<PAGE>
MANAGER AND FOUNDER
AQUILA MANAGEMENT CORPORATION
380 Madison Avenue, Suite 2300
New York, New York 10017
INVESTMENT SUB-ADVISER
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
David B. Frohnmayer
James A. Gardner
Diana P. Herrmann
Sterling K. Jenson
Raymond H. Lung
John W. Mitchell
Richard C. Ross
OFFICERS
Diana P. Herrmann, President
James M. McCullough, Senior Vice 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.
ANNUAL
REPORT
SEPTEMBER 30, 1999
TAX-FREE TRUST OF
OREGON
[Logo of the Tax-Free Trust of Oregon: Square box with 2 fir trees in front
of a mountain and the sun]
A TAX-FREE INCOME INVESTMENT
[Logo of the Aquilasm Group of Funds: an eagle's head in an oval]
ONE OF THE
AQUILASM GROUP OF FUNDS
</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
ANNUAL REPORT
"TAKE PRIDE IN HOW YOUR INVESTMENT IS HELPING OTHERS -
WHILE PRIMARILY HELPING YOU"
Dear Fellow Shareholders: November 15, 1999
Our surveys of shareholders of Tax-Free Trust of Oregon have shown that
you and other owners of the Trust bought your shares primarily for TAX-FREE
INCOME. And, secondarily, the knowledge - provided through the price STABILITY
of the shares of the Trust - that your money would be there when YOU needed it.
Additionally, our surveys showed that most of our shareholders are
pre-retirees or retirees. These are people who are looking forward to making
sure that they have the security of a sound income source from the Trust when
they are no longer in the workforce.
The point you may not have fully appreciated - when you made your
investment in the Trust - was that in the process of having the Trust provide
YOU with these benefits, it also provides help to a variety of OTHERS within
your community and Oregon. And, this is a factor in which you can take real
PRIDE.
The economy of Oregon has been growing at a significant rate. As this
growth takes place, new and additional municipal projects are needed for the
benefit of the citizens of Oregon and the various communities in the State.
These projects include schools, highways, recreational facilities, and a whole
array of useful public purpose projects. These projects are what help economic
development and provide a high quality of life for the citizens of Oregon.
We think it is important for you to realize this. The projects that the
Trust helped finance are all ones that you and others can reach out and touch.
We are illustrating for you some of the various kinds of municipal projects that
your investment in the Trust has helped create in Oregon.
[Photo]
Eugene Water and Electric Board
[Photo]
Clackamas County
School District
[Photo]
Portland International Airport
[Photo]
Max Light Rail
</PAGE>
<PAGE>
As you know, interest rates continuously change - both up and down.
However, the value of Tax-Free Trust of Oregon is that it provides you with a
decent DOUBLE TAX-FREE return, plus high stability and a high level of safety
for your capital - regardless of such interest rate changes - by having a high
quality portfolio of a variety of municipal bonds with differing maturities.
The tax laws of Oregon, as well as those of the Federal government,
allow you to receive income from your investment in the Trust DOUBLE TAX-FREE.
It is realized by the State and Federal governmental authorities that it is
essential that various municipal projects be built with an advantage to the
investor. This advantage is primarily one of TAX-FREE income for you.
More specifically though, you can take comfort in the knowledge that
your investment in the Trust is comprised of a portfolio of municipal securities
which possess extremely high quality. Therefore, you can "SLEEP WELL AT NIGHT"
knowing that the chances of anything happening to these high quality bonds is
very slight indeed. The reason for this, of course, is that the various
municipal projects represented in the Trust have behind them a very sound stream
of income from taxes and revenues generated by the projects themselves.
We again wish to emphasize that while primarily HELPING YOU, Tax-Free
Trust of Oregon is also HELPING OTHERS in your communities and Oregon.
Consequently, you can take great PRIDE in your investment in Tax-Free
Trust of Oregon.
You can rest assured that the overall management of the Trust is doing a
very careful job of "MINDING THE STORE" for you.
We appreciate the continued confidence that you have placed in the Trust
through your investment in Tax-Free Trust of Oregon.
Sincerely,
/s/ Diana P. Herrmann
- ---------------------
Diana P. Herrmann
President
/s/ Lacy B. Herrman
- -------------------
Lacy B. Herrmann
Chairman, Board of Trustees
</PAGE>
<PAGE>
PERFORMANCE REPORT
The following graph illustrates the value of $10,000 invested in the
Class A shares of Tax-Free Trust of Oregon for the 10-year period ended
September 30, 1999 as compared with the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (a cost of living index). The performance of each of
the other classes is not shown in the graph but is included in the table below.
It should be noted that the Lehman Index does not include any operating expenses
nor sales charges and being nationally oriented, does not reflect state specific
bond market performance.
[Line chart with the following information:]
<TABLE>
<CAPTION>
Trust's Class A Shares
Lehman Brothers Municipal Bond Index Without Sales Charge With Sales Charge Cost of Living Index
</CAPTION>
<S> <C> <C> <C>
10,000 10,000 9,600 10,000
10,680 10,557 10,131 10,616
12,088 11,817 11,341 10,976
13,352 12,929 12,408 11,304
15,053 14,337 13,759 11,616
14,690 14,096 13,527 11,960
16,334 15,308 14,691 12,264
17,321 16,139 15,488 12,632
18,885 17,319 16,621 12,912
20,530 18,439 17,696 13,097
20,386 18,392 17,650 13,442
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED SEPTEMBER 30, 1999
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
Class A (6/16/86)
With Sales Charge (4.58)% 4.63% 5.85% 6.25%
Without Sales Charge (0.62)% 5.49% 6.28% 6.57%
Class C (4/5/96)
With CDSC (2.36)% n/a n/a 3.80%
Without CDSC (1.38)% n/a n/a 3.80%
Class Y (4/5/96)
No Sales Charge (0.39)% n/a n/a 5.15%
Lehman Index (0.70)% 6.77% 7.39% 7.63%* (Class A)
(0.70)% n/a n/a 5.67% (Class C&Y)
* From commencement of the index on 1/1/87.
Total return figures shown for the Trust reflect any change in price and assume
all distributions within the period were invested in additional shares. Returns
for Class A shares are calculated with and without the effect of the initial 4%
maximum sales charge. Returns for Class C shares are calculated with and without
the effect of the 1% contingent deferred sales charge (CDSC), imposed on
redemptions made within the first 12 months after purchase. Class Y shares are
sold without any sales charge. The rates of return will vary and the principal
value of an investment will fluctuate with market conditions. Shares, if
redeemed, may be worth more or less than their original cost. A portion of each
classes' income may be subject to federal and state income taxes. Past
performance is not predictive of future investment results.
</PAGE>
<PAGE>
MANAGEMENT DISCUSSION
One of our major goals with Tax-Free Trust of Oregon is the
protection of the net asset value of your shares. Historically - to a creditable
degree - we have achieved this goal on a reasonably consistent basis. Much of
this is accomplished through the management style we pursue. This involves
utilization of the conservative approach of having a high quality portfolio of
municipal bonds which are chosen to meet various maturity standards. As at
September 30, 1999, the percentage of securities having a credit rating of AAA
or AA was 92.5%. With bond maturities, we employ a practice of structuring the
portfolio so that it has 1 year to 30 years in its maturity selection, with the
overall portfolio maturity having an average life of approximately 12 years.
Despite our efforts to control the movement of the share net asset
value of the Trust, we sometimes find the task to be a very difficult one. This
is because we cannot control the movement of interest rates, which are governed
considerably by the actions of the Federal Reserve Board. Over the past year and
a half, we have witnessed the decline in interest rates of three separate steps
of .25 of 1% each, for a total of .75 of 1%. Then, recently, the Fed decided to
increase rates again three separate times by the same basic amounts of .25 of 1%
apiece, for a total of .75 of 1%. As a result, the net asset value of a Class A
share of Tax-Free Trust of Oregon underwent a slight decline from $10.86 on
September 30, 1998 to the level of $10.27 on September 30, 1999.
The Federal Reserve action to lower rates was prompted by the
concern that our policy makers felt toward economic and monetary difficulties in
the international scene. Then as those fears dissipated, another concern raised
its head. This was the possibility of inflationary pressures in our economy
caused by the vibrant economic growth being experienced in the United States,
coupled with the extremely low unemployment rate.
While it is true that municipal bonds of Oregon are not directly
affected by international events, they do react to market conditions of domestic
interest rate changes. This situation is the primary reason for the price change
in the Trust's share net asset value that we experienced during the last fiscal
year of the Trust. Additionally, in 1998 there was an abundance of supply of
municipal bonds in the market, as issuers saw the opportunity to refinance their
existing debt. However, in 1999 when interest rates began to increase, such
opportunities began to wane. Through September, 1999, municipal issuance is down
20% in the year over year comparison.
All in all, we feel that it is very important that investors focus
upon the relationship between the double tax-free return that is provided by
Tax-Free Trust of Oregon and that of taxable fixed income securities. When a
comparison is made between tax-free vs. taxable, one realizes the distinct
benefits to them in terms of the actual amount of money that you can keep in
your pocket from an investment in Tax-Free Trust of Oregon.
We will continually strive to provide the shareholders of the Trust
with a satisfactory double tax-free yield as well as high stability of the
principal of their investment, through maintaining the disciplines that have
prevailed since the inception of Tax-Free Trust of Oregon.
</PAGE>
<PAGE>
[Logo of KPMG LLP:four solid rectangles with the letters KPMG in front]
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Tax-Free Trust of Oregon:
We have audited the accompanying statement of assets and liabilities
of Tax-Free Trust of Oregon, including the statement of investments, as of
September 30, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999, by correspondence with the custodia n and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Tax-Free Trust of Oregon as of September 30, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
- -------------
New York, New York
November 5, 1999
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS - 49.3% S&P VALUE
</CAPTION>
<S> <C> <C> <C>
City of Beaverton
$ 910,000 5.950%, 04/01/2003 Aa3/AA- $ 944,125
960,000 6.050%, 04/01/2004 Aa3/AA- 994,800
1,020,000 6.150%, 04/01/2005 Aa3/AA- 1,056,975
1,080,000 6.250%, 04/01/2006 Aa3/AA- 1,121,850
Clackamas County School District #115 (AMBAC
Indemnity Corporation Insured)
600,000 5.600%, 06/01/2006 Aaa/AAA 636,750
615,000 5.700%, 06/01/2007 Aaa/AAA 655,744
1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,083,750
Clackamas County School District #12 (Financial
Guaranty Insurance Corporation)
4,000,000 4.800%, 06/01/2018 Aaa/AAA 3,545,000
Clackamas and Washington County School
District #3J
2,000,000 5.850%, 08/01/2006 A1/AAA 2,082,500
1,150,000 5.875%, 10/01/2009 A1/A+ 1,188,813
Clackamas, Multnomah and Washington County
School District #7J
1,000,000 7.100%, 06/15/2009 Aaa/NR 1,022,880
250,000 7.100%, 06/15/2010 Aaa/NR 255,720
1,500,000 5.700%, 06/15/2010 Aa2/NR 1,545,000
Deschutes and Jefferson County School District #2J
(MBIA Corporation Insured)
3,700,000 5.600%, 06/01/2009 Aaa/AAA 3,769,375
Eugene Oregon (Parks & Open Space)
1,465,000 5.250%, 02/01/2018 Aa2/NR 1,411,894
1,555,000 5.250%, 02/01/2019 Aa2/NR 1,486,969
Hood River County School District (AMBAC
Indemnity Corporation Insured)
2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,060,000
Jackson County School District #5, Ashland
(Financial Security Assurance Insured)
1,400,000 5.100%, 06/01/2005 Aaa/AAA 1,435,000
Jackson County School District #549C, (Financial
Security Assurance Insured)
1,000,000 5.300%, 06/01/2008 Aaa/AAA 1,017,500
Jefferson County School District #509J (Financial
Security Assurance Insured)
1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,771,875
Josephine County School District #7 (Grants Pass)
(Financial Guaranty Insurance Corporation)
2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,770,875
Lane County School District #4J
2,000,000 5.375%, 07/01/2009 Aa3/NR 2,020,000
1,000,000 5.375%, 07/01/2013 Aa3/NR 993,750
Lane County School District #52J (Financial
Guaranty Insurance Corporation Insured)
750,000 6.400%, 12/01/2009 Aaa/AAA 810,936
Lane and Douglas County School District 97J (Siuslaw)
(State & School Bond Guarantee)
1,000,000 5.400%, 06/15/2019 Aa2/NR 973,750
Lincoln County Oregon School District
(Financial Guaranty Insurance Corporation)
1,245,000 5.250%, 06/15/2012 Aaa/AAA 1,238,775
Lincoln County (MBIA Corporation Insured)
1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,007,500
Malheur County Jail Bonds (MBIA Corporation Insured)
1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,435,788
Marion and Clackamas County Union High School
District #7J (Financial Security Assurance Insured)
1,000,000 7.000%, 06/01/2010 Aaa/AAA 1,111,250
1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,433,800
Metropolitan Service District Refunding (Oregon
Convention Center)
4,320,000 6.250%, 01/01/2013 Aa2/AA+ 4,422,600
Multnomah County
1,000,000 5.200%, 10/01/2008 Aa1/NR 1,030,000
Multnomah County Drainage District #1
Assessment Bond (MBIA Corporation Insured)
1,000,000 5.250%, 07/01/2017 Aaa/AAA 957,500
Multnomah County School District #4
1,330,000 5.900%, 01/01/2005 A1/A+ 1,373,225
Multnomah County School District #40
5,100,000 5.625%, 06/01/2012 NR/AA- 5,189,250
Northern Oregon Correctional (AMBAC Indemnity
Corporation Insured)
2,000,000 5.400%, 09/15/2016 Aaa/AAA 1,980,000
Oak Lodge Water District (AMBAC Indemnity
Corporation Insured)
215,000 7.300%, 12/01/2005 Aaa/AAA 241,069
215,000 7.300%, 12/01/2006 Aaa/AAA 240,532
215,000 7.400%, 12/01/2007 Aaa/AAA 239,994
Puerto Rico Commonwealth Infrastructure
(MBIA Corporation Insured)
1,500,000 4.875% , 07/01/2023 Aaa/AAA 1,320,000
State of Oregon Board of Higher Education
900,000 6.200%, 10/15/2007 Aa2/AA 940,500
3,195,000 6.400%, 10/01/2011 Aa2/AA 3,290,850
2,000,000 6.250%, 10/15/2012 Aa2/AA 2,072,500
2,150,000 6.500%, 10/01/2017 Aa2/AA 2,211,812
2,890,000 6.000%, 10/15/2018 Aa2/AA 2,951,413
5,000,000 4.875%, 08/01/2019 Aa2/AA 4,425,000
8,000,000 5.000%, 08/01/2022 Aa2/AA 7,200,000
1,500,000 5.000%, 08/01/2022 Aa2/AA 1,350,000
1,655,000 5.600%, 08/01/2023 Aa2/AA 1,628,106
1,500,000 5.600%, 08/01/2023 Aa2/AA 1,475,625
6,300,000 6.000%, 08/01/2026 Aa2/AA 6,811,875
State of Oregon Elderly & Disabled Housing
725,000 6.250%, 08/01/2013 Aa2/AA 760,344
State of Oregon Veterans' Welfare
505,000 9.000%, 04/01/2008 Aa2/AA 575,069
700,000 9.200%, 10/01/2008 Aa2/AA 915,250
1,200,000 5.200%, 10/01/2018 Aa2/AA 1,156,500
Polk County School District #2 (Financial Security
Assurance Insured)
1,000,000 5.400%, 06/01/2012 Aaa/AAA 1,012,500
Polk, Marion, and Benton County School District #13J
(Financial Guaranty Insurance Corporation Insured)
1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,033,750
City of Portland
1,000,000 4.500%, 11/01/2004 Aaa/NR 1,001,250
1,480,000 5.100%, 10/01/2009 Aaa/NR 1,487,400
2,790,000 5.750%, 06/01/2013 Aaa/NR 2,849,287
2,000,000 5.600%, 06/01/2015 Aa2/NR 2,010,000
1,440,000 5.250%, 06/01/2015 Aa2/NR 1,402,200
Portland Oregon Emergency Facilities
1,120,000 5.125%, 06/01/2018 Aaa/NR 1,064,000
Portland Community College District
3,500,000 6.000%, 07/01/2012 Aa3/AA 3,648,750
Port of Portland
1,000,000 4.500%, 03/01/2006 Aa2/AA+ 987,500
City of Salem
1,000,000 5.875%, 01/01/2007 A1/AA- 1,030,000
Salem-Keizer Oregon School District #24,
(Financial Security Assurance Insured)
2,000,000 4.875%, 06/01/2014 Aaa/AAA 1,875,000
Tri-County Metropolitan Transportation District
6,100,000 6.000%, 07/01/2012 Aaa/AAA 6,420,250
Tualatin Hills Park and Recreation District
(MBIA Corporation Insured)
2,970,000 5.750%, 03/01/2012 Aaa/AAA 3,118,500
2,000,000 5.750%, 03/01/2015 Aaa/AAA 2,100,000
Umatilla County Oregon (Financial Guaranty
Insurance Corporation Insured)
2,000,000 5.600%, 10/01/2015 Aaa/AAA 2,027,500
Umatilla County School District #8R (AMBAC
Indemnity Corporation Insured)
700,000 6.100%, 12/01/2012 Aaa/AAA 750,750
Umatilla County School District #6R (AMBAC
Indemnity Corporation Insured)
2,675,000 5.050%, 06/15/2022 Aaa/AAA 2,434,250
Washington County
2,500,000 6.200%, 12/01/2007 Aa1/AA 2,590,625
1,625,000 5.000%, 12/01/2011 Aa1/AA 1,598,594
3,110,000 6.000%, 12/01/2013 Aa1/AA 3,312,150
Washington County School District #88JT (Financial
Security Assurance Insured)
2,900,000 6.100%, 06/01/2012 Aaa/AAA 3,099,281
2,055,000 5.125%, 06/15/2012 Aaa/NR 2,021,606
Washington and Clackamas County School District
#23J
720,000 6.625%, 01/01/2008 NR/NR* 724,752
2,000,000 5.400%, 01/01/2010 A1/NR 2,020,000
1,000,000 5.650%, 06/01/2015 A1/NR 1,005,000
Washington & Multnomah County School District
#48J
1,175,000 5.500%, 06/01/2006 Aa2/AA- 1,213,188
1,130,000 5.600%, 06/01/2007 Aa2/AA- 1,168,137
1,000,000 6.150%, 06/01/2008 Aa2/AA- 1,013,450
1,415,000 5.700%, 06/01/2008 Aa2/AA- 1,464,525
525,000 6.300%, 09/01/2009 Aaa/AAA 545,344
1,440,000 6.000%, 06/01/2011 Aa2/AA- 1,503,000
2,010,000 6.500%, 09/01/2011 Aaa/AAA 2,095,425
Washington & Yamhill County School District #58J
(AMBAC Indemnity Corporation Insured)
70,000 6.600%, 11/01/2004 Aaa/AAA 70,111
80,000 6.600%, 11/01/2005 Aaa/AAA 80,120
90,000 6.600%, 11/01/2006 Aaa/AAA 90,127
Yamhill County School District #29J
(Financial Security Assurance Insured)
2,000,000 5.350%, 06/01/2006 Aaa/AAA 2,052,500
500,000 6.100%, 06/01/2011 Aaa/AAA 536,250
Total State of Oregon General Obligation Bonds 162,099,030
STATE OF OREGON REVENUE BONDS - 48.3%
AIRPORT REVENUE BONDS - 3.2%
Port of Portland Airport (Financial Guaranty
Insurance Corporation Insured)
500,000 5.500%, 07/01/2006 Aaa/AAA 515,625
Port of Portland Airport (MBIA
Corporation Insured)
600,000 6.400%, 07/01/2003 NR/AAA 628,500
3,530,000 6.750%, 07/01/2009 NR/AAA 3,715,325
2,425,000 6.750%, 07/01/2015 NR/AAA 2,552,313
2,000,000 5.500%, 07/01/2024 Aaa/AAA 1,937,500
1,295,000 5.000%, 07/01/2028 Aaa/AAA 1,131,506
Total Airport Revenue Bonds 10,480,769
CERTIFICATE OF PARTICIPATION REVENUE BONDS - 11.5%
Marion County Certificate of Participation
(MBIA Corporation Insured)
1,000,000 5.000%, 06/01/2023 Aaa/AAA 897,500
Multnomah County Certificate of Participation
1,000,000 5.200%, 07/01/2005 Aa3/NR 1,022,500
3,100,000 6.000%, 08/01/2012 Aa/A 3,262,750
State of Oregon Certificate of Participation
(AMBAC Indemnity Corporation Insured)
2,100,000 7.500%, 09/01/2015 Aaa/AAA 2,210,565
Oregon State Department Of Administration Services
(AMBAC Indemnity Corporation Insured)
2,000,000 4.875%, 05/01/2018 Aaa/AAA 1,777,500
950,000 5.000%, 11/01/2019 Aaa/AAA 860,937
1,500,000 5.800%, 05/01/2024 Aaa/AAA 1,601,250
2,500,000 5.000%, 05/01/2024 Aaa/AAA 2,234,375
Oregon State Department Of Administration Services
(MBIA Corporation Insured)
1,450,000 5.375%, 11/01/2016 Aaa/AAA 1,431,875
1,000,000 5.750%, 05/01/2017 Aaa/AAA 1,015,000
5,805,000 5.500%, 11/01/2020 Aaa/AAA 5,725,181
State of Oregon Certificate of Participation
(MBIA Corporation Insured)
2,150,000 7.050%, 01/15/2006 Aaa/AAA 2,211,899
1,250,000 5.700%, 01/15/2010 Aaa/AAA 1,279,687
2,750,000 6.200%, 11/01/2012 Aaa/AAA 2,925,313
1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,183,580
1,000,000 5.500%, 01/15/2015 Aaa/AAA 1,011,250
550,000 5.500%, 01/15/2015 Aaa/AAA 556,187
500,000 5.800%, 03/01/2015 Aaa/AAA 510,625
600,000 7.200%, 03/01/2015 Aaa/AAA 614,190
1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,021,250
2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,130,000
Southwestern Oregon Community College District
(AMBAC Indemnity Corporation Insured)
1,000,000 5.600%, 06/01/2016 Aaa/AAA 1,005,000
Washington County Educational Services,
Certificates of Participation
645,000 5.625%, 06/01/2016 A1/NR 645,000
Washington County Educational Services,
Certificates of Participation,
(MBIA Corporation Insured)
830,000 5.750%, 06/01/2025 Aaa/AAA 833,112
Total Certificate of Participation Revenue Bonds 37,966,526
HOSPITAL REVENUE BONDS - 6.4%
Clackamas Hospital Facilities Authority (Adventist
Health System/West) (MBIA Corporation Insured)
2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,105,000
Clackamas Hospital Facilites Authority (Sisters of
Providence Hospital)
500,000 6.375%, 10/01/2004 A1/AA- 528,750
Clackamas Hospital Facilites Authority (Legacy
Health System)
1,000,000 5.250%, 02/15/2017 NR/AA 955,000
1,000,000 5.250%, 02/15/2018 NR/AA 947,500
Clackamas Hospital Facilites Authority (Legacy
Health System) (MBIA Corporation Insured)
2,650,000 4.750%, 02/15/2011 Aaa/AAA 2,537,375
Clackamas County Oregon Hospital Facilites
Authority (Mary's Woods)
3,250,000 6.625%, 05/15/2029 NR/NR* 3,172,812
Douglas County Hospital Facilities Authority
(Catholic Health) (MBIA Corporation Insured)
535,000 5.600%, 11/15/2005 Aaa/AAA 559,744
Medford Hospital Authority (Asante Health Systems)
(MBIA Corporation Insured)
1,000,000 5.000%, 08/15/2018 Aaa/AAA 917,500
500,000 5.000%, 08/15/2024 Aaa/AAA 446,250
3,000,000 5.125%, 08/15/2028 Aaa/AAA 2,696,250
Salem Oregon Hospital Facilites Authority
1,500,000 5.000%, 08/15/2018 NR/AA- 1,350,000
Western Lane County Hospital Facilities Authority
(Sisters of St. Joseph Hospital)
(MBIA Corporation Insured)
1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,048,750
3,765,000 5.750%, 08/01/2019 Aaa/AAA 3,802,650
Total Hospital Revenue Bonds 21,067,581
HOUSING, EDUCATIONAL, AND CULTURAL REVENUE
BONDS - 9.1%
Clackamas Community College District Revenue
(MBIA Corporation Insured)
1,865,000 5.700%, 06/01/2016 Aaa/AAA 1,967,575
Portland Oregon Housing Authority
4,140,000 5.100%, 01/01/2027 NR/A 3,715,650
State of Oregon Housing Finance Agency,
1,000,000 6.800%, 07/01/2013 Aa2/A+ 1,038,750
State of Oregon Housing and Community Services,
1,670,000 5.200%, 07/01/2009 Aa2/NR 1,672,088
695,000 5.900%, 07/01/2012 Aa2/NR 711,506
30,000 6.750%, 07/01/2012 Aa2/NR 31,387
500,000 6.700%, 07/01/2013 Aa2/NR 514,375
420,000 6.350%, 07/01/2014 Aa2/NR 433,650
60,000 6.800%, 07/01/2016 Aa2/NR 62,925
2,000,000 5.400%, 07/01/2027 Aa2/NR 1,915,000
3,500,000 6.875%, 07/01/2028 Aa2/NR 3,666,250
State of Oregon Housing and Community Services,
(MBIA Corporation Insured)
1,500,000 5.450%, 07/01/2024 Aaa/AAA 1,470,000
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- 1,008,750
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 1,179,686
State of Oregon Housing, Educational and Cultural
Facilities Authority (Reed College),
2,145,000 6.750%, 07/01/2021 NR/A+ 2,273,700
Oregon Health Sciences University Revenue
(MBIA Corporation Insured)
4,500,000 5.250%, 07/01/2015 Aaa/AAA 4,415,625
City of Salem Educational Facilities (Willamette
University),
1,000,000 6.000%, 04/01/2010 A2/NR 1,035,000
1,740,000 6.750%, 04/01/2011 NR/NR* 1,805,250
Yamhill County Educational Services (AMBAC
Indemnity Corporation Insurance)
1,000,000 5.150%, 07/01/2019 NR/AAA 933,750
Total Housing, Educational, and Cultural
Revenue Bonds 29,850,917
TRANSPORTATION REVENUE BONDS - 3.9%
Port of Morrow,
2,600,000 6.375%, 04/01/2008 Aaa/NR 2,720,250
State of Oregon Department of Transportation (Light
Rail) (MBIA Corporation Insured),
2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,130,000
1,500,000 6.100%, 06/01/2007 Aaa/AAA 1,599,375
Port St. Helens, Oregon Pollution
80,000 7.750%, 02/01/2006 A3/NR 85,600
Tri-County Metropolitan Transportation District
3,680,000 5.700%, 08/01/2013 Aa3/AA+ 3,749,000
2,500,000 5.400%, 06/01/2019 NR/AA+ 2,403,125
Total Transportation Revenue Bonds 12,687,350
URBAN RENEWAL REVENUE BONDS - 0.1%
City of Portland Urban Renewal,
300,000 9.000%, 12/01/2002 A/NR 302,310
Total Urban Renewal Revenue Bonds 302,310
UTILITY REVENUE BONDS - 4.8%
Emerald Peoples Utility District (AMBAC Indemnity
Corporation Insured),
700,000 6.700%, 11/01/2005 Aaa/AAA 728,434
Emerald Peoples Utility District Electic Systems
(Financial Security Assurance Insured)
1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,051,250
City of Eugene Electric Utility (Financial Security
Assurance Insured)
640,000 4.850%, 08/01/2013 Aaa/AAA 589,600
1,700,000 5.000%, 08/01/2018 Aaa/AAA 1,553,375
1,340,000 5.050%, 08/01/2022 Aaa/AAA 1,221,075
1,200,000 5.000%, 08/01/2023 Aaa/AAA 1,075,500
City of Eugene Electric Utility
610,000 6.650%, 08/01/2009 A1/AA 635,925
660,000 6.650%, 08/01/2010 A1/AA 688,050
1,000,000 6.000%, 08/01/2011 A1/AA 1,022,500
700,000 6.700%, 08/01/2011 A1/AA 730,625
500,000 5.000%, 08/01/2017 A1/AA 455,625
1,400,000 5.800%, 08/01/2019 A1/AA 1,485,750
City of Eugene Trojan Nuclear Project
3,600,000 5.900%, 09/01/2009 Aa1/AA- 3,622,140
Northern Wasco County Public Utility Development
(AMBAC Indemnity Corporation Insured),
1,000,000 5.625%, 12/01/2022 Aaa/AAA 1,001,250
Total Utility Revenue Bonds 15,861,099
WATER AND SEWER REVENUE BONDS - 8.3%
City of Canby Sewer
(Financial Security Assurance Insured),
500,000 6.250%, 12/01/2017 Aaa/AAA 528,125
City of Klamath Falls Water (Financial Security
Assurance Insured),
1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,157,750
City of Oregon City Sewer,
750,000 6.875%, 10/01/2019 NR/NR* 839,063
City of Portland Sewer
1,500,000 6.050%, 06/01/2009 A1/A+ 1,605,000
City of Portland Sewer, (MBIA Corporation Insured)
2,000,000 4.500%, 06/01/2015 Aaa/AAA 1,752,500
2,500,000 5.250%, 06/01/2016 Aaa/AAA 2,428,125
City of Portland Sewer (Financial Guaranty
Insurance Corporation Insured),
2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,902,125
500,000 6.000%, 10/01/2012 Aaa/AAA 532,500
1,185,000 5.000%, 06/01/2015 Aaa/AAA 1,112,419
2,855,000 6.250%, 06/01/2015 Aaa/AAA 3,083,400
Portland Water System Revenue
3,000,000 5.500%, 08/01/2014 Aa1/NR 3,018,750
1,440,000 5.500%, 08/01/2015 Aa1/NR 1,445,400
Washington County Unified Sewer Agency
(AMBAC Indemnity Corporation Insured),
2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,249,850
800,000 5.900%, 10/01/2006 Aaa/AAA 849,000
315,000 5.900%, 10/01/2006 Aaa/AAA 330,750
2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,678,125
750,000 6.125%, 10/01/2012 Aaa/AAA 803,437
Total Water and Sewer Revenue Bonds 27,316,319
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 356,658
380,000 6.300%, 07/01/2005 Aaa/NR 381,862
Oregon Economic Development Commission
(Consolidated Freightways)
1,500,000 7.000%, 04/01/2004 A2/A- 1,519,920
Multnomah County School District #1J, Special
Obligations
1,000,000 5.000%, 03/01/2007 A1/A+ 1,006,250
Total Other Revenue Bonds 3,264,690
Total State of Oregon Revenue Bonds 158,797,561
PUERTO RICO - 0.6%
Puerto Rico Commonwealth Infrastructure, (AMBAC
Indemnity Corp. Insured)
2,100,000 5.000% , 07/01/2028 Aaa/AAA 1,876,875
Total Puerto Rico 1,876,875
Total Municipal Bonds (cost $ 319,147,493**) 98.2% 322,773,466
Other assets in excess of liabilities 1.8 5,972,999
Net Assets 100.0% $ 328,746,465
</TABLE>
(*) Any security not rated has been determined by the
Investment Sub-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.
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $319,147,493) $ 322,773,466
Cash 1,625,493
Interest receivable 5,402,082
Receivable for investment securities sold 401,664
Receivable for Trust shares sold 305,530
Other assets 3,363
Total assets 330,511,598
LIABILITIES
Payable for Trust shares redeemed 1,103,836
Dividends payable 355,803
Distribution fees payable 125,528
Management fees payable 108,630
Accrued expenses 71,336
Total liabilities 1,765,133
NET ASSETS $ 328,746,465
Net Assets consist of:
Capital Stock - Authorized an unlimited number of shares, par value $.01 per share 320,020
Additional paid-in capital 324,615,258
Net unrealized appreciation on investments 3,625,973
Undistributed net investment income 220,108
Accumulated net realized loss on investments (34,894)
$ 328,746,465
CLASS A
Net Assets $ 308,700,996
Capital shares outstanding 30,049,573
Net asset value and redemption price per share $ 10.27
Offering price per share (100/96 of $10.27 adjusted to nearest cent) $ 10.70
CLASS C
Net Assets $ 3,001,439
Capital shares outstanding 292,376
Net asset value and offering price per share $ 10.27
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) $ 10.27*
CLASS Y
Net Assets $ 17,044,030
Capital shares outstanding 1,660,072
Net asset value, offering and redemption price per share $ 10.27
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 18,188,315
Expenses:
Management fees (note 3) $ 1,345,097
Distribution and service fees (note 3) 503,887
Transfer and shareholder servicing agent fees 197,897
Trustees' fees and expenses (note 8) 81,359
Legal fees 70,584
Shareholders' reports and proxy statements 68,533
Custodian fees 27,156
Audit and accounting fees 24,750
Registration fees and dues 20,548
Insurance 14,450
Miscellaneous 38,700
2,392,961
Expenses paid indirectly (note 7) (92,798)
Net expenses 2,300,163
Net investment income 15,888,152
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 389,398
Change in unrealized appreciation on investments (18,253,687)
Net realized and unrealized loss on investments (17,864,289)
Net decrease in net assets resulting from operations $ (1,976,137)
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1999 1998
</CAPTION>
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 15,888,152 $ 15,855,970
Net realized gain from securities transactions 389,398 898,940
Change in unrealized appreciation on investments (18,253,687) 5,060,852
Change in net assets resulting from operations (1,976,137) 21,815,762
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6):
Class A Shares:
Net investment income (15,357,860) (15,702,552)
Net realized gain on investments (603,490) (222,521)
Class C Shares:
Net investment income (82,349) (40,552)
Net realized gain on investments (2,451) (571)
Class Y Shares:
Net investment income (607,653) (409,309)
Net realized gain on investments (20,435) (4,740)
Change in net assets from distributions (16,674,238) (16,380,245)
CAPITAL SHARE TRANSACTIONS (NOTE 9):
Proceeds from shares sold 42,624,580 34,355,105
Reinvested dividends and distributions 9,912,125 9,925,195
Cost of shares redeemed (39,440,132) (32,251,564)
Change in net assets from capital share transactions 13,096,573 12,028,736
Change in net assets (5,553,802) 17,464,253
NET ASSETS:
Beginning of period 334,300,267 316,836,014
End of period (including undistributed net investment
income of $220,108 and $374,665, respectively) $ 328,746,465 $ 334,300,267
</TABLE>
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS
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 September 30, 1999 there were no Class I shares
outstanding. All classes of shares represent interests in the same portfolio of
investments and are identical as to rights and privileges but differ with
respect to the effect of sales charges, the distribution and/or service fees
borne by each class, expenses specific to each class, voting rights on matters
affecting a single class and the exchange 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.
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.
</PAGE>
<PAGE>
For the year ended September 30, 1999, the Trust incurred fees for
advisory and administrative services of $1,345,097.
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 year ended September 30, 1999, service fees on Class A
Shares amounted to $482,779, of which the Distributor received $14,550.
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 year ended September 30, 1999, amounted to $15,831. 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 year ended September 30, 1999, amounted to $5,277. The total of
these payments made with respect to Class C Shares amounted to $21,108, of which
the Distributor received $15,187.
</PAGE>
<PAGE>
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 year
ended September 30, 1999, the Distributor received commissions of $164,339 on
sales of Class A Shares.
4. PURCHASES AND SALES OF SECURITIES
During the year ended September 30, 1999, purchases of securities and
proceeds from the sales of securities aggregated $62,550,676 and $54,008,675,
respectively.
At September 30, 1999, aggregate gross unrealized appreciation for all
securities in which there is an excess of market value over tax cost amounted to
$8,972,737, and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over market value amounted to $5,346,764,
for a net unrealized appreciation of $3,625,973.
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 these amendments could have an
adverse effect on the general financial condition of certain municipal entities
that would 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, in
cash, or in a combination of both, at the shareholder's option. Net realized
capital gains, if any, are distributed annually and are taxable.
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.
</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. TRUSTEES' FEES AND EXPENSES
During the fiscal year there were nine Trustees, two of whom are
affiliated with the Manager and are not paid any trustee fees. Trustees' fees
paid during the year were at the average annual rate of $6,800 for carrying out
their responsibilities and attendance at regularly scheduled Board Meetings. If
additional or special meetings are scheduled for the Trust, separate meeting
fees are paid for each such meeting to those Trustees in attendance. The Trust
also reimburses Trustees for expenses such as travel, accommodations, and meals
incurred in connection with attendance at regularly scheduled or special Board
Meetings and at the Annual Meeting and outreach meetings of Shareholders. For
the fiscal year ended September 30, 1999 such reimbursements averaged
approximately $3,500 per Trustee.
9. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
</CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Proceeds from shares sold 3,077,787 $ 32,804,150 2,478,110 $ 26,612,757
Reinvested dividends and
distributions 912,832 9,714,231 907,937 9,756,708
Cost of shares redeemed (3,633,583) (38,503,659) (2,903,272) (31,179,164)
Net change 357,036 4,014,722 482,775 5,190,301
CLASS C SHARES:
Proceeds from shares sold 211,679 2,254,086 50,665 544,808
Reinvested dividends and
distributions 4,179 44,213 1,209 12,994
Cost of shares redeemed (30,354) (317,699) (19,993) (213,501)
Net change 185,504 1,980,600 31,881 344,301
CLASS Y SHARES:
Proceeds from shares sold 721,432 7,566,344 670,706 7,197,540
Reinvested dividends and
distributions 14,352 153,681 14,468 155,493
Cost of shares redeemed (58,206) (618,774) (80,210) (858,899)
Net change 677,578 7,101,251 604,964 6,494,134
Total transactions in Trust
shares 1,220,118 $ 13,096,573 1,119,620 $ 12,028,736
</TABLE>
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A(1)
YEAR ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
</CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.86 $10.68 $10.49 $10.55 $10.20
Income from Investment Operations:
Net investment income 0.50 0.53 0.53 0.54 0.55
Net gain (loss) on securities (both
realized and unrealized) (0.56) 0.19 0.21 (0.05) 0.39
Total from Investment Operations (0.06) 0.72 0.74 0.49 0.94
Less Distributions (note 6):
Dividends from net investment income (0.51) (0.53) (0.54) (0.54) (0.55)
Distributions from capital gains (0.02) (0.01) (0.01) (0.01) (0.04)
Total Distributions (0.53) (0.54) (0.55) (0.55) (0.59)
Net Asset Value, End of Period $10.27 $10.86 $10.68 $10.49 $10.55
Total Return (not reflecting sales charge)(%) (0.62) 6.90 7.21 4.76 9.52
Ratios/Supplemental Data
Net Assets, End of Period ($ millions) 309 322 312 305 311
Ratio of Expenses to Average Net
Assets (%) 0.71 0.71 0.73 0.73 0.73
Ratio of Net Investment Income to
Average Net Assets (%) 4.70 4.83 5.01 5.15 5.37
Portfolio Turnover Rate (%) 16 7 5 10 13
The expense ratios after giving effect to the expense offset for uninvested cash
balances were:
Ratio of Expenses to Average Net
Assets (%) 0.68 0.69 0.72 0.72 0.71
</TABLE>
(1) Designated as Class A Shares on April 5, 1996.
See accompanying notes to financial statements.
</PAGE>
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C(1) CLASS Y(1)
PERIOD(2) PERIOD(2)
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED SEPTEMBER 30, ENDED
1999 1998 1997 9/30/96 1999 1998 1997 9/30/96
</CAPTION>
<S> <C> <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 0.41 0.43 0.43 0.22 0.52 0.54 0.54 0.27
Net gain (loss) on securities (both realized
and unrealized) (0.55) 0.20 0.21 0.15 (0.56) 0.19 0.21 0.15
Total from Investment Operations (0.14) 0.63 0.64 0.37 (0.04) 0.73 0.75 0.42
Less Distributions (note 6):
Dividends from net investment income (0.42) (0.44) (0.45) (0.22) (0.52) (0.55) (0.55) (0.27)
Distributions from capital gains (0.02) (0.01) (0.01) - (0.02) (0.01) (0.01) -
Total Distributions (0.44) (0.45) (0.46) (0.56) (0.54) (0.56) (0.56) (0.27)
Net Asset Value, End of Period $10.27 $10.85 $10.67 $10.49 $10.27 $10.85 $10.68 $10.49
Total Return (not reflecting sales charge) (%) (1.38) 6.00 6.20 3.61+ (0.39) 6.96 7.37 4.14+
Ratios/Supplemental Data
Net Assets, End of Period ($ millions) 3.0 1.2 .8 .3 17.0 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 (%) 3.84 3.98 4.14 4.17* 4.86 4.95 5.21 5.35*
Portfolio Turnover Rate (%) 16 7 5 10+ 16 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* 0.53 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>
FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED)
This information is presented in order to comply with a requirement
of the Internal Revenue Code AND NO ACTION ON THE PART OF SHAREHOLDERS IS
REQUIRED.
For the fiscal year ended September 30, 1999, $16,018,411 of
dividends paid by Tax-Free Trust of Oregon, constituting 96.24% of total
dividends paid during fiscal 1999, were exempt-interest dividends; $626,376 of
dividends paid, constituting 3.76% of total dividends paid during fiscal 1999,
were capital gain dividends; and the balance was ordinary dividend income.
Prior to January 31, 2000, shareholders will be mailed IRS Form
1099-DIV which will contain information on the status of distributions paid for
the 1999 CALENDAR YEAR.
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.
The Trust has NOT incurred, nor is anticipated to incur, any costs
related to Y2K. All such costs are being incurred by the respective vendors.
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>
<PAGE>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of Tax-Free Trust of Oregon (the
"Trust") was held on May 3, 1999. The holders of shares representing 69% of the
total net asset value of the shares entitled to vote were present in person or
by proxy. At the meeting, the following matters were voted upon and approved by
the shareholders (the resulting votes for each matter are presented below).
1. To elect Trustees.
Number of Votes:
TRUSTEE FOR WITHHELD
Lacy B. Herrmann 230,894,921 3,636,585
Vernon R. Alden 231,019,204 3,512,302
Warren C. Coloney 231,117,615 3,413,892
David B. Frohnmayer 231,121,288 3,410,219
James A. Gardner 231,237,216 3,294,291
Diana P. Herrmann 231,237,216 3,294,291
Raymond H. Lung 231,237,216 3,294,291
John W. Mitchell 231,237,216 3,294,291
Richard C. Ross 231,237,216 3,294,291
2. To ratify the selection of KPMG LLP as the Fund's independent auditors.
Number of Votes:
FOR AGAINST ABSTAIN
227,059,510 1,149,298 6,322,688
</PAGE>
