Registration Nos. 33-4382 & 811-4626
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 24 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]
Amendment No. 25 [ X ]
THE CASCADES TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
EDWARD M.W. HINES
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue, 27th Floor
New York, New York 10176
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
___
[___] immediately upon filing pursuant to paragraph (b)
[_X_] on January 31, 2000, pursuant to paragraph (b)
[___] 60 days after filing pursuant to paragraph (a)(i)
[___] on (date) pursuant to paragraph (a)(i)
[___] 75 days after filing pursuant to paragraph (a)(ii)
[___] on (date) pursuant to paragraph (a)(ii) of Rule 485.
[___] This post-effective amendment designates a new
effective date for a previous post-effective amendment.
<PAGE>
Aquilasm
Group of Funds
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300 * New York, New York 10017
800-872-6734 * 212-697-6666
PROSPECTUS
Class A Shares January 31, 2000
Class C Shares
Tax-Free Trust of Oregon is a mutual fund that seeks to
provide you as high a level of current income exempt from Oregon
state and regular Federal income taxes as is consistent with
preservation of capital. The Trust invests in municipal
obligations that pay interest exempt from Oregon state and
Federal income taxes and are of investment grade quality.
For purchase, redemption or account inquiries contact
the Trust's Shareholder Servicing Agent:
PFPC Inc. * 400 Bellevue Parkway * Wilmington, DE 19809
Call 800-872-6735 toll free
For general inquiries & yield information
Call 800-872-6734 toll free or 212-697-6666
The Securities and Exchange Commission has not approved or
disapproved the Trust's securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a criminal
offense.
<PAGE>
THE TRUST'S OBJECTIVE, INVESTMENT STRATEGIES AND MAIN RISKS
"What is the Trust's objective?"
The Trust's objective is to provide you as high a level of
current income exempt from Oregon state and regular Federal income
taxes as is consistent with preservation of capital.
"What is the Trust's investment strategy?"
The Trust invests in tax-free municipal obligations, which pay
interest exempt from Oregon state and regular Federal income taxes. We call
these "Oregon Obligations." In general, all or almost all of these
obligations are issued by the State of Oregon, its counties and various
other local authorities; at least 65% of the portfolio will always consist
of obligations of these issuers. These obligations can be of any maturity
but the Trust's average portfolio maturity has traditionally been between 12
and 18 years. At the time of purchase, an obligation must be considered
"investment grade."
The Sub-Adviser selects obligations for the Trust's portfolio to
best achieve the Trust's objectives. The Sub-Adviser evaluates specific
obligations for purchase by various characteristics including quality,
maturity and coupon rate.
The interest paid on certain types of Oregon Obligations may be
subject to the Federal alternative minimum tax ("AMT"). At least 80% of the
Trust's net assets must be invested in Oregon Obligations whose interest is
not subject to AMT.
"What are the main risks of investing in the Trust?"
Among the risks of investing in shares of the Trust and its
portfolio of securities are the following:
Loss of money is a risk of investing in the Trust.
The Trust's assets, being primarily or entirely Oregon issues, are
subject to economic and other conditions affecting Oregon. Adverse local
events, such as a downturn in the Oregon economy, could affect the value of
the Trust's portfolio.
There are two types of risk associated with any fixed-income debt
securities such as Oregon Obligations: interest rate risk and credit
risk.
* Interest rate risk relates to fluctuations in market value
arising from changes in interest rates. If interest rates rise,
the value of debt securities, including Oregon Obligations, will
normally decline. All fixed-rate debt securities, even the most
highly rated Oregon Obligations, are subject to interest rate
risk. Oregon Obligations with longer maturities generally have a
more pronounced reaction to interest rate changes than shorter-
term securities.
* Credit risk relates to the ability of the particular issuers
of the Oregon Obligations the Trust owns to make periodic
interest payments as scheduled and ultimately repay principal at
maturity.
An investment in the Trust is not a deposit in U.S. Bank National
Association or its bank or non-bank affiliates or any other bank, and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
The Trust is classified as a "non-diversified" investment company
under the Investment Company Act of 1940 (the "1940 Act"). Thus, compared
with "diversified" funds, it may invest a greater percentage of its assets
in obligations of a particular issuer and may therefore not have as much
diversification among securities, and thus diversification of risk. In
general, the more the Trust invests in the securities of specific issuers,
the more the Trust is exposed to risks associated with investments in those
issuers.
<PAGE>
TAX-FREE TRUST OF OREGON
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in Tax-Free Trust of Oregon by showing
changes in the performance of the Trust's Class A Shares from year to year
over a 10-year period and by showing how the Trust's average annual returns
for one, five and ten years compare to a broad measure of market
performance. How the Trust has performed in the past is not necessarily an
indication of how the Trust will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1990-1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16%
14% 13.96
12% 11.00 XXXX
10% XXXX . 10.11 XXXX
8% 6.57 XXXX 7.71 XXXX XXXX 7.44
6% XXXX XXXX XXXX XXXX XXXX XXXX 5.40
4% XXXX XXXX XXXX XXXX XXXX 3.70 XXXX XXXX
2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
0% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
- -2% XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX -1.97
- -4% XXXX XXXX XXXX XXXX -3.7 XXXX XXXX XXXX XXXX XXXX
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Calendar Years
During the 10-year period shown in the bar chart, the highest return for a
quarter was 5.95% (quarter ended March 31, 1995) and the lowest return for
a quarter was -3.99% (quarter ended March 31, 1994).
Note: The Trust's Class A Shares are sold subject to a maximum 4% sales
load which is not reflected in the bar chart. If the sales load were
reflected, returns would be less than those shown above.
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
For the period 1-Year 5-Year 10-Years inception
ended December 31, 1999
<S> <C> <C> <C> <C>
Tax-Free Trust of Oregon
Class A Shares (1) -5.89% 4.72% 5.45% 6.08%*
Tax-Free Trust of Oregon
Class C Shares -3.68 N/A N/A 3.59%**
Lehman Brothers
Municipal Bond Index**** -2.07 6.91% 6.90% 7.40%
<FN>
(1) The average annual total returns shown do reflect the maximum 4% sales
load.
</FN>
<FN>
*From commencement of operations on June 16, 1986.
</FN>
<FN>
**From commencement of new class of shares on April 5, 1996.
</FN>
<FN>
*** The average annual total return for Class C shares for one year assumes
redemption at the end of the year and payment of 1% CDSC.
</FN>
<FN>
****The Lehman Brothers Municipal Bond Index is nationally oriented and
consists of an unmanaged mix of investment-grade long-term municipal
securities of issuers throughout the United States. At December 31, 1999,
there were approximately 53,000 securities in the Index.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
FEES AND EXPENSES OF THE TRUST
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Trust.
Class A Class C
Shares Shares
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.....
(as a percentage of offering price) 4.00% None
Maximum Deferred Sales Charge (Load).....None(1) 1.00%(2)
(as a percentage of the lesser of
redemption value or purchase price)
Maximum Sales Charge (Load)
Imposed on Reinvested Dividends or
Distributions
(as a percentage of offering price).....None None
Redemption Fees..........................None None
Exchange Fee.............................None None
Annual Trust Operating Expenses (expenses that are
deducted from the Trust's assets)
Management Fee ................... 0.40% 0.40%
Distribution
and /or Service (12b-1) Fee.. 0.15% 0.75%
All Other Expenses:
Service Fee........................None 0.25%
Other Expenses (3).................0.16% 0.16%
Total All Other Expenses (3)..............0.16% 0.41%
Total Annual Trust
Operating Expenses (3)....................0.71% 1.56%
<FN>
(1) If you buy Class A Shares in transactions of $1 million or more there
is no sales charge but you will be subject to a contingent deferred sales
charge of up to 1% if you redeem your shares during the first two years
after purchase and 0.50 of 1% during the third and fourth years after
purchase.
</FN>
<FN>
(2) A contingent deferred sales charge of 1% is imposed on the redemption
proceeds of the shares if redeemed during the first 12 months after
purchase.
</FN>
<FN>
(3) Does not reflect a 0.03% offset in Trust expenses received in the year
ended September 30, 1999 for uninvested cash balances. Reflecting this
offset for that year, other expenses, all other expenses and total annual
Trust operating expenses were 0.13%, 0.13% and 0.68%, respectively, for
Class A Shares; for Class C Shares, these expenses were 0.13%, 0.38% and
1.53%, respectively.
</FN>
</TABLE>
Example
This Example is intended to help you compare the cost of investing in the
Trust with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Trust for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return
each year, you reinvest all dividends and distributions, and that the
Trust's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A Shares............$470 $618 $779 $1,247
Class C Shares............$259 $493 $850 $1,417(4)
You would pay the following expenses if you did not redeem your Class C Shares:
Class C Shares............$159 $493 $850 $1,417(4)
<FN>
(4) Six years after the date of purchase, Class C Shares are automatically
converted to Class A Shares. Over time, long-term Class C Shareholders could pay
the economic equivalent of an amount that is more than the maximum front-end
sales charge allowed under applicable regulations because of the 12b-1 fee and
service fee. Because these fees are paid out of the Trust's assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
</FN>
</TABLE>
INVESTMENT OF THE TRUST'S ASSETS
"Is the Trust right for me?"
The shares of the Trust are designed to be a suitable investment
for individuals, corporations, institutions and fiduciaries who seek
income exempt from Oregon state and regular Federal income taxes.
Oregon Obligations
The Trust invests in Oregon Obligations, which are a type of
municipal obligation. They pay interest which bond counsel or other
appropriate counsel deems to be exempt from regular Federal and State of
Oregon income taxes. They include obligations of Oregon issuers and
certain non-Oregon issuers, of any maturity.
At the time of purchase, the Trust's Oregon Obligations must be of
investment grade quality. This means that they must either
* be rated within the four highest credit ratings assigned by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, or,
* if unrated, be determined to be of comparable quality by the
Trust's Sub-Adviser, U.S. Bank National Association.
The obligations of non-Oregon issuers that the Trust can purchase
are those issued by or under the authority of Guam, the Northern Mariana
Islands, Puerto Rico and the Virgin Islands. Interest paid on these
obligations is currently exempt from regular Federal and Oregon income
taxes. The Trust purchases the obligations of these issuers only when
obligations of Oregon issuers with the appropriate characteristics of
quality, maturity and coupon rate are unavailable.
Municipal Obligations
Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities to obtain funds for
public purposes.
There are two principal classifications of municipal obligations:
"notes" and "bonds." Notes generally have maturities of one year or
less, while bonds are paid back over longer periods.
The various public purposes for which municipal obligations
are issued include:
*obtaining funds for general operating expenses,
*refunding outstanding obligations,
*obtaining funds for loans to other public institutions and
facilities, and
*funding the construction of highways, bridges, schools,
hospitals, housing, mass transportation, streets and water
and sewer works.
Municipal obligations include:
*tax, revenue or bond anticipation notes,
*construction loan notes,
*project notes, which sometimes carry a U.S. government
guarantee,
*municipal lease/purchase agreements, which are similar to
installment purchase contracts for property or equipment,
and
*floating and variable rate demand notes.
INSERT PICTURE PAGE
Max Light Rail
Clackamas County School District
State of Oregon
Portland International Airport
City of Portland
City of Salem
Oregon Convention Center
Eugene Water &_Electric Board
Reed College
The Trust invests in tax-free municipal securities, primarily the
kinds of obligations issued by various communities and political
subdivisions within Oregon. Most of these securities are used in
general to finance construction of long-term municipal projects:
examples are pictured above. The municipal obligations which financed
these particular projects were included in the Trust's portfolio as of
December 31, 1999 and together represented 28.50% of the Trust's
portfolio. Since the portfolio is subject to change, the Trust may not
necessarily own these specific securities at the time of the delivery
of this Prospectus.
"What factors may affect the value of the Trust's investments and
their yields?"
Change in prevailing interest rates is the most common factor
that affects the value of the obligations in the Trust's portfolio.
Any such change may have different effects on short-term and long-term
Oregon Obligations. Long-term obligations (which usually have higher
yields) may fluctuate in value more than short-term ones. Thus, the
Trust may shorten the average maturity of its portfolio when it
believes that prevailing interest rates may rise. While this strategy
may promote one part of the Trust's objective, preservation of
capital, it may also result in a lower level of income.
"What are the main risk factors and special considerations regarding
investment in Oregon Obligations?"
The following is a discussion of the general factors that might
influence the ability of Oregon issuers to repay principal and
interest when due on Oregon Obligations that the Trust owns. The Trust
has derived this information from sources that are generally available
to investors and believes it to be accurate, but it has not been
independently verified and it may not be complete.
Oregon's economy has diversified away from timber and
agriculture to a broader mix of high technology, service, and
international trade. Despite the successful migration from dependence
on lumber and agriculture, the State's employment has lagged that of
the Nation. The Nation's unemployment of 4.5% has not been this strong
since the early 1960s. Oregon's unemployment has been as high as 5.5%
in 1999.
This had not been the case for most of the 1990s. Oregon had
been among the 10 leading states for job growth throughout most of the
1990s. However, over the last two years, a steady loss of
manufacturing jobs has dampened growth in the State. A star industry
in the State had been semiconductor manufacturing, but global
oversupply and low prices have halted growth in this industry.
Oregon's manufacturers are greatly dependent on the Asian economy for
an outlet for their goods. The weakness or strength of the Asian
economy has a large influence on Oregon's economy.
The principal sources of State tax revenues are the personal
income and corporate income taxes. Oregon does not have a sales tax;
however, the issue of a sales tax is brought before the Oregon voters
frequently. Oregon has a very friendly initiative process; any
registered Oregon voter may submit a proposed initiative. In recent
years, Oregon has seen active use of the initiative and referendum
process, with initiative measures being proposed on a variety of
constitutional and statutory topics. Three such initiatives voted on
in the 1990s have dramatically changed the landscape for local
government.
In addition to general obligation bonds, the State and its
political subdivisions issue revenue obligations payable from specific
projects or sources, including lease rentals. There can be no
assurance that a material downturn in the State's economy, with
resulting impact on the financial strength of State and local
entities, will not adversely affect the ability of obligors of the
obligations held in the Trust's portfolio to make the required
payments on these obligations and, consequently, the market value of
such obligations.
Additionally, certain municipal securities held by the Trust
may rely in whole or in part for repayment on ad valorem property
taxes. There are limits under Oregon State law on the issuance of
bonds supported by such taxes. In recent years several voter
initiatives have also amended the State Constitution to "freeze" or
roll back such taxes. Prior to the enactment of the measures rolling
back ad valorem property taxes school districts received 70% of their
funds from the tax and 30% from the State (income tax). These
initiatives created the need for the school districts to go to the
State for more funding. Now, the State funds 70% of school district
funding, with 30% coming from property taxes. Whereas, the State has
been able to fund the minimum needs, the revenue sources for the State
are much more volatile revenue than are property taxes.
There is a relatively inactive market for municipal bonds of
Oregon issuers other than the general obligations of the State itself
and certain other limited segments of the market. Consequently, the
market price of such other bonds may have a higher degree of
volatility and it may be difficult to execute sales of blocks of such
bonds. If the Trust were forced to sell a large volume of these bonds
for any reason, such as redemptions of a large number of its shares,
there is a risk that the large sale itself might adversely affect the
value of the Trust's portfolio.
TRUST MANAGEMENT
"How is the Trust managed?"
Aquila Management Corporation, 380 Madison Avenue, Suite 2300,
New York, NY 10017, the Manager, is the Trust's investment adviser
under an Advisory and Administration Agreement. It has delegated its
investment advisory duties, including portfolio management, to U.S.
Bank National Association, the Sub-Adviser, under a sub-advisory
agreement described below. The Manager is also responsible for
administrative services, including providing for the maintenance of
the headquarters of the Trust, overseeing relationships between the
Trust and the service providers to the Trust, either keeping the
accounting records of the Trust or, at its expense and responsibility,
delegating such duties in whole or in part to a company satisfactory
to the Trust, maintaining the Trust's books and records and providing
other administrative services.
The Sub-Adviser provides the Trust with local advisory services.
Under the Sub-Advisory Agreement, the Sub-Adviser provides for
investment supervision, including supervising continuously the invest
ment program of the Trust and the composition of its portfolio,
determining what securities will be purchased or sold by the Trust and
arranging for the purchase and the sale of securities held in the
portfolio of the Trust; and, at the Sub-Adviser's expense, for pricing
of the Trust's portfolio daily.
During the fiscal year ended September 30, 1999, the Trust
accrued management fees to the Manager at the annual rate of 0.40 of
1% of its average annual net assets.
Information about the Manager and the Sub-Adviser
The Trust's Manager is founder and Manager and/or
administrator to the Aquilasm Group of Funds, which consists of tax-
free municipal bond funds, money market funds and equity funds. As of
December 31, 1999, these funds had aggregate assets of approximately
$3.0 billion, of which approximately $1.8 billion consisted of assets
of the tax-free municipal bond funds. Mr. Lacy B. Herrmann controls
the Manager, which was founded in 1984, directly, through a trust and
through share ownership by his wife.
The Sub-Adviser is a subsidiary of U.S. Bancorp ("USB"), 601
Second Avenue South, Minneapolis, Minnesota 55480, which is a regional
multi-state bank holding company, headquartered in Minneapolis,
Minnesota, that primarily serves the Midwestern, Rocky Mountain and
Northwestern states. USB operates five bank and eleven trust companies
with offices in 17 contiguous states from Illinois to Washington. USB
also has various other subsidiaries engaged in financial services. At
September 30, 1999, on a pro forma combined basis, USB and its
consolidated subsidiaries had consolidated assets of approximately $77
billion, consolidated deposits of $48 billion and shareholders'equity
of $6.7 billion.
Mr. Michael Hamilton is the Trust's portfolio manager. Mr.
Hamilton has been employed by the parent company of the Sub-Adviser
and its predecessors since 1989. He has been associated with the Trust
since 1994, assisting in administration and credit analysis and became
portfolio manager in 1999. Mr. Hamilton has managed municipal bond
common trust funds, individual municipal bond portfolios, taxable
portfolios and money market funds. He holds a B.A. from College of
Idaho and an M.B.A from Western Washington University.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Trust's
classes of shares is determined as of 4:00 p.m., New York time, on
each day that the New York Stock Exchange is open (a "business day"),
by dividing the value of the Trust's net assets (which means the value
of the assets less liabilities) allocable to each class by the total
number of shares of such class outstanding at that time. In general,
net asset value of the Trust's shares is based on portfolio market
value, except that Oregon Obligations maturing in 60 days or less are
generally valued at amortized cost. The price at which a purchase or
redemption of shares is effected is based on the next calculated net
asset value after your purchase or redemption order is received in
proper form. The New York Stock Exchange annually announces the days
on which it will not be open. The most recent announcement indicates
that it will not be open on the following days: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, the Exchange may close on days not included in that
announcement.
PURCHASES
"Are there alternate purchase plans?"
The Trust provides individuals with alternate ways to purchase
shares through two separate classes of shares (Class A and Class C).
Although the classes have different sales charge structures and
ongoing expenses, they both represent interests in the same portfolio
of Oregon Obligations. You should choose the class that best suits
your own circumstances and needs.
"Can I purchase shares of the Trust?"
You can purchase shares of the Trust if you live in Oregon or
in one of the other states listed below. You should not purchase
shares of the Trust if you do not reside in one of the following
states. Otherwise the Trust can redeem the shares you purchased. This
may cause you to suffer a loss and may have tax consequences.
Also, if you do not reside in Oregon, dividends from the Trust
may be subject to state income taxes of the state in which you do
reside. Therefore, you should consult your tax adviser before buying
shares of the Trust.
On the date of this Prospectus, Class A and C Shares are
available only in:
* Oregon * Arizona * California * Colorado
* District of Columbia * Florida * Hawaii
* Idaho * Illinois Minnesota * Missouri
* Nevada * New York
* Pennsylvania * Texas * Washington
"How much money do I need to invest?"
Option I
*Initially, $1,000.
*Subsequently, any amount (for investments in shares of the
same class).
Option II
*$50 or more if an Automatic Investment Program is established.
*Subsequently, any amount you specify ($50 or more).
*You are not permitted to maintain both an Automatic
Investment Program and an Automatic Withdrawal program
simultaneously.
Under either option, your investment must be drawn in United
States dollars on a United States commercial bank, savings bank or
credit union or a United States branch of a foreign commercial bank
(each of which is a "Financial Institution").
"How do I purchase shares?"
You may purchase the Trust's shares:
* through an investment broker or dealer, or a bank or
financial intermediary, which has a sales agreement with the
Distributor, Aquila Distributors, Inc., in which case that insti
tution will take action on your behalf, and you will not
personally perform the steps indicated below; or
* directly through the Distributor, by mailing payment to the
Trust's Agent, PFPC Inc.
* The price you will pay is net asset value plus a sales
charge for Class A Shares and net asset value for Class C Shares.
(See "What price will I pay for the Trust's shares?")
In either instance, all purchases of Class A Shares are subject
to the applicable sales charge.
Opening an Account Adding to An Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to payable to
Tax-Free Trust of Tax-Free Trust
Oregon. of Oregon.
* Complete the application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to the Trust's
you wish to authorize. confirmations
or supply the name(s)
of account owner(s),
the account number, and
the name of the Trust.
* Send your check and * Send your check and
completed application completed account infor-
to your dealer or mation to the dealer or
to the Trust's to the Trust's
Agent, PFPC, Inc. Agent, PFPC, Inc.
Unless you indicate otherwise, your investment will be made in
Class A Shares.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of $50
or more, from your Financial Institution if it is a member of the
Automated Clearing House. You may make investments through two
electronic transfer features, "Automatic Investment" and "Telephone
Investment."
* Automatic Investment: You can authorize a pre-determined amount
to be regularly transferred from your account.
* Telephone Investment: You can make single investments of up to
$50,000 by telephone instructions to the Agent.
Before you can transfer funds electronically, the Trust's
Agent must have your completed application authorizing these features.
Or, if you initially decide not to choose these conveniences and then
later wish to do so, you must complete a Ready Access Features Form
which is available from the Distributor or Agent, or if your account
is set up so that your broker or dealer makes these sorts of changes,
request your broker or dealer to make them. The Trust may modify or
terminate these investment methods or charge a service fee, upon 30
days' written notice to shareholders.
REDEEMING YOUR INVESTMENT
You may redeem some or all of your shares by a request to the
Agent. Shares will be redeemed at the next net asset value determined
after your request has been received in proper form.
There is no minimum period for investment in the Trust, except
for shares recently purchased by check or by Automatic or Telephone
Investment as discussed below.
If you own both Class A and C Shares and do not specify which
class you wish to redeem, we will redeem your Class A Shares.
Certain shares are subject to a contingent deferred sales
charge, or CDSC. These are:
* Class C Shares held for less than 12 months (from the date
of purchase).
* CDSC Class A Shares.
Upon redemption, enough additional shares will be redeemed to pay
for any applicable CDSC.
A redemption may result in a tax liability for you.
"How can I redeem my investment?"
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-872-6735
By FAX, send
instructions to:
302-791-3055
For liquidity and convenience, the Trust offers expedited redemption.
Expedited Redemption Methods
(Non-Certificate Shares Only)
You may request expedited redemption for any shares not issued in
certificate form in two ways:
1 By Telephone. The Agent will take instructions from anyone by
telephone to redeem shares and make payments:
a) to a Financial Institution account you have previously specified;
b) by check in the amount of $50,000 or less, mailed to the same name
and address (which has been unchanged for the past 30 days) as the
account from which you are redeeming. You may only redeem by check via
telephone request once in any 7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to supply:
account name(s) and number
name of the caller
the social security number registered to the account
personal identification
Note: Check the accuracy of your confirmation statements immediately.
The Trust, the Agent, and the Distributor are not responsible for
losses resulting from unauthorized telephone transactions if the Agent
follows reasonable procedures designed to verify a caller's identity.
The Agent may record calls.
2 By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of instruction
sent to the Agent: PFPC Inc., by FAX at 302-791-3055 or by mail to 400
Bellevue Parkway, Wilmington, DE 19809. The letter, signed by the
registered shareholder(s) (no signature guarantee is required), must
indicate:
account name(s)
account number
amount to be redeemed
any payment directions
To have redemption proceeds sent directly to a Financial Institution
account, you must complete the Expedited Redemption section of the
Application or a Ready Access Features Form. You will be required to
provide (1) details about your Financial Institution account, (2)
signature guarantees and (3) possible additional documentation.
The name(s) of the shareholder(s) on the Financial Institution account
must be identical to those on the Trust's records of your account.
You may change your designated Financial Institution account at any
time by completing and returning a revised Ready Access Features Form.
Regular Redemption Method
(Certificate and Non-Certificate Shares)
Certificate Shares. Mail to the Trust's Agent:
(1) blank (unsigned) certificates for Class A Shares to be redeemed,
(2) redemption instructions, and (3) a stock assignment form.
To be in "proper form," items (2) and (3) above must be signed by the
registered shareholder(s) exactly as the account is registered. For a
joint account, both shareholder signatures are necessary.
For your protection, mail certificates separately from signed
redemption instructions. We recommend that certificates be sent by
registered mail, return receipt requested.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or execu
tors, or if redemption is requested by someone other than the
shareholder of record. The Agent may require signature guarantees if
insufficient documentation is on file.
We do not require a signature guarantee for redemptions up to $50,000,
payable to the record holder, and sent to the address of record,
except as noted above. In all other cases, signatures must be
guaranteed.
Your signature may be guaranteed by any:
member of a national securities exchange
U.S. bank or trust company
state-chartered savings bank
federally chartered savings and loan association
foreign bank having a U.S. correspondent bank; or
participant in the Securities Transfer Association
Medallion Program ("STAMP"), the Stock Exchanges Medallion
Program ("SEMP") or the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP")
A notary public is not an acceptable signature guarantor.
Non-Certificate Shares. You must use the Regular Redemption
Method if you have not chosen Expedited Redemption to a predesignated
Financial Institution account. To redeem by this method, send a letter
of instruction to the Trust's Agent, which includes:
Account name(s)
Account number
Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be
redeemed
Payment instructions (we normally mail redemption
proceeds to your address as registered with the Trust)
Signature(s) of the registered shareholder(s); and
Signature guarantee(s), if required, as indicated above
"When will I receive the proceeds of my redemption?"
Redemption proceeds are normally sent on the next business day
following receipt in proper form of your redemption request. Except as
described below, payments will normally be sent to your address of
record within 7 days.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and None
as you requested on
your Application or Ready
Access Features Form,
wired or transferred
through the Automated
Clearing House to your
Financial Institution
Account
Through a broker
/dealer Check or wire, to None
your broker/dealer.
However,
your broker/dealer
may charge a fee.
Although the Trust does not currently intend to, it can charge up
to $5.00 per wire redemption, after written notice to shareholders who
have elected this redemption procedure. Upon 30 days' written notice
to shareholders the Trust may modify or terminate the use of the
Automated Clearing House to make redemption payments at any time or
charge a service fee, although no such fee is presently contemplated.
If any such changes are made, the Prospectus will be supplemented to
reflect them.
The Trust may delay payment for redemption of shares recently
purchased by check (including certified, cashier's or official bank
check) or by Automatic Investment or Telephone Investment up to 15
days after purchase; however, payment for redemption will not be
delayed after (i) the check or transfer of funds has been honored, or
(ii) the Agent receives satisfactory assurance that your Financial
Institution will honor the check or transfer of funds. You can
eliminate possible delays by paying for purchased shares with wired
funds or Federal Reserve drafts.
The Trust has the right to postpone payment or suspend redemption
rights during certain periods. These periods may occur (i) when the
New York Stock Exchange is closed for other than weekends and
holidays, (ii) when the Securities and Exchange Commission (the "SEC")
restricts trading on the New York Stock Exchange, (iii) when the SEC
determines an emergency exists which causes disposal of, or
determination of the value of, the portfolio securities to be
unreasonable or impracticable, and (iv) during such other periods as
the SEC may permit.
The Trust can redeem your shares if their value totals less than
$500 as a result of redemptions or failure to meet and maintain the
minimum investment level under an Automatic Investment program. Before
such a redemption is made, we will send you a notice giving you 60
days to make additional investments to bring your account up to the
minimum.
Redemption proceeds may be paid in whole or in part by
distribution of the Trust's portfolio securities ("redemption in
kind") in conformity with SEC rules. This method will only be used if
the Board of Trustees determines that payments partially or wholly in
cash would be detrimental to the best interests of the remaining
shareholders.
"Are there any reinvestment privileges?"
If you reinvest proceeds of redemption within 120 days of a
redemption you will not have to pay any additional sales charge on the
reinvestment. You must reinvest in the same class as the shares
redeemed. You may exercise this privilege only once a year, unless
otherwise approved by the Distributor.
The Distributor will refund to you any CDSC deducted at the time
of redemption by adding it to the amount of your reinvestment.
Reinvestment will not alter the tax consequences of your original
redemption.
"Is there an Automatic Withdrawal Plan?"
Yes, but it is only available for Class A Shares. Under an
Automatic Withdrawal Plan you can arrange to receive a monthly or
quarterly check in a stated amount, not less than $50.
ALTERNATE PURCHASE PLANS
"How do the different arrangements for Class A Shares and Class C
Shares affect the cost of buying, holding and redeeming shares, and
what else should I know about the two classes?"
In this Prospectus the Trust provides you with two alternative
ways to invest in the Trust through two separate classes of shares.
All classes represent interests in the same portfolio of Oregon
Obligations. The classes of shares offered to individuals differ in
their sales charge structures and ongoing expenses, as described
below. You should choose the class that best suits your own
circumstances and needs.
Class A Shares Class C Shares
"Front-Payment Shares" "Level-Payment Shares"
Initial Class A Shares are None. Class C
Sales offered at net asset Shares are offered
Charge value plus a maximum at net asset value
sales charge of 4%, with no sales charge
paid at the time of payable at the time
purchase. Thus, of purchase.
your investment is
reduced by the
applicable sales
charge.
Contingent None (except for A maximum CDSC* of
Deferred certain purchases of 1% is imposed upon
Sales $1 million or more) the redemption of
Charge Class C Shares held
("CDSC") for less than 12
months. No CDSC
applies to Class C
shares acquired
through the
reinvestment of
dividends.
Distributions An asset retention Level charge for
And service fee of 0.15 distribution and
Service of 1% is imposed on service fees for 6
Fees the average annual years after the date
net assets of purchase at the
represented by the aggregate annual
Class A Shares. rate of 1% of the
average net assets
represented by the
Class C Shares
Other The initial sale Class C Shares
Information charge is waived or together with a pro-
reduced in some rata portion of all
cases. Larger Class C Shares
purchases qualify acquired through
for lower sales dividends and other
charges. distributions paid
in additional Class
C Shares
automatically
convert to Class A
Shares after 6
years.
Systematic Payroll Investments
You can make systematic investments in either Class A Shares or
Class C Shares each pay period if your employer has established a
Systematic Payroll Investment Plan with the Trust. To participate in
the Payroll Plan, you must make your own arrangements with your
employer's payroll department, which may include completing special
forms. Additionally, the Trust requires that you complete the
application included with this Prospectus. Once your application is
received by the Trust and a new account is opened, under the Payroll
Plan your employer will deduct a preauthorized amount from each
payroll check. This amount will then be sent directly to the Trust for
purchase of shares at the then current offering price, which includes
applicable sales charge. You will receive a confirmation from the
Trust for each transaction. Should you wish to change the dollar
amount or end future systematic payroll investments, you must notify
your employer directly. Changes may take up to ten days.
"What price will I pay for the Trust's shares?"
Class A Shares Offering Class C Shares Offering
Price Price
Net asset value per share Net asset value per
plus the applicable share
sales charge
You will receive that day's offering price on purchase orders,
including Telephone Investments and investments by mail, received in
proper form prior to 4:00 p.m. New York time. Dealers have the added
flexibility of transmitting orders received prior to 4:00 p.m. New
York time to the Distributor or Agent before the Distributor's close
of business that day (normally 5:00 p.m. New York time) and still
receiving that day's offering price. Otherwise, orders will be filled
at the next determined offering price. Dealers are required to submit
orders promptly. Purchase orders received on a non-business day,
including those for Automatic Investment, will be executed on the next
succeeding business day. The sale of shares will be suspended (1)
during any period when net asset value determination is suspended or
(2) when the Distributor judges it is in the Trust's best interest to
do so.
"What are the sales charges for purchases of Class A Shares?"
The following table shows the amount of sales charge incurred by
a "single purchaser" of Class A Shares. A "single purchaser" is:
* an individual;
* an individual, together with his or her spouse, and/or any
children under 21 years of age purchasing shares for their account;
* a trustee or other fiduciary purchasing shares for a single trust
estate or fiduciary account; or
* a tax-exempt organization as detailed in Section 501(c)(3) or
(13) of the Internal Revenue Code.
II III
Sales Charge as Sales Charge as
Percentage of Approximate
I Public Percentage of
Amount of Purchase Offering Price Amount Invested
Less than $25,000 4.00% 4.17%
$25,000 but less
than $50,000 3.75% 3.90%
$50,000 but less
than $100,000 3.50% 3.63%
$100,000 but less
than $250,000 3.25% 3.36%
$250,000 but less
than $500,000 3.00% 3.09%
$500,000 but less
than $1,000,000 2.50% 2.56%
For purchases of $1 million or more see "Sales Charges for Purchases
of $1 Million or More."
For example:
If you pay $10,000 (Column I), your sales charge would be 4.00% or
$400 (Column II). ($10,000 x .04 = $400)
The value of your account, after deducting the sales charge from your
payment, would increase by $9,600. (This would be the initial value of
your account if you opened it with the $10,000 purchase.) ($10,000 -
$400 = $9,600)
The sales charge as a percentage of the increase in the value of your
account would be 4.17% (Column III). ($400 / $9,600 = .0416666 or
4.17%)
Sales Charges for Purchases of $1 Million or More
You will not pay a sales charge at the time of purchase when you
purchase "CDSC Class A Shares." CDSC Class A Shares are Class A Shares
issued under the following circumstances:
(i) Class A Shares issued in a single purchase of $1 million or
more by a single purchaser; and
(ii) all Class A Shares issued to a single purchaser in a single
purchase when the value of the purchase, together with the value of
the purchaser's other CDSC Class A Shares and Class A Shares on which
a sales charge has been paid, equals or exceeds $1 million.
If you redeem all or part of your CDSC Class A Shares during the
four years after you purchase them, you must pay a special contingent
deferred sales charge upon redemption.
You will pay 1% of the Redemption Value if you redeem within the
first two years after purchase, and 0.50 of 1% of the Redemption Value
if you redeem within the third or fourth year. The Redemption Value is
the net asset value of the redeemed shares when they were purchased or
when they are redeemed, whichever is less.
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation
"Single purchasers" may qualify for a reduced sales charge in
accordance with the above schedule when making subsequent purchases of
Class A Shares.
Letters of Intent
"Single purchasers" may also qualify for reduced sales charges, in
accordance with the above schedule, after a written Letter of Intent
(included with the Application) is received by the Distributor.
General
Class A Shares may be purchased without a sales charge by certain
classes of purchasers.
Certain Investment Companies
If you redeem shares of an investment company (not a member of the
Aquilasm Group of Funds) on which you have paid a sales charge, you can
invest the proceeds within 120 days in Class A Shares of the Trust without
paying a sales charge. You can get additional information from the
Distributor.</R
"What are the sales, service and distribution charges for Class C Shares?"
* No sales charge at time of purchase.
* Annual fees for service and distribution at a combined annual rate of
1% of average annual net assets of the Trust represented by Class C
Shares.
* After six years, Class C Shares automatically convert to Class A
Shares, which bear lower service and distribution fees.
Redemption of Class C Shares
* 1% charge if redeemed within the first 12 months after purchase. This
contingent deferred sales charge, or CDSC, is calculated based on the
lesser of the net asset value at the time of purchase or at the time
of redemption.
* No CDSC applies if Class C Shares are held for 12 months after
purchase.
* Shares acquired by reinvestment of dividends or distributions are not
subject to any CDSC.
Broker/Dealer Compensation - Class C Shares
The Distributor will pay any broker/dealer executing a Class C Share
purchase 1% of the sales price.
"What about confirmations?"
A statement will be mailed to you confirming each purchase of shares
in the Trust. Additionally, your account at the Agent will be credited in
full and fractional shares (rounded to the nearest 1/1000th of a share).
"Is there a Distribution Plan or a Services Plan?"
The Trust has adopted a Distribution Plan (the "Plan") under the
Investment Company Act of 1940's Rule 12b-1 in order to:
(i) permit the Trust to finance activities primarily intended to
result in the sale of its shares;
(ii) permit the Manager, out of its own funds, to make payment
for distribution expenses; and
(iii) protect the Trust against any claim that some of the expenses
which it pays or may pay might be considered to be sales-related
and therefore come within the purview of the Rule.
Pursuant to the Plan, the Trust makes payments with respect to both
Class A and C Shares under agreements to certain broker/dealers, or others
who have (i) rendered assistance (whether direct, administrative, or both)
in the distribution and/or retention of the Trust's shares or (ii) assisted
in the servicing of shareholder accounts.
For any fiscal year, these payments may not exceed 0.15 of 1% for
Class A Shares, and 0.75 of 1% for Class C Shares, of the average annual
net assets represented by each class. Because these distribution fees are
paid out of assets on an ongoing basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types
of sales charges.
For any class, these payments are made only from the assets allocable
to that class. Whenever the Trust makes Class A permitted payments, the
aggregate annual rate of the advisory fee and sub-advisory fee otherwise
payable by the Trust will be reduced from 0.50 of 1% to 0.40 of 1% of the
Trust's average annual net assets.
Shareholder Services Plan for Class C Shares
The Trust's Shareholder Services Plan authorizes it to pay a
service fee under agreements to certain qualified recipients who have
agreed to provide personal services to Class C shareholders and/or maintain
their accounts. For any fiscal year, such fees may not exceed 0.25 of 1% of
the average annual net assets represented by Class C Shares. Payment is
made only out of the Trust's assets represented by Class C Shares.
Service fees with respect to Class C Shares will be paid to the
Distributor during the first year after purchase and thereafter to other
qualified recipients.
"Transfer on Death" Registration (Both Classes)
The Trust generally permits "transfer on death" ("TOD")
registration of shares, so that on the death of the shareholder the shares
are transferred to a designated beneficiary or beneficiaries. Ask the Agent
or your broker-dealer for the Transfer on Death Registration Request Form.
With it you will receive a copy of the TOD Rules of the Aquilasm Group of
Funds, which specify how the registration becomes effective and operates.
By opening a TOD Account, you agree to be bound by the TOD Rules.
DIVIDENDS AND DISTRIBUTIONS
"How are dividends and distributions determined?"
The Trust pays dividends and other distributions with respect to
each class of shares. The Trust calculates its dividends and other
distributions with respect to each class at the same time and in the same
manner. Net income for dividend purposes includes all interest income
accrued by the Trust since the previous dividend declaration less expenses
paid or accrued. Net income also includes any original issue discount,
which occurs if the Trust purchases an obligation for less than its face
amount. The discount from the face amount is treated as additional income
earned over the life of the obligation. Because the Trust's income varies,
so will the Trust's dividends. There is no fixed dividend rate. It is
expected that most of the Trust's dividends will be comprised of interest
income. The dividends and distributions of each class can vary due to
certain class-specific charges. The Trust will declare all of its net
income as dividends on every day, including weekends and holidays, on those
shares outstanding for which payment was received by the close of business
on the preceding business day.
Redeemed shares continue to earn dividends through and including the
earlier of:
1. the day prior to the day when redemption
proceeds are mailed, wired or transferred by the
Automated Clearing House or the Agent or paid by the
Agent to a selected dealer; or
2. the third day the New York Stock Exchange is
open after the day the net asset value of the redeemed
shares was determined.
The Trust's present policy is to pay dividends so they will be
received or credited by approximately the first day of each month.
"How are dividends and distributions paid?"
Dividends and distributions will automatically be reinvested in
full and fractional shares of the Trust of the same class at net asset
value on the record date for the dividend or distribution, unless you elect
otherwise.
You may choose to have all or any part of the payments for
dividends or distributions paid in cash. You can elect to have the cash
portion of your dividends or distributions deposited, without charge, by
electronic funds transfers into your account at a financial institution, if
it is a member of the Automated Clearing House.
You can make any of these elections on the Application, by a Ready
Access Features Form or by a letter to the Agent. Your election to receive
some or all of your dividends and distributions in cash will be effective
as of the next payment of dividends after it has been received in proper
form by the Agent. It will continue in effect until the Agent receives
written notification of a change.
All shareholders, whether their dividends and distributions are
received in cash or reinvested, will receive a monthly statement indicating
the current status of their investment account with the Trust.
If you do not comply with laws requiring you to furnish taxpayer
identification numbers and report dividends, the Trust may be required to
impose backup withholding at a rate of 31% upon payment of redemptions to
shareholders and on capital gains distributions (if any) and any other
distributions that do not qualify as "exempt-interest dividends."
TAX INFORMATION
Net investment income includes income from Oregon Obligations in the
portfolio, which the Trust allocates as "exempt-interest dividends." Such
dividends are exempt from regular Federal income tax. The Trust will
allocate "exempt-interest dividends" by applying one designated percentage
to all income dividends it declares during its tax year. It will normally
make this designation in the first month following its fiscal year end for
dividends paid in the prior year.
It is possible that, under certain circumstances, a small portion of
dividends paid by the Trust will be subject to income taxes. During the
Trust's fiscal year ended September 30,1999 96.24% of the Trust's dividends
were exempt-interest dividends. For the calendar year 1999, 100% of total
dividends paid were exempt-interest dividends.
Net capital gains of the Trust, if any, realized through October 31st
of each year and not previously paid out will be paid out after that date.
The Trust may also pay supplemental distributions after the end of its
fiscal year. If net capital losses are realized in any year, they are
charged against capital and not against net investment income, which is
distributed regardless of gains or losses.
The Trust intends to qualify during each fiscal year under the
Internal Revenue Code to pay "exempt-interest dividends" to its
shareholders. "Exempt-interest dividends" derived from net income earned by
the Trust on Oregon Obligations will be excludable from gross income of the
shareholders for regular Federal income tax purposes. Capital gains
dividends are not included in "exempt-interest dividends." Although
"exempt-interest dividends" are not taxed, each taxpayer must report the
total amount of tax-exempt interest (including "exempt-interest dividends"
from the Trust) received or acquired during the year.
The Trust will treat as ordinary income in the year received certain
gains on Oregon Obligations it acquired after April 30, 1993 and sells for
less than face or redemption value. Those gains will be taxable to you as
ordinary income, if distributed.
Capital gains dividends (net long-term gains over net short-term
losses which the Trust distributes and so designates) are reportable by
shareholders as gains from the sale or exchange of a capital asset held for
more than a year. This is the case whether the shareholder reinvests the
distribution in shares of the Trust or receives it in cash, regardless of
the length of time the investment is held.
Short-term gains, when distributed, are taxed to shareholders as
ordinary income. Capital losses of the Trust are not distributed, but
carried forward by the Trust to offset gains in later years and reduce
future capital gains dividends and amounts taxed to shareholders.
The Trust's gains or losses on sales of Oregon Obligations will be
deemed long- or short-term, depending upon the length of time the Trust
holds these obligations.
You will receive information on the tax status of the Trust's
dividends and distributions annually.
Special Tax Matters
Under the Internal Revenue Code, interest on loans incurred by
shareholders to enable them to purchase or carry shares of the Trust may
not be deducted for regular Federal tax purposes. In addition, under rules
used by the Internal Revenue Service for determining when borrowed funds
are deemed used for the purpose of purchasing or carrying particular
assets, the purchase of shares of the Trust may be considered to have been
made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of shares.
If you or your spouse are receiving Social Security or railroad
retirement benefits, a portion of these benefits may become taxable, if you
receive exempt-interest dividends from the Trust.
If you, or someone related to you, is a "substantial user" of
facilities financed by industrial development or private activity bonds,
you should consult your own tax adviser before purchasing shares of the
Trust.
Interest from all Oregon Obligations is tax-exempt for purposes of
computing the shareholder's regular tax. However, interest from so-called
private activity bonds issued after August 7, 1986, constitutes a tax
preference for both individuals and corporations and thus will enter into a
computation of the alternative minimum tax ("AMT"). Whether or not that
computation will result in a tax will depend on the entire content of your
return. The Trust will not invest more than 20% of its assets in the types
of Oregon Obligations that pay interest subject to AMT. An adjustment
required by the Internal Revenue Code will tend to make it more likely that
corporate shareholders will be subject to AMT. They should consult their
tax advisers.
"What should I know about Oregon taxes?"
Individual shareholders of the Trust, resident in Oregon, will not be
subject to Oregon personal income tax on distributions received from the
Trust to the extent such distributions are attributable to interest on tax-
exempt obligations of the State of Oregon and its political subdivisions
and authorities or on obligations issued by or under the authority of the
governments of Puerto Rico, the Virgin Islands, Guam, and the Northern
Mariana Islands, provided that the Trust complies with the requirement of
the Code that at least 50 % of its assets at the close of each quarter of
its taxable year is invested in state, municipal or other obligations the
interest on which is exempt from Federal income tax under Section 103(a)
thereof.
Other distributions from the Trust, including all long-term and short-
term capital gains, will generally not be exempt from Oregon income tax.
Trust distributions are expected to be fully includable in income in
determining the Oregon excise tax on corporations.
Shares of the Trust will not be subject to the Oregon property tax.
Shareholders of the Trust should consult their tax advisers about
other state and local tax consequences of their investment in the Trust.
<TABLE>
<CAPTION>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The financial highlights table is intended to help you understand the
Trust's financial performance for the designated periods of the Trust's
operations. Certain information reflects financial results for a single Trust
share. The total returns in the table represent the rate that an investor would
have earned or lost on an investment in the Trust (assuming reinvestment of all
dividends and distributions). This information has been audited by KPMG LLP,
whose report, along with the Trust's financial statements, is included in the
annual report, is incorporated by reference into the SAI and is available upon
request.
Class A(1) Class
C(2)
Year ended September 30, Year Ended
September
30
1999 1998 1997 1996 1999
1998 1997
<S> <C> <C> <C> <C> <C> <C>
<C>
Net Asset Value, Beginning
of Period ............. $10.86 $10.68 $10.49 $10.55 $10.85
$10.67 $10.49
Income from Investment
Operations:
Net investment income .. 0.50 0.53 0.53 0.54 0.41
0.43 0.44
Net gain (loss) on
securities (both
realized and
unrealized) .......... (0.56) 0.19 0.21 (0.05) (0.55)
0.21 0.20
Total from Investment
Operations ........... (0.06) 0.72 0.74 0.49 (0.14)
0.63 0.64
Less Distributions:
Dividends from net
investment income .... (0.51) (0.53) (0.54) (0.54) (0.42)
(0.44) (0.45)
Distributions from
capital gains ........ (0.02) (0.01) (0.01) (0.01) (0.02)
(0.01) (0.01)
Total Distributions .... (0.53) (0.54) (0.55) (0.55) (0.44)
(0.45) (0.46)
Net Asset Value, End of
Period ................. $10.27 $10.86 $10.68 10.49 $10.27
$10.85 $10.67
Total Return (not reflecting
sales charge)(%) ....... (0.62) 6.90 7.21 4.76 (1.38)
6.00 6.20
Ratios/Supplemental Data
Net Assets, End of Period
(in millions $) 309 322 312 305 3
1.2 .8
Ratio of Expenses to
Average Net
Assets (%) .......... 0.71 0.71 0.73 0.73 1.56
1.56 1.58
Ratio of Net Investment
Income to Average Net
Assets (%) ........... 4.70 4.83 5.01 5.15 3.84
3.98 4.14
Portfolio Turnover
Rate (%) ............... 16 7 5 10 16
7 5
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 1.53
1.54 1.57
<CAPTION>
Class A(1) Class C(3)
Year Ended September 30, Period Ended 9/30/96
1995
<C> <C>
$10.20 $10.34
0.55 0.22
(0.39) 0.15
(0.94) 0.37
(0.55) (0.22)
(0.04) -
(0.59) (0.22)
$10.55 $10.49
9.52 3.61+
311 .3
0.73 1.56*
5.37 4.17*
13 10+
0.71 1.56
<FN>
(1) Designated as Class A Shares on April 5, 1996.
</FN>
<FN>
(2) New Class of Shares established on April 5, 1996.
</FN>
<FN>
(3) From April 5, 1996 through September 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
<PAGE>
APPLICATION FOR TAX-FREE TRUST OF OREGON
FOR CLASS A OR CLASS C SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
PFPC Inc.,
400 Bellevue Parkway, Wilmington, DE 19809
Tel.# 1-800-872-6735
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniformed Gifts/Transfers to Minors Act.
Please type or print name exactly as account is to be registered
1.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.______________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for __________________________________________________________
Minor's First Name Middle Initial Last Name
Under the _____________UGTMA** _________________________________________
Name of State Minor's Social Security Number
4. _____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or organization. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)____________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
Employer's Address:_____________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you are a
non-U.S. Citizen or resident and not subject to back-up withholding (See
certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
______________________________ ___________________________________
Dealer Name Branch Number
______________________________ ___________________________________
Street Address Rep. Number/Name
______________________________ (_________)________________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
(Indicate Class of Shares)
__ Class A Shares (Front-Payment Class)
__ Class C Shares (Level-Payment Class)
Indicate Method of Payment (For either method, make check payment to
TAX-FREE TRUST OF OREGON)
__ Initial Investment $____________ (Minimum $1,000)
__ Automatic Investment $___________ (Minimum $50)
For Automatic Investments of at least $50 per month, you must complete
Step 3, Section A, Step 4, Sections A & B and attached a PRE-PRINTED
DEPOSIT SLIP OR VOIDED CHECK.
IF NO SHARE CLASS IS MARKED, INVESTMENT WILL AUTOMATICALLY BE MADE IN
CLASS A SHARES.
B. DISTRIBUTIONS
All income dividends and capital gains distributions are automatically
reinvested in additional shares at Net Asset Value unless otherwise
indicated below.
Dividends are to be:___ Reinvested ___Paid in cash*
Capital Gains Distributions are to be: ___ Reinvested ___ Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like you to
deposit the dividend. (A Financial Institution is a commercial bank,
savings bank or credit union.)
___ Mail check to my/our address listed in Step 1B.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Tax-Free Trust of Oregon account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or on
the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply calling
the Trust toll-free at 1-800-872-6735. To establish this program, please
complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. LETTER OF INTENT
APPLICABLE TO CLASS A SHARES ONLY.
See Terms of Letter of Intent and Escrow at the end of this application
___ Yes ___ No
I/We intend to invest in Class A Shares of the Trust during the 13-month
period from the date of my/our first purchase pursuant to this Letter
(which purchase cannot be more than 90 days prior to the date of this
Letter), an aggregate amount (excluding any reinvestment of dividends or
distributions) of at least $25,000 which, together with my/our present
holdings of Trust shares (at public offering price on date of this Letter),
will equal or exceed the minimum amount checked below:
___ $25,000 ___ $50,000 ___ $100,000 ___ $250,000
___ $500,000
D. AUTOMATIC WITHDRAWAL PLAN
APPLICABLE TO CLASS A SHARES ONLY.
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to 1st
actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set forth
below. To realize the amount stated below, PFPC Inc. (the "Agent") is
authorized to redeem sufficient shares from this account at the then
current Net Asset Value, in accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning________________.
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is payable
to a Financial Institution for your account, indicate Financial
Institution name, address and your account number.
_______________________________ ______________________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ______________________________________
Street Financial Institution Street Address
_______________________________ ______________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
E. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your name
within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorney's fees, resulting
from acceptance of, or acting or failure to act upon, this Authorization.
F. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution account
listed.
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Trust
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ ____________________________________
Account Registration Financial Institution Account Number
_______________________________ ____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ ____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITOR'S AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT YOU MUST
ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to
my/our account any drafts or debits drawn on my/our account initiated by
the Agent, PFPC Inc. and to pay such sums in accordance therewith,
provided my/our account has sufficient funds to cover such drafts or
debits. I/We further agree that your treatment of such orders will be
the same as if I/we personally signed or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you receive
my/our written instructions to cancel this service. I/We also agree that if
any such drafts or debits are dishonored, for any reason, you shall have no
liabilities.
Financial Institution Account Number ____________________________________
Name and Address where my/our account is maintained
Name of Financial Institution____________________________________________
Street Address___________________________________________________________
City__________________________________________State ________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account is
registered
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
______________________________________________
(Please Print)
X_____________________________________________ __________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant to
the above authorization shall be subject to the provisions of the Operating
Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit in the
normal course of business initiated by the Agent (except any loss due to
your payment of any amount drawn against insufficient or uncollected
funds), provided that you promptly notify us in writing of any claim
against you with respect to the same, and further provided that you will
not settle or pay or agree to settle or pay any such claim without the
written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any such
electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of legal
age to purchase shares of the Trust and has received and read a current
Prospectus of the Trust and agrees to its terms.
- - I/We authorize the Trust and its agents to act upon these instructions
for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution has
insufficient funds, the Trust and its agents may cancel the purchase
transaction and are authorized to liquidate other shares or fractions
thereof held in my/our Trust account to make up any deficiency resulting
from any decline in the net asset value of shares so purchased and any
dividends paid on those shares. I/We authorize the Trust and its agents
to correct any transfer error by a debit or credit to my/our Financial
Institution account and/or Trust account and to charge the account for any
related charges. I/We acknowledge that shares purchased either through
Automatic Investment or Telephone Investment are subject to applicable
sales charges.
- - The Trust, the Agent and the Distributor and their Trustees, directors,
employees and agents will not be liable for acting upon instructions
believed to be genuine, and will not be responsible for any losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify the identity of the caller. The
Agent will request some or all of the following information: account name
and number; name(s) and social security number registered to the account
and personal identification; the Agent may also record calls. Shareholders
should verify the accuracy of confirmation statements immediately upon
receipt. Under penalties of perjury, the undersigned whose Social Security
(Tax I.D.) Number is shown above certifies (i) that Number is my correct
taxpayer identification number and (ii) currently I am not under IRS
notification that I am subject to backup withholding (line out (ii) if
under notification). If no such Number is shown, the undersigned further
certifies, under penalties of perjury, that either (a) no such Number has
been issued, and a Number has been or will soon be applied for; if a Number
is not provided to you within sixty days, the undersigned understands that
all payments (including liquidations) are subject to 31% withholding under
federal tax law, until a Number is provided and the undersigned may be
subject to a $50 I.R.S. penalty; or (b) that the undersigned is not a
citizen or resident of the U.S.; and either does not expect to be in the
U.S. for 183 days during each calendar year and does not conduct a
business in the U.S. which would receive any gain from the Trust, or is
exempt under an income tax treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST,
ALL TRUSTEES MUST SIGN.*
__________________________ ____________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ ____________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trusts, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
- - You may cancel any feature at any time, effective 3 days after the Agent
receives written notice from you.
- - Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by the
terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access features form which may be obtained from Aquila
Distributors at 1-800-872-6734 and send it to the Agent together with
a "voided" check or pre-printed deposit slip from the new account.
The new Financial Institution change is effective in 15 days after this
form is received in good order by the Trust's Agent.
TERMS OF LETTER OF INTENT AND ESCROW
By checking Box 3c and signing the Application, the investor is
entitled to make each purchase at the public offering price applicable to
a single transaction of the dollar amount checked above, and agrees to be
bound by the terms and conditions applicable to Letters of Intent
appearing below.
The investor is making no commitment to purchase shares, but if the
investor's purchases within thirteen months from the date of the investor's
first purchase do not aggregate $25,000, or, if such purchases added to the
investor's present holdings do not aggregate the minimum amount specified
above, the investor will pay the increased amount of sales charge
prescribed in the terms of escrow below.
The commission to the dealer or broker, if any, named herein shall
be at the rate applicable to the minimum amount of the investor's
specified intended purchases checked above. If the investor's actual
purchases do not reach this minimum amount, the commissions previously
paid to the dealer will be adjusted to the rate applicable to the
investor's total purchases. If the investor's purchases exceed the dollar
amount of the investor's intended purchases and pass the next commission
break-point, the investor shall receive the lower sales charge, provided
that the dealer returns to the Distributor the excess of commissions
previously allowed or paid to him over that which would be applicable to
the amount of the investor's total purchases.
The investor's dealer or broker shall refer to this Letter of Intent
in placing any future purchase orders for the investor while this Letter
is in effect.
The escrow shall operate as follows:
1. Out of the initial purchase (or subsequent purchases if necessary), 3%
of the dollar amount specified in the Letter of Intent (computed to the
nearest full share) shall be held in escrow in shares of the Trust by the
Agent. All dividends and any capital distributions on the escrowed shares
will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within a thirteen-month period, the escrowed shares will be promptly
released to the investor. However, shares disposed of prior to completion
of the purchase requirement under the Letter will be deducted from the
amount required to complete the investment commitment.
3. If the total purchases pursuant to the Letter are less than the amount
specified in the Letter as the intended aggregate purchases, the investor
must remit to the Distributor an amount equal to the difference between
the dollar amount of sales charges actually paid and the amount of sales
charges which would have been paid if the total amount purchased had been
made at a single time. If such difference in sales charges is not paid
within twenty days after receipt of a request from the Distributor or the
dealer, the Distributor will, within sixty days after the expiration of
the Letter, redeem the number
of escrowed shares necessary to realize such
difference in sales charges. Full shares and any cash proceeds for a
fractional share remaining after such redemption will be released to the
investor. The escrow of shares will not be released until any additional
sales charge due has been paid as stated in this section.
4. By checking Box 3c and signing the Application, the investor irrevocably
constitutes and appoints the Agent or the Distributor as his attorney to
surrender for redemption any or all escrowed shares on the books of the
Trust.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees to the
terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Trust purchased for
and held under the Plan, but the Agent will credit all such shares to
the Planholder on the records of the Trust. Any share certificates now
held by the Planholder may be surrendered unendorsed to the Agent with
the application so that the shares represented by the certificate may
be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the Trust
at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of business
on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Trust) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with
the Trust's usual redemption procedures and will mail a check for the
proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Trust. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the
Trust, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue as
a dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his executor or guardian,
or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Trust, the Planholder will be deemed to have appointed any
successor transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously
making regular purchases. While an occasional lump sum investment may
be made, such investment should normally be an amount equivalent to
three times the annual withdrawal or $5,000, whichever is less.
<PAGE>
[Inside Back cover]
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
Ralph R. Shaw
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 Center, 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
Counsel
Hollyer Brady Smith Troxell Barrett Rockett Hines & Mone llp
551 Fifth Avenue * New York, New York 10176
[Back cover-left column]
This Prospectus concisely states information about the Trust that
you should know before investing. A Statement of Additional Information
about the Trust (the "SAI") has been filed with the Securities and Exchange
Commission. The SAI contains information about the Trust and its management
not included in this Prospectus. The SAI is incorporated by reference in
its entirety in this Prospectus. Only when you have read both this
Prospectus and the SAI are all material facts about the Trust available to
you.
You can get additional information about the Trust's investments in
the Trust's annual and semi-annual reports to shareholders. In the Trust's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Trust's performance
during its last fiscal year. You can get the SAI and the Trust's annual and
semi-annual reports without charge, upon request by calling 800-872-6735
(toll free).
In addition, you can review and copy information about the Trust
(including the SAI) at the Public Reference Room of the SEC in Washington,
D.C. You can get information on the operation of the SEC's public reference
room by calling the SEC at 1-800-SEC-0330. You can get other information
about the Trust at the SEC's Internet site at http://www.sec.gov. You can
get copies of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
-------
The file number under which the Trust is registered with the SEC
under the Investment Company Act of 1940 is 811-4626.
TABLE OF CONTENTS
The Trust's Objective, Investment Strategies and Main Risks 2
Risk/Return Bar Chart and Performance Table 3
Fees and Expenses of the Trust 4
Investment of the Trust's Assets 5
Trust Management 9
Net Asset Value Per Share 10
Purchases 10
Redeeming Your Investment 12
Alternate Purchase Plans 16
Dividends and Distributions 24
Tax Information 25
Financial Highlights 28
Application and Letter of Intent
[Back cover-right column]
Tax-Free Trust
of Oregon
One Of The
Aquilasm Group Of Funds
A tax-free
income investment
A Series of The Cascades Trust
PROSPECTUS
---------
To receive a free copy of the Trust's SAI,
annual or semi-annual report, or other information
about the Trust, or to make shareholder inquiries call:
the Trust's Shareholder Servicing Agent at:
800-872-6735 toll-free
or you can write to:
PFPC Inc. * 400 Bellevue Parkway * Wilmington, DE 19809
For general inquiries & yield information,
call 800-872-6734 or 212-697-6666.
This Prospectus should be read
and retained for future reference
Aquilasm
Group of Funds
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300 * New York, New York 10017
800-872-6734 * 212-697-6666
PROSPECTUS
Class Y Shares January 31, 2000
Class I Shares
Tax-Free Trust of Oregon is a mutual fund that seeks to
provide you as high a level of current income exempt from Oregon
state and regular Federal income taxes as is consistent with
preservation of capital. The Trust invests in municipal
obligations that pay interest exempt from Oregon state and
Federal income taxes and are of investment grade quality.
For purchase, redemption or account inquiries contact
the Trust's Shareholder Servicing Agent:
PFPC Inc. * 400 Bellevue Parkway * Wilmington, DE 19809
Call 800-872-6735 toll free
For general inquiries & yield information
Call 800-872-6734 toll free or 212-697-6666
The Securities and Exchange Commission has not approved or disapproved the
Trust's securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
THE TRUST'S OBJECTIVE, INVESTMENT STRATEGIES AND MAIN RISKS
"What is the Trust's objective?"
The Trust's objective is to provide you as high a level of current
income exempt from Oregon state and regular Federal income taxes as is
consistent with preservation of capital.
"What is the Trust's investment strategy?"
The Trust invests in tax-free municipal obligations, which pay
interest exempt from Oregon state and regular Federal income taxes. We call
these "Oregon Obligations." In general, all or almost all of these
obligations are issued by the State of Oregon, its counties and various
other local authorities; at least 65% of the portfolio will always consist
of obligations of these issuers. These obligations can be of any maturity
but the Trust's average portfolio maturity has traditionally been between 12
and 18 years. At the time of purchase, an obligation must be considered
"investment grade."
The Sub-Adviser selects obligations for the Trust's portfolio to
best achieve the Trust's objectives. The Sub-Adviser evaluates specific
obligations for purchase by various characteristics including quality,
maturity and coupon rate.
The interest paid on certain types of Oregon Obligations may be
subject to the Federal alternative minimum tax ("AMT"). At least 80% of the
Trust's net assets must be invested in Oregon Obligations whose interest is
not subject to AMT.
"What are the main risks of investing in the Trust?"
Among the risks of investing in shares of the Trust and its portfolio of
securities are the following:
Loss of money is a risk of investing in the Trust.
The Trust's assets, being primarily or entirely Oregon issues,
are subject to economic and other conditions affecting Oregon. Adverse
local events, such as a downturn in the Oregon economy, could affect the
value of the Trust's portfolio.
There are two types of risk associated with any fixed-income debt
securities such as Oregon Obligations: interest rate risk and credit
risk.
* Interest rate risk relates to fluctuations in market value
arising from changes in interest rates. If interest rates rise,
the value of debt securities, including Oregon Obligations, will
normally decline. All fixed-rate debt securities, even the most
highly rated Oregon Obligations, are subject to interest rate
risk. Oregon Obligations with longer maturities generally have a
more pronounced reaction to interest rate changes than shorter-
term securities.
* Credit risk relates to the ability of the particular issuers
of the Oregon Obligations the Trust owns to make periodic
interest payments as scheduled and ultimately repay principal at
maturity.
An investment in the Trust is not a deposit in U.S. Bank National
Association or its bank or non-bank affiliates or any other bank, and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
The Trust is classified as a "non-diversified" investment company
under the Investment Company Act of 1940 (the "1940 Act"). Thus, compared with
"diversified" funds, it may invest a greater percentage of its assets in
obligations of a particular issuer and may therefore not have as much
diversification among securities, and thus diversification of risk. In
general, the more the Trust invests in the securities of specific issuers, the
more the Trust is exposed to risks associated with investments in those
issuers.
TAX-FREE TRUST OF OREGON
RISK/RETURN BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the
risks of investing in Tax-Free Trust of Oregon by showing
changes in the performance of the Trust's Class Y Shares from
year to year over a four-year period and by showing how the
Trust's average annual returns for one year and since inception
compare to a broad measure of market performance. How the Trust
has performed in the past is not necessarily an indication of how
the Trust will perform in the future.
<TABLE>
<CAPTION>
[Bar Chart]
Annual Total Returns
1996-1999
<S> <C> <C>
8% 7.50%
6.22 XXXX
6% XXXX XXXX
XXXX XXXX 5.56%
4% XXXX XXXX XXXX
XXXX XXXX XXXX
2% XXXX XXXX XXXX
XXXX XXXX XXXX
0% XXXX XXXX XXXX
XXXX XXXX XXXX
- -1 XXXX XXXX XXXX
XXXX XXXX XXXX -1.73
1996 1997 1998 1999
Calendar Years
During the period shown in the bar chart, the highest return for
a quarter was 2.58% (quarter ended June 30, 1997) and the lowest
return for a quarter was -1.41% (quarter ended June 30, 1999).
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since
For the period 1-Year inception*
ended December 31, 1999
<S> <C> <C>
Tax-Free Trust of Oregon
Class Y Shares 5.75% 7.93%
Tax-Free Trust of Oregon
Class I Shares ** N/A N/A
Lehman Brothers
Municipal Bond Index *** 6.47% 7.12%
<FN>
*From commencement of Class Y Shares on April 5, 1996.
</FN>
<FN>
**Commencement of Class I Shares was on January 31, 1998. To date
no Class I Shares have been sold.
</FN>
<FN>
***The Lehman Brothers Municipal Bond Index is nationally
oriented and consists of an unmanaged mix of investment-grade
long-term municipal securities of issuers throughout the United
States. At December 31, 1999, there were approximately 53,000
securities in the Index.
</FN>
</TABLE>
TAX-FREE TRUST OF OREGON
FEES AND EXPENSES OF THE TRUST
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Trust. No Class I Shares are
currently outstanding.
<TABLE>
<CAPTION>
Class I Class Y
Shares Shares
<S> <C> <C>
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases.........................None None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load).........None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends or Distributions
(as a percentage of offering price)........None None
Redemption Fees..............................None None
Exchange Fee.................................None None
Annual Trust Operating Expenses (expenses that are
deducted from the Trust's assets)
Management Fee ..................... 0.40% 0.40%
Distribution
and/or Service (12b-1)Fee....................0.10%(1) None
All Other Expenses (2).......................0.35% 0.16%
Total Annual Trust Operating Expenses (2)...0.85% 0.56%
<FN>
(1) Current rate; up to 0.25% can be authorized.
</FN>
<FN>
(2) Does not reflect a 0.03% offset in Trust expenses received in
the year ended September 30, 1999 for uninvested cash balances.
Reflecting this offset for that year, all other expenses and
total annual Trust operating expenses were 0.32% and 0.82%,
respectively, for Class I Shares; for Class Y Shares, these
expenses were 0.13% and 0.53%, respectively. Other expenses for
the two classes differ because Class I Shares bear program costs
for financial intermediaries of 0.25%, which includes transfer
agent services, and charges common to both classes of 0.10%;
Class Y Shares bear only the common charges of 0.10% and an
allocation for transfer agent services of 0.06%
</FN>
</TABLE>
Example
This Example is intended to help you compare the cost of
investing in the Trust with the cost of investing in other mutual
funds.
The Example assumes that you invest $10,000 in the Trust for
the time periods indicated and then redeem all of your shares at
the end of those periods. The Example also assumes that your
investment has a 5% return each year, that you reinvest all
dividends and distributions, and that the Trust's operating
expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class I Shares.......... $87 $271 $471 $1,049
Class Y Shares...........$57 $179 $313 $701
</TABLE>
INVESTMENT OF THE TRUST'S ASSETS
"Is the Trust right for me?"
The shares of the Trust are designed to be a suitable investment
for individuals, corporations, institutions and fiduciaries who seek income
exempt from Oregon state and regular Federal income taxes.
Institutional Class Shares ("Class Y Shares") are offered only to
institutions acting for investors in a fiduciary, advisory, agency, custodial
or similar capacity. Financial Intermediary Class Shares ("Class I Shares")
are offered and sold only through financial intermediaries with which Aquila
Distributors, Inc. (the "Distributor") has entered into sales agreements. The
Fund does not sell the shares of either class directly to retail
customers.
Oregon Obligations
The Trust invests in Oregon Obligations, which are a type of
municipal obligation. They pay interest which bond counsel or other
appropriate counsel deems to be exempt from regular Federal and State of
Oregon income taxes. They include obligations of Oregon issuers and
certain non-Oregon issuers, of any maturity.
At the time of purchase, the Trust's Oregon Obligations must be of
investment grade quality. This means that they must either
* be rated within the four highest credit ratings assigned by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, or,
* if unrated, be determined to be of comparable quality by the
Trust's Sub-Adviser, U.S. Bank National Association.
The obligations of non-Oregon issuers that the Trust can purchase
are those issued by or under the authority of Guam, the Northern Mariana
Islands, Puerto Rico and the Virgin Islands. Interest paid on these
obligations is currently exempt from regular Federal and Oregon income
taxes. The Trust purchases the obligations of these issuers only when
obligations of Oregon issuers with the appropriate characteristics of
quality, maturity and coupon rate are unavailable.
Municipal Obligations
Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities to obtain funds for public
purposes.
There are two principal classifications of municipal obligations:
"notes" and "bonds." Notes generally have maturities of one year or less,
while bonds are paid back over longer periods.
The various public purposes for which municipal obligations
are issued include:
*obtaining funds for general operating expenses,
*refunding outstanding obligations,
*obtaining funds for loans to other public institutions and
facilities, and
*funding the construction of highways, bridges, schools,
hospitals, housing, mass transportation, streets and water
and sewer works.
Municipal obligations include:
*tax, revenue or bond anticipation notes,
*construction loan notes,
*project notes, which sometimes carry a U.S. government
guarantee,
*municipal lease/purchase agreements, which are similar to
installment purchase contracts for property or equipment,
and
*floating and variable rate demand notes.
"What factors may affect the value of the Trust's investments and their
yields?"
Change in prevailing interest rates is the most common factor
that affects the value of the obligations in the Trust's portfolio. Any
such change may have different effects on short-term and long-term Oregon
Obligations. Long-term obligations (which usually have higher yields) may
fluctuate in value more than short-term ones. Thus, the Trust may shorten
the average maturity of its portfolio when it believes that prevailing
interest rates may rise. While this strategy may promote one part of the
Trust's objective, preservation of capital, it may also result in a lower
level of income.
"What are the main risk factors and special considerations regarding
investment in Oregon Obligations?"
The following is a discussion of the general factors that might
influence the ability of Oregon issuers to repay principal and interest
when due on Oregon Obligations that the Trust owns. The Trust has derived
this information from sources that are generally available to investors and
believes it to be accurate, but it has not been independently verified and
it may not be complete.
Oregon's economy has diversified away from timber and agriculture
to a broader mix of high technology, service, and international trade.
Despite the successful migration from dependence on lumber and agriculture,
the State's employment has lagged that of the Nation. The Nation's
unemployment of 4.5% has not been this strong since the early 1960s.
Oregon's unemployment has been as high as 5.5% in 1999.
This had not been the case for most of the 1990s. Oregon had been
among the 10 leading states for job growth throughout most of the 1990s.
However, over the last two years, a steady loss of manufacturing jobs has
dampened growth in the State. A star industry in the State had been
semiconductor manufacturing, but global oversupply and low prices have
halted growth in this industry. Oregon's manufacturers are greatly
dependent on the Asian economy for an outlet for their goods. The weakness
or strength of the Asian economy has a large influence on Oregon's
economy.
The principal sources of State tax revenues are the personal income
and corporate income taxes. Oregon does not have a sales tax; however, the
issue of a sales tax is brought before the Oregon voters frequently. Oregon
has a very friendly initiative process; any registered Oregon voter may
submit a proposed initiative. In recent years, Oregon has seen active use
of the initiative and referendum process, with initiative measures being
proposed on a variety of constitutional and statutory topics. Three such
initiatives voted on in the 1990s have dramatically changed the landscape
for local government.
In addition to general obligation bonds, the State and its
political subdivisions issue revenue obligations payable from specific
projects or sources, including lease rentals. There can be no assurance
that a material downturn in the State's economy, with resulting impact on
the financial strength of State and local entities, will not adversely
affect the ability of obligors of the obligations held in the Trust's
portfolio to make the required payments on these obligations and,
consequently, the market value of such obligations.
Additionally, certain municipal securities held by the Trust may
rely in whole or in part for repayment on ad valorem property taxes. There
are limits under Oregon State law on the issuance of bonds supported by
such taxes. In recent years several voter initiatives have also amended
the State Constitution to "freeze" or roll back such taxes. Prior to the
enactment of the measures rolling back ad valorem property taxes school
districts received 70% of their funds from the tax and 30% from the State
(income tax). These initiatives created the need for the school districts
to go to the State for more funding. Now, the State funds 70% of school
district funding, with 30% coming from property taxes. Whereas, the State
has been able to fund the minimum needs, the revenue sources for the State
are much more volatile revenue than are property taxes.
There is a relatively inactive market for municipal bonds of
Oregon issuers other than the general obligations of the State itself and
certain other limited segments of the market. Consequently, the market
price of such other bonds may have a higher degree of volatility and it
may be difficult to execute sales of blocks of such bonds. If the Trust
were forced to sell a large volume of these bonds for any reason, such as
redemption's of a large number of its shares, there is a risk that the
large sale itself might adversely affect the value of the Trust's
portfolio.
TRUST MANAGEMENT
"How is the Trust managed?"
Aquila Management Corporation, 380 Madison Avenue, Suite 2300, New
York, NY 10017, the Manager, is the Trust's investment adviser under an
Advisory and Administration Agreement. It has delegated its investment
advisory duties, including portfolio management, to U.S. Bank National
Association, the Sub-Adviser, under a sub-advisory agreement described
below. The Manager is also responsible for administrative services,
including providing for the maintenance of the headquarters of the Trust,
overseeing relationships between the Trust and the service providers to the
Trust, either keeping the accounting records of the Trust or, at its
expense and responsibility, delegating such duties in whole or in part to a
company satisfactory to the Trust, maintaining the Trust's books and
records and providing other administrative services.
The Sub-Adviser provides the Trust with local advisory services.
Under the Sub-Advisory Agreement, the Sub-Adviser provides for
investment supervision, including supervising continuously the investment
program of the Trust and the composition of its portfolio, determining what
securities will be purchased or sold by the Trust and arranging for the
purchase and the sale of securities held in the portfolio of the Trust;
and, at the Sub-Adviser's expense, for pricing of the Trust's portfolio
daily.
During the fiscal year ended September 30, 1999, the Trust accrued
management fees to the Manager at the annual rate of 0.40 of 1% of its
average annual net assets.
Information about the Manager and the Sub-Adviser
The Trust's Manager is founder and Manager and/or administrator to
the Aquilasm Group of Funds, which consists of tax-free municipal bond
funds, money market funds and equity funds. As of December 31, 1999, these
funds had aggregate assets of approximately $3.0 billion, of which
approximately $1.8 billion consisted of assets of the tax-free municipal
bond funds. Mr. Lacy B. Herrmann controls the Manager, which was founded in
1984, directly, through a trust and through share ownership by his
wife.
The Sub-Adviser is a subsidiary of U.S. Bancorp ("USB"), 601 Second
Avenue South, Minneapolis, Minnesota 55480, which is a regional multi-state
bank holding company, headquartered in Minneapolis, Minnesota, that
primarily serves the Midwestern, Rocky Mountain and Northwestern states.
USB operates five banks and eleven trust companies with offices in 17
contiguous states from Illinois to Washington. USB also has various other
subsidiaries engaged in financial services. At September 30, 1999, on a pro
forma combined basis, USB and its consolidated subsidiaries had
consolidated assets of approximately $77 billion, consolidated deposits of
$48 billion and shareholders' equity of $6.7 billion.
Mr. Michael Hamilton is the Trust's portfolio manager. Mr. Hamilton
has been employed by the parent company of the Sub-Adviser and its
predecessors since 1989. He has been associated with the Trust since 1994,
assisting in administration and credit analysis and became portfolio
manager in 1999. Mr. Hamilton has managed municipal bond common trust
funds, individual municipal bond portfolios, taxable portfolios and money
market funds. He holds a B.A. from College of Idaho and an M.B.A from
Western Washington University.
NET ASSET VALUE PER SHARE
The net asset value of the shares of each of the Trust's classes of
shares is determined as of 4:00 p.m., New York time, on each day that the
New York Stock Exchange is open (a "business day"), by dividing the value
of the Trust's net assets (which means the value of the assets less
liabilities) allocable to each class by the total number of shares of such
class outstanding at that time. In general, net asset value of the Trust's
shares is based on portfolio market value, except that Oregon Obligations
maturing in 60 days or less are generally valued at amortized cost. The
price at which a purchase or redemption of shares is effected is based on
the next calculated net asset value after your purchase or redemption order
is received in proper form. The New York Stock Exchange annually announces
the days on which it will not be open. The most recent announcement
indicates that it will not be open on the following days: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However,
the Exchange may close on days not included in that announcement.
PURCHASES
"Are there alternate purchase plans?"
This Prospectus offers two separate classes of shares. All classes
represent interests in the same portfolio of Oregon Obligations.
"Can I purchase shares of the Trust?"
You can purchase shares of the Trust if you live in Oregon or in
one of the other states listed below. You should not purchase shares of the
Trust if you do not reside in one of the following states. Otherwise the
Trust can redeem the shares you purchased. This may cause you to suffer a
loss and may have tax consequences.
Also, if you do not reside in Oregon, dividends from the Trust may be
subject to state income taxes of the state in which you do reside.
Therefore, you should consult your tax adviser before buying shares of the
Trust.
On the date of this Prospectus, Class Y Shares are available only in:
* Oregon * California * Colorado
* Connecticut * District of Columbia * Florida
* Hawaii* Idaho * Illinois * Missouri * Nevada * New York * Pennsylvania
Class I Shares are available only in:
* Oregon * District of Columbia * Missouri
* New York
"How much money do I need to invest?"
For Class Y Shares:
$1,000. Subsequent investments can be in any amount.
Class I Shares:
Financial intermediaries can set their own requirements for initial
and subsequent investments.
Your investment must be drawn in United States dollars on a United
States commercial bank, savings bank or credit union or a United States
branch of a foreign commercial bank (each of which is a "Financial
Institution").
"How do I purchase shares?"
You may purchase Class Y Shares:
* through an investment broker or dealer, or a bank or financial
intermediary, which has a sales agreement with the Distributor, Aquila
Distributors, Inc., in which case that institution will take action on
your behalf, and you will not personally perform the steps indicated
below; or
* directly through the Distributor, by mailing payment to the
Trust's Agent, PFPC Inc.
* The price you will pay is net asset value for both Class Y Shares
and Class I Shares. (See "What price will I pay for the Trust's
shares?")
You may purchase Class I Shares only through a financial intermediary.
Opening a Class Y Shares Account Adding to a Class Y
Shares Account
* Make out a check for * Make out a check for
the investment amount the investment amount
payable to payable to
Tax-Free Trust of Tax-Free Trust
Oregon. of Oregon.
* Complete the application * Fill out the pre-printed
included with the Prospectus, stub attached
indicating the features to the Trust's
you wish to authorize. confirmations
or supply the name(s)
of account owner(s),
the account number, and
the name of the Trust.
* Send your check and * Send your check and
completed application completed account
to your dealer or information to your
to the Trust's dealer or to the Trust's
Agent, PFPC Inc. Agent, PFPC Inc.
"Can I transfer funds electronically?"
You can have funds transferred electronically, in amounts of $50 or
more, from your Financial Institution if it is a member of the Automated
Clearing House. You may make investments through two electronic transfer
features, "Automatic Investment" and "Telephone Investment."
* Automatic Investment: You can authorize a pre-determined
amount to be regularly transferred from your account.
* Telephone Investment: You can make single investments of up
to $50,000 by telephone instructions to the Agent.
Before you can transfer funds electronically, the Trust's Agent must
have your completed application authorizing these features. Or, if you
initially decide not to choose these conveniences and then later wish to do
so, you must complete a Ready Access Features Form which is available from
the Distributor or Agent, or if your account is set up so that your broker
or dealer makes these sorts of changes, request your broker or dealer to
make them. The Trust may modify or terminate these investment methods or
charge a service fee, upon 30 days' written notice to shareholders.
REDEEMING YOUR INVESTMENT
Redeeming Class Y Shares
You may redeem some or all of your shares by a request to the
Agent. Shares will be redeemed at the next net asset value determined after
your request has been received in proper form.
There is no minimum period for investment in the Trust, except for
shares recently purchased by check or by Automatic or Telephone Investment
as discussed below.
A redemption may result in a tax liability for you.
"How can I redeem my investment?"
By mail, send instructions to:
PFPC Inc.
Attn: Aquilasm Group of Funds
400 Bellevue Parkway
Wilmington, Delaware 19809
By telephone, call:
800-872-6735
By FAX, send
instructions to:
302-791-3055
For liquidity and convenience, the Trust offers expedited redemption
for Class Y Shares.
Expedited Redemption Methods
You may request expedited redemption in two ways:
1. By Telephone. The Agent will take instructions from anyone by
telephone to redeem shares and make payments:
a) to a Financial Institution account you have previously specified;
or
b) by check in the amount of $50,000 or less, mailed to the same name
and address (which has been unchanged for the past 30 days) as the
account from which you are redeeming. You may only redeem by check via
telephone request once in any 7-day period.
Telephoning the Agent
Whenever you telephone the Agent, please be prepared to supply:
* account name(s) and number
* name of the caller
* the social security number registered to the account
* personal identification
Note: Check the accuracy of your confirmation statements immediately.
The Trust, the Agent, and the Distributor are not responsible for losses
resulting from unauthorized telephone transactions if the Agent follows
reasonable procedures designed to verify a caller's identity. The Agent may
record calls.
2. By FAX or Mail. You may request redemption payments to a
predesignated Financial Institution account by a letter of instruction
sent to the Agent: PFPC Inc., by FAX at 302-791-3055 or by mail to 400
Bellevue Parkway, Wilmington, DE 19809. The letter, signed by the
registered shareholder(s) (no signature guarantee is required), must
indicate:
* account name(s)
* account number
* amount to be redeemed
* any payment directions
To have redemption proceeds sent directly to a Financial Institution
account, you must complete the Expedited Redemption section of the
Application or a Ready Access Features Form. You will be required to
provide (1) details about your Financial Institution account, (2) signature
guarantees and (3) possible additional documentation.
The name(s) of the shareholder(s) on the Financial Institution account
must be identical to those on the Trust's records of your account.
You may change your designated Financial Institution account at any
time by completing and returning a revised Ready Access Features Form.
Regular Redemption Method
To redeem by the regular redemption method, send a letter of
instructions to the Trust's Agent, which includes:
* Account name(s)
* Account number
* Dollar amount or number of shares to be redeemed or a
statement that all shares held in the account are to be redeemed
* Payment instructions (we normally mail redemption proceeds
to your address as registered with the Trust)
* Signature(s) of the registered shareholder(s) and
* Signature guarantee(s), if required, as indicated below. To
be in "proper form," your letter must be signed by the registered
shareholder(s) exactly as the account is registered. For a joint
account, both shareholder signatures are necessary.
We may require additional documentation for certain types of
shareholders such as corporations, partnerships, trustees or executors, or
if redemption is requested by someone other than the shareholder of record.
The Agent may require signature guarantees if insufficient documentation is
on file.
We do not require a signature guarantee for redemptions up to $50,000,
payable to the record holder, and sent to the address of record, except as
noted above. In all other cases, signatures must be guaranteed.
Your signature may be guaranteed by any:
* member of a national securities exchange
* U.S. bank or trust company
* state-chartered savings bank
* federally chartered savings and loan association
* foreign bank having a U.S. correspondent bank; or
* participant in the Securities Transfer Association Medallion
Program ("STAMP"), the Stock Exchanges Medallion Program ("SEMP")
or the New York Stock Exchange, Inc. Medallion Signature Program
("MSP")
A notary public is not an acceptable signature guarantor.
Redemption of Class I Shares
You may redeem all or any part of your Class I Shares at the net
asset value next determined after receipt in proper form of your redemption
request by your financial intermediary. Redemption requests for Class I
Shares must be made through a financial intermediary and cannot be made
directly. Financial intermediaries may charge a fee for effecting
redemptions. There is no minimum period for any investment in the Trust.
The Trust does not impose redemption fees or penalties on redemption of
Class I Shares. A redemption may result in a transaction taxable to
you.
"When will I receive the proceeds of my redemption?"
Redemption proceeds for Class Y Shares are normally sent on the
next business day following receipt in proper form of your redemption
request. Except as described below, payments will normally be sent to your
address of record within 7 days.
Redemption Method of Payment Charges
Under $1,000 Check None
$1,000 or more Check or, if and None
as you requested
on your Application
or Ready Access Features
Form, wired or
transferred through
the Automated Clearing
House to your Financial
Institution Account
Through a broker/
dealer Check or wire None.However,
to your broker /dealer Your
broker/dealer
may charge a
fee.
Although the Trust does not currently intend to, it can charge up to
$5.00 per wire redemption, after written notice to shareholders who have
elected this redemption procedure. Upon 30 days' written notice to
shareholders the Trust may modify or terminate the use of the Automated
Clearing House to make redemption payments at any time or charge a service
fee, although no such fee is presently contemplated. If any such changes
are made, the Prospectus will be supplemented to reflect them.
Redemption payments for Class I Shares are made to financial
intermediaries.
The Trust may delay payment for redemption of shares recently
purchased by check (including certified, cashier's or official bank check)
or by Automatic Investment or Telephone Investment up to 15 days after
purchase; however, payment for redemption will not be delayed after (i) the
check or transfer of funds has been honored, or (ii) the Agent receives
satisfactory assurance that your Financial Institution will honor the check
or transfer of funds. You can eliminate possible delays by paying for
purchased shares with wired funds or Federal Reserve drafts.
The Trust has the right to postpone payment or suspend redemption
rights during certain periods. These periods may occur (i) when the New
York Stock Exchange is closed for other than weekends and holidays, (ii)
when the Securities and Exchange Commission (the "SEC") restricts trading
on the New York Stock Exchange, (iii) when the SEC determines an emergency
exists which causes disposal of, or determination of the value of, the
portfolio securities to be unreasonable or impracticable, and (iv) during
such other periods as the SEC may permit.
The Trust can redeem your shares if their value totals less than $500
as a result of redemptions or failure to meet and maintain the minimum
investment level under an Automatic Investment program. Before such a
redemption is made, we will send you a notice giving you 60 days to make
additional investments to bring your account up to the minimum.
Redemption proceeds may be paid in whole or in part by distribution
of the Trust's portfolio securities ("redemption in kind") in conformity
with SEC rules. This method will only be used if the Board of Trustees
determines that payments partially or wholly in cash would be detrimental
to the best interests of the remaining shareholders.
"Is there an Automatic Withdrawal Plan?"
Yes, but it is only available for Class Y Shares. Under an
Automatic Withdrawal Plan you can arrange to receive a monthly or quarterly
check in a stated amount, not less than $50.
ALTERNATE PURCHASE PLANS
In this Prospectus the Trust provides you with two alternative ways to
invest in the Trust through two separate classes of shares. All classes
represent interests in the same portfolio of Oregon Obligations.
Class Y Shares Class I Shares
"Institutional
Class" "Financial
Intermediary Class"
Initial Sales None None. Financial
Charge intermediaries may
charge a fee for
purchase of shares
Contingent None None
Deferred Sales
Charge ("CDSC")
Distributions and None Distribution fee of
Service Fees up to 0.25 of 1% of
average annual net
assets allocable to
Class I Shares,
currently 0.10 of 1%
of such net assets,
and a service fee
of 0.25 of 1% of
such assets
"What price will I pay for the Trust's shares?"
The offering price for Class Y Shares is the net asset value per
share. You will receive that day's offering price on purchase orders,
including Telephone Investments and investments by mail, received in proper
form prior to 4:00 p.m. New York time. Dealers have the added flexibility
of transmitting orders received prior to 4:00 p.m. New York time to the
Distributor or Agent before the Distributor's close of business that day
(normally 5:00 p.m. New York time) and still receiving that day's offering
price. Otherwise, orders will be filled at the next determined offering
price. Dealers are required to submit orders promptly. Purchase orders
received on a non-business day, including those for Automatic Investment,
will be executed on the next succeeding business day. The sale of shares
will be suspended (1) during any period when net asset value determination
is suspended, or (2) when the Distributor judges it is in the Trust's best
interest to do so.
The offering price for Class I Shares is the net asset value per
share. The offering price determined on any day applies to all purchases
received by each financial intermediary prior to 4:00 p.m. New York time on
any business day. Purchase orders received by financial intermediaries
after that time will be filled at the next determined offering price.
"What about confirmations and share certificates?"
A statement will be mailed to you confirming each purchase of Class Y
Shares in the Trust. Additionally, your account at the Agent will be
credited in full and fractional shares (rounded to the nearest 1/1000th of
a share). Financial intermediaries will confirm purchases of Class I
Shares. The Trust will not issue certificates for Class Y Shares or Class I
Shares.
"Is there a Distribution Plan or a Services Plan?"
The Trust has adopted a Distribution Plan (the "Plan") under the
Investment Company Act of 1940's Rule 12b-1 in order to:
(i) permit the Trust to finance activities primarily intended to result in
the sale of its shares;
(ii) permit the Manager, out of its own funds, to make payment for
distribution expenses; and
(iii) protect the Trust against any claim that some of the
expenses which it pays or may pay might be considered to be
sales-related and therefore come within the purview of the Rule.
No payments are made with respect to assets represented by Class Y
Shares.
Under the Plan, the Trust makes payments with respect to Class I
Shares under agreements to certain broker/dealers, or others who have (i)
rendered assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's shares or (ii) assisted in the
servicing of shareholder accounts.
For any fiscal year, payments with respect to Class I Shares are made
at a rate set from time to time by the Board of Trustees (currently 0.10 of
1%) but not more than 0.25 of 1% of the average annual net assets
represented by the Class I Shares of the Fund. Such payments can be made
only out of the Fund's assets allocable to the Class I Shares. Because
these distribution fees are paid out of assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
For any class, these payments are made only from the assets allocable
to that class. Whenever the Trust makes Class A permitted payments, the
aggregate annual rate of the advisory fee and sub-advisory fee otherwise
payable by the Trust will be reduced from 0.50 of 1% to 0.40 of 1% of the
Trust's average annual net assets.
Shareholder Services Plan for Class I Shares
The Trust's Shareholder Services Plan authorizes it to pay a
service fee under agreements to certain qualified recipients who have
agreed to provide personal services to Class I shareholders and/or maintain
their accounts. For any fiscal year, such fees may not exceed 0.25 of 1% of
the average annual net assets represented by Class I Shares. Payment is
made only out of the Trust's assets represented by Class I Shares. No
payments are made with respect to assets represented by Class Y Shares.
"Transfer on Death" Registration (Not available for Class I Shares)
If you own Class Y Shares, the Trust generally permits "transfer on
death" ("TOD") registration of shares, so that on the death of the
shareholder the shares are transferred to a designated beneficiary or
beneficiaries. Ask the Agent or your broker-dealer for the Transfer on
Death Registration Request Form. With it you will receive a copy of the TOD
Rules of the Aquilasm Group of Funds, which specify how the registration
becomes effective and operates. By opening a TOD Account, you agree to be
bound by the TOD Rules. This service is not available for Class I
Shares.
DIVIDENDS AND DISTRIBUTIONS
"How are dividends and distributions determined?"
The Trust pays dividends and other distributions with respect to
each class of shares. The Trust calculates its dividends and other
distributions with respect to each class at the same time and in the same
manner. Net income for dividend purposes includes all interest income
accrued by the Trust since the previous dividend declaration less expenses
paid or accrued. Net income also includes any original issue discount,
which occurs if the Trust purchases an obligation for less than its face
amount. The discount from the face amount is treated as additional income
earned over the life of the obligation. Because the Trust's income varies,
so will the Trust's dividends. There is no fixed dividend rate. It is
expected that most of the Trust's dividends will be comprised of interest
income. The dividends and distributions of each class can vary due to
certain class-specific charges. The Trust will declare all of its net
income as dividends on every day, including weekends and holidays, on those
shares outstanding for which payment was received by the close of business
on the preceding business day.
Redeemed shares continue to earn dividends through and including the
earlier of:
1. the day prior to the day when redemption
proceeds are mailed, wired or transferred by the
Automated Clearing House or the Agent or paid by the
Agent to a selected dealer; or
2. the third day the New York Stock Exchange is
open after the day the net asset value of the redeemed
shares was determined.
The Trust's present policy is to pay dividends so they will be
received or credited by approximately the first day of each month.
"How are dividends and distributions paid?"
Dividends and distributions will automatically be reinvested in
full and fractional shares of the Trust of the same class at net asset
value on the record date for the dividend or distribution.
If you own or purchase Class Y Shares, you may choose to have all
or any part of the payments for dividends or distributions paid in cash.
You can elect to have the cash portion of dividends or distributions
deposited, without charge, by electronic funds transfers into your account
at a financial institution, if it is a member of the Automated Clearing
House.
You can make any of these elections on the Application, by a Ready
Access Features Form or by a letter to the Agent. Your election to receive
some or all of your dividends and distributions in cash will be effective
as of the next payment of dividends after it has been received in proper
form by the Agent. It will continue in effect until the Agent receives
written notification of a change.
All arrangements for the payment of dividends and distributions
with respect to Class I Shares, including reinvestment of dividends, must
be made through financial intermediaries.
All Class Y shareholders, whether their dividends or distributions
are received in cash or reinvested, will receive a monthly statement
indicating the current status of their investment account with the Trust.
Financial intermediaries provide their own statements of Class I Shares
accounts.
If you do not comply with laws requiring you to furnish taxpayer
identification numbers and report dividends, the Trust may be required to
impose backup withholding at a rate of 31% upon payment of redemptions to
shareholders and on capital gains distributions (if any) and any other
distributions that do not qualify as "exempt-interest dividends."
TAX INFORMATION
Net investment income includes income from Oregon Obligations in the
portfolio, which the Trust allocates as "exempt-interest dividends." Such
dividends are exempt from regular Federal income tax. The Trust will
allocate "exempt-interest dividends" by applying one designated percentage
to all income dividends it declares during its tax year. It will normally
make this designation in the first month following its fiscal year end for
dividends paid in the prior year.
It is possible that, under certain circumstances, a small portion
of dividends paid by the Trust will be subject to income taxes. During the
Trust's fiscal year ended September 30,1999 96.24% of the Trust's dividends
were exempt-interest dividends. For the calendar year 1999, 100% of total
dividends paid were exempt interest dividends.
Net capital gains of the Trust, if any, realized through October 31st
of each year and not previously paid out will be paid out after that date.
The Trust may also pay supplemental distributions after the end of its
fiscal year. If net capital losses are realized in any year, they are
charged against capital and not against net investment income, which is
distributed regardless of gains or losses.
The Trust intends to qualify during each fiscal year under the
Internal Revenue Code to pay "exempt-interest dividends" to its
shareholders. "Exempt-interest dividends" derived from net income earned by
the Trust on Oregon Obligations will be excludable from gross income of the
shareholders for regular Federal income tax purposes. Capital gains
dividends are not included in "exempt-interest dividends." Although
"exempt-interest dividends" are not taxed, each taxpayer must report the
total amount of tax-exempt interest (including "exempt-interest dividends"
from the Trust) received or acquired during the year.
The Trust will treat as ordinary income in the year received certain
gains on Oregon Obligations it acquired after April 30, 1993 and sells for
less than face or redemption value. Those gains will be taxable to you as
ordinary income, if distributed.
Capital gains dividends (net long-term gains over net short-term
losses which the Trust distributes and so designates) are reportable by
shareholders as gains from the sale or exchange of a capital asset held for
more than a year. This is the case whether the shareholder reinvests the
distribution in shares of the Trust or receives it in cash, regardless of
the length of time the investment is held.
Short-term gains, when distributed, are taxed to shareholders as
ordinary income. Capital losses of the Trust are not distributed, but
carried forward by the Trust to offset gains in later years and reduce
future capital gains dividends and amounts taxed to shareholders.
The Trust's gains or losses on sales of Oregon Obligations will be
deemed long- or short-term, depending upon the length of time the Trust
holds these obligations.
You will receive information on the tax status of the Trust's
dividends and distributions annually.
Special Tax Matters
Under the Internal Revenue Code, interest on loans incurred by
shareholders to enable them to purchase or carry shares of the Trust may
not be deducted for regular Federal tax purposes. In addition, under rules
used by the Internal Revenue Service for determining when borrowed funds
are deemed used for the purpose of purchasing or carrying particular
assets, the purchase of shares of the Trust may be considered to have been
made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of shares.
If you or your spouse are receiving Social Security or railroad
retirement benefits, a portion of these benefits may become taxable, if you
receive exempt-interest dividends from the Trust.
If you, or someone related to you, is a "substantial user" of
facilities financed by industrial development or private activity bonds,
you should consult your own tax adviser before purchasing shares of the
Trust.
Interest from all Oregon Obligations is tax-exempt for purposes of
computing the shareholder's regular tax. However, interest from so-called
private activity bonds issued after August 7, 1986, constitutes a tax
preference for both individuals and corporations and thus will enter into a
computation of the alternative minimum tax ("AMT"). Whether or not that
computation will result in a tax will depend on the entire content of your
return. The Trust will not invest more than 20% of its assets in the types
of Oregon Obligations that pay interest subject to AMT. An adjustment
required by the Internal Revenue Code will tend to make it more likely that
corporate shareholders will be subject to AMT. They should consult their
tax advisers.
"What should I know about Oregon taxes?"
Individual shareholders of the Trust, resident in Oregon, will not be
subject to Oregon personal income tax on distributions received from the
Trust to the extent such distributions are attributable to interest on tax-
exempt obligations of the State of Oregon and its political subdivisions
and authorities or on obligations issued by or under the authority of the
governments of Puerto Rico, the Virgin Islands, Guam, and the Northern
Mariana Islands, provided that the Trust complies with the requirement of
the Code that at least 50 % of its assets at the close of each quarter of
its taxable year is invested in state, municipal, or other obligations the
interest on which is exempt from Federal income tax under Section 103(a)
thereof.
Other distributions from the Trust, including all long-term and short-
term capital gains, will generally not be exempt from Oregon income tax.
Trust distributions are expected to be fully includable in income in
determining the Oregon excise tax on corporations.
Shares of the Trust will not be subject to the Oregon property tax.
Shareholders of the Trust should consult their tax advisers about
other state and local tax consequences of their investment in the trust.
<PAGE>
<TABLE>
<CAPTION>
The table shown below for Class A Shares is for information purposes only.
Class A Shares are not offered by this Prospectus. No historical
information exists for Class I Shares, none of which were outstanding
during the period indicated.
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The financial highlights table is intended to help you understand the
Trust's financial performance for the designated periods of the Trust's
operations. Certain information reflects financial results for a single Trust
share. The total returns in the table represent the rate that an investor would
have earned or lost on an investment in the Trust (assuming reinvestment of all
dividends and distributions). This information has been audited by KPMG LLP,
whose report, along with the Trust's financial statements, is included in the
annual report, is incorporated by reference into the SAI and is available upon
request.
Class A(1)
Class Y(2)
Year ended September 30, Year ended
September
1999 1998 1997 1996 1999
1998 1997
<S> <C> <C> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning
of Period .............. $10.86 $10.68 $10.49 $10.55 $10.85
$10.68 $10.49
Income from Investment
Operations:
Net investment income .. 0.50 0.53 0.53 0.54 0.52
0.54 0.54
Net gain (loss) on
securities (both
realized and
unrealized) .......... (0.56) 0.19 0.21 (0.05) (0.56)
0.19 0.21
Total from Investment
Operations ........... (0.06) 0.72 0.74 0.49 (0.04)
0.73 0.75
Less Distributions:
Dividends from net
investment income .... (0.51) (0.53) (0.54) (0.54) (0.52)
(0.55) (0.55)
Distributions from
capital gains ........ (0.02) (0.01) (0.01) (0.01) (0.02)
(0.01) (0.01)
Total Distributions .... (0.53) (0.54) (0.55) (0.55) (0.54)
(0.56) (0.56)
Net Asset Value, End of
Period ................. $10.27 $10.86 $10.68 $10.49 $10.27
$10.85 $10.68
Total Return (not reflecting
sales charge)(%) ....... (0.62) 6.90 7.21 4.76 (0.39)
6.96 7.37
Ratios/Supplemental Data
Net Assets, End of Period
(in millions $) 309 322 312 305 17
10.7 4
Ratio of Expenses to
Average Net
Assets (%) 0.71 0.71 0.73 0.73 0.56
0.55 0.58
Ratio of Net Investment
Income to Average Net
Assets (%) 4.70 4.83 5.01 5.15 4.86
4.95 5.21
Portfolio Turnover
Rate (%) 16 7 5 10 16
7 5
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 0.53
0.53 0.57
<CAPTION>
Class A(1) Class Y(2)
Year Ended September 30, Period Ended 9/30/96(3)
1995
<C> <C>
$10.20 $10.34
0.55 0.27
(0.39) 0.15
(0.94) 0.42
(0.55) (0.27)
(0.04) -
(0.59) (0.27)
$10.55 $10.49
9.52 4.14+
311 .2
0.73 0.58*
5.37 5.35*
13 10+
0.71 0.57*
<FN>
(1) Designated as Class A Shares on April 5, 1996.
</FN>
<FN>
(2) New Class of Shares established on April 5, 1996.
</FN>
<FN>
(3) From April 5, 1996 through September 30, 1996.
</FN>
<FN>
+ Not annualized.
</FN>
<FN>
* Annualized.
</FN>
</TABLE>
<PAGE>
<PAGE>
APPLICATION FOR TAX-FREE TRUST OF OREGON
FOR CLASS I & Y SHARES ONLY
PLEASE COMPLETE STEPS 1 THROUGH 4 AND MAIL TO:
PFPC Inc.,
400 Bellevue Parkway, Wilmington, DE 19809
Tel.# 1-800-872-6735
STEP 1
A. ACCOUNT REGISTRATION
___Individual Use line 1
___Joint Account* Use lines 1&2
___For a Minor Use line 3
___For Trust, Corporation, Partnership or other Entity Use line 4
* Joint Accounts will be Joint Tenants with rights of survivorship
unless otherwise specified.
** Uniform Gifts/Transfers to Minors Act.
Please type or print name(s) exactly as account is to be registered
1.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
2.______________________________________________________________________
First Name Middle Initial Last Name Social Security Number
3.______________________________________________________________________
Custodian's First Name Middle Initial Last Name
Custodian for __________________________________________________________
Minor's First Name Middle Initial Last Name
Under the ___________UGTMA** ___________________________________________
Name of State Minor's Social Security Number
4. _____________________________________________________________________
_____________________________________________________________________
(Name of Corporation or organization. If a Trust, include the name(s) of
Trustees in which account will be registered and the name and date of the
Trust Instrument. Account for a Pension or Profit Sharing Plan or Trust
may be registered in the name of the Plan or Trust itself.)
________________________________________________________________________
Tax I.D. Number Authorized Individual Title
B. MAILING ADDRESS AND TELEPHONE NUMBER
________________________________________________________________________
Street or PO Box City
_________________________________ (______)_______________________
State Zip Daytime Phone Number
Occupation:________________________Employer:____________________________
Employer's Address:_____________________________________________________
Street Address: City State Zip
Citizen or resident of: ___ U.S. ___ Other Check here ___ if you are a
non-U.S. Citizen or resident and not subject to back-up withholding (See
certification in Step 4, Section B, below.)
C. INVESTMENT DEALER OR BROKER:
(Important - to be completed by Dealer or Broker)
______________________________ ____________________________________
Dealer Name Branch Number
______________________________ ____________________________________
Street Address Rep. Number/Name
______________________________ (_________)_________________________
City State Zip Area Code Telephone
STEP 2 PURCHASES OF SHARES
A. INITIAL INVESTMENT
Make check payment to TAX-FREE TRUST OF OREGON
__ Initial Investment $______________ (Minimum $1,000)
(Indicate Class of Shares)
__ Class I Shares
__ Class Y Shares
B. DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless otherwise
indicated below.
You can have any portion of either type reinvested, with the balance paid
in cash, by indicating a percent below:
Dividends are to be: ___%Reinvested ___%Paid in cash*
Capital gains distributions are to be: ___%Reinvested ___%Paid in cash*
* For cash dividends, please choose one of the following options:
___ Deposit directly into my/our Financial Institution account.
ATTACHED IS A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK
showing the Financial Institution account where I/we would like you to
deposit the dividend. (A Financial Institution is a commercial bank,
savings bank or credit union.)
___ Mail check to my/our address listed in Step 1B.
STEP 3
SPECIAL FEATURES
A. AUTOMATIC INVESTMENT PROGRAM
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to have amounts
automatically drawn on your Financial Institution account and invested in
your Tax-Free Trust of Oregon account. To establish this program, please
complete Step 4, Sections A & B of this Application.
I/We wish to make regular monthly investments of $ _________________
(minimum $50) on the ___ 1st day or ___ 16th day of the month (or
on the first business day after that date).
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
B. TELEPHONE INVESTMENT
(Check appropriate box)
___ Yes ___ No
This option provides you with a convenient way to add to your account
(minimum $50 and maximum $50,000) at any time you wish by simply calling
the Trust toll-free at 1-800-872-6735. To establish this program, please
complete Step 4, Sections A & B of this Application.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK)
C. AUTOMATIC WITHDRAWAL PLAN
(Minimum investment $5,000)
Application must be received in good order at least 2 weeks prior to
1st actual liquidation date.
(Check appropriate box)
___ Yes ___ No
Please establish an Automatic Withdrawal Plan for this account,
subject to the terms of the Automatic Withdrawal Plan Provisions set
forth below. To realize the amount stated below, PFPC Inc. (the "Agent")
is authorized to redeem sufficient shares from this account at the then
current Net Asset Value, in accordance with the terms below:
Dollar Amount of each withdrawal $ ______________beginning______________
Minimum: $50 Month/Year
Payments to be made: ___ Monthly or ___ Quarterly
Checks should be made payable as indicated below. If check is payable
to a Financial Institution for your account, indicate Financial
Institution name, address and your account number.
________________________________________ ___________________________
First Name Middle Initial Last Name Financial Institution Name
_______________________________ ____________________________________
Street Financial Institution Street Address
_______________________________ ____________________________________
City State Zip City State Zip
____________________________________
Financial Institution Account Number
D. TELEPHONE EXCHANGE
(Check appropriate box)
___ Yes ___ No
This option allows you to effect exchanges among accounts in your name
within the Aquilasm Group of Funds by telephone.
The Agent is authorized to accept and act upon my/our or any other
person's telephone instructions to execute the exchange of shares of one
Aquila-sponsored fund for shares of another Aquila-sponsored fund with
identical shareholder registration in the manner described in the
Prospectus. Except for gross negligence in acting upon such telephone
instructions to execute an exchange, and subject to the conditions set
forth herein, I/we understand and agree to hold harmless the Agent, each
of the Aquila Funds, and their respective officers, directors, trustees,
employees, agents and affiliates against any liability, damage, expense,
claim or loss, including reasonable costs and attorney's fees, resulting
from acceptance of, or acting or failure to act upon, this Authorization.
E. EXPEDITED REDEMPTION
(Check appropriate box)
___ Yes ___ No
The proceeds will be deposited to your Financial Institution account
listed.
Cash proceeds in any amount from the redemption of shares will be
mailed or wired, whenever possible, upon request, if in an amount of
$1,000 or more to my/our account at a Financial Institution. The
Financial Institution account must be in the same name(s) as this Trust
account is registered.
(YOU MUST ATTACH A PRE-PRINTED DEPOSIT SLIP OR VOIDED CHECK).
_______________________________ _____________________________________
Account Registration Financial Institution Account Number
_______________________________ _____________________________________
Financial Institution Name Financial Institution Transit/Routing
Number
_______________________________ _____________________________________
Street City State Zip
STEP 4 Section A
DEPOSITOR'S AUTHORIZATION TO HONOR DEBITS
IF YOU SELECTED AUTOMATIC INVESTMENT OR TELEPHONE INVESTMENT
YOU MUST ALSO COMPLETE STEP 4, SECTIONS A & B.
I/We authorize the Financial Institution listed below to charge to my/our
account any drafts or debits drawn on my/our account initiated by the
Agent, PFPC Inc., and to pay such sums in accordance therewith, provided
my/our account has sufficient funds to cover such drafts or debits. I/We
further agree that your treatment of such orders will be the same as if
I/we personally signed or initiated the drafts or debits.
I/We understand that this authority will remain in effect until you
receive my/our written instructions to cancel this service. I/We also
agree that if any such drafts or debits are dishonored, for any reason,
you shall have no liabilities.
Financial Institution Account Number __________________________________
Name and Address where my/our account is maintained
Name of Financial Institution__________________________________________
Street Address_________________________________________________________
City_______________________________State _________________ Zip ________
Name(s) and Signature(s) of Depositor(s) as they appear where account
is registered
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
_________________________________________________
(Please Print)
X________________________________________________ ____________________
(Signature) (Date)
INDEMNIFICATION AGREEMENT
To: Financial Institution Named Above
So that you may comply with your depositor's request, Aquila Distributors,
Inc. (the "Distributor") agrees:
1 Electronic Funds Transfer debit and credit items transmitted pursuant
to the above authorization shall be subject to the provisions of the
Operating Rules of the National Automated Clearing House Association.
2 To indemnify and hold you harmless from any loss you may suffer in
connection with the execution and issuance of any electronic debit
in the normal course of business initiated by the Agent (except any
loss due to your payment of any amount drawn against insufficient or
uncollected funds), provided that you promptly notify us in writing
of any claim against you with respect to the same, and further
provided that you will not settle or pay or agree to settle or pay
any such claim without the written permission of the Distributor.
3 To indemnify you for any loss including your reasonable costs and
expenses in the event that you dishonor, with or without cause, any
such electronic debit.
STEP 4 Section B
SHAREHOLDER AUTHORIZATION/SIGNATURE(S) REQUIRED
- - The undersigned warrants that he/she has full authority and is of
legal age to purchase shares of the Trust and has received and
read a current Prospectus of the Trust and agrees to its terms.
- - I/We authorize the Trust and its agents to act upon these
instructions for the features that have been checked.
- - I/We acknowledge that in connection with an Automatic Investment or
Telephone Investment, if my/our account at the Financial Institution
has insufficient funds, the Trust and its agents may cancel the
purchase transaction and are authorized to liquidate other shares or
fractions thereof held in my/our Trust account to make up any
deficiency resulting from any decline in the net asset value of shares
so purchased and any dividends paid on those shares. I/We authorize the
Trust and its agents to correct any transfer error by a debit or credit
to my/our Financial Institution account and/or Trust account and to
charge the account for any related charges. I/We acknowledge that
shares purchased either through Automatic Investment or Telephone
Investment are subject to applicable sales charges.
- - The Trust, the Agent and the Distributor and their Trustees,
directors, employees and agents will not be liable for acting upon
instructions believed to be genuine, and will not be responsible for
any losses resulting from unauthorized telephone transactions if the
Agent follows reasonable procedures designed to verify the identity of
the caller. The Agent will request some or all of the following
information: account name and number; name(s) and social security
number registered to the account and personal identification; the
Agent may also record calls. Shareholders should verify the accuracy
of confirmation statements immediately upon receipt. Under penalties
of perjury, the undersigned whose Social Security (Tax I.D.) Number is
shown above certifies (i) that Number is my correct taxpayer
identification number and (ii) currently I am not under IRS
notification that I am subject to backup withholding (line out (ii) if
under notification). If no such Number is shown, the undersigned
further certifies, under penalties of perjury, that either (a) no such
Number has been issued, and a Number has been or will soon be applied
for; if a Number is not provided to you within sixty days, the
undersigned understands that all payments (including liquidations) are
subject to 31% withholding under federal tax law, until a Number is
provided and the undersigned may be subject to a $50 I.R.S. penalty; or
(b) that the undersigned is not a citizen or resident of the U.S.; and
either does not expect to be in the U.S. for 183 days during each
calendar year and does not conduct a business in the U.S. which would
receive any gain from the Trust, or is exempt under an income tax
treaty.
NOTE: ALL REGISTERED OWNERS OF THE ACCOUNT MUST SIGN BELOW. FOR A TRUST,
ALL TRUSTEES MUST SIGN.*
__________________________ __________________________ _________
Individual (or Custodian) Joint Registrant, if any Date
__________________________ __________________________ _________
Corporate Officer, Partner, Title Date
Trustee, etc.
* For Trusts, Corporations or Associations, this form must be accompanied
by proof of authority to sign, such as a certified copy of the corporate
resolution or a certificate of incumbency under the trust instrument.
SPECIAL INFORMATION
- - Certain features (Automatic Investment, Telephone Investment, Expedited
Redemption and Direct Deposit of Dividends) are effective 15 days after
this form is received in good order by the Trust's Agent.
- - You may cancel any feature at any time, effective 3 days after the
Agent receives written notice from you.
- - Either the Trust or the Agent may cancel any feature, without prior
notice, if in its judgment your use of any feature involves unusual
effort or difficulty in the administration of your account.
- - The Trust reserves the right to alter, amend or terminate any or all
features or to charge a service fee upon 30 days written notice to
shareholders except if additional notice is specifically required by
the terms of the Prospectus.
BANKING INFORMATION
- - If your Financial Institution account changes, you must complete a
Ready Access Features Form which may be obtained from Aquila
Distributors at 1-800-872-6734 and send it to the Agent together
with a "voided" check or pre-printed deposit slip from the new
account. The new Financial Institution change is effective in 15
days after this form is received in good order by the Trust's Agent.
AUTOMATIC WITHDRAWAL PLAN PROVISIONS
By requesting an Automatic Withdrawal Plan, the applicant agrees
to the terms and conditions applicable to such plans, as stated below.
1. The Agent will administer the Automatic Withdrawal Plan (the "Plan")
as agent for the person (the "Planholder") who executed the Plan
authorization.
2. Certificates will not be issued for shares of the Trust purchased for
and held under the Plan, but the Agent will credit all such shares to
the Planholder on the records of the Trust. Any share certificates now
held by the Planholder may be surrendered unendorsed to the Agent with
the application so that the shares represented by the certificate may
be held under the Plan.
3. Dividends and distributions will be reinvested in shares of the Trust
at Net Asset Value without a sales charge.
4. Redemptions of shares in connection with disbursement payments will be
made at the Net Asset Value per share in effect at the close of
business on the last business day of the month or quarter.
5. The amount and the interval of disbursement payments and the address to
which checks are to be mailed may be changed, at any time, by the
Planholder on written notification to the Agent. The Planholder should
allow at least two weeks time in mailing such notification before the
requested change can be put in effect.
6. The Planholder may, at any time, instruct the Agent by written notice
(in proper form in accordance with the requirements of the then current
Prospectus of the Trust) to redeem all, or any part of, the shares held
under the Plan. In such case the Agent will redeem the number of shares
requested at the Net Asset Value per share in effect in accordance with
the Trust's usual redemption procedures and will mail a check for the
proceeds of such redemption to the Planholder.
7. The Plan may, at any time, be terminated by the Planholder on written
notice to the Agent, or by the Agent upon receiving directions to that
effect from the Trust. The Agent will also terminate the Plan upon
receipt of evidence satisfactory to it of the death or legal incapacity
of the Planholder. Upon termination of the Plan by the Agent or the
Trust, shares remaining unredeemed will be held in an uncertificated
account in the name of the Planholder, and the account will continue
as a dividend-reinvestment, uncertificated account unless and until
proper instructions are received from the Planholder, his executor or
guardian, or as otherwise appropriate.
8. The Agent shall incur no liability to the Planholder for any action
taken or omitted by the Agent in good faith.
9. In the event that the Agent shall cease to act as transfer agent for
the Trust, the Planholder will be deemed to have appointed any
successor transfer agent to act as his agent in administering the Plan.
10.Purchases of additional shares concurrently with withdrawals are
undesirable because of sales charges when purchases are made.
Accordingly, a Planholder may not maintain this Plan while
simultaneously
making regular purchases. While an occasional lump sum investment may
be made, such investment should normally be an amount equivalent to
three times the annual withdrawal or $5,000, whichever is less.
<PAGE>
[Inside Back cover]
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
Ralph R. Shaw
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 Center, 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
Counsel
Hollyer Brady Smith Troxell Barrett Rockett Hines & Mone llp
551 Fifth Avenue * New York, New York 10176
[Back cover-left column]
This Prospectus concisely states information about the
Trust that you should know before investing. A Statement of Additional
Information about the Trust (the "SAI") has been filed with the Securities
and Exchange Commission. The SAI contains information about the Trust and
its management not included in this Prospectus. The SAI is incorporated by
reference in its entirety in this Prospectus. Only when you have read both
this Prospectus and the SAI are all material facts about the Trust
available to you.
You can get additional information about the Trust's investments in
the Trust's annual and semi-annual reports to shareholders. In the Trust's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Trust's performance
during its last fiscal year. You can get the SAI and the Trust's annual and
semi-annual reports without charge, upon request by calling 800-872-
*6735(toll free).
In addition, you can review and copy information about the Trust
(including the SAI) at the Public Reference Room of the SEC in Washington,
D.C. You can get information on the operation of the SEC's public reference
room by calling the SEC at 1-800-SEC-0330. You can get other information
about the Trust at the SEC's Internet site at http://www.sec.gov. You can
get copies of this information, upon payment of a duplicating fee, by
writing the Public Reference Section of the SEC, Washington, D.C.
20549-6009.
-------
The file number under which the Trust is registered with the SEC
under the Investment Company Act of 1940 is 811-4626.
TABLE OF CONTENTS
The Trust's Objective, Investment Strategies and Main Risks 2
Risk/Return Bar Chart and Performance Table 3
Fees and Expenses of the Trust 4
Investment of the Trust's Assets 5
Trust Management 9
Net Asset Value Per Share 10
Purchases 10
Redeeming Your Investment 12
Alternate Purchase Plans 16
Dividends and Distributions 24
Tax Information 25
Financial Highlights 28
Application
[Back cover-right column]
Tax-Free Trust
of Oregon
One Of The
Aquilasm Group Of Funds
A tax-free
income investment
A Series of The Cascades Trust
PROSPECTUS
---------
To receive a free copy of the Trust's SAI,
annual or semi-annual report, or other information
about the Trust, or to make shareholder inquiries call:
the Trust's Shareholder Servicing Agent at:
800-872-6735 toll-free
or you can write to:
PFPC Inc. * 400 Bellevue Parkway * Wilmington, DE 19809
For general inquiries & yield information,
call 800-872-6734 or 212-697-6666.
This Prospectus should be read
and retained for future reference
<PAGE>
Tax-Free Trust of Oregon
380 Madison Avenue Suite 2300
New York, NY 10017
800-USA-OREG (800-872-6734)
212-697-6666
Statement
of Additional
Information January 31, 2000
This Statement of Additional Information (the "SAI") is not a
Prospectus. There are two Prospectuses for the Trust dated January 31,
2000: one Prospectus describes Front-Payment Class Shares ("Class A
Shares") and Level-Payment Class Shares ("Class C Shares") of the Trust and
the other describes Institutional Class Shares ("Class Y Shares") and
Financial Intermediary Class Shares ("Class I Shares") of the Trust.
References in the SAI to "the Prospectus" refer to either of these
Prospectuses. The SAI should be read in conjunction with the Prospectus for
the class of shares in which you are considering investing. Either or both
Prospectuses may be obtained from the Trust's Shareholder Servicing Agent,
PFPC Inc., by writing to it at: 400 Bellevue Parkway, Wilmington, DE 19809
or by calling:
800-872-6735 toll free
or from Aquila Distributors, Inc., the Trust's Distributor, by writing to
it at
380 Madison Avenue, Suite 2300, New York, N Y 10017;
or by calling: 800-872-6734 toll free
or 212-697-6666
FINANCIAL STATEMENTS
The financial statements for the Trust for the year ended September
30, 1999, which are contained in the Annual Report for that fiscal year,
are hereby incorporated by reference into the SAI. Those financial
statements have been audited by KPMG LLP, independent auditors, whose
report thereon is incorporated herein by reference. The Annual Report of
the Trust for the fiscal year ended September 30, 1999 can be obtained
without charge by calling any of the toll-free numbers listed above. The
Annual Report will be delivered with the SAI.
TABLE OF CONTENTS
Trust History
Investment Strategies and Risks
Trust Policies
Management of the Trust
Ownership of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Capital Stock
Purchase, Redemption, and Pricing of Shares
Additional Tax Information
Underwriters
Performance
Appendix a
<PAGE>
TAX-FREE TRUST OF OREGON
Statement of Additional Information
TRUST HISTORY
The Trust is a series of The Cascades Trust (the "Business Trust")
formed in 1985 under the name Tax-Free Trust of Oregon. On August 10, 1989,
the name of the Business Trust was changed to The Cascades Trust. The
Business Trust presently has only one active series, the original series,
which continues to be called Tax-Free Trust of Oregon.
The Trust is an open-end, non-diversified management investment
company.
INVESTMENT STRATEGIES AND RISKS
Ratings
The ratings assigned by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") represent their respective opinions
of the quality of the municipal bonds and notes which they undertake to
rate. It should be emphasized, however, that ratings are general and not
absolute standards of quality. Consequently, obligations with the same
maturity, stated interest rate and rating may have different yields, while
obligations of the same maturity and stated interest rate with different
ratings may have the same yield.
Rating agencies consider municipal obligations rated in the fourth
highest credit rating to be of medium quality. Thus, they may present
investment risks which do not exist with more highly rated obligations.
Such obligations possess less attractive investment characteristics.
Changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than is
the case for higher grade bonds.
See Appendix A to this SAI for further information about the
ratings of Moody's and S&P as to the various rated Oregon Obligations which
the Trust may purchase.
The table below gives information as to the percentage of Trust net
assets invested, as of September 30, 1999, in Oregon Obligations in the
various rating categories:
Highest rating (1) 54.6%
Second highest rating (2) 37.9%
Third highest rating (3) 5.5%
Fourth highest rating (4) 0.0%
Not rated: 2.0%
100.0%
(1) Aaa of Moody's or AAA of S&P.
(2) Aa of Moody's or AA of S&P.
(3) A of Moody's or A of S&P.
(4) Baa of Moody's or BBB of S&P.
Municipal Bonds
The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and unlimited taxing power
for the payment of principal and interest. Revenue or special tax bonds are
payable only from the revenues derived from a particular facility or class
of facilities or projects or, in a few cases, from the proceeds of a
special excise or other tax, but are not supported by the issuer's power to
levy unlimited general taxes. There are, of course, variations in the
security of municipal bonds, both within a particular classification and
between classifications, depending on numerous factors. The yields of
municipal bonds depend on, among other things, general financial
conditions, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue.
Since the Trust may invest in industrial development bonds or private
activity bonds, the Trust may not be an appropriate investment for entities
which are "substantial users" of facilities financed by those bonds or for
investors who are "related persons" of such users. Generally, an individual
will not be a "related person" under the Internal Revenue Code unless such
investor or his or her immediate family (spouse, brothers, sisters and
lineal descendants) owns directly or indirectly in the aggregate more than
50 percent of the equity of a corporation or is a partner of a partnership
which is a "substantial user" of a facility financed from the proceeds of
those bonds. A "substantial user" of such facilities is defined generally
as a "non-exempt person who regularly uses a part of [a] facility" financed
from the proceeds of industrial development or private activity bonds.
As indicated in the Prospectus, there are certain Oregon Obligations
the interest on which is subject to the Federal alternative minimum tax on
individuals. While the Trust may purchase these obligations, it may, on the
other hand, refrain from purchasing particular Oregon Obligations due to
this tax consequence. Also, as indicated in the Prospectus, the Trust will
not purchase obligations of Oregon issuers the interest on which is subject
to regular Federal income tax. The foregoing may reduce the number of
issuers of obligations which are available to the Trust.
Additional Information about the State of Oregon and Oregon Obligations
In addition to the material in the Prospectus the following is a brief
summary of the complex factors affecting the financial situation in Oregon.
This information is derived from sources that are generally available to
investors and is based in part on information obtained from various state
and local agencies in Oregon. It should be noted that the creditworthiness
of obligations issued by local Oregon issuers may be unrelated to the
creditworthiness of obligations issued by the State of Oregon, and that
there is no obligation on the part of Oregon to make payment on such local
obligations in the event of default.
General Economic Conditions. The pace of job creation in Oregon is
below average, and has been so for the last two years. Oregon's
unemployment rate spent most of the 1990s lower than the Nation's. However,
a slow down in the Asian economies has helped to push Oregon's unemployment
rate to approximately 5.5%, while the Nation's has dropped to approximately
4.5%. Whereas, Oregon has diversified its economic base away from timber
and agriculture, its exposure to the chip manufacturing industry has
dragged the State economy down. High tech industries are important to a
number of Pacific Northwest states; however, a concentration of software
firms helped buoy their economies. The higher unemployment rate for Oregon
has a small silver lining; companies looking to relocate or expand will
find a labor pool bigger than in other parts of the country.
One industry seeing some improvement is the state's paper industry.
After suffering through a weak global market, prices have begun to rebound.
While it is unlikely that paper mills will become an engine for growth,
many of the rural areas of the state do still depend on the forest
industry. Employment in high technology, transportation equipment, and the
service sector are expected to grow over the next few years. Lumber and
wood products, construction, and trade sector employment is expected to
slow down for the next few years.
Budgetary Process. The Oregon budget is approved on a biennial
basis by separate appropriation measures. A biennium begins July 1 and ends
June 30 of odd-numbered years. Measures are passed for the approaching
biennium during each regular Legislative session, held beginning in January
of odd-numbered years.
Because the Oregon Legislative Assembly meets in regular session
for approximately six months of each biennium, provision is made for
interim funding through the Legislative Emergency Board. The Emergency
Board is authorized to make allocations of General Fund monies to State
agencies from the State Emergency Fund. The Emergency Board may also
authorize increases in expenditure limitations from Other or Federal Funds
(dedicated or continuously appropriated funds), and may take other actions
to meet emergency needs when the Legislative Assembly is not in session.
The most significant feature of the budgeting process in Oregon is the
constitutional requirement that the budget be in balance at the end of each
biennium. Because of this provision, Oregon may not budget a deficit and is
required to alleviate any revenue shortfalls within each biennium.
Revenue and Expenditures. The Oregon Biennial budget is a two-year
fiscal plan balancing proposed spending against expected revenues. The
total budget consists of three segments distinguished by source of revenue:
programs supported by General Fund revenues; programs supported by Other
Funds (dedicated fund) revenues, including lottery funds; and Federal
Funds. In its 1999 Regular Session, the Oregon Legislative Assembly
approved General Fund appropriations totaling $10,127.3 million for the
1999-2001 biennium.
General Fund revenue totaled $8,324.6 million for the 1997-1999
biennium. Revenue exceeded the May 1999 estimate by $64.4 million and $99.6
million higher that the Close of Session (COS) estimate. Total General Fund
Revenues increased 7.7% during the biennium. This is much slower growth
than during the prior two biennia. When added to the beginning balance of
$800.1 million, total resources for the biennium were $9,124.8 million.
Expenditures were $8,798.5 million for the biennium, leaving an ending
balance of $362.3 million.
General Fund revenue is projected to be $9,911.3 million for the
1999-2001 biennium. The beginning balance is estimated to be $261.9 million
for a total General Fund resource estimate of $10,173.2 million. The
December 1999-2001 General Fund revenue estimate is $83.9 million higher
than the May 1999 forecast. The overall General Fund resource projection is
$10.1 million more than the September forecast.
In the November 1994 general election, Oregonians approved a ballot
measure, introduced through the initiative process, that will have, or may
have, a material financial impact on the State. "Measure 11" amends Oregon
statutes to require mandated minimum sentences for certain felonies,
effective April 1, 1995. "Measure 11" creates a need for an estimated 6,085
new prison beds by the year 2001 and calls for State correction facility
construction costs of approximately $462 million in the next five years.
The State also estimates increases in State expenditures for correctional
operations, beginning with an increase of $3.2 million in fiscal year 1996,
with accelerating costs that should peak at an annual increase of up to
$101.6 million by fiscal year 2001. Because these demands will be made by
on the State General Fund, they will reduce amounts that otherwise would be
available in the future for the Oregon Legislative Assembly to appropriate
for other purposes.
In November 1996, voters approved Ballot Measure 47, the property
tax cut and cap. It will reduce revenues to schools, cities, and counties
by as much as $1 billion and put pressure on the General Fund to make up
some or all of the difference.
Ballot Measure 50, passed by Oregon voters in May of 1997, limits
the taxes a property owner must pay. It limits taxes on each property by
rolling back the 1997-98 assessed value of each property to 90 percent of
its 1995-96 value. The measure also limits future growth on taxable value
to 3 percent a year, with exceptions for items such as new construction,
remodeling, subdivisions, and rezoning. It establishes permanent tax rates
for Oregon's local taxing districts, yet allows voters to approve new,
short-term option levies outside the permanent rate limit if approved by a
majority of a 50 percent voter turnout.
In November 1998, voters approved the Oregon School Bond Guaranty
Act. This law authorizes the state to use its full faith, credit and
unlimited taxing power pledge to guarantee the timely payment for
qualifying school district general obligation bonds.
Debt Administration and Limitation. Oregon statutes give the State
Treasurer authority to review and approve the terms and conditions of sale
for State agency bonds. The Governor, by statute, seeks the advice of the
State Treasurer when recommending the total biennial bonding level for
State programs. Agencies may not request that the Treasurer issue bonds or
certificates of participation unless so authorized in the "biennial bonding
bill." Statutes contain management and reporting requirements for state
agencies on proposed and outstanding debt.
A variety of general obligation and revenue bond programs have been
approved in Oregon to finance public purpose programs and projects. General
obligation bond authority require voter approval or a constitutional
amendment, while revenue bonds may be issued under statutory authority.
However, under the Oregon Constitution the state may issue up to $50,000 of
general obligation debt without specific voter approval. The State
Legislative Assembly has the right to place limits on general obligation
bond programs which are more restrictive than those approved by the voters.
General obligation authorizations are normally expressed as a percentage of
statewide True Cash Value (TCV) of taxable property. Revenue bonds usually
are limited by the Legislative Assembly to a specific dollar amount.
The State's constitution authorizes the issuance of general
obligation bonds for financing community colleges, highway construction,
and pollution control facilities. Higher education institutions and
activities and community colleges are financed through an appropriation
from the General fund. Facilities acquired under the pollution control
program are required to conservatively appear to be at least 70 percent
self-supporting and self-liquidating from revenue, gifts, federal
government grants, user charges, assessments, and other fees.
Additionally, the State's constitution authorizes the issuance of
general obligation bonds to make farm and home loans to veterans, provide
loans for state residents to construct water development projects, provide
credit for multi-family housing for elderly and disabled person, and for
small scale local energy projects. These bonds are self-supporting and are
accounted for as enterprise funds.
The State's constitution further authorizes the issuance of general
obligation bonds for financing higher education building projects,
facilities, institutions, and activities. For the year ending June 30,
1998, the total balance of general obligation bonds was $2.96 billion. The
debt service requirements for general obligation bonds, including interest
of approximately $2.16 billion, as of March 1, 1999, was $4.62 billion.
In addition to general obligation and direct revenue bonds, the
State of Oregon issues industrial development revenue bonds ("IDBs");
Oregon Mass Transportation Financing Authority revenue bonds; and Health,
Housing, Education and Cultural Facilities Authority ("HHECFA") revenue
bonds. The IDBs are issued to finance the expansion, enhancement, or
relocation of private industry in the State. Before such bonds are issued,
the project application must be reviewed and approved by both the Oregon
State Treasury and the Oregon Economic Development Commission. Strict
guidelines for eligibility have been developed to ensure that the program
meets a clearly defined development objective. IDBs issued by the State are
secured solely by payments from the private company and there is no
obligation, either actual or implied, to provide state funds to secure the
bonds.
HHECFA is a public corporation created in 1989, and modified in
1991, to assist with the assembling and financing of lands for health care,
housing, educational and cultural uses, and for the construction and
financing of facilities for such uses. The authority reviews proposed
projects and makes recommendations to the State Treasurer as to the
issuance of bonds to finance proposed projects. The State has no financial
obligation for these bonds, which are secured solely by payments from the
entities for which projects were financed.
The State is statutorily authorized to enter into financing
agreements though the issuance of certificates of participation.
Certificates of participation have been used for the acquisition of
computer systems by the Department of Transportation, Department of
Administrative Services, and the Oregon University System. Also,
certificates of participation have been used for the acquisition,
construction, or remodeling of buildings by the Departments of
Administrative Services, Fish and Wildlife, Agriculture, Oregon University
System, Forestry, Military, Corrections, the State Fair, Public Employees
Retirement System, and Oregon Youth Authority. Further, certificates of
participation were used in the acquisition of telecommunication systems by
the Department of Administrative Services and the Adult & Family Services
Division. For the year ending June 30, 1998, the certificates of
participation debt totaled $665.1 million.
The Treasurer on behalf of the State may also issue Federally
taxable bonds in those situations where securing a Federal tax exemption is
unlikely or undesirable; regulate "current" as well as "advance." refunding
bonds; enter into financing agreements, including lease purchase
agreements, installment sales agreements and loan agreements to finance
real or personal property; and approve certificates of participation with
respect to the financing agreements. Amounts payable by the State under a
financing agreement are limited to funds appropriated or otherwise made
available by the Legislative Assembly for such payment. The principal
amount of such financing agreements are treated as bonds subject to maximum
annual bonding levels established by the Legislative Assembly under Oregon
statutes.
When-Issued and Delayed Delivery Obligations
The Trust may buy Oregon Obligations on a when-issued or delayed
delivery basis. The purchase price and the interest rate payable on the
Oregon Obligations are fixed on the transaction date. At the time the Trust
makes the commitment to purchase Oregon Obligations on a when-issued or
delayed delivery basis, it will record the transaction and thereafter
reflect the value each day of such Oregon Obligations in determining its
net asset value. The Trust will make commitments for such when-issued
transactions only when it has the intention of actually acquiring the
Oregon Obligations. The Trust places an amount of assets equal in value to
the amount due on the settlement date for the when-issued or delayed
delivery securities being purchased in a segregated account, which is
marked to market every business day. On delivery dates for such
transactions, the Trust will meet its commitments by selling the assets
held in the separate account and/or from cash flow.
Determination of the Marketability of Certain Securities
In determining marketability of floating and variable rate demand
notes and participation interests (including municipal lease/purchase
obligations) the Board of Trustees will consider the following factors, not
all of which may be applicable to any particular issue: the quality,
maturity and coupon rate of the issue, ratings received from the nationally
recognized statistical rating organizations and any changes or prospective
changes in such ratings, the likelihood that the issuer will continue to
appropriate the required payments for the issue, recent purchases and sales
of the same or similar issues, the general market for municipal securities
of the same or similar quality, the Sub-Adviser's opinion as to
marketability of the issue and other factors that may be applicable to any
particular issue.
Futures Contracts and Options
Although the Trust does not presently do so and may in fact never do
so, it is permitted to buy and sell futures contracts relating to municipal
bond indices ("Municipal Bond Index Futures") and to U.S. Government
securities ("U.S. Government Securities Futures," together referred to as
"Futures"), and exchange-traded options based on Futures as a possible
means to protect the asset value of the Trust during periods of changing
interest rates. The following discussion is intended to explain briefly the
workings of Futures and options on them which would be applicable if the
Trust were to use them.
Unlike when the Trust purchases or sells an Oregon Obligation, no
price is paid or received by the Trust upon the purchase or sale of a
Future. Initially, however, when such transactions are entered into, the
Trust will be required to deposit with the futures commission merchant
("broker") an amount of cash or Oregon Obligations equal to a varying
specified percentage of the contract amount. This amount is known as
initial margin. Subsequent payments, called variation margin, to and from
the broker, will be made on a daily basis as the price of the underlying
index or security fluctuates making the Future more or less valuable, a
process known as marking to market. Insolvency of the broker may make it
more difficult to recover initial or variation margin. Changes in variation
margin are recorded by the Trust as unrealized gains or losses. Margin
deposits do not involve borrowing by the Trust and may not be used to
support any other transactions. At any time prior to expiration of the
Future, the Trust may elect to close the position by taking an opposite
position which will operate to terminate the Trust's position in the
Future. A final determination of variation margin is then made. Additional
cash is required to be paid by or released to the Trust and it realizes a
gain or a loss. Although Futures by their terms call for the actual
delivery or acceptance of cash, in most cases the contractual obligation is
fulfilled without having to make or take delivery. All transactions in the
futures markets are subject to commissions payable by the Trust and are
made, offset or fulfilled through a clearing house associated with the
exchange on which the contracts are traded. Although the Trust intends to
buy and sell Futures only on an exchange where there appears to be an
active secondary market, there is no assurance that a liquid secondary
market will exist for any particular Future at any particular time. In such
event, or in the event of an equipment failure at a clearing house, it may
not be possible to close a futures position.
Municipal Bond Index Futures currently are based on a long-term
municipal bond index developed by the Chicago Board of Trade ("CBT") and
The Bond Buyer (the "Municipal Bond Index"). Financial Futures contracts
based on the Municipal Bond Index began trading on June 11, 1985. The
Municipal Bond Index is comprised of 40 tax-exempt municipal revenue and
general obligation bonds. Each bond included in the Municipal Bond Index
must be rated A or higher by Moody's or S&P and must have a remaining
maturity of 19 years or more. Twice a month new issues satisfying the
eligibility requirements are added to, and an equal number of old issues
are deleted from, the Municipal Bond Index. The value of the Municipal Bond
Index is computed daily according to a formula based on the price of each
bond in the Municipal Bond Index, as evaluated by six dealer-to-dealer
brokers.
The Municipal Bond Index Futures contract is traded only on the CBT.
Like other contract markets, the CBT assures performance under futures
contracts through a clearing corporation, a nonprofit organization managed
by the exchange membership which is also responsible for handling daily
accounting of deposits or withdrawals of margin.
There are at present U.S. Government Securities Futures contracts
based on long-term Treasury bonds, Treasury notes, GNMA Certificates and
three-month Treasury bills. U.S. Government Securities Futures have traded
longer than Municipal Bond Index Futures, and the depth and liquidity
available in the trading markets for them are in general greater.
Call Options on Futures Contracts. The Trust may also purchase and
sell exchange-traded call and put options on Futures. The purchase of a
call option on a Future is analogous to the purchase of a call option on an
individual security. Depending on the pricing of the option compared to
either the Future upon which it is based, or upon the price of the
underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. Like the purchase of
a futures contract, the Trust may purchase a call option on a Future to
hedge against a market advance when the Trust is not fully invested.
The writing of a call option on a Future constitutes a partial hedge
against declining prices of the securities which are deliverable upon
exercise of the Future. If the price at expiration of the Future is below
the exercise price, the Trust will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Trust's portfolio holdings.
Put Options on Futures Contracts. The purchase of put options on a
Future is analogous to the purchase of protective put options on portfolio
securities. The Trust may purchase a put option on a Future to hedge the
Trust's portfolio against the risk of rising interest rates.
The writing of a put option on a Future constitutes a partial hedge
against increasing prices of the securities which are deliverable upon
exercise of the Future. If the Future price at expiration is higher than
the exercise price, the Trust will retain the full amount of the option
premium which provides a partial hedge against any increase in the price of
securities which the Trust intends to purchase.
The writer of an option on a Future is required to deposit initial and
variation margin pursuant to requirements similar to those applicable to
Futures. Premiums received from the writing of an option will be included
in initial margin. The writing of an option on a Future involves risks
similar to those relating to Futures.
Risk Factors in Futures Transactions and Options
One risk in employing Futures or options on Futures to attempt to
protect against the price volatility of the Trust's Oregon Obligations is
that the Sub-Adviser could be incorrect in its expectations as to the
extent of various interest rate movements or the time span within which the
movements take place. For example, if the Trust sold a Future in
anticipation of an increase in interest rates, and then interest rates went
down instead, the Trust would lose money on the sale.
Another risk as to Futures or options on them arises because of the
imperfect correlation between movement in the price of the Future and
movements in the prices of the Oregon Obligations which are the subject of
the hedge. The risk of imperfect correlation increases as the composition
of the Trust's portfolio diverges from the municipal bonds included in the
applicable index or from the securities underlying the U.S. Government
Securities Futures. The price of the Future or option may move more than or
less than the price of the Oregon Obligations being hedged. If the price of
the Future or option moves less than the price of the Oregon Obligations
which are the subject of the hedge, the hedge will not be fully effective
but, if the price of the Oregon Obligations being hedged has moved in an
unfavorable direction, the Trust would be in a better position than if it
had not hedged at all. If the price of the Oregon Obligations being hedged
has moved in a favorable direction, this advantage will be partially offset
by the Future or option. If the price of the Future or option has moved
more than the price of the Oregon Obligations, the Trust will experience
either a loss or gain on the Future or option which will not be completely
offset by movements in the price of the Oregon Obligations which are the
subject of the hedge. To compensate for the imperfect correlation of
movements in the price of the Oregon Obligations being hedged and movements
in the price of the Futures or options, the Trust may buy or sell Futures
or options in a greater dollar amount than the dollar amount of the Oregon
Obligations being hedged if the historical volatility of the prices of the
Oregon Obligations being hedged is less than the historical volatility of
the debt securities underlying the hedge. It is also possible that, where
the Trust has sold Futures or options to hedge its portfolio against
decline in the market, the market may advance and the value of the Oregon
Obligations held in the Trust's portfolio may decline. If this occurred the
Trust would lose money on the Future or option and also experience a
decline in value of its portfolio securities.
Where Futures or options are purchased to hedge against a possible
increase in the price of Oregon Obligations before the Trust is able to
invest in them in an orderly fashion, it is possible that the market may
decline instead; if the Trust then decides not to invest in them at that
time because of concern as to possible further market decline or for other
reasons, the Trust will realize a loss on the Futures or options that is
not offset by a reduction in the price of the Oregon Obligations which it
had anticipated purchasing.
The particular municipal bonds comprising the index underlying
Municipal Bond Index Futures will vary from the bonds held by the Trust.
The correlation of the hedge with such bonds may be affected by disparities
in the average maturity, ratings, geographical mix or structure of the
Trust's investments as compared to those comprising the Index, and general
economic or political factors. In addition, the correlation between
movements in the value of the Municipal Bond Index may be subject to change
over time, as additions to and deletions from the Municipal Bond Index
alter its structure. The correlation between U.S. Government Securities
Futures and the municipal bonds held by the Trust may be adversely affected
by similar factors and the risk of imperfect correlation between movements
in the prices of such Futures and the prices of Municipal Bonds held by the
Trust may be greater.
Trading in Municipal Bond Index Futures may be less liquid than that
in other Futures. The trading of Futures and options is also subject to
certain market risks, such as inadequate trading activity or limits on
upward or downward price movements which could at times make it difficult
or impossible to liquidate existing positions.
Regulatory Aspects of Futures and Options
The Trust will, due to requirements under the Investment Company Act
of 1940 (the "1940 Act"), deposit in a segregated account Oregon
Obligations maturing in one year or less or cash, in an amount equal to the
fluctuating market value of long Futures or options it has purchased, less
any margin deposited on long positions.
The Trust must operate as to its long and short positions in Futures
in conformity with restrictions it has committed to pursuant to a rule (the
"CFTC Rule") adopted by the Commodity Futures Trading Commission ("CFTC")
under the Commodity Exchange Act (the "CEA") to be eligible for the
exclusion provided by the CFTC Rule from qualifications as a "commodity
pool operator" (as defined under the CEA). Under these restrictions the
Trust will not, as to any positions, whether long, short or a combination
thereof, enter into Futures or options for which the aggregate initial
margins and premiums paid for options exceed 5% of the fair market value of
its assets. Under the restrictions, the Trust also must, as to its short
positions, use Futures and options solely for bona-fide hedging purposes
within the meaning and intent of the applicable provisions under the CEA.
As to the Trust's long positions which are used as part of its portfolio
strategy and are incidental to its activities in the underlying cash
market, the "underlying commodity value" (see below) of its Futures must
not exceed the sum of (i) cash set aside in an identifiable manner, or
short-term U.S. debt obligations or other U.S. dollar-denominated high
quality short-term money market instruments so set aside, plus any funds
deposited as margin; (ii) cash proceeds from existing investments due in 30
days and (iii) accrued profits held at the futures commission merchant.
(There is described above the segregated account which the Trust must
maintain as to its Futures and options activities due to requirements other
than those described in this paragraph; the Trust will, as to long
positions, be required to abide by the more restrictive of the two
requirements.) The "underlying commodity value" of a Future or option is
computed by multiplying the size of the Future by the daily settlement
price of the Future or option.
The "sale" of a Future means the acquisition by the Trust of an
obligation to deliver an amount of cash equal to a specified dollar amount
times the difference between the value of the index or government security
at the close of the last trading day of the Future and the price at which
the Future is originally struck (which the Trust anticipates will be lower
because of a subsequent rise in interest rates and a corresponding decline
in the index value). This is referred to as having a "short" Futures
position. The "purchase" of a Future means the acquisition by the Trust of
a right to take delivery of such an amount of cash. In this case, the Trust
anticipates that the closing value will be higher than the price at which
the Future is originally struck. This is referred to as having a "long"
futures position. No physical delivery of the bonds making up the index or
the U.S. government securities, as the case may be, is made as to either a
long or a short futures position.
TRUST POLICIES
Investment Restrictions
The Trust has a number of policies concerning what it can and cannot
do. Those that are called fundamental policies cannot be changed unless the
holders of a "majority" (as defined in the 1940 Act) of the Trust's
outstanding shares vote to change them. Under the 1940 Act, the vote of the
holders of a "majority" of the Trust's outstanding shares means the vote of
the holders of the lesser of (a) 67% or more of the Trust's shares present
at a meeting or represented by proxy if the holders of more than 50% of its
shares are so present or represented; or (b) more than 50% of the Trust's
outstanding shares. Those fundamental policies not set forth in the
Prospectus are set forth below:
1. The Trust invests only in certain limited securities.
The Trust cannot buy any securities other than Oregon Obligations
(discussed under "Investment of the Trust's Assets" in the Prospectus and
in "Investment Strategies and Risks" in the SAI), Municipal Bond Index
Futures, U.S. Government Securities Futures and options on such Futures;
therefore the Trust cannot buy any voting securities, any commodities or
commodity contracts other than Municipal Bond Index Futures and U.S.
Government Securities Futures, any mineral related programs or leases, any
shares of other investment companies or any warrants, puts, calls or
combinations thereof other than on Futures.
The Trust cannot buy real estate or any non-liquid interests in real
estate investment trusts; however, it can buy any securities which it can
otherwise buy even though the issuer invests in real estate or has
interests in real estate.
2. The Trust does not buy for control.
The Trust cannot invest for the purpose of exercising control or
management of other companies.
3. The Trust does not sell securities it does not own or borrow from
brokers to buy securities.
Thus, it cannot sell short or buy on margin; however, the Trust can
make margin deposits in connection with the purchase or sale of Municipal
Bond Index Futures, U.S. Government Securities Futures and options on them,
and can pay premiums on these options.
4. The Trust is not an underwriter.
The Trust cannot engage in the underwriting of securities, that is,
the selling of securities for others. Also, it cannot invest in restricted
securities. Restricted securities are securities which cannot freely be
sold for legal reasons.
6. The Trust has industry investment requirements.
The Trust cannot buy the obligations of issuers in any one industry if
more than 25% of its total assets would then be invested in securities of
issuers of that industry; the Trust will consider that a non-governmental
user of facilities financed by industrial development bonds is an issuer in
an industry.
7. The Trust cannot make loans.
The Trust can buy those Oregon Obligations which it is permitted to
buy (see "Investment of the Trust's Assets" in the Prospectus); this is
investing, not making a loan. The Trust cannot lend its portfolio
securities.
8. The Trust can borrow only in limited amounts for special purposes.
The Trust can borrow from banks for temporary or emergency purposes
but only up to 10% of its total assets. It can mortgage or pledge its
assets only in connection with such borrowing and only up to the lesser of
the amounts borrowed or 5% of the value of its total assets. However, this
shall not prohibit margin arrangements in connection with the purchase or
sale of Municipal Bond Index Futures, U.S. Government Securities Futures or
options on them, or the payment of premiums on those options. Interest on
borrowings would reduce the Trust's income.
Except in connection with borrowings, the Trust will not issue senior
securities.
The Trust will not purchase any Oregon Obligations, Futures or options
on Futures while it has any outstanding borrowings which exceed 5% of the
value of its total assets.
As a fundamental policy, at least 80% of the Trust's net assets will
be invested in Oregon Obligations the income paid upon which will not be
subject to the alternative minimum tax; accordingly, the Trust can invest
up to 20% of its net assets in obligations which are subject to the Federal
alternative minimum tax.
The Trust may employ such traditional measures as varying maturities,
upgrading credit standards for portfolio purchases, broadening
diversification and increasing its position in cash, in an attempt to
protect against declines in the value of its investments and other market
risks.
Portfolio Turnover
A portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities for a year
and dividing it by the monthly average value of such securities during the
year, excluding certain short-term securities. Since the turnover rate of
the Trust will be affected by a number of factors, the Trust is unable to
predict what rate the Trust will have in any particular period or periods,
although such rate is not expected to exceed 100%. However, the rate could
be substantially higher or lower in any particular period.
MANAGEMENT OF THE TRUST
The Board of Trustees
The business and affairs of the Trust are managed under the direction
and control of its Board of Trustees. The Board of Trustees has authority over
every aspect of the Trust's operations, including approval of the advisory and
sub-advisory agreements and their annual renewal, the contracts with all other
service providers and payments under the Trust's Distribution Plan and
Shareholder Services Plan.
Trustees and Officers
The Trustees and officers of the Trust, their ages, their
affiliations, if any, with the Manager or the Distributor and their
principal occupations during at least the past five years are set forth
below. None of the Trustees or officers of the Trust is affiliated with the
Sub-Adviser. Mr. Herrmann is an interested person of the Trust as that term
is defined in the Investment Company Act of 1940 (the "1940 Act") as an
officer of the Trust and as a director, officer and shareholder of the
Manager and the Distributor. Ms. Herrmann is an interested person of the
Trust as an officer of the Trust, as an officer, director and shareholder
of the Manager and as a shareholder of the Distributor. Each is also an
interested person as a member of the immediate family of the other. Mr.
Lung is an interested person as a security holder of the Sub-Adviser's
parent. Mr. Mitchell is an interested person as a security holder of the
Sub-Adviser's parent. They are so designated by an asterisk.
Lacy B. Herrmann* Chairman Founder and Chairman of
380 Madison Avenue of the the Board of Aquila
New York, New York Board of Management Corporation,
10017 Trustees the sponsoring organization
Age: 70 and Manager or Administrator and/or
Adviser or Sub-Adviser to the Aquila Money-
Market Funds,the Aquila Bond Funds and the
Aquila Equity Funds, and Founder, Chairman
of the Board of Trustees and (currently or
until 1998) President of each since its
establishment, beginning in 1984; Director
of Aquila Distributors, Inc., distributor
of the above funds, since 1981 and formerly
Vice President or Secretary, 1981-1998;
President and a Director of STCM Management
Company, Inc., sponsor and sub-adviser to
CCMT; Founder and Chairman of several other
money market funds; Director or Trustee of
OCC Cash Reserves, Inc. and Quest For Value
Accumulation Trust, and Director or Trustee
of Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Global Value Fund, Inc.
and Oppenheimer Rochester Group of Funds,
each of which is an open-end investment
company; Trustee of Brown University, 1990-
1996 and currently Trustee Emeritus;
actively involved for many years in
leadership roles with university, school
and charitable organizations.
Vernon R. Alden Trustee Director of Sonesta International
20 Park Plaza Hotels Corporation, Boston
Suite 1010 Massachusetts and General
Boston, Independent Partner of
Massachusetts 02116 the Merrill Lynch-Lee Funds; Former
Age: 76 Director of Colgate-Palmolive Company,
Digital Equipment Corporation, Intermet
Corporation, The McGraw Hill and The Mead
Corporations; Chairman of the Board and
Executive Committee of The Boston Company,
Inc., a financial services company, 1969-
1978; Trustee of Tax-Free Trust of Oregon
(this Trust) since 1988, of Hawaiian Tax-
Free Trust, Pacific Capital Cash Assets
Trust, Pacific Capital Tax-Free Cash Assets
Trust and Pacific Capital U.S. Government
Securities Cash Assets Trust since 1989, of
Cascades Cash Fund, 1989-1994, of
Narragansett Insured Tax-Free Income Fund
since 1992, and of Aquila Cascadia Equity
Fund since 1996; Associate Dean and member
of the faculty of Harvard University
Graduate School of Business Administration,
1951-1962; member of the faculty and
Program Director of Harvard Business School
- University of Hawaii Advanced Management
Program, summer of 1959 and 1960; President
of Ohio University, 1962-1969; Chairman of
The Japan Society of Boston, Inc., and
member of several Japan-related advisory
councils; Chairman of the Massachusetts
Business Development Council and the
Massachusetts Foreign Business Council,
1978-1983; Trustee Emeritus, Boston
Symphony Orchestra; Chairman of the
Massachusetts Council on the Arts and
Humanities, 1972-1984; Member of the Board
of Fellows of Brown University, 1969-1986;
Trustee of various other cultural and
educational organizations; Honorary Consul
General of the Royal Kingdom of Thailand;
Received Decorations from the Emperor of
Japan (1986) and the King of Thailand (1996
and 1997).
David B.Frohnmayer Trustee President, University of Oregon since 1994;
1226 University of Oregon Dean of the University of
Eugene, OR 97403-1226 Oregon Law School, 1992-1994;
Age: 59 Attorney General of the State of
Oregon, 1981-1991; Trustee of Aquila
Cascadia Equity Fund and Tax-Free Trust of
Oregon (this Trust) since 1997.
James A. Gardner Trustee President of Gardner Associates,
an
Road Vandervert Ranch investment and real estate firm, since
Vandervert 1970; President Emeritus of Lewis and Clark
Bend, Oregon 97707 College and Law School since 1989
and
Age: 56 President, 1981-1989; Program
Officer
and County Representative of the Ford
Foundation, 1969-1981; Lecturer and
Assistant Director of Admissions of Harvard
College, 1968-1969; Member of the Oregon
Young Presidents Organization since 1983;
Member of the Council on Foreign Relations
since 1988; Founding Member of the Pacific
Council since 1995; Trustee of Tax-Free
Trust of Oregon (this Trust) since 1986 and
of Cascades Cash Fund, 1989-1994; Trustee
of Aquila Cascadia Equity Fund since 1996;
Director of the Oregon High Desert Museum
since 1989; active in civic, business,
educational and church organizations in
Oregon.
Diana P. Herrmann, * Trustee President and Chief
380 Madison Avenue President Operating Officer of the
New York, New York Manager/Administrator since
10017 since 1997, a Director since
Age: 41 1984, Secretary since 1986
and previously its Executive Vice
President, Senior Vice President or Vice
President, 1986-1997; President of various
Aquila Bond and Money-Market Funds since
1998; Assistant Vice President, Vice
President, Senior Vice President or
Executive Vice President of Aquila Money-
Market, Bond and Equity Funds since 1986;
Trustee of a number of Aquila Money-Market,
Bond and Equity Funds since 1995; Trustee
of Reserve Money-Market Funds since 1999
and Reserve Private Equity Series since
1998; Assistant Vice President and formerly
Loan Officer of European American Bank,
1981-1986; daughter of the Trust's
Chairman; Trustee of the Leopold Schepp
Foundation (academic scholarships) since
1995; actively involved in mutual fund and
trade associations and in college and other
volunteer organizations.
Sterling K. Jenson Trustee President and Chief Executive Officer of
568 South 350 East First Security Investment Management
since
Farmington, Utah 84025 1995 and Senior Vice President, 1990-1995;
Age: 47 Chartered Financial Analyst (CFA)
since 1984;Trustee of Aquila Cascadia
Equity Fund and Tax-Free Trust of Oregon
(this Trust); past President of Salt Lake
City Society of Financial Analysts (1996-
1997); member of various investment-related
and charitable organizations.
Raymond H. Lung* Trustee Retired; Trustee of Qualivest
Group of
16199 N.W. Canterwood Funds, 1994-1997; Executive Vice President
Way, Portland, and Executive Trust Officer of U.S.
Oregon 97229 National Bank of Oregon, 1989-1991; Senior
Age: 73 Vice President and Executive Trust Officer,
1980-1989; various other management
positions, 1954-1980; Member of Executive
Committee of the Trust Division of American
Bankers Association, 1986-1988; Director of
Pacific Securities Depository Trust Company
and Pacific Clearing Corporation
(subsidiaries of the Pacific Stock
Exchange), 1980-1987; Director of Collins
Pine Company and Ostrander Companies
(lumber and oil), 1980-1990; Trustee of Tax-
Free Trust of Oregon (this Trust) since
1992, of Cascades Cash Fund, 1992-1994 and
of Aquila Cascadia Equity Fund since 1996.
John W. Mitchell* Trustee Principal of M & H Economic
P.O. Box 40012 Consultants; Economist, Western Region, for
Portland, Oregon U. S. Bancorp since 1998; Chief
97240-0012 Economist of U.S. Bancorp,
Portland,
Age: 55 Oregon, 1983-1998; Professor of
Boise State
University, 1970-1983; Member of the Oregon
Governor's Council of Economic Advisors,
1984-1998; Chairman of the Oregon
Governor's Technical Advisory Committee for
Tax Review in 1998; Trustee of Aquila
Cascadia Equity Fund and Tax Free Trust of
Oregon (this Trust) since 1999.
Richard C. Ross Trustee President of Richard Ross Communications,
510 SW Country Club Road a consulting firm, since 1986; Senior
Lake Oswego, communications consultant to Pihas,
Oregon 97034 Schmidt, Westerdahl, advertising and public
Age: 78 relations, 1986-1988; Executive News
Director of KATU Television, 1975-1986;
News Director of KGW-TV, 1956-1975; Trustee
of Tax-Free Trust of Oregon (this
Trust)since 1988 and of Aquila Cascadia
Equity Fund since 1996; Director of the
Portland Rose Festival since 1972; Director
of the Greater Portland Convention &
Visitors Association, 1982-1985; Director
of the Portland Chamber of Commerce, 1971-
1980; President of the Oregon chapter of
the National Multiple Sclerosis Society,
1984-1986; Director of the Meridian Park
Hospital Foundation, 1984-1987; Chairman of
the Broadcasters Group of the Bar-Press-
Broadcasters professional relations
committee, 1964-1984; Former President of
the Rotary Club of East Portland and
currently a Director of Goodwill
Industries, Metropolitan Youth Symphony and
the Lake Oswego Community Theatre.
Ralph R. Shaw Trustee General Partner, Shaw Management
400 SW Sixth Avenue, Company, an investment counseling
Suite 1100 firm, since 1980, of Shaw
Portland, Oregon Venture Partners since 1983,
97204-1636 of Shaw Venture Partners II
Age: 61 since June 1987 and of Shaw
Venture Partners III since 1994 (US
Bancorp, parent of the Sub-Adviser, is a
limited partner in the last three
ventures). Mr. Shaw presently serves on the
boards of directors of Schnitzer Steel
Industries, Inc., Magni Systems, Inc.,
Micromonitors, Inc., Integra Telecom, Inc.
(formerly OGIT Communications, Inc.),
Dendreon Corporation (formerly Activated
Cell Therapy, Inc.), LaTIS, Inc.,
Industrial Devices Corporation, Telestream,
Inc., and 3PF.COM, Inc. (formerly
ComAlliance, Inc.). Additionally, he serves
on the Board of Advisors of K-2 Designs,
Inc. and as trustee of the Tax-Free Trust
of Oregon (this Trust). He is active in
local civic and charitable organizations.
James M. McCullough Senior Senior Vice President of
1750 Aspen Court Vice Aquila Distributors since 2000,
Lake Oswego, OR President Aquila Cascadia Equity
97034 Fund, Aquila Rocky Mountain
Age: 54 Equity Fund and Tax-Free Trust
of Oregon (this Trust) since 1999; Director
of Fixed Income Institutional Sales, CIBC
Oppenheimer & Co. Inc., Seattle, WA, 1995-
1999; Sales Manager, Oregon Municipal
Bonds, Kidder, Peabody, Inc., (acquired in
1995 by Paine, Webber)Portland, OR, 1994-
1995.
Kerry A. Lemert Vice Vice President of Aquila Cascadia Equity
2019 Lloyd Center President Fund and Tax Free Trust of Oregon (this
Trust)
Portland, since 1998; Assistant Vice President,
Oregon 97232 Black & Co., 1997-1998; Dealer-
Sales and
Age: 45 Assistant Municipal bond trader, Pacific
Crest
Securities, 1994-1997; Assistant Municipal
Bond Trader, Registered Sales Assistant,
Paine Webber Inc., Portland Oregon, 1988-
1994; Sales Assistant, E.F. Hutton & Co.,
Inc., Portland, Oregon, 1984-1988.
Christine L. Neimeth,Vice Vice President of Aquila Cascadia
2019 Lloyd Center, President Equity Fund and Tax Free Trust
Portland, Oregon 97232 of Oregon (this Trust) since 1998;
Management,
Age: 35 Information Systems consultant
Hillcrest Ski and
Sport, 1997; Institutional Municipal Bond
Salesperson, Pacific Crest Securities,
1996; Institutional Bond Broker, Hilliard
Farber and Company 1991-1995; Bond Trader,
Bear Stearns and Company, 1989-91. Active
in college alumni and volunteer
organizations.
Rose F. Marotta Chief Chief Financial Officer
380 Madison Avenue Financial of the Aquila Money-
New York, New York Officer Market, Bond and Equity
10017 Funds since 1991 and
Age: 75 Treasurer, 1981-1991; formerly
Treasurer of the
{Sub-Adviser} since 1984 and of the
Distributor since 1985.predecessor of CCMT;
Treasurer and Director of STCM Management
Company, Inc., since 1974; Treasurer of
Trinity Liquid Assets Trust, 1982-1986 and
of Oxford Cash Management Fund, 1982-1988;
Treasurer of InCap Management Corporation
since 1982, of the Manager/ Administrator
Richard F. West Treasurer Treasurer of the Aquila Money-
380 Madison Avenue Market, Bond and Equity Funds
New York, New York and of Aquila Distributors,
10017 Inc. since 1992; Associate Director
Age: 64 of Furman Selz Incorporated, 1991-
1992; Vice
President of Scudder, Stevens & Clark, Inc.
and Treasurer of Scudder Institutional
Funds, 1989-1991; Vice President of Lazard
Freres Institutional Funds Group, Treasurer
of Lazard Freres Group of Investment
Companies and HT Insight Funds, Inc., 1986-
1988; Vice President of Lehman Management
Co., Inc. and Assistant Treasurer of Lehman
Money Market Funds, 1981-1985; Controller
of Seligman Group of Investment Companies,
1960-1980.
Edward M. W. Hines Secretary Partner of Hollyer Brady
551 Fifth Avenue Smith Troxell Barrett
New York, New York 10176 Rockett Hines & Mone
Age: 60 LLP, attorneys, since 1989 and counsel,
1987-1989; Secretary of the Aquila Money-
Market, Bond and Equity Funds since 1982;
Secretary of Trinity Liquid Assets Trust,
1982-1985 and Trustee of that Trust, 1985-
1986; Secretary of Oxford Cash Management
Fund, 1982-1988.
John M. Herndon Assistant Secretary of
380 Madison Avenue the Aquila Money-Market,
New York, New York Assistant Bond and Equity Funds
10017 Secretary since 1995 and Vice
Age: 60 President of the Aquila Money-
Market Funds
since 1990; Vice President of the
Administrator since 1990; Investment
Services Consultant and Bank Services
Executive of Wright Investors' Service, a
registered investment adviser, 1983-1989;
Member of the American Finance Association,
the Western Finance Association and the
Society of Quantitative Analysts.
The Trust does not currently pay fees to any of the Trust's
officers or to Trustees affiliated with the Manager or the Sub-Adviser. For
its fiscal year ended September 30, 1999, the Trust paid a total of $81,359
in compensation and reimbursement of expenses to those Trustees to whom it
pays fees. No other compensation or remuneration of any type, direct or
contingent, was paid by the Trust to its Trustees.
The Trust is one of the 14 funds in the Aquilasm Group of Funds,
which consist of tax-free municipal bond funds, money market funds and
equity funds. The following table lists the compensation of all Trustees
who received compensation from the Trust and the compensation they received
during the Trust's fiscal year from other funds in the Aquilasm Group of
Funds. None of such Trustees has any pension or retirement benefits from
the Trust or any of the other funds in the Aquilasm group.
Compensation Number of
from all boards on
Compensation funds in the which the
from the Aquilasm Trustee
Name Trust Group of serves
Funds
Vernon R.
Alden $8,735 $49,155 7
David B.
Frohnmayer $7,200 $8,350 2
James A.
Gardner $8,745 $10,245 2
Sterling K.
Jensen $350 $700 2
Raymond H.
Lung $9,200 $11,688 2
John W.
Mitchell $6,000 $7,050 2
Richard C.
Ross $8,702 $10,202 2
OWNERSHIP OF SECURITIES
Of shares of the Trust outstanding on January 21, 2000, Merrill,
Lynch, Pierce, Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, FL held of record 1,989,379 Class A Shares (6.75% of the
class) and 69,373 Class C Shares (20.3% of the class); Wedbush Morgan
Securities, 1000 Wilshire Blvd., Los Angeles, CA held of record 38,987
Class C Shares (11.7% of the class; US Bank National Association held of
record 590,588 Class Y Shares in 7 accounts (32.39% of the class). On the
basis of information received from those holders, the Trust's management
believes that all of such shares are held for the benefit of clients.
Management Ownership
As of the date of this SAI, all of the Trustees and officers as a
group owned less than 1% of its outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Information about the Manager, the Sub-Adviser, and the Distributor
Management Fees
During the fiscal years ended September 30, 1999, 1998 and 1997 the Trust
incurred management fees as follows:
Manager Sub-Adviser
1999 $1,345,097
1998 $1,307,096
1997 $617,654(1) $617,654(2)
(1) paid or accrued to the Manager under the administration agreement then
in effect.
(2) paid or accrued to the Trust's former adviser and to the Sub-Adviser
under the former advisory agreement in effect until August 1, 1997 and an
interim advisory agreement in effect until October 31, 1997,
respectively.
Aquila Distributors, Inc. 380 Madison Avenue, Suite 2300, New York, NY
10017 is the Trust's Distributor. The Distributor currently handles the
distribution of the shares of fourteen funds (five money-market funds, seven
tax-free municipal bond funds and two equity funds), including the Trust.
Under the Distribution Agreement, the Distributor is responsible for the
payment of certain printing and distribution costs relating to prospectuses
and reports as well as the costs of supplemental sales literature, advertising
and other promotional activities. The shares of the Distributor are owned 72%
by Mr. Herrmann and other members of his immediate family, 24% by Diana P.
Herrmann and the balance by an officer of the Distributor.
The Advisory and Administration Agreement
The Advisory and Administration Agreement provides that subject to the
direction and control of the Board of Trustees of the Trust, the Manager
shall:
(i) supervise continuously the investment program of the Trust and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the
Trust;
(iii) arrange for the purchase and the sale of securities held in the
portfolio of the Trust; and
(iv) at its expense provide for pricing of the Trust's portfolio daily
using a pricing service or other source of pricing information
satisfactory to the Trust and, unless otherwise directed by the Board
of Trustees, provide for pricing of the Trust's portfolio at least
quarterly using another such source satisfactory to the Trust.
The Advisory and Administration Agreement provides that, subject to
the termination provisions described below, the Manager may at its own
expense delegate to a qualified organization ("Sub-Adviser"), affiliated or
not affiliated with the Manager, any or all of the above duties. Any such
delegation of the duties set forth in (i), (ii) or (iii) above shall be by
a written agreement (the "Sub-Advisory Agreement") approved as provided in
Section 15 of the Investment Company Act of 1940. The Manager has delegated
all of such functions to the Sub-Adviser in the Sub-Advisory Agreement.
The Advisory and Administration Agreement also provides that subject
to the direction and control of the Board of Trustees of the Trust, the
Manager shall provide all administrative services to the Trust other than
those relating to its investment portfolio which have been delegated to a
Sub-Adviser of the Trust under the Sub-Advisory Agreement; as part of such
administrative duties, the Manager shall:
(i) provide office space, personnel, facilities and equipment for the
performance of the following functions and for the maintenance of the
headquarters of the Trust;
(ii) oversee all relationships between the Trust and any sub-adviser,
transfer agent, custodian, legal counsel, auditors and principal
underwriter, including the negotiation of agreements in relation
thereto, the supervision and coordination of the performance of such
agreements, and the overseeing of all administrative matters which are
necessary or desirable for the effective operation of the Trust and
for the sale, servicing or redemption of the Trust's shares;
(iii) either keep the accounting records of the Trust, including the
computation of net asset value per share and the dividends (provided
that if there is a Sub-Adviser, daily pricing of the Trust's portfolio
shall be the responsibility of the Sub-Adviser under the Sub-Advisory
Agreement) or, at its expense and responsibility, delegate such duties
in whole or in part to a company satisfactory to the Trust;
(iv) maintain the Trust's books and records, and prepare (or assist
counsel and auditors in the preparation of) all required proxy
statements, reports to the Trust's shareholders and Trustees, reports
to and other filings with the Securities and Exchange Commission and
any other governmental agencies, and tax returns, and oversee the
insurance relationships of the Trust;
(v) prepare, on behalf of the Trust and at the Trust's expense, such
applications and reports as may be necessary to register or maintain
the registration of the Trust and/or its shares under the securities
or "Blue-Sky" laws of all such jurisdictions as may be required from
time to time;
(vi) respond to any inquiries or other communications of shareholders
of the Trust and broker-dealers, or if any such inquiry or
communication is more properly to be responded to by the Trust's
shareholder servicing and transfer agent or distributor, oversee such
shareholder servicing and transfer agent's or distributor's response
thereto.
The Advisory and Administration Agreement contains provisions relating
to compliance of the investment program, responsibility of the Manager for
any investment program managed by it, allocation of brokerage, and
responsibility for errors that are substantially the same as the
corresponding provisions in the Sub-Advisory Agreement.
The Advisory and Administration Agreement provides that the Manager
shall, at its own expense, pay all compensation of Trustees, officers, and
employees of the Trust who are affiliated persons of the Manager.
The Trust bears the costs of preparing and setting in type its
prospectuses, statements of additional information and reports to its
shareholders, and the costs of printing or otherwise producing and
distributing those copies of such prospectuses, statements of additional
information and reports as are sent to its shareholders. All costs and
expenses not expressly assumed by the Manager under the agreement or
otherwise by the Manager, administrator or principal underwriter or by any
Sub-Adviser shall be paid by the Trust, including, but not limited to (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums;
(iv) compensation and expenses of its Trustees other than those affiliated
with the Manager or such sub-adviser, administrator or principal
underwriter; (v) legal and audit expenses; (vi) custodian and transfer
agent, or shareholder servicing agent, fees and expenses; (vii) expenses
incident to the issuance of its shares (including issuance on the payment
of, or reinvestment of, dividends); (viii) fees and expenses incident to
the registration under Federal or State securities laws of the Trust or its
shares; (ix) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders of the Trust; (x) all other
expenses incidental to holding meetings of the Trust's shareholders; and
(xi) such non-recurring expenses as may arise, including litigation
affecting the Trust and the legal obligations for which the Trust may have
to indemnify its officers and Trustees.
The Advisory and Administration Agreement provides that it may be
terminated by the Manager at any time without penalty upon giving the Trust
sixty days' written notice (which notice may be waived by the Trust) and
may be terminated by the Trust at any time without penalty upon giving the
Manager sixty days' written notice (which notice may be waived by the
Manager), provided that such termination by the Trust shall be directed or
approved by a vote of a majority of its Trustees in office at the time or
by a vote of the holders of a majority (as defined in the 1940 Act) of the
voting securities of the Trust outstanding and entitled to vote. The
specific portions of the Advisory and Administration Agreement which relate
to providing investment advisory services will automatically terminate in
the event of the assignment (as defined in the 1940 Act) of the Advisory
and Administration Agreement, but all other provisions relating to
providing services other than investment advisory services will not
terminate, provided however, that upon such an assignment the annual fee
payable monthly and computed on the net asset value of the Trust as of the
close of business each business day shall be reduced to the annual rate of
0.26 of 1% of such net asset value.
The Sub-Advisory Agreement
The services of the Sub-Adviser are rendered under the Sub-Advisory
Agreement between the Manager and the Sub-Adviser, which provides, subject
to the control of the Board of Trustees, for investment supervision and at
the Sub-Adviser's expense for pricing of the Trust's portfolio daily using
a pricing service or other source of pricing information satisfactory to
the Trust and, unless otherwise directed by the Board of Trustees, for
pricing of the Trust's portfolio at least quarterly using another such
source satisfactory to the Trust. The Sub-Advisory Agreement states that
the Sub-Adviser shall, at its expense, provide to the Trust all office
space and facilities, equipment and clerical personnel necessary for the
carrying out of the Sub-Adviser's duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement provides that any investment program
furnished by the Sub-Adviser shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment Company
Act of 1940 (the "Act") and any rules or regulations in force thereunder;
(2) any other applicable laws, rules and regulations; (3) the Declaration
of Trust and By-Laws of the Trust as amended from time to time; (4) any
policies and determinations of the Board of Trustees of the Trust; and (5)
the fundamental policies of the Trust, as reflected in its registration
statement under the Act or as amended by the shareholders of the Trust.
The Sub-Advisory Agreement provides that the Sub-Adviser shall give to
the Manager, as defined therein, and to the Trust the benefit of its best
judgment and effort in rendering services thereunder, but the Sub-Adviser
shall not be liable for any loss sustained by reason of the adoption of any
investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon
(i) its own investigation and research or (ii) investigation and research
made by any other individual, firm or corporation, if such purchase, sale
or retention shall have been made and such other individual, firm or
corporation shall have been selected in good faith by the Sub-Adviser.
Nothing therein contained shall, however, be construed to protect the
Sub-Adviser against any liability to the Trust or its security holders by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under the Agreement.
The Sub-Advisory Agreement provides that nothing in it shall prevent
the Sub-Adviser or any affiliated person (as defined in the Act) of the
Sub-Adviser from acting as investment adviser or manager for any other
person, firm or corporation and shall not in any way limit or restrict the
Sub-Adviser or any such affiliated person from buying, selling or trading
any securities for its own or their own accounts or for the accounts of
others for whom it or they may be acting, provided, however, that the
Sub-Adviser expressly represents that, while acting as Sub-Adviser, it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under the Agreement. It is
agreed that the Sub-Adviser shall have no responsibility or liability for
the accuracy or completeness of the Trust's Registration Statement under
the Act and the Securities Act of 1933, except for information supplied by
the Sub-Adviser for inclusion therein. The Sub-Adviser shall promptly
inform the Trust as to any information concerning the Sub-Adviser
appropriate for inclusion in such Registration Statement, or as to any
transaction or proposed transaction, which might result in an assignment
(as defined in the Act) of the Agreement. To the extent that the Manager is
indemnified under the Trust's Declaration of Trust with respect to the
services provided by the Sub-Adviser, the Manager agrees to provide the
Sub-Adviser the benefits of such indemnification.
The Sub-Advisory Agreement provides that in connection with its duties
to arrange for the purchase and sale of the Trust's portfolio securities,
the Sub-Adviser shall select such broker-dealers ("dealers") as shall, in
the Sub-Adviser's judgment, implement the policy of the Trust to achieve
"best execution," i.e., prompt, efficient, and reliable execution of orders
at the most favorable net price. The Sub-Adviser shall cause the Trust to
deal directly with the selling or purchasing principal or market maker
without incurring brokerage commissions unless the Sub-Adviser determines
that better price or execution may be obtained by paying such commissions;
the Trust expects that most transactions will be principal transactions at
net prices and that the Trust will incur little or no brokerage costs. The
Trust understands that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that principal
transactions placed through dealers include a spread between the bid and
asked prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer will
provide best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well as the
difficulty of the transaction in question, and thus need not pay the lowest
spread or commission available if the Sub-Adviser determines in good faith
that the amount of commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer, viewed either in
terms of the particular transaction or the Sub-Adviser's overall
responsibilities. If, on the foregoing basis, the transaction in question
could be allocated to two or more dealers, the Sub-Adviser is authorized,
in making such allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a dealer
has sold shares of the Trust. Such research may be in written form or
through direct contact with individuals and may include quotations on
portfolio securities and information on particular issuers and industries,
as well as on market, economic, or institutional activities. The Trust
recognizes that no dollar value can be placed on such research services or
on execution services and that such research services may or may not be
useful to the Trust and may be used for the benefit of the Sub-Adviser or
its other clients.
During the fiscal years ended September 30, 1999, 1998 and 1997,
all of the Trust's transactions were principal transactions and no
brokerage commissions were paid.
The Sub-Advisory Agreement provides that the Sub-Adviser agrees to
maintain, and to preserve for the periods prescribed, such books and
records with respect to the portfolio transactions of the Trust as are
required by applicable law and regulation, and agrees that all records
which it maintains for the Trust on behalf of the Manager shall be the
property of the Trust and shall be surrendered promptly to the Trust or the
Manager upon request. The Sub-Adviser agrees to furnish to the Manager and
to the Board of Trustees of the Trust such periodic and special reports as
each may reasonably request.
The Sub-Advisory Agreement provides that the Sub-Adviser shall bear
all of the expenses it incurs in fulfilling its obligations under the
Agreement. In particular, but without limiting the generality of the
foregoing: the Sub-Adviser shall furnish the Trust, at the Sub-Adviser's
expense, all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under the Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser,
administrator or principal underwriter of the Trust all necessary financial
information in connection with such adviser's, administrator's or principal
underwriter's duties under any agreement between such adviser,
administrator or principal underwriter and the Trust. The Sub-Adviser will
also pay all compensation of the Trust's officers, employees, and Trustees,
if any, who are affiliated persons of the Sub-Adviser.
The Sub-Advisory Agreement became effective on May 1, 1998 and
provides that it shall, unless terminated as therein provided, continue in
effect until the June 30 next preceding the first anniversary of the
effective date of the Agreement, and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually (1)
by a vote of the Trust's Board of Trustees, including a vote of a majority
of the Trustees who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party, with votes cast in
person at a meeting called for the purpose of voting on such approval, or
(2) by a vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Trust and by such a vote of the
Trustees.
The Sub-Advisory Agreement provides that it may be terminated by the
Sub-Adviser at any time without penalty upon giving the Manager and the
Trust sixty days' written notice (which notice may be waived). It may be
terminated by the Manager or the Trust at any time without penalty upon
giving the Sub-Adviser sixty days' written notice (which notice may be
waived by the Sub-Adviser), provided that such termination by the Trust
shall be directed or approved by a vote of a majority of its Trustees in
office at the time or by a vote of the holders of a majority (as defined in
the Act) of the voting securities of the Trust outstanding and entitled to
vote. The Sub-Advisory Agreement will automatically terminate in the event
of its assignment (as defined in the Act) or the termination of the
Advisory and Administration Agreement. The Sub-Adviser agrees that it will
not exercise its termination rights for at least three years from the
effective date of the Agreement, except for regulatory reasons.
Underwriting Commissions
During the fiscal years ended September 30, 1999, 1998 and 1997,
the aggregate dollar amounts of sales charges on sales of shares in the
Trust were $892,031, $834,920 and $864,852, respectively, and the amounts
retained by the Distributor were $164,339, $156,496 and $78,595,
respectively.
In connection with sales of Class A Shares, the Distributor pays a
portion of the sales charge on such shares to dealers in the form of
discounts and to brokers in the form of agency commissions (together,
"Commissions"), in amounts that vary with the size of the sales charge as
follows:
Sales Charge as
Percentage Commissions
of Public as Percentage
Offering of Offering
Price Price
4.00% 3.00%
3.75% 3.00%
3.50% 2.75%
3.25% 2.75%
3.00% 2.50%
2.50% 2.25%
Distribution Plan
The Trust's Distribution Plan has four parts, relating respectively to
distribution payments with respect to Class A Shares (Part I), to
distribution payments relating to Class C Shares (Part II), to distribution
payments relating to Class I Shares (Part III) and to certain defensive
provisions (Part IV).
At the date of the SAI, most of the outstanding shares of the Trust
would be considered Qualified Holdings of various broker-dealers
unaffiliated with the Manager, Sub-Adviser or Distributor. The Distributor
will consider shares which are not Qualified Holdings of such unrelated
broker-dealers to be Qualified Holdings of the Distributor and will
authorize Permitted Payments to the Distributor with respect to such shares
whenever Permitted Payments are being made under the Plan.
Provisions Relating to Class A Shares (Part I)
Part I of the Plan applies only to the Front-Payment Class Shares
("Class A Shares") of the Trust (regardless of whether such class is so
designated or is redesignated by some other name).
As used in Part I of the Plan, "Qualified Recipients" shall mean
broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor"), including but not limited to any principal underwriter of
the Trust, with which the Trust or the Distributor has entered into written
agreements in connection with Part I ("Class A Plan Agreements") and which
have rendered assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's Front-Payment Class Shares or
servicing of shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all Front-Payment
Class Shares beneficially owned by such Qualified Recipient, or
beneficially owned by its brokerage customers, other customers, other
contacts, investment advisory clients, or other clients, if the Qualified
Recipient was, in the sole judgment of the Distributor, instrumental in the
purchase and/or retention of such shares and/or in providing administrative
assistance or other services in relation thereto.
Subject to the direction and control of the Trust's Board of Trustees,
the Trust may make payments ("Class A Permitted Payments") to Qualified
Recipients, which Class A Permitted Payments may be made directly, or
through the Distributor or shareholder servicing agent as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as adjusted for any
part or parts of a fiscal year during which payments under the Plan are not
accruable or for any fiscal year which is not a full fiscal year), 0.15 of
1% of the average annual net assets of the Trust represented by the Front-
Payment Class Shares. Such payments shall be made only out of the Trust's
assets allocable to the Front-Payment Class Shares.
The Distributor shall have sole authority (i) as to the selection of
any Qualified Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) as to the amount of Class A Permitted Payments, if
any, to each Qualified Recipient provided that the total Class A Permitted
Payments to all Qualified Recipients do not exceed the amount set forth
above. The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the Qualified
Recipient; (b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area with respect to
holders of Front-Payment Class Shares, including without limitation, any or
all of the following activities: answering customer inquiries regarding
account status and history, and the manner in which purchases and
redemptions of shares of the Trust may be effected; assisting shareholders
in designating and changing dividend options, account designations and
addresses; providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; assisting in processing purchase
and redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with customer orders to
purchase or redeem shares; verifying and guaranteeing shareholder
signatures in connection with redemption orders and transfers and changes
in shareholder designated accounts; furnishing (either alone or together
with other reports sent to a shareholder by such person) monthly and year-
end statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Trust, proxy statements, annual reports,
updating prospectuses and other communications from the Trust to its
shareholders; receiving, tabulating and transmitting to the Trust proxies
executed by shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the Distributor or a
shareholder may request from time to time; and (c) the possibility that the
Qualified Holdings of the Qualified Recipient would be redeemed in the
absence of its selection or continuance as a Qualified Recipient.
Notwithstanding the foregoing two sentences, a majority of the Independent
Trustees (as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient but not
paid during a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference will not be
carried over to subsequent years.
While Part I is in effect, the Trust's Distributor shall report at
least quarterly to the Trust's Trustees in writing for their review on the
following matters: (i) all Class A Permitted Payments made under the Plan,
the identity of the Qualified Recipient of each payment, and the purposes
for which the amounts were expended; and (ii) all fees of the Trust to the
Manager, Sub-Adviser or Distributor paid or accrued during such quarter. In
addition, if any such Qualified Recipient is an affiliated person, as that
term is defined in the 1940 Act, of the Trust, Manager, Sub-Adviser or
Distributor, such person shall agree to furnish to the Distributor for
transmission to the Board of Trustees of the Trust an accounting, in form
and detail satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the compensation
paid to such affiliated person, not less often than annually.
Part I originally went into effect when it was approved (i) by a vote
of the Trustees, including the Independent Trustees, with votes cast in
person at a meeting called for the purpose of voting on Part I of the Plan;
and (ii) by a vote of holders of at least a "majority" (as so defined) of
the outstanding voting securities of the Front-Payment Class Shares class
(or of any predecessor class or category of shares, whether or not
designated as a class) and a vote of holders of at least a "majority" (as
so defined) of the outstanding voting securities of the Level-Payment Class
Shares and/or of any other class whose shares are convertible into Front-
Payment Class Shares. Part I has continued, and will, unless terminated as
hereinafter provided, continue in effect, until the April 30 next
succeeding such effectiveness, and from year to year thereafter only so
long as such continuance is specifically approved at least annually by the
Trust's Trustees and its Independent Trustees with votes cast in person at
a meeting called for the purpose of voting on such continuance. Part I may
be terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
1940 Act) of the outstanding voting securities of the Trust to which Part I
applies. Part I may not be amended to increase materially the amount of
payments to be made without shareholder approval of the class or classes of
shares affected by Part I as set forth in (ii) above, and all amendments
must be approved in the manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal underwriter
of the Trust, the Class A Plan Agreement shall be the agreement
contemplated by Section 15(b) of the 1940 Act since each such agreement
must be approved in accordance with, and contain the provisions required
by, the Rule. In the case of Qualified Recipients which are not principal
underwriters of the Trust, the Class A Plan Agreements with them shall be
(i) their agreements with the Distributor with respect to payments under
the Trust's Distribution Plan in effect prior to April 1, 1996 or (ii)
Class A Plan Agreements entered into thereafter.
Provisions relating to Class C Shares (Part II)
Part II of the Plan applies only to the Level-Payment Shares Class
("Class C Shares") of the Trust (regardless of whether such class is so
designated or is redesignated by some other name).
As used in Part II of the Plan, "Qualified Recipients" shall mean
broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor"), including but not limited to any principal underwriter of
the Trust, with which the Trust or the Distributor has entered into written
agreements in connection with Part II ("Class C Plan Agreements") and which
have rendered assistance (whether direct, administrative, or both) in the
distribution and/or retention of the Trust's Level-Payment Class Shares or
servicing of shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all Level- Payment
Class Shares beneficially owned by such Qualified Recipient, or
beneficially owned by its brokerage customers, other customers, other
contacts, investment advisory clients, or other clients, if the Qualified
Recipient was, in the sole judgment of the Distributor, instrumental in the
purchase and/or retention of such shares and/or in providing administrative
assistance or other services in relation thereto.
Subject to the direction and control of the Trust's Board of Trustees,
the Trust may make payments ("Class C Permitted Payments") to Qualified
Recipients, which Class C Permitted Payments may be made directly, or
through the Distributor or shareholder servicing agent as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as adjusted for any
part or parts of a fiscal year during which payments under the Plan are not
accruable or for any fiscal year which is not a full fiscal year), 0.75 of
1% of the average annual net assets of the Trust represented by the Level-
Payment Class Shares. Such payments shall be made only out of the Trust's
assets allocable to the Level-Payment Class Shares. The Distributor shall
have sole authority (i) as to the selection of any Qualified Recipient or
Recipients; (ii) not to select any Qualified Recipient; and (iii) the
amount of Class C Permitted Payments, if any, to each Qualified Recipient
provided that the total Class C Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. The Distributor is
authorized, but not directed, to take into account, in addition to any
other factors deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient; (b) the extent to which the
Qualified Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Level- Payment Class Shares,
including without limitation, any or all of the following activities:
answering customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Trust may be
effected; assisting shareholders in designating and changing dividend
options, account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and transfers
and changes in shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person) monthly
and year-end statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Trust, proxy statements, annual reports,
updating prospectuses and other communications from the Trust to its
shareholders; receiving, tabulating and transmitting to the Trust proxies
executed by shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the Distributor or a
shareholder may request from time to time; and (c) the possibility that the
Qualified Holdings of the Qualified Recipient would be redeemed in the
absence of its selection or continuance as a Qualified Recipient.
Notwithstanding the foregoing two sentences, a majority of the Independent
Trustees (as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient but not
paid during a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference will not be
carried over to subsequent years.
While Part II is in effect, the Trust's Distributor shall report at
least quarterly to the Trust's Trustees in writing for their review on the
following matters: (i) all Class C Permitted Payments made under the Plan,
the identity of the Qualified Recipient of each payment, and the purposes
for which the amounts were expended; and (ii) all fees of the Trust to the
Manager, Sub-Adviser or Distributor paid or accrued during such quarter. In
addition, if any such Qualified Recipient is an affiliated person, as that
term is defined in the 1940 Act, of the Trust, Manager, Sub-Adviser or
Distributor such person shall agree to furnish to the Distributor for
transmission to the Board of Trustees of the Trust an accounting, in form
and detail satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the compensation
paid to such affiliated person, not less often than annually.
Part II originally went into effect when it was approved (i) by a vote
of the Trustees, including the Independent Trustees, with votes cast in
person at a meeting called for the purpose of voting on Part II of the
Plan; and (ii) by a vote of holders of at least a "majority" (as so
defined) of the outstanding voting securities of the Level-Payment Class
Shares. Part II has continued, and will, unless terminated as therein
provided, continue in effect, until the April 30 next succeeding such
effectiveness, and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the Trust's
Trustees and its Independent Trustees with votes cast in person at a
meeting called for the purpose of voting on such continuance. Part II may
be terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
1940 Act) of the outstanding voting securities of the Trust to which Part
II applies. Part II may not be amended to increase materially the amount
of payments to be made without shareholder approval of the class or classes
of shares affected by Part II as set forth in (ii) above, and all
amendments must be approved in the manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal underwriter
of the Trust, the Class C Plan Agreement shall be the agreement
contemplated by Section 15(b) of the 1940 Act since each such agreement
must be approved in accordance with, and contain the provisions required
by, the Rule. In the case of Qualified Recipients which are not principal
underwriters of the Trust, the Class C Plan Agreements with them shall be
(i) their agreements with the Distributor with respect to payments under
the Trust's Distribution Plan in effect prior to April 1, 1996 or (ii)
Class C Plan Agreements entered into thereafter.
Provisions relating to Class I Shares (Part III)
Part III of the Plan applies only to the Financial Intermediary Class
Shares ("Class I Shares") of the Trust (regardless of whether such class is
so designated or is redesignated by some other name).
As used in Part III of the Plan, "Qualified Recipients" shall mean
broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor"), including but not limited to any principal underwriter of
the Trust, with which the Trust or the Distributor has entered into written
agreements in connection with Part III ("Class I Plan Agreements") and
which have rendered assistance (whether direct, administrative, or both) in
the distribution and/or retention of the Trust's Class I Shares or
servicing of shareholder accounts with respect to such shares. "Qualified
Holdings" shall mean, as to any Qualified Recipient, all Class I Shares
beneficially owned by such Qualified Recipient, or beneficially owned by
its brokerage customers, other customers, other contacts, investment
advisory clients, or other clients, if the Qualified Recipient was, in the
sole judgment of the Distributor, instrumental in the purchase and/or
retention of such shares and/or in providing administrative assistance or
other services in relation thereto.
Subject to the direction and control of the Trust's Board of Trustees,
the Trust may make payments ("Class I Permitted Payments") to Qualified
Recipients, which Class I Permitted Payments may be made directly, or
through the Distributor or shareholder servicing agent as disbursing agent,
which may not exceed, for any fiscal year of the Trust (as adjusted for any
part or parts of a fiscal year during which payments under the Plan are not
accruable or for any fiscal year which is not a full fiscal year), at a
rate fixed for time to time by the Board of Trustees, initially 0.10 of 1%
of the average annual net assets of the Trust represented by the Class I
Shares, but not more than 0.25 of 1% of such assets. Such payments shall be
made only out of the Trust's assets allocable to Class I Shares. The
Distributor shall have sole authority (i) as to the selection of any
Qualified Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) the amount of Class I Permitted Payments, if any, to
each Qualified Recipient provided that the total Class I Permitted Payments
to all Qualified Recipients do not exceed the amount set forth above. The
Distributor is authorized, but not directed, to take into account, in
addition to any other factors deemed relevant by it, the following: (a) the
amount of the Qualified Holdings of the Qualified Recipient; (b) the extent
to which the Qualified Recipient has, at its expense, taken steps in the
shareholder servicing area with respect to holders of Class I Shares,
including without limitation, any or all of the following activities:
answering customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Trust may be
effected; assisting shareholders in designating and changing dividend
options, account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and transfers
and changes in shareholder designated accounts; furnishing (either alone or
together with other reports sent to a shareholder by such person) monthly
and year-end statements and confirmations of purchases and redemptions;
transmitting, on behalf of the Trust, proxy statements, annual reports,
updating prospectuses and other communications from the Trust to its
shareholders; receiving, tabulating and transmitting to the Trust proxies
executed by shareholders with respect to meetings of shareholders of the
Trust; and providing such other related services as the Distributor or a
shareholder may request from time to time; and (c) the possibility that the
Qualified Holdings of the Qualified Recipient would be redeemed in the
absence of its selection or continuance as a Qualified Recipient.
Notwithstanding the foregoing two sentences, a majority of the Independent
Trustees (as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient but not
paid during a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference will not be
carried over to subsequent years.
While Part III is in effect, the Trust's Distributor shall report at
least quarterly to the Trust's Trustees in writing for their review on the
following matters: (i) all Class I Permitted Payments made under the Plan,
the identity of the Qualified Recipient of each payment, and the purposes
for which the amounts were expended; and (ii) all fees of the Trust to the
Manager, Sub-Adviser or Distributor paid or accrued during such quarter. In
addition, if any such Qualified Recipient is an affiliated person, as that
term is defined in the Act, of the Trust, Manager, Sub-Adviser or
Distributor such person shall agree to furnish to the Distributor for
transmission to the Board of Trustees of the Trust an accounting, in form
and detail satisfactory to the Board of Trustees, to enable the Board of
Trustees to make the determinations of the fairness of the compensation
paid to such affiliated person, not less often than annually.
Part III originally went into effect when it was approved (i) by a
vote of the Trustees, including the Independent Trustees, with votes cast
in person at a meeting called for the purpose of voting on Part III of the
Plan; and (ii) by a vote of holders of at least a "majority" (as so
defined) of the outstanding voting securities of the Class I Shares Class.
Part III has continued, and will, unless terminated as thereinafter
provided, continue in effect, until the April 30 next succeeding such
effectiveness, and from year to year thereafter only so long as such
continuance is specifically approved at least annually by the Trust's
Trustees and its Independent Trustees with votes cast in person at a
meeting called for the purpose of voting on such continuance. Part III may
be terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
1940 Act) of the outstanding voting securities of the Trust to which Part
III applies. Part III may not be amended to increase materially the amount
of payments to be made without shareholder approval of the class or classes
of shares affected by Part III as set forth in (ii) above, and all
amendments must be approved in the manner set forth in (i) above.
In the case of a Qualified Recipient which is a principal underwriter
of the Trust, the Class I Plan Agreement shall be the agreement
contemplated by Section 15(b) of the 1940 Act since each such agreement
must be approved in accordance with, and contain the provisions required
by, the Rule. In the case of Qualified Recipients which are not principal
underwriters of the Trust, the Class I Plan Agreements with them shall be
(i) their agreements with the Distributor with respect to payments under
the Trust's Distribution Plan in effect prior to April 1, 1996 or (ii)
Class I Plan Agreements entered into thereafter.
Defensive Provisions (Part IV)
Another part of the Plan (Part IV) states that if and to the extent
that any of the payments listed below are considered to be "primarily
intended to result in the sale of" shares issued by the Trust within the
meaning of Rule 12b-1, such payments are authorized under the Plan: (i) the
costs of the preparation of all reports and notices to shareholders and the
costs of printing and mailing such reports and notices to existing
shareholders, irrespective of whether such reports or notices contain or
are accompanied by material intended to result in the sale of shares of the
Trust or other funds or other investments; (ii) the costs of the
preparation and setting in type of all prospectuses and statements of
additional information and the costs of printing and mailing all
prospectuses and statements of additional information to existing
shareholders; (iii) the costs of preparation, printing and mailing of any
proxy statements and proxies, irrespective of whether any such proxy
statement includes any item relating to, or directed toward, the sale of
the Trust's shares; (iv) all legal and accounting fees relating to the
preparation of any such reports, prospectuses, statements of additional
information, proxies and proxy statements; (v) all fees and expenses
relating to the registration or qualification of the Trust and/or its
shares under the securities or "Blue-Sky" laws of any jurisdiction; (vi)
all fees under the Securities Act of 1933 and the 1940 Act, including fees
in connection with any application for exemption relating to or directed
toward the sale of the Trust's shares; (vii) all fees and assessments of
the Investment Company Institute or any successor organization,
irrespective of whether some of its activities are designed to provide
sales assistance; (viii) all costs of the preparation and mailing of
confirmations of shares sold or redeemed or share certificates, and reports
of share balances; and (ix) all costs of responding to telephone or mail
inquiries of investors or prospective investors.
The Plan states that while it is in effect, the selection and
nomination of those Trustees of the Trust who are not "interested persons"
of the Trust shall be committed to the discretion of such disinterested
Trustees but that nothing in the Plan shall prevent the involvement of
others in such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such disinterested
Trustees.
The Plan defines as the Trust's Independent Trustees those Trustees
who are not "interested persons" of the Trust as defined in the 1940 Act
and who have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan. The Plan, unless
terminated as therein provided, continues in effect from year to year only
so long as such continuance is specifically approved at least annually by
the Trust's Board of Trustees and its Independent Trustees with votes cast
in person at a meeting called for the purpose of voting on such
continuance. In voting on the implementation or continuance of the Plan,
those Trustees who vote to approve such implementation or continuance must
conclude that there is a reasonable likelihood that the Plan will benefit
the Trust and its shareholders. The Plan may be terminated at any time by
vote of a majority of the Independent Trustees or by the vote of the
holders of a "majority" (as defined in the 1940 Act) of the outstanding
voting securities of the Trust. The Plan may not be amended to increase
materially the amount of payments to be made without shareholder approval
and all amendments must be approved in the manner set forth above as to
continuance of the Plan.
The Plan and each Part of it shall also be subject to all applicable
terms and conditions of Rule 18f-3 under the 1940 Act as now in force or
hereafter amended. Specifically, but without limitation, the provisions of
Part IV shall be deemed to be severable, within the meaning of and to the
extent required by Rule 18f-3, with respect to each outstanding class of
shares of the Trust.
Payments Under the Plan
During the fiscal years ended September 30, 1999, 1998 and 1997
payments were made only under Part I and Part II of the Plan. All payments
were to Qualified Recipients and were made were for compensation. During
those periods, no payments were made under Part III or Part IV of the
Plan.
Payments to Qualified Recipients
During the fiscal years ended September 30, 1999, 1998 and 1997,
$482,779, $476,542 and $459,662, respectively, was paid under Part I of the
Plan to Qualified Recipients with respect to Class A Shares, of which
$14,550, $14,437 and $12,019, respectively, was retained by the
Distributor. During the fiscal years ended September 30, 1999, 1998 and
1997, respectively, $15,831, $7,431 and $4,910, was paid under Part II of
the Plan to Qualified Recipients with respect to Class C Shares.
Shareholder Services Plan
The Trust has adopted a Shareholder Services Plan (the "Services
Plan") to provide for the payment with respect to Class C Shares and Class
I Shares of the Trust of "Service Fees" within the meaning of the Conduct
Rules of the National Association of Securities Dealers, Inc. The Services
Plan applies only to the Class C Shares and Class I Shares of the Trust
(regardless of whether such class is so designated or is redesignated by
some other name).
Provisions for Level-Payment Class Shares (Part I)
As used in Part I of the Services Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor"), including but not limited to the Distributor and any other
principal underwriter of the Trust, who have, pursuant to written
agreements with the Trust or the Distributor, agreed to provide personal
services to shareholders of Level-Payment Class Shares and/or maintenance
of Level-Payment Class Shares shareholder accounts. "Qualified Holdings"
shall mean, as to any Qualified Recipient, all Level-Payment Class Shares
beneficially owned by such Qualified Recipient's customers, clients or
other contacts. "Manager" shall mean Aquila Management Corporation or any
successor serving as administrator of the Trust.
Subject to the direction and control of the Trust's Board of Trustees,
the Trust may make payments ("Service Fees") to Qualified Recipients, which
Service Fees (i) may be paid directly or through the Distributor or
shareholder servicing agent as disbursing agent and (ii) may not exceed,
for any fiscal year of the Trust (as adjusted for any part or parts of a
fiscal year during which payments under the Services Plan are not accruable
or for any fiscal year which is not a full fiscal year), 0.25 of 1% of the
average annual net assets of the Trust represented by the Level-Payment
Class Shares. Such payments shall be made only out of the Trust's assets
allocable to the Level-Payment Class Shares. The Distributor shall have
sole authority with respect to the selection of any Qualified Recipient or
Recipients and the amount of Service Fees, if any, paid to each Qualified
Recipient, provided that the total Service Fees paid to all Qualified
Recipients may not exceed the amount set forth above and provided, further,
that no Qualified Recipient may receive more than 0.25 of 1% of the average
annual net asset value of shares sold by such Recipient. The Distributor is
authorized, but not directed, to take into account, in addition to any
other factors deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient and (b) the extent to which
the Qualified Recipient has, at its expense, taken steps in the shareholder
servicing area with respect to holders of Level-Payment Class Shares,
including without limitation, any or all of the following activities:
answering customer inquiries regarding account status and history, and the
manner in which purchases and redemptions of shares of the Trust may be
effected; assisting shareholders in designating and changing dividend
options, account designations and addresses; providing necessary personnel
and facilities to establish and maintain shareholder accounts and records;
assisting in processing purchase and redemption transactions; arranging for
the wiring of funds; transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; verifying and guaranteeing
shareholder signatures in connection with redemption orders and transfers
and changes in shareholder designated accounts; and providing such other
related services as the Distributor or a shareholder may request from time
to time. Notwithstanding the foregoing two sentences, a majority of the
Independent Trustees (as defined below) may remove any person as a
Qualified Recipient. Amounts within the above limits accrued to a Qualified
Recipient but not paid during a fiscal year may be paid thereafter; if less
than the full amount is accrued to all Qualified Recipients, the difference
will not be carried over to subsequent years. Service Fees with respect to
Class C Shares will be paid to the Distributor for the first year.
During the fiscal years ended September 30, 1999, 1998 and 1997,
$5,277, $2,477 and $1,636, respectively, of Service Fees were paid to
Qualified Recipients with respect to the Trust's Class C Shares. All of
such payments were for compensation.
Provisions for Financial Intermediary Class Shares (Part II)
As used in Part II of the Services Plan, "Qualified Recipients" shall
mean broker-dealers or others selected by Aquila Distributors, Inc. (the
"Distributor"), including but not limited to the Distributor and any other
principal underwriter of the Trust, who have, pursuant to written
agreements with the Trust or the Distributor, agreed to provide personal
services to shareholders of Financial Intermediary Class Shares,
maintenance of Financial Intermediary Class Shares shareholder accounts
and/or pursuant to specific agreements entering confirmed purchase orders
on behalf of customers or clients. "Qualified Holdings" shall mean, as to
any Qualified Recipient, all Financial Intermediary Class Shares
beneficially owned by such Qualified Recipient's customers, clients or
other contacts. "Manager" shall mean Aquila Management Corporation or any
successor serving as administrator of the Trust.
Subject to the direction and control of the Trust's Board of
Trustees, the Trust may make payments ("Service Fees") to Qualified
Recipients, which Service Fees (i) may be paid directly or through the
Distributor or shareholder servicing agent as disbursing agent and (ii) may
not exceed, for any fiscal year of the Trust (as adjusted for any part or
parts of a fiscal year during which payments under the Services Plan are
not accruable or for any fiscal year which is not a full fiscal year), 0.25
of 1% of the average annual net assets of the Trust represented by the
Financial Intermediary Class Shares. Such payments shall be made only out
of the Trust's assets allocable to the Financial Intermediary Class Shares.
The Distributor shall have sole authority with respect to the selection of
any Qualified Recipient or Recipients and the amount of Service Fees, if
any, paid to each Qualified Recipient, provided that the total Service Fees
paid to all Qualified Recipients may not exceed the amount set forth above
and provided, further, that no Qualified Recipient may receive more than
0.25 of 1% of the average annual net asset value of shares sold by such
Recipient. The Distributor is authorized, but not directed, to take into
account, in addition to any other factors deemed relevant by it, the
following: (a) the amount of the Qualified Holdings of the Qualified
Recipient and (b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area with respect to
holders of Financial Intermediary Class Shares, including without
limitation, any or all of the following activities: answering customer
inquiries regarding account status and history, and the manner in which
purchases and redemptions of shares of the Trust may be effected; assisting
shareholders in designating and changing dividend options, account
designations and addresses; providing necessary personnel and facilities to
establish and maintain shareholder accounts and records; assisting in
processing purchase and redemption transactions; arranging for the wiring
of funds; transmitting and receiving funds in connection with customer
orders to purchase or redeem shares; verifying and guaranteeing shareholder
signatures in connection with redemption orders and transfers and changes
in shareholder designated accounts; and providing such other related
services as the Distributor or a shareholder may request from time to time.
Notwithstanding the foregoing two sentences, a majority of the Independent
Trustees (as defined below) may remove any person as a Qualified Recipient.
Amounts within the above limits accrued to a Qualified Recipient but not
paid during a fiscal year may be paid thereafter; if less than the full
amount is accrued to all Qualified Recipients, the difference will not be
carried over to subsequent years. No payments with respect to Class I
Shares were made as of the fiscal year ended September 30, 1999.
General Provisions
While the Services Plan is in effect, the Trust's Distributor shall
report at least quarterly to the Trust's Trustees in writing for their
review on the following matters: (i) all Service Fees paid under the
Services Plan, the identity of the Qualified Recipient of each payment, and
the purposes for which the amounts were expended; and (ii) all fees of the
Trust to the Distributor paid or accrued during such quarter. In addition,
if any Qualified Recipient is an "affiliated person," as that term is
defined in the 1940 Act, of the Trust, Manager, Sub-Adviser or Distributor,
such person shall agree to furnish to the Distributor for transmission to
the Board of Trustees of the Trust an accounting, in form and detail
satisfactory to the Board of Trustees, to enable the Board of Trustees to
make the determinations of the fairness of the compensation paid to such
affiliated person, not less often than annually.
The Services Plan has been approved by a vote of the Trustees,
including those Trustees who, at the time of such vote, were not
"interested persons" (as defined in the 1940 Act) of the Trust and had no
direct or indirect financial interest in the operation of the Services Plan
or in any agreements related to the Services Plan (the "Independent
Trustees"), with votes cast in person at a meeting called for the purpose
of voting on the Services Plan. It will continue in effect for a period of
more than one year from its original effective date only so long as such
continuance is specifically approved at least annually as set forth in the
preceding sentence. It may be amended in like manner and may be terminated
at any time by vote of the Independent Trustees.
The Services Plan shall also be subject to all applicable terms and
conditions of Rule 18f-3 under the 1940 Act as now in force or hereafter
amended.
While the Services Plan is in effect, the selection and nomination of
those Trustees of the Trust who are not "interested persons" of the Trust,
as that term is defined in the 1940 Act, shall be committed to the
discretion of such disinterested Trustees. Nothing therein shall prevent
the involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority of
such disinterested Trustees.
Transfer Agent, Custodian and Auditors
The Trust's Shareholder Servicing Agent (transfer agent) is PFPC Inc.,
400 Bellevue Parkway, Wilmington, Delaware 19809.
The Trust's Custodian, Bank One Trust Company, N.A., 100 East Broad
Street, Columbus, Ohio 43271, is responsible for holding the Trust's
assets.
The Trust's auditors, KPMG LLP, 345 Park Avenue, New York, New York,
10154, perform an annual audit of the Trust's financial statements.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokerage allocation and other practices relating to purchases and
sales of the Trust's securities are set forth in the description of the Sub-
Advisory Agreement. It provides that the Sub-Adviser shall select such
broker-dealers ("dealers") as shall, in the Sub-Adviser's judgment,
implement the policy of the Trust to achieve "best execution," i.e.,
prompt, efficient, and reliable execution of orders at the most favorable
net price. The Sub-Adviser shall cause the Trust to deal directly with the
selling or purchasing principal or market maker without incurring brokerage
commissions unless the Sub-Adviser determines that better price or
execution may be obtained by paying such commissions; the Trust expects
that most transactions will be principal transactions at net prices and
that the Trust will incur little or no brokerage costs. The Trust
understands that purchases from underwriters include a commission or
concession paid by the issuer to the underwriter and that principal
transactions placed through dealers include a spread between the bid and
asked prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer will
provide best execution, the dealer's reliability, integrity, financial
condition and risk in positioning the securities involved, as well as the
difficulty of the transaction in question, and thus need not pay the lowest
spread or commission available if the Sub-Adviser determines in good faith
that the amount of commission is reasonable in relation to the value of the
brokerage and research services provided by the dealer, viewed either in
terms of the particular transaction or the Sub-Adviser's overall
responsibilities. If, on the foregoing basis, the transaction in question
could be allocated to two or more dealers, the Sub-Adviser is authorized,
in making such allocation, to consider (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a dealer
has sold shares of the Trust. Such research may be in written form or
through direct contact with individuals and may include quotations on
portfolio securities and information on particular issuers and industries,
as well as on market, economic, or institutional activities. The Trust
recognizes that no dollar value can be placed on such research services or
on execution services and that such research services may or may not be
useful to the Trust and may be used for the benefit of the Sub-Adviser or
its other clients.
CAPITAL STOCK
The Trust has four classes of shares.
* Front-Payment Class Shares ("Class A Shares") are offered to anyone
at net asset value plus a sales charge, paid at the time of purchase,
at the maximum rate of 4.0% of the public offering price, with lower
rates for larger purchases. Class A Shares are subject to an asset
retention service fee under the Trust's Distribution Plan at the rate
of 0.15 of 1% of the average annual net assets represented by the
Class A Shares.
* Level-Payment Class Shares ("Class C Shares") are offered to anyone
at net asset value with no sales charge payable at the time of
purchase but with a level charge for service and distribution fees for
six years after the date of purchase at the aggregate annual rate of
1% of the average annual net assets of the Class C Shares. Six years
after the date of purchase, Class C Shares are automatically converted
to Class A Shares. If you redeem Class C Shares before you have held
them for 12 months from the date of purchase you will pay a contingent
deferred sales charge ("CDSC"); this charge is 1%, calculated on the
net asset value of the Class C Shares at the time of purchase or at
redemption, whichever is less. There is no CDSC after Class C Shares
have been held beyond the applicable period. For purposes of applying
the CDSC and determining the time of conversion, the 12-month and
six-year holding periods are considered modified by up to one month
depending upon when during a month your purchase of such shares is
made.
Institutional Class Shares ("Class Y Shares") are offered only to
institutions acting for investors in a fiduciary, advisory, agency,
custodial or similar capacity, and are not offered directly to retail
customers. Class Y Shares are offered at net asset value with no sales
charge, no redemption fee, no contingent deferred sales charge and no
distribution fee.
Financial Intermediary Class Shares ("Class I Shares") are offered and
sold only through financial intermediaries with which Aquila
Distributors, Inc. has entered into sales agreements, and are not
offered directly to retail customers. Class I Shares are offered at
net asset value with no sales charge and no redemption fee or
contingent deferred sales charge, although a financial intermediary
may charge a fee for effecting a purchase or other transaction on
behalf of its customers. Class I Shares may carry a distribution fee
of up to 0.25 of 1% of average annual net assets allocable to Class I
Shares, currently 0.10 of 1% of such net assets, and a service fee of
0.25 of 1% of such assets.
The Trust's four classes of shares differ in their different sales
charge structures and ongoing expenses, which are likely to be reflected in
differing yields and other measures of investment performance. All four
classes represent interests in the same portfolio of Oregon Obligations and
have the same rights, except that each class bears the separate expenses,
if any, of its participation in the Distribution Plan and Shareholder
Services Plan and has exclusive voting rights with respect to such
participation.
At any meeting of shareholders, shareholders are entitled to one vote
for each dollar of net asset value (determined as of the record date for
the meeting) per share held (and proportionate fractional votes for
fractional dollar amounts). Shareholders will vote on the election of
Trustees and on other matters submitted to the vote of shareholders. Shares
vote by classes on any matter specifically affecting one or more classes,
such as an amendment of an applicable part of the Distribution Plan. No
amendment, whether or not affecting the rights of the shareholders, may be
made to the Declaration of Trust without the affirmative vote of the
holders of a majority of the outstanding shares of the Trust, except that
the Trust's Board of Trustees may change the name of the Trust.
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares and to divide or combine the shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Trust. Each share represents an
equal proportionate interest in the Trust with each other share of its
class; shares of the respective classes represent proportionate interests
in the Trust in accordance with their respective net asset values. Upon
liquidation of the Trust, shareholders are entitled to share pro-rata in
the net assets of the Trust available for distribution to shareholders, in
accordance with the respective net asset values of the shares of each of
the Trust's classes at that time. All shares are presently divided into
four classes; however, if they deem it advisable and in the best interests
of shareholders, the Board of Trustees of the Trust may create additional
classes of shares, which may differ from each other as provided in rules
and regulations of the Securities and Exchange Commission or by exemptive
order. The Board of Trustees may, at its own discretion, create additional
series of shares, each of which may have separate assets and liabilities
(in which case any such series will have a designation including the word
"Series"). Shares are fully paid and non-assessable, except as set forth in
the next paragraph; the holders of shares have no pre-emptive or conversion
rights, except that Class C Shares automatically convert to Class A Shares
after being held for six years.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of a trust such as
the Trust, may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. For shareholder protection,
however, an express disclaimer of shareholder liability for acts or
obligations of the Trust is contained in the Declaration of Trust, which
requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of the Trust.
The Declaration of Trust provides for indemnification out of the Trust's
property of any shareholder held personally liable for the obligations of
the Trust. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the Trust and satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote circumstances in
which the Trust itself would be unable to meet its obligations. In the
event the Trust had two or more Series, and if any such Series were to be
unable to meet the obligations attributable to it (which, as is the case
with the Trust, is relatively remote), the other Series would be subject to
such obligations, with a corresponding increase in the risk of the
shareholder liability mentioned in
the prior sentence.
PURCHASE, REDEMPTION, AND PRICING OF SHARES
The following supplements the information about purchase, redemption
and pricing of shares set forth in the Prospectus
Sales Charges for Purchases of $1 Million or More of Class A Shares
You will not pay a sales charge at the time of purchase when you
purchase "CDSC Class A Shares." CDSC Class A Shares are Class A Shares
issued under the following circumstances:
(i) Class A Shares issued in a single purchase of $1 million
or more by a single purchaser; and
(ii) all Class A Shares issued to a single purchaser in a
single purchase when the value of the purchase, together with the
value of the purchaser's other CDSC Class A Shares and Class A
Shares on which a sales charge has been paid, equals or exceeds
$1 million.
See "Special Dealer Arrangements" for other circumstances under
which Class A Shares are considered CDSC Class A Shares. CDSC Class A
Shares do not include: (i)Class A Shares purchased without a sales charge
as described under "General" below and (ii)Class A Shares purchased in
transactions of less than $1 million when certain special dealer
arrangements are not in effect under "Certain Investment Companies" set
forth under "Reduced Sales Charges," below.
Broker/Dealer Compensation - Class A Shares
Upon notice to all selected dealers, the Distributor may distribute
up to the full amount of the applicable sales charge to broker/dealers.
Under the Securities Act of 1933, broker/dealers may be deemed to be
underwriters during periods when they receive all, or substantially all, of
the sales charge.
Redemption of CDSC Class A Shares
If you redeem all or part of your CDSC Class A Shares during the
four years after you purchase them, you must pay a special contingent
deferred sales charge upon redemption.
You will pay 1% of the Redemption Value if you redeem within the
first two years after purchase, and 0.50 of 1% of the Redemption Value if
you redeem within the third or fourth year.
This charge is based on the "Redemption Value" of your shares which
is the lesser of: (i) the net asset value when you purchased the CDSC Class
A Shares you are redeeming; or (ii) the net asset value at the time of your
redemption.
This special charge also applies to CDSC Class A Shares purchased
without a sales charge pursuant to a Letter of Intent (see "Reduced Sales
Charges for Certain Purchases of Class A Shares"). This special charge will
not apply to shares acquired through the reinvestment of dividends or
distributions on CDSC Class A Shares or to CDSC Class A Shares held for
longer than four years. When redeeming shares, the Agent will redeem the
CDSC Class A Shares held the longest, unless otherwise instructed. If you
own both CDSC and non-CDSC Class A Shares, the latter will be redeemed
first.
The Trust will treat all CDSC Class A Shares purchases made during
a calendar month as if they were made on the first business day of that
month at the average cost of all purchases made during that month.
Therefore, the four-year holding period will end on the first business day
of the 48th calendar month after the date of those purchases. Accordingly,
the holding period may, in fact, be one month less than the full 48
depending on when your actual purchase was made. If you exchange your CDSC
Class A Shares for shares of an Aquila money-market fund (see "Exchange
Privilege" below), running of the 48-month holding period for those
exchanged shares will be suspended.
Broker/Dealer Compensation - CDSC Class A Shares
The Distributor currently intends to pay any dealer executing a purchase of
CDSC Class A Shares as follows:
Amount of Purchase Amount Distributed
To Broker/Dealer as a %
of Purchase Price
$1 million but less than $2.5 million 1%
$2.5 million but less than $5 million 0.50 of 1%
$5 million or more 0.25 of 1%
Reduced Sales Charges for Certain Purchases of Class A Shares
Right of Accumulation
"Single purchasers" may qualify for a reduced sales charge in
accordance with the above schedule when making subsequent purchases of
Class A Shares. A reduced sales charge applies if the cumulative value
(based on purchase cost or current net asset value, whichever is higher) of
Class A Shares previously purchased with a sales charge, together with
Class A Shares of your subsequent purchase, also with a sales charge,
amounts to $25,000 or more.
Letters of Intent
"Single purchasers" may also qualify for reduced sales charges, in
accordance with the above schedule, after a written Letter of Intent
(included with the Application) is received by the Distributor. The Letter
of Intent confirms that you intend to purchase, within a thirteen-month
period, Class A Shares of the Trust through a single selected dealer or the
Distributor. Class A Shares of the Trust which you previously purchased
within 90 days prior to the Distributor's receipt of your Letter of Intent
and which you still own may also be included in determining the applicable
reduction. For more information, including escrow provisions, see Letter of
Intent provisions of the Application.
General
Class A Shares may be purchased without a sales charge by:
* the Trust's Trustees and officers,
* the directors, officers and certain employees, retired
employees and representatives of the Adviser, Administrator,
Distributor and their parents and/or affiliates,
* selected dealers and brokers and their officers and
employees,
* certain persons connected with firms providing legal,
advertising or public relations assistance,
* certain family members of, and plans for the benefit of, the
foregoing,
* and plans for the benefit of trust or similar clients of
banking institutions over which these institutions have full
investment authority, if the Distributor has an agreement
relating to such purchases.
Except for the last category, purchasers must give written
assurance that the purchase is for investment and that the Class A Shares
will not be resold except through redemption. Since there may be tax
consequences of these purchases, your tax advisor should be consulted.
Class A Shares may also be issued without a sales charge in a
merger, acquisition or exchange offer made pursuant to a plan of
reorganization to which the Trust is a party.
The Trust permits the sale of its Class A Shares at prices that
reflect the reduction or elimination of the sales charge to investors who
are members of certain qualified groups.
A qualified group is a group or association, or a category of
purchasers who are represented by a fiduciary, professional or other
representative (other than a registered broker-dealer), which
(i) satisfies uniform criteria which enable the Distributor to
realize economies of scale in its costs of distributing shares;
(ii) gives its endorsement or authorization (if it is a group or
association) to an investment program to facilitate solicitation
of its membership by a broker or dealer; and
(iii) complies with the conditions of purchase that make up an
agreement between the Trust and the group, representative or
broker or dealer.
At the time of purchase, the Distributor must receive information
sufficient to permit verification that the purchase qualifies for a reduced
sales charge, either directly or through a broker or dealer.
Certain Investment Companies
Class A Shares of the Trust may be purchased without sales charge
from proceeds of a redemption, made within 120 days prior to such purchase,
of shares of an investment company (not a member of the Aquilasm Group of
Funds) on which a sales charge, including a contingent deferred sales
charge, has been paid. Additional information is available from the
Distributor.
To qualify, follow these special procedures:
1. Send a completed Application (included with the Prospectus)
and payment for the shares to be purchased directly to the
Distributor, Aquila Distributors, Inc., 380 Madison Avenue, Suite
2300, New York, NY 10017-2513. Do not send this material to the
address indicated on the Application.
2. Your completed Application must be accompanied by evidence
satisfactory to the Distributor that you, as the prospective
shareholder, have made a Qualifying Redemption in an amount at
least equal to the net asset value of the Class A Shares to be
purchased.
Satisfactory evidence includes a confirmation of the date
and the amount of the redemption from the investment company, its
transfer agent or the investor's broker or dealer, or a copy of
the investor's account statement with the investment company
reflecting the redemption transaction.
3. Complete and return to the Distributor a Transfer Request
Form, which is available from the Distributor.
The Trust reserves the right to alter or terminate this privilege
at any time without notice. The Prospectus will be supplemented to reflect
such alteration or termination.
Special Dealer Arrangements
During certain periods determined by the Distributor, the
Distributor (not the Trust) will pay to any dealer effecting a purchase of
Class A Shares of the Trust from the proceeds of a redemption of the shares
of an investment company (not a member of the Aquilasm Group of Funds), up
to 1% of the proceeds. The shareholder, however, will not be subject to any
sales charge. These arrangements will be in effect through March 31, 2000,
unless extended or earlier terminated by a supplement to the SAI.
Dealer payments will be made in up to 4 payments of 0.25 of 1% of
the proceeds over a four-year period. The first payment will be made
subsequent to receipt of the proper documentation detailed above. Future
payments, over the remaining years, will be made at the end of the quarter
of the anniversary month that the purchase of Class A Shares took place,
with respect to any part of the investment that remains in the Trust during
the entire time period. No payments will be made with respect to any shares
redeemed during the four-year period.
Additional Compensation for Broker/Dealers
The Distributor may compensate broker/dealers, above the normal
sales commissions, in connection with sales of any class of shares.
However, broker/dealers may receive levels of compensation which differ as
between classes of share sold.
The Distributor, not the Trust, will pay these additional expenses.
Therefore, the price you pay for shares and the amount that the Trust
receives from your payment will not be affected.
Additional compensation may include full or partial payment for:
* advertising of the Trust's shares;
* payment of travel expenses, including lodging, for
attendance at sales seminars by qualifying registered
representatives; and/or
* other prizes or financial assistance to broker/dealers
conducting their own seminars or conferences.
Such compensation may be limited to broker/dealers whose
representatives have sold or are expected to sell significant amounts of
the Trust's shares. However, broker/dealers may not use sales of the
Trust's shares to qualify for additional compensation to the extent such
may be prohibited by the laws of any state or self-regulatory agency, such
as the National Association of Securities Dealers, Inc.
The cost to the Distributor of such promotional activities and such
payments to participating dealers will not exceed the amount of the sales
charges in respect of sales of all classes of shares of the Trust effected
through such participating dealers, whether retained by the Distributor or
re-allowed to participating dealers. Any of the foregoing payments to be
made by the Distributor may be made instead by the Administrator out of its
own funds, directly or through the Distributor.
Automatic Withdrawal Plan
You may establish an Automatic Withdrawal Plan if you own or
purchase Class A Shares or Class Y Shares of the Trust having a net asset
value of at least $5,000. The Automatic Withdrawal Plan is not available
for Class C Shares or Class I Shares.
Under an Automatic Withdrawal Plan you will receive a monthly or
quarterly check in a stated amount, not less than $50. If such a plan is
established, all dividends and distributions must be reinvested in your
shareholder account. Redemption of Class A Shares to make payments under
the Automatic Withdrawal Plan will give rise to a gain or loss for tax
purposes. (See the Automatic Withdrawal Plan provisions of the Application
included with the Prospectus.
Purchases of additional Class A Shares concurrently with
withdrawals are undesirable because of sales charges when purchases are
made. Accordingly, you may not maintain an Automatic Withdrawal Plan while
simultaneously making regular purchases. While an occasional lump sum
investment may be made, such investment should normally be an amount at
least equal to three times the annual withdrawal or $5,000, whichever is
less.
Share Certificates
You may obtain Share certificates for full Class A Shares only if
you make a written request to the Agent. All share certificates previously
issued by the Trust represent Class A Shares. If you lose the certificates,
you may incur delay and expense when redeeming shares or having the
certificates reissued.
Share certificates will not be issued:
* for fractional Class A Shares;
* if you have selected Automatic Investment or Telephone
Investment for Class A Shares.
* if you have selected Expedited Redemption. However, if you
specifically request, Class A Share certificates will be issued
with a concurrent automatic suspension of Expedited Redemption on
your account.
Share certificates will not be issued for Class C Shares, Class Y
Shares or Class I Shares.
Reinvestment privilege
If you reinvest proceeds of redemption within 120 days of a
redemption you will not have to pay any additional sales charge on the
reinvestment. You must reinvest in the same class as the shares redeemed.
You may exercise this privilege only once a year, unless otherwise approved
by the Distributor.
The Distributor will refund to you any CDSC deducted at the time of
redemption by adding it to the amount of your reinvestment. The Class C or
CDSC Class A Shares purchased upon reinvestment will be deemed to have been
outstanding from the date of your original purchase of the redeemed shares,
less the period from redemption to reinvestment.
Reinvestment will not alter the tax consequences of your original
redemption.
Exchange Privilege
There is an exchange privilege as set forth below among this Trust,
certain tax-free municipal bond funds and equity funds (together with the
Trust, the "Bond or Equity Funds") and certain money-market funds (the
"Money-Market Funds"), all of which are sponsored by Aquila Management
Corporation and Aquila Distributors, Inc., and have the same Manager or
Administrator and Distributor as the Trust. All exchanges are subject to
certain conditions described below. As of the date of the Prospectus, the
Aquila-sponsored Bond or Equity Funds are this Trust, Aquila Rocky Mountain
Equity Fund, Aquila Cascadia Equity Fund, Hawaiian Tax-Free Trust, Tax-Free
Trust of Arizona, Churchill Tax-Free Fund of Kentucky, Tax-Free Fund of
Colorado, Tax-Free Fund For Utah and Narragansett Insured Tax-Free Income
Fund; the Aquila Money-Market Funds are Capital Cash Management Trust,
Pacific Capital Cash Assets Trust (Original Shares), Pacific Capital
Tax-Free Cash Assets Trust (Original Shares), Pacific Capital U.S.
Government Securities Cash Assets Trust (Original Shares) and Churchill
Cash Reserves Trust.
Generally, you can exchange shares of a given class of a Bond or
Equity Fund including the Trust for shares of the same class of any other
Bond or Equity Fund, or for shares of any Money-Market Fund, without the
payment of a sales charge or any other fee, and there is no limit on the
number of exchanges you can make from fund to fund. Similar exchangability
is available to Class I Shares to the extent that other Aquila-sponsored
funds are made available to its customers by a financial intermediary. All
exchanges of Class I Shares must be made through your financial
intermediary. The following important information should be noted:
(1) CDSCs Upon Redemptions of Shares Acquired Through Exchanges. If
you exchange shares subject to a CDSC, no CDSC will be imposed at the time
of exchange, but the shares you receive in exchange for them will be
subject to the applicable CDSC if you redeem them before the requisite
holding period (extended, if required) has expired.
If the shares you redeem would have incurred a CDSC if you had not
made any exchanges, then the same CDSC will be imposed upon the redemption
regardless of the exchanges that have taken place since the original
purchase.
(2) Extension of Holding Periods by Owning Money-Market Funds. Any
period of 30 days or more during which Money-Market Fund shares received on
an exchange of CDSC Class A Shares or Class C Shares are held is not
counted in computing the applicable holding period for CDSC Class A Shares
or Class C Shares.
(3) Originally Purchased Money-Market Fund Shares. Shares of a Money-
Market Fund (and any shares acquired as a result of reinvestment of
dividends and/or distributions on these shares) acquired directly in a
purchase (or in exchange for Money-Market Fund shares that were themselves
directly purchased), rather than in exchange for shares of a Bond or Equity
Fund, may be exchanged for shares of any class of any Bond or Equity Fund
that the investor is otherwise qualified to purchase, but the shares
received in such an exchange will be subject to the same sales charge, if
any, that they would have been subject to had they been purchased rather
than acquired in exchange for Money-Market Fund shares. If the shares
received in exchange are shares that would be subject to a CDSC if
purchased directly, the holding period governing the CDSC will run from the
date of the exchange, not from the date of the purchase of Money-Market
Fund shares.
This Trust, as well as the Money-Market Funds and other Bond or Equity
Funds, reserves the right to reject any exchange into its shares, if shares
of the fund into which exchange is desired are not available for sale in
your state of residence. The Trust may also modify or terminate this
exchange privilege at any time. In the case of termination, the Prospectus
will be appropriately supplemented. No such modification or termination
shall take effect on less than 60 days' written notice to shareholders.
All exercises of the exchange privilege are subject to the conditions
that (i) the shares being acquired are available for sale in your state of
residence; (ii) the aggregate net asset value of the shares surrendered for
exchange is at least equal to the minimum investment requirements of the
investment company whose shares are being acquired and (iii) the ownership
of the accounts from which and to which the exchange is made are identical.
The Agent will accept telephone exchange instructions from anyone. To
make a telephone exchange telephone:
800-872-6735 toll free
Note: The Trust, the Agent, and the Distributor will not be
responsible for any losses resulting from unauthorized telephone
transactions if the Agent follows reasonable procedures designed to verify
the identity of the caller. The Agent will request some or all of the
following information: account name(s) and number, name of the caller, the
social security number registered to the account and personal
identification. The Agent may also record calls. You should verify the
accuracy of confirmation statements immediately upon receipt.
Exchanges will be effected at the relative exchange prices of the
shares being exchanged next determined after receipt by the Agent of your
exchange request. The exchange prices will be the respective net asset
values of the shares, unless a sales charge is to be deducted in connection
with an exchange of shares, in which case the exchange price of shares of a
Bond or Equity Fund will be their public offering price. Prices for
exchanges are determined in the same manner as for purchases of the Trust's
shares. (See "How to Invest in the Trust.")
An exchange is treated for Federal tax purposes as a redemption and
purchase of shares and may result in the realization of a capital gain or
loss, depending on the cost or other tax basis of the shares exchanged and
the holding period (see "Tax Effects of Redemptions"); no representation is
made as to the deductibility of any such loss should such occur.
Dividends paid by the Money-Market Funds are taxable, except to the
extent that a portion or all of the dividends paid by Pacific Capital
Tax-Free Cash Assets Trust (a tax-free money-market Fund) are exempt from
regular Federal income tax, and to the extent that a portion or all of the
dividends paid by Pacific Capital U.S. Government Securities Cash Assets
Trust (which invests in U.S. Government obligations) are exempt from state
income taxes. Dividends paid by Aquila Rocky Mountain Equity Fund and
Aquila Cascadia Equity Fund are taxable. If your state of residence is not
the same as that of the issuers of obligations in which a tax-free
municipal bond fund or a tax-free money-market fund invests, the dividends
from that fund may be subject to income tax of the state in which you
reside. Accordingly, you should consult your tax adviser before acquiring
shares of such a bond fund or a tax-free money-market fund under the
exchange privilege arrangement.
If you are considering an exchange into one of the funds listed above,
you should send for and carefully read its Prospectus.
Conversion of Class C Shares
Conversion of Class C Shares into Class A Shares will be effected at
relative net asset values on the first business day of the month following
that in which the sixth anniversary of your purchase of the Class C Shares
occurred, except as noted below. Accordingly, the holding period applicable
to your Class C Shares may be up to one month more than the six years
depending upon when your actual purchase was made during a month. Because
the per share value of Class A Shares may be higher than that of Class C
Shares at the time of conversion, you may receive fewer Class A Shares than
the number of Class C Shares converted. If you have made one or more
exchanges of Class C Shares among the Aquila-sponsored Bond or Equity Funds
under the Exchange Privilege, the six-year holding period is deemed to have
begun on the date you purchased your original Class C Shares of the Trust
or of another of the Aquila Bond or Equity Funds. The six-year holding
period will be suspended by one month for each period of thirty days during
which you hold shares of a Money-Market Fund you have received in exchange
for Class C Shares under the Exchange Privilege.
"Transfer on Death" Registration (Not Available for Class I Shares)
Each of the funds in the Aquilasm Group of Funds now permits
registration of its shares in beneficiary form, subject to the funds' rules
governing Transfer on Death ("TOD") registration, if the investor resides
in a state that has adopted the Uniform Transfer on Death Security
Registration Act (a "TOD State"; for these purposes, Missouri is deemed to
be a TOD State). This form of registration allows you to provide that, on
your death, your shares are to be transferred to the one or more persons
that you specify as beneficiaries. To register shares of the Trust in TOD
form, complete the special TOD Registration Request Form and review the
Rules Governing TOD Registration; both are available from the Agent. The
Rules, which are subject to amendment upon 60 days' notice to TOD account
owners, contain important information regarding TOD accounts with the
Trust; by opening such an account you agree to be bound by them, and
failure to comply with them may result in your shares' not being
transferred to your designated beneficiaries. If you open a TOD account
with the Trust that is otherwise acceptable but, for whatever reason,
neither the Trust nor the Agent receives a properly completed TOD
Registration Request Form from you prior to your death, the Trust reserves
the right not to honor your TOD designation, in which case your account
will become part of your estate.
You are eligible for TOD registration only if, and as long as, you
reside in a TOD State. If you open a TOD account and your account address
indicates that you do not reside in a TOD State, your TOD registration will
be ineffective and the Trust may, in its discretion, either open the
account as a regular (non-TOD) account or redeem your shares. Such a
redemption may result in a loss to you and may have tax consequences.
Similarly, if you open a TOD account while residing in a TOD State and
later move to a non-TOD State, your TOD registration will no longer be
effective. In both cases, should you die while residing in a non-TOD State
the Trust reserves the right not to honor your TOD designation. At the date
of this SAI, most states are TOD States.
Computation of Net Asset Value
The net asset value of the shares of each of the Trust's classes is
determined as of 4:00 p.m., New York time, on each day that the New York
Stock Exchange is open, by dividing the value of the Trust's net assets
allocable to each class by the total number of its shares of such class
then outstanding. Securities having a remaining maturity of less than sixty
days when purchased and securities originally purchased with maturities in
excess of sixty days but which currently have maturities of sixty days or
less are valued at cost adjusted for amortization of premiums and accretion
of discounts. All other portfolio securities are valued at the mean between
bid and asked quotations which, for Oregon Obligations, may be obtained
from a reputable pricing service or from one or more broker-dealers dealing
in Oregon Obligations, either of which may, in turn, obtain quotations from
broker-dealers or banks which deal in specific issues. However, since
Oregon Obligations are ordinarily purchased and sold on a "yield" basis by
banks or dealers which act for their own account and do not ordinarily make
continuous offerings, quotations obtained from such sources may be subject
to greater fluctuations than is warranted by prevailing market conditions.
Accordingly, some or all of the Oregon Obligations in the Trust's portfolio
may be priced, with the approval of the Trust's Board of Trustees, by
differential comparisons to the market in other municipal bonds under
methods which include consideration of the current market value of tax-free
debt instruments having varying characteristics of quality, yield and
maturity. Any securities or assets for which market quotations are not
readily available are valued at their fair value as determined in good
faith under procedures established by and under the general supervision and
responsibility of the Trust's Board of Trustees. In the case of Oregon
Obligations, such procedures may include "matrix" comparisons to the prices
for other tax-free debt instruments on the basis of the comparability of
their quality, yield, maturity and other special factors, if any, involved.
With the approval of the Trust's Board of Trustees, the Adviser may at its
own expense and without reimbursement from the Trust employ a pricing
service, bank or broker-dealer experienced in such matters to perform any
of the above described functions.
As indicated above, the net asset value per share of the Trust's
shares will be determined on each day that the New York Stock Exchange is
open. That Exchange annually announces the days on which it will not be
open. The most recent announcement indicates that it will not be open on
the following days: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. However, the Exchange may close on days not included
in that announcement.
Reasons for Differences in Public Offering Price
As described herein and in the Prospectus, there are a number of
instances in which the Trust's Class A Shares are sold or issued on a basis
other than the maximum public offering price, that is, the net asset value
plus the highest sales charge. Some of these relate to lower or eliminated
sales charges for larger purchases, whether made at one time or over a
period of time as under a Letter of Intent or right of accumulation. The
reasons for these quantity discounts are, in general, that (i) they are
traditional and have long been permitted in the industry and are therefore
necessary to meet competition as to sales of shares of other funds having
such discounts; and (ii) they are designed to avoid an unduly large dollar
amount of sales charge on substantial purchases in view of reduced selling
expenses. Quantity discounts are made available to certain related persons
("single purchasers") for reasons of family unity and to provide a benefit
to tax-exempt plans and organizations.
The reasons for the other instances in which there are reduced or
eliminated sales charges for Class A Shares are as follows. Exchanges at
net asset value are permitted because a sales charge has already been paid
on the shares exchanged. Sales without sales charge are permitted to
Trustees, officers and certain others due to reduced or eliminated selling
expenses and/or since such sales may encourage incentive, responsibility
and interest and an identification with the aims and policies of the Trust.
Limited reinvestments of redemptions of Class A Shares and Class C Shares
at no sales charge are permitted to attempt to protect against mistaken or
incompletely informed redemption decisions. Shares may be issued at no
sales charge in plans of reorganization due to reduced or eliminated sales
expenses and since, in some cases, such issuance is exempted in the 1940
Act from the otherwise applicable restrictions as to what sales charge must
be imposed. In no case in which there is a reduced or eliminated sales
charge are the interests of existing shareholders adversely affected since,
in each case, the Trust receives the net asset value per share of all
shares sold or issued.
Limitation of Redemptions in Kind
The Trust has elected to be governed by Rule 18f-1 under the 1940 Act,
pursuant to which the Trust is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1 percent of the net asset value of the Trust
during any 90-day period for any one shareholder. Should redemptions by any
shareholder exceed such limitation, the Trust will have the option of
redeeming the excess in cash or in kind. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage costs in converting the
assets into cash. The method of valuing securities used to make redemptions
in kind will be the same as the method of valuing portfolio securities
described under "Net Asset Value Per Share" in the Prospectus, and such
valuation will be made as of the same time the redemption price is
determined.
ADDITIONAL TAX INFORMATION
Certain Exchanges
If you incur a sales commission on a purchase of shares of one mutual
fund (the original fund) and then sell such shares or exchange them for
shares of a different mutual fund without having held them at least 91
days, you must reduce the tax basis for the shares sold or exchanged to the
extent that the standard sales commission charged for acquiring shares in
the exchange or later acquiring shares of the original fund or another fund
is reduced because of the shareholder's having owned the original fund
shares. The effect of the rule is to increase your gain or reduce your loss
on the original fund shares. The amount of the basis reduction on the
original fund shares, however, is added on the investor's basis for the
fund shares acquired in the exchange or later acquired..
Tax Status of the Trust
During its last fiscal year, the Trust qualified as a "regulated
investment company" under the Internal Revenue Code and intends to continue
such qualification. A regulated investment company is not liable for
federal income taxes on amounts paid by it as dividends and distributions.
The Code, however, contains a number of complex qualifying tests.
Therefore, it is possible, although not likely, that the Trust might not
meet one or more of these tests in any particular year. If the Trust fails
to qualify, it would be treated for tax purposes as an ordinary
corporation. As a consequence, it would receive no tax deduction for
payments made to shareholders and would be unable to pay dividends and
distributions which would qualify as "exempt-interest dividends" or
"capital gains dividends."
UNDERWRITERS
Aquila Distributors, Inc. acts as the Trust's principal underwriter
in the continuous public offering of all of the Trust's classes of shares.
The Distributor is not obligated to sell a specific number of shares. Under
the Distribution Agreement, the Distributor is responsible for the payment
of certain printing and distribution costs relating to prospectuses and
reports as well as the costs of supplemental sales literature, advertising
and other promotional activities.
(1) (2) (3) (4) (5)
Name of Net Under- Compensation Brokerage Other
Principal writing on Redemptions Commissions Compen-
Underwriter Discounts and sation
and Repurchases
Commissions
Aquila $164,339 None None None(1)
Distributors
Inc.
(1) Amounts paid to the Distributor under the Trust's Distribution Plan
described in the Prospectus are for compensation.
PERFORMANCE
As noted in the Prospectus, the Trust may from time to time quote
various performance figures to illustrate its past performance.
Performance quotations by investment companies are subject to rules of
the Securities and Exchange Commission ("SEC"). These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Trust be
accompanied by certain standardized performance information computed as
required by the SEC. Current yield and average annual compounded total
return quotations used by the Trust are based on these standardized methods
and are computed separately for each of the Trust's classes of shares. Each
of these and other methods that may be used by the Trust are described in
the following material. Prior to April 6, 1996, the Trust had outstanding
only one class of shares which are currently designated "Class A Shares."
On that date the Trust began to offer shares of two other classes, Class C
Shares and Class Y Shares. During most of the historical periods listed
below, there were no Class C Shares or Class Y Shares outstanding and the
information below relates solely to Class A Shares unless otherwise
indicated. Class I Shares were first offered on January 31, 1998 and none
were outstanding during the periods indicated.
Total Return
Average annual total return is determined by finding the average
annual compounded rates of return over 1-, 5- and 10- year periods and a
period since the inception of the operations of the Trust (on June 16,
1986) that would equate an initial hypothetical $1,000 investment in shares
of each of the Trust's classes to the value such an investment would have
if it were completely redeemed at the end of each such period.
In the case of Class A Shares, the calculation assumes the maximum
sales charge is deducted from the hypothetical initial $1,000 purchase. In
the case of Class C Shares, the calculation assumes the applicable
contingent deferred sales charge ("CDSC") imposed on a redemption of Class
C Shares held for the period is deducted. In the case of Class Y Shares,
the calculation assumes that no sales charge is deducted and no CDSC is
imposed. For all classes, it is assumed that on each reinvestment date
during each such period any capital gains are reinvested at net asset
value, and all income dividends are reinvested at net asset value, without
sales charge (because the Trust does not impose any sales charge on
reinvestment of dividends for any class). The computation further assumes
that the entire hypothetical account was completely redeemed at the end of
each such period.
Investors should note that the maximum sales charge (4%) reflected in
the following quotations for Class A Shares is a one time charge, paid at
the time of initial investment. The greatest impact of this charge is
during the early stages of an investment in the Trust. Actual performance
will be affected less by this one time charge the longer an investment
remains in the Trust. Sales charges at the time of purchase are payable
only on purchases of Class A Shares of the Trust.
Average Annual Compounded Rates of Return:
Class A Shares Class C Shares Class Y Shares
One Year -4.58% -2.36% -0.39%
Five Years 4.63% N/A N/A
Ten Years 5.85% N/A N/A
Since
inception on
June 16, 1986 6.25% 3.80%(1) 5.15%(1)
(1) Period from April 6, 1996 (inception of class) through September 30,
1999.
These figures were calculated according to the following SEC formula:
P(1+T)n = ERV
where
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5- and 10-year
periods or the period since inception, at the end of each
such period.
The Trust may quote total rates of return in addition to its average
annual total return for each of its classes of shares. Such quotations are
computed in the same manner as the Trust's average annual compounded rate,
except that such quotations will be based on the Trust's actual return for
a specified period as opposed to its average return over the periods
described above.
Total Return
Class A Shares Class C Shares Class Y Shares
One Year -4.58% -2.36% -0.39%
Five Years 25.37% N/A N/A
Ten Years 76.50% N/A N/A
Since
inception on
June 16, 1986 123.90% 13.89%(1) 19.14%(1)
(1) Period from April 6, 1996 (inception of class) through September 30,
1999.
Yield
Current yield reflects the income per share earned by the Trust's
portfolio investments. Current yield is determined by dividing the net
investment income per share earned for each of the Trust's classes of
shares during a 30-day base period by the maximum offering price per share
on the last day of the period and annualizing the result. Expenses accrued
for the period include any fees charged to all shareholders of each class
during the base period net of fee waivers and reimbursements of expenses,
if any.
The Trust may also quote a taxable equivalent yield for each of its
classes of shares which shows the taxable yield that would be required to
produce an after-tax yield equivalent to that of a fund which invests in
tax-exempt obligations. Such yield is computed by dividing that portion of
the yield of the Trust (computed as indicated above) which is tax-exempt by
one minus the highest applicable combined Federal and Oregon income tax
rate (and adding the result to that portion of the yield of the Trust that
is not tax-exempt, if any).
The Oregon and the combined Oregon and Federal income tax rates upon
which the Trust's tax equivalent yield quotations are based are 9.0% and
46.12%, respectively. The latter rate reflects currently-enacted Federal
income tax law. From time to time, as any changes to such rates become
effective, tax equivalent yield quotations advertised by the Trust will be
updated to reflect such changes. Any tax rate increases will tend to make a
tax-free investment, such as the Trust, relatively more attractive than
taxable investments. Therefore, the details of specific tax increases may
be used in Trust sales material.
Yield for the 30-day period ended September 30, 1999 (the date of the
Trust's most recent audited financial statements):
Class A Shares Class C Shares Class Y Shares
Yield 4.24% 3.56% 4.56 %
Taxable
Equivalent
Yield 7.58% 6.37% 8.16%
These figures were obtained using the Securities and Exchange
Commission formula:
Yield = 2 [(a-b + 1)6-1]
cd
where:
a = interest earned during the period
b = expenses accrued for the period (net of waivers
and reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
Current Distribution Rate
Current yield and tax equivalent yield, which are calculated according
to a formula prescribed by the SEC, are not indicative of the amounts which
were or will be paid to the Trust's shareholders. Amounts paid to
shareholders are reflected in the quoted current distribution rate or
taxable equivalent distribution rate. The current distribution rate is
computed by (i) dividing the total amount of dividends per share paid by
the Trust during a recent 30-day period by (ii) the current maximum
offering price and by (iii) annualizing the result. A taxable equivalent
distribution rate shows the taxable distribution rate that would be
required to produce an after-tax distribution rate equivalent to the
Trust's current distribution rate (calculated as indicated above). The
current distribution rate can differ from the current yield computation
because it could include distributions to shareholders from additional
sources (i.e., sources other than dividends and interest), such as
short-term capital gains.
APPENDIX A
DESCRIPTION OF MUNICIPAL BOND RATINGS
Municipal Bond Ratings
Standard & Poor's. A Standard & Poor's municipal obligation rating is
a current assessment of the creditworthiness of an obligor with respect to
a specific obligation. This assessment may take into consideration obligors
such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer
or obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors rights.
AAA Debt rated "AAA" has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in small degree.
A Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Plus (+) or Minus (:): The ratings from "AA" to "B" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or the risk of default upon failure
of, such completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Moody's Investors Service. A brief description of the applicable
Moody's Investors Service rating symbols and their meanings follows:
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1 and B1.
Moody's Short Term Loan Ratings - There are four rating categories for
short-term obligations, all of which define an investment grade situation.
These are designated Moody's Investment Grade as MIG 1 through MIG 4. In
the case of variable rate demand obligations (VRDOs), two ratings are
assigned; one representing an evaluation of the degree of risk associated
with scheduled principal and interest payments, and the other representing
an evaluation of the degree of risk associated with the demand feature. The
short-term rating assigned to the demand feature of VRDOs is designated as
VMIG. When no rating is applied to the long or short-term aspect of a
VRDO, it will be designated NR. Issues or the features associated with MIG
or VMIG ratings are identified by date of issue, date of maturity or
maturities or rating expiration date and description to distinguish each
rating from other ratings. Each rating designation is unique with no
implication as to any other similar issue of the same obligor. MIG ratings
terminate at the retirement of the obligation while VMIG rating expiration
will be a function of each issuer's specific structural or credit features.
MIG1/VMIG1 This designation denotes best quality.
There is present strong protection by established cash
flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG2/VMIG2 This designation denotes high quality.
Margins of protection are ample although not so large
as in the preceding group.
MIG3/VMIG3 This designation denotes favorable
quality. All security elements are accounted for but
there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is
likely to be less well established.
MIG4/VMIG4 This designation denotes adequate
quality. Protection commonly regarded as required of an
investment security is present and although not
distinctly or predominantly speculative, there is
specific risk.
THE CASCADES TRUST
PART C: OTHER INFORMATION
Financial Statements
Tax-Free Trust of Oregon Portfolio:
Included in Part A:
Per Share Income and Capital Changes
Incorporated by reference into Part B:
Report of Independent Certified Public
Accountants
Statement of Assets and Liabilities as of
September 30, 1999
Statement of Operations for the year ended
September 30, 1999
Statement of Changes in Net Assets for the
years ended September 30, 1999 and 1998
Statement of Investments as of September 30, 1999
Notes to Financial Statements
Included in Part C:
Consent of Independent Certified Public
Accountants
ITEM 23 Exhibits:
(a) Supplemental Declaration of Trust Amending
and Restating the Declaration of Trust (ii)
(b) By-laws (v)
c) Instruments defining rights of shareholders
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares and to divide or
combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests
in the Trust. Each share represents an equal proportionate
interest in the Trust with each other share of its class; shares
of the respective classes represent proportionate interests in
the Trust in accordance with their respective net asset values.
Upon liquidation of the Trust, shareholders are entitled to share
pro-rata in the net assets of the Trust available for
distribution to shareholders, in accordance with the respective
net asset values of the shares of each of the Trust's classes at
that time. All shares are presently divided into four classes;
however, if they deem it advisable and in the best interests of
shareholders, the Board of Trustees of the Trust may create
additional classes of shares, which may differ from each other as
provided in rules and regulations of the Securities and Exchange
Commission or by exemptive order. The Board of Trustees may, at
its own discretion, create additional series of shares, each of
which may have separate assets and liabilities (in which case any
such series will have a designation including the word "Series").
Shares are fully paid and non-assessable, except as set forth
under the caption "General Information" in the Additional
Statement; the holders of shares have no pre-emptive or
conversion rights, except that Class C Shares automatically
convert to Class A Shares after being held for six years.
At any meeting of shareholders, shareholders are entitled to
one vote for each dollar of net asset value (determined as of the
record date for the meeting) per share held (and proportionate
fractional votes for fractional dollar amounts). Shareholders
will vote on the election of Trustees and on other matters
submitted to the vote of shareholders. Shares vote by classes on
any matter specifically affecting one or more classes, such as an
amendment of an applicable part of the Distribution Plan. No
amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding
shares of the Trust except that the Trust's Board of Trustees may
change the name of the Trust. The Trust may be terminated (i)
upon the sale of its assets to another issuer, or (ii) upon
liquidation and distribution of the assets of the Trust, in
either case if such action is approved by the vote of the holders
of a majority of the outstanding shares of the Trust.
(d) (i) Investment Advisory and Administration
Agreement (iv)
(ii) Sub-Advisory Agreement (iv)
(e) (i) Distribution Agreement (vi)
(ii) Sales Agreement for Brokerage
Firms for Tax-Free Trust of
Oregon Portfolio (iii)
(iii) Sales Agreement for Financial
Institutions for Tax-Free Trust
of Oregon Portfolio (iii)
(iv) Sales Agreement for Investment
Advisers for Tax-Free Trust of
Oregon Portfolio (iii)
(v) Services Agreement (ii)
(f) Not applicable
(g) (i) Custody Agreement for Tax-Free
Trust of Oregon Portfolio (i)
(h) (ii) Transfer Agency Agreement for Tax-Free
Trust of Oregon Portfolio (iv)
(i) Opinion of Trust's counsel (iv)
(i) (i) Consent of Trust counsel (vi)
(j) Not applicable
(k) Not Applicable
(l) Not applicable
(m) (i) Distribution Plan (iv)
(ii) Shareholder Services Plan (iv)
(n) Plan Pursuant to Rule 18f-3 (iv)
(i) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 17 dated January 31, 1996 and
incorporated herein by reference.
(ii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 18 dated April 3, 1996 and incorporated
herein by reference.
(iii) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 19 dated January 24, 1997, and
incorporated herein by reference.
(iv) Filed as an exhibit to Registrant's Post-Effective
Amendment No. 20 dated December 1, 1997, and
incorporated herein by reference.
(v) Filed as an exhibit to Registrant's Post-Effective
Amendment No 23 filed January 28, 1999 and
incorporated herein by reference.
(vi) Filed herewith.
ITEM 24. Persons Controlled By Or Under Common Control With
Registrant
None
ITEM 25. Indemnification
Subdivision (c) of Section 12 of Article SEVENTH of Registrant's
Amended and Restated Declaration of Trust, filed as Exhibit 1 to
Registrant's Post Effective Amendment No. 18 dated April 3, 1996. is
incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, officers, and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in that Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses
incurred or paid by a Trustee, officer, or controlling person of
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such Trustee, officer, or controlling
person in connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 26. Business and Other Connections of Investment
Adviser and Sub-Adviser
The business and other connections of Aquila Management Corporation,
the Trust's Investment Adviser and Administrator is set forth in the
prospectus (Part A); the business and other connections of Mr. Lacy B.
Herrmann, its controlling shareholder are set forth in the Statement
of Additional Information (Part B). For information as to the
business, profession, vocation, or employment of a substantial nature
of its Directors and officers, reference is made to the Form ADV filed
by it under the Investment Advisers Act of 1940.
U.S. Bank National Association, Registrant's Sub-Adviser is a bank. It
performs investment advisory services for mutual fund and non-mutual
fund clients. The Sub-Adviser is a subsidiary of U.S. Bancorp ("USB"),
601 Second Avenue South, Minneapolis, Minnesota 55480, which is a
regional multi-state bank holding company, headquartered in
Minneapolis, Minnesota that primarily serves the Midwestern, Rocky
Mountain and Northwestern states. USB operates five bank and eleven
trust companies with offices in 17 contiguous states from Illinois to
Washington. For information as to the business, profession, vocation,
or employment of a substantial nature of its Directors and officers,
reference is made to the Form ADV filed by it under the Investment
Advisers Act of 1940.
ITEM 27. Principal Underwriters
(a) Aquila Distributors, Inc. serves as principal underwriter to
the following Funds, including the Registrant: Capital Cash
Management Trust, Churchill Cash Reserves Trust, Churchill Tax-
Free Fund of Kentucky, Hawaiian Tax-Free Trust, Narragansett
Insured Tax-Free Income Fund, Pacific Capital Cash Assets Trust,
Pacific Capital Tax-Free Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust, Prime Cash Fund, Tax-
Free Fund For Utah, Tax-Free Fund of Colorado, Tax-Free Trust of
Arizona, Aquila Rocky Mountain Equity Fund, Aquila Cascadia
Equity Fund and Tax-Free Trust of Oregon.
(b) For information about the directors and officers of Aquila
Distributors, Inc., reference is made to the Form BD filed by it
under the Securities Exchange Act of 1934.
(c) Not applicable.
ITEM 28. Location of Accounts and Records
All such accounts, books, and other documents are maintained by the
Manager, the Sub-Adviser the custodian, and the transfer agent, whose
addresses appear in or on the back cover pages of the Prospectus and the
Statement of Additional Information.
ITEM 29. Management Services
Not applicable.
ITEM 30. Undertakings
Not applicable.
<PAGE>
Independent Auditors' Consent
To the Board of Trustees and Shareholders of
Tax-Free Trust of Oregon:
We consent to the use of our report dated November 5, 1999, incorporated
herein by reference and to the referencesto our firm under the headings
"Financial Highlights" in the Prospectus and " Transfer Agent,Custodian and
Auditors" in the Statement of Additional Information.
/s/KPMG LLP
KPMG LLP
New York, New York
January 24, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933, and has
caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York, on the 28th day of January, 2000.
THE CASCADES TRUST
(Registrant)
/s/Lacy B. Herrmann
By____________________________
Lacy B. Herrmann, President and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/Lacy B. Herrmann 1/28/2000
______________________ President, Chairman of ___________
Lacy B. Herrmann the Board and Trustee
(Principal Executive
Officer)
/s/Vernon R. Alden 1/28/2000
______________________ Trustee ___________
Vernon R. Alden
/s/Warren C. Coloney 1/28/2000
______________________ Trustee ___________
Warren C. Coloney
/s/Dave Frohnmayer
1/28/2000
______________________ Trustee ___________
Dave Frohnmayer
/s/James A. Gardner 1/28/2000
______________________ Trustee ___________
James A. Gardner
/s/Diana P. Herrmann 1/28/2000
______________________ Trustee ___________
Diana P. Herrmann
/s/Raymond H. Lung 1/28/2000
______________________ Trustee ___________
Raymond H. Lung
/s/Sterling K. Jenson 1/28/2000
______________________ Trustee __________
Sterling K. Jenson
/s/ 1/28/2000
______________________ Trustee ___________
John W. Mitchell
/s/Richard C. Ross 1/28/2000
______________________ Trustee ___________
Richard C. Ross
/s/Ralph R. Shaw
______________________ Trustee ___________
Ralph R. Shaw
/s/Rose F. Marotta 1/28/2000
______________________ Chief Financial Officer ___________
Rose F. Marotta (Principal Financial and
Accounting Officer)
<PAGE>
THE CASCADES TRUST
EXHIBIT INDEX
Number Name
(e) (i) Distribution Agreement
(i) Consent of Trust counsel
Correspondence
THE CASCADES TRUST
DISTRIBUTION AGREEMENT
AGREEMENT, made as of this 28th day of May, 1999 by and
between TAX-FREE TRUST OF OREGON (hereinafter called the
"Business Trust"), and AQUILA DISTRIBUTORS, INC.,
(hereinafter called the "Distributor").
W I T N E S S E T H:
WHEREAS, the Business Trust and the Distributor have
previously entered into the Distribution Agreement with
respect to a portfolio of the Business Trust entitled Tax-
Free Trust of Oregon (the "Trust") dated as of February 10,
1999;
WHEREAS, on May 1, 1999 the Board of Trustees of the
Business Trust approved a new Distribution Agreement, to go
into effect upon anticipated changes in ownership of the
Distributor; and
WHEREAS, the transfer of shares of the Distributor
effecting such changes in ownership occurred as of the date
hereof; and
WHEREAS, contemporaneously therewith pursuant to an
instrument executed and delivered between the parties, a new
Distribution Agreement went into effect, identical in its
provisions to the Distribution Agreement in effect
immediately prior thereto, except for the date of its
effectiveness; and
WHEREAS, this Agreement is a document explicitly
containing all of the provisions of the new Distribution
Agreement, representing in explicit form the new
Distribution Agreement created thereby;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged,
it is agreed by a between the parties hereto as follows:
b. For purposes of determining the renewal date
of this Agreement under paragraph 9 only, the effective date
of this Agreement shall be considered to be the same as the
effective date of the previously effective Distribution
Agreement.
W I T N E S S E T H :
In consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed by and between
the parties hereto as follows:
1. The Distributor agrees to act as principal
underwriter
and exclusive distributor of the shares of the Trust. The
price at which shares of the Trust are issued to the public
by the Distributor shall be as computed and effective as set
forth in the Prospectus and Statement of Additional
Information of the Trust current as of the time of such sale
(collectively, the "Current Prospectus"). The Distributor
is authorized to determine from time to time (i) the sales
charges forming part of the public offering price and any
dealer discount paid to dealers and any agency commissions
paid to brokers; (ii) the terms of any privilege reducing or
eliminating such sales charges; and (iii) the terms of any
sales agreement entered into by the Distributor
relating to the sale of the Trust/Fund's shares and the
identity of any broker or dealer with which such agreements
are entered into. The Trust/Fund agrees that it will
promptly amend or supplement the Current Prospectus in
connection with any change in any of the foregoing. The
Trust agrees that it will promptly amend or supplement the
Current Prospectus in connection with any change in any of
the foregoing. The Distributor agrees to bear the costs of
printing and distributing all copies of the Trust's
prospectuses, statements of additional information and
reports to shareholders which are not sent to the Trust's
shareholders, as well as the costs of supplemental sales
literature, advertising and other promotional activities.
the above sentence only in cash funds
2. The Business Trust agrees to issue shares of the
Trust, subject to the provisions of its Declaration of Trust
and ByLaws, to the Distributor as ordered by the
Distributor, but only to the extent that the Distributor
shall have received purchase orders therefor at the times
and subject to the conditions set forth in the Current
Prospectus. Certificates for shares need not be created or
delivered by the Business Trust in any case in which the
purchase is made under terms not calling for such
certificates. Shares issued by the Business Trust shall be
registered in such name or names and amounts as the
Distributor may request from time to time and all shares
when so paid for and issued shall be fully paid and non-
assessable to the extent set forth in the Current
Prospectus.
3. The Distributor shall act as principal in all
matters relating to promotion of the growth of the Trust and
shall enter into all of its engagements, agreements and
contracts as principal on its own account. The title to
shares of the Trust issued and sold through the Distributor
shall pass directly from the Business Trust to the dealer or
investor, or shall, if the Distributor so consents, first
pass to the Distributor, as may from time to time be
determined by the Board of Trustees of the Business Trust.
4. The Business Trust hereby consents to any
arrangements whereby the Distributor may act as principal
underwriter for other investment companies or as principal
underwriter, sponsor or depositor for unit investment trusts
and periodic payment plan certificates issued thereby, or as
investment adviser, subadviser or administrator to the
Business Trust or other investment companies or persons.
The Business Trust also consents to the Distributor carrying
on a business as a broker, dealer and underwriter in
securities and to carrying on any other lawful business.
5. The Business Trust covenants and agrees that it
will not during the term of this Agreement, without the
consent of the Distributor, offer any shares of the Trust
for sale directly or through any person or corporation other
than the Distributor excepting only (a) the reinvestment of
dividends and/or distributions, or their declaration in
shares of the Trust, in optional form or otherwise; (b) the
issuance of additional shares through stock splits or stock
dividends; (c) sales of shares to another investment or
securities holding company in the process of purchasing all
or a portion of its assets; or (d) in connection with an
exchange of the Trust's shares for shares of another
investment company or securities holding company.
6. The Business Trust agrees to use its best efforts to
register from time to time under the Securities Act of 1933
adequate amounts of shares of the Trust for sale by the
Distributor to the public and to register or qualify, or to
permit the Distributor to register or qualify, such shares
for offering to the public in such States or other
jurisdictions as may be designated by the Distributor.
7. The Business Trust agrees to advise the
Distributor of the net asset value of the Trust's shares as
often as computed. The Business Trust will also furnish to
the Distributor, as soon as practicable, such information as
may reasonably be requested by the Distributor in order that
it may know all of the facts necessary to sell shares of the
Trust.
8. The Distributor is familiar with the Declaration of
Trust and By-Laws of the Business Trust, each as presently
in effect. Insofar as they are applicable to the
Distributor as principal underwriter of the Business Trust,
it will comply with the provisions of the Declaration of
Trust and By-Laws of the Business Trust and with the
provisions of all acts administered by the Securities and
Exchange Commission (the "Commission") and rules thereunder.
9. This amended and restated Agreement shall go into
effect on the date first above written, and shall, unless
terminated as hereinafter provided, continue in effect until
the next June 30, and from year to year thereafter, but only
so long as such continuance is specifically approved at
least annually as provided in the Investment Company Act of
1940 (the "Act"). This Agreement shall automatically
terminate in the event of its assignment (as defined in the
Act) and may be terminated by either party on sixty days
written notice to the other party.
10. The Business Trust agrees with the Distributor,
for the benefit of the Distributor and each person, if any,
who controls the Distributor within the meaning of Section
15 of the Securities Act of 1933 (the "Securities Act") and
each and all and any of them, to indemnify and hold harmless
the Distributor and any such controlling person from and
against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become
subject under the Securities Act, under any other statute,
at common law or otherwise, and to reimburse the Distributor
and such controlling persons, if any, for any legal or other
expenses (including the cost of any investigation and
preparation) reasonably incurred by them or any of them in
connection with any litigation whether or not resulting in
any liability, insofar as such losses, claims, damages,
liabilities or litigation arise out of, or are based upon,
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or any
Prospectus, filed with the Commission, or any amendment
thereof or supplement thereto, or which arise out of, or are
based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided,
however, that this indemnity agreement shall not apply to
amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Business
Trust or to any such losses, claims, damages, liabilities or
litigation arising out of, or based upon, any untrue
statement or alleged untrue statement of a material fact
contained in any such Registration Statement or Prospectus,
or any amendment thereof or supplement thereto, or arising
out of, or based upon, the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon
information furnished in writing to the Business Trust by
the Distributor for inclusion in any such Registration
Statement or Prospectus or any
amendment thereof or supplement thereto. The Distributor
and each such controlling person shall, promptly after the
complaint shall have been served upon the Distributor or
such controlling person in respect of which indemnity may be
sought from the Business Trust on account of its agreement
contained in this paragraph, notify the Business Trust in
writing of the commencement thereof. The omission of the
Distributor or such controlling person so to notify the
Business Trust of any such litigation shall relieve the
Business Trust from any liability which it may have to the
Distributor or such controlling person on account of the
indemnity agreement contained in this paragraph, but shall
not relieve the Business Trust from any liability which it
may have to the Distributor or controlling person otherwise
than on account of the indemnity agreement contained in the
paragraph. In case any such litigation shall be brought
against the Distributor or any such controlling person and
notice of the commencement thereof shall have been given to
the Business Trust, the Business Trust shall be entitled to
participate in (and, to the extent that it shall wish, to
direct) the defense thereof at its own expense, but such
defense shall be conducted by counsel of good standing and
satisfactory to the Distributor or such controlling person
or persons, defendant or defendants in the litigation. The
indemnity agreement of the Business Trust contained in this
paragraph shall remain operative and in full force and
effect regardless of any investigation made by or on behalf
of the Distributor or any such controlling person, and shall
survive any delivery of shares of the Trust. The Business
Trust agrees to notify the Distributor promptly of the
commencement of any litigation or proceeding against it or
any of its officers or directors of which it may be advised
in connection with the issue and sale of shares of the
Trust.
11. Anything herein to the contrary notwithstanding,
the agreement in paragraph 10, insofar as it constitutes a
basis for reimbursement by the Business Trust for
liabilities (other than payment by the Business Trust of
expenses incurred or paid in the successful defense of any
action, suit or proceeding) arising under the Securities
Act, shall not extend to the extent of any interest therein
of any person who is an underwriter or a partner or
controlling person of an underwriter within the meaning of
Section 15 of the Securities Act or who, at the date of this
Agreement, is a Trustee of the Business Trust, except to the
extent that an interest of such character shall have been
determined by a court of appropriate jurisdiction as not
against public policy as expressed in the Securities Act.
Unless in the opinion of counsel for the Business Trust the
matter has been adjudicated by controlling precedent, the
Business Trust, will, if a claim for such reimbursement is
asserted, submit to a court of appropriate jurisdiction the
question of whether or not such interest is against the
public policy as expressed in the Securities Act.
12. The Distributor agrees to indemnify and hold
harmless the Business Trust and its Trustees and such
officers as shall have signed any Registration Statement
filed with the Commission from and against any and all
losses, claims, damages or liabilities, joint or several, to
which the Business Trust or such Trustees or officers may
become subject under the Securities Act, under any other
statute, at common law or otherwise, and will reimburse the
Business Trust or such Trustees or officers for any legal or
other expenses (including the cost of any investigation and
preparation) reasonably incurred by it or them or any of
them in connection with any litigation, whether or not
resulting in any liability, insofar as such losses, claims,
damages, liabilities or litigation arise out of, or are
based upon, any untrue statement or alleged omission to
state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, which statement
or omission was made in reliance upon information furnished
in writing to the Business Trust by the Distributor for
inclusion in any Registration Statement or any Prospectus,
or any amendment thereof or supplement thereto. The
Distributor shall not be liable for amounts paid in
settlement of any such litigation if such settlement was
effected without its consent. The Business Trust and its
Trustees and such officers, defendant or defendants, in any
such litigation shall, promptly after the complaint shall
have been served upon the Business Trust or any such Trustee
or officer in respect of which indemnity may be sought from
the Distributor on account of its agreement contained in
this paragraph, notify the Distributor in writing of the
commencement thereof. The omission of the Business Trust or
such Trustee or officer so to notify the Distributor of any
such litigation shall relieve the Distributor from any
liability which it may have to the Business Trust or such
Trustee or officer on account of the indemnity agreement
contained in this paragraph, but shall not relieve the
Distributor from any liability which it may have to the
Business Trust or such Trustee or officer otherwise than on
account of the indemnity agreement contained in this
paragraph. In case any such litigation shall be brought
against the Business Trust or any such Trustee or officer
and notice of the commencement thereof shall have been so
given to the Distributor, the Distributor shall be entitled
to participate in (and, to the extent that it shall wish, to
direct) the defense thereof at its own expense, but such
defense shall be conducted by counsel of good standing and
satisfactory to the Business Trust. The indemnity agreement
of the Distributor contained in this paragraph shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of the Business Trust and
shall survive any delivery of shares of the Trust. The
Distributor agrees to notify the Business Trust promptly of
the commencement of any litigation or proceeding against it
or any of its officers or directors or against any such
controlling person of which it may be advised, in connection
with the issue and sale of the Trust's shares.
13. Notwithstanding any provision contained in this
Agreement, no party hereto and no person or persons in
control of any party hereto shall be protected against any
liability to the Business Trust or its security holders to
which they would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the
performance of their duties, or by reason of their reckless
disregard of their obligations and duties under this
Agreement.
14. The Business Trust shall immediately advise the
Distributor (a) when any post-effective amendment to its
Registration Statement or any further amendment or
supplement thereto or any further Registration Statement or
amendment or supplement thereto becomes effective, (b) of
any request by the Commission for amendments to the
Registration Statement or the then effective Prospectus or
for additional information, (c) of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement, or the initiation of any
proceedings for that purpose, and (d) of the happening of
any event which makes untrue any material statement made in
the Registration Statement or the Current Prospectus or
which in the opinion of counsel for the Business Trust
requires the making of a change in the Registration
Statement or the Current Prospectus in order to make the
statements therein not misleading. In case of the happening
at any time of any event which materially affects the Trust
or its securities and which should be set forth in a
supplement to or an amendment of the then effective
Prospectus in order to make the statements therein not
misleading the Business Trust shall prepare and furnish to
the Distributor such amendment or amendments to the then
effective Prospectus as will correct the Prospectus so that
as corrected it will not contain, or such supplement or
supplements to the then effective Prospectus which when read
in conjunction with the then effective Prospectus will make
the combined information not contain, any untrue statement
of a material fact or any omission to state any material
fact necessary in order to make the statements in the then
effective Prospectus not misleading. The Business Trust
shall, if at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration
Statement, make every reasonable effort to obtain the prompt
lifting of such order.
15. Except as expressly provided in paragraphs 10 and 12
hereof, the agreements herein set forth have been made and
are made solely for the benefit of the Business Trust, the
Distributor, and the persons expressly provided for in
paragraphs 10 and 12, their respective heirs, successors,
personal representatives and assigns, and except as so
provided, nothing expressed or mentioned herein is intended
or shall be construed to give any person, firm or
corporation, other than the Business Trust, the Distributor,
and the persons expressly provided for in paragraphs 10 and
12, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any representation, warranty
or agreement herein contained. Except as so provided, the
term "heirs, successors, personal representatives and
assigns" shall not include any purchaser of shares merely
because of such purchase.
16. The Distributor understands that the obligations
of this Agreement are not binding upon any shareholder of
the Trust personally, but bind only the Business Trust's
property; the Distributor represents that it has notice of
the provisions of the Business Trust's Declaration of Trust
disclaiming shareholder liability for acts or obligations of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized
officers and their seals to be affixed as of the day and
year first above written.
ATTEST:
_______________________
By:______________________________
ATTEST: AQUILA DISTRIBUTORS, INC.
_______________________
By:______________________________
HOLLYER BRADY SMITH TROXELL
BARRETT ROCKETT HINES & MONE LLP
551 Fifth Avenue
New York, NY 10176
Tel: (212) 818-1110
FAX: (212) 818-0494
January 28, 2000
To the Trustees of The Cascades Trust
We consent to the incorporation by reference into post-
effective amendment No. 24 under the 1933 Act and No. 25 under
the 1940 Act of our opinion dated December 1, 1997.
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
/s/ W.L.D. Barrett
by__________________________
Partner
