend,
Oregon 97707
President of Gardner Associates, an investment and real estate
firm, since 1970; President Emeritus of Lewis and Clark College and
Law School since 1989 and President, 1981-1989; affiliated with the
Ford Foundation, 1969-1981; Lecturer and Assistant Director of
Admissions of Harvard College, 1968-1969; Member of the Oregon
Young Presidents Organization since 1983; Director of Stanley
Investment & Management Inc., an international business brokerage,
since 1987; Member of the Council on Foreign Relations since 1988;
Trustee of Cascades Cash Fund, 1989-1994; Director of the Oregon
High Desert Museum since 1989; active in civic, business,
educational and church organizations in Oregon.
Diana P. Herrmann*, Trustee, 380 Madison Avenue, New York, New York
10017
Senior Vice President and Secretary and formerly Vice President
of the Administrator since 1986 and Director since 1984; Trustee of
Tax-Free Trust of Arizona since 1994 and of Churchill Tax-Free Fund
of Kentucky since 1995; Vice President of InCap Management
Corporation since 1986 and Director since 1983; Vice President and
formerly Assistant Vice President of the Money Funds since 1986;
Assistant Vice President of Oxford Cash Management Fund, 1986-1988;
Assistant Vice President and formerly Loan Officer of European
American Bank, 1981-1986; daughter of the Trust's President;
Trustee of the Leopold Schepp Foundation (academic scholarships)
since 1995; actively involved in mutual fund and trade associations
and in college and other volunteer organizations.
Ann R. Leven, Trustee, 785 Park Avenue, Apartment 20A, New York, NY
10021
Treasurer of the National Gallery of Art, Washington, D.C.,
since 1994, Deputy Treasurer, 1990-1994; Treasurer of the
Smithsonian Institution, Washington, D.C., 1984-1990; President of
ARL Associates, strategic consultants, since 1983; Vice
President/Senior Corporate Planning Officer of The Chase Manhattan
Bank, N.A., 1979-1983; Treasurer of The Metropolitan Museum of Art,
1972-1979; Trustee of Short Term Asset Reserves, 1984-1993, of
Churchill Tax-Free Fund of Kentucky since 1987, of Cascades Cash
Fund, 1989-1994, and of Churchill Cash Reserves Trust since 1995;
Trustee of Oxford Cash Management Fund, 1987-1988; Director of the
Delaware Group of mutual funds since 1989; Adjunct Professor at
Columbia University Graduate School of Business Administration
since 1975; Trustee of the American Red Cross Endowment Fund,
1985-1990; Member of the Visiting Committee of Harvard Business
School, 1979-1985; Member of the Board of Overseers of The Amos
Tuck School, Dartmouth College, 1978-1984; Staff Director of the
Presidential Task Force on the Arts and Humanities, 1981; Director
of Alliance Capital Reserves Fund, a money market fund,
1978-1979.
Raymond H. Lung*, Trustee, 2828 Southwest Hamilton Street,
Portland, Oregon 97201
Retired; Trustee of Qualivest Group of Funds since 1994;
Executive Vice President and Executive Trust Officer of U.S.
National Bank of Oregon, 1989-1991; Senior Vice President and
Executive Trust Officer, 1980-1989; various other management
positions, 1954-1980; Member of Executive Committee, Trust
Division, American Bankers Association, 1986-1988; Director of
Pacific Securities Depository Trust Company and Pacific Clearing
Corporation (subsidiaries of the Pacific Stock Exchange),
1980-1987; Director of Collins Pine Company and Ostrander Companies
(lumber and oil), 1980-1990; Trustee of Cascades Cash Fund,
1992-1994.
Richard C. Ross, Trustee, 510 SW Country Club Road, Lake Oswego,
Oregon 97034
President of Richard Ross Communications, a consulting firm,
since 1986; Senior communications consultant to Pihas, Schmidt,
Westerdahl, advertising and public relations, 1986-1988; Executive
News Director of KATU Television, 1975-1986; News Director of
KGW-TV, 1956-1975; Trustee of Cascades Cash Fund, 1989-1994;
Director of the Portland Rose Festival since 1972; Director of the
Greater Portland Convention & Visitors Association, 1982-1985;
Director of the Portland Chamber of Commerce, 1971-1980; President
of the Oregon chapter of the National Multiple Sclerosis Society,
1984-1986; Director of the Meridian Park Hospital Foundation,
1984-1987; Chairman of the Broadcasters Group of the
Bar-Press-Broadcasters professional relations committee, 1964-1984;
Former President of the Rotary Club of East Portland and currently
a Director of Goodwill Industries, Metropolitan Youth Symphony and
the Lake Oswego Community Theatre.
W. Dennis Cheroutes, Senior Vice President, 410 17th Street,
Suite 1715, Denver, Colorado 80202
Investment Executive, Dain Bosworth, Inc., 1986-1995; and
branch office mutual fund co-ordinator, 1990-1995; owner of special
order clothing business, 1976-1986.
Sally Wilson Church, Vice President, 4800 MaCadam Avenue, Suite
300, Portland, Oregon 97201
Vice President of Cascades Cash Fund, 1989-1994; Corporate Vice
President of Shearson Lehman Hutton and Senior Marketing
Coordinator of its Northwest Region, 1985-1989 and an employee in
various capacities at that firm, 1978-1985.
Nancy L. Kayani, Vice President, 4800 MaCadam Avenue, Suite 300,
Portland, Oregon 97201
Assistant Vice President of Cascades Cash Fund, 1992-1994;
Customer Service Representative of U.S. National Bank of Oregon,
1990-1991; Securities Trader of Bidwell & Co., 1988-1989;
Securities Trader and Mutual Fund Regional Representative of
Fidelity Investments Southwest, 1985-1987; Stockbroker of Dean
Witter Reynolds, 1983-1984; Mutual Regional Representative of
Columbia Management Company, 1980-1983;
William C. Wallace, Vice President, 380 Madison Avenue, New York,
New York 10017
Vice President of Capital Cash Management Trust and Pacific
Capital Cash Assets Trust since 1984; Senior Vice President of
Hawaiian Tax-Free Trust since 1985 and Vice President, 1984-1985;
Senior Vice President of Tax-Free Trust of Arizona since 1989 and
Vice President, 1986-1988; Vice President of Churchill Tax-Free
Fund of Kentucky and Tax-Free Fund of Colorado since 1987, of
Pacific Capital Tax-Free Cash Assets Trust and Pacific Capital U.S.
Treasuries Cash Assets Trust since 1988 and of Narragansett Insured
Tax-Free Income Fund since 1992; Secretary and Director of STCM
Management Company, Inc. since 1974; President of the Distributor
since 1995 and formerly Vice President of the Distributor,
1986-1992; Member of the Panel of Arbitrators, American Arbitration
Association, since 1978; Assistant Vice President, American Stock
Exchange, Market Development Division, and Director of Marketing,
American Gold Coin Exchange, a subsidiary of the American Stock
Exchange, 1976-1984.
Rose F. Marotta, Chief Financial Officer, 380 Madison Avenue, New
York, New York 10017
Chief Financial Officer of the Money Funds and the Bond and
Equity Funds since 1991; Treasurer of the Money Funds and the Bond
and Equity Funds, 1981-1991; formerly Treasurer of the predecessor
of CCMT; Treasurer and Director of STCM Management Company, Inc.,
since 1974; Treasurer of Trinity Liquid Assets Trust, 1982-1986 and
of Oxford Cash Management Fund, 1982-1988; Treasurer of InCap
Management Corporation since 1982, of the Administrator since 1984
and of the Distributor since 1985.
Richard F. West, Treasurer, 380 Madison Avenue, New York, New York
10017
Treasurer of the Money Funds and the Bond and Equity Funds and of
Aquila Distributors, Inc. since 1992; Associate Director of Furman
Selz Incorporated, 1991-1992; Vice President of Scudder, Stevens &
Clark, Inc. and Treasurer of Scudder Institutional Funds,
1989-1991; Vice President of Lazard Freres Institutional Funds
Group, Treasurer of Lazard Freres Group of Investment Companies and
HT Insight Funds, Inc., 1986-1988; Vice President of Lehman
Management Co., Inc. and Assistant Treasurer of Lehman Money Market
Funds, 1981-1985; Controller of Seligman Group of Investment
Companies, 1960-1980.
Edward M. W. Hines, Secretary, 551 Fifth Avenue, New York, New York
10176
Partner of Hollyer Brady Smith Troxell Barrett Rockett Hines &
Mone LLP, attorneys, since 1989 and counsel, 1987-1989; Secretary
of the Money Funds and the Bond and Equity Funds since 1982;
Secretary of Trinity Liquid Assets Trust, 1982-1985 and Trustee of
that Trust, 1985-1986; Secretary of Oxford Cash Management Fund,
1982-1988.
John M. Herndon, Assistant Secretary, 380 Madison Avenue, New
York, New York 10017
Assistant Secretary of the Money Funds and the Bond and Equity
Funds since 1995; Vice President of the Money Funds since 1990;
Vice President of the Administrator since 1990; Investment
Services Consultant and Bank Services Executive of Wright
Investors' Service, a registered investment adviser, 1983-1989;
Member of the American Finance Association, the Western Finance
Association and the Society of Quantitative Analysts.
Patricia A. Craven, Assistant Secretary & Compliance Officer,
380 Madison Avenue, New York, New York 10017
Assistant Secretary of the Money Funds and the Bond and Equity
Funds since 1995; Counsel to the Administrator and the Distributor
since 1995; formerly a Legal Associate for Oppenheimer Management
Corporation, 1993-1995.
Compensation of Trustees
The Trust does not pay fees to Trustees affiliated with the
Administrator or Adviser or to any of the Trust's officers. During
the fiscal year ended September 30, 1995, the Trust paid $69,415 in
fees and reimbursement of expenses to its other Trustees. The Trust
is one of the 14 funds in the Aquilasm Group of Funds, which
consist of tax-free municipal bond funds, money market funds and an
equity fund. The following table lists the compensation of all
Trustees who received compensation from the Trust and the
compensation each received during the Trust's fiscal year from all
funds in the Aquilasm Group of Funds and the number of such funds.
None of such Trustees has any pension or retirement benefits from
the Trust or any of the other funds in the Aquila group.
<TABLE>
<CAPTION>
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Trust Group serves
<S> <C> <C> <C>
Vernon R.
Alden $8,427 $30,638 6
Warren C.
Coloney $8,654 $8,654 1
James A.
Gardner $6,675 $6,675 1
Ann R.
Leven $6,350 $14,300 3
Raymond H.
Lung $7,886 $7,886 1
Richard C.
Ross $7,885 $7,885 1
</TABLE>
ADDITIONAL INFORMATION AS TO MANAGEMENT ARRANGEMENTS
Additional Information as to the Advisory Agreement
The Investment Advisory Agreement (the "Advisory Agreement")
between the Trust and Qualivest Capital Management, Inc. (the
"Adviser") contains the provisions described below, in addition to
those described in the Prospectus.
The Advisory Agreement may be terminated by the Adviser at any
time without penalty upon giving the Trust sixty days' written
notice, and may be terminated by the Trust at any time without
penalty upon giving the Adviser sixty days' written notice,
provided that such termination by the Trust shall be directed or
approved by the vote of a majority of all its Trustees in office at
the time or by the vote of the holders of a majority (as defined in
the 1940 Act) of its voting securities at the time outstanding and
entitled to vote; it automatically terminates in the event of its
assignment (as so defined).
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations thereunder, the Adviser is not liable for any loss
sustained by the adoption of any investment policy or the purchase,
sale or retention of any security and permits the Adviser to act as
investment adviser for any other person, firm or corporation. The
Trust agrees to indemnify the Adviser to the full extent permitted
under the Trust's Declaration of Trust.
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The Advisory Agreement states that it is agreed that the
Adviser shall have no responsibility or liability for the accuracy
or completeness of the Trust's Registration Statement under the
Securities Act of 1933 and the 1940 Act, except for the information
supplied by the Adviser for inclusion therein.
The Advisory Agreement contains the following provisions as to
the Trust's portfolio transactions. In connection with its duties
to arrange for the purchase and sale of the Trust's portfolio
securities, the Adviser shall select such broker-dealers
("dealers") as shall, in the Adviser's judgment, implement the
policy of the Trust to achieve "best execution," i.e., prompt,
efficient and reliable execution of orders at the most favorable
net price. The Adviser shall cause the Trust to deal directly with
the selling or purchasing principal or market maker without
incurring brokerage commissions unless the Adviser determines that
better price or execution may be obtained by paying such
commissions; the Trust expects that most transactions will be
principal transactions at net prices and that the Trust will incur
little or no brokerage costs. The Trust understands that purchases
from underwriters include a commission or concession paid by the
issuer to the underwriter and that principal transactions placed
through dealers include a spread between the bid and asked price.
In allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion. If,
on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, Administrator or
principal underwriter as the Trust. Such research may be in written
form or through direct contact with individuals and may include
quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic or
institutional activities. The Trust recognizes that no dollar value
can be placed on such research services or on execution services,
that such research services may or may not be useful to the Trust
and/or other accounts of the Adviser and that research received by
such other accounts may or may not be useful to the Trust.
During the fiscal year ended September 30, 1995, all of
the Trust's transactions were principal transactions and no
brokerage commissions were paid.
For the three fiscal years ended September 30, 1995, 1994
and 1993 , respectively, fees of $729,908, $819,214 and $714,343
were paid or accrued to the Adviser.
Additional Information as to the Administration Agreement
In addition to the provisions of the Administration Agreement
(the "Administration Agreement") between the Administrator and the
Trust described in the Prospectus, the Administration Agreement
contains the provisions described below.
Subject to the control of the Trust's Board of Trustees, the
Administrator provides all administrative services to the Trust
other than those relating to its investment portfolio and the
maintenance of its accounting books and records (see below for
discussion); as part of such duties, the Administrator (i) provides
office space, personnel, facilities, and equipment for the
performance of the following functions and for the maintenance of
the Trust's headquarters; (ii) oversees all relationships between
the Trust and its transfer agent, custodian, legal counsel,
auditors and principal underwriter, including the negotiation,
subject to the approval of the Trust's Board of Trustees, of
agreements in relation thereto, the supervision and coordination of
the performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for
effective operation and for the sale, servicing, or redemption of
the Trust's shares; (iii) provides to the Adviser and to the Trust
statistical and other factual information and advice regarding
economic factors and trends, but does not generally furnish advice
or make recommendations regarding the purchase or sale of
securities; (iv) maintains the Trust's books and records (other
than accounting books and records), and prepares (or assists
counsel and auditors in the preparation of) all required proxy
statements, reports to shareholders and Trustees, reports to and
other filings with the Securities and Exchange Commission and any
other governmental agencies, and tax returns, and oversees the
Trust's insurance relationships; (v) prepares, on the Trust's
behalf and at its expense, such applications and reports as may be
necessary to register or maintain the Trust's registration or that
of its shares under the securities or "Blue-Sky" laws of all such
jurisdictions as may be required from time to time; (vi) responds
to any inquiries or other communications from shareholders and
broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Trust's shareholder servicing
and transfer agent or distributor, oversees such shareholder
servicing and transfer agent's or distributor's response thereto.
Since the Trust pays its own legal and audit expenses, to the
extent that the Trust's counsel and accountants prepare or assist
in the preparation of prospectuses, proxy statements and reports to
shareholders, the costs of such preparation or assistance are paid
by the Trust.
The expense limitation referred to in the Prospectus, if in
effect, is implemented monthly so that at no time is there any
unpaid liability under the limitation, subject to readjustment
during the year.
The Administration Agreement may be terminated at any time
without penalty by the Administrator upon sixty days' written
notice to the Trust and the Adviser; it may be terminated by the
Trust at any time without penalty upon giving the Administrator
sixty days' written notice, provided that such termination by the
Trust shall be directed or approved by a vote of a majority of the
Trustees in office at the time, including a majority of the
Trustees who are not interested persons of the Trust. In either
case the notice provision may be waived.
The Administration Agreement provides that the Administrator
shall not be liable for any error in judgement or for any loss
suffered by the Trust in connection with the matters to which the
Administration Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence of the
Administrator in the performance of its duties, or from reckless
disregard by it of its obligations and duties under the
Administration Agreement. The Trust agrees to indemnify the
Administrator to the full extent permitted by the Declaration of
Trust.
For the three fiscal years ended September 30, 1995, 1994
and 1993 , respectively, fees of $729,908, $819,214 and $714,343
were paid or accrued to the Administrator.
Glass-Steagall Act
Federal banking laws and regulations presently prohibit a
national bank or any affiliate thereof from sponsoring, organizing
or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, and generally
from underwriting, selling or distributing securities, such as
shares of the Trust.
The Adviser is a subsidiary of a national bank and is an
affiliate of a bank holding company. Therefore, it is subject to
applicable federal banking laws and regulations. The Adviser has
been advised by its counsel, Miller, Nash, Wiener, Hager & Carlsen,
that the Adviser may perform the advisory services for the Trust
required by the Advisory Agreement, without violating federal
banking laws and regulations. Moreover, such counsel have advised
that changes in federal banking laws and regulations related to the
permissible activities of national banks, subsidiaries of national
banks, and national banks and their subsidiaries that are
affiliates of a bank holding company, as well as further judicial
or administrative decisions or interpretations of present and
future statutes and regulations, could prevent the Adviser from
continuing to serve as investment adviser to the Trust or could
restrict the services which the Adviser is permitted to perform for
the Trust.
In the event that the Adviser is prohibited from acting as the
Trust's investment adviser, it is probable that the Board of
Trustees of the Business Trust would either recommend to the
shareholders the selection of another qualified adviser or, if that
course of action appeared impractical, that the Trust be
liquidated.
COMPUTATION OF NET ASSET VALUE
The net asset value of the Trust's shares is determined as of
4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, by dividing the value of the Trust's net assets
by the total number of its shares then outstanding. However,
Futures and options on them are valued at the last sales price on
the principal commodities exchange on which the Future or option is
traded or, if there are no sales, at the mean between the bid and
asked prices as of the close of that exchange; such close may be
later than 4:00 p.m., New York time. Securities having a remaining
maturity of less than sixty days when purchased and securities
originally purchased with maturities in excess of sixty days but
which currently have maturities of sixty days or less are valued at
cost adjusted for amortization of premiums and accretion of
discounts. All other portfolio securities are valued at the mean
between bid and asked quotations which, for Oregon Obligations, may
be obtained from a reputable pricing service or from one or more
broker-dealers dealing in Oregon Obligations, either of which may,
in turn, obtain quotations from broker-dealers or banks which deal
in specific issues. However, since Oregon Obligations are
ordinarily purchased and sold on a "yield" basis by banks or
dealers which act for their own account and do not ordinarily make
continuous offerings, quotations obtained from such sources may be
subject to greater fluctuations than is warranted by prevailing
market conditions. Accordingly, some or all of the Oregon
Obligations in the Trust's portfolio may be priced, with the
approval of the Trust's Board of Trustees, by differential
comparisons to the market in other municipal bonds under methods
which include consideration of the current market value of tax-free
debt instruments having varying characteristics of quality, yield
and maturity. Any securities or assets for which market quotations
are not readily available are valued at their fair value as
determined in good faith under procedures established by and under
the general supervision and responsibility of the Trust's Board of
Trustees. In the case of Oregon Obligations, such procedures may
include "matrix" comparisons to the prices for other tax-free debt
instruments on the basis of the comparability of their quality,
yield, maturity and other special factors, if any, involved. With
the approval of the Trust's Board of Trustees, the Adviser may at
its own expense and without reimbursement from the Trust employ a
pricing service, bank or broker-dealer experienced in such matters
to perform any of the above described functions.
As indicated above, the net asset value per share of the
Trust's shares will be determined on each day that the New York
Stock Exchange is open. That Exchange annually announces the days
on which it will not be open. The most recent announcement
indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, that Exchange may close on days not included in that
announcement.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a number
of instances in which the Trust's shares are sold or issued on a
basis other than the maximum public offering price, that is, the
net asset value plus the highest sales charge. Some of these relate
to lower or eliminated sales charges for larger purchases, whether
made at one time or over a period of time as under a Letter of
Intent or right of accumulation. (See the table of sales charges in
the Prospectus.) The reasons for these quantity discounts are, in
general, that (i) they are traditional and have long been permitted
in the industry and are therefore necessary to meet competition as
to sales of shares of other funds having such discounts; (ii)
certain quantity discounts are required by rules of the National
Association of Securities Dealers, Inc. (as are elimination of
sales charges on the reinvestment of dividends and distributions);
and (iii) they are designed to avoid an unduly large dollar amount
of sales charge on substantial purchases in view of reduced selling
expenses. Quantity discounts are made available to certain related
persons ("single purchasers") for reasons of family unity and to
provide a benefit to tax-exempt plans and organizations.
The reasons for the other instances in which there are reduced
or eliminated sales charges are as follows. Exchanges at net asset
value are permitted because a sales charge has already been paid on
the shares exchanged. Sales without sales charge are permitted to
Trustees, officers and certain others due to reduced or eliminated
selling expenses and/or since such sales may encourage incentive,
responsibility and interest and an identification with the aims and
policies of the Trust. Limited reinvestments of redemptions at no
sales charge are permitted to attempt to protect against mistaken
or incompletely informed redemption decisions. Shares may be issued
at no sales charge in plans of reorganization due to reduced or
eliminated sales expenses and since, in some cases, such issuance
is exempted in the 1940 Act from the otherwise applicable
restrictions as to what sales charge must be imposed. In no case in
which there is a reduced or eliminated sales charge are the
interests of existing shareholders adversely affected since, in
each case, the Trust receives the net asset value per share of all
shares sold or issued.
AUTOMATIC WITHDRAWAL PLAN
Any shareholder who owns or purchases shares of the Trust
having a net asset value of at least $5,000 may establish an
Automatic Withdrawal Plan under which he or she will receive a
monthly or quarterly check in a stated amount, not less than $50.
Stock certificates will not be issued for shares held under an
Automatic Withdrawal Plan. All dividends and distributions must be
reinvested. Shares will be redeemed on the last business day of the
month or quarter as may be necessary to meet withdrawal payments.
Redemption of shares for withdrawal purposes may reduce or
even liquidate the account. Monthly or quarterly payments paid to
shareholders may not be considered as a yield or income on
investment.
ADDITIONAL TAX INFORMATION
Any investor who incurs a sales commission on purchase of
shares of one mutual fund (the original fund) and who then sells
such shares or exchanges them for shares of a different mutual fund
without having held them at least 91 days must reduce the tax basis
for the shares sold or exchanged to the extent that the standard
sales commission charged for acquiring shares in the exchange or
later acquiring shares of the original fund or another fund is
reduced because of the shareholder's having owned the original fund
shares. The effect of the rule is to increase the investor's gain
or reduce his or her loss on the original fund shares. The amount
of the basis reduction on the original fund shares, however, is
added on the investor's basis for the fund shares acquired in the
exchange or later acquired. The provision applies to commissions
charged after October 3, 1989.
GENERAL INFORMATION
Additional Series
Shares of each Series of the Business Trust created by the
Board of Trustees are entitled to vote as a Series only to the
extent permitted by the 1940 Act (see below) or as permitted by the
Board of Trustees. Income and operating expenses are allocated
among Series in a manner acceptable to the Board of Trustees.
Under Rule 18f-2 under the 1940 Act, as to any investment
company which has two or more Series outstanding, on any matter
required to be submitted to shareholder vote, such matter is not
deemed to have been effectively acted upon unless approved by the
holders of a "majority" (as defined in that Rule) of the voting
securities of each Series affected by the matter. Such separate
voting requirements do not apply to the election of trustees or the
ratification of the selection of accountants. Rule 18f-2 contains
special provisions for cases in which an advisory contract is
approved by one or more, but not all, Series. A change in
investment policy may go into effect as to one or more Series whose
holders so approve the change, even though the required vote is not
obtained as to the holders of other affected Series.
Indemnification of Shareholders and Trustees
Under Massachusetts law, shareholders of a trust such as the
Business Trust may, under certain circumstances, be held personally
liable as partners for the obligations of the trust. For
shareholder protection, however, an express disclaimer of
shareholder liability for acts or obligations of the Business Trust
is contained in the Declaration of Trust which requires that notice
of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Business Trust or the
Trustees. The Declaration of Trust provides for indemnification out
of the Business Trust's property of any shareholder held personally
liable for the obligations of the Business Trust. The Declaration
of Trust also provides that the Business Trust shall, upon request,
assume the defense of any claim made against any shareholder for
any act or obligation of the Business Trust and satisfy any
judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
the relatively remote circumstances in which the Business Trust
itself would be unable to meet its obligations. If any Series of
the Business Trust were to be unable to meet the obligations
attributable to it (which, as is the case with the Trust, is
relatively remote), the other Series would be subject to such
obligations, with a corresponding increase in the risk of the
shareholder liability mentioned in the prior sentence.
The Declaration of Trust further indemnifies the Trustees of
the Business Trust out of the property of the Trust and provides
that they will not be liable for errors of judgment or mistakes of
fact or law; but nothing in the Declaration of Trust protects a
Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Custodian and Auditors
The Trust's Custodian, Bank One Trust Company, N.A., is
responsible for holding the Trust's assets.
The Trust's auditors, KPMG Peat Marwick LLP, perform an annual
audit of the Trust's financial statements.
The financial statements of the Trust for the fiscal year
ended September 30, 1995, which are contained in the Annual Report
for that fiscal year, are hereby incorporated by reference into the
Additional Statement. Those financial statements have been audited
by KPMG Peat Marwick LLP, independent auditors, whose report
thereon is incorporated herein by reference.
Underwriting Commissions
During the Trust's fiscal year ended September 30, 1995,
the aggregate dollar amount of sales charges on the sales of the
Trust's shares was $652,963 and the amount retained by the
Distributor was $85,550.
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL BOND RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation
rating is a current assessment of the creditworthiness of an
obligor with respect to a specific obligation. This assessment
may take into consideration obligors such as guarantors, insurers
or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by
the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit
in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and
repayment of principal in accordance with the terms of
the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization
or other arrangement under the laws of bankruptcy and
other laws affecting creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest
and repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category
than in higher rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Provisional Ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes the
successful completion of the project being financed by the debt
being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and
risk.
Moody's Investors Service. A brief description of the
applicable Moody's Investors Service rating symbols and their
meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are
designated by the symbols Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating
categories for short-term obligations, all of which define an
investment grade situation. These are designated Moody's
Investment Grade as MIG 1 through MIG 4. In the case of variable
rate demand obligations (VRDOs), two ratings are assigned; one
representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the other
representing an evaluation of the degree of risk associated with
the demand feature. The short-term rating assigned to the demand
feature of VRDOs is designated as VMIG. When no rating is applied
to the long or short-term aspect of a VRDO, it will be designated
NR. Issues or the features associated with MIG or VMIG ratings
are identified by date of issue, date of maturity or maturities
or rating expiration date and description to distinguish each
rating from other ratings. Each rating designation is unique with
no implication as to any other similar issue of the same obligor.
MIG ratings terminate at the retirement of the obligation while
VMIG rating expiration will be a function of each issuer's
specific structural or credit features.
MIG1/VMIG1 This designation denotes best quality. There
is present strong protection by established
cash flows, superior liquidity support or
demonstrated broad-based access to the market
for refinancing.
MIG2/VMIG2 This designation denotes high quality.
Margins of protection are ample although not
so large as in the preceding group.
MIG3/VMIG3 This designation denotes favorable quality.
All security elements are accounted for but
there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow
protection may be narrow and market access
for refinancing is likely to be less well
established.
MIG4/VMIG4 This designation denotes adequate quality.
Protection commonly regarded as required of
an investment security is present and
although not distinctly or predominantly
speculative, there is specific risk.
<PAGE>
INVESTMENT ADVISER
Qualivest Capital Mangement, 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
Aquila Mangement 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
Coloumbus, Ohio 43271
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
COUNSEL
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
TAX-FREE TRUST
OF OREGON
[LOGO]
A tax-free
income investment
STATEMENT OF
ADDITIONAL
INFORMATION
[EAGLE LOGO]
One of The
Aquilasm Group of Funds
<PAGE>
THE CASCADES TRUST
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Tax-Free Trust of Oregon Portfolio:
Included in Part A:
Financial Highlights
Incorporated by reference into Part B:
Report of Independent Auditors
Statement of Assets and Liabilities as of
September 30, 1995
Statement of Operations for the year ended
September 30, 1995
Statement of Changes in Net Assets for the
years ended September 30, 1995 and 1994
Statement of Investments as of
September 30, 1995
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors
(b) Exhibits:
(1) Supplemental Declaration of Trust (viii)
(2) By-laws (viii)
(3) Not applicable
(4) (a) Specimen share certificate for
Cascades Cash Fund Portfolio (iv)
(b) Specimen share certificate for
Tax-Free Trust of Oregon Portfolio (ii)
(5) (a) Investment Advisory Agreement for Cascades
Cash Fund Portfolio (vii)
(b) Investment Advisory Agreement for Tax-Free
Trust of Oregon Portfolio (x)
(6) (a) Distribution Agreement for Cascades Cash
Fund Portfolio (iv)
(b) Assistance Agreement for Cascades Cash
Fund Portfolio, with related
contemporaneous correspondence (v)
(c) Distribution Assistance Agreement for Cas-
cades Cash Fund Portfolio, with related
contemporaneous correspondence (v)
(d) Distribution Agreement for Tax-Free Trust
of Oregon Portfolio (i)
(e) Sales Agreement for Brokerage Firms for
Tax-Free Trust of Oregon Portfolio
(vi)
(f) Sales Agreement for Financial Institutions
for Tax-Free Trust of Oregon Portfolio
(vi)
(g) Sales Agreement for Investment Advisers for
Tax-Free Trust of Oregon Portfolio (ix)
(7) Not applicable
(8) (a) Custody Agreement for Cascades Cash Fund
Portfolio (iv)
(b) Custody Agreement for Tax-Free Trust of
Oregon Portfolio (x)
(9) (a) Transfer Agency Agreement for Cascades Cash
Fund Portfolio (iv)
(b) Administration Agreement for Cascades Cash
Fund Portfolio (x)
(c) Transfer Agency Agreement for Tax-Free
Trust of Oregon Portfolio (iii)
(d) Administration Agreement for Tax-Free Trust
of Oregon Portfolio (ix)
(10) (a) Opinion and consent of counsel to the Trust
for Cascades Cash Fund Portfolio (iv)
(b) Opinion and consent of counsel to the Trust
for Tax-Free Trust of Oregon Portfolio
(ii)
(11) (a) Opinion and consent of counsel to the
Adviser for Cascades Cash Fund
Portfolio (v)
(b) Opinion and consent of counsel to the
Adviser for Tax-Free Trust of Oregon
Portfolio (ii)
(12) Not applicable
(13) Agreement with initial shareholder (ii)
(14) Not applicable
(15) (a) Distribution Plan for Cascades Cash Fund
Portfolio (viii)
(b) Distribution Plan for Tax-Free Trust of
Oregon Portfolio (x)
(16) Schedule for computation of performance
quotations (ix)
(i) Filed as an exhibit to Registrant's Initial
Registration Statement dated March 27, 1986 and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Pre-Effective
Amendment No. 1 dated June 6, 1986 and
incorporated herein by reference.
(iii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 6 dated May 30, 1989 and incorpo-
rated herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 7 dated August 7, 1989 and incorporated
herein by reference.
(v) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 8 dated Dec. 26, 1989 and incorporated
herein by reference.
(vi) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 10 dated Nov. 30, 1990 and incorporated
herein by reference.
(vii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 14 dated Nov. 30, 1992 and incorporated
herein by reference.
(viii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 15 dated Dec. 2, 1993 and incorporated
herein by reference.
(ix) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 16 dated November 30, 1994 and
incorporated herein by reference.
(x) Filed herewith.
ITEM 25. Persons Controlled By Or Under Common Control With
Registrant
None
ITEM 26. Number of Holders of Securities
As of January 30, 1996, Registrant had 0 holders
of record of its shares in its Cascades Cash Fund
portfolio which ceased operations on September 30,
1994 and 5,726 holders of record of its shares
in its Tax-Free Trust of Oregon portfolio.
ITEM 27. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of
Registrant's Amended and Restated Declaration of
Trust, filed as Exhibit 1 to Registrant's Post-
Effective Amendment No. 10 dated November 30, 1990,
is incorporated herein by reference.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to Trustees, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission
such indemnification is against public policy as
expressed in that Act and is, therefore, unenforce-
able. In the event that a claim for indemnifica-
tion against such liabilities (other than the pay-
ment by Registrant of expenses incurred or paid by
a Trustee, officer, or controlling person of Regis-
trant in the successful defense of any action,
suit, or proceeding) is asserted by such Trustee,
officer, or controlling person in connection with
the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against pub-
lic policy as expressed in the Act and will be go-
verned by the final adjudication of such issue.
ITEM 28. Business and Other Connections of Investment
Adviser
Qualivest Capital Management, Inc., Registrant's
investment adviser, performs investment advisory
services for mutual fund and non-mutual fund cli-
ents. For information as to the business, profes-
sion, vocation, or employment of a substantial na-
ture of its Directors and officers, reference is
made to the Form ADV filed by it under the Invest-
ment Advisers Act of 1940.
ITEM 29. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal un-
derwriter to Aquila Rocky Mountain Equity Fund, Ca-
pital Cash Management Trust, Churchill Cash Re-
serves Trust, Churchill Tax-Free Fund of Kentucky,
Hawaiian Tax-Free Trust, Narragansett Insured Tax-
Free Income Fund, Pacific Capital Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets Trust,
Pacific Capital U.S. Treasuries Cash Assets Trust,
Prime Cash Fund, Short Term Asset Reserves, Tax-
Free Fund for Utah, Tax-Free Fund of Colorado, and
Tax-Free Trust of Arizona, in addition to serving
as the Registrant's principal underwriter.
(b) For information about the Directors and officers of
Aquila Distributors, Inc., reference is made to the
Form BD filed by it under the Securities Exchange
Act of 1934.
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books, and other documents are
maintained by the adviser, the administrator, the
custodian, and the transfer agent, whose addresses
appear on the back cover pages of the Prospectus
and the Statement of Additional Information.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
<PAGE>
KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
Independent Auditors' Consent
To the Trustees and Shareholders of
Tax-Free Trust of Oregon:
We consent to the use of our report dated October 25, 1995
incorporated herein by reference and to the reference to our firm
under the heading "Financial Highlights" in the Prospectus.
New York, New York KPMG Peat Marwick LLP
January 25, 1996 /s/KPMG Peat Marwick LLP
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement or Amendment to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York, on the 30th day of
January, 1996.
THE CASCADES TRUST
(Registrant)
By /s/Lacy B. Herrmann
-----------------------
Lacy B. Herrmann, President
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement or Amendment has been signed below by
the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 1/30/96
- ---------------------- President, Chairman of -----------
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Vernon R. Alden 1/30/96
- ---------------------- Trustee -----------
Vernon R. Alden
/s/Warren C. Coloney 1/30/96
- ---------------------- Trustee -----------
Warren C. Coloney
/s/James A. Gardner 1/30/96
- ---------------------- Trustee -----------
James A. Gardner
/s/Diana P. Herrmann 1/30/96
- ---------------------- Trustee -----------
Diana P. Herrmann
/s/Ann R. Leven 1/30/96
- ---------------------- Trustee -----------
Ann R. Leven
/s/Raymond H. Lung 1/30/96
- ---------------------- Trustee -----------
Raymond H. Lung
/s/Richard C. Ross 1/30/96
- ---------------------- Trustee -----------
Richard C. Ross
/s/Rose F. Marotta 1/30/96
- ---------------------- Chief Financial Officer -----------
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
THE CASCADES TRUST
EXHIBIT INDEX
Exhibit Exhibit Page
Number Name Number
5(b) Investment Advisory Agreement for
Tax-Free Trust of Oregon
Portfolio
8(b) Custody Agreement for
Tax-Free Trust of Oregon Portfolio
9(d) Administration Agreement for Tax-
Free Trust of Oregon Portfolio
15(b) Distribution Plan for Tax-Free
Trust of Oregon Portfolio
16 Schedule for computation of per-
formance quotations
TAX-FREE TRUST OF OREGON
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of July 1, 1995, by and
between The Cascades Trust (the "Business Trust"), a Massachusetts
business trust, 380 Madison Avenue, Suite 2300, New York, NY 10017,
and Qualivest Capital Management, Inc. (the "Adviser"), 111 S.W.
Fifth Avenue, U.S. Bancorp Tower, Portland, Oregon 97204
W I T N E S S E T H :
WHEREAS, the Business Trust and the Adviser have
previously entered into an Investment Advisory Agreement with
respect to a portfolio of the Business Trust entitled Tax-Free
Trust of Oregon (the "Trust"); and
WHEREAS, the Business Trust and the Adviser now wish
to amend and restate their agreement as herein set forth, referred
to hereafter as "this Agreement";
NOW THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good and
valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. In General
The Adviser agrees, all as more fully set forth
herein, to act as managerial investment adviser to the Trust with
respect to the investment of the Trust's assets, and to supervise
and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Trust.
2. Duties and Obligations of the Adviser With Respect To
Investment of the Assets of the Trust
(a) Subject to the succeeding provisions of
this section and subject to the direction and control of the Board
of Trustees of the Business Trust, the Adviser shall:
(i) Supervise continuously the investment
program of the Trust and the composition of
its portfolio;
(ii) Determine what securities shall be
purchased or sold by the Trust;
(iii) Arrange for the purchase and the sale of
securities held in the portfolio of the Trust;
and
(iv) Either keep the accounting records of the
Trust, including the computation of net asset
value per share and the dividends or, at its
expense and responsibility, delegate such
duties in whole or in part to a company
satisfactory to the Business Trust.
(b) Any investment program furnished by the
Adviser under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment
Company Act of l940 (the "Act") and any rules or regulations in
force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the
Business Trust as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Business Trust; and
(5) the fundamental policies of the Trust, as reflected in its
registration statement under the Act or as amended by the
shareholders of the Trust.
(c) The Adviser shall give the Trust the
benefit of its best judgment and effort in rendering services
hereunder, but the Adviser shall not be liable for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon (i) its own
investigation and research or (ii) investigation and research made
by any other individual, firm or corporation, if such purchase,
sale or retention shall have been made and such other individual,
firm or corporation shall have been selected in good faith by the
Adviser. Nothing herein contained shall, however, be construed to
protect the Adviser against any liability to the Trust or its
security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this
Agreement.
(d) Nothing in this Agreement shall prevent the
Adviser or any affiliated person (as defined in the Act) of the
Adviser from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its own or their own accounts
or for the accounts of others for whom it or they may be acting,
provided, however, that the Adviser expressly represents that it
will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Trust under this
Agreement. It is agreed that the Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Business Trust's Registration Statement under the Act and the
Securities Act of 1933, except for information supplied by the
Adviser for inclusion therein. The Adviser shall promptly inform
the Business Trust as to any information concerning the Adviser
appropriate for inclusion in such Registration Statement, or as to
any transaction or proposed transaction which might result in an
assignment of the Agreement. The Business Trust agrees to
indemnify the Adviser to the full extent permitted by the Business
Trust's Declaration of Trust.
(e) In connection with its duties to arrange
for the purchase and sale of the Trust's portfolio securities, the
Adviser shall select such broker-dealers ("dealers") as shall, in
the Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt, efficient, and reliable
execution of orders at the most favorable net price. The Adviser
shall cause the Trust to deal directly with the selling or
purchasing principal or market maker without incurring brokerage
commissions unless the Adviser determines that better price or
execution may be obtained by paying such commissions; the Trust
expects that most transactions will be principal transactions at
net prices and that the Trust will incur little or no brokerage
costs. The Business Trust understands that purchases from
underwriters include a commission or concession paid by the issuer
to the underwriter and that principal transactions placed through
dealers include a spread between the bid and asked prices. In
allocating transactions to dealers, the Adviser is authorized to
consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well
as the difficulty of the transaction in question, and thus need not
pay the lowest spread or commission available if the Adviser
determines in good faith that the amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the
particular transaction or the Adviser's overall responsibilities as
to the accounts as to which it exercises investment discretion.
If, on the foregoing basis, the transaction in question could be
allocated to two or more dealers, the Adviser is authorized, in
making such allocation, to consider (i) whether a dealer has
provided research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust or any other
investment company or companies having the Adviser as its
investment adviser or having the same sub-adviser, administrator or
principal underwriter as the Trust. Such research may be in
written form or through direct contact with individuals and may
include quotations on portfolio securities and information on
particular issuers and industries, as well as on market, economic,
or institutional activities. The Business Trust recognizes that no
dollar value can be placed on such research services or on
execution services, that such research services may or may not be
useful to the Trust and/or other accounts of the Adviser, and that
research received by such other accounts may or may not be useful
to the Trust.
3. Allocation of Expenses
The Adviser agrees that it will furnish the Trust,
at the Adviser's expense, all office space, facilities, equipment
and clerical personnel necessary for carrying out its duties under
this Agreement. The Adviser agrees that it will supply, or cause
to be supplied, to any sub-adviser, administrator or principal
underwriter of the Trust all necessary financial information in
connection with such sub-adviser's, administrator's or principal
underwriter's duties under any agreement between such sub-adviser,
administrator or principal underwriter and the Business Trust. The
Adviser will also pay all compensation of the Trust's officers,
employees, and Trustees, if any, who are affiliated persons of the
Adviser. The Trust agrees to bear the costs of preparing and
setting in type its prospectuses, statements of additional
information and reports to its shareholders, and the costs of
printing or otherwise producing and distributing those copies of
such prospectuses, statements of additional information and reports
as are sent to its shareholders. All costs and expenses not
expressly assumed by the Adviser under this Agreement or by such
sub-adviser, administrator or principal underwriter shall be paid
by the Trust, including, but not limited to (i) interest and taxes;
(ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Trustees other than those
affiliated with the Adviser or such sub-adviser, administrator or
principal underwriter; (v) legal and audit expenses; (vi) custodian
and transfer agent, or shareholder servicing agent, fees and
expenses; (vii) expenses incident to the issuance of its shares
(including issuance on the payment of, or reinvestment of,
dividends); (viii) fees and expenses incident to the registration
under Federal or State securities laws of the Trust or its shares;
(ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Trust; (x) all
other expenses incidental to holding meetings of the Trust's
shareholders; and (xi) such non-recurring expenses as may arise,
including litigation affecting the Trust and the legal obligations
for which the Business Trust may have to indemnify its officers and
Trustees.
4. Compensation of the Adviser
(a) The Business Trust agrees to pay the
Adviser, and the Adviser agrees to accept as full compensation for
all services rendered by the Adviser as such, a management fee
payable monthly and computed on the net asset value of the Trust as
of the close of business each business day at the annual rate of
0.25 of 1% of such net asset value, provided, however, that for any
day that the Trust pays or accrues a fee under the Distribution
Plan of the Trust based upon the assets of the Trust, the annual
management fee shall be payable at the annual rate of 0.20 of 1% of
such net asset value.
(b) The Adviser agrees that the fee under (a)
above shall be reduced, but not below zero, by an amount equal to
one-half 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 such assets in
excess of $100 million, or (ii) 25% of the Trust's total annual
investment income. The payment of the fee under (a) above 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, subject to readjustment during the year.
5. Duration and Termination
(a) This Amended and Restated Investment
Advisory Agreement shall become effective upon the date stated
above and shall, unless terminated as hereinafter provided,
continue in effect until the June 30 next preceding the second
anniversary of the effective date of this Agreement, and from year
to year thereafter, but only so long as such continuance is
specifically approved at least annually (1) by a vote of the
Business Trust's Board of Trustees, including a vote of a majority
of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party,
with votes cast in person at a meeting called for the purpose of
voting on such approval, or (2) by a vote of the holders of a
"majority" (as so defined) of the outstanding voting securities of
the Trust and by such a vote of the Trustees.
(b) This Agreement may be terminated by the
Adviser at any time without penalty upon giving the Business Trust
sixty days' written notice (which notice may be waived by the
Business Trust) and may be terminated by the Business Trust at any
time without penalty upon giving the Adviser sixty days' written
notice (which notice may be waived by the Adviser), provided that
such termination by the Business Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the
Act) of the voting securities of the Trust outstanding and entitled
to vote. This Agreement shall automatically terminate in the event
of its assignment (as defined in the Act).
6. Disclaimer of Shareholder Liability
The Adviser understands that the obligations of
this Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Business Trust's property; the
Adviser represents that it has notice of the provisions of the
Business Trust's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Trust.
7. Notices of Meetings
The Business Trust agrees that notice of each
meeting of the Board of Trustees of the Business Trust will be sent
to the Adviser and that the Business Trust will make appropriate
arrangements for the attendance (as persons present by invitation)
of such person or persons as the Adviser may designate.
IN WITNESS WHEREOF, the parties hereto have
caused the foregoing instrument to be executed by their duly
authorized officers and their seals to be hereunto affixed, all as
of the day and year first above written.
ATTEST: The Cascades Trust
________________________ By:___________________________________
ATTEST: Qualivest Capital Management, Inc.
________________________ By:___________________________________
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of March 30, 1995, by and between
TAX-FREE TRUST OF OREGON, a business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust"), and BANK ONE
TRUST COMPANY, N.A., a banking company organized under the laws of
the United States (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that Securities and cash of the
Trust be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements
herein made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1.1 "Authorized Person" means any Officer or other person
duly authorized by resolution of the Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Trust and
named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the
Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to
time serving under the Trust's Declaration of Trust, dated October
17, 1985, as from time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry
system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry
regulations of federal agencies as are substantially in the form of
such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the Fund computes the net asset value of the Fund.
1.5 "Fund" shall mean any of the individual investment
portfolios of the Trust, including any additional portfolios
hereafter created, as each are or will be identified in Exhibit A
hereto; provided, however, that in the event that the Trust
consists of only one such portfolio, "Fund" shall refer to the
Trust.
1.6 "NASD" shall mean The National Association of Securities
Dealers, Inc.
1.7 "Officer" shall mean the President, any Senior Vice
President, Vice President or Assistant Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer,
the Treasurer, or any Assistant Treasurer of the Trust.
1.8 "Oral Instructions" shall mean instructions orally
transmitted to and accepted by the Custodian because such
instructions are: (i) reasonably believed by the Custodian to have
been given by an Authorized Person, (ii) recorded and kept among
the records of the Custodian made in the ordinary course of
business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a
transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral
Instructions vary from the Written Instructions which purport to
confirm them, the Custodian shall notify the Trust of such variance
but such Oral Instructions will govern unless the Custodian has not
yet acted.
1.9 "Custody Account" shall mean any account in the name of
a Fund, which is provided for in Section 3.2 below, or of the
Trust.
1.10 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.11 "Securities Depository" shall mean The Participants Trust
Company or The Depository Trust Company and (provided that the
Custodian shall have received a copy of a resolution of the Board
of Trustees, certified by an Officer, specifically approving the
use of such clearing agency as a depository for the Trust) any
other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of
1934 (the "1934 Act"), which acts as a system for the central
handling of Securities where all Securities of any particular class
or series of an issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.12 "Securities" shall include, without limitation, common
and preferred stocks, bonds, call options, put options, debentures,
notes, bank certificates of deposit, bankers' acceptances,
mortgage-backed securities, other money market instruments or other
obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that
the Custodian has the facilities to clear and to service.
1.13 "Shares" shall mean the units of beneficial interest
issued by the Trust.
1.14 "Written Instructions" shall mean (i) written
communications actually received by the Custodian and signed by one
or more persons as the Board of Trustees shall have from time to
time authorized, or (ii) communications by telex or any other such
system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to the
Custodian and approved by resolutions of the Board of Trustees, a
copy of which, certified by an Officer, shall have been delivered
to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints
the Custodian as custodian of all Securities and cash owned by or
in the possession of the Trust at any time during the period of
this Agreement, provided that such Securities or cash at all times
shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held
by the Custodian for the account of the Fund, except Securities
maintained in a Securities Depository or Book-Entry System, shall
be physically segregated from other Securities and non-cash
property in the possession of the Custodian and shall be identified
as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain
in its trust department a custody account in the name of each Fund,
subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other
assets of the Fund which are delivered to it.
3.3 Appointment of Agents. Subject to the continuing
approval of the Board of Trustees, the Custodian may appoint, and
at any time remove, any domestic bank or trust company, and is
qualified to act as a custodian under the 1940 Act, as sub-
custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such
a bank or trust company (any such accounts to be in the name of the
Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent shall not relieve
the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver,
or cause to be delivered, to the Custodian all of the Fund's
Securities, cash and other assets, including (a) all payments of
income, payments of principal and capital distributions received by
the Fund with respect to such Securities, cash or other assets
owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be
responsible for such Securities, cash or other assets until
actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Funds in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund
shall deliver to the Custodian a resolution of the Board
of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit
in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use
of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and
returns of collateral consisting of Securities.
(b) Securities of a Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account
("Depository Account") of the Custodian in such Book-
Entry System or Securities Depository which includes only
assets held by the Custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian and the Custodian's account
on the books of the Book-Entry System and Securities
Depository as the case may be, with respect to Securities
of a Fund maintained in a Book-Entry System or Securities
Depository shall, by book-entry or otherwise, identify
such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice
from the Book-Entry System or Securities Depository that
such Securities have been transferred to the Depository
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund
are held in a Book-Entry System or Securities Depository,
the Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities
has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Fund.
(e) Upon request, the Custodian shall provide the Fund with
copies of any report (obtained by the Custodian from a
Book-Entry System or Securities Depository in which
Securities of the Fund is kept) on the internal
accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of the Custodian or any sub-
custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of the
Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-
Entry System or Securities Depository. At its election,
the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry
System or Securities Depository or any other person for
any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and
to the extent that the Custodian has been made whole for
any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from a Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only
(i) in the case of Securities (other than options on
Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or any
sub-custodian appointed pursuant to Section 3.3 above) of
such Securities registered as provided in Section 3.9
below in proper form for transfer, or if the purchase of
such Securities is effected through a Book-Entry System
or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and
options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title
thereto in favor of the Trust or any nominee referred to
in Section 3.9 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the
Trust and a bank which is a member of the Federal Reserve
System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased
Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System
or Securities Depository for the account of the Fund with
such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned
by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Trust, including but not limited to the following
payments for the account of a Fund: interest; taxes;
administration, investment management, investment
advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating
expenses of a Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or
treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Corporation and of any registered national
securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or
other interest-bearing account with any banking
institution (including the Custodian), which deposit or
account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from a Custody Account but only in the following
cases:
(a) Upon the sale of Securities for the account of a Fund but
only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with
tender or other similar offers for Securities of a Fund;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to
the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by a Fund;
(h) In the case of warrants, rights or similar Securities,
upon the exercise thereof, provided that, in any such
case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(i) For delivery in connection with any loans of Securities
of a Fund, but only against receipt of such collateral as
the Trust shall have specified to the Custodian in Proper
Instructions;
(j) For delivery as security in connection with any
borrowings by the Trust on behalf of a Fund requiring a
pledge of assets by such Fund, but only against receipt
by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with the rules of The
Options Clearing Corporation and of any registered
national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Trust
on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits
in connection with transactions by the Trust on behalf of
a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of
a resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless
otherwise instructed by the Trust, the Custodian shall with respect
to all Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis
all income and other payments to which the Trust is
entitled either by law or pursuant to custom in the
securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax
laws or the laws or regulations of any other taxing
authority now or hereafter in effect, and prepare and
submit reports to the Internal Revenue Service ("IRS")
and to the Trust at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.9 Registration and Transfer of Securities. All Securities
held for a Fund that are issued or issuable only in bearer form
shall be held by the Custodian in that form, provided that any such
Securities shall be held in a Book-Entry System for the account of
the Trust on behalf of a Fund, if eligible therefor. All other
Securities held for a Fund may be registered in the name of the
Trust on behalf of such Fund, the Custodian, or any sub-custodian
appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either thereof; provided,
however, that such Securities are held specifically for the account
of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name
of any of the nominees hereinabove referred to or in the name of a
Book-Entry System or Securities Depository, any Securities
registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund,
complete and accurate records with respect to Securities, cash or
other property held for the Trust, including (i) journals or other
records of original entry containing an itemized daily record in
detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and
Securities loaned (together with a record of the collateral
therefor and substitutions of such collateral), (D) dividends and
interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related
thereto. The Custodian shall keep such other books and records of
the Trust as the Trust shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 31
and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian
shall (i) be maintained in a form acceptable to the Trust and in
compliance with rules and regulations of the Securities and
Exchange Commission, (ii) be the property of the Trust and at all
times during the regular business hours of the Custodian be made
available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be
maintained by Rule 31a-1 under the 1940 Act, be preserved for the
periods prescribed in Rule 31a-2 under the 1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement by Fund and a summary of
all transfers to or from the Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement, by
Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide
the Trust with such reports, as the Trust may reasonably request
from time to time, on the internal accounting controls and
procedures for safeguarding Securities, which are employed by the
Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause
all proxies, if any, relating to Securities which are not
registered in the name of a Fund, to be promptly executed by the
registered holder of such Securities, without indication of the
manner in which such proxies are to be voted, and shall include all
other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, and all notices to the
holders of such Securities.
3.14 Information on Corporate Actions. The Custodian will
promptly notify the Trust of corporate actions, limited to those
Securities registered in nominee name and to those Securities held
at a Depository or sub-Custodian acting as agent for the Custodian.
The Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Card Service, J.J.
Kenny's Munibase System, Depository Trust Reorganization Notices,
Xcitek Inc., Standard & Poor's Called Bond Listing or The Wall
Street Journal or received by first class mail from the agent. For
market announcements not yet received and distributed by the
Custodian's services, the Trust will inform its custody
representative with appropriate instructions. The Custodian will,
upon receipt of the Trusts's response within the required deadline,
effect such action for receipt or payment for the Trust. For those
responses received after the deadline, the Custodian will effect
such action for receipt or payment, subject to the limitations of
the agent(s) effecting such actions. The Custodian will promptly
notify the Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide or cause
to be provided to the Custodian with all relevant information
contained in the prospectus for any security which has unique
put/option provisions and provide the Custodian with specific
tender instructions at least ten business days prior to the
beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for the Trust, Written Instructions shall be delivered
to the Custodian, specifying (a) the Fund making the purchase, (b)
the name of the issuer or writer of such Securities, and the title
or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any) or other units purchased, (d)
the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the
name of the person to whom such amount is payable. The Custodian
shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein.
The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Fund, if in the
relevant Custody Account there is insufficient cash available to
the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of
Securities for a Fund is made by the Custodian in advance of
receipt for the account of the Fund of the Securities purchased but
in the absence of specific Written or Oral Instructions to so pay
in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of
Securities by a Fund, Written Instructions shall be delivered to
the Custodian, specifying (a) the Fund making the purchase, (b) the
name of the issuer or writer of such Securities, and the title or
other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the
date of sale and settlement (e) the sale price per unit, (f) the
total amount payable upon such sale, and (g) the person to whom
such Securities are to be delivered. Upon receipt of the total
amount payable to the Trust as specified in such Written
Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the
foregoing, the Custodian may accept payment in such form as shall
be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3
above or any other provision of this Agreement, the Custodian, when
instructed to deliver Securities against payment, shall be
entitled, if so directed in Written Instructions and if in
accordance with generally accepted market practice, to deliver such
Securities prior to actual receipt of final payment therefor. In
any such case, the Trust shall bear the risk that final payment for
such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person
to whom they were delivered, and the Custodian shall have no
liability for any of the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion
and from time to time, the Custodian may credit the relevant
Custody Account, prior to actual receipt of final payment thereof,
with (i) proceeds from the sale of Securities which it has been
instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii)
income from cash, Securities or other assets of the Trust. Any
such credit shall be conditional upon actual receipt by the
Custodian of final payment and may be reversed if final payment is
not actually received in full. The Custodian may, in its sole
discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt
of final payment. Any such funds shall be repayable immediately
upon demand made by the Custodian at any time prior to the actual
receipt of all final payments in anticipation of which funds were
credited to the Custody Account.
4.6 Advances by Custodian for Settlement. If the Custodian
should, in its sole discretion, advance funds to the Trust to
facilitate the settlement of transactions on behalf of a Fund in
its Custody Account, then such advance shall be repayable
immediately upon demand made by the Custodian and shall bear
interest from the date incurred at a rate per annum (based on a
360-day year from the actual number of days involved) equal to 1%
over the Federal Funds rate in effect from time to time as
announced by The Wall Street Journal under the section entitled
Money Rates, or any successor title, such rate to be adjusted on
the effective date of any changes in such rate.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available
for the purpose in the relevant Custody Account, and upon receipt
of Proper Instructions specifying that the funds are required to
redeem Shares of a Fund, the Custodian shall wire each amount
specified in such Proper Instructions to or through such bank as
the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not
be under any obligation to effect payment or distribution by any
bank designated in Proper Instructions given pursuant to Section
5.1 above of any amount paid by the Custodian to such bank in
accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of and in conformity with Proper Instructions,
the Custodian shall establish and maintain a segregated account or
accounts for and on behalf of each Fund, into and from which
account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Trust,
(b) for purposes of segregating cash or Securities in
connection with securities options purchased or written
by a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities made
by a Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees,
certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under
this Agreement, and shall be without liability to the Trust for any
loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim unless such loss, damages, cost,
expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian shall be
entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not
be under any obligation at any time to ascertain whether the Trust
is in compliance with the 1940 Act, the regulations thereunder, the
provisions of the Trust's charter documents or by-laws, or its
investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be
liable for, or considered to be custodian of, any cash belonging to
the Trust or any money represented by a check, draft or other
instrument for the payment of money, until the Custodian or its
agents actually receive such cash or collect on such instrument.
7.3 No Responsibility for title, etc. So long as and to the
extent that it is in the exercise of reasonable care, the Custodian
shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received or delivered by
it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. The Custodian shall not
be required to enforce collection, by legal means or otherwise, of
any money or property due and payable with respect to Securities
held for the Trust if such Securities are in default or payment is
not made after due demand or presentation. The Custodian shall
inform the Trust promptly of any such default or failure to make
payment.
7.5 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it
to be genuine. The Custodian shall be entitled to rely upon any
Oral Instructions and/or any Written Instructions actually received
by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties
or obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
7.7 Cooperation. The Custodian shall cooperate with and
supply necessary information to the entity or entities appointed by
the Trust to keep the books of account of the Trust and/or compute
the value of the assets of the Trust. The Custodian shall take all
such reasonable actions as the Trust may from time to time request
to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to
the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's filings on Form N-1A and Form N-SAR and
any other reports required by the Securities and Exchange
Commission, and (b) the fulfillment by the Trust of any other
requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian and any sub-custodian appointed pursuant to
Section 3.3 above, and any nominee of the Custodian or of such sub-
custodian from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
or foreign securities and/or banking laws) or claim arising
directly or indirectly (a) from the fact that Securities are
registered in the name of any such nominee, or (b) from any action
or inaction by the Custodian or such sub-custodian (i) at the
request or direction of or in reliance on the advice of the Trust,
or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-
custody agreement with a sub-custodian appointed pursuant to
Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement,
provided that neither the Custodian nor any such sub-custodian
shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the
Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which may,
in the opinion of the Custodian, result in the Custodian or its
nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required
to take such action until the Trust shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any
failure or delay in performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without
limitation, acts of God; earthquakes; fires; floods; wars; civil or
military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its
reasonable control as may cause interruption, loss or malfunction
of utility, transportation, computer (hardware or software) or
telephone communication service; accidents; labor disputes, acts of
civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay
shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective
as of the date first set forth above and shall continue in full
force and effect until terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of the giving of such notice.
If a successor custodian shall have been appointed by the Board of
Trustees, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of
termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Trust and held by
the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or
for the benefit of the Trust at the successor custodian, provided
that the Trust shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall
then be entitled. Upon such delivery and transfer, the Custodian
shall be relieved of all obligations under this Agreement. The
Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
Custodian by regulatory authorities in the State of Ohio or upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 10.1 above, then the
Custodian shall have the right to deliver to a bank or trust
company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not
less than $25 million, and (c) is doing business in New York, New
York, all Securities, cash and other property held by the Custodian
under this Agreement and to transfer to an account of or for the
Trust at such bank or trust company all Securities of the Trust
held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the
successor custodian under this Agreement and the Custodian shall be
relieved of all obligations under this Agreement. If, after
reasonable inquiry, the Custodian cannot find a successor custodian
as contemplated in this Section 10.3, then the Custodian shall have
the right to deliver to the Trust all Securities and cash then
owned by the Trust and to transfer any Securities held in a Book-
Entry System or Securities Depository to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own
custodian with respect to the Trust and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon
from time to time by the Trust and the Custodian. The fees and
other charges in effect on the date hereof and applicable to the
Funds are set forth in Exhibit C attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts and under a Declaration of Trust, to
which reference is hereby made a copy of which is on file at the
office of the Secretary of State of Massachusetts as required by
law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of the Trust entered into in the name of
the Trust or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons
dealing with any of the Funds of the Trust must look solely to the
assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given to a party
hereunder shall be in writing and shall be sent or delivered to the
party at the address set forth after its name herein below:
To the Trust:
TAX-FREE TRUST OF OREGON
380 Madison Avenue
New York, NY 10017
Attn: Mr. Richard F. West, Treasurer and Mr.
William Killeen, Senior Operations
Officer
Telephone: (212)-697-6666
Facsimile: (212)-687-5373
To the Custodian:
BANK ONE TRUST COMPANY, N.A.,
100 East Broad Street
Columbus, OH 43271-0187
Attention: Mr. Robert F. Schultz, Senior Trust
Officer
Telephone: (614)-248-5445
Facsimile: (614)-248-2554
or at such other address as either party shall have provided to the
other by notice given in accordance with this Article XIII.
Writing shall include transmission by or through teletype,
facsimile, central processing unit connection, on-line terminal and
magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
14.2 No Waiver. No failure by either party hereto to exercise
and no delay by such party in exercising, any right hereunder shall
operate as a waiver thereof. The exercise by either party hereto
of any right hereunder shall not preclude the exercise of any other
right, and the remedies provided herein are cumulative and not
exclusive of any remedies provided at law or in equity.
14.3 Amendments. This Agreement cannot be changed orally and
no amendment to this Agreement shall be effective unless evidenced
by an instrument in writing executed by the parties hereto.
14.4 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14.5 Severability. If any provision of this Agreement shall
be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
14.6 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without
the written consent of the other party hereto.
14.7 Headings. The headings of sections in this Agreement are
for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its
behalf by its representatives thereunto duly authorized, all as of
the day and year first above written.
ATTEST: TAX-FREE TRUST OF OREGON
By:
Assistant Secretary President
ATTEST: BANK ONE TRUST COMPANY, N.A.
By:
Senior Trust Officer
<PAGE>
EXHIBIT A
Name of Fund Date Added (if
(if different different from date
from the Trust of original Custody Agreement
<PAGE>
EXHIBIT B
I, Richard F. West, Treasurer, and I, Patricia Craven, Assistant
Secretary, of TAX-FREE TRUST OF OREGON, a Massachusetts business
trust (the "Trust"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Trust in conformity with the Trust's Declaration of
Trust and By-Laws to give Oral Instructions and Certificate on
behalf of the Trust, and the signatures set forth opposite their
respective names are their true and correct signatures:
NAME SIGNATURE
Lacy B. Herrmann _____________________________
Rose F. Marotta _____________________________
Richard F. West _____________________________
William C. Wallace _____________________________
Diana P. Herrmann _____________________________
Charles E. Childs III _____________________________
John M. Herndon _____________________________
William Killeen _____________________________
Patricia A. Craven _____________________________
________________________ _____________________________
Richard F. West, Patricia A. Craven,
Treasurer Assistant Secretary
<PAGE>
EXHIBIT C
Compensation of Custodian - Equity Fund/Money Market Funds
Whereas Article XI of the Custody Agreement between Tax-Free Trust
of Oregon and Bank One Trust Company, N.A. stipulates that the
compensation of Custodian shall be agreed upon by the Trust and
Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to
the following schedule:
I. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction "
includes, but is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit,
withdrawal, and collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement,
overdraft charges will be at 100 basis points above the
Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate
applied to 90% of each day's positive collected balance will reduce
custody, FDIC and other fees as allowed by law. For each month
that the charges exceed the earnings credit, the deficiency shall
be paid to Custodian. For each month that the earnings credit
exceeds the charges, the Custodian shall carry such surplus credits
forward to subsequent month(s) and calendar year(s) until utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to
be exceptional.
The above fee schedule will remain in effect until March 31, 1998
and thereafter unless changed.
As stated by the Custodian in bidding to provide custody services
to the Trust, if at any time the Trust is not completely satisfied
with the Custodian's service levels, the Custodian will cease to
charge custody fees until its responsiveness and accuracy meet the
requirements of the Trust.
<PAGE>
EXHIBIT C
Compensation of Custodian - Bond Funds
Whereas Article XI of the Custody Agreement between Tax-Free Trust
of Oregon and Bank One Trust Company, N.A. stipulates that the
compensation of Custodian shall be agreed upon by the Trust and
Custodian, the following is hereby agreed:
The compensation of the Custodian shall be computed according to
the following schedule:
I. Annual Holding Fee:
.00006 times the market value of assets held
II. Activity Fee:
A. $5.00 per book entry security transaction.
For the purpose of this agreement, a "transaction "
includes, but is not limited to, a purchase sale,
maturity, redemption, tender, exchange, deposit,
withdrawal, and collateral movement of a security.
B. $28.00 per ineligible security transaction.
C. $10.00 per principal paydown on amortized issues.
II. Other Activity Fees:
A. $5.00 per wire.
B. $2.00 per outgoing check from custody account.
III. Overdraft Charges:
As described in Section 4.6 of the Custody Agreement,
overdraft charges will be at 100 basis points above the
Fed Funds rate.
An earnings credit using the most recent 90-day T-bill auction rate
applied to 90% of each day's positive collected balance will reduce
custody, FDIC and other fees as allowed by law. For each month
that the charges exceed the earnings credit, the deficiency shall
be paid to Custodian. For each month that the earnings credit
exceeds the charges, the Custodian shall carry such surplus credits
forward to subsequent month(s) and calendar year(s) until utilized.
Custodian is to be reimbursed for out of pocket expenses deemed to
be exceptional.
The above fee schedule will remain in effect until March 31, 1998
and thereafter unless changed.
As stated by the Custodian in bidding to provide custody services
to the Trust, if at any time the Trust is not completely satisfied
with the Custodian's service levels, the Custodian will cease to
charge custody fees until its responsiveness and accuracy meet the
requirements of the Trust.
TAX-FREE TRUST OF OREGON
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
THIS AGREEMENT, made the 1st day of July, 1995, by and
between The Cascades Trust (the "Business Trust"), a
Massachusetts business Trust, 380 Madison Avenue, Suite 2300, New
York, New York 10017 and Aquila Management Corporation (the
"Administrator"), a New York corporation, 380 Madison Avenue,
Suite 2300, New York, New York 10017
W I T N E S S E T H
WHEREAS, the Business Trust and the Administrator have
previously entered into an Administration Agreement with respect
to a portfolio of the Business Trust entitled Tax-Free Trust of
Oregon (the "Trust"); and
WHEREAS, the Business Trust and the Administrator now wish
to amend and restate their agreement as herein set forth,
referred to hereafter as "this Agreement";
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. In General.
The Administrator shall perform (at its own expense) the
functions set forth more fully herein for the Trust and for the
investment adviser for the Trust (the "Adviser").
2. Duties and Obligations of the Adviser and Administrator to
the Trust and to Each Other.
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of
the Business Trust, the Administrator shall provide all
administrative services to the Trust other than those services
relating to the investment portfolio of the Trust and the
maintenance of its accounting books and records; as part of such
duties, the Administrator shall:
(i) provide office space, personnel, facilities and
equipment for the performance of the following functions and
for the maintenance of the headquarters of the Trust;
(ii) oversee all relationships between the Trust and its
transfer agent, custodian, legal counsel, auditors and
principal underwriter, including the negotiation of
agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the
overseeing of all administrative matters which are necessary
or desirable for the effective operation of the Trust and
for the sale, servicing or redemption of the Trust's shares;
(iii) provide to the Adviser and the Trust statistical and
other factual information and advice regarding economic
factors and trends, but shall not generally furnish advice
or make recommendations regarding the purchase or sale of
securities;
(iv) maintain the Trust's books and records (other than
accounting books and records), and prepare (or assist
counsel and auditors in the preparation of) all required
proxy statements, reports to the Trust's shareholders and
Trustees, reports to and other filings with the Securities
and Exchange Commission and any other governmental agencies,
and tax returns, and oversee the insurance relationships of
the Trust;
(v) prepare, on behalf of the Trust and at the Trust's
expense, such applications and reports as may be necessary
to register or maintain the registration of the Trust and/or
its shares under the securities or "Blue-Sky" laws of all
such jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of
shareholders of the Trust and broker-dealers, or if any such
inquiry or communication is more properly to be responded to
by the Trust's shareholder servicing and transfer agent or
distributor, oversee such shareholder servicing and transfer
agent's or distributor's response thereto.
(b) Any activities performed by the Administrator under this
section shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the Investment Company Act of
1940 (the "Act") and any rules or regulations in force
thereunder; (2) any other applicable laws, rules and regulations;
(3) the Declaration of Trust and By-Laws of the Business Trust as
amended and restated from time to time; (4) any policies and
determinations of the Board of Trustees of the Business Trust;
and (5) the fundamental policies of the Trust, as reflected in
its registration statement under the Act, or as amended by the
shareholders of the Trust.
(c) The Administrator assumes no responsibility under this
Agreement other than to render the services called for hereunder,
and specifically assumes no responsibilities for investment
advice or the investment or reinvestment of the Trust's assets.
(d) The Administrator shall not be liable for any error in
judgment or for any loss suffered by the Trust in connection with
the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Agreement.
(e) Nothing in this Agreement shall prevent the
Administrator or any officer thereof from acting as investment
adviser, sub-adviser, administrator or manager for any other
person, firm, or corporation, and shall not in any way limit or
restrict the Administrator or any of its officers, stockholders
or employees from buying, selling or trading any securities for
its own or their own accounts or for the accounts of others for
whom it or they may be acting, provided, however, that the
Administrator expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the
performance of its obligations to the Adviser or the Trust under
this Agreement. The Business Trust shall indemnify the
Administrator to the full extent permitted by the Business
Trust's Declaration of Trust.
3. Allocation of Expenses.
The Administrator shall, at its own expense, provide office
space, facilities, equipment, and personnel for the performance
of its functions hereunder and shall pay all compensation of
Trustees, officers, and employees of the Trust who are affiliated
persons of the Administrator.
4. Compensation of the Administrator.
(a) The Business Trust shall pay the Administrator, and the
Administrator shall accept as full compensation for all services
rendered hereunder, a fee payable monthly and computed on the net
asset value of the Trust at the end of each business day at the
annual rate of 0.25 of 1% of such net asset value, provided,
however, that for any day that the Trust pays or accrues a fee
under the Distribution Plan of the Trust based upon the assets of
the Trust, the annual management fee shall be payable at the
annual rate of 0.20 of 1% of such net asset value.
(b) The above fee shall be reduced, but not below zero, by
an amount equal to one-half 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 such assets in excess of $100 million, or (ii) 25% of the
Trust's total annual investment income. The payment of the above
fee 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, subject to readjustment during the year.
5. Duration and Termination.
(a) This Agreement shall become effective as of the date
first written above, after approval by a vote of a majority of
the Trustees who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party, with votes
cast in person at a meeting called for the purpose of voting on
such approval and shall, unless terminated as hereinafter
provided, continue in effect until the June 30 next preceding the
first anniversary of the effective date of this Agreement, and
from year to year thereafter.
(b) This Agreement may be terminated by the Administrator at
any time without penalty upon giving the Adviser and the Business
Trust sixty days' written notice (which notice may be waived by
them) and may be terminated by the Business Trust at any time
without penalty upon giving the Administrator sixty days' written
notice (which notice may be waived by the Administrator) provided
that such termination by the Business Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the
time, including a majority of the Trustees who are not interested
persons (as defined in the Act) of the Business Trust.
(c) This Agreement may not be amended, nor shall any
successor agreement between the parties be executed or delivered,
to increase the compensation of the Administrator without the
vote of the Business Trust's Board of Trustees, including a vote
of a majority of the Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any
such party, with votes cast in person at a meeting called for the
purpose of voting on such approval, and the vote of the holders
of a "majority" (as so defined) of the outstanding voting
securities of the Trust.
6. Disclaimer of Shareholder Liability
The Administrator understands that the obligations of this
Agreement are not binding upon any shareholder of the Trust
personally, but bind only the Trust's property; the Administrator
represents that it has notice of the provisions of the Business
Trust's Declaration of Trust disclaiming shareholder liability
for acts or obligations of the Business Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers and
their seals to be hereunto affixed, all as of the day and year
first above written.
ATTEST: The Cascades Trust
________________________ By:___________________________________
ATTEST: Aquila Management Corporation
_______________________ By:___________________________________
Dated: July 1, 1995
Tax-Free Trust of Oregon
DISTRIBUTION PLAN
1. The Plan. This amended and restated Plan (the "Plan") is
the written plan, contemplated by Rule 12b-1 (the "Rule") under
the Investment Company Act of 1940 (the "1940 Act") of Tax-Free
Trust of Oregon (the "Trust"), a portfolio of The Cascades Trust,
a Massachusetts business trust (referred to herein as the
"Business Trust").
2. Definitions. As used in this Plan, "Qualified Recipients"
shall mean broker-dealers or others selected by Aquila
Distributors, Inc. (the "Distributor"), including but not limited
to any principal underwriter of the Trust with which the
Distributor has entered into written agreements ("Related
Agreements") contemplated by the Rule and which have rendered
assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's shares or servicing
of shareholder accounts. "Qualified Holdings" shall mean, as to
any Qualified Recipient, all Trust shares beneficially owned by
such Qualified Recipient, or beneficially owned by its brokerage
customers, other customers, other contacts, investment advisory
clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase
and/or retention of such Trust shares and/or in providing
administrative assistance or other services in relation thereto.
3. Certain Payments Permitted. Subject to the direction and
control of the Board of Trustees of the Business Trust, the Trust
may make payments ("Permitted Payments") to Qualified Recipients,
which Permitted Payments may be made directly, or through the
Distributor or shareholder servicing agent as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as
adjusted for any part or parts of a fiscal year during which
payments under the Plan are not accruable or for any fiscal year
which is not a full fiscal year) 0.15 of 1% of the average annual
net assets of the Trust. The Distributor shall have sole
authority (i) as to the selection of any Qualified Recipient or
Recipients; (ii) not to select any Qualified Recipient; and (iii)
the amount of Permitted Payments, if any, to each Qualified
Recipient provided that the total Permitted Payments to all
Qualified Recipients do not exceed the amount set forth above.
The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it,
the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified
Recipient has, at its expense, taken steps in the shareholder
servicing area, including without limitation, any or all of the
following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Trust may be effected; assisting
shareholders in designating and changing dividend options,
account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption
transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or
redeem shares; verifying and guaranteeing shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person)
monthly and year end statements and confirmations of purchases
and redemptions; transmitting, on behalf of the Trust, proxy
statements, annual reports, updating prospectuses and other
communications from the Trust to its shareholders; receiving
tabulating and transmitting to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the
Distributor or a shareholder may request from time to time; and
(c) the possibility that the Qualified Holdings of the Qualified
Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the
foregoing two sentences, a majority of the Independent Trustees
(as defined below) may remove any person as a Qualified
Recipient. Amounts within the above limits accrued to a
Qualified Recipient but not paid during a fiscal year may be paid
thereafter; if less than the full amount is accrued to all
Qualified Recipients, the difference will not be carried over to
subsequent years.
4. Additional Payments by the Administrator. Whenever the
Administrator (i) makes any payment directly or through the
Distributor for additional compensation to dealers in connection
with sales of shares of the Trust, which additional compensation
may include payment or partial payment for advertising of the
Trust's shares, payment of travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered
representatives and members of their families to locations within
or outside of the United States, other prizes or financial
assistance to securities dealers in offering their own seminars
or conferences, or other items described in the Trust's
prospectus, in amounts that will not exceed the amount of the
sales charges in respect of sales of shares of the Trust effected
through such participating dealers whether retained by
Distributor or reallowed to participating dealers, or (ii) bears
the costs, not borne by the Trust's Distributor, of printing and
distributing all copies of the Trust's prospectuses, statements
of additional information and reports to shareholders which are
not sent to the Trust's shareholders, or the costs of
supplemental sales literature and advertising, such payments are
authorized.
It is recognized that, in view of the bearing by the
Administrator of certain distribution expenses, the profits, if
any, of the Administrator are dependent primarily on the
administration fees paid by the Trust to the Administrator and
that its profits, if any, would be less, or losses, if any, would
be increased due to the bearing by it of such expenses. If and to
the extent that any such administration fees paid by the Trust
might, in view of the foregoing, be considered as indirectly
financing any activity which is primarily intended to result in
the sale of shares issued by the Trust, the payment of such fees
is authorized by the Plan.
5. Certain Trust Payments Authorized. If and to the extent
that any of the payments listed below are considered to be
"primarily intended to result in the sale of" shares issued by
the Trust within the meaning of the Rule, such payments are
authorized under this Plan: (i) the costs of the preparation of
all reports and notices to shareholders and the costs of printing
and mailing such reports and notices to existing shareholders,
irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of shares
of the Trust or other funds or other investments; (ii) the costs
of the preparation and setting in type of all prospectuses and
statements of additional information, and the costs of printing
and mailing of all prospectuses and statements of additional
information to existing shareholders; (iii) the costs of the
preparation, printing and mailing of all proxy statements and
proxies, irrespective of whether any such proxy statement
includes any item relating to, or directed toward, the sale of
the Trust's shares; (iv) all legal and accounting fees relating
to the preparation of any such reports, prospectuses, statements
of additional information, proxies and proxy statements; (v) all
fees and expenses relating to the registration or qualification
of the Trust and/or its shares under the securities or "Blue-Sky"
laws of any jurisdiction; (vi) all fees under the Securities Act
of 1933 and the 1940 Act, including fees in connection with any
application for exemption relating to or directed toward the sale
of the Trust's shares; (vii) all fees and assessments of the
Investment Company Institute or any successor organization,
irrespective of whether some of its activities are designed to
provide sales assistance; (viii) all costs of the preparation and
mailing of confirmations of shares sold or redeemed or share
certificates, and reports of share balances; and (ix) all costs
of responding to telephone or mail inquiries of investors.
6. Disinterested Trustees. While this Plan is in effect, the
selection and nomination of those Trustees of the Business Trust
who are not "interested persons" of the Business Trust shall be
committed to the discretion of such disinterested Trustees.
Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.
7. Reports. While this Plan is in effect, the Trust's
sub-adviser, administrator or Distributor shall report at least
quarterly to the Business Trust's Trustees in writing for their
review on the following matters: (i) all Permitted Payments made
under Section 3 of this Plan, the identity of the Qualified
Recipient of each payment, and the purposes for which the amounts
were expended; (ii) all payments made under Section 4 of this
Plan; (iii) all costs of each item specified in Section 5 of this
Plan (making estimates of such costs where necessary or
desirable) during the preceding calendar or fiscal quarter; and
(iv) all fees of the Trust to the Distributor, sub-adviser or
administrator paid or accrued during such quarter. In addition
if any such Qualified Recipient is an affiliate, as that term is
defined in the Act, of the Trust, the Adviser, the Administrator
or the Distributor, such person shall agree to furnish to the
Distributor for transmission to the Board of Trustees of the
Business Trust an accounting, in form and detail satisfactory to
the Board of Trustees, to enable the Board of Trustees to make
the determinations of the fairness of the compensation paid to
such affiliated person, not less often than annually.
8. Effectiveness, Continuation, Termination and Amendment.
This Plan originally went into effect when it was approved (i) by
a vote of the Trustees of the Business Trust and of those
Trustees (the "Independent Trustees") who, at the time of such
vote, were not "interested persons" as defined in the 1940 Act of
the Business Trust and had no direct or indirect financial
interest in the operation of this Plan or in any agreements
related to this Plan, with votes cast in person at a meeting
called for the purpose of voting on this Plan; and (ii) by a vote
of holders of at least a "majority" (as so defined) of the
outstanding voting securities of the Trust. This Plan has
continued, and will, unless terminated as hereinafter provided,
continue in effect until the June 30 next succeeding the date
first written above and from year to year thereafter only so long
as such continuance is specifically approved at least annually by
the Business Trust's Trustees and its Independent Trustees with
votes cast in person at a meeting called for the purpose of
voting on such continuance. This Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by
the vote of the holders of a "majority" (as defined in the 1940
Act) of the outstanding voting securities of the Trust. This
Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval as set forth in
(ii) above, and all amendments must be approved in the manner set
forth in (i) above.
9. Related Agreements. In the case of a Qualified Recipient
which is a principal underwriter of the Trust, the related
agreement shall be the agreement contemplated by Section 15(b) of
the 1940 Act since each such agreement must be approved in
accordance with, and contain the provisions required by, the
Rule. In the case of Qualified Recipients which are not
principal underwriters of the Trust, any related agreements with
them shall be approved in accordance with, and contain the
provisions required by, the Rule.
---------------------
(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.
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<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.
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<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
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<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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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
custodian 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
9
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1995
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (51.8%) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
RATING
FACE MOODYS/
AMOUNT STATE OF OREGON REVENUE BONDS (CONTINUED) S&P VALUE
<C> <S> <C> <C>
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
<FN>
(*) 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.
</FN>
<FN>
(**)Aggregate cost for Federal tax purposes is $287,860,457.
</FN>
</TABLE>
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
Year Ended Year Ended
September 30, September 30,
1995 1994
<S> <C> <C>
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>
<CAPTION>
TRUST SHARE
TRANSACTIONS:
SHARES
Year Ended Year Ended
September September
30, 1995 30, 1994
<S> <C> <C> <C> <C>
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>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year
Year ended September 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
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
<TABLE>
<CAPTION>
Tax-Free Trust of Oregon T O T A L R E T U R N B A S E D O N P O P
1-YEAR TOTAL RETURN TO 9/30/95: 5.09%
<S> <C>
Initial Investment $1,000
Net Asset Value Per Share (NAV) $10.20 As of 9/30/94
Public Offering Price Per Share (PO $10.63 As of 9/30/94
Number of Shares Purchased 94.073 Based on POP
</TABLE>
<TABLE>
<CAPTION>
ENDING ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET OFFERING INVESTMENT CUMULATIVE
@ BEGINNING OF DIVIDEND $ VALUE PER PRICE PER DIVIDEND @ END TOTAL
OF PERIOD SHARES FACTOR DIVIDEND SHARE SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OCTOBER 1994 1,000.00 94.073 0.038202 * 3.59 10.04 10.46 0.358 948.09 -5.19%
NOVEMBER 1994 948.09 94.431 0.047774 4.51 9.75 10.16 0.463 925.22 -7.48%
DECEMBER 1994 925.22 94.894 0.084616 8.03 9.93 10.34 0.809 950.33 -4.97%
JANUARY 1995 950.33 95.703 0.046165 4.42 10.03 10.45 0.440 964.32 -3.57%
FEBRUARY 1995 964.32 96.143 0.044393 4.27 10.29 10.72 0.415 993.58 -0.64%
MARCH 1995 993.58 96.558 0.047190 4.56 10.39 10.82 0.439 1,007.79 0.78%
APRIL 1995 1,007.79 96.996 0.045641 4.43 10.40 10.83 0.426 1,013.19 1.32%
MAY 1995 1,013.19 97.422 0.045744 4.46 10.52 10.96 0.424 1,029.34 2.93%
JUNE 1995 1,029.34 97.846 0.046474 4.55 10.53 10.97 0.432 1,034.86 3.49%
JULY 1995 1,034.86 98.278 0.046066 4.53 10.47 10.91 0.432 1,033.49 3.35%
AUGUST 1995 1,033.49 98.710 0.047096 4.65 10.48 10.92 0.444 1,039.13 3.91%
SEPTEMBER 27, 1995** 1,039.13 99.154 0.043766 4.34 10.48 10.92 0.414 1,043.47 4.35%
SEPTEMBER 30, 1995 1,043.47 99.568 0.004352 0.43 10.55 10.99 0.041 1,050.87 5.09%
1-YEAR TOTAL RETURN TO 9/30/95: 5.09%
<FN>
* From 10/1/94-10/25/94
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Trust of Oregon T O T A L R E T U R N B A S E D O N P O P
AVG ANNUAL TOTAL RETURN SINCE INCEPTION TO 9/30/95: 7.01%
CUMULATIVE TOTAL RETURN SINCE INCEPTION TO 9/30/95: 87.67%
<S> <C>
Initial Investment $10,000
Net Asset Value Per Share (NAV) $9.60 As of 6/16/86
Public Offering Price Per Share (PO $10.00 As of 6/16/86
Number of Shares Purchased 1000.000 Based on POP
ENDING ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET OFFERING INVESTMENT CUMULATIVE
@ BEGINNING OF DIVIDEND $ VALUE PER PRICE PER DIVIDEND @ END TOTAL
OF PERIOD SHARES FACTOR DIVIDEND SHARE SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JUNE 1986 10,000.00 1,000.000 0.004571 4.57 9.58 9.98 0.477 9,584.57 -4.15%
JULY 1986 9,584.57 1,000.477 0.047946 47.97 9.48 9.88 5.060 9,532.49 -4.68%
AUGUST 1986 9,532.49 1,005.537 0.054356 54.66 9.89 10.30 5.526 9,999.42 -0.01%
SEPTEMBER 1986 9,999.42 1,011.064 0.060560 61.23 9.82 10.23 6.235 9,989.87 -0.10%
OCTOBER 1986 9,989.87 1,017.299 0.060841 61.89 10.05 10.47 6.159 10,285.75 2.86%
NOVEMBER 1986 10,285.75 1,023.457 0.052641 53.88 10.12 10.54 5.324 10,411.26 4.11%
DECEMBER 1986 10,411.26 1,028.781 0.062475 64.27 10.07 10.49 6.383 10,424.10 4.24%
JANUARY 1987 10,424.10 1,035.164 0.057295 59.31 10.19 10.61 5.820 10,607.63 6.08%
FEBRUARY 1987 10,607.63 1,040.984 0.052518 54.67 10.26 10.69 5.328 10,735.17 7.35%
MARCH 1987 10,735.17 1,046.313 0.059281 62.03 10.12 10.54 6.129 10,650.71 6.51%
APRIL 1987 10,650.71 1,052.442 0.055550 58.46 9.48 9.88 6.167 10,035.61 0.36%
MAY 1987 10,035.61 1,058.609 0.052867 55.97 9.21 9.59 6.077 9,805.75 -1.94%
JUNE 1987 9,805.75 1,064.685 0.058127 61.89 9.39 9.78 6.591 10,059.28 0.59%
JULY 1987 10,059.28 1,071.276 0.055313 59.26 9.50 9.90 6.237 10,236.38 2.36%
AUGUST 1987 10,236.38 1,077.513 0.055713 60.03 9.53 9.93 6.299 10,328.74 3.29%
SEPTEMBER 1987 10,328.74 1,083.813 0.052729 57.15 9.11 9.49 6.273 9,930.68 -0.69%
OCTOBER 1987 9,930.68 1,090.086 0.053614 58.44 9.07 9.45 6.444 9,945.52 -0.54%
NOVEMBER 1987 9,945.52 1,096.529 0.055576 60.94 9.33 9.72 6.532 10,291.56 2.92%
DECEMBER 1987 10,291.56 1,103.061 0.055723 61.47 9.48 9.88 6.484 10,518.49 5.18%
JANUARY 1988 10,518.49 1,109.545 0.052076 57.78 9.74 10.15 5.932 10,864.75 8.65%
FEBRUARY 1988 10,864.75 1,115.477 0.055061 61.42 9.78 10.19 6.280 10,970.79 9.71%
MARCH 1988 10,970.79 1,121.757 0.055107 61.82 9.56 9.96 6.466 10,785.82 7.86%
APRIL 1988 10,785.82 1,128.224 0.050989 57.53 9.54 9.94 6.030 10,820.78 8.21%
MAY 1988 10,820.78 1,134.254 0.057241 64.93 9.51 9.91 6.827 10,851.68 8.52%
JUNE 1988 10,851.68 1,141.081 0.053919 61.53 9.58 9.98 6.422 10,993.08 9.93%
JULY 1988 10,993.08 1,147.503 0.051692 59.32 9.57 9.97 6.198 11,040.92 10.41%
AUGUST 1988 11,040.92 1,153.701 0.059259 68.37 9.56 9.96 7.151 11,097.75 10.98%
SEPTEMBER 1988 11,097.75 1,160.853 0.053453 62.05 9.67 10.07 6.417 11,287.50 12.87%
OCTOBER 1988 11,287.50 1,167.269 0.055425 64.70 9.75 10.16 6.635 11,445.57 14.46%
NOVEMBER 1988 11,445.57 1,173.905 0.053727 63.07 9.71 10.11 6.495 11,461.69 14.62%
DECEMBER 1988 11,461.69 1,180.400 0.053728 63.42 9.64 10.04 6.579 11,442.48 14.42%
JANUARY 1989 11,442.48 1,186.979 0.057007 67.67 9.81 10.22 6.898 11,711.93 17.12%
FEBRUARY 1989 11,711.93 1,193.877 0.049885 59.56 9.73 10.14 6.121 11,675.98 16.76%
MARCH 1989 11,675.98 1,199.998 0.055668 66.80 9.61 10.01 6.951 11,598.78 15.99%
APRIL 1989 11,598.78 1,206.949 0.050123 60.50 9.80 10.21 6.173 11,888.60 18.89%
MAY 1989 11,888.60 1,213.122 0.059390 72.05 9.94 10.35 7.248 12,130.48 21.30%
JUNE 1989 12,130.48 1,220.370 0.051936 63.38 9.95 10.36 6.370 12,206.07 22.06%
JULY 1989 12,206.07 1,226.740 0.049851 61.15 9.98 10.40 6.128 12,304.02 23.04%
AUGUST 1989 12,304.02 1,232.868 0.056334 69.45 9.89 10.30 7.022 12,262.52 22.63%
SEPTEMBER 1989 12,262.52 1,239.890 0.051451 63.79 9.77 10.18 6.530 12,177.52 21.78%
OCTOBER 1989 12,177.52 1,246.420 0.051473 64.16 9.85 10.26 6.513 12,341.39 23.41%
NOVEMBER 1989 12,341.39 1,252.933 0.058446 73.23 9.89 10.30 7.404 12,464.74 24.65%
DECEMBER 1989 12,464.74 1,260.338 0.051122 64.43 9.93 10.34 6.489 12,579.58 25.80%
JANUARY 1990 12,579.58 1,266.826 0.053255 67.46 9.78 10.19 6.898 12,457.03 24.57%
FEBRUARY 1990 12,457.03 1,273.725 0.056423 71.87 9.79 10.20 7.341 12,541.63 25.42%
MARCH 1990 12,541.63 1,281.065 0.048943 62.70 9.77 10.18 6.418 12,578.71 25.79%
APRIL 1990 12,578.71 1,287.483 0.053231 68.53 9.69 10.09 7.073 12,544.24 25.44%
MAY 1990 12,544.24 1,294.556 0.053140 68.79 9.77 10.18 7.041 12,716.60 27.17%
JUNE 1990 12,716.60 1,301.597 0.054313 70.69 9.79 10.20 7.221 12,813.33 28.13%
JULY 1990 12,813.33 1,308.818 0.052863 69.19 9.85 10.26 7.024 12,961.04 29.61%
AUGUST 1990 12,961.04 1,315.842 0.052704 69.35 9.66 10.06 7.179 12,780.38 27.80%
SEPTEMBER 1990 12,780.38 1,323.021 0.054385 71.95 9.66 10.06 7.448 12,852.34 28.52%
OCTOBER 1990 12,852.34 1,330.470 0.054648 72.71 9.73 10.14 7.473 13,018.18 30.18%
NOVEMBER 1990 13,018.18 1,337.942 0.056377 75.43 9.88 10.29 7.635 13,294.30 32.94%
DECEMBER 1990 13,294.30 1,345.577 0.052873 71.14 9.88 10.29 7.201 13,365.44 33.65%
JANUARY 1991 13,365.44 1,352.777 0.052446 70.95 9.93 10.34 7.145 13,504.03 35.04%
FEBUARY 1991 13,504.03 1,359.922 0.053805 73.17 10.01 10.43 7.310 13,685.99 36.86%
MARCH 1991 13,685.99 1,367.232 0.049989 68.35 9.92 10.33 6.890 13,631.29 36.31%
APRIL 1991 13,631.29 1,374.122 0.052056 71.53 9.95 10.36 7.189 13,744.04 37.44%
MAY 1991 13,744.04 1,381.311 0.048852 67.48 10.00 10.42 6.748 13,880.59 38.81%
JUNE 1991 13,880.59 1,388.059 0.053360 74.07 9.92 10.33 7.466 13,843.61 38.44%
JULY 1991 13,843.61 1,395.525 0.051891 72.42 10.00 10.42 7.242 14,027.67 40.28%
AUGUST 1991 14,027.67 1,402.767 0.053103 74.49 10.06 10.48 7.405 14,186.33 41.86%
SEPTEMBER 1991 14,186.33 1,410.171 0.051400 72.48 10.15 10.57 7.141 14,385.72 43.86%
OCTOBER 1991 14,385.72 1,417.313 0.050959 72.22 10.15 10.57 7.116 14,457.95 44.58%
NOVEMBER 1991 14,457.95 1,424.428 0.052411 74.66 10.17 10.59 7.341 14,561.09 45.61%
DECEMBER 1991 14,561.09 1,431.769 0.052212 74.76 10.28 10.71 7.272 14,793.34 47.93%
JANUARY 1992 14,793.34 1,439.041 0.053991 77.70 10.35 10.78 7.507 14,971.77 49.72%
FEBRUARY 1992 14,971.77 1,446.548 0.049722 71.93 10.25 10.68 7.017 14,899.04 48.99%
MARCH 1992 14,899.04 1,453.565 0.049315 71.68 10.19 10.61 7.035 14,883.51 48.84%
APRIL 1992 14,883.51 1,460.600 0.051694 75.50 10.23 10.66 7.381 15,017.44 50.17%
MAY 1992 15,017.44 1,467.980 0.050288 73.82 10.32 10.75 7.153 15,223.38 52.23%
JUNE 1992 15,223.38 1,475.134 0.049591 73.15 10.40 10.83 7.034 15,414.54 54.15%
JULY 1992 15,414.54 1,482.168 0.051154 75.82 10.61 11.05 7.146 15,801.62 58.02%
AUGUST 1992 15,801.62 1,489.313 0.049199 73.27 10.46 10.90 7.005 15,651.49 56.51%
SEPTEMBER 1992 15,651.49 1,496.319 0.049145 73.54 10.47 10.91 7.024 15,739.99 57.40%
OCTOBER 1992 15,739.99 1,503.342 0.050869 76.47 10.29 10.72 7.432 15,545.86 55.46%
NOVEMBER 1992 15,545.86 1,510.774 0.049453 74.71 10.43 10.86 7.163 15,832.08 58.32%
DECEMBER 1992 15,832.08 1,517.937 0.081718 124.04 10.45 10.89 11.870 15,986.49 59.86%
JANUARY 1993 15,986.49 1,529.807 0.048740 74.56 10.53 10.97 7.081 16,183.43 61.83%
FEBRUARY 1993 16,183.43 1,536.888 0.048089 73.91 10.81 11.26 6.837 16,687.67 66.88%
MARCH 1993 16,687.67 1,543.725 0.049737 76.78 10.69 11.14 7.182 16,579.20 65.79%
APRIL 1993 16,579.20 1,550.908 0.047455 73.60 10.71 11.16 6.872 16,683.82 66.84%
MAY 1993 16,683.82 1,557.780 0.047339 73.74 10.72 11.17 6.879 16,773.14 67.73%
JUNE 1993 16,773.14 1,564.659 0.049125 76.86 10.79 11.24 7.124 16,959.53 69.60%
JULY 1993 16,959.53 1,571.782 0.047422 74.54 10.76 11.21 6.927 16,986.91 69.87%
AUGUST 1993 16,986.91 1,578.709 0.047016 74.22 10.90 11.35 6.810 17,282.16 72.82%
SEPTEMBER 1993 17,282.16 1,585.519 0.048418 76.77 10.96 11.42 7.004 17,454.06 74.54%
OCTOBER 1993 17,454.06 1,592.523 0.046418 73.92 10.90 11.35 6.782 17,432.43 74.32%
NOVEMBER 1993 17,432.43 1,599.305 0.046859 74.94 10.80 11.25 6.939 17,347.44 73.47%
DECEMBER 1993 17,347.44 1,606.244 0.047932 76.99 10.92 11.38 7.050 17,617.18 76.17%
JANUARY 1994 17,617.18 1,613.295 0.044567 71.90 10.93 11.39 6.578 17,705.21 77.05%
FEBRUARY 1994 17,705.21 1,619.873 0.045788 74.17 10.73 11.18 6.912 17,455.41 74.55%
MARCH 1994 17,455.41 1,626.785 0.044714 72.74 10.52 10.96 6.914 17,186.52 71.87%
APRIL 1994 17,186.52 1,633.700 0.047809 78.11 10.39 10.82 7.517 17,052.25 70.52%
MAY 1994 17,052.25 1,641.217 0.046405 76.16 10.37 10.80 7.344 17,095.58 70.96%
JUNE 1994 17,095.58 1,648.562 0.046201 76.17 10.34 10.77 7.366 17,122.29 71.22%
JULY 1994 17,122.29 1,655.928 0.047093 77.98 10.34 10.77 7.542 17,200.27 72.00%
AUGUST 1994 17,200.27 1,663.469 0.046874 77.97 10.34 10.77 7.541 17,278.25 72.78%
SEPTEMBER 1994 17,278.25 1,671.010 0.048961 81.81 10.22 10.65 8.005 17,159.54 71.60%
OCTOBER 1994 17,159.54 1,679.016 0.044336 74.44 10.04 10.46 7.414 16,931.76 69.32%
NOVEMBER 1994 16,931.76 1,686.430 0.047774 80.57 9.75 10.16 8.263 16,523.26 65.23%
DECEMBER 1994 16,523.26 1,694.693 0.084616 143.40 9.93 10.34 14.441 16,971.70 69.72%
JANUARY 1995 16,971.70 1,709.134 0.046165 78.90 10.03 10.45 7.867 17,221.52 72.22%
FEBRUARY 1995 17,221.52 1,717.001 0.044393 76.22 10.29 10.72 7.407 17,744.16 77.44%
MARCH 1995 17,744.16 1,724.408 0.047190 81.37 10.39 10.82 7.832 17,997.98 79.98%
APRIL 1995 17,997.98 1,732.241 0.045641 79.06 10.40 10.83 7.602 18,094.36 80.94%
MAY 1995 18,094.36 1,739.843 0.045744 79.59 10.52 10.96 7.565 18,382.73 83.83%
JUNE 1995 18,382.73 1,747.408 0.046474 81.21 10.53 10.97 7.712 18,481.41 84.81%
JULY 1995 18,481.41 1,755.120 0.046066 80.85 10.47 10.91 7.722 18,456.96 84.57%
AUGUST 1995 18,456.96 1,762.842 0.047096 83.02 10.48 10.92 7.922 18,557.61 85.58%
SEPTEMBER 27, 1995* 18,557.61 1,770.764 0.043766 77.50 10.48 10.92 7.395 18,635.11 86.35%
SEPTEMBER 30, 1995 18,635.11 1,778.159 0.004352 7.74 10.55 10.99 0.734 18,767.32 87.67%
AVG ANNUAL TOTAL RETURN SINCE INCEPTION TO 9/30/95: 7.01%
<FN>
* Record Date CUMULATIVE TOTAL RETURN SINCE INCEPTION TO9/30/95: 87.67%
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Trust of Oregon
Taxable Equivalent Yield
September 30, 1995
<S> <C>
S.E.C. Yield 4.24 %
Taxable Portion 1.02 %
Tax-Exempt Portion 98.98 %
Combined Effective Tax Rate 46.12 %
Balance (remainder) 53.88 %
Taxable Equivalent Yield 7.83 %
[ (.0424 * .9898) / .5388) + (.0424 * .0102) ]
0.07789072 + 0.00043248
0.0783
OR
7.83%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Trust of Oregon T O T A L R E T U R N B A S E D O N P O P
5-YEAR AVERAGE ANNUAL TOTAL RETURN TO 9/30/95: 6.96%
<S> <C>
Initial Investment $1,000
Net Asset Value Per Share (NAV) $9.67 As of 9/28/90
Public Offering Price Per Share (PO $10.07 As of 9/28/90
Number of Shares Purchased 99.305 Based on POP
<CAPTION>
ENDING ENDING
INVESTMENT NUMBER PERIOD PERIOD NET ASSET OFFERING INVESTMENT CUMULATIVE
@ BEGINNING OF DIVIDEND $ VALUE PER PRICE PER DIVIDEND @ END TOTAL
OF PERIOD SHARES FACTOR DIVIDEND SHARE SHARE SHARES OF PERIOD RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OCTOBER 1990 1,000.00 99.305 0.047679 * 4.73 9.73 10.14 0.487 970.97 -2.90%
NOVEMBER 1990 970.97 99.791 0.056377 5.63 9.88 10.29 0.569 991.57 -0.84%
DECEMBER 1990 991.57 100.361 0.052873 5.31 9.88 10.29 0.537 996.87 -0.31%
JANUARY 1991 996.87 100.898 0.052446 5.29 9.93 10.34 0.533 1,007.21 0.72%
FEBRUARY 1991 1,007.21 101.431 0.053805 5.46 10.01 10.43 0.545 1,020.78 2.08%
MARCH 1991 1,020.78 101.976 0.049989 5.10 9.92 10.33 0.514 1,016.70 1.67%
APRIL 1991 1,016.70 102.490 0.052056 5.34 9.95 10.36 0.536 1,025.11 2.51%
MAY 1991 1,025.11 103.026 0.048852 5.03 10.00 10.42 0.503 1,035.29 3.53%
JUNE 1991 1,035.29 103.529 0.053360 5.52 9.92 10.33 0.557 1,032.54 3.25%
JULY 1991 1,032.54 104.086 0.051891 5.40 10.00 10.42 0.540 1,046.26 4.63%
AUGUST 1991 1,046.26 104.626 0.053103 5.56 10.06 10.48 0.552 1,058.10 5.81%
SEPTEMBER 1991 1,058.10 105.179 0.051400 5.41 10.15 10.57 0.533 1,072.97 7.30%
OCTOBER 1991 1,072.97 105.711 0.050959 5.39 10.15 10.57 0.531 1,078.36 7.84%
NOVEMBER 1991 1,078.36 106.242 0.052411 5.57 10.17 10.59 0.548 1,086.05 8.61%
DECEMBER 1991 1,086.05 106.790 0.052212 5.58 10.28 10.71 0.542 1,103.37 10.34%
JANUARY 1992 1,103.37 107.332 0.053991 5.79 10.35 10.78 0.560 1,116.68 11.67%
FEBRUARY 1992 1,116.68 107.892 0.049722 5.36 10.25 10.68 0.523 1,111.26 11.13%
MARCH 1992 1,111.26 108.415 0.049315 5.35 10.19 10.61 0.525 1,110.10 11.01%
APRIL 1992 1,110.10 108.940 0.051694 5.63 10.23 10.66 0.550 1,120.09 12.01%
MAY 1992 1,120.09 109.490 0.050288 5.51 10.32 10.75 0.534 1,135.45 13.54%
JUNE 1992 1,135.45 110.024 0.049591 5.46 10.40 10.83 0.525 1,149.71 14.97%
JULY 1992 1,149.71 110.549 0.051154 5.66 10.61 11.05 0.533 1,178.58 17.86%
AUGUST 1992 1,178.58 111.082 0.049199 5.47 10.46 10.90 0.522 1,167.38 16.74%
SEPTEMBER 1992 1,167.38 111.604 0.049145 5.48 10.47 10.91 0.524 1,173.98 17.40%
OCTOBER 1992 1,173.98 112.128 0.050869 5.70 10.29 10.72 0.554 1,159.50 15.95%
NOVEMBER 1992 1,159.50 112.682 0.049453 5.57 10.43 10.86 0.534 1,180.85 18.08%
DECEMBER 1992 1,180.85 113.217 0.081718 9.25 10.45 10.89 0.885 1,192.36 19.24%
JANUARY 1993 1,192.36 114.102 0.048740 5.56 10.53 10.97 0.528 1,207.05 20.71%
FEBRUARY 1993 1,207.05 114.630 0.048089 5.51 10.81 11.26 0.510 1,244.66 24.47%
MARCH 1993 1,244.66 115.140 0.049737 5.73 10.69 11.14 0.536 1,236.57 23.66%
APRIL 1993 1,236.57 115.676 0.047455 5.49 10.71 11.16 0.513 1,244.38 24.44%
MAY 1993 1,244.38 116.188 0.047339 5.50 10.72 11.17 0.513 1,251.04 25.10%
JUNE 1993 1,251.04 116.701 0.049125 5.73 10.79 11.24 0.531 1,264.94 26.49%
JULY 1993 1,264.94 117.233 0.047422 5.56 10.76 11.21 0.517 1,266.98 26.70%
AUGUST 1993 1,266.98 117.749 0.047016 5.54 10.90 11.35 0.508 1,289.00 28.90%
SEPTEMBER 1993 1,289.00 118.257 0.048418 5.73 10.96 11.42 0.522 1,301.82 30.18%
OCTOBER 1993 1,301.82 118.780 0.046418 5.51 10.90 11.35 0.506 1,300.21 30.02%
NOVEMBER 1993 1,300.21 119.285 0.046859 5.59 10.80 11.25 0.518 1,293.87 29.39%
DECEMBER 1993 1,293.87 119.803 0.047932 5.74 10.92 11.38 0.526 1,313.99 31.40%
JANUARY 1994 1,313.99 120.329 0.044567 5.36 10.93 11.39 0.491 1,320.56 32.06%
FEBRUARY 1994 1,320.56 120.820 0.045788 5.53 10.73 11.18 0.516 1,301.93 30.19%
MARCH 1994 1,301.93 121.335 0.044714 5.43 10.52 10.96 0.516 1,281.87 28.19%
APRIL 1994 1,281.87 121.851 0.047809 5.83 10.39 10.82 0.561 1,271.86 27.19%
MAY 1994 1,271.86 122.411 0.046405 5.68 10.37 10.80 0.548 1,275.09 27.51%
JUNE 1994 1,275.09 122.959 0.046201 5.68 10.34 10.77 0.549 1,277.08 27.71%
JULY 1994 1,277.08 123.509 0.047093 5.82 10.34 10.77 0.563 1,282.90 28.29%
AUGUST 1994 1,282.90 124.071 0.046874 5.82 10.34 10.77 0.562 1,288.71 28.87%
SEPTEMBER 1994 1,288.71 124.634 0.048961 6.10 10.22 10.65 0.597 1,279.86 27.99%
OCTOBER 1994 1,279.86 125.231 0.044336 5.55 10.04 10.46 0.553 1,262.87 26.29%
NOVEMBER 1994 1,262.87 125.784 0.047774 6.01 9.75 10.16 0.616 1,232.40 23.24%
DECEMBER 1994 1,232.40 126.400 0.084616 10.70 9.93 10.34 1.077 1,265.85 26.58%
JANUARY 1995 1,265.85 127.477 0.046165 5.88 10.03 10.45 0.587 1,284.48 28.45%
FEBRUARY 1995 1,284.48 128.064 0.044393 5.69 10.29 10.72 0.552 1,323.46 32.35%
MARCH 1995 1,323.46 128.616 0.047190 6.07 10.39 10.82 0.584 1,342.39 34.24%
APRIL 1995 1,342.39 129.201 0.045641 5.90 10.40 10.83 0.567 1,349.58 34.96%
MAY 1995 1,349.58 129.768 0.045744 5.94 10.52 10.96 0.564 1,371.09 37.11%
JUNE 1995 1,371.09 130.332 0.046474 6.06 10.53 10.97 0.575 1,378.45 37.85%
JULY 1995 1,378.45 130.907 0.046066 6.03 10.47 10.91 0.576 1,376.63 37.66%
AUGUST 1995 1,376.63 131.483 0.047096 6.19 10.48 10.92 0.591 1,384.13 38.41%
SEPTEMBER 27, 1995** 1,384.13 132.074 0.043766 5.78 10.48 10.92 0.552 1,389.91 38.99%
SEPTEMBER 30, 1995 1,389.91 132.625 0.004352 0.58 10.55 10.99 0.055 1,399.78 39.98%
5-YEAR AVERAGE ANNUAL TOTAL RETURN TO 9/30/95: 6.96%
<FN>
* For the period 10/1/90-10/25/90
</FN>
<FN>
** Record Date
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Tax-Free Trust of Oregon SEC Yield
Accrued Weighted SEC Expenses Daily Shares
Date Interest Market Value Avg Yld Income (Net of Reimburs.) Outstanding POP SEC Yield
- --------- ------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/01/95 5,389,232.01 305,305,087.50 5.13 44,273.94 6,125.15 29,494,224.585 11.00
09/02/95 5,389,232.01 305,305,087.50 5.13 44,273.94 6,133.45 29,494,224.585 11.01
09/03/95 5,389,232.01 305,305,087.50 5.13 44,273.94 6,133.45 29,494,224.585 11.01
09/04/95 5,389,232.01 305,305,087.50 5.13 44,273.94 6,133.45 29,494,228.585 11.01
09/05/95 4,660,726.81 305,556,481.25 5.11 44,033.61 6,133.45 29,486,390.904 11.01
09/06/95 4,710,009.46 305,535,418.75 5.11 44,037.61 6,138.89 29,492,686.085 11.01
09/07/95 4,673,307.31 305,380,175.00 5.12 44,096.50 6,138.62 29,481,627.170 11.00
09/08/95 4,722,593.08 305,354,206.25 5.12 44,099.81 6,136.72 29,474,253.416 11.00
09/09/95 4,722,593.08 305,354,206.25 5.12 44,099.81 6,134.39 29,474,253.416 11.01
09/10/95 4,722,593.08 305,354,206.25 5.12 44,099.81 6,134.39 29,474,253.416 11.01
09/11/95 4,870,450.75 305,354,206.25 5.12 44,120.84 6,134.39 29,515,517.006 11.01
09/12/95 4,919,736.71 306,180,343.75 5.06 43,726.84 6,134.94 29,463,504.898 11.04
09/13/95 4,971,008.21 305,688,962.50 5.06 43,664.98 6,148.19 29,457,177.932 11.04
09/14/95 5,020,177.43 305,829,212.50 5.05 43,605.26 6,147.42 29,476,338.993 11.04
09/15/95 5,069,346.29 305,692,237.50 5.06 43,679.27 6,150.20 29,471,285.030 11.04
09/16/95 5,069,346.29 305,692,237.50 5.06 43,679.27 6,146.76 29,471,285.030 11.02
09/17/95 5,069,346.29 305,692,237.50 5.06 43,679.27 6,146.76 29,471,285.030 11.02
09/18/95 5,178,983.16 305,403,487.50 5.08 43,826.64 6,146.76 29,462,935.751 11.02
09/19/95 5,227,719.39 302,283,718.75 5.07 43,307.86 6,140.24 29,453,129.193 11.03
09/20/95 5,276,455.75 302,317,156.25 5.07 43,319.43 6,138.84 29,425,417.745 11.03
09/21/95 5,325,192.16 301,273,318.75 5.15 43,860.62 6,136.04 29,431,315.106 10.98
09/22/95 5,373,928.42 300,684,900.00 5.20 44,208.50 6,115.52 29,422,065.488 10.95
09/23/95 5,373,928.42 300,684,900.00 5.20 44,208.50 6,101.36 29,422,065.488 10.96
09/24/95 5,373,928.42 300,684,900.00 5.20 44,208.50 6,101.36 29,422,065.488 10.96
09/25/95 5,520,137.65 300,721,100.00 5.19 44,149.78 6,101.36 29,409,101.338 10.96
09/26/95 5,568,874.02 300,935,756.25 5.17 44,017.47 6,098.85 29,406,838.499 10.97
09/27/95 5,617,610.31 300,038,381.25 5.25 44,574.83 6,104.05 29,401,249.831 10.92
09/28/95 5,666,346.65 300,454,518.75 5.22 44,387.53 6,085.02 29,465,938.042 10.95
09/29/95 5,736,449.88 301,875,231.25 5.13 43,834.66 6,103.76 29,443,350.517 10.99
09/30/95 5,736,449.88 301,875,231.25 5.13 43,834.66 6,119.51 29,443,350.517 11.00 0.0424
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT DATED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000791049
<NAME> THE CASCADES TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 288,717,723
<INVESTMENTS-AT-VALUE> 300,850,319
<RECEIVABLES> 7,502,215
<ASSETS-OTHER> 4,512,186
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 312,864,720
<PAYABLE-FOR-SECURITIES> 1,601,509
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 709,111
<TOTAL-LIABILITIES> 2,310,620
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 298,242,094
<SHARES-COMMON-STOCK> 29,423,007
<SHARES-COMMON-PRIOR> 30,098,577
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 179,410
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,132,596
<NET-ASSETS> 310,554,100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,738,698
<OTHER-INCOME> 0
<EXPENSES-NET> (2,196,509)
<NET-INVESTMENT-INCOME> 16,542,189
<REALIZED-GAINS-CURRENT> 301,287
<APPREC-INCREASE-CURRENT> 11,027,760
<NET-CHANGE-FROM-OPS> 27,871,236
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,257,162)
<DISTRIBUTIONS-OF-GAINS> (1,341,034)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,396,282
<NUMBER-OF-SHARES-REDEEMED> (4,963,693)
<SHARES-REINVESTED> 978,995
<NET-CHANGE-IN-ASSETS> (5,762,525)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 625,070
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 729,908
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<GROSS-EXPENSE> 2,246,367
<AVERAGE-NET-ASSETS> 307,400,324
<PER-SHARE-NAV-BEGIN> 10.20
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> (0.04)
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<PER-SHARE-NAV-END> 10.55
<EXPENSE-RATIO> 0.71
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
