INVESTMENT ADVISER-ADMINISTRATOR AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
SUB-ADVISER
FIRST ASSET MANAGEMENT
a division of First Bank National Association,
a subsidiary of U.S. Bancorp
111 S.W. Fifth Avenue
U.S. Bancorp Tower
Portland, Oregon 97204
BOARD OF TRUSTEES
Lacy B. Herrmann, Chairman
Vernon R. Alden
Warren C. Coloney
David B. Frohnmayer
James A. Gardner
Diana P. Herrmann
Raymond H. Lung
Richard C. Ross
OFFICERS
Lacy B. Herrmann, President
Sue McCarthy-Jones, Senior Vice President
Nancy Kayani, Vice President
Christine L. Neimeth, 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
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
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, 1998
TAX-FREE TRUST OF OREGON
A tax-free income investment
(logo of Tax-Free Trust of Oregon: Square box with 2 fir trees in front of a
mountain and the sun)
One of the
AQUILAsm Group of Funds
<PAGE>
(logo of Tax-Free Trust of Oregon: Square box with 2 fir trees in front of a
mountain and the sun)
SERVING OREGON INVESTORS FOR OVER A DECADE
TAX-FREE TRUST OF OREGON
SEMI-ANNUAL REPORT
"QUALITY FOSTERS PEACE OF MIND"
April 30, 1998
Dear Investor:
Recently, there has been a lot of news about the Far East and the
problems that a number of countries in that area are experiencing. These
problems have included some failures of major financial corporations in
Japan, South Korea, Indonesia, Hong Kong, and various other countries. Also,
there have been major deterioration changes in the currencies of these
countries as they relate to U.S. dollars.
It is hard to believe the magnitude of recent currency depreciation that
has taken place in various countries vs. the U.S. dollar. The currency
deteriorations against the U.S. dollar have ranged from 10% to well over 70%
with various countries around the world. While we may have some problems in
our own country, these are very substantially less than those of other
countries.
What has occurred as a result of the problems of these countries is a
flight to quality. In comparison to various economies and currencies of the
Far East, as well as other countries in the world, the U.S. economy,
securities markets and currency stand out as a beacon of quality.
Quality has also been one of the trademarks of Tax-Free Trust of Oregon
from the inception of the Trust. It has been our strong belief that you can
sleep much better at night by having high quality issues in the fund in which
you invest. Indeed, presently, the portfolio of Tax-Free Trust of Oregon
consists of 48.77% of tax-exempt securities having a AAA rating, and 45.17%
of securities having a AA rating. Thus, 93.94% of the Trust's overall
portfolio is rated as AA or AAA. These are the two highest quality
securities you can possibly own.
Just as important for you to know, in the portfolio management of the
Trust separate credit analysis is done by the portfolio adviser to confirm
that such top-quality assessment of the individual securities is justified.
In other words, we do not merely rely upon the judgment of rating agencies,
but rather independently verify the credit quality of each security.
Why do we structure the portfolio this way? Primarily, so that you can
feel comfortable with your investment in Tax-Free Trust of Oregon in terms of
knowing that that portion of your savings possesses a high level of capital
preservation.
<PAGE>
PATTERN OF PRICING OF SHARE VALUE
When you look at the pricing of share value of Tax-Free Trust of Oregon,
you will note that it presents a high level of share price consistency. This
is in stark contrast to the currency deterioration and volatility of currency
and securities markets that is taking place around the world. The chart below
shows you that consistency for every year since the Trust began.
SHARE NET ASSET VALUE BAR CHART
<TABLE>
<CAPTION>
IN DOLLARS
<S> <C>
6/16/86 9.6
3/31/87 10.12
3/31/88 9.56
3/31/89 9.61
3/31/90 9.76
3/31/91 9.93
3/31/92 10.19
3/31/93 10.7
3/31/94 10.35
3/31/95 10.37
3/31/96 10.5
3/31/97 10.44
3/31/98 10.74
</TABLE>
OTHER STEPS TAKEN TO
PROTECT YOUR MONEY
As we have pointed out in previous reports to you, we have also
consistently sought to diversify the holdings of municipal bonds in the
portfolio so that no one segment could hurt the overall value of your money
in the remote event a problem occurred. As a result, it is worth pointing out
that the portfolio of securities presently consists of 199 issues spread over
a variety of categories throughout various communities in Oregon. This
diversification is illustrated in the accompanying pie chart.
PORTFOLIO DIVERSIFICATION BY PROJECT
<TABLE>
<S> <C>
Veterans Welfare 3.90%
Education 34.94%
General Obligations 10.42%
Housing 4.29%
Utilities 4.57%
Transportation 5.54%
Convention Center 1.4%
Water/Sewer 10.96%
Hospitals 5.99%
Other Revenue 10.85%
Airports 2.35%
Correctional Facilities 3.18%
Park and Recreational 1.61%
</TABLE>
<PAGE>
PORTFOLIO DISTRIBUTION BY MATURITY
(IN YEARS)
<TABLE>
<S> <C>
0-5 2.02%
6-10 16.40%
11-15 37.46%
16-20 29.30%
Over 20 Years 14.82%
</TABLE>
We also ensure that the maturity of the portfolio is spread out over
various time periods, as is indicated in the accompanying pie chart, with the
average portfolio maturity being 14.7 years and duration to call of 4.7 years.
Altogether then, when you consider the quality, diversification, and
maturity of the portfolio, what we have consistently tried to do for you is
to provide you with the means by which you can have "peace of mind" with your
investment in Tax-Free Trust of Oregon.
Working In Your Interest
You can be assured that all those associated with the management of your
investment will consistently work in your investment interest. We very much
value you as a shareholder and appreciate the confidence you have shown in
Tax-Free Trust of Oregon.
Sincerely
/s/ Lacy B. Herrmann
Lacy B. Herrmann
President and Chairman
of the Board of Trustees
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Rating
FACE MOODY'S/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS - 53.7% S&P VALUE
<C> <S> <C> <C>
City of Albany (MBIA Corporation Insured)
$ 150,000 6.400%, 11/01/1999 Aaa/AAA$ 150,320
460,000 6.500%, 11/01/2000 Aaa/AAA 460,975
2,195,000 6.625%, 11/01/2009 Aaa/AAA 2,199,346
City of Beaverton
910,000 5.950%, 04/01/2003 Aa/AA- 968,012
520,000 6.600%, 06/01/2003 NR/AA- 522,470
960,000 6.050%, 04/01/2004 Aa/AA- 1,023,600
560,000 6.600%, 06/01/2004 NR/AA- 562,660
1,020,000 6.150%, 04/01/2005 Aa/AA- 1,088,850
1,080,000 6.250%, 04/01/2006 Aa/AA- 1,152,900
Clackamas County School District #115 (AMBAC
Indemnity Corporation Insured)
600,000 5.600%, 06/01/2006 Aaa/AAA 648,000
615,000 5.700%, 06/01/2007 Aaa/AAA 666,506
1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,092,500
Clackamas and Washington County School District #3J
2,000,000 5.850%, 08/01/2006 A1/AA- 2,137,500
1,150,000 5.875%, 10/01/2009 A1/AA- 1,237,687
Clackamas, Multnomah and Washington County
School District #7J
1,000,000 7.100%, 06/15/2009 Aaa/NR 1,066,250
250,000 7.100%, 06/15/2010 Aaa/NR 266,562
1,500,000 5.700%, 06/15/2010 Aa/NR 1,586,250
Columbia Gorge Community College District
(Financial Security Assurance Insured)
1,200,000 5.400%, 06/01/2013 Aaa/AAA 1,236,000
Deschutes and Jefferson County School District #2J
(MBIA Corporation Insured)
3,700,000 5.600%, 06/01/2009 Aaa/AAA 3,871,125
Hood River County School District (AMBAC
Indemnity Corporation Insured)
2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,120,000
Jackson County School District #549C (Financial
Security Assurance Insured)
1,400,000 5.100%, 06/01/2005 Aaa/AAA 1,471,750
1,000,000 5.300%, 06/01/2008 Aaa/AAA 1,051,250
<PAGE>
Jefferson County School District #509J (Financial
Security Assurance Insured)
$1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,830,937
Josephine County School District #7 (Grants Pass)
(Financial Guaranty Insurance Corporation)
2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,865,375
Lane County School District #4J
2,000,000 5.375%, 07/01/2009 Aa/NR 2,067,500
1,000,000 5.375%, 07/01/2013 Aa/NR 1,028,750
Lane County School District #52J (Financial Guaranty
Insurance Corporation Insured)
750,000 6.400%, 12/01/2009 Aaa/AAA 850,312
Lincoln County Oregon School District
(Financial Guaranty Insurance Corporation)
1,245,000 5.250%, 06/15/2012 Aaa/AAA 1,302,581
Lincoln County (MBIA Corporation Insured)
1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,028,750
Malheur County Jail Bonds
(MBIA Corporation Insured)
1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,491,269
Marion and Clackamas County Union High School
District #7J (Financial Security Assurance Insured)
1,000,000 7.000%, 06/01/2010 Aaa/AAA 1,155,000
1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,455,575
Metropolitan Oregon Open Space Program
2,340,000 5.250%, 09/01/2013 Aa/AA+ 2,410,200
Metropolitan Service District Refunding (Oregon
Convention Center)
4,320,000 6.250%, 01/01/2013 Aaa/AAA 4,546,800
Multnomah County
1,245,000 5.100%, 10/01/2007 Aa1/NR 1,294,800
1,000,000 5.200%, 10/01/2008 Aa1/NR 1,040,000
Multnomah County Drainage District #1
Assesment Bond (MBIA Corporation Insured)
1,000,000 5.250%, 07/01/2017 Aaa/AAA 1,018,750
Multnomah County School District #1
3,225,000 6.500%, 12/15/2000 Aa/A+ 3,242,447
<PAGE>
Multnomah County School District #1 (continued)
$1,180,000 6.600%, 12/15/2001 Aa/A+ 1,186,856
3,725,000 6.800%, 12/15/2004 Aa/A+ 3,745,897
Multnomah County School District #4
1,330,000 5.900%, 01/01/2005 A1/A+ 1,409,800
Multnomah County School District #40
5,100,000 5.625%, 06/01/2012 NR/AA- 5,393,250
Northern Oregon Correctional (AMBAC Indemnity
Corporation Insured)
2,000,000 5.400%, 09/15/2016 Aaa/AAA 2,067,500
Oak Lodge Water District (AMBAC Indemnity
Corporation Insured)
215,000 7.300%, 12/01/2005 Aaa/AAA 253,163
215,000 7.300%, 12/01/2006 Aaa/AAA 252,356
215,000 7.400%, 12/01/2007 Aaa/AAA 253,162
State of Oregon
5,000,000 7.000%, 12/01/2011 Aa2/AA 5,204,350
State of Oregon Alternate Energy Project Series A
1,000,000 6.400%, 01/01/2008 Aa2/AA 1,018,310
State of Oregon Board of Higher Education
900,000 6.200%, 10/15/2007 Aa2/AA 964,125
3,195,000 6.400%, 10/01/2011 Aa2/AA 3,390,694
2,000,000 6.250%, 10/15/2012 Aa2/AA 2,157,500
2,150,000 6.500%, 10/01/2017 Aa2/AA 2,305,875
2,890,000 6.000%, 10/15/2018 Aa2/AA 3,085,075
1,655,000 5.600%, 08/01/2023 Aa2/AA 1,714,994
1,500,000 5.600%, 08/01/2023 Aa2/AA 1,554,375
6,300,000 6.000%, 08/01/2026 Aa2/AA 6,827,625
State of Oregon Elderly & Disabled Housing
725,000 6.250%, 08/01/2013 Aa2/AA 789,344
State of Oregon Veterans' Welfare
900,000 11.250%, 04/01/1998 Aa/AA 900,000
505,000 9.000%, 04/01/2008 Aa2/AA 607,894
700,000 9.200%, 10/01/2008 Aa/AA 966,875
7,150,000 6.875%, 12/01/2013 Aa/AA 7,422,987
500,000 6.875%, 12/01/2014 Aa2/AA 519,090
1,000,000 7.000%, 12/01/2015 Aa/AA 1,042,150
1,200,000 5.200% 10/01/2018 Aa2/AA 1,201,500
<PAGE>
Polk County School District #2 (Financial Security
Assurance Insured)
$1,000,000 5.400%, 06/01/2012 Aaa/AAA 1,032,500
Polk, Marion, and Benton County School
District #13J (Financial Guaranty Insurance
Corporation Insured)
1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,067,500
City of Portland
1,625,000 4.500%, 11/01/2004 Aaa/NR 1,639,219
1,480,000 5.100%, 10/01/2009 Aaa/NR 1,518,850
1,000,000 7.125%, 10/01/2010 Aaa/NR 1,037,010
2,790,000 5.750%, 06/01/2013 Aaa/NR 2,953,912
2,000,000 5.600%, 06/01/2015 Aa/NR 2,105,000
2,320,000 5.250%, 06/01/2015 Aa/NR 2,386,700
Portland Community College District
3,500,000 6.000%, 07/01/2012 A1/AA 3,749,375
Port of Portland
1,000,000 4.500%, 03/01/2006 Aa/AA+ 1,010,000
City of Salem
1,000,000 5.875%, 01/01/2007 A1/A+ 1,041,250
Tri-County Metropolitan Transportation District
6,100,000 6.000%, 07/01/2012 Aa/AA+ 6,496,500
Tualatin Hills Park and Recreation District
(MBIA Corporation Insured)
2,970,000 5.750%, 03/01/2012 Aaa/AAA 3,144,488
2,000,000 5.750%, 03/01/2015 Aaa/AAA 2,110,000
Umatilla County Oregon (Financial Guaranty
Insurance Corporation Insured)
2,000,000 5.600%, 10/01/2015 Aaa/AAA 2,090,000
Umatilla County School District #8R (AMBAC
Indemnity Corporation Insured)
700,000 6.100%, 12/01/2012 Aaa/AAA 776,125
3,000,000 5.050%, 06/15/2022 Aaa/AAA 2,977,500
Washington County
2,500,000 6.200%, 12/01/2007 Aa/AA 2,665,625
3,110,000 6.000%, 12/01/2013 Aa/AA 3,421,000
<PAGE>
Washington County School District #88J (Financial
Security Assurance Insured)
$2,900,000 6.100%, 06/01/2012 Aaa/AAA 3,161,000
Washington and Clackamas County School
District #23J
1,675,000 6.625%, 01/01/2005 NR/NR* 1,750,375
1,000,000 5.650%, 06/01/2015 A1/NR 1,048,750
720,000 6.625%, 01/01/2008 NR/NR* 752,400
2,000,000 5.400%, 01/01/2010 A1/NR 2,072,500
Washington & Multnomah County School District #48J
1,175,000 5.500%, 06/01/2006 Aa/AA- 1,257,250
700,000 4.500%, 09/01/2006 Aa/AA- 705,250
1,130,000 5.600%, 06/01/2007 Aa/AA- 1,211,925
1,000,000 6.150%, 06/01/2008 Aa/AA- 1,043,750
1,415,000 5.700%, 06/01/2008 Aa/AA- 1,522,894
525,000 6.300%, 09/01/2009 Aaa/AAA 562,406
1,440,000 6.000%, 06/01/2011 Aa/AA- 1,544,400
2,010,000 6.500%, 09/01/2001 Aaa/AAA 2,165,775
Washington & Yamhill County School District #58J
(AMBAC Indemnity Corporation Insured)
70,000 6.600%, 11/01/2004 Aaa/AAA 70,141
80,000 6.600%, 11/01/2005 Aaa/AAA 80,154
90,000 6.600%, 11/01/2006 Aaa/AAA 90,166
Wolf Creek Highway Water District
505,000 6.900%, 12/01/2005 NR/AA 515,757
Yamhill County School District #29J
(Financial Security Assurance Insured)
2,000,000 5.350%, 06/01/2006 Aaa/AAA 2,110,000
500,000 6.100%, 06/01/2011 Aaa/AAA 546,250
Total State of Oregon General Obligation Bonds 176,878,003
STATE OF OREGON REVENUE BONDS - 44.9%
Airport Revenue Bonds - 2.3%
Port of Portland Airport (Financial Guaranty
Insurance Corporation Insured)
500,000 5.500%, 07/01/2006 Aaa/AAA 525,625
<PAGE>
Port of Portland Airport (MBIA Corporation Insured)
600,000 6.400%, 07/01/2003 Aaa/AAA 645,750
3,530,000 6.750%, 07/01/2009 Aaa/AAA 3,830,050
2,425,000 6.750%, 07/01/2015 Aaa/AAA 2,634,156
Total Airport Revenue Bonds 7,635,581
Certificate of Participation Revenue Bonds - 10.8%
Multnomah County Certificate of Participation
1,000,000 5.200%, 07/01/2005 Aa/NR 1,041,250
3,100,000 6.000%, 08/01/2012 Aa/A 3,351,875
State of Oregon Certificate of Participation
(AMBAC Indemnity Corporation Insured)
2,100,000 7.500%, 09/01/2015 Aaa/AAA 2,307,375
Oregon State Department Of Administration Services
(AMBAC Indemnity Corporation Insured)
1,000,000 5.750%, 05/01/2017 Aaa/AAA 1,068,750
950,000 5.000%, 11/01/2019 Aaa/AAA 927,438
5,805,000 5.500%, 11/01/2020 Aaa/AAA 6,022,688
1,500,000 5.800%, 05/01/2024 Aaa/AAA 1,605,000
State of Oregon Certificate of Participation
(MBIA Corporation Insured)
2,150,000 7.050%, 01/15/2006 Aaa/AAA 2,305,875
1,250,000 5.700%, 01/15/2010 Aaa/AAA 1,309,375
2,750,000 6.200%, 11/01/2012 Aaa/AAA 3,011,250
1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,236,250
1,000,000 5.500%, 01/15/2015 Aaa/AAA 1,025,000
550,000 5.500%, 01/15/2015 Aaa/AAA 563,750
500,000 5.800%, 03/01/2015 Aaa/AAA 520,000
600,000 7.200%, 03/01/2015 Aaa/AAA 642,000
1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,040,000
1,450,000 5.375%, 11/01/2016 Aaa/AAA 1,491,687
2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,195,000
Southwestern Oregon Community College District
(AMBAC Indemnity Corporation Insured)
1,000,000 5.600%, 06/01/2016 Aaa/AAA 1,041,250
<PAGE>
City of Portland Certificate of Participation
1,100,000 7.250%, 04/01/2008 NR/NR* 1,137,235
Washington County Educational Services,
Certificates of Participation
645,000 5.625%, 06/01/2016 A1/NR 665,963
830,000 5.750%, 06/01/2025 Aaa/AAA 866,312
Total Certificate of Participation Revenue Bonds 35,375,323
Hospital Revenue Bonds - 4.5%
Clackamas Hospital Facilities Authority (Adventist
Health System/West) (MBIA Corporation Insured)
2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,170,000
Clackamas Hospital Facilites Authority
(Kaiser Permanente)
2,400,000 6.500%, 04/01/2011 Aa3/AA 2,574,000
Clackamas Hospital Facilites Authority (Sisters of
Providence Hospital)
500,000 6.375%, 10/01/2004 A1/AA- 548,125
Douglas County Hospital Facilities Authority
(Catholic Health) (MBIA Corporation Insured)
535,000 5.600%, 11/15/2005 Aaa/AAA 576,462
Medford Hospital Facilities Authority Rogue Valley
(Health Services) (MBIA Corporation Insured)
500,000 6.800%, 12/01/2011 Aaa/AAA 541,250
1,685,000 6.750%, 12/01/2020 Aaa/AAA 1,813,481
Western Lane County Hospital Facilities Authority
(Sisters of St. Joseph Hospital) (MBIA
Corporation Insured)
1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,076,250
1,450,000 7.125%, 08/01/2017 Aaa/AAA 1,540,625
3,765,000 5.750%, 08/01/2019 Aaa/AAA 4,023,844
Total Hospital Revenue Bonds 14,864,037
Housing, Educational, and Cultural Revenue
Bonds - 8.6%
Clackamas Community College
District Revenue (MBIA Corporation Insured)
1,865,000 5.700%, 06/01/2016 Aaa/AAA 1,958,250
<PAGE>
State of Oregon Housing Finance Agency,
1,000,000 6.800%, 07/01/2013 A1/A+ 1,061,250
State of Oregon Housing and Community Services,
1,670,000 5.200%, 07/01/2009 Aa/NR 1,718,013
705,000 5.900%, 07/01/2012 Aa/NR 749,062
755,000 6.750%, 07/01/2012 Aa/NR 810,681
500,000 6.700%, 07/01/2013 Aa/NR 528,750
465,000 6.350%, 07/01/2014 Aa/NR 496,387
1,420,000 6.750%, 07/01/2016 Aa/NR 1,499,875
905,000 6.800%, 07/01/2016 Aa/NR 969,481
3,500,000 6.875%, 07/01/2028 Aa/NR 3,745,000
State of Oregon Housing and Community
Services, (MBIA Corporation Insured)
1,500,000 5.450%, 07/01/2024 Aaa/AAA 1,531,875
State of Oregon Housing, Educational and Cultural
Facilities Authority (George Fox University)
(LOC: Bank of America)
1,000,000 5.700%, 03/01/2017 A1/AA- 1,047,500
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 1,227,463
State of Oregon Housing, Educational and
Cultural Facilities Authority (Reed College),
2,145,000 6.750%, 07/01/2021 NR/A+ 2,354,137
Oregon Health Sciences University Revenue
(AMBAC Indemnity Corporation Insured)
4,500,000 5.250%, 07/15/2015 Aaa/AAA 4,584,375
City of Salem Educational Facilities
(Willamette University),
1,000,000 6.000%, 04/01/2010 A/NR 1,070,000
1,740,000 6.750%, 04/01/2011 NR/NR* 1,870,500
Yamhill County Educational Services (AMBAC
Indemnity Corporation Insurance)
1,000,000 5.150%, 07/01/2019 NR/AAA 1,003,750
Total Housing, Educational, and Cultural Revenue Bonds 28,226,349
<PAGE>
Transportation Revenue Bonds - 3.2%
Port of Morrow,
2,600,000 6.375%, 04/01/2008 Aaa/NR 2,811,250
State of Oregon Department of Transportation (Light
Rail) (MBIA Corporation Insured),
2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,207,500
1,500,000 6.100%, 06/01/2007 Aaa/AAA 1,659,375
Port St. Helens,
85,000 7.750%, 02/01/2006 A3/NR 93,394
Tri-County Metropolitan Transportation District
3,680,000 5.700%, 08/01/2013 A1/AA 3,790,400
Total Transportation Revenue Bonds 10,561,919
Urban Renewal Revenue Bonds - .2%
City of Portland Urban Renewal,
300,000 9.000%, 12/01/2002 A/NR 305,565
City of Wilsonville Urban Renewal,
500,000 5.850%, 06/01/2004 Baa1/NR 500,975
Total Urban Renewal Revenue Bonds 806,540
Utility Revenue Bonds - 4.5%
Emerald Peoples Utility District (AMBAC Indemnity
Corporation Insured),
700,000 6.700%, 11/01/2005 Aaa/AAA 752,500
Emerald Peoples Utility District Electic Systems
(Financial Security Assurance Insured)
1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,088,750
City of Eugene Electric Utility
(Financial Security Assurance Insured)
1,700,000 5.000%, 08/01/2018 Aaa/AAA 1,678,750
1,200,000 5.050%, 08/01/2022 Aaa/AAA 1,183,500
City of Eugene Electric Utility
610,000 6.650%, 08/01/2009 A1/AA 658,038
660,000 6.650%, 08/01/2010 A1/AA 711,975
1,000,000 6.000%, 08/01/2011 A1/AA 1,052,500
700,000 6.700%, 08/01/2011 A1/AA 756,000
500,000 5.000%, 08/01/2017 A1/AA 489,375
1,400,000 5.800%, 08/01/2019 A1/AA 1,529,500
<PAGE>
City of Eugene Trojan Nuclear Project
3,865,000 5.900%, 09/01/2009 Aa1/AA- 3,875,899
Northern Wasco County Public Utility Development
(AMBAC Indemnity Corporation Insured),
1,000,000 5.625%, 12/01/2022 Aaa/AAA 1,042,500
Total Utility Revenue Bonds 14,819,287
Water and Sewer Revenue Bonds - 9.6%
City of Canby Sewer (Financial Security
Assurance Insured),
500,000 6.250%, 12/01/2017 Aaa/AAA 543,750
City of Klamath Falls Water (Financial Security
Assurance Insured),
1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,197,625
City of Oregon City Sewer,
750,000 6.875%, 10/01/2019 NR/NR* 878,438
City of Portland Sewer
1,500,000 6.050%, 06/01/2009 A1/A+ 1,655,625
City of Portland Sewer, (MBIA Corporation Insured)
2,500,000 5.250%, 06/01/2016 Aaa/AAA 2,521,875
City of Portland Sewer (Financial Guaranty
Insurance Corporation Insured),
2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,980,469
500,000 6.000%, 10/01/2012 Aaa/AAA 545,625
1,000,000 5.000%, 06/01/2014 Aaa/AAA 998,750
2,000,000 5.000%, 06/01/2015 Aaa/AAA 1,985,000
2,855,000 6.250%, 06/01/2015 Aaa/AAA 3,190,463
Portland Water System Revenue
3,000,000 5.550%, 08/01/2014 Aa1/NR 3,116,250
1,440,000 5.550%, 08/01/2015 Aa1/NR 1,492,200
800,000 5.900%, 10/01/2006 Aaa/AAA 877,000
Washington County Unified Sewer Agency (AMBAC
Indemnity Corporation Insured),
1,040,000 6.800%, 11/01/2004 Aaa/AAA 1,086,800
2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,324,050
315,000 5.900%, 10/01/2006 Aaa/AAA 342,169
2,195,000 7.000%, 11/01/2009 Aaa/AAA 2,302,006
<PAGE>
Washington County Unified Sewer Agency (continued)
2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,771,875
750,000 6.125%, 10/01/2012 Aaa/AAA 831,563
Total Water and Sewer Revenue Bonds 31,641,533
Other Revenue Bonds - 1.2%
Baker County Pollution Control (Ash Grove
Cement West Project) (Small Business
Administration Insured),
355,000 6.200%, 07/01/2004 Aaa/NR 360,669
380,000 6.300%, 07/01/2005 Aaa/NR 386,065
State of Oregon Bond Bank
500,000 6.800%, 01/01/2011 Aaa/NR 521,345
Oregon Economic Development Commission
(Consolidated Freightways)
1,500,000 7.000%, 04/01/2004 Aa2/BBB- 1,500,510
Multnomah County School District #1J,
Special Obligations
1,000,000 5.000%, 03/01/2007 Aa/A+ 1,026,250
Total Other Revenue Bonds 3,794,839
Total State of Oregon Revenue Bonds 147,725,408
PUERTO RICO
Puerto Rico Housing Finance Corporation
(GNMA Collateralized)
15,000 7.800%, 10/15/2021 Aaa/AAA 15,432
Total Puerto Rico 15,432
Total Municipal Bonds (cost $306,304,671**) 98.6% 324,618,843
Other assets in excess of liabilities 1.4 4,544,760
Net Assets 100.0% $329,163,603
<FN> (*) Any security not rated has been 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 identical. </FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value (identified cost $306,304,671) $324,618,843
Cash 372,127
Interest receivable 5,653,137
Receivable for Trust shares sold 399,337
Other assets 5,433
Total assets 331,048,877
LIABILITIES
Payable for investment securities purchased 1,202,253
Payable for Trust shares redeemed 124,277
Dividends payable 202,619
Distribution fees payable 120,490
Management fees payable 111,514
Accrued expenses 124,121
Total liabilities 1,885,274
NET ASSETS $329,163,603
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares,
par value $.01 per share $ 306,525
Additional paid-in capital 310,347,810
Accumulated net realized gain on investments 195,096
Net unrealized appreciation on investments 18,314,172
$329,163,603
CLASS A
Net Assets $319,416,829
Capital shares outstanding 29,744,367
Net asset value and redemption price per share $ 10.74
Offering price per share (100/96 of $10.74 adjusted
to nearest cent) $ 11.19
CLASS C
Net Assets $ 1,062,730
Capital shares outstanding 99,028
Net asset value and offering price per share $ 10.73
Redemption price per share (*generally, a charge of 1%
is imposed on the proceeds of shares redeemed during
the first 12 months after purchase.) $ 10.73*
CLASS Y
Net Assets $ 8,684,044
Capital shares outstanding 809,072
Net asset value, offering and redemption price per share $ 10.73
</TABLE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest income $ 8,972,439
Expenses:
Management fees (note 3) $ 645,957
Distribution and service fees (note 3) 240,995
Transfer and shareholder servicing agent fees 101,000
Legal fees 40,000
Trustees' fees and expenses 37,000
Shareholders' reports and proxy statements 33,000
Audit and accounting fees 14,000
Custodian fees 12,000
Registration fees and dues 11,000
Insurance 5,000
Miscellaneous 7,481
1,147,433
Expenses paid indirectly (note 7) (12,000)
Net expenses 1,135,433
Net investment income 7,837,006
Realized and unrealized gain on investments:
Net realized gain from securities transactions 577,877
Change in unrealized appreciation on investments 1,495,364
Net realized and unrealized gain on investments 2,073,241
Net increase in net assets resulting from operations $ 9,910,247
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 Sept. 30, 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,837,006 $ 15,494,091
Net realized gain from securities transactions 577,877 394,005
Change in unrealized appreciation on investments 1,495,364 5,718,838
Change in net assets resulting from operations 9,910,247 21,606,934
DISTRIBUTIONS TO SHAREHOLDERS (note 6):
Class A Shares:
Net investment income (7,805,354) (15,480,977)
Net realized gain on investments (222,521) (387,996)
Class C Shares:
Net investment income (18,152) (27,150)
Net realized gain on investments (571) (997)
Class Y Shares:
Net investment income (168,450) (87,359)
Net realized gain on investments (4,740) (5,012)
Change in net assets from distributions (8,219,788) (15,989,491)
CAPITAL SHARE TRANSACTIONS (note 8):
Proceeds from shares sold 20,344,706 33,347,126
Reinvested dividends and distributions 5,009,981 9,592,553
Cost of shares redeemed (14,717,557) (37,395,842)
Change in net assets from capital share transactions 10,637,130 5,543,837
Change in net assets 12,327,589 11,161,280
NET ASSETS:
Beginning of period 316,836,014 305,674,734
End of period $329,163,603 $ 316,836,014
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
1. ORGANIZATION
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 and until April 5, 1996, offered only one class
of shares. On that date, the Trust began offering two additional classes of
shares, Class C and Class Y shares. All shares outstanding prior to that date
were designated as Class A shares and, as was the case since inception, are
sold with a front-payment sales charge and bear an annual service fee. Class
C shares are sold with a level-payment sales charge with no payment at time
of purchase but level service and distribution fees from date of purchase
through a period of six years thereafter. A contingent deferred sales charge
of 1% is assessed to any Class C shareholder who redeems shares of this Class
within one year from the date of purchase. The Class Y shares are only
offered to institutions acting for an investor in a fiduciary, advisory,
agency, custodian or similar capacity. They are not available to individual
retail investors. Class Y shares are sold at net asset value without any
sales charge, redemption fees, contingent deferred sales charge or
distribution or service fees. On January 31, 1998 the Trust established Class
I shares, which are offered and sold only through financial intermediaries
and are not offered directly to retail customers. At March 31, 1998 there
were no Class I shares outstanding. All classes of shares represent interests
in the same portfolio of investments in the Trust and are identical as to
rights and privileges. They differ only with respect to the effect of sales
charges, the distribution and/or service fees borne by the respective class,
expenses specific to each class, voting rights on matters affecting a single
class and the exchange privileges of each class.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
a) Portfolio valuation: Municipal securities which have remaining
maturities of more than 60 days are valued at fair value 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.
<PAGE>
In Fiscal 1997, the Trust began amortizing bond premium using the
constant yield method. Accordingly, net unrealized appreciation and
additional paid-in capital have been adjusted by equal amounts at the
beginning of the year. This change had no effect on the Trust's net asset
value or distribution policy and conforms to the amortization policy followed
by the Trust for Federal tax purposes.
b) 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 premium and accretion of original issue discount. Market
discount is recognized upon disposition of the security.
c) 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.
d) Allocation of expenses: Expenses, other than class-specific expenses,
are allocated daily to each class of shares based on the relative net assets
of each class. Class-specific expenses, which include distribution and
service fees and any other items that are specifically attributed to a
particular class, are charged directly to such class.
e) 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
of increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
3. FEES AND RELATED PARTY TRANSACTIONS
(a) Management Arrangements:
Aquila Management Corporation (the "Manager"), the Trust's founder and
sponsor, serves as the Manager for the Trust under an Advisory and
Administration Agreement with the Trust. The portfolio management of the Trust
has been delegated to a sub-adviser as described below. Under the Advisory
and Administrative Agreement, the Manager provides all administrative
services to the Trust, other than those relating to the day-to-day portfolio
management. The Manager's services include providing the office of the Trust
and all related services as well as overseeing the activities of any
sub-adviser and all the various support organizations to the Trust such as
the shareholder servicing agent, custodian, legal counsel, auditors and
distributor and additionally maintaining the Trust's accounting books and
records. For its services, the Manager is entitled to receive a fee which
<PAGE>
is payable monthly and computed as of the close of business each day at
the annual rate of 0.40 of 1% on the Trust's net assets.
U.S. Bank National Association (the "Sub-Adviser"), serves as the
Investment Sub-Adviser for the Trust under a Sub-Advisory Agreement between
the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser
continuously provides, subject to oversight of the Manager and the Board of
Trustees of the Trust, the investment program of the Trust and the
composition of its portfolio, arranges for the purchases and sales of
portfolio securities, and provides for daily pricing of the Trust's
portfolio. For its services, the Sub-Adviser is entitled to receive a fee
from the Manager which is payable monthly and computed as of the close of
business each day at the annual rate of 0.18 of 1% on the Trust's net assets.
On October 31, 1997, the Management arrangements described above were
approved by the Trust's shareholders and went into effect. From inception of
the Trust to that date, Aquila Management Corporation had served as
sub-adviser, and then administrator, and U.S. Bank National Association and
its predecessors in interest had served as investment adviser, pursuant to
agreements with the Trust for total fees at an annual rate of 0.40 of 1% of
the Trust's net assets, the same fee as under the new arrangements.
For the six months ended March 31, 1998, the Trust incurred fees for
advisory and administrative services of $645,957.
Specific details as to the nature and extent of the services provided by
the Manager and the Sub-Adviser are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
b) Distribution and Service Fees:
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part
of the Plan, with respect to Class A Shares, the Trust is authorized to make
service fee payments to broker-dealers or others ("Qualified Recipients")
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 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. The Trust makes payment
of this service fee at the annual rate of 0.15% of the Trust's average net
assets represented by Class A Shares. For the six months ended March 31, 1998,
service fees on Class A Shares amounted to $236,588, of which the Distributor
received $6,971.
Under another part of the Plan, the Trust is authorized to make payments
with respect to Class C Shares to Qualified Recipients which have rendered
assistance in the distribution and/or retention
<PAGE>
of the Trust's Class C shares or servicing of shareholder accounts. These
payments are made at the annual rate of 0.75% of the Trust's net assets
represented by Class C Shares and for the six months ended March 31, 1998,
amounted to $3,305. In addition, under a Shareholder Services Plan, the Trust
is authorized to make service fee payments with respect to Class C Shares to
Qualified Recipients for providing personal services and/or maintenance of
shareholder accounts. These payments are made at the annual rate of 0.25% of
the Trust's net assets represented by Class C Shares and for the six months
ended March 31, 1998, amounted to $1,102. The total of these payments made
with respect to Class C Shares amounted to $4,407, of which the Distributor
received $2,043.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
Under a Distribution Agreement, 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. For the
six months ended March 31, 1998, the Distributor received sales commissions
of $89,946.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended March 31, 1998, purchases of securities and
proceeds from the sales of securities aggregated $21,383,655 and $10,134,691,
respectively.
At March 31, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted
to $18,333,724 and aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over market value amounted to $19,552
for a net unrealized appreciation of $18,314,172.
5. 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. Two such developments, Measure 5, a 1990 amendment to the Oregon
Constitution, as well as measures 47 and 50, limit the taxing and spending
authority of certain Oregon governmental entities. Although they may have an
adverse effect on the general financial condition of these entities and may
impair the ability of certain Oregon issuer's to pay interest and principal
on their obligations, experience over the history of such amendments would
indicate a low probability of this happening.
<PAGE>
6. 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 statement
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.
7. EXPENSES
The Trust has negotiated an expense offset arrangement with its
custodian, wherein it receives credit toward the reduction of custodian fees
and other Trust expenses whenever there are uninvested cash balances. The
Statement of Operations reflects the total expenses before any offset, the
amount of offset and the net expenses. It is general intention of the Fund to
invest, to the extent practicable, some or all of cash balances in
income-producing assets rather than leave cash on deposit.
<PAGE>
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 September 30, 1997
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 1,427,266 $ 15,328,559 2,755,147 $ 29,089,742
Reinvested dividends and
distributions 460,257 4,945,528 903,248 9,535,675
Cost of shares redeemed (1,352,919) (14,525,555) (3,530,285) (37,291,993)
Net change 534,604 5,748,532 128,110 1,333,424
CLASS C SHARES:
Proceeds from shares sold 23,615 254,438 42,838 451,359
Reinvested dividends and
distributions 424 4,557 538 5,679
Cost of shares redeemed (2) (22) (459) (4,904)
Net change 24,037 258,973 42,917 452,134
CLASS Y SHARES:
Proceeds from shares sold 443,879 4,761,709 359,104 3,806,025
Reinvested dividends and
distributions 5,572 59,896 4,836 51,199
Cost of shares redeemed (17,909) (191,980) (9,464) (98,945)
Net change 431,542 4,629,625 354,476 3,758,279
Total transactions in Trust
shares 990,183 $10,637,130) 525,503 $5,543,837
</TABLE>
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
(unaudited)
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class A(1)
Six Months Ended Year ended September 30,
March 31, 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.68 $10.49 $10.55 $10.20 $10.95 $10.48
Income from Investment Operations:
Net investment income 0.26 0.53 0.54 0.55 0.56 0.58
Net gain (loss) on securities (both
realized and unrealized) 0.08 0.21 (0.05) 0.39 (0.75) 0.50
Total from Investment Operations 0.34 0.74 0.49 0.94 (0.19) 1.08
Less Distributions (note 6):
Dividends from net investment income (0.27) (0.54) (0.54) (0.55) (0.56) (0.58)
Distributions from capital gains (0.01) (0.01) (0.01) (0.04) - (0.03)
Total Distributions (0.28) (0.55) (0.55) (0.59) (0.56) (0.61)
Net Asset Value, End of Period $10.74 $10.68 $10.49 $10.55 $10.20 $10.95
Total Return (not reflecting sales charge)(%) 3.14+ 7.21 4.76 9.52 (1.77) 10.60
Ratios/Supplemental Data
Net Assets, End of Period ($ millions) 319 312 305 311 316 331
Ratio of Expenses to Average Net Assets (%) 0.70* 0.72 0.72 0.71 0.68 0.66
Ratio of Net Investment Income to Average Net
Assets (%) 4.86* 5.02 5.16 5.38 5.28 5.46
Portfolio Turnover Rate (%) 3 5 10 13 11 8
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:
Net Investment Income ($) 0.26 0.53 0.54 0.55 0.56 0.58
Ratio of Expenses to Average Net Assets (%) 0.70* 0.73 0.73 0.73 0.70 0.68
Ratio of Net Investment Income to Average Net
Assets (%) 4.86* 5.01 5.15 5.37 5.26 5.44
<FN> (1) Designated as Class A Shares on April 5, 1996. </FN>
<FN> + Not annualized. </FN>
<FN> * Annualized. </FN>
</TABLE>
<PAGE>
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Class C(1) Class Y(1)
Six Months Year Period(2) Six Months Year Period(2)
Ended March Ended Sept. Ended Sept. Ended March Ended Sept. Ended Sept.
31, 1998 30, 1997 30, 1996 31, 1998 30, 1997 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.67 $10.49 $10.34 $10.68 $10.49 $10.34
Income from Investment Operations:
Net investment income 0.25 0.43 0.22 0.27 0.54 0.27
Net gain (loss) on securities (both
realized and unrealized) 0.07 0.21 0.15 0.06 0.21 0.15
Total from Investment Operations 0.32 0.64 0.37 0.33 0.75 0.42
Less Distributions (note 6):
Dividends from net investment income (0.25) (0.45) (0.22) (0.27) (0.55) (0.27)
Distributions from capital gains (0.01) (0.01) - (0.01) (0.01) -
Total Distributions (0.26) (0.46) (0.22) (0.28) (0.56) (0.27)
Net Asset Value, End of Period $10.73 $10.67 $10.49 $10.73 $10.68 $10.49
Total Return (not reflecting sales
charge)(%) 2.71+ 6.20 3.61+ 3.13+ 7.37 4.14+
Ratios/Supplemental Data
Net Assets, End of Period ($ thousands) 1,063 800 336 8,684 4,031 242
Ratio of Expenses to Average Net
Assets (%) 1.52* 1.57 1.56* 0.55* 0.57 0.57*
Ratio of Net Investment Income to
Average Net Assets (%) 4.03* 4.15 4.18* 4.95* 5.22 5.36*
Portfolio Turnover Rate (%) 3+ 5 10+ 3+ 5 10+
<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 ($) 0.25 0.44 0.22 0.27 0.54 0.27
Ratio of Expenses to Average Net
Assets (%) 1.53* 1.58 1.56+ 0.55* 0.58 0.58*
Ratio of Net Investment Income to
Average Net Assets (%) 4.02* 4.14 4.17* 4.95* 5.21 5.35*
<FN> (1) New Class of Shares established on April 5, 1996. </FN>
<FN> (2) From April 5, 1996 to September 30, 1996. </FN>
<FN> + Not annualized. </FN>
<FN> * Annualized. </FN>
</TABLE>
<PAGE>
Report on the Special Meeting of Shareholders (unaudited)
A Special Meeting of Shareholders of Tax-Free Trust of Oregon was held
on October 31, 1997.* At the meeting, the following matters were submitted to
a shareholder vote and approved:
(i) the approval of a proposed Interim Investment Advisory Agreement with
First Bank National Association (votes for: 222,760,812.46 (90.57%);
votes against: 4,296,431.24 (1.75%); abstentions: 18,881,862.96
(7.68%); broker non-votes: 0.00 (0.00%)),
(ii) the approval of a proposed Investment Advisory and Administration
Agreement with Aquila Management Corp. (votes for: 223,111,178.61
(90.72%); votes against: 4,231,613.89 (1.72%); abstentions:
18,596,292.80 (7.56%); broker non-votes: 21.36 (0.00%)), and
(iii) the approval of a proposed Sub-Advisory Agreement between First Bank
National Association and Aquila Management Corporation (votes for:
221,268,261.97 (89.97%); votes against: 4,559,536.25 (1.85%);
abstentions: 20,111,308.48 (8.18%); broker non-votes: 0.00 (0.00%)).
_______________________________________
* On the record date for the Special Meeting, the holders of 29,208,930.35
Class A Shares, 74,384.78 Class C Shares, and 339,809.28 Class Y Shares were
outstanding and entitled to vote representing a total net asset value of
$316,964,033.12. The holders of shares entitled to vote representing a total
net asset value of $245,939,106.66 (77.59%) were present in person or by
proxy at the meeting.
