<PAGE>
MANAGER AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISOR
U.S. BANK NATIONAL ASSOCIATION
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
John W. Mitchell
Richard C. Ross
OFFICERS
Diana P. Herrmann, President
Kerry A. Lemert, 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 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, 1999
TAX-FREE TRUST OF
OREGON
A TAX-FREE INCOME INVESTMENT
(Logo of the 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
(Logo of the Aquila Group of Funds: An eagle's head)
</PAGE>
<PAGE>
(Logo of the 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
"THE BEST THINGS IN LIFE CAN BE TAX-FREE"
April 12, 1999
Dear Fellow Shareholder:
When you compare TAX-FREE municipal bonds with similar maturity high
quality taxable U.S. Treasuries, we think it is fair to say,
"THE BEST THINGS IN LIFE CAN BE TAX-FREE."
You actually get to keep more of your return - in dollars and cents
- - with the TAX-FREE investment, when you take into consideration the effect of
taxes you pay with a TAXABLE bond.
SEEING IS BELIEVING
Let us show you the mathematics of how this works out. Let's suppose
you purchase a $1,000 15-year U.S. Treasury bond yielding 5% and a $1,000
tax-free municipal bond with a maturity of 15 years yielding 4.4%.
Your investments would look as follows:
U.S. TREASURY* TAX-FREE*
Interest Income $50.00 $44.00
Federal Tax Bracket 28% 28%
Federal Tax Paid $14.00 $-0-
Net Income Retained $36.00 $44.00
Even though on the surface the U.S. Treasury appears to be yielding
higher than the TAX-FREE municipal, once the effect of Federal taxes is taken
into consideration, the TAX-FREE investment allows you to keep more money in
your pocket. State taxes are not applicable to either investment.
Obviously, investors in income tax brackets higher than 28% will
obtain an even greater advantage.
Only you can make the decision as to the right asset allocation for
your investment money. However, given the fact that there is an increased supply
of high quality municipal bonds available and a favorable ratio of taxable vs.
tax-free bonds, we believe it is fair to say that,
"THE BEST THINGS IN LIFE CAN BE TAX-FREE."
THE TAX-FREE BONDS IN THE TRUST'S PORTFOLIO
The portfolio of Tax-Free Trust of Oregon contains only high quality
tax-free municipal bonds. Additionally, the maturity of the overall portfolio of
the Trust has an INTERMEDIATE character. Each of these factors with the tax-free
bonds in the Trust's portfolio lends itself to the kind of investment with the
Trust that allows you to "SLEEP WELL AT NIGHT."
THE OTHER BENEFITS OF YOUR INVESTMENT
There are other benefits inherent in your investment in Tax-Free
Trust of Oregon. In these benefits, you can take pride and say,
</PAGE>
<PAGE>
"THE BEST THINGS IN LIFE CAN TRULY BE TAX-FREE."
The tax-free bonds in the Trust help finance a variety of public
purpose projects throughout the State. These are the kind of projects that
benefit you and your neighbors.
For example, do you:
* use Max Light Rail service in Portland to go shopping or to basketball
games?
* have a child or grandchild attending Reed College?
* fly out of Portland International Airport for business or vacation?
* attend conferences and exhibits at the Oregon Convention Center?
If so, that's your money in the Trust at work with these projects.
The money that you and other shareholders have invested in the Trust has helped
build each of these projects and many more projects throughout the State.
Just remember how proud and excited you were the day you sat behind
the wheel of your first car or walked into your first home. It was your
hard-earned dollars that paid for these comforts.
Well, in another sense, you can be equally proud and excited about
the projects you have helped finance in your community and throughout the State
of Oregon. It is your hard-earned dollars that have helped build the Oregon
Convention Center, the airport, and all the various other projects throughout
the State that the Trust has helped finance. It was truly with your investment
and that of other shareholders that Tax-Free Trust of Oregon helped build the
benefits that you can see and touch.
</PAGE>
<PAGE>
In a very real sense, these projects belong to you and came to
fruition through your hard work. Thus, not only do you get income advantages
through your investment in Tax-Free Trust of Oregon, but, also, you can
literally take pride in saying that through the benefits of these projects,
"THE BEST THINGS IN LIFE CAN BE TAX-FREE."
YOUR CONFIDENCE APPRECIATED
You can be assured that all those associated with the management of
your investment in Tax-Free Trust of Oregon are consistently working in your
best interest. We very much value you as a shareholder and appreciate the
confidence you have shown in the Trust.
Sincerely,
Diana P. Herrmann
President
Lacy B. Herrmann
Chairman, Board of Trustees
* The investment examples given, while realistic, are for illustrative
purposes only, and are strictly hypothetical in nature. They do not
represent the performance of any particular investment. For simplicity,
a stable net asset value has been assumed over the life of each
investment and the effect of dividend reinvestment was not taken into
account. Of course, the actual rate of return and share price of a
municipal bond fund, such as Tax-Free Trust of Oregon, will fluctuate
with general interest rate changes. Thus, redemption price may be more
or less than original purchase price.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
MARCH 31, 1999 (unaudited)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS - 51.1% S&P VALUE
</CAPTION>
<S> <C> <C> <C>
960,000 6.050%, 04/01/2004 Aa3/AA- 1,016,400
1,020,000 6.150%, 04/01/2005 Aa3/AA- 1,079,925
1,080,000 6.250%, 04/01/2006 Aa3/AA- 1,146,150
Clackamas County School District #115 (AMBAC
Indemnity Corporation Insured)
600,000 5.600%, 06/01/2006 Aaa/AAA 657,750
615,000 5.700%, 06/01/2007 Aaa/AAA 676,500
1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,121,250
Clackamas County School District #12 (Financial
Guaranty Insurance Corporation)
2,000,000 5.250%, 06/01/2015 Aaa/AAA 2,072,500
9,000,000 4.800%, 06/01/2018 Aaa/AAA 8,831,250
Clackamas and Washington County School
District #3J
2,000,000 5.850%, 08/01/2006 A1/AAA 2,132,500
1,150,000 5.875%, 10/01/2009 A1/A+ 1,221,875
Clackamas, Multnomah and Washington County
School District #7J
1,000,000 7.100%, 06/15/2009 Aaa/NR 1,043,750
250,000 7.100%, 06/15/2010 Aaa/NR 260,937
1,500,000 5.700%, 06/15/2010 Aa2/NR 1,593,750
Columbia Gorge Community College District
(Financial Security Assurance Insured)
1,200,000 5.400%, 06/01/2013 Aaa/AAA 1,275,000
Deschutes and Jefferson County School District #2J
(MBIA Corporation Insured)
3,700,000 5.600%, 06/01/2009 Aaa/AAA 3,875,750
Hood River County School District (AMBAC
Indemnity Corporation Insured)
2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,130,000
Jackson County School District #5, Ashland
(Financial Security Assurance Insured)
1,400,000 5.100%, 06/01/2005 Aaa/AAA 1,485,750
</PAGE>
<PAGE>
Jackson County School District #549C, (Financial
Security Assurance Insured)
1,000,000 5.300%, 06/01/2008 Aaa/AAA 1,057,500
Jefferson County School District #509J (Financial
Security Assurance Insured)
1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,841,875
Josephine County School District #7 (Grants Pass)
(Financial Guaranty Insurance Corporation)
2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,899,125
Lane County School District #4J
2,000,000 5.375%, 07/01/2009 Aa3/NR 2,080,000
1,000,000 5.375%, 07/01/2013 Aa3/NR 1,028,750
Lane County School District #52J (Financial
Guaranty Insurance Corporation Insured)
750,000 6.400%, 12/01/2009 Aaa/AAA 850,313
Lincoln County Oregon School District (Financial
Guaranty Insurance Corporation)
1,245,000 5.250%, 06/15/2012 Aaa/AAA 1,305,694
Lincoln County (MBIA Corporation Insured)
1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,032,500
Malheur County Jail Bonds (MBIA Corporation
Insured)
1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,494,631
Marion and Clackamas County Union High School
District #7J (Financial Security Assurance
Insured)
1,000,000 7.000%, 06/01/2010 Aaa/AAA 1,150,000
1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,482,375
Metropolitan Oregon Open Space Program
2,340,000 5.250%, 09/01/2013 Aa2/AA+ 2,416,050
Metropolitan Service District Refunding (Oregon
Convention Center)
4,320,000 6.250%, 01/01/2013 Aa2/AA+ 4,490,812
Multnomah County
1,245,000 5.100%, 10/01/2007 Aa1/NR 1,316,587
1,000,000 5.200%, 10/01/2008 Aa1/NR 1,062,500
</PAGE>
<PAGE>
Multnomah County Drainage District #1 Assessment
Bond (MBIA Corporation Insured)
1,000,000 5.250%, 07/01/2017 Aaa/AAA 1,022,500
Multnomah County School District #4
1,330,000 5.900%, 01/01/2005 A1/A+ 1,404,812
Multnomah County School District #40
5,100,000 5.625%, 06/01/2012 NR/AA- 5,406,000
Northern Oregon Correctional (AMBAC Indemnity
Corporation Insured)
2,000,000 5.400%, 09/15/2016 Aaa/AAA 2,080,000
Oak Lodge Water District (AMBAC Indemnity
Corporation Insured)
215,000 7.300%, 12/01/2005 Aaa/AAA 250,206
215,000 7.300%, 12/01/2006 Aaa/AAA 250,206
215,000 7.400%, 12/01/2007 Aaa/AAA 249,669
Puerto Rico Commonwealth Infrastructure (MBIA
Corporation Insured)
1,500,000 4.875% , 07/01/2023 Aaa/AAA 1,485,000
State of Oregon Alternate Energy Project Series A
1,000,000 6.400%, 01/01/2008 Aa2/AA 1,002,800
State of Oregon Board of Higher Education
900,000 6.200%, 10/15/2007 Aa2/AA 961,875
3,195,000 6.400%, 10/01/2011 Aa2/AA 3,374,719
2,000,000 6.250%, 10/15/2012 Aa2/AA 2,140,000
2,150,000 6.500%, 10/01/2017 Aa2/AA 2,279,000
2,890,000 6.000%, 10/15/2018 Aa2/AA 3,067,012
3,000,000 4.875%, 08/01/2019 Aa2/AA 2,943,750
8,000,000 5.000%, 08/01/2022 Aa2/AA 8,010,000
1,500,000 5.000%, 08/01/2022 Aa2/AA 1,501,875
1,655,000 5.600%, 08/01/2023 Aa2/AA 1,743,956
1,500,000 5.600%, 08/01/2023 Aa2/AA 1,580,625
6,300,000 6.000%, 08/01/2026 Aa2/AA 7,126,875
State of Oregon Elderly & Disabled Housing
725,000 6.250%, 08/01/2013 Aa2/AA 785,719
State of Oregon Veterans' Welfare
505,000 9.000%, 04/01/2008 Aa2/AA 593,375
700,000 9.200%, 10/01/2008 Aa2/AA 960,750
1,200,000 5.200%, 10/01/2018 Aa2/AA 1,215,000
</PAGE>
<PAGE>
Polk County School District #2 (Financial Security
Assurance Insured)
1,000,000 5.400%, 06/01/2012 Aaa/AAA 1,036,250
Polk, Marion, and Benton County School
District #13J (Financial Guaranty Insurance
Corporation Insured)
1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,071,250
City of Portland
1,000,000 4.500%, 11/01/2004 Aaa/NR 1,015,000
1,480,000 5.100%, 10/01/2009 Aaa/NR 1,529,950
2,790,000 5.750%, 06/01/2013 Aaa/NR 2,992,275
2,000,000 5.600%, 06/01/2015 Aa2/NR 2,110,000
1,645,000 5.250%, 06/01/2015 Aa2/NR 1,684,069
Portland Community College District
3,500,000 6.000%, 07/01/2012 Aa3/AA 3,736,250
Port of Portland
1,000,000 4.500%, 03/01/2006 Aa2/AA+ 1,021,250
City of Salem
1,000,000 5.875%, 01/01/2007 A1/AA- 1,041,250
Salem-Keizer Oregon School District #24, (Financial
Security Assurance Insured)
2,000,000 4.875%, 06/01/2014 Aaa/AAA 2,017,500
Tri-County Metropolitan Transportation District
6,100,000 6.000%, 07/01/2012 Aa2/AA+ 6,496,500
Tualatin Hills Park and Recreation District (MBIA
Corporation Insured)
2,970,000 5.750%, 03/01/2012 Aaa/AAA 3,237,300
2,000,000 5.750%, 03/01/2015 Aaa/AAA 2,180,000
Umatilla County Oregon (Financial Guaranty
Insurance Corporation Insured)
2,000,000 5.600%, 10/01/2015 Aaa/AAA 2,140,000
Umatilla County School District #8R (AMBAC
Indemnity Corporation Insured)
700,000 6.100%, 12/01/2012 Aaa/AAA 777,875
Umatilla County School District #6R (AMBAC
Indemnity Corporation Insured)
325,000 5.050%, 06/15/2022 Aaa/AAA 344,906
2,675,000 5.050%, 06/15/2022 Aaa/AAA 2,671,656
</PAGE>
<PAGE>
Washington County
2,500,000 6.200%, 12/01/2007 Aa1/AA 2,640,625
1,625,000 5.000%, 12/01/2011 Aa1/AA 1,679,844
3,110,000 6.000%, 12/01/2013 Aa1/AA 3,432,662
Washington County School District #88J (Financial
Security Assurance Insured)
2,315,000 6.100%, 06/01/2012 Aaa/AAA 2,581,225
585,000 6.100%, 06/01/2012 Aaa/AAA 639,844
Washington and Clackamas County School
District #23J
1,000,000 5.650%, 06/01/2015 A1/NR 1,068,750
720,000 6.625%, 01/01/2008 NR/NR* 737,755
2,000,000 5.400%, 01/01/2010 A1/NR 2,097,500
Washington & Multnomah County School
District #48J
1,175,000 5.500%, 06/01/2006 Aa2/AA- 1,254,312
1,130,000 5.600%, 06/01/2007 Aa2/AA- 1,211,925
1,000,000 6.150%, 06/01/2008 Aa2/AA- 1,030,000
1,415,000 5.700%, 06/01/2008 Aa2/AA- 1,508,744
525,000 6.300%, 09/01/2009 Aaa/AAA 558,469
1,440,000 6.000%, 06/01/2011 Aa2/AA- 1,549,800
2,010,000 6.500%, 09/01/2011 Aaa/AAA 2,145,675
Washington & Yamhill County School District #58J
(AMBAC Indemnity Corporation Insured)
70,000 6.600%, 11/01/2004 Aaa/AAA 70,137
80,000 6.600%, 11/01/2005 Aaa/AAA 80,151
90,000 6.600%, 11/01/2006 Aaa/AAA 90,162
Yamhill County School District #29J (Financial
Security Assurance Insured)
2,000,000 5.350%, 06/01/2006 Aaa/AAA 2,117,500
500,000 6.100%, 06/01/2011 Aaa/AAA 554,375
Total State of Oregon General Obligation Bonds 173,683,947
</PAGE>
<PAGE>
STATE OF OREGON REVENUE BONDS - 47.0% AIRPORT REVENUE BONDS-
2.6% Port of Portland Airport (Financial Guaranty
Insurance Corporation Insured)
500,000 5.500%, 07/01/2006 Aaa/AAA 524,375
Port of Portland Airport (MBIA Corporation Insured)
205,000 6.400%, 07/01/2003 NR/AAA 219,606
395,000 6.400%, 07/01/2003 Aaa/AAA 423,637
1,210,000 6.750%, 07/01/2009 NR/AAA 1,303,775
2,320,000 6.750%, 07/01/2009 Aaa/AAA 2,470,800
1,595,000 6.750%, 07/01/2015 Aaa/AAA 1,702,662
830,000 6.750%, 07/01/2015 NR/AAA 894,325
1,295,000 5.000%, 07/01/2028 Aaa/AAA 1,270,719
Total Airport Revenue Bonds 8,809,899
CERTIFICATE OF PARTICIPATION REVENUE BONDS - 11.1% Marion
County Certificate of Participation (MBIA
Corporation Insured)
1,000,000 5.000%, 06/01/2023 Aaa/AAA 985,000
Multnomah County Certificate of Participation
1,000,000 5.200%, 07/01/2005 Aa3/NR 1,048,750
3,100,000 6.000%, 08/01/2012 Aa/A 3,344,125
State of Oregon Certificate of Participation (AMBAC
Indemnity Corporation Insured)
2,100,000 7.500%, 09/01/2015 Aaa/AAA 2,257,500
Oregon State Department Of Administration
Services (AMBAC Indemnity Corporation Insured)
950,000 5.000%, 11/01/2019 Aaa/AAA 944,062
1,500,000 5.800%, 05/01/2024 Aaa/AAA 1,676,250
2,500,000 5.000%, 05/01/2024 Aaa/AAA 2,478,125
Oregon State Department Of Administration
Services (MBIA Corporation Insured)
1,000,000 5.750%, 05/01/2017 Aaa/AAA 1,076,250
5,805,000 5.500%, 11/01/2020 Aaa/AAA 6,044,456
1,450,000 5.375%, 11/01/2016 Aaa/AAA 1,498,938
</PAGE>
<PAGE>
State of Oregon Certificate of Participation (MBIA
Corporation Insured)
2,150,000 7.050%, 01/15/2006 Aaa/AAA 2,255,522
1,250,000 5.700%, 01/15/2010 Aaa/AAA 1,304,688
2,750,000 6.200%, 11/01/2012 Aaa/AAA 3,000,938
1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,207,753
1,000,000 5.500%, 01/15/2015 Aaa/AAA 1,041,250
550,000 5.500%, 01/15/2015 Aaa/AAA 572,688
500,000 5.800%, 03/01/2015 Aaa/AAA 526,875
600,000 7.200%, 03/01/2015 Aaa/AAA 627,270
1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,053,750
2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,187,500
Southwestern Oregon Community College District
(AMBAC Indemnity Corporation Insured)
1,000,000 5.600%, 06/01/2016 Aaa/AAA 1,053,750
Washington County Educational Services,
Certificates of Participation
645,000 5.625%, 06/01/2016 A1/NR 666,769
Washington County Educational Services,
Certificates of Participation, (MBIA Corporation
Insured)
830,000 5.750%, 06/01/2025 Aaa/AAA 876,688
Total Certificate of Participation Revenue Bonds 37,728,897
HOSPITAL REVENUE BONDS - 4.9%
Clackamas Hospital Facilities Authority (Adventist
Health System/West) (MBIA Corporation Insured)
2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,142,500
Clackamas Hospital Facilites Authority (Kaiser
Permanente)
2,400,000 6.500%, 04/01/2011 A3/A 2,544,000
Clackamas Hospital Facilites Authority (Sisters of
Providence Hospital)
500,000 6.375%, 10/01/2004 A1/AA- 543,750
</PAGE>
<PAGE>
Douglas County Hospital Facilities Authority
(Catholic Health) (MBIA Corporation Insured)
535,000 5.600%, 11/15/2005 Aaa/AAA 581,813
Medford Hosptial Authority (Asante Health Systems)
(MBIA Corporation Insured)
1,000,000 5.000%, 08/15/2018 Aaa/AAA 985,000
500,000 5.000%, 08/15/2024 Aaa/AAA 490,625
3,000,000 5.125%, 08/15/2028 Aaa/AAA 3,003,750
Salem Oregon Hospital Facilites Authority
1,500,000 5.000%, 08/15/2018 NR/AA- 1,468,125
Western Lane County Hospital Facilities Authority
(Sisters of St. Joseph Hospital) (MBIA Corporation
Insured)
1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,078,750
3,765,000 5.750%, 08/01/2019 Aaa/AAA 4,033,256
Total Hospital Revenue Bonds 16,871,569
HOUSING, EDUCATIONAL, AND CULTURAL REVENUE BONDS - 9.0%
Clackamas Community College District Revenue
(MBIA Corporation Insured)
1,865,000 5.700%, 06/01/2016 Aaa/AAA 2,051,500
Portland Oregon Housing Authority
4,140,000 5.100%, 01/01/2027 NR/A 4,108,950
State of Oregon Housing Finance Agency,
1,000,000 6.800%, 07/01/2013 A1/A+ 1,055,000
State of Oregon Housing and Community Services,
1,670,000 5.200%, 07/01/2009 Aa2/NR 1,722,188
705,000 5.900%, 07/01/2012 Aa2/NR 742,894
455,000 6.750%, 07/01/2012 Aa2/NR 482,869
500,000 6.700%, 07/01/2013 Aa2/NR 522,500
445,000 6.350%, 07/01/2014 Aa2/NR 470,588
35,000 6.750%, 07/01/2016 Aa2/NR 35,000
815,000 6.800%, 07/01/2016 Aa2/NR 862,881
3,500,000 6.875%, 07/01/2028 Aa2/NR 3,701,250
</PAGE>
<PAGE>
State of Oregon Housing and Community Services,
(MBIA Corporation Insured)
1,500,000 5.450%, 07/01/2024 Aaa/AAA 1,535,625
State of Oregon Housing, Educational and Cultural
Facilities Authority (George Fox University)
(LOC: Bank of America)
1,000,000 5.700%, 03/01/2017 NR/AA- 1,051,250
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 1,203,450
State of Oregon Housing, Educational and Cultural
Facilities Authority (Reed College),
2,145,000 6.750%, 07/01/2021 NR/A+ 2,327,325
Oregon Health Sciences University Revenue (MBIA
Corporation Insured)
4,500,000 5.250%, 07/15/2015 Aaa/AAA 4,657,500
City of Salem Educational Facilities (Willamette
University),
1,000,000 6.000%, 04/01/2010 A2/NR 1,068,750
1,740,000 6.750%, 04/01/2011 NR/NR* 1,846,575
Yamhill County Educational Services (AMBAC
Indemnity Corporation Insurance)
1,000,000 5.150%, 07/01/2019 NR/AAA 1,010,000
Total Housing, Educational, and Cultural
Revenue Bonds 30,456,095
TRANSPORTATION REVENUE BONDS - 3.4%
Port of Morrow,
2,600,000 6.375%, 04/01/2008 Aaa/NR 2,795,000
State of Oregon Department of Transportation (Light
Rail) (MBIA Corporation Insured),
2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,212,500
1,500,000 6.100%, 06/01/2007 Aaa/AAA 1,651,875
</PAGE>
<PAGE>
Port St. Helens, Oregon Polution
80,000 7.750%, 02/01/2006 A3/NR 88,400
1,000,000 4.800%, 04/01/2010 NR/A- 1,012,500
Tri-County Metropolitan Transportation District
3,680,000 5.700%, 08/01/2013 A1/AA+ 3,841,000
Total Transportation Revenue Bonds 11,601,275
URBAN RENEWAL REVENUE BONDS - .1%
City of Portland Urban Renewal,
300,000 9.000%, 12/01/2002 A/NR 304,059
Total Urban Renewal Revenue Bonds 304,059
UTILITY REVENUE BONDS - 4.9%
Emerald Peoples Utility District (AMBAC Indemnity
Corporation Insured),
700,000 6.700%, 11/01/2005 Aaa/AAA 742,000
Emerald Peoples Utility District Electic Systems
(Financial Security Assurance Insured)
1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,077,500
City of Eugene Electric Utility (Financial Security
Assurance Insured)
640,000 4.850%, 08/01/2013 Aaa/AAA 637,600
1,700,000 5.000%, 08/01/2018 Aaa/AAA 1,689,375
1,340,000 5.050%, 08/01/2022 Aaa/AAA 1,341,675
1,200,000 5.000%, 08/01/2023 Aaa/AAA 1,176,000
City of Eugene Electric Utility
610,000 6.650%, 08/01/2009 A1/AA 651,175
660,000 6.650%, 08/01/2010 A1/AA 704,550
1,000,000 6.000%, 08/01/2011 A1/AA 1,046,250
700,000 6.700%, 08/01/2011 A1/AA 748,125
500,000 5.000%, 08/01/2017 A1/AA 496,875
1,400,000 5.800%, 08/01/2019 A1/AA 1,536,500
City of Eugene Trojan Nuclear Project
3,865,000 5.900%, 09/01/2009 Aa1/AA- 3,874,663
Northern Wasco County Public Utility Development
(AMBAC Indemnity Corporation Insured),
1,000,000 5.625%, 12/01/2022 Aaa/AAA 1,055,000
Total Utility Revenue Bonds 16,777,288
</PAGE>
<PAGE>
WATER AND SEWER REVENUE BONDS - 10.0% City of Canby Sewer
(Financial Security Assurance
Insured),
500,000 6.250%, 12/01/2017 Aaa/AAA 542,500
City of Klamath Falls Water (Financial Security
Assurance Insured),
1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,208,625
City of Oregon City Sewer,
750,000 6.875%, 10/01/2019 NR/NR* 873,750
City of Portland Sewer
1,500,000 6.050%, 06/01/2009 A1/A+ 1,659,375
City of Portland Sewer, (MBIA Corporation Insured)
2,500,000 5.250%, 06/01/2016 Aaa/AAA 2,559,375
2,000,000 4.500%, 06/02/2015 Aaa/AAA 1,925,000
City of Portland Sewer (Financial Guaranty
Insurance Corporation Insured),
2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,977,063
500,000 6.000%, 10/01/2012 Aaa/AAA 545,000
1,000,000 5.000%, 06/01/2014 Aaa/AAA 1,013,750
4,435,000 5.000%, 06/01/2015 Aaa/AAA 4,468,263
2,855,000 6.250%, 06/01/2015 Aaa/AAA 3,190,463
Portland Water System Revenue
3,000,000 5.500%, 08/01/2014 Aa1/NR 3,131,250
1,440,000 5.500%, 08/01/2015 Aa1/NR 1,497,600
Washington County Unified Sewer Agency (AMBAC
Indemnity Corporation Insured),
1,040,000 6.800%, 11/01/2004 Aaa/AAA 1,061,819
2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,329,350
800,000 5.900%, 10/01/2006 Aaa/AAA 879,000
315,000 5.900%, 10/01/2006 Aaa/AAA 342,169
2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,775,000
750,000 6.125%, 10/01/2012 Aaa/AAA 832,500
Total Water and Sewer Revenue Bonds 33,811,852
</PAGE>
<PAGE>
OTHER REVENUE BONDS - 1.0%
Baker County Pollution Control (Ash Grove Cement
West Project) (Small Business Administration
Insured),
355,000 6.200%, 07/01/2004 Aaa/NR 357,197
380,000 6.300%, 07/01/2005 Aaa/NR 382,440
Oregon Economic Development Commission
(Consolidated Freightways)
1,500,000 7.000%, 04/01/2004 A1/BBB 1,502,430
Multnomah County School District #1J , Special
Obligations
1,000,000 5.000%, 03/01/2007 Aa3/A+ 1,028,750
Total Other Revenue Bonds 3,270,817
Total State of Oregon Revenue Bonds 159,631,751
PUERTO RICO - 0.6%
Puerto Rico Commonwealth Infrastructure, (AMBAC
Indemnity Corp. Insured)
2,100,000 5.000% , 07/01/2028 Aaa/AAA 2,097,375
Total Puerto Rico 2,097,375
Total Municipal Bonds (cost $ 317,918,413**) 98.7% 335,413,073
Other assets in excess of liabilities 1.3 4,407,407
Net Assets 100.0% $339,820,480
(*) 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.
(**) Cost for Federal tax purposes is identical.
</TABLE>
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
<TABLE>
ASSETS
<S> <C> <C>
Investments at value (cost $317,918,413) $335,413,073
Interest receivable 5,347,595
Receivable for Trust shares sold 442,082
Other assets 6,946
Total assets 341,209,696
LIABILITIES
Payable for Trust shares redeemed 539,225
Dividends payable 341,144
Cash overdraft 178,104
Distribution fees payable 124,994
Management fees payable 115,112
Accrued expenses 90,637
Total liabilities 1,389,216
NET ASSETS $339,820,480
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share 316,716
Additional paid-in capital 321,339,349
Net unrealized appreciation on investments 17,494,660
Accumulated net realized gain on investments 414,866
Undistributed net investment income 254,889
$339,820,480
CLASS A
Net Assets $325,801,634
Capital shares outstanding 30,364,312
Net asset value and redemption price per share $ 10.73
Offering price per share (100/96 of $10.73 adjusted to nearest cent) $ 11.18
CLASS C
Net Assets $ 2,389,369
Capital shares outstanding 222,840
Net asset value and offering price per share $ 10.72
Redemption price per share (* a charge of 1% is imposed on the redemption
proceeds of the shares, or on the original price, whichever is lower,
if redeemed during the first 12 months after purchase) $ 10.72*
CLASS Y
Net Assets $ 11,629,477
Capital shares outstanding 1,084,427
Net asset value, offering and redemption price per share $ 10.72
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
INVESTMENT INCOME
<S> <C> <C> <C>
Interest income $ 9,030,003
EXPENSES:
Management fees (note 3) $ 672,954
Distribution and service fees (note 3) 250,614
Transfer and shareholder servicing agent fees 105,000
Trustees' fees and expenses 44,000
Shareholders' reports and proxy statements 32,000
Legal fees 30,000
Custodian fees 12,000
Audit and accounting fees 11,000
Registration fees and dues 11,000
Insurance 6,000
Miscellaneous 22,419
1,196,987
Expenses paid indirectly (note 7) (40,000)
Net expenses 1,156,987
Net investment income 7,873,016
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 1,041,242
Change in unrealized appreciation on investments (4,385,000)
Net realized and unrealized gain (loss) on investments (3,343,758)
Net increase in net assets resulting from operations $ 4,529,258
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX
MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPT. 30, 1998
</CAPTION>
OPERATIONS:
<S> <C> <C> <C>
Net investment income $ 7,873,016 $ 15,855,970
Net realized gain from securities transactions 1,041,242 898,940
Change in unrealized appreciation on investments (4,385,000) 5,060,852
Change in net assets resulting from operations 4,529,258 21,815,762
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (7,695,318) (15,702,552)
Net realized gain on investments (603,490) (222,521)
Class C Shares:
Net investment income (29,189) (40,552)
Net realized gain on investments (2,451) (571)
Class Y Shares:
Net investment income (268,285) (409,309)
Net realized gain on investments (20,435) (4,740)
Change in net assets from distributions (8,619,168) (16,380,245)
CAPITAL SHARE TRANSACTIONS (NOTE 8):
Proceeds from shares sold 19,969,005 34,355,105
Reinvested dividends and distributions 5,242,367 9,925,195
Cost of shares redeemed (15,601,249) (32,251,564)
Change in net assets from capital share transactions 9,610,123 12,028,736
Change in net assets 5,520,213 17,464,253
NET ASSETS:
Beginning of period 334,300,267 316,836,014
End of period $ 339,820,480 $ 334,300,267
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS
(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 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 and are not offered directly to 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 investors. At March 31, 1999 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>
<PAGE>
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 and disclosure of contingent 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 the 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 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.
</PAGE>
<PAGE>
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.
For the six months ended March 31, 1999, the Trust incurred fees for
advisory and administrative services of $672,954.
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, 1999, service fees on Class A
Shares amounted to $243,005, of which the Distributor received $7,607.
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 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, 1999, amounted to $5,707. 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, 1999, amounted to $1,902. The
total of these payments made with respect to Class C Shares amounted to $7,609,
of which the Distributor received $5,120.
Specific details about the Plans are more fully defined in the Trust's
Prospectus and Statement of Additional Information.
</PAGE>
<PAGE>
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, 1999, the Distributor received commissions of $85,078 on
sales of Class A Shares.
4. PURCHASES AND SALES OF SECURITIES
During the six months ended March 31, 1999, purchases of securities
and proceeds from the sales of securities aggregated $36,140,631 and
$29,555,356, respectively.
At March 31, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$17,687,869, and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $193,209, for
a net unrealized appreciation of $17,494,660.
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.
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 taxes at ordinary income and/or capital gain rates. Also, annual
capital gains distributions, if any, are taxable.
</PAGE>
<PAGE>
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 the general intention of the Trust to invest,
to the extent practicable, some or all of cash balances in income-producing
assets rather than leave cash on deposit.
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
CLASS A SHARES:
<S> <C> <C> <C> <C> <C>
Proceeds from shares sold 1,609,153 $ 17,379,193 2,478,110 $ 26,612,757
Reinvested dividends and
distributions 475,947 5,137,066 907,937 9,756,708
Cost of shares redeemed (1,413,324) (15,255,277) (2,903,272) (31,179,164)
Net change 671,776 7,260,982 482,775 5,190,301
CLASS C SHARES:
Proceeds from shares sold 115,602 1,245,202 50,665 544,808
Reinvested dividends and
distributions 1,596 17,211 1,209 12,994
Cost of shares redeemed (1,229) (13,335) (19,993) (213,501)
Net change 115,969 1,249,078 31,881 344,301
CLASS Y SHARES:
Proceeds from shares sold 124,668 1,344,610 670,706 7,197,540
Reinvested dividends and
distributions 8,155 88,090 14,468 155,493
Cost of shares redeemed (30,891) (332,637) (80,210) (858,899)
Net change 101,932 1,100,063 604,964 6,494,134
Total transactions in Trust
shares 889,677 $ 9,610,123 1,119,620 $ 12,028,736
</TABLE>
</PAGE>
<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,
3/31/99 1998 1997 1996 1995 1994
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.86 $10.68 $10.49 $10.55 $10.20 $10.95
Income from Investment Operations:
Net investment income 0.25 0.53 0.53 0.54 0.55 0.56
Net gain (loss) on securities (both
realized and unrealized) (.08) 0.19 0.21 (0.05) 0.39 (0.75)
Total from Investment Operations 0.17 0.72 0.74 0.49 0.94 (0.19)
Less Distributions (note 6):
Dividends from net investment income (0.28) (0.53) (0.54) (0.54) (0.55) (0.56)
Distributions from capital gains (0.02) (0.01) (0.01) (0.01) (0.04) -
Total Distributions (0.30) (0.54) (0.55) (0.55) (0.59) (0.56)
Net Asset Value, End of Period $10.73 $10.86 $10.68 $10.49 $10.55 $10.20
Total Return (not reflecting sales charge)(%) 1.37+ 6.90 7.21 4.76 9.52 (1.77)
Ratios/Supplemental Data
Net Assets, End of Period ($ millions) 325.8 322 312 305 311 316
Ratio of Expenses to Average Net
Assets (%) 0.71* 0.71 0.73 0.73 0.73 0.70
Ratio of Net Investment Income to
Average Net Assets (%) 4.66* 4.83 5.01 5.15 5.37 5.26
Portfolio Turnover Rate (%) 8+ 7 5 10 13 11
The expense ratios after giving effect to the expense offset for uninvested cash
balances were:
Ratio of Expenses to Average Net
Assets (%) 0.69* 0.69 0.72 0.72 0.71 0.68
</TABLE>
(1) Designated as Class A Shares on April 5, 1996.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C(1) CLASS Y(1)
SIX MONTHS YEAR YEAR PERIOD(2) SIX MONTHS YEAR YEAR PERIOD(2)
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
3/31/99 9/30/98 9/30/97 9/30/96 3/31/99 9/30/98 9/30/97 9/30/96
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.85 $10.67 $10.49 $10.34 $10.85 $10.68 $10.49 $10.34
Income from Investment Operations:
Net investment income 0.20 0.43 0.43 0.22 0.26 0.54 0.54 0.27
Net gain (loss) on securities
(both realized and unrealized) (0.08) 0.20 0.21 0.15 (0.09) 0.19 0.21 0.15
Total from Investment Operations 0.12 0.63 0.64 0.37 0.17 0.73 0.75 0.42
Less Distributions (note 6):
Dividends from net investment
income (0.23) (0.44) (0.45) (0.22) (0.28) (0.55) (0.55) (0.27)
Distributions from capital gains (0.02) (0.01) (0.01) - (0.02) (0.01) (0.01) -
Total Distributions (0.25) (0.45) (0.46) (0.22) (0.30) (0.56) (0.56) (0.27)
Net Asset Value, End of Period $10.72 $10.85 $10.67 $10.49 $10.72 $10.85 $10.68 $10.49
Total Return (not reflecting sales
charge) (%) 0.93+ 6.00 6.20 3.61+ 1.43+ 6.96 7.37 4.14+
Ratios/Supplemental Data
Net Assets, End of Period
($ millions) 2.4 1.2 .8 .3 11.6 10.7 4.0 .2
Ratio of Expenses to Average Net
Assets (%) 1.56* 1.56 1.58 1.56* 0.56* 0.55 0.58 0.58*
Ratio of Net Investment Income
to Average Net Assets (%) 3.74* 3.98 4.14 4.17* 4.80* 4.95 5.21 5.35*
Portfolio Turnover Rate (%) 8+ 7 5 10+ 8+ 7 5 10+
The expense ratios after giving effect to the expense offset for uninvested cash
balances were:
Ratio of Expenses to Average Net
Assets (%) 1.53* 1.54 1.57 1.56* 0.54* 0.53 0.57 0.57*
</TABLE>
(1) New Class of Shares established on April 5, 1996.
(2) From April 5, 1996 to September 30, 1996.
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
PREPARING FOR YEAR 2000 (UNAUDITED)
The Trustees and officers of the Trust have been monitoring issues
involving preparedness for the turn of the century for some time in an effort to
minimize or eliminate any potential impact upon the Trust and its shareholders.
Our officers have focussed significant time and effort in order that the various
computerized functions that could affect the Trust are ready by the beginning of
the year 2000.
The Trust is highly reliant on certain mission-critical suppliers'
services. Each supplier of these services has provided the Trust's officers with
assurances that it is actively addressing potential problems relating to the
year 2000. The officers, in turn, are monitoring and will continue to monitor
the progress of its suppliers.
As you can well understand, we cannot directly control our supplier
operations. We assure you, however, that we recognize a responsibility to inform
our shareholders if in the future we become aware of any developments which
would lead us to believe that the Trust will be significantly affected by year
2000 problems.
We will continue to keep you up-to-date through future
communications.
</PAGE>
