N-30D 1 semitfto.txt TAX-FREE TRUST OF OREGON 3/31/01 SEMI-ANNUAL REPORT MANAGER AND FOUNDER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 INVESTMENT SUB-ADVISER U.S. BANCORP ASSET MANAGEMENT, INC. 555 S.W. Oak U.S. Bancorp Tower Portland, Oregon 97204 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman David B. Frohnmayer James A. Gardner Diana P. Herrmann Sterling K. Jenson Timothy J. Leach Raymond H. Lung John W. Mitchell Patricia L. Moss Ralph R. Shaw Nancy Wilgenbusch OFFICERS Diana P. Herrmann, President James M. McCullough, Senior Vice President Sally J. Church, Vice President Christine L. Neimeth, Vice President Rose F. Marotta, Chief Financial Officer Joseph P. DiMaggio, Treasurer Edward M.W. Hines, Secretary DISTRIBUTOR AQUILA DISTRIBUTORS, INC. 380 Madison Avenue, Suite 2300 New York, New York 10017 TRANSFER AND SHAREHOLDER SERVICING AGENT PFPC INC. 400 Bellevue Parkway Wilmington, Delaware 19809 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 100 East Broad Street Columbus, Ohio 43271 INDEPENDENT AUDITORS KPMG LLP 757 Third Avenue New York, New York 10017 Further information is contained in the Prospectus, which must precede or accompany this report. SEMI-ANNUAL REPORT MARCH 31, 2002 TAX-FREE TRUST OF OREGON A tax-free income investment [Logo of Tax-Free Trust of Oregon: a square with two pine trees in front of a mountain] [Logo of the Aquila Group of Funds: an eagle's head] One of the AQUILA(SM) Group of Funds [Logo of Tax-Free Trust of Oregon: a square with two pine trees in front of a mountain] SERVING OREGON INVESTORS FOR MORE THAN 15 YEARS TAX-FREE TRUST OF OREGON SEMI-ANNUAL REPORT "MEETING OBJECTIVES" May 3, 2002 Dear Fellow Shareholder: As you know, the objective of Tax-Free Trust of Oregon is to provide you with "as high a level of current income exempt from Oregon state and regular Federal income taxes as is consistent with preservation of capital."* From the inception of the Trust on June 16, 1986, management has always strived to meet this objective through having an investment portfolio of high quality securities and a maturity level which is primarily intermediate term in nature. This investment approach offers shareholders the opportunity to feel good about their investment knowing that: * the share price should fluctuate relatively little, and thus * their investment should be relatively secure. Through the various checks we have made of shareholder sentiments, this philosophy consistently rings true in the thinking of our investors. Shareholders of Tax-Free Trust of Oregon have expressed to us their desire to make sure that their investment in the Trust is such that they will get a "RETURN OF THEIR MONEY" as well as a "TAX-FREE RETURN ON THEIR MONEY." Therefore, we have managed the investment portfolio of the Trust accordingly. We think you will be interested in seeing just how well the Trust has met its objective of a stable share value since its inception. The Trust's share price will always have some fluctuation to it as a result of market activity and interest rate changes. However, the share price of the Trust has fluctuated relatively little since its inception in 1986. We have continually sought to meet the objective of PRESERVING SHAREHOLDERS' CAPITAL in the Trust to the maximum extent possible and believe that our efforts and success in this regard are evident in the following graph.** [Graphic of a bar chart with the following information:] SHARE NET ASSET VALUE 6/16/86 $9.60 12/31/86 $10.07 12/31/87 $9.48 12/31/88 $9.64 12/31/89 $9.91 12/31/90 $9.89 12/31/91 $10.32 12/31/92 $10.46 12/31/93 $10.92 12/31/94 $9.92 12/31/95 $10.72 12/31/96 $10.55 12/31/97 $10.77 12/31/98 $10.79 12/31/99 $10.08 12/31/00 $10.56 12/31/01 $10.53 3/31/02 $10.52 Now, let's take a look at how well we have done in providing preservation of your capital over the six-month period from October 1, 2001 to March 31, 2002 covered by this Semi-Annual report. CLASS A SHARE PRICE October, 2001 $10.80 November, 2001 $10.67 December, 2001 $10.53 January, 2002 $10.65 February, 2002 $10.73 March, 2002 $10.52 As you will note, the share price of the Trust fluctuated somewhat as interest rates changed over the period. However, the total fluctuation over this period was only $0.28 ($10.52 vs. $10.80), or approximately 3%. Thus, the total volatility of share price was far less than that experienced by various other investments that you might have made over the last six months. Now, let's take a look at the DOUBLE TAX-FREE DIVIDEND RATE paid over the last six months, representing the first half of the fiscal year. As you are aware, by having the Trust principally invest in Oregon municipal bonds, the Trust is in a position to provide its shareholders with income which is exempt from both Oregon state and regular Federal income tax. Also, we have consistently tried to ensure that people get their monthly dividend in time to meet their schedule for payments of various living expenses. Therefore, we pick a payment date every month that allows the income to be provided to you by around the 1st of the following month. APPROXIMATE PER # OF DAYS SHARE DIVIDEND PAID COVERED BY DIVIDEND ------------------- ------------------- October, 2001 $.041 31 November, 2001 $.041 31 December, 2001 $.037 28 January, 2002 $.041 31 February, 2002 $.038 29 March, 2002 $.041 31 As you will observe, we try to ensure that the rate of income you receive is approximately equal for every month, in keeping with our shareholders' income needs. This is the same approach we have maintained since the inception of the Trust in June, 1986. The dividend paid will, however, fluctuate slightly based upon the number of days covered by the dividend. As you will note, February's and December's dividends are smaller than other months because it covers only 29 and 28 days respectively. For you as a shareholder of Tax-Free Trust of Oregon, we have tried our best to meet the stated objectives for the Trust. We want you to keep what you have in principal while earning a consistent stream of income every month. Most importantly, we want the Trust to meet your objective of feeling comfortable with your investment and having enough money each month to be able to meet your desired living expenses. It is always gratifying to accomplish what you have set out to do. We hope that by the Trust meeting its objectives, we have helped you to meet your objectives as well. Sincerely, /s/ Diana P. Herrmann /s/ Lacy B. Herrmann ----------------------- --------------------- Diana P. Herrmann Lacy B. Herrmann President Chairman of the Board of Trustees * For certain investors, some dividends may be subject to Federal and state taxes, including the Alternative Minimum Tax (AMT). ** The above chart illustrates the record of Class A Net Asset Value Price since the Trust's inception. Past performance does not guarantee future stability. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS MARCH 31, 2002 (UNAUDITED)
RATING FACE MOODY'S/ AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS - 54.9% S&P VALUE --------------- ------------------------------------------------ --------- -------------- City of Beaverton, Oregon $ 910,000 5.950%, 04/01/2003 ............................... Aa3/AA $ 926,553 960,000 6.050%, 04/01/2004 ............................... Aa3/AA 976,166 1,020,000 6.150%, 04/01/2005 ............................... Aa3/AA 1,037,677 1,080,000 6.250%, 04/01/2006 ............................... Aa3/AA 1,099,235 Bend Oregon Transportation Highway Systems (MBIA Corporation Insured) 1,135,000 5.300%, 9/1/2017 ................................. Aaa/NR 1,150,606 Blue Mountain Oregon Hospital District (AMBAC Indemnity Corporation Insured) 1,000,000 5.000%, 02/01/2021 ............................... Aaa/AAA 971,250 Chemeketa Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,385,000 5.500%, 06/01/2014 ............................... Aaa/AAA 1,481,950 Clackamas County Oregon School District #62 (Oregon City) (State School Bond Guaranty Program) 2,000,000 5.500%, 06/15/2020 ............................... Aa2/AA 2,045,000 Clackamas County, Oregon School District #86 (Canby) (State School Bond Guaranty Program) 3,535,000 5.250%, 06/15/2020 ............................... Aa2/AA 3,548,256 Clackamas County Oregon School District #108 (Estacada) (Financial Security Assurance Insured) 1,295,000 5.375%, 06/15/2017 ............................... Aaa/AAA 1,325,756 2,000,000 5.000%, 06/15/2025 ............................... Aaa/AAA 1,920,000 Clackamas County Oregon School District #115 (AMBAC Indemnity Corporation Insured) 615,000 5.700%, 06/01/2007 ............................... Aaa/AAA 661,894 1,000,000 6.150%, 06/01/2014 ............................... Aaa/AAA 1,085,000 Clackamas County Oregon, Tax Allocation 1,000,000 6.500%, 05/01/2020 ............................... NR/NR* 1,000,300 Clackamas, Multnomah and Washington County, Oregon School District #7J 1,500,000 5.700%, 06/15/2010 ............................... Aa2/NR 1,575,000 Clackamas, Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 3,955,000 5.250%, 06/15/2017 ............................... Aaa/AAA 4,019,269 2,750,000 5.250%, 06/15/2018 ............................... Aaa/AAA 2,780,936 Clackamas and Washington County, Oregon School District #3J (Financial Guaranty Insurance Corporation Insured) $ 1,620,000 5.000%, 06/01/2017 ............................... Aaa/AAA $ 1,603,800 Clackamas and Washington County, Oregon School District #3J 1,150,000 5.875%, 10/01/2009 ............................... A1/A+ 1,174,921 Clatsop County School District #1 (Astoria) (State School Bond Guaranty Program) 1,725,000 5.500%, 06/15/2019 ............................... NR/AA 1,765,969 Columbia County, Oregon School District #502 (Financial Guaranty Insurance Corporation Insured) 2,070,000 zero coupon, 06/01/2015 .......................... Aaa/AAA 1,053,112 Deschutes County Oregon Admin. School District #1 (Financial Security Assurance Insured) 1,145,000 5.500%, 06/15/2014 ............................... AAA/NR 1,209,406 1,300,000 5.500%, 06/15/2016 ............................... AAA/NR 1,353,625 1,355,000 5.500%, 06/15/2018 ............................... AAA/NR 1,395,650 3,000,000 5.125%, 06/15/2021 ............................... AAA/NR 2,958,750 Deschutes County Oregon Admin. School District #1 1,500,000 5.000%, 12/01/2017 ............................... A1/A 1,477,500 Douglas County Oregon School District #4 (Roseburg) (State School Bond Guaranty Program) 1,075,000 5.125%, 12/15/2017 ............................... Aa2/NR 1,080,375 Douglas County, Oregon School District #116 (Winston- Dillard) (State School Bond Guaranty Program) 1,020,000 5.625%, 06/15/2020 ............................... NR/AA 1,051,875 Eugene, Oregon (Parks & Open Space) 1,465,000 5.250%, 02/01/2018 ............................... Aa2/NR 1,477,819 1,555,000 5.250%, 02/01/2019 ............................... Aa2/NR 1,562,775 Hood River County, Oregon School District (AMBAC Indemnity Corporation Insured) 2,000,000 5.650%, 06/01/2008 ............................... Aaa/AAA 2,112,500 Jackson County, Oregon School District #4 (Phoenix- Talent) (Financial Security Assurance Insured) 1,395,000 5.500%, 06/15/2018 ............................... Aaa/AAA 1,435,106 Jackson County Oregon School District #9 (Eagle Point) (State School Bond Guaranty Program) $ 1,120,000 5.625%, 06/15/2017 ............................... Aa2/NR $ 1,171,800 1,660,000 5.000%, 06/15/2021 ............................... Aa2/NR 1,612,275 Jackson County, Oregon School District #549C (Financial Security Assurance Insured) 1,000,000 5.300%, 06/01/2008 ............................... Aaa/AAA 1,056,250 Jackson County Oregon School District #549 (Medford) (State School Bond Guaranty Program) 1,750,000 5.000%, 06/15/2012 ............................... Aa2/NR 1,806,875 Jefferson County School District #509J (Financial Guaranty Insurance Corporation Insured) 1,025,000 5.250%, 06/15/2017 ............................... Aaa/AAA 1,041,656 Josephine County, Oregon School District #7 (Grants Pass) (Financial Guaranty Insurance Corporation Insured) 2,700,000 5.700%, 06/01/2013 ............................... Aaa/AAA 2,818,125 Josephine County, Oregon Three Rivers School District (Financial Security Assurance Insured) 1,780,000 5.250%, 06/15/2018 ............................... Aaa/NR 1,791,125 Lane County, Oregon School District #040 (Creswell) (State School Bond Guaranty Program) 1,430,000 5.375%, 06/15/2020 ............................... NR/AA 1,451,450 Lane County, Oregon School District #4J (Eugene) 2,000,000 5.375%, 07/01/2009 ............................... Aa3/NR 2,072,500 Lane County, Oregon School District #52J (Financial Guaranty Insurance Corporation Insured) 750,000 6.400%, 12/01/2009 ............................... Aaa/AAA 823,125 Lane & Douglas County, Oregon School District #45J (State School Bond Guaranty Program) 1,525,000 6.000%, 06/15/2018 ............................... NR/AA 1,626,031 Lane and Douglas County, Oregon School District 97J (Siuslaw) (State School Bond Guaranty Program) 1,000,000 5.400%, 06/15/2019 ............................... Aa2/NR 1,016,250 Lincoln County, Oregon (MBIA Corporation Insured) 1,000,000 5.375%, 02/01/2010 ............................... Aaa/AAA 1,021,620 Lincoln County Oregon School District (Financial Guaranty Insurance Corporation Insured) $ 1,245,000 5.250%, 06/15/2012 ............................... Aaa/AAA $ 1,288,575 Linn Benton Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,160,000 zero coupon, 06/15/2011 .......................... Aaa/AAA 748,200 Linn County Oregon School District #9 (Lebanon) (MBIA Corporation Insured) 2,500,000 5.000%, 06/15/2030 ............................... Aaa/AAA 2,371,875 Linn County Oregon School District #7 (Harrisburg) (State School Bond Guaranty Program) 1,660,000 5.500%, 06/15/2019 ............................... NR/AA 1,699,425 Linn County Oregon School District #9 (Lebanon) (Financial Guaranty Insurance Corporation Insured) 3,000,000 zero coupon, 06/15/2030 .......................... Aaa/AAA 2,726,250 Malheur County, Oregon Jail Bonds (MBIA Corporation Insured) 1,345,000 6.300%, 12/01/2012 ............................... Aaa/AAA 1,455,963 Marion and Clackamas County, Oregon Union High School District #7J (Financial Security Assurance Insured) 1,340,000 6.000%, 06/01/2013 ............................... Aaa/AAA 1,437,150 Metro Oregon 3,240,000 5.000%, 01/01/2013 ............................... Aa1/AA+ 3,316,950 Multnomah and Clackmas County, Oregon School District #10 (Gresham-Barlow) (Financial Security Assurance Insured) 1,500,000 5.500%, 06/15/2018 ............................... Aaa/AAA 1,543,125 2,650,000 5.000%, 06/15/2021 ............................... Aaa/AAA 2,577,125 Multnomah County School District #7 (Reynolds) (State School Bond Guaranty Program) 500,000 5.625%, 06/15/2017 ............................... Aa2/AA 523,125 2,000,000 5.125%, 06/15/2019 ............................... Aa2/AA 1,987,500 Multnomah County School District #40 5,100,000 5.625%, 06/01/2012 ............................... NR/AA- 5,342,250 Multnomah County School District #40 (Financial Security Assurance Insured) $ 2,055,000 5.000%, 12/01/2015 ............................... Aaa/AAA $ 2,072,981 Northern Oregon Correctional (AMBAC Indemnity Corporation Insured) 1,195,000 5.400%, 09/15/2016 ............................... Aaa/AAA 1,218,900 Oak Lodge Water District (AMBAC Indemnity Corporation Insured) 215,000 7.300%, 12/01/2005 ............................... Aaa/AAA 235,962 215,000 7.300%, 12/01/2006 ............................... Aaa/AAA 236,500 215,000 7.400%, 12/01/2007 ............................... Aaa/AAA 236,769 Portland Oregon Community College District 3,015,000 5.125%, 06/01/2013 ............................... Aa2/AA 3,116,756 1,865,000 5.130%, 06/01/2016 ............................... Aa2/AA 1,888,313 2,350,000 5.000%, 06/01/2021 ............................... Aa2/AA 2,282,437 Portland Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,395,000 5.000%, 06/01/2017 ............................... Aaa/AAA 1,382,794 Southwestern Oregon Community College District (MBIA Corporation Insured) 1,120,000 6.000%, 06/01/2025 ............................... Aaa/AAA 1,194,200 State of Oregon Board of Higher Education 900,000 6.200%, 10/15/2007 ............................... Aa2/AA 917,523 2,000,000 6.250%, 10/15/2012 ............................... Aa2/AA 2,039,460 820,000 zero coupon, 08/01/2016 .......................... Aa2/AA 390,525 655,000 zero coupon, 08/01/2017 .......................... Aa2/AA 291,475 500,000 zero coupon, 08/01/2018 .......................... Aa2/AA 208,750 2,890,000 6.000%, 10/15/2018 ............................... Aa2/AA 2,943,234 540,000 zero coupon, 08/01/2019 .......................... Aa2/AA 211,950 2,560,000 5.500%, 08/01/2021 ............................... Aa2/AA 2,614,400 3,000,000 5.000%, 08/01/2022 ............................... Aa2/AA 2,898,750 1,655,000 5.600%, 08/01/2023 ............................... Aa2/AA 1,696,375 1,500,000 5.600%, 08/01/2023 ............................... Aa2/AA 1,537,500 6,300,000 6.000%, 08/01/2026 ............................... Aa2/AA 6,969,375 State of Oregon Elderly & Disabled Housing 720,000 6.25%, 08/01/2013 ................................ Aa2/AA 742,997 State of Oregon Veterans' Welfare $ 505,000 9.000%, 04/01/2008 ............................... Aa2/AA $ 536,012 700,000 9.200%, 10/01/2008 ............................... Aa2/AA 894,250 1,135,000 5.200%, 10/01/2018 ............................... Aa2/AA 1,137,837 2,000,000 5.250%, 10/01/2042 ............................... Aa2/AA 1,945,000 Polk County, Oregon School District #2 (Dallas) (Financial Security Assurance Insured) 1,000,000 5.400%, 06/01/2012 ............................... Aaa/AAA 1,043,750 Polk, Marion, and Benton County, Oregon School District #13J (Financial Guaranty Insurance Corporation Insured) 1,000,000 5.500%, 12/01/2008 ............................... Aaa/AAA 1,061,250 City of Portland, Oregon 1,480,000 5.100%, 10/01/2009 ............................... Aaa/NR 1,494,844 2,790,000 5.750%, 06/01/2013 ............................... Aaa/NR 2,985,300 1,000,000 4.600%, 06/01/2014 ............................... Aaa/NR 987,500 2,000,000 5.600%, 06/01/2015 ............................... Aa2/NR 2,062,500 305,000 5.250%, 06/01/2015 ............................... Aa2/NR 309,194 2,975,000 zero coupon, 06/01/2015 .......................... Aa2/NR 1,502,375 1,120,000 5.125%, 06/01/2018 ............................... Aaa/NR 1,122,800 Salem-Keizer Oregon School District #24 (Financial Security Assurance Insured) 1,000,000 4.875%, 06/01/2014 ............................... Aaa/AAA 1,001,250 Tualatin Hills Park and Recreation District, Oregon (MBIA Corporation Insured) 2,470,000 5.750%, 03/01/2012 ............................... Aaa/AAA 2,627,463 2,000,000 5.750%, 03/01/2015 ............................... Aaa/AAA 2,125,000 Umatilla County, Oregon (Financial Guaranty Insurance Corporation Insured) 2,000,000 5.600%, 10/01/2015 ............................... Aaa/AAA 2,147,500 Umatilla County, Oregon School District #8R Hermiston (AMBAC Indemnity Corporation Insured) 700,000 6.100%, 12/01/2012 ............................... Aaa/AAA 753,375 Wasco County Oregon School District #12 (Financial Security Assurance Insured) 1,135,000 6.000%, 06/15/2015 ............................... Aaa/AAA 1,261,269 1,400,000 5.500%, 06/15/2017 ............................... Aaa/AAA 1,484,000 1,790,000 5.500%, 06/15/2020 ............................... Aaa/AAA 1,875,025 Washington and Clackamas County, Oregon School District #23J (Tigard) $ 2,000,000 5.400%, 01/01/2010 ............................... Aa3/NR $ 2,058,840 1,000,000 5.650%, 06/01/2015 ............................... Aa3/NR 1,075,000 Washington County, Oregon School District #15 (Forest Grove) (Financial Security Assurance Insured) 1,760,000 5.375%, 06/15/2016 ............................... Aaa/NR 1,819,400 2,000,000 5.000%, 06/15/2021 ............................... Aaa/NR 1,945,000 Washington County, Oregon School District #48J (Beaverton) 1,175,000 5.500%, 06/01/2006 ............................... Aa2/AA- 1,227,875 1,130,000 5.600%, 06/01/2007 ............................... Aa2/AA- 1,180,850 1,000,000 6.150%, 06/01/2008 ............................... Aa2/AA- 1,005,610 1,415,000 5.700%, 06/01/2008 ............................... Aa2/AA- 1,478,675 1,440,000 6.000%, 06/01/2011 ............................... Aa2/AA- 1,517,400 2,000,000 5.125%, 01/01/2015 ............................... Aa2/AA- 2,035,000 1,600,000 5.125%, 01/01/2016 ............................... Aa2/AA- 1,618,000 Washington County, Oregon School District #88JT (Financial Security Assurance Insured) 585,000 6.100%, 06/01/2012 ............................... Aaa/AAA 621,563 2,315,000 6.100%, 06/01/2012 ............................... Aaa/AAA 2,500,200 2,055,000 5.125%, 06/15/2012 ............................... Aaa/NR 2,119,219 Washington County, Oregon School District #48J (Beaverton) (Financial Guaranty Insurance Corporation Insured) 2,500,000 5.375%, 06/01/2019 ............................... Aaa/AAA 2,534,375 Washington Multnomah & Yamhill County, Oregon School District #1J 1,295,000 5.250%, 06/01/2013 ............................... Aa3/NR 1,337,087 Washington & Yamhill, Oregon County School District #58J (AMBAC Indemnity Corporation Insured) 70,000 6.600%, 11/01/2004 ............................... Aaa/AAA 70,219 80,000 6.600%, 11/01/2005 ............................... Aaa/AAA 80,250 90,000 6.600%, 11/01/2006 ............................... Aaa/AAA 90,282 Yamhill, Oregon County School District #29J (Newberg) (Financial Security Assurance Insured) 2,000,000 5.350%, 06/01/2006 ............................... Aaa/AAA 2,075,000 -------------- Total State of Oregon General Obligation Bonds 192,719,891 -------------- STATE OF OREGON REVENUE BONDS - 44.1% -------------------------------------------------------- AIRPORT REVENUE BONDS - 0.9% -------------------------------------------------------- Port of Portland, Oregon Airport (AMBAC Indemnity Corporation Insured) $ 3,000,000 5.500%, 07/01/2024 ............................... Aaa/AAA $ 3,015,000 -------------- CERTIFICATES OF PARTICIPATION REVENUE BONDS - 7.4% -------------------------------------------------------- Jackson County Oregon Fire District #5 (MBIA Corporation Insured) 1,000,000 5.000%, 01/15/2029 ............................... Aaa/AAA 951,250 Multnomah County, Oregon 1,000,000 5.200%, 07/01/2005 ............................... Aa3/NR 1,032,500 Oregon State Department of Administration Services (AMBAC Indemnity Corporation Insured) 500,000 5.375%, 05/01/2014 ............................... Aaa/AAA 521,875 950,000 5.000%, 11/01/2019 ............................... Aaa/AAA 940,500 1,500,000 5.800%, 05/01/2024 ............................... Aaa/AAA 1,635,000 3,500,000 6.000%, 05/01/2026 ............................... Aaa/AAA 3,911,250 Oregon State Department of Administration Services (MBIA Corporation Insured) 1,480,000 5.375%, 11/01/2016 ............................... Aaa/AAA 1,585,450 4,250,000 5.500%, 11/01/2020 ............................... Aaa/AAA 4,568,750 State of Oregon (MBIA Corporation Insured) 1,250,000 5.700%, 01/15/2010 ............................... Aaa/AAA 1,278,725 2,750,000 6.200%, 11/01/2012 ............................... Aaa/AAA 2,843,473 1,000,000 5.500%, 01/15/2015 ............................... Aaa/AAA 1,021,440 550,000 5.500%, 01/15/2015 ............................... Aaa/AAA 561,792 500,000 5.800%, 03/01/2015 ............................... Aaa/AAA 511,830 1,000,000 5.800%, 03/01/2015 ............................... Aaa/AAA 1,023,660 2,000,000 6.250%, 11/01/2019 ............................... Aaa/AAA 2,068,560 Washington County, Oregon Educational Services 645,000 5.625%, 06/01/2016 ............................... A1/NR 655,481 Washington County, Oregon Educational Services (MBIA Corporation Insured) 830,000 5.750%, 06/01/2025 ............................... Aaa/AAA 852,825 -------------- Total Certificates of Participation Revenue Bonds 25,964,361 -------------- HOSPITAL REVENUE BONDS - 7.8% -------------------------------------------------------- Clackamas, Oregon Hospital Facilities Authority (Adventist Health System/West) (MBIA Corporation Insured) $ 2,000,000 6.350%, 03/01/2009 ............................... Aaa/AAA $ 2,042,500 Clackamas, Oregon Hospital Facilities Authority (Legacy Health System) 2,000,000 5.250%, 02/15/2017 ............................... Aa3/AA 1,987,500 2,980,000 5.250%, 02/15/2018 ............................... Aa3/AA 2,931,575 Clackamas, Oregon Hospital Facilities Authority (Legacy Health System) (MBIA Corporation Insured) 2,650,000 4.750%, 02/15/2011 ............................... NR/AAA 2,643,375 Clackamas, Oregon Hospital Facilities Authority (Sisters of Providence Hospital) 500,000 6.375%, 10/01/2004 ............................... Aa3/AA- 518,250 Clackamas County Oregon Hospital Facilities Authority (Mary's Woods) 3,450,000 6.625%, 05/15/2029 ............................... NR/NR* 3,506,062 Deschutes County, Oregon Hospital Facilities Authority (Cascade Health) 2,000,000 5.600%, 01/01/2027 ............................... A1/NR 1,957,500 Douglas County, Oregon Hospital Facilities Authority (Catholic Health) (MBIA Corporation Insured) 535,000 5.600%, 11/15/2005 ............................... Aaa/AAA 572,450 Medford, Oregon Hospital Authority (Asante Health Systems) (MBIA Corporation Insured) 1,000,000 5.000%, 08/15/2018 ............................... Aaa/AAA 977,500 State of Oregon Health Housing Educational & Cultural Facilities Auth. (Peacehealth) (AMBAC Indemnity Corporation Insured) 2,300,000 5.250%, 11/15/2017 ............................... Aaa/AAA 2,334,500 1,850,000 5.000%, 11/15/2026 ............................... Aaa/AAA 1,759,812 1,430,000 5.000%, 11/15/2032 ............................... Aaa/AAA 1,344,200 Western Lane County, Oregon Hospital Facilities Authority (Sisters of St. Joseph Hospital) (MBIA Corporation Insured) $ 1,000,000 5.625%, 08/01/2007 ............................... Aaa/AAA $ 1,052,500 3,765,000 5.750%, 08/01/2019 ............................... Aaa/AAA 3,877,950 -------------- Total Hospital Revenue Bonds 27,505,674 -------------- HOUSING, EDUCATIONAL, AND CULTURAL REVENUE BONDS - 7.8% -------------------------------------------------------- Central Oregon Community College District, Oregon 1,000,000 5.300%, 05/01/2025 ............................... Aaa/AAA 1,000,000 Clackamas, Oregon Community College District (MBIA Corporation Insured) 1,865,000 5.700%, 06/01/2016 ............................... Aaa/AAA 2,007,206 Multnomah County Oregon Educational Facility (University of Portland) 1,000,000 6.000%, 04/01/2020 ............................... NR/BBB+ 1,023,750 Portland Oregon Housing Authority 1,000,000 5.100%, 01/01/2027 ............................... NR/A 933,750 State of Oregon Housing and Community Services 620,000 5.900%, 07/01/2012 ............................... Aa2/NR 646,350 500,000 6.700%, 07/01/2013 ............................... Aa2/NR 506,690 1,935,000 6.050%, 07/01/2020 ............................... Aa2/NR 1,990,631 975,000 6.000%, 07/01/2020 ............................... Aa2/NR 1,000,594 1,950,000 5.400%, 07/01/2027 ............................... Aa2/NR 1,957,312 2,150,000 6.875%, 07/01/2028 ............................... Aa2/NR 2,198,741 State of Oregon Housing and Community Services (MBIA Corporation Insured) 1,500,000 5.450%, 07/01/2024 ............................... Aaa/AAA 1,505,625 State of Oregon Housing, Educational and Cultural Facilities Authority (George Fox University) (LOC: Bank of America) 1,000,000 5.700%, 03/01/2017 ............................... NR/AA- 1,027,500 State of Oregon Housing Finance Authority 1,000,000 6.800%, 07/01/2013 ............................... AA2/A+ 1,013,200 Oregon Health Sciences University (MBIA Corporation Insured) $ 4,500,000 5.250%, 07/01/2015 ............................... Aaa/AAA $ 4,584,375 11,515,000 zero coupon, 07/01/2021 .......................... Aaa/AAA 3,987,069 City of Salem, Oregon Educational Facilities (Willamette University) 1,000,000 6.000%, 04/01/2010 ............................... A2/NR 1,037,500 Yamhill County, Oregon Educational Services (AMBAC Indemnity Corporation Insured) 1,000,000 5.150%, 07/01/2019 ............................... NR/AAA 1,001,250 -------------- Total Housing, Educational, and Cultural Revenue Bonds .............................. 27,421,543 -------------- TRANSPORTATION REVENUE BONDS - 2.5% -------------------------------------------------------- State of Oregon Department of Transportation (Light Rail) (MBIA Corporation Insured) 2,000,000 6.000%, 06/01/2005 ............................... Aaa/AAA 2,147,500 Oregon State Department Transportation Highway 2,555,000 5.375%, 11/15/2018 ............................... Aa1/AA+ 2,602,906 Tri-County Metropolitan Transportation District 1,440,000 5.750%, 08/01/2016 ............................... Aa3/AA+ 1,528,200 Tri-County Metropolitan Transportation District (LOC: Morgan Guaranty Trust) 2,500,000 5.400%, 06/01/2019 ............................... NR/AA 2,515,625 -------------- Total Transportation Revenue Bonds ............... 8,794,231 -------------- URBAN RENEWAL REVENUE BONDS - 2.0% -------------------------------------------------------- Portland Oregon Airport Way Renewal & Redevelopment (AMBAC Indemnity Corporation Insured) 1,640,000 6.000%, 06/15/2014 ............................... Aaa/NR 1,801,950 1,765,000 5.750%, 06/15/2020 ............................... Aaa/NR 1,866,488 Portland Oregon Urban Renewal Tax Allocation (AMBAC Indemnity Corporation Insured) (Convention Center) 1,150,000 5.750%, 06/15/2018 ............................... Aaa/NR 1,217,562 2,000,000 5.450%, 06/15/2019 ............................... Aaa/NR 2,050,000 -------------- Total Urban Renewal Revenue Bonds ................ 6,936,000 -------------- UTILITY REVENUE BONDS - 2.7% -------------------------------------------------------- City of Eugene, Oregon Electric Utility (Financial Security Assurance Insured) $ 1,600,000 5.000%, 08/01/2018 ............................... Aaa/AAA $ 1,586,000 City of Eugene, Oregon Electric Utility (MBIA Corporation Insured) 640,000 4.850%, 08/01/2013 ............................... Aaa/AAA 640,122 1,200,000 5.000%, 08/01/2023 ............................... Aaa/AAA 1,176,000 City of Eugene, Oregon Electric Utility 1,000,000 6.000%, 08/01/2011 ............................... A1/AA 1,013,690 500,000 5.000%, 08/01/2017 ............................... A1/AA 494,375 1,400,000 5.800%, 08/01/2019 ............................... A1/AA 1,499,750 City of Eugene, Oregon Trojan Nuclear Project 2,120,000 5.900%, 09/01/2009 ............................... Aa1/AA- 2,145,864 Northern Wasco County, Oregon Public Utility Development (Financial Guaranty Insurance Corporation Insured) 1,000,000 5.625%, 12/01/2022 ............................... Aaa/AAA 1,017,500 -------------- Total Utility Revenue Bonds ...................... 9,573,301 -------------- WATER AND SEWER REVENUE BONDS - 11.9% -------------------------------------------------------- Bend Oregon Sewer Revenue (AMABC Indemnity Corporation Insured) 1,130,000 5.150%, 10/01/2014 ............................... Aaa/NR 1,161,075 City of Klamath Falls Water (Financial Security Assurance Insured) 1,100,000 6.100%, 06/01/2014 ............................... Aaa/AAA 1,182,500 City of Klamath Wastewater (AMBAC Indemnity Corporation Insured) 1,545,000 5.650%, 06/01/2020 ............................... Aaa/AAA 1,604,869 Klamath Falls, Oregon Water Revenue (Financial Security Assurance Insured) 1,575,000 5.500%, 07/01/2016 ............................... Aaa/AAA 1,671,469 Lebanon Oregon Wastewater (Financial Security Assurance Insured) $ 1,000,000 5.700%, 03/01/2020 ............................... Aaa/AAA $ 1,043,750 City of Portland Sewer (MBIA Corporation Insured) 2,500,000 5.250%, 06/01/2016 ............................... Aaa/AAA 2,528,125 City of Portland Sewer (Financial Guaranty Insurance Corporation Insured) 500,000 6.000%, 10/01/2012 ............................... Aaa/AAA 519,745 2,355,000 6.250%, 06/01/2015 ............................... Aaa/AAA 2,537,512 2,500,000 5.750%, 08/01/2019 ............................... Aaa/AAA 2,640,625 Portland Water System 1,440,000 5.500%, 08/01/2015 ............................... Aa1/NR 1,474,200 7,420,000 5.500%, 08/01/2019+ .............................. Aa1/NR 7,614,775 1,185,000 5.500%, 08/01/2020 ............................... Aa1/NR 1,213,144 Salem Oregon Water & Sewer (Financial Security Assurance Insured) 1,000,000 5.375%, 06/01/2015 ............................... Aaa/AAA 1,058,750 1,970,000 5.375%, 06/01/2016 ............................... Aaa/AAA 2,024,175 3,025,000 5.500%, 06/01/2020 ............................... Aaa/AAA 3,096,844 Washington County Oregon Clean Water Services (Financial Guaranty Insurance Corporation Insured) 995,000 5.000%, 10/01/2013 ............................... Aaa/AAA 1,018,631 3,525,000 5.125%, 10/01/2017 ............................... Aaa/AAA 3,538,219 Washington County Unified Sewer Agency (AMBAC Indemnity Corporation Insured) 2,120,000 5.900%, 10/01/2006 ............................... Aaa/AAA 2,260,450 315,000 5.900%, 10/01/2006 ............................... Aaa/AAA 333,900 2,500,000 6.125%, 10/01/2012 ............................... Aaa/AAA 2,678,125 750,000 6.125%, 10/01/2012 ............................... Aaa/AAA 803,438 -------------- Total Water and Sewer Revenue Bonds 42,004,321 -------------- OTHER REVENUE BONDS - 1.1% -------------------------------------------------------- Baker County Pollution Control (Ash Grove Cement West Project) (Small Business Administration Insured) 355,000 6.200%, 07/01/2004 ............................... Aaa/NR 357,592 380,000 6.300%, 07/01/2005 ............................... Aaa/NR 382,782 Multnomah County School District #1J, Special Obligations $ 1,000,000 5.000%, 03/01/2007 ............................... A1/A $ 1,009,990 Oregon State Department of Administration Services (Lottery Revenue) (Financial Security Assurance Insured) 2,000,000 5.750%, 04/01/2014 ............................... Aaa/AAA 2,127,500 -------------- Total Other Revenue Bonds ........................ 3,877,864 -------------- Total State of Oregon Revenue Bonds .............. 155,092,295 -------------- Total Municipal Bonds (cost $338,311,670**) ......... 99.0% 347,812,186 Other assets less liabilities ....................... 1.0 3,515,217 ------ -------------- Net Assets .......................................... 100.0% $ 351,327,403 ====== ==============
(*) Any security not rated has been determined by the Investment Sub-Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a rating service. (**) See notes 2f and 4. + This security is pledged as collateral for the Trust's when-issued commitment. PORTFOLIO ABBREVIATIONS: AMBAC - American Municipal Bond Assurance Corp. LOC - Letter of Credit MBIA - Municipal Bond Investors Assurance Corp. See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2002 (UNAUDITED) ASSETS Investments at value (cost $338,311,670) ............................................... $347,812,186 Cash ................................................................................... 1,987,458 Interest receivable .................................................................... 5,499,869 Receivable for Trust shares sold ....................................................... 547,829 Receivable for investment securities sold .............................................. 193,112 Other assets ........................................................................... 2,151 ------------ Total assets ........................................................................... 356,042,605 ------------ LIABILITIES Payable for investment securities purchased ............................................ 3,018,276 Payable for Trust shares redeemed ...................................................... 965,751 Dividends payable ...................................................................... 373,327 Distribution fees payable .............................................................. 156,724 Management fees payable ................................................................ 119,895 Accrued expenses ....................................................................... 81,229 ------------ Total liabilities ...................................................................... 4,715,202 ------------ NET ASSETS ................................................................................ $351,327,403 ============ Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share ..... $ 333,961 Additional paid-in capital ............................................................. 340,396,059 Net unrealized appreciation on investments (note 4) .................................... 9,500,516 Accumulated net realized gain on investments ........................................... 700,033 Undistributed net investment income .................................................... 396,834 ------------ $351,327,403 ============ CLASS A Net Assets ............................................................................. $310,272,401 ============ Capital shares outstanding ............................................................. 29,490,890 ============ Net asset value and redemption price per share ......................................... $ 10.52 ============ Offering price per share (100/96 of $10.52 adjusted to nearest cent) ................... $ 10.96 ============ CLASS C Net Assets ............................................................................. $ 18,695,211 ============ Capital shares outstanding ............................................................. 1,778,418 ============ Net asset value and offering price per share ........................................... $ 10.51 ============ Redemption price per share (* a charge of 1% is imposed on the redemption proceeds of the shares, or on the original price, whichever is lower, if redeemed during the first 12 months after purchase) .......................................... $ 10.51* ============ CLASS Y Net Assets ............................................................................. $ 22,359,791 ============ Capital shares outstanding ............................................................. 2,126,765 ============ Net asset value, offering and redemption price per share ............................... $ 10.51 ============
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENT OF OPERATIONS FOR THE SIX MONTHSENDED MARCH 31, 2002 (UNAUDITED) INVESTMENT INCOME: Interest income ......................................................... $ 9,063,396 Expenses: Management fees (note 3) ................................................ $ 695,402 Distribution and service fees (note 3) .................................. 308,886 Transfer and shareholder servicing agent fees ........................... 90,107 Trustees' fees and expenses ............................................. 50,973 Legal fees .............................................................. 36,655 Shareholders' reports and proxy statements .............................. 27,089 Custodian fees .......................................................... 15,402 Audit and accounting fees ............................................... 14,063 Registration fees and dues .............................................. 10,620 Insurance ............................................................... 8,361 Miscellaneous ........................................................... 24,671 ----------- 1,282,229 Expenses paid indirectly (note 7) ....................................... (33,111) ----------- Net expenses ............................................................ 1,249,118 ----------- Net investment income ................................................... 7,814,278 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions ................... 620,753 Change in unrealized appreciation on investments ........................ (6,773,577) ----------- Net realized and unrealized gain (loss) on investments .................. (6,152,824) ----------- Net increase in net assets resulting from operations .................... $ 1,661,454 ===========
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MARCH 31, 2002 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2001 ---------------- ------------------ OPERATIONS: Net investment income ........................................ $ 7,814,278 $ 15,243,893 Net realized gain (loss) from securities transactions ........ 620,753 648,916 Change in unrealized appreciation on investments ............. (6,773,577) 13,003,395 ------------- ------------- Change in net assets resulting from operations ............ 1,661,454 28,896,204 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 6): Class A Shares: Net investment income ........................................ (6,939,210) (13,839,683) Net realized gain on investments ............................. (498,049) (198,559) Class C Shares: Net investment income ........................................ (279,184) (322,032) Net realized gain on investments ............................. (24,704) (4,451) Class Y Shares: Net investment income ........................................ (538,783) (1,068,265) Net realized gain on investments ............................. (38,172) (15,146) ------------- ------------- Change in net assets from distributions ................... (8,318,102) (15,448,136) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 8): Proceeds from shares sold .................................... 28,894,666 45,694,799 Reinvested dividends and distributions ....................... 5,197,678 8,937,268 Cost of shares redeemed ...................................... (21,144,766) (38,726,743) ------------- ------------- Change in net assets from capital share transactions ...... 12,947,578 15,905,324 ------------- ------------- Change in net assets ...................................... 6,290,930 29,353,392 NET ASSETS: Beginning of period .......................................... 345,036,473 315,683,081 ------------- ------------- End of period ................................................ $ 351,327,403 $ 345,036,473 ============= =============
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Tax-Free Trust of Oregon (the "Trust") is a separate portfolio of The Cascades Trust. The Cascades Trust (the "Business Trust") is an open-end investment company, which was organized on October 17, 1985, as a Massachusetts business trust and is authorized to issue an unlimited number of shares. The Trust is a non-diversified portfolio which commenced operations on June 16, 1986 and until April 5, 1996, offered only one class of shares. On that date, the Trust began offering two additional classes of shares, Class C and Class Y shares. All shares outstanding prior to that date were designated as Class A shares and are sold with a front-payment sales charge and bear an annual service fee. Class C shares are sold with a level-payment sales charge with no payment at time of purchase but level service and distribution fees from date of purchase through a period of six years thereafter. A contingent deferred sales charge of 1% is assessed to any Class C shareholder who redeems shares of this Class within one year from the date of purchase. The Class Y shares are only offered to institutions acting for an investor in a fiduciary, advisory, agency, custodian or similar capacity and are not offered directly to retail investors. Class Y shares are sold at net asset value without any sales charge, redemption fees, contingent deferred sales charge or distribution or service fees. On January 31, 1998 the Trust established Class I shares, which are offered and sold only through financial intermediaries and are not offered directly to retail investors. At March 31, 2002 there were no Class I shares outstanding. All classes of shares represent interests in the same portfolio of investments and are identical as to rights and privileges but differ with respect to the effect of sales charges, the distribution and/or service fees borne by each class, expenses specific to each class, voting rights on matters affecting a single class and the exchange privileges of each class. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies. a) PORTFOLIO VALUATION: Municipal securities which have remaining maturities of more than 60 days are valued at fair value each business day based upon information provided by a nationally prominent independent pricing service and periodically verified through other pricing services; in the case of securities for which market quotations are readily available, securities are valued at the mean of bid and asked quotations and, in the case of other securities, at fair value determined under procedures established by and under the general supervision of the Board of Trustees. Securities which mature in 60 days or less are valued at amortized cost if their term to maturity at purchase was 60 days or less, or by amortizing their unrealized appreciation or depreciation on the 61st day prior to maturity, if their term to maturity at purchase exceeded 60 days. b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME: Securities transactions are recorded on the trade date. Realized gains and losses from securities transactions are reported on the identified cost basis. Interest income is recorded daily on the accrual basis and is adjusted for amortization of premium and accretion of original issue and market discount. c) FEDERAL INCOME TAXES: It is the policy of the Trust to qualify as a regulated investment company by complying with the provisions of the Internal Revenue Code applicable to certain investment companies. The Trust intends to make distributions of income and securities profits sufficient to relieve it from all, or substantially all, Federal income and excise taxes. d) ALLOCATION OF EXPENSES: Expenses, other than class-specific expenses, are allocated daily to each class of shares based on the relative net assets of each class. Class-specific expenses, which include distribution and service fees and any other items that are specifically attributed to a particular class, are charged directly to such class. e) USE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. f) NEW ACCOUNTING PRONOUNCEMENT: In November 2000, the AICPA issued a revised audit and accounting guide, AUDITS OF INVESTMENT COMPANIES, which is effective for fiscal years beginning after December 15, 2000. The revised Guide requires the Trust to amortize premium and all discounts on all fixed-income securities. The Fund elected to adopt this requirement effective October 1, 2001. This change does not affect the Trust 's net asset value, but does change the classification of certain amounts in the statement of operations. For the six month period ending March 31, 2002, interest income increased by $57,100, net realized gain on investments decreased by $39,239, and the change in net unrealized appreciation of investments decreased by $17,861. In addition, the Trust recorded an adjustment to increase the cost of securities and increase accumulated undistributed net investment income by $289,945 to reflect the cumulative effect of this change up to the date of adoption. For the six months ended March 31, 2002, the new accounting pronouncement did not have a material impact on the financial highlights of the Trust. 3. FEES AND RELATED PARTY TRANSACTIONS (a) MANAGEMENT ARRANGEMENTS: Aquila Management Corporation (the "Manager"), the Trust's founder and sponsor, serves as the Manager for the Trust under an Advisory and Administration Agreement with the Trust. The portfolio management of the Trust has been delegated to a sub-adviser as described below. Under the Advisory and Administrative Agreement, the Manager provides all administrative services to the Trust, other than those relating to the day-to-day portfolio management. The Manager's services include providing the office of the Trust and all related services as well as overseeing the activities of the sub-adviser and all the various support organizations to the Trust such as the shareholder servicing agent, custodian, legal counsel, auditors and distributor and additionally maintaining the Trust's accounting books and records. For its services, the Manager is entitled to receive a fee which is payable monthly and computed as of the close of business each day at the annual rate of 0.40% on the Trust's net assets. U.S. Bancorp Asset Management, Inc. (formerly U.S. Bancorp Piper Jaffray Asset Management, Inc.) (the "Sub-Adviser"), serves as the Investment Sub-Adviser for the Trust under a Sub-Advisory Agreement between the Manager and the Sub-Adviser. Under this agreement, the Sub-Adviser continuously provides, subject to oversight of the Manager and the Board of Trustees of the Trust, the investment program of the Trust and the composition of its portfolio, arranges for the purchases and sales of portfolio securities, and provides for daily pricing of the Trust's portfolio. For its services, the Sub-Adviser is entitled to receive a fee from the Manager which is payable monthly and computed as of the close of business each day at the annual rate of 0.18% on the Trust's net assets. Specific details as to the nature and extent of the services provided by the Manager and the Sub-Adviser are more fully defined in the Trust's Prospectus and Statement of Additional Information. b) DISTRIBUTION AND SERVICE FEES: The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment Company Act of 1940. Under one part of the Plan, with respect to Class A Shares, the Trust is authorized to make service fee payments to broker-dealers or others ("Qualified Recipients") selected by Aquila Distributors, Inc. (the "Distributor"), including, but not limited to, any principal underwriter of the Trust, with which the Distributor has entered into written agreements contemplated by the Rule and which have rendered assistance in the distribution and/or retention of the Trust's shares or servicing of shareholder accounts. The Trust makes payment of this service fee at the annual rate of 0.15% of the Trust's average net assets represented by Class A Shares. For the six months ended March 31, 2002, service fees on Class A Shares amounted to $231,798, of which the Distributor received $9,029. Under another part of the Plan, the Trust is authorized to make payments with respect to Class C Shares to Qualified Recipients which have rendered assistance in the distribution and/or retention of the Trust's Class C shares or servicing of shareholder accounts. These payments are made at the annual rate of 0.75% of the Trust's net assets represented by Class C Shares and for the six months ended March 31, 2002, amounted to $57,816. In addition, under a Shareholder Services Plan, the Trust is authorized to make service fee payments with respect to Class C Shares to Qualified Recipients for providing personal services and/or maintenance of shareholder accounts. These payments are made at the annual rate of 0.25% of the Trust's net assets represented by Class C Shares and for the six months ended March 31, 2002, amounted to $19,272. The total of these payments made with respect to Class C Shares amounted to $77,088, of which the Distributor received $50,636. Specific details about the Plans are more fully defined in the Trust's Prospectus and Statement of Additional Information. Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Trust's shares. Through agreements between the Distributor and various broker-dealer firms ("dealers"), the Trust's shares are sold primarily through the facilities of these dealers having offices within Oregon, with the bulk of sales commissions inuring to such dealers. For the six months ended March 31, 2002, total commissions on sales of Class A Shares amounted to $509,732, of which the Distributor received $60,178. 4. PURCHASES AND SALES OF SECURITIES During the six months ended March 31, 2002, purchases of securities and proceeds from the sales of securities aggregated $45,167,733 and $30,183,491, respectively. At March 31, 2002, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $11,251,452, and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $1,460,990 for a net unrealized appreciation of $9,790,462. 5. PORTFOLIO ORIENTATION Since the Trust invests principally and may invest entirely in double tax-free municipal obligations of issuers within Oregon, it is subject to possible risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Oregon and whatever effects these may have upon Oregon issuers' ability to meet their obligations. Two such developments, Measure 5, a 1990 amendment to the Oregon Constitution, as well as Measures 47 and 50, limit the taxing and spending authority of certain Oregon governmental entities. Although these amendments could have an adverse effect on the general financial condition of certain municipal entities that would impair the ability of certain Oregon issuer's to pay interest and principal on their obligations, experience over the history of such amendments would indicate a low probability of this happening. 6. DISTRIBUTIONS The Trust declares dividends daily from net investment income and makes payments monthly in additional shares at the net asset value per share, in cash, or in a combination of both, at the shareholder's option. Net realized capital gains, if any, are distributed annually and are taxable. The Trust intends to maintain, to the maximum extent possible, the tax-exempt status of interest payments received from portfolio municipal securities in order to allow dividends paid to shareholders from net investment income to be exempt from regular Federal and State of Oregon income taxes. However, due to differences between financial statement reporting and Federal income tax reporting requirements, distributions made by the Trust may not be the same as the Trust's net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. 7. EXPENSES The Trust has negotiated an expense offset arrangement with its custodian, wherein it receives credit toward the reduction of custodian fees and other Trust expenses whenever there are uninvested cash balances.The Statement of Operations reflects the total expenses before any offset, the amount of offset and the net expenses. It is the general intention of the Trust to invest, to the extent practicable, some or all of cash balances in income-producing assets rather than leave cash on deposit. 8. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Trust were as follows:
SIX MONTHS ENDED MARCH 31, 2002 YEAR ENDED (UNAUDITED) SEPTEMBER 30, 2001 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS A SHARES: Proceeds from shares sold ................ 1,906,845 $ 20,317,992 3,046,769 $ 32,323,152 Reinvested dividends and distributions ......................... 441,224 4,693,291 815,575 8,626,274 Cost of shares redeemed .................. (1,630,655) (17,392,411) (3,219,333) (34,011,543) ---------- ------------ ---------- ------------ Net change ............................ 717,414 7,618,872 643,011 6,937,883 ---------- ------------ ---------- ------------ CLASS C SHARES: Proceeds from shares sold ................ 638,841 6,806,613 754,192 8,004,403 Reinvested dividends and distributions ......................... 19,005 201,860 20,272 214,572 Cost of shares redeemed .................. (61,628) (656,924) (160,595) (1,702,903) ---------- ------------ ---------- ------------ Net change ............................ 596,218 6,351,549 613,869 6,516,072 ---------- ------------ ---------- ------------ CLASS Y SHARES: Proceeds from shares sold ................ 166,326 1,770,061 507,863 5,367,244 Reinvested dividends and distributions ......................... 28,484 302,527 9,109 96,422 Cost of shares redeemed .................. (290,526) (3,095,431) (285,830) (3,012,297) ---------- ------------ ---------- ------------ Net change ............................ (95,716) (1,022,843) 231,142 2,451,369 ---------- ------------ ---------- ------------ Total transactions in Trust shares ................................... 1,217,916 $ 12,947,578 1,488,022 $ 15,905,324 ========== ============ ========== ============
TAX-FREE TRUST OF OREGON FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A -------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 3/31/02 ----------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 ----------- ----- ---- ---- ---- ---- Net asset value, beginning of period.......... $10.72 $10.29 $10.27 $10.86 $10.68 $10.49 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income...................... 0.24 0.49 0.50 0.50 0.53 0.53 Net gain (loss) on securities (both realized and unrealized)................ (0.18) 0.44 0.02 (0.56) 0.19 0.21 ------ ------ ------ ------ ------ ------ Total from investment operations........... 0.06 0.93 0.52 (0.06) 0.72 0.74 ------ ------ ------ ------ ------ ------ Less distributions (note 6): Dividends from net investment income....... (0.24) (0.49) (0.50) (0.51) (0.53) (0.54) Distributions from capital gains........... (0.02) (0.01) -- (0.02) (0.01) (0.01) ------ ------ ------ ------ ------ ------ Total distributions........................ (0.26) (0.50) (0.50) (0.53) (0.54) (0.55) ------ ------ ------ ------ ------ ------ Net asset value, end of period................ $10.52 $10.72 $10.29 $10.27 $10.86 $10.68 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge).... 0.52%+ 9.18% 5.26% (0.62)% 6.90% 7.21% Ratios/supplemental data Net assets, end of period (in millions).... $310 $309 $289 $309 $322 $312 Ratio of expenses to average net assets ... 0.71%* 0.72% 0.71% 0.71% 0.71% 0.73% Ratio of net investment income to average net assets ..................... 4.50%* 4.62% 4.93% 4.70% 4.83% 5.01% Portfolio turnover rate ................... 9%+ 17% 20% 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.... 0.69%* 0.70% 0.70% 0.68% 0.69% 0.72%
+ Not annualized. * Annualized. See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C -------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 3/31/02 -------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ....... $10.71 $10.28 $10.27 $10.85 $10.67 $10.49 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income ................... 0.19 0.39 0.41 0.41 0.43 0.43 Net gain (loss) on securities (both realized and unrealized) ............. (0.18) 0.45 0.02 (0.55) 0.20 0.21 ------ ------ ------ ------ ------ ------ Total from investment operations ........ 0.01 0.84 0.43 (0.14) 0.63 0.64 ------ ------ ------ ------ ------ ------ Less distributions (note 6): Dividends from net investment income .... (0.19) (0.40) (0.42) (0.42) (0.44) (0.45) Distributions from capital gains ........ (0.02) (0.01) -- (0.02) (0.01) (0.01) ------ ------ ------ ------ ------ ------ Total distributions ..................... (0.21) (0.41) (0.42) (0.44) (0.45) (0.46) ------ ------ ------ ------ ------ ------ Net asset value, end of period ............. $10.51 $10.71 $10.28 $10.27 $10.85 $10.67 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) . 0.10%+ 8.26% 4.27% (1.38)% 6.00% 6.20% Ratios/supplemental data Net assets, end of period (in millions) . $ 18.7 $ 12.7 $ 5.8 $ 3.0 $ 1.2 $ 0.80 Ratio of expenses to average net assets ........................... 1.56%* 1.56% 1.55% 1.56% 1.56% 1.58% Ratio of net investment income to average net assets ................... 3.64%* 3.70% 4.03% 3.84% 3.98% 4.14% Portfolio turnover rate ................. 9%+ 17% 20% 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............................ 1.54%* 1.54% 1.54% 1.53% 1.54% 1.57% CLASS Y ------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 3/31/02 -------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 ----------- ------ ------ ------ ------ ------ Net asset value, beginning of period ....... $10.72 $10.28 $10.27 $10.85 $10.68 $10.49 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income ................... 0.25 0.50 0.52 0.52 0.54 0.54 Net gain (loss) on securities (both realized and unrealized) ............. (0.20) 0.45 0.01 (0.56) 0.19 0.21 ------ ------ ------ ------ ------ ------ Total from investment operations ........ 0.05 0.95 0.53 (0.04) 0.73 0.75 ------ ------ ------ ------ ------ ------ Less distributions (note 6): Dividends from net investment income .... (0.24) (0.50) (0.52) (0.52) (0.55) (0.55) Distributions from capital gains ........ (0.02) (0.01) -- (0.02) (0.01) (0.01) ------ ------ ------ ------ ------ ------ Total distributions ..................... (0.26) (0.51) (0.52) (0.54 (0.56) (0.56) ------ ------ ------ ------ ------ ------ Net asset value, end of period ............. $10.51 $10.72 $10.28 $10.27 $10.85 $10.68 ====== ====== ====== ====== ====== ====== Total return (not reflecting sales charge) . 0.50%+ 9.45% 5.32% (0.39)% 6.96% 7.37% Ratios/supplemental data Net assets, end of period (in millions) $ 22.4 $ 23.8 $ 20.5 $ 17.0 $ 10.7 $ 4.0 Ratio of expenses to average net assets ........................... 0.56%* 0.57% 0.56% 0.56% 0.55% 0.58% Ratio of net investment income to average net assets ................... 4.65%* 4.76% 5.08% 4.86% 4.95% 5.21% Portfolio turnover rate ................. 9%+ 17% 20% 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............................ 0.54%* 0.55% 0.54% 0.53% 0.53% 0.57%
+ Not annualized. * Annualized. See accompanying notes to financial statements.