<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>semitfto.txt
<DESCRIPTION>TAX-FREE TRUST OF OREGON 3/31/01 SEMI-ANNUAL REPORT
<TEXT>
<PAGE>
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
<PAGE>
[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
<PAGE>
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.
<PAGE>
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.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF INVESTMENTS
MARCH 31, 2002
(UNAUDITED)
<TABLE>
<CAPTION>
RATING
FACE MOODY'S/
AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS - 54.9% S&P VALUE
--------------- ------------------------------------------------ --------- --------------
<S> <C><C><C> <C> <C>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ................................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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 ...............................
<PAGE>
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
====== ==============
</TABLE>
(*) Any security not rated has been determined by the
Investment Sub-Adviser to have sufficient quality to be
ranked in the top four credit ratings if a credit rating
were to be assigned by a rating service.
(**) 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.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2002
(UNAUDITED)
<TABLE>
<S><C><C> <C>
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
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENT OF OPERATIONS
FOR THE SIX MONTHSENDED MARCH 31, 2002
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
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
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2002 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2001
---------------- ------------------
<S><C><C> <C> <C>
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
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Tax-Free Trust of Oregon (the "Trust") is a separate portfolio of The
Cascades Trust. The Cascades Trust (the "Business Trust") is an open-end
investment company, which was organized on October 17, 1985, as a Massachusetts
business trust and is authorized to issue an unlimited number of shares. The
Trust is a non-diversified portfolio which commenced operations on June 16, 1986
and until April 5, 1996, offered only one class of shares. On that date, the
Trust began offering two additional classes of shares, Class C and Class Y
shares. All shares outstanding prior to that date were designated as Class A
shares and are sold with a front-payment sales charge and bear an annual service
fee. Class C shares are sold with a level-payment sales charge with no payment
at time of purchase but level service and distribution fees from date of
purchase through a period of six years thereafter. A contingent deferred sales
charge of 1% is assessed to any Class C shareholder who redeems shares of this
Class within one year from the date of purchase. The Class Y shares are only
offered to institutions acting for an investor in a fiduciary, advisory, agency,
custodian or similar capacity and are not offered directly to retail investors.
Class Y shares are sold at net asset value without any sales charge, redemption
fees, contingent deferred sales charge or distribution or service fees. On
January 31, 1998 the Trust established Class I shares, which are offered and
sold only through financial intermediaries and are not offered directly to
retail investors. At March 31, 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
Under a Distribution Agreement, the Distributor serves as the exclusive
distributor of the Trust's shares. Through agreements between the Distributor
and various broker-dealer firms ("dealers"), the Trust's shares are sold
primarily through the facilities of these dealers having offices within Oregon,
with the bulk of sales commissions inuring to such dealers. For the six months
ended March 31, 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.
<PAGE>
7. EXPENSES
The Trust has negotiated an expense offset arrangement with its custodian,
wherein it receives credit toward the reduction of custodian fees and other
Trust expenses whenever there are uninvested cash balances.The Statement of
Operations reflects the total expenses before any offset, the amount of offset
and the net expenses. It is the general intention of the Trust to invest, to the
extent practicable, some or all of cash balances in income-producing assets
rather than leave cash on deposit.
8. CAPITAL SHARE TRANSACTIONS
Transactions in Capital Shares of the Trust were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 2002 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2001
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S><C><C> <C> <C> <C> <C>
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
========== ============ ========== ============
</TABLE>
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
3/31/02 -----------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
----------- ----- ---- ---- ---- ----
<S><C><C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
<PAGE>
TAX-FREE TRUST OF OREGON
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
3/31/02 --------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
----------- ------ ------ ------ ------ ------
<S><C><C> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
CLASS Y
-------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
3/31/02 --------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 1997
----------- ------ ------ ------ ------ ------
<S><C><C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
+ Not annualized.
* Annualized.
See accompanying notes to financial statements.
</TEXT>
</DOCUMENT>