(TAX-FREE TRUST OF OREGON LOGO--LOGO OF TREE, SNOW-CAPPED MOUNTAIN AND SUN)
TAX-FREE TRUST OF OREGON
SEMI-ANNUAL REPORT
"BACK TO BASICS"
April 10, 1996
Dear Investor:
OBSERVATIONS ABOUT 1995
The year 1995 was an extraordinary one in the securities market.
As measured by various popular indexes, the stock market produced
what would be considered "once in a lifetime" returns.
The dazzle of spectacular price increases among common stocks in
1995 attracted the attention and participation of many investors. With stock
price gains generally of the magnitude of 25% or more in a year, we can see
why.
Although bond prices, including those of municipal securities,
also experienced considerable gains, these were distinctly overshadowed by
what happened in the stock markets.
Consequently, with all the stock price excitement, many investors
were distracted from their longer-term financial planning goals. As we all
know - but sometimes forget - things do not continuously grow to the sky.
ANOTHER YEAR - 1996
Here we are at the early stage of another year - 1996.
Accordingly, it is well to consider the risk/reward characteristics of one's
investments in light of longer-term investment goals and what might occur in
this calendar year.
Few people, including ourselves, are very good at crystal ball
gazing with the securities markets. Nevertheless, we still would hazard an
opinion that the magnitude of positive returns experienced in the stock
markets in 1995 will NOT be repeated in 1996.
As a result, we feel it prudent that all investors, including all
current shareholders of the Trust, think seriously about the orientation of
their investment funds. One should think about what might be the desirable
risk/reward relationship of one's assets this year, as such orientation or
allocation suits one's longer-term investment goals and objectives.
BACK TO BASICS
It is always important to remember that stocks and bonds are
entirely different types of investments. They are appropriate for different
type investment objectives.
Stocks are attractive for capital growth prospects while bonds
are primarily used for capital preservation - and, for tax-free income
in the case of municipal bonds. Individual equity securities can
<PAGE>
appreciate in value significantly during one time period and then, when a
disappointing earnings report comes out, can just as easily drop in price
by 20% - 30% IN JUST ONE DAY in the highly volatile marketplace that
currently exists.
Municipal bonds, on the other hand, generally don't fluctuate in
price very significantly, unless they have long maturities or are of low
quality. They just plod along from year to year, producing a relatively high
level of capital preservation and a consistent and relatively decent level of
annual tax-free income return.
Moreover, with the relatively high level of credit safety that is
inherent to municipal securities, this kind of investment gives you a comfort
level you can count on in terms of protection of your investment and
consistency of income stream, particularly over the longer-term time span in
which your investment should be viewed.
Therefore, with those investors having as a key investment goal
the preservation of capital and a consistent monthly income stream, then
Tax-Free Trust of Oregon could well be the investment vehicle that could
serve one best.
QUALITY OF PORTFOLIO
Quality is the most important ingredient in providing the means
to protect investment capital.
That is why the investment portfolio of Tax-Free Trust of Oregon
has been constructed with such a high quality orientation. Of the nine
separate credit ratings assignable to municipal securities by the nationally
renown credit rating services, we only invest in the top four ratings.
[PIE CHART GRAPHIC with following information:]
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION BY QUALITY
(By Credit Rating)
<S> <C>
AAA 45.3%
Below A & Not Rated* 1.9%
A 6.6%
AA 46.2%
<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>
</TABLE>
It is worth emphasizing that at March 31, 1996, 98.1% of the
Trust's assets were ranked in the top three ratings - AAA, AA, AND A.
This represents EXCEPTIONALLY high quality standards.
Consequently, the level of capital preservation offered to the Trust's
shareholders is of the highest order.
Moreover, the Trust's local Investment Adviser, Qualivest Capital
Management, Inc., is constantly reviewing each and every security in the
portfolio as to its creditworthiness. We want shareholders to have the
comfort of "SLEEPING WELL AT NIGHT" knowing that someone is paying close
attention to the quality orientation of their investment in the Trust.
SHARE PRICE STABILITY
In viewing the value of one's investment in the Trust, it is
essential that regard be given to a reasonable time span.
Unless one limits the maturity of fixed-income securities to one
year or less, there will ALWAYS be fluctuations in price as market conditions
vary.
2
<PAGE>
A key goal that management has is to provide shareholders with a
high level of share price stability over a reasonable time period.
The accompanying chart illustrates the performance of the Trust's
share price since inception on June 16, 1986.
[BAR CHART GRAPHIC with the following information:]
<TABLE>
<CAPTION>
SHARE NET ASSET VALUE
Date Share Net Asset Value
In dollars
<S> <C>
6/16/86 9.60
9/30/86 9.82
3/31/87 10.12
9/30/87 9.11
3/31/88 9.56
9/30/88 9.67
3/31/89 9.61
9/30/89 9.76
3/31/90 9.76
9/30/90 9.67
3/31/91 9.93
9/30/91 10.15
3/31/92 10.19
9/30/92 10.48
3/31/93 10.70
9/30/93 10.95
3/31/94 10.35
9/30/94 10.20
3/31/95 10.37
9/30/95 10.55
3/31/96 10.50
</TABLE>
We believe this goal of share price stability has been achieved
quite well over the years.
In accomplishing this goal, the quality composition of the
investment portfolio is an important element.
Also, however, the maturity structure of the portfolio is a key
ingredient. The Trust presently holds securities with very short maturities,
but also some with quite long maturities. However, the average maturity at
March 31, 1996 was 15.1 years. This helps contain fluctuations in share
price - up or down - to a modest nature.
Another factor in creating share price stability is
diversification - diversification by number of issues, by numerous municipal
issuers, by nature of projects financed and by geographic location within
Oregon. The diversification employed by the Trust encompasses all these
elements. At March 31, 1996, there were 194 separate securities in the
investment portfolio.
RATE OF RETURN
We consistently try to provide shareholders with a good level of
DOUBLE TAX-FREE income - as high as possible commensurate with the degree of
capital preservation we strive to achieve.
The accompanying chart shows the average level of DOUBLE TAX-FREE
income distributed to shareholders over the past 12-month period, as measured
against the maximum public offering price.
Since shareholders are subject to the payment of income tax at
Federal tax levels as well as payments of State of Oregon income tax, we have
also shown in this chart the rate of taxable income return one would have had
to earn over the course of the 12-month period in order to equate to the DOUBLE
TAX-FREE income return generated by the Trust.
3
<PAGE>
[BAR CHART GRAPHIC with following information:]
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON'S DOUBLE TAX-FREE
DISTRIBUTION RATE* AS COMPARED TO THE TAXABLE
EQUIVALENT RATE AN INVESTOR WOULD HAVE TO EARN
AT VARIOUS TAX BRACKETS.
Rate of Return
Tax Bracket Double Tax-Free Taxable Equivalent
Distribution Rate Rate
<C> <C> <C>
28% 5.03% 7.68%
31% 5.03% 8.01%
36% 5.03% 8.64%
39.6% 5.03% 9.15%
<FN>
* For the period 4/1/95-3/31/96
</FN>
</TABLE>
No matter which Federal income tax bracket applies, you can
readily see that there is quite a difference between the taxable and the
DOUBLE TAX-FREE return levels.
It is important to note that it would not have been possible over
the past 12-month period to find taxable fixed-income investments that would
produce the same level of after tax return as that of the Trust, unless one
settled for a lesser quality and higher risk taxable investment.
SIZE OF TRUST'S ASSETS
We are pleased to report that at March 31, 1996, the total net
asset size of Tax-Free Trust of Oregon was $305,980,789.
Such asset size helps keep the Trust's expense ratio for its
operations reasonable and below the industry average for similar-type
municipal bond funds.
OUR APPRECIATION
We thank all shareholders for their continued loyalty and for the
confidence placed in the management of Tax-Free Trust of Oregon.
You can be assured that we will constantly try our best to merit
your continuing support.
Sincerely,
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
4
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
MARCH 31, 1996 (UNAUDITED)
RATING
FACE STATE OF OREGON GENERAL OBLIGATION MOODY'S/
AMOUNT BONDS (50.6%) S&P VALUE
<C> <S> <C> <C>
City of Albany (MBIA Corporation
Insured),
$ 150,000 6.400%, 11/01/1999 Aaa/AAA $ 150,327
460,000 6.500%, 11/01/2000 Aaa/AAA 461,002
2,195,000 6.625%, 11/01/2009 Aaa/AAA 2,197,831
Port of Astoria (MBIA Corporation
Insured)
410,000 6.200%, 02/01/2004 Aaa/AAA 426,912
1,250,000 6.600%, 09/01/2011 Aaa/AAA 1,309,375
City of Beaverton
910,000 5.950%, 04/01/2003 Aa/AA- 968,012
520,000 6.600%, 06/01/2003 NR/AA- 546,000
960,000 6.050%, 04/01/2004 Aa/AA- 1,021,200
560,000 6.600%, 06/01/2004 NR/AA- 588,000
1,020,000 6.150%, 04/01/2005 Aa/AA- 1,085,025
500,000 5.000%, 06/01/2005 Aa/AA- 499,375
1,080,000 6.250%, 04/01/2006 Aa/AA- 1,148,850
Clackamas County School District #115
(AMBAC Indemnity Corporation Insured)
600,000 5.600%, 06/01/2006 Aaa/AAA 627,750
615,000 5.700%, 06/01/2007 Aaa/AAA 642,675
1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,038,750
Clackamas and Washington County School
District #3J
2,000,000 5.850%, 08/01/2006 A1/AA- 2,112,500
5,000,000 5.875%, 08/01/2009 A1/AA- 5,168,750
1,150,000 5.875%, 10/01/2009 A1/AA- 1,198,875
Clackamas, Multnomah and Washington
County School District #7J
1,000,000 7.100%, 06/15/2009 Aaa/NR 1,100,000
250,000 7.100%, 06/15/2010 Aaa/NR 275,000
1,500,000 5.700%, 06/15/2010 Aa/NR 1,524,375
Columbia Gorge Community College
District (Financial Security
Assurance Insured)
1,200,000 5.400%, 06/01/2013 Aaa/AAA 1,165,500
Deschutes and Jefferson County
School District #2J (MBIA
Corporation Insured)
3,700,000 5.600%, 06/01/2009 Aaa/AAA 3,760,125
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON GENERAL RATINGS
AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE
<S> <C> <C> <C>
Hood River County School District
(AMBAC Indemnity Corporation Insured)
2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,070,000
Jackson County School District #549C
(Financial Security Assurance
Insured)
1,150,000 5.300%, 06/01/2008 Aaa/AAA 1,162,937
Josephine County School District #7
(Grants Pass) (Financial Guaranty
Insurance Corporation Insured)
2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,689,875
Jefferson County School District #509J
(Financial Security Assurance
Insured)
1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,725,937
Lane County School District #4J
2,000,000 5.375%, 7/01/2009 Aa/NR 2,002,500
Lane County School District #52J
(Financial Guaranty Insurance
Corporation Insured)
750,000 6.400%, 12/01/2009 Aaa/AAA 815,625
Lincoln County Oregon School District
(Financial Guaranty Insurance
Corporation Insured)
1,245,000 5.250%, 06/15/2009 Aaa/NR 1,195,200
Lincoln County (MBIA Corporation
Insured)
1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,006,250
Malheur County Jail Bonds (MBIA
Corporation Insured)
1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,427,381
Marion and Clackamas County Union
High School District #7J (Financial
Security Assurance Insured)
1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,391,925
Multnomah County
1,245,000 5.100%, 10/01/2007 Aa1/NR 1,252,781
1,000,000 5.200%, 10/01/2008 Aa1/NR 1,006,250
Multnomah County School District #1
3,225,000 6.500%, 12/15/2000 Aa/A+ 3,305,625
1,180,000 6.600%, 12/15/2001 Aa/A+ 1,209,500
3,725,000 6.800%, 12/15/2004 Aa/A+ 3,822,781
Multnomah County School District #1J
1,000,000 5.000%, 03/01/2007 Aa/A+ 983,750
Multnomah County School District #4
1,330,000 5.900%, 01/01/2005 A1/A+ 1,411,462
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON GENERAL RATINGS
AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
Multnomah County School District #40
4,100,000 5.625%, 06/01/2012 NR/AA- 4,130,750
Metropolitan Service District
Refunding (Oregon Convention Center)
4,320,000 6.250%, 01/01/2013 Aa/AA+ 4,492,800
Oak Lodge Water District (AMBAC
Indemnity Corporation Insured)
215,000 7.300%, 12/01/2005 Aaa/AAA 252,087
215,000 7.300%, 12/01/2006 Aaa/AAA 250,475
215,000 7.400%, 12/01/2007 Aaa/AAA 250,206
State of Oregon
5,000,000 7.000%, 12/01/2011 Aa/AA- 5,400,000
State of Oregon Alternate Energy
Project Series A
1,530,000 4.900%, 01/01/2004 Aa/AA- 1,533,825
1,000,000 6.400%, 01/01/2008 Aa/AA- 1,051,250
State of Oregon Board of Higher
Education
900,000 6.200%, 10/15/2007 Aa/AA- 958,500
3,195,000 6.400%, 10/01/2011 Aa/AA- 3,342,768
2,000,000 6.250%, 10/15/2012 Aa/AA- 2,072,500
2,150,000 6.500%, 10/01/2017 Aa/AA- 2,249,437
2,890,000 6.000%, 10/15/2018 Aa/AA- 2,947,800
State of Oregon Elderly & Disabled
Housing
725,000 6.250%, 08/01/2013 Aa/AA- 754,906
State of Oregon Veterans' Welfare
900,000 11.250%, 04/01/1998 Aa/AA- 1,022,625
875,000 7.500%, 03/01/2000 Aa/AA- 916,133
505,000 9.000%, 04/01/2008 Aa/AA- 619,887
700,000 9.200%, 10/01/2008 Aa/AA- 955,500
565,000 8.000%, 11/01/2012 Aa/AA- 607,375
7,150,000 6.875%, 12/01/2013 Aa/AA- 7,677,312
500,000 6.875%, 12/01/2014 Aa/AA- 536,250
1,000,000 7.000%, 12/01/2015 Aa/AA- 1,075,000
Pacific Communities Hospital District
(Financial Guaranty Insurance
Corporation Insured)
200,000 6.500%, 12/01/2003 Aaa/AAA 203,874
380,000 6.500%, 12/01/2005 Aaa/AAA 387,360
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON GENERAL RATINGS
AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
Polk County School District #2
(Financial Security Assurance
Insured)
1,000,000 5.400%, 06/01/2012 Aaa/AAA 977,500
Polk, Marion, and Benton County School
District #13J (Financial Guaranty
Insurance Corporation Insured)
1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,026,250
City of Portland
1,625,000 4.500%, 11/01/2004 Aaa/NR 1,584,375
1,480,000 5.100%, 10/01/2009 Aaa/NR 1,435,600
2,000,000 7.125%, 10/01/2010 Aaa/NR 2,175,000
City of Portland (Limited)
2,500,000 5.250%, 06/01/2015 Aa/NR 2,409,375
Portland Community College District
3,500,000 6.000%, 07/01/2012 A1/AA 3,591,875
Port of Portland
1,000,000 4.500%, 03/01/2006 Aa/AA+ 948,750
City of Salem
1,000,000 5.875%, 01/01/2007 A1/A+ 1,033,750
City of Springfield Advanced Refunding
275,000 8.600%, 06/01/2003 A/NR 277,224
Tri-County Metropolitan Transportation
District
6,100,000 6.000%, 07/01/2012 Aa/AA+ 6,290,625
Tualatin Hills Park and Recreation
District (MBIA Corporation Insured)
2,970,000 5.750%, 03/01/2010 Aaa/AAA 3,003,412
Umatilla County School District #8R
(AMBAC Indemnity Corporation Insured)
700,000 6.100%, 12/01/2012 Aaa/AAA 729,750
Wasco County School District #9 (AMBAC
Indemnity Corporation Insured)
700,000 5.500%, 06/01/2008 Aaa/AAA 716,625
Washington County
2,500,000 6.200%, 12/01/2007 Aa/AA 2,659,375
2,110,000 6.000%, 12/01/2013 Aa/AA 2,183,850
Washington County School District #88J
(Financial Security Assurance Insured)
2,900,000 6.100%, 06/01/2012 Aaa/AAA 3,026,875
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON GENERAL OBLIGATION RATINGS
AMOUNT BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
Washington and Clackamas County School
District #23J
1,675,000 6.625%, 01/01/2005 NR/NR* 1,796,437
1,000,000 5.650%, 06/01/2015 A1/NR 992,500
720,000 6.625%, 01/01/2008 NR/NR* 772,200
2,000,000 5.400%, 01/01/2010 A1/NR 1,985,000
Washington & Multnomah County School
District #48J
1,175,000 5.500%, 06/01/2006 Aa/AA- 1,216,125
1,440,000 4.500%, 09/01/2006 Aa/AA- 1,378,800
1,130,000 5.600%, 06/01/2007 Aa/AA- 1,172,375
1,000,000 6.150%, 06/01/2008 Aa/AA- 1,046,250
1,415,000 5.700%, 06/01/2008 Aa/AA- 1,468,062
525,000 6.300%, 09/01/2009 Aaa/AAA 568,312
1,440,000 6.000%, 06/01/2011 Aa/AA- 1,494,000
2,010,000 6.500%, 09/01/2001 Aaa/AAA 2,195,925
250,000 5.750%, 09/01/2012 Aaa/AAA 261,875
Washington & Yamhill County School
District #58J (AMBAC Indemnity
Corporation Insured)
70,000 6.600%, 11/01/2004 Aaa/AAA 70,757
80,000 6.600%, 11/01/2005 Aaa/AAA 80,797
90,000 6.600%, 11/01/2006 Aaa/AAA 90,871
Wolf Creek Highway Water Disrtict
505,000 6.900%, 12/01/2005 NR/AA 540,350
Yamhill County School District #29J
(Financial Security Assurance Insured)
2,000,000 5.350%, 06/01/2006 Aaa/AAA 2,030,000
500,000 6.100%, 06/01/2011 Aaa/AAA 525,625
Total State of Oregon General
Obligation Bonds 154,941,080
STATE OF OREGON REVENUE BONDS (48.1%)
AIRPORT REVENUE BONDS (2.5%)
Port of Portland Airport (Financial
Guaranty Insurance Corporation
Insured)
500,000 5.500%, 07/01/2006 Aaa/AAA 509,375
Port of Portland Airport (MBIA
Corporation Insured)
600,000 6.400%, 07/01/2003 Aaa/AAA 648,000
3,530,000 6.750%, 07/01/2009 Aaa/AAA 3,816,812
2,425,000 6.750%, 07/01/2015 Aaa/AAA 2,615,968
Total Airport Revenue Bonds 7,590,155
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
CERTIFICATE OF PARTICIPATION REVENUE
BONDS (9.8%)
Oregon State Department Of Administration
Services (AMBAC Indemnity Corporation
Insured)
5,805,000 5.500%, 11/01/2020 Aaa/AAA 5,587,312
Multnomah County Certificate of
Participation Health Facilities Lease
Purchase Program
1,000,000 5.200%, 07/01/2005 Aa/NR 1,002,500
Multnomah County Certificate of
Participation Juvenile Justice Center,
3,100,000 6.000%, 08/01/2012 Aa/A 3,173,625
State of Oregon Certificate of
Participation (AMBAC Indemnity
Corporation Insured)
3,100,000 7.500%, 09/01/2015 Aaa/AAA 3,526,250
State of Oregon Certificate of
Participation (MBIA Corporation
Insured)
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 2,856,562
1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,277,937
1,000,000 5.500%, 01/15/2015 Aaa/AAA 972,500
550,000 5.500%, 01/15/2015 Aaa/AAA 534,875
600,000 7.200%, 03/01/2015 Aaa/AAA 663,750
1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,000,000
2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,080,000
Southwestern Oregon Community College
District (AMBAC Indemnity Corporation
Insured)
1,000,000 5.600%, 06/01/2016 Aaa/AAA 988,750
City of Portland Certificate of
Participation
1,100,000 7.250%, 04/01/2008 NR/NR* 1,190,750
Washington County Educational Services,
Certificates of Participation
645,000 5.625%, 06/01/2016 A1/NR 631,293
Washington County Educational Services,
Certificates of Participation (MBIA
Corporation Insured)
830,000 5.750%, 06/01/2025 Aaa/AAA 820,662
Total Certificate of Participation
Revenue Bonds 29,918,141
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
HOSPITAL REVENUE BONDS (5.0%)
Clackamas Hospital Facilities Authority
(Adventist Health System/West) (MBIA
Corporation Insured)
2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,120,000
Clackamas Hospital Facilites Authority
(Kaiser Permanente)
2,400,000 6.500%, 04/01/2011 Aa3/AA 2,508,000
Clackamas Hospital Facilites Authority
(Sisters of Providence Hospital)
500,000 6.375%, 10/01/2004 A1/AA- 535,625
Douglas County Hospital Facilities
Authority (Catholic Health) (MBIA
Corporation Insured)
535,000 5.600%, 11/15/2005 Aaa/AAA 551,718
Medford Hosptial Facilities Authority
(Rogue Valley Health Services) (MBIA
Corporation Insured)
500,000 6.800%, 12/01/2011 Aaa/AAA 540,000
1,685,000 6.750%, 12/01/2020 Aaa/AAA 1,802,950
Portland Hospital Facilities Authority
(Legacy Health Systems) (AMBAC
Indemnity Corporation Insured)
900,000 6.500%, 05/01/2004 Aaa/AAA 976,500
Western Lane County Hospital Facilities
Authority (Sisters of St. Joseph
Hospital) (MBIA Corporation Insured)
1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,033,750
1,450,000 7.125%, 08/01/2017 Aaa/AAA 1,604,062
3,765,000 5.750%, 08/01/2019 Aaa/AAA 3,722,643
Total Hospital Revenue Bonds 15,395,248
HOUSING, EDUCATIONAL, AND CULTURAL
REVENUE BONDS (7.7%)
State of Oregon Housing Finance
Agency,
1,000,000 6.800%, 07/01/2013 A1/A+ 1,037,500
State of Oregon Housing and Community
Services,
500,000 5.100%, 07/01/2007 Aa/NR 486,875
1,670,000 5.200%, 07/01/2009 Aa/NR 1,613,637
920,000 6.750%, 07/01/2012 Aa/NR 968,300
500,000 6.700%, 07/01/2013 Aa/NR 509,375
500,000 6.350%, 07/01/2014 Aa/NR 513,125
1,100,000 6.800%, 07/01/2016 Aa/NR 1,160,500
1,945,000 6.750%, 07/01/2016 Aa/NR 1,981,468
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
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)
1,130,000 7.125%, 07/01/2020 Aaa/AAA 1,264,187
State of Oregon Housing, Educational and
Cultural Facilities Authority (OMSI),
800,000 5.900%, 10/01/2006 A1/NR 808,656
State of Oregon Housing, Educational and
Cultural Facilities Authority (Reed
College),
2,145,000 6.750%, 07/01/2021 NR/A+ 2,391,675
Oregon Health Sciences University
Revenue (AMBAC Insured)
4,500,000 5.250%, 07/15/2015 Aaa/AAA 4,224,375
City of Salem Educational Facilities
(Willamette University),
1,000,000 6.000%, 04/01/2010 A/NR 1,040,000
1,740,000 6.750%, 04/01/2011 NR/NR* 1,914,000
Total Housing, Educational, and Cultural
Revenue Bonds 23,588,673
TRANSPORTATION REVENUE BONDS (2.9%)
Port of Morrow,
2,600,000 6.375%, 04/01/2008 Aaa/NR 2,830,750
State of Oregon Department of
Transportation (Light Rail) (MBIA
Corporation Insured),
2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,145,000
Port of St. Helens,
95,000 7.750%, 02/01/2006 Baa/1NR 105,806
Tri-County Metropolitan Transportation
District
3,680,000 5.700%, 08/01/2013 A1/AA 3,680,000
Total Transportation Revenue Bonds 8,761,556
URBAN RENEWAL REVENUE BONDS (.6%)
Keiser Urban Renewal Agency,
950,000 5.400%, 07/01/2008 NR/A- 927,437
City of Portland Urban Renewal,
300,000 9.000%, 12/01/2002 A/NR 308,247
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
City of Wilsonville Urban Renewal,
500,000 5.850%, 06/01/2004 Baa1/NR 500,450
Total Urban Renewal Revenue Bonds 1,736,134
UTILITY REVENUE BONDS (7.1%)
Emerald Peoples Utility District (AMBAC
Indemnity Corporation Insured),
700,000 6.700%, 11/01/2005 Aaa/AAA 770,000
145,000 7.200%, 11/01/2006 Aaa/AAA 147,441
35,000 7.200%, 11/01/2006 Aaa/AAA 35,732
3,860,000 7.350%, 11/01/2013 Aaa/AAA 3,921,374
Emerald Peoples Utility District Electic
Systems (Financial Security Assurance
Insured)
1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,107,500
City of Eugene Electric Utility
610,000 6.650%, 08/01/2009 A1/AA 645,837
660,000 6.650%, 08/01/2010 A1/AA 696,300
1,000,000 6.000%, 08/01/2011 A1/AA 1,023,750
700,000 6.700%, 08/01/2011 A1/AA 736,750
500,000 5.000%, 08/01/2017 A1/AA 454,375
1,400,000 5.800%, 08/01/2019 A1/AA 1,396,500
City of Eugene Trojan Nuclear Project
3,865,000 5.900%, 09/01/2009 Aa/AA 3,865,115
Marion County Solid Waste and Electric
(AMBAC Indemnity Corporation Insured),
1,445,000 7.500%, 10/01/2004 Aaa/AAA 1,494,072
4,335,000 7.700%, 10/01/2009 Aaa/AAA 4,500,120
Northern Wasco County Public Utility
Developement (AMBAC Indemnity
Corporation Insured),
1,000,000 5.625%, 12/01/2022 Aaa/AAA 977,500
Total Utility Revenue Bonds 21,772,366
WATER AND SEWER REVENUE BONDS (10.4%)
City of Canby Sewer (Financial Security
Assurance Insured),
500,000 6.250%, 12/01/2017 Aaa/AAA 518,125
City of Eugene Water,
780,000 6.550%, 08/01/2004 A1/AA- 800,194
365,000 6.600%, 08/01/2005 A1/AA- 374,486
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
City of Klamath Falls Water (Financial
Security Assurance Insured),
1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,139,875
City of Oregon City Sewer,
750,000 6.875%, 10/01/2019 NR/NR* 762,187
City of Portland Sewer,
2,400,000 4.900%, 03/01/2005 A1/A+ 2,397,000
3,150,000 5.100%, 03/01/2007 A1/A+ 3,130,312
1,500,000 6.050%, 06/01/2009 A1/A+ 1,591,875
City of Portland Sewer (Financial
Guaranty Insurance Corporation
Insured),
2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,878,281
500,000 6.000%, 10/01/2012 Aaa/AAA 515,625
2,855,000 6.250%, 06/01/2015 Aaa/AAA 2,987,043
Portland Water System Revenue
3,000,000 5.550%, 08/01/2014 Aa/1NR 2,928,750
1,440,000 5.550%, 08/01/2015 Aa1/NR 1,396,800
Washington County Unified Sewer Agency
(AMBAC Indemnity Corporation Insured),
1,040,000 6.800%, 11/01/2004 Aaa/AAA 1,123,200
2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,247,200
1,115,000 5.900%, 10/01/2006 Aaa/AAA 1,181,900
2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,600,000
750,000 6.125%, 10/01/2012 Aaa/AAA 780,000
Washington County Unified Sewer Agency
2,195,000 7.000%, 11/01/2009 Aaa/AAA 2,387,062
Total Water and Sewer Revenue
Bonds 31,739,915
OTHER REVENUE BONDS (2.1%)
Baker County Pollution Control (Ash
Grove Cement West Project) (Small
Business Administration Insured),
355,000 6.200%, 07/01/2004 Aaa/NR 368,312
380,000 6.300%, 07/01/2005 Aaa/NR 394,250
State of Oregon Bond Bank
500,000 6.800%, 01/01/2011 Aaa/NR 542,500
1,000,000 6.700%, 01/01/2011 Aaa/NR 1,082,500
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
FACE STATE OF OREGON RATINGS
AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE
<C> <S> <C> <C>
Oregon Economic Development Commission
(Consolidated Freightways)
1,500,000 7.000%, 04/01/2004 Aa3/BBB- 1,507,755
City of Portland
2,465,000 4.650%, 04/01/2004 Aa/NR 2,428,054
Total Other Revenue Bonds 6,323,371
Total State of Oregon Revenue
Bonds 146,825,559
Total State of Oregon 301,766,639
PUERTO RICO
Puerto Rico Housing Finance Corporation
(GNMA Collateralized)
115,000 7.800%, 10/15/2021 Aaa/AAA 120,031
Total Puerto Rico 120,031
Total Municipal Bonds - 98.7%
(Cost - $291,607,267**) 301,886,670
Other assets in excess of
liabilities - 1.3% 4,094,119
Net Assets - 100% $305,980,789
<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>
(**) Cost for Federal tax purposes is $290,657,743.
</FN>
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNAUDITED)
<S> <C>
ASSETS
Investments at value (cost - $291,607,267) $ 301,886,670
Cash 371,074
Interest receivable 3,969,154
Receivable for Trust shares sold 228,618
Other assets 7,188
Total assets 306,462,704
LIABILITIES
Payable for Trust shares redeemed 121,908
Distribution fees payable 113,649
Adviser and Administrator fees payable 97,638
Dividends payable 86,986
Accrued expenses 61,734
Total liabilities 481,915
NET ASSETS (equivalent to $10.50 per share
on 29,147,816 shares outstanding) $ 305,980,789
Net Assets consist of:
Capital Stock - Authorized an unlimited number of
shares, par value $0.01 per share $ 291,478
Additional paid-in capital 294,909,884
Accumulated net realized gain on investments 500,024
Net unrealized appreciation on investments 10,279,403
$ 305,980,789
Net Asset Value, redemption price per share $ 10.50
Offering price per share (100/96 of $10.50 adjusted
to nearest cent) $ 10.94
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest income $8,908,492
Expenses:
Investment Adviser fees (note B) $308,623
Administrator fees (note B) 308,623
Distribution fees (note B) 231,713
Transfer and shareholder servicing
agent fees 100,000
Legal fees 43,000
Trustees' fees and expenses 40,000
Shareholders' reports and proxy statements 32,500
Audit and accounting fees 13,000
Custodian fees (note F) 12,725
Registration fees and dues 10,000
Insurance 3,500
Miscellaneous 17,496
1,121,180
Expenses paid indirectly (note F) (12,725)
Net expenses 1,108,455
Net investment income 7,800,037
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain from securities
transactions 500,024
Change in unrealized appreciation on
investments (1,853,193)
Net realized and unrealized gain (loss)
on investments (1,353,169)
Net increase in net assets resulting from
operations $ 6,446,868
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER
31, 1996 30, 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,800,037 $ 16,542,189
Net realized gain from securities
transactions 500,024 301,287
Change in unrealized appreciation on
investments (1,853,193) 11,027,760
Net increase in net assets resulting
from operations 6,446,868 27,871,236
DISTRIBUTIONS TO SHAREHOLDERS (NOTE E):
Net investment income ($0.27 and
$0.55 per share, respectively) (7,800,037) (16,257,162)
Net realized gain from securities
transactions ($0.01 and $0.04 per
share, respectively) (292,145) (1,341,034)
Total distributions (8,092,182) (17,598,196)
Net increase (decrease) from
investment activities (1,645,314) 10,273,040
<CAPTION>
TRUST SHARE TRANSACTIONS:
SHARES
SIX MONTHS YEAR ENDED
ENDED MARCH SEPTEMBER
31, 1996 30, 1995
<S> <C> <C> <C> <C>
Shares sold 936,398 2,396,282 9,980,290 24,616,407
Shares issued through
reinvestment of
dividends 435,542 978,995 4,636,314 10,024,851
Shares redeemed (1,647,131) (4,963,693) (17,544,601) (50,676,823)
Decrease in shares
and net assets
derived from
Trust share
transactions (275,191) (1,588,416) (2,927,997) (16,035,565)
Net decrease in
net assets (4,573,311) (5,762,525)
NET ASSETS:
Beginning of period 310,554,100 316,316,625
End of period $305,980,789 $310,554,100
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Tax-Free Trust of Oregon (the "Trust") is a separate non-diversified
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 commenced operations on June 16, 1986. The
Trust is authorized to issue an unlimited number of shares and, since its
inception, has issued only one class of shares, to which these financial
statements relate. It is anticipated that the Trust will begin offering two
additional classes of shares during the second calendar quarter of 1996. The
shares outstanding at that time will be designated as Class A Shares and, as
is the case now, will be sold with a front-end sales charge and bear a
service fee. Class C Shares will be sold with no front-end sales charge but
will be assessed a contingent deferred sales charge if redeemed within 12
months from the time of purchase and a level charge for service and
distribution fees. Class Y 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, and will be
sold at net asset value with no sales charge, no redemption fee,
no contingent deferred sales charge and no service or distribution fees. All
classes of shares will have identical rights and privileges except with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on
matters affecting a single class and the exchange privilege of each class.
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.
(4) USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts
19
<PAGE>
of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
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 Trust's investments and
provides various services to the Trust, including maintenance of the Trust's
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 Trust's
average daily net assets.
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 Trust's 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 Trust's average daily net assets.
Specific details as to the nature and extent of the services provided by
the Adviser and the Administrator are more fully defined in the Trust's
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
Trust's 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 six months ended March 31, 1996.
For the six months ended March 31, 1996, the Trust incurred fees under
the Advisory Agreement and Administration Agreement of $308,623 and $308,623,
respectively.
Under a Distribution Agreement, Aquila Distributors, Inc. (the
"Distributor") serves as the exclusive distributor of the Trust's shares.
Through agreements between the Distributor and various broker-dealer firms
("dealers"), the Trust's 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 six months ended March
31, 1996, the Distributor received sales commissions in the amount of $28,920.
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
at the annual rate of 0.15% of the average net assets of the Trust to
broker-dealers or others selected by the Distributor, including, but not
limited to, any principal underwriter of the Trust,
20
<PAGE>
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 Trust's shares or servicing of shareholder accounts. During
the six months ended March 31, 1996, service fees amounted to $231,713, of
which the Distributor received $4,512. Specific details about the Plan are
more fully defined in the Trust's Prospectus and Statement of Additional
Information.
NOTE C - PURCHASES AND SALES OF SECURITIES:
During the six months ended March 31, 1996, purchases of securities and
proceeds from the sales of securities aggregated $19,477,114 and $16,587,570,
respectively.
At March 31, 1996, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $12,235,069 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to
$1,006,142 for a net unrealized appreciation of $11,228,927.
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 shareholder's 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 Trust's 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 six months ended March 31,
1996, the Trust's custodian fees amounted to $12,725, all of which 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.
21
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
(UNAUDITED)
For a share outstanding throughout each period
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $10.55 $10.20 $10.95 $10.48 $10.15 $9.67
Income from
Investment
Operations:
Net investment
income 0.27 0.55 0.56 0.58 0.65 0.62
Net gain (loss)
on securities
(both
realized and
unrealized) (0.04) 0.39 (0.75) 0.50 0.29 0.49
Total from
Investment
Operations 0.23 0.94 (0.19) 1.08 0.94 1.11
Less Distributions:
Dividends from
net investment
income (0.27) (0.55) (0.56) (0.58) (0.61) (0.63)
Distributions
from capital
gains (0.01) (0.04) ( -- ) ( -- ) (0.03) ( -- )
Total Distri-
butions (0.28) (0.59) (0.56) (0.61) (0.61) (0.63)
Net Asset Value,
End of Period $10.50 $10.55 $10.20 $10.95 $10.48 $10.15
Total Return
(not reflecting
sales load) 2.20%# 9.52% (1.77)% 10.64% 9.51% 11.83%
Ratios/Supplemental
Data
Net Assets, End
of Period (in
thousands) $305,981 $310,554 $316,317 $331,018 $249,953 $189,734
Ratio of Expenses
to Average
Net Assets 0.72%* 0.71% 0.68% 0.66% 0.66% 0.71%
Ratio of Net
Investment
Income to
Average Net
Assets 5.04%* 5.38% 5.28% 5.46% 5.87% 6.30%
Portfolio
Turnover Rate 6% 13% 11% 8% 11% 21%
<CAPTION>
Net investment income per share and the ratios of income and expenses to
average net assets without the expense offset in custodian fees for
uninvested cash balances would have been:
<S> <C> <C> <C> <C> <C> <C>
Net Investment
Income $0.27 $0.55 $0.56 $0.58 $0.65 $0.62
Ratio of Expenses
to Average Net
Assets 0.73%* 0.73% 0.70% 0.68% 0.66% 0.73%
Ratio of Net
Investment Income
to Average Net
Assets 5.03%* 5.37% 5.26% 5.44% 5.87% 6.28%
<FN>
#Not annualized.
</FN>
<FN>
*Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
REPORT ON THE SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
A Special Meeting of Shareholders of the Tax-Free Trust of Oregon was
held on November 27, 1995. On the record date for this meeting, 29,441,928
shares of the Trust were outstanding and entitled to vote and the holders of
16,751,076 shares (56.9%) entitled to vote were present in person or by
proxy at the meeting. At the meeting, the shareholders voted upon and
approved an amendment to the Trust's Declaration of Trust to authorize the
creation of additional classes of shares (votes for: 14,788,047 (88.3%);
votes against: 933,138 (5.6%); abstentions: 1,029,891 (6.1%); broker
non-votes: 0 (0.0%)).
23
<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 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.
SEMI-ANNUAL
REPORT
MARCH 31, 1996
TAX-FREE TRUST OF
OREGON
A tax-free income investment
(TAX-FREE TRUST OF OREGON LOGO - LOGO OF TREE, SNOW-CAPPED MOUNTAIN AND SUN)
(AQUILA LOGO - LOGO OF EAGLE)
One of the
AQUILAsm Group of Funds
