-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BO/K2tJtPRJ2l6J6kDtiWw7xOX8n3HLsyu95xqPPupNHoMrpAE7ouU7fLZCPxbHe a973ek3LyZcETXARuk0J5Q== 0000791049-03-000016.txt : 20031208 0000791049-03-000016.hdr.sgml : 20031208 20031208111810 ACCESSION NUMBER: 0000791049-03-000016 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031208 EFFECTIVENESS DATE: 20031208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASCADES TRUST CENTRAL INDEX KEY: 0000791049 IRS NUMBER: 136868231 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04626 FILM NUMBER: 031041794 BUSINESS ADDRESS: STREET 1: 380 MADISON AVE STE 2300 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2126976666 MAIL ADDRESS: STREET 1: 380 MADISON AVENUE STREET 2: # 2300 CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: TAX FREE TRUST OF OREGON DATE OF NAME CHANGE: 19890810 N-CSR 1 tftoformncsr.txt TAX-FREE TRUST OF OREGON ANNUAL REPORT 9/30/03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4626 Tax-Free Trust or Oregon (Exact name of Registrant as specified in charter) 380 Madison Avenue New York, New York 10017 (Address of principal executive offices) (Zip code) Joseph P. DiMaggio 380 Madison Avenue New York, New York 10017 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 697-6666 Date of fiscal year end: 9/30 Date of reporting period: 9/30/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. [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 ANNUAL REPORT MANAGEMENT DISCUSSION As of the fiscal year end of September 30, 2003, the total net assets of Tax-Free Trust of Oregon (the "Trust") were $441,497,870 as compared to $402,481,655 on September 30, 2002. Most of this growth in assets was realized through new investors buying shares of the Trust, as well as existing shareholders adding to their accounts. As you are probably aware, the Federal Reserve Board (the "Fed") last lowered short-term interest rates in June of 2003 and then only 1/4 of 1% to the level of 1.00%. The bond market was generally disappointed by the amount of the cut and, therefore, reacted with a relatively significant rise in rates from which the bond market has not, in our minds, fully recovered. Treasury securities with maturities longer than three years have higher yields and lower market values than they had at September 30, 2002. Municipal bonds, while not as dramatic in their reaction as the Treasury market, have also suffered through decreasing market values for bonds with maturities longer than 8 years since September 30, 2002. Concurrently, the generally higher interest rates caused the Class A share of the Trust to be slightly lower on September 30, 2003, at the level of $11.04, as compared to $11.12 on September 30, 2002. The 2003 Oregon Legislature endured the longest session in its history as it struggled to come up with responsible means to balance the budget - a State Constitutional requirement - for the 2003-05 biennium. As the unemployment rate rose and the revenue flowing to the State's coffers dwindled, we saw the legislators battle how to keep schools and state services operating at expected levels. At many points, the Legislature seemed to be at a standstill, as stalwart Republicans wanted to cut levels of programs and moderate Republicans and Democrats wanted to raise taxes. With the economy not bailing them out, and what seemed to be a sense of fiscal panic beginning to set in, a small group of bipartisan lawmakers got together and pounded out a way to achieve the revenue in order to meet a $11.4 billion budget for Oregon - Raise Taxes. The actual tax increase is for three years and is being called an income tax surcharge. The three-year surcharge is expected to raise over $800 million in increased revenue. Some estimates say that the average Oregonian will have their state tax increased by a few $100 and should not feel the impact as their federal tax decrease is expected to all but make up for the state increase. As of this writing, signatures were being gathered to put the tax increase on a special ballot to be voted upon in February of 2004. All three rating agencies reduced the State's credit rating based upon their analysis of a poor economic environment in Oregon. Moodys lowered the State rating from Aa2 to Aa3 with a stable outlook, Fitch dropped the State from a AA credit to A+. And, S&P lowered the State's rating to AA- from AA with a stable outlook. The highest investment grade rating is AAA (Aaa) and the lowest is BBB, with varying degrees within each category. Over the past 30 years, Oregon's State credit has fluctuated between Aaa rated and A rated. The State of Oregon has not enjoyed a Aaa credit rating level since 1979, and only Moody's has ever rated it Aaa. The highest that Standard & Poors has ever rated the State is AA+ and that was only for a short period of time in 1979-1980. For the most part, during the past 30 years, Oregon has been a Aa/AA rated credit, just sometimes a little weaker than other times. We believe City, County and School District budgets across the country have fared better than their respective overall State budgets. Strong housing markets throughout the country have generally left local municipal budgets in better shape, as many depend on property taxes, not the more volatile income tax for revenue. During the economic boom of the 1990's, Oregonians passed initiatives that reduced and capped property taxes. Furthermore, the State Legislature was instructed to provide for the adequate funding of schools. Where local municipalities outside of Oregon were benefiting from rising property values, their revenue streams were more stable. By contrast, Oregonians had shifted from property taxes to the arguably much more volatile income tax as a major source of revenue. This "shift" left many local Oregon municipalities scrambling as the State ran into decreasing revenue, which resulted in less money flowing to the local municipalities. Many School Districts asked voters to pass levys to help prop up their budgets. Multnomah County residents recently passed Oregon's first county income tax to support the school district and some emergency service programs. The income tax is for 1.25% and is retroactive to January of 2003. The tax is not due until April of 2004, but the county does have a form available that will help residents estimate their tax so it can be paid now. In general, issuance of municipal debt nationally through the first nine months of 2003 was the highest on record, $286 billion, a 12.9% increase over same period for 2002. In our view, consumer demand for municipal securities continued to be strong as the result of equity markets continuing to be volatile. Municipalities found the low interest rates appetizing as they plugged budget holes and refinanced existing debt. Through September 30, 2003, the rate of municipal bond issuance within Oregon surpassed the national average, increasing by a significant 47.3% over the same period in 2002, from approximately $2.2 billion to $3.3 billion. The issuance is a mix of budget hole plugging, refinancings, and taxable debt issued for pension obligations. During the fall of 2003, Oregonians approved a State Constitution amendment that allows the State to issue general obligation debt to support the Public Employees Retirement System (PERS). The State brought to market a $2 billion pension obligation bond deal in late October that will skew Oregon issuance for 2003. The pension obligation bonds issued by the State are taxable at the Federal level. Therefore, these bonds should not have an impact on the market for double tax-exempt securities like the municipal bonds held by the Tax-Free Trust of Oregon. It remains the goal of Tax-Free Trust of Oregon to avoid undue volatility of share price through structuring the portfolio to consist of high-quality securities which have an intermediate average maturity. As of September 30, 2003, Tax-Free Trust of Oregon's portfolio had 96.23% of its securities rated in the two highest categories possible - Aaa and Aa. As of this date, the portfolio had an intermediate average maturity of 12.9 years. As always, we continue to evaluate credit concerns and seek to reduce, if not eliminate, those credits from the portfolio that are of concern. In general, we continue to seek a satisfactory level of double tax-free dividends as well as high stability for the principal of shareholders' investments. PERFORMANCE REPORT The following graph illustrates the value of $10,000 invested in the Class A shares of Tax-Free Trust of Oregon for the 10-year period ended September 30, 2003 as compared with the Lehman Brothers Quality Intermediate Municipal Bond Index and the Consumer Price Index (a cost of living index). The performance of each of the other classes is not shown in the graph but is included in the table below. It should be noted that the Lehman Index does not include any operating expenses nor sales charges and being nationally oriented, does not reflect state specific bond market performance. [Graphic of a line chart with the following information:]
Lehman Brothers Quality Intermediate Trust's Class A Shares Municipal Bond Index With Sales Charge Without Sales Charge Cost of Living Index 9/93 $10,000 $9,600 $10,000 $10,000 9/94 $9,943 $9,440 $9,836 $10,296 9/95 $10,942 $10,251 $10,682 $10,558 9/96 $11,424 $10,808 $11,262 $10,875 9/97 $12,296 $11,598 $12,086 $11,110 9/98 $13,195 $12,348 $12,867 $11,275 9/99 $13,334 $12,317 $12,835 $11,571 9/00 $14,045 $12,969 $13,514 $11,971 9/01 $15,382 $14,145 $14,739 $12,288 9/02 $16,653 $15,331 $15,975 $12,474 9/03 $17,351 $15,933 $16,602 $12,764
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED SEPTEMBER 30, 2003 -------------------------------------------- SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION ------ ------- -------- --------- Class A (6/16/86) With Sales Charge ......................... (0.47)% 4.30% 4.77% 6.34% Without Sales Charge ...................... 3.65% 5.15% 5.20% 6.59% Class C (4/5/96) With CDSC ................................. 1.77% 4.26% n/a 4.96% Without CDSC .............................. 2.77% 4.26% n/a 4.96% Class Y (4/5/96) No Sales Charge ........................... 3.80% 5.31% n/a 6.02% Lehman Index ................................. 4.19% 5.63% 5.66% 6.58%* (Class A) 4.19% 5.63% n/a 6.03% (Class C&Y)
* From commencement of the index on 1/1/87. Total return figures shown for the Trust reflect any change in price and assume all distributions within the period were invested in additional shares. Returns for Class A shares are calculated with and without the effect of the initial 4% maximum sales charge. Returns for Class C shares are calculated with and without the effect of the 1% contingent deferred sales charge (CDSC), imposed on redemptions made within the first 12 months after purchase. Class Y shares are sold without any sales charge. The rates of return will vary and the principal value of an investment will fluctuate with market conditions. Shares, if redeemed, may be worth more or less than their original cost. A portion of each classes' income may be subject to federal and state income taxes. Past performance is not predictive of future investment results. [Logo of KPMG LLP: four solid rectangles with the letters KPMG in front of them] INDEPENDENT AUDITORS' REPORT To the Board of Trustees and Shareholders of Tax-Free Trust of Oregon: We have audited the accompanying statement of assets and liabilities of Tax-Free Trust of Oregon, including the statement of investments, as of September 30, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2003, by correspondence with the custodian. As to securities sold but not yet delivered, we performed other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Tax-Free Trust of Oregon as of September 30, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP New York, New York November 14, 2003 TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS SEPTEMBER 30, 2003
RATING FACE MOODY'S/ AMOUNT STATE OF OREGON GENERAL OBLIGATION BONDS (56.5%) S&P VALUE - ------------ -------------------------------------------------------- -------- ------------- City of Beaverton, Oregon $ 960,000 6.050%, 04/01/2004 ............................... Aa3/AA $ 983,270 1,020,000 6.150%, 04/01/2005 ............................... Aa3/AA 1,043,837 1,080,000 6.250%, 04/01/2006 ............................... Aa3/AA 1,105,607 Bend, Oregon Transportation Highway System (MBIA Corporation Insured) 1,135,000 5.300%, 9/1/2017 ................................. Aaa/NR 1,235,731 Benton & Linn Counties Oregon School District #509J (Financial Security Assurance Insured) 4,670,000 5.000%, 06/01/2021 ............................... Aaa/NR 4,909,337 Chemeketa, Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,385,000 5.500%, 06/01/2014 ............................... Aaa/AAA 1,610,063 Clackamas County, Oregon School District #007J (Lake Oswego) 1,500,000 5.700%, 06/15/2010 ............................... Aa2/NR 1,543,245 1,340,000 5.375%, 06/01/2013 ............................... Aa2/NR 1,510,850 Clackamas County, Oregon School District #62 (Oregon City) (State School Bond Guaranty Program) 1,330,000 5.375%, 06/15/2017 ............................... Aa3/AA*** 1,469,650 2,030,000 5.500%, 06/15/2020 ............................... Aa3/AA*** 2,217,775 Clackamas County, Oregon School District #86 (Canby) (State School Bond Guaranty Program) 3,535,000 5.250%, 06/15/2020 ............................... Aa3/AA*** 3,791,287 Clackamas County, Oregon School District #108 (Estacada) (Financial Security Assurance Insured) 1,295,000 5.375%, 06/15/2017 ............................... Aaa/AAA 1,427,737 2,000,000 5.000%, 06/15/2025 ............................... Aaa/AAA 2,042,500 Clackamas County, Oregon School District #115 (Gladstone) (AMBAC Indemnity Corporation Insured) 615,000 5.700%, 06/01/2007 ............................... Aaa/AAA 646,636 1,000,000 6.150%, 06/01/2014 ............................... Aaa/AAA 1,054,390 Clackamas County, Oregon Tax Allocation 1,000,000 6.500%, 05/01/2020 ............................... NR/NR* 1,000,740 Clackamas, Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 3,955,000 5.250%, 06/15/2017 ............................... Aaa/AAA 4,315,894 4,310,000 5.250%, 06/15/2018 ............................... Aaa/AAA 4,676,350 Clackamas and Washington County, Oregon School District #3J (Financial Guaranty Insurance Corporation Insured) $ 1,620,000 5.000%, 06/01/2017 ............................... Aaa/AAA $ 1,721,250 Clatsop County School District #1 (Astoria) (State School Bond Guaranty Program) 1,855,000 5.500%, 06/15/2019 ............................... NR/AA*** 2,158,756 Columbia County, Oregon School District #502 (Financial Guaranty Insurance Corporation Insured) 2,070,000 zero coupon, 06/01/2015 .......................... Aaa/AAA 1,283,400 Deschutes County, Oregon (Financial Security Assurance Insured) 2,000,000 5.000%, 12/01/2014 ............................... Aaa/NR 2,210,000 1,615,000 5.000%, 12/01/2015 ............................... Aaa/NR 1,776,500 2,260,000 5.000%, 12/01/2016 ............................... Aaa/NR 2,466,225 Deschutes County, Oregon Admin. School District #1 (Bend-LaPine) (Financial Security Assurance Insured) 1,145,000 5.500%, 06/15/2014 ............................... AAA/NR 1,302,437 1,300,000 5.500%, 06/15/2016 ............................... AAA/NR 1,460,875 1,355,000 5.500%, 06/15/2018 ............................... AAA/NR 1,504,050 3,000,000 5.125%, 06/15/2021 ............................... AAA/NR 3,153,750 Deschutes County, Oregon Admin. School District #1 (Bend-LaPine) 1,500,000 5.000%, 12/01/2017 ............................... A1/A 1,614,375 Douglas County, Oregon School District #4 (Roseburg) (State School Bond Guaranty Program) 1,075,000 5.125%, 12/15/2017 ............................... Aa3/NR 1,161,000 Douglas County, Oregon School District #116 (Winston- Dillard) (State School Bond Guaranty Program) 1,020,000 5.625%, 06/15/2020 ............................... NR/AA*** 1,125,825 Eugene, Oregon (Parks & Open Space) 1,465,000 5.250%, 02/01/2018 ............................... Aa2/NR 1,604,175 1,555,000 5.250%, 02/01/2019 ............................... Aa2/NR 1,689,119 Gresham, Oregon (Financial Security Assurance Insured) 1,155,000 5.375%, 06/01/2018 ............................... Aaa/NR 1,277,718 Jackson County, Oregon School District #4 (Phoenix- Talent) (Financial Security Assurance Insured) 1,490,000 5.500%, 06/15/2013 ............................... Aaa/AAA 1,685,563 1,395,000 5.500%, 06/15/2018 ............................... Aaa/AAA 1,548,450 Jackson County, Oregon School District #9 (Eagle Point) (State School Bond Guaranty Program) $ 1,120,000 5.625%, 06/15/2017 ............................... Aa3/NR $ 1,269,800 1,880,000 5.000%, 06/15/2021 ............................... Aa3/NR 1,955,200 Jackson County, Oregon School District #549 (Medford) (State School Bond Guaranty Program) 1,750,000 5.000%, 06/15/2012 ............................... Aa3/NR 1,962,187 Jackson County, Oregon School District #549C (Financial Security Assurance Insured) 1,000,000 5.300%, 06/01/2008 ............................... Aaa/AAA 1,071,250 Jefferson County School District #509J (Financial Guaranty Insurance Corporation Insured) 1,215,000 5.250%, 06/15/2014 ............................... Aaa/AAA 1,359,281 1,025,000 5.250%, 06/15/2017 ............................... Aaa/AAA 1,128,781 Josephine County, Oregon School District #7 (Grants Pass) (Financial Guaranty Insurance Corporation Insured) 2,700,000 5.700%, 06/01/2013 ............................... Aaa/AAA 3,024,000 Josephine County, Oregon Three Rivers School District (Financial Security Assurance Insured) 1,780,000 5.250%, 06/15/2018 ............................... Aaa/NR 1,931,300 1,130,000 5.000%, 06/15/2019 ............................... Aaa/NR 1,192,150 Lane County, Oregon School District #40 (Creswell) (State School Bond Guaranty Program) 1,430,000 5.375%, 06/15/2020 ............................... NR/AA 1,553,337 Lane County, Oregon School District #52J (Financial Guaranty Insurance Corporation Insured) 750,000 6.400%, 12/01/2009 ............................... Aaa/AAA 865,312 Lane & Douglas County, Oregon School District #45J (South Lane) (State School Bond Guaranty Program) 1,525,000 6.000%, 06/15/2018 ............................... NR/AA*** 1,820,469 Lane & Douglas County, Oregon School District 97J (Siuslaw) (State School Bond Guaranty Program) 1,000,000 5.400%, 06/15/2019 ............................... Aa3/NR 1,097,500 Lincoln County, Oregon (MBIA Corporation Insured) 1,000,000 5.375%, 02/01/2010 ............................... Aaa/AAA 1,013,360 Lincoln County, Oregon School District (Financial Guaranty Insurance Corporation Insured) $ 1,245,000 5.250%, 06/15/2012 ............................... Aaa/AAA $ 1,386,619 Linn-Benton, Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,160,000 zero coupon, 06/15/2011 .......................... Aaa/AAA 884,500 Linn County, Oregon School District #7 (Harrisburg) (State School Bond Guaranty Program) 1,660,000 5.500%, 06/15/2019 ............................... NR/AA*** 1,821,850 Linn County, Oregon School District #9 (Lebanon) Convertible Capital Appreciation Bond (Financial Guaranty Insurance Corporation Insured) 3,000,000 zero coupon, 06/15/2030 .......................... Aaa/AAA 3,116,250 Linn County, Oregon School District #9 (Lebanon) (MBIA Corporation Insured) 2,500,000 5.000%, 06/15/2030 ............................... Aaa/AAA 2,540,625 Malheur County, Oregon Jail Bonds (MBIA Corporation Insured) 1,345,000 6.300%, 12/01/2012 ............................... Aaa/AAA 1,482,862 Marion & Polk County, Oregon School District #24 (Salem-Keizer) (Financial Security Assurance Insured) 1,000,000 4.875%, 06/01/2014 ............................... Aaa/AAA 1,052,500 Metro, Oregon 3,240,000 5.000%, 01/01/2013 ............................... Aa1/AA+ 3,519,450 3,000,000 5.250%, 09/01/2014 ............................... Aa1/AA+ 3,363,750 Multnomah and Clackamas County, Oregon School District #10 (Gresham-Barlow) (Financial Security Assurance Insured) 1,500,000 5.500%, 06/15/2018 ............................... Aaa/AAA 1,665,000 2,650,000 5.000%, 06/15/2021 ............................... Aaa/AAA 2,772,562 Multnomah County School District #7 (Reynolds) (State School Bond Guaranty Program) 500,000 5.625%, 06/15/2017 ............................... Aa3/AA*** 566,875 2,375,000 5.125%, 06/15/2019 ............................... Aa3/AA*** 2,532,344 Multnomah County School District #40 5,100,000 5.625%, 06/01/2012 ............................... NR/AA- 5,309,100 Multnomah County School District #40 (Financial Security Assurance Insured) $ 2,055,000 5.000%, 12/01/2015 ............................... Aaa/AAA $ 2,214,262 1,000,000 5.000%, 12/01/2017 ............................... Aaa/AAA 1,066,250 Northern Oregon Correctional (AMBAC Indemnity Corporation Insured) 1,195,000 5.400%, 09/15/2016 ............................... Aaa/AAA 1,310,019 Oak Lodge Water District (AMBAC Indemnity Corporation Insured) 215,000 7.300%, 12/01/2005 ............................... Aaa/AAA 230,856 215,000 7.300%, 12/01/2006 ............................... Aaa/AAA 229,512 215,000 7.400%, 12/01/2007 ............................... Aaa/AAA 229,512 State of Oregon Board of Higher Education 820,000 zero coupon, 08/01/2016 .......................... Aa3/AA*** 472,525 655,000 zero coupon, 08/01/2017 .......................... Aa3/AA*** 356,156 500,000 zero coupon, 08/01/2018 .......................... Aa3/AA*** 255,625 540,000 zero coupon, 08/01/2019 .......................... Aa3/AA*** 260,550 2,560,000 5.500%, 08/01/2021 ............................... Aa3/AA*** 2,796,800 3,000,000 5.000%, 08/01/2022 ............................... Aa3/AA*** 3,123,750 1,655,000 5.600%, 08/01/2023 ............................... Aa3/AA*** 1,789,469 1,500,000 5.600%, 08/01/2023 ............................... Aa3/AA*** 1,621,875 6,300,000 6.000%, 08/01/2026 ............................... Aa3/AA*** 7,245,000 State of Oregon Elderly & Disabled Housing 40,000 6.250%, 08/01/2013 ............................... Aa3/AA*** 40,484 State of Oregon Refunding Series A 1,975,000 5.250%, 10/15/2013 ............................... Aa3/AA*** 2,231,750 2,115,000 5.250%, 10/15/2014 ............................... Aa3/AA*** 2,368,800 State of Oregon Veterans' Welfare 700,000 9.200%, 10/01/2008 ............................... Aa3/AA 926,625 1,010,000 5.200%, 10/01/2018 ............................... Aa3/AA 1,051,662 845,000 5.250%, 10/01/2042 ............................... Aa3/AA 873,519 Polk, Marion, and Benton County, Oregon School District #13J (Financial Guaranty Insurance Corporation Insured) 1,000,000 5.500%, 12/01/2008 ............................... Aaa/AAA 1,062,500 City of Portland, Oregon 1,480,000 5.100%, 10/01/2009 ............................... Aaa/NR 1,483,685 2,790,000 5.750%, 06/01/2013 ............................... Aaa/NR 3,006,225 City of Portland, Oregon (continued) $ 1,000,000 4.600%, 06/01/2014 ............................... Aaa/NR $ 1,058,750 2,000,000 5.600%, 06/01/2015 ............................... Aa2/NR 2,187,500 175,000 5.250%, 06/01/2015 ............................... Aa2/NR 185,500 2,975,000 zero coupon, 06/01/2015 Aa2/NR 1,833,344 1,120,000 5.125%, 06/01/2018 ............................... Aaa/NR 1,225,000 10,480,000 4.350%, 06/01/2023 ............................... Aa2/NR 10,178,700 Portland, Oregon Community College District 3,015,000 5.125%, 06/01/2013 ............................... Aa2/AA 3,335,344 3,115,000 5.125%, 06/01/2016 ............................... Aa2/AA 3,379,775 2,350,000 5.000%, 06/01/2021 ............................... Aa2/AA 2,441,063 Portland, Oregon Community College District (Financial Guaranty Insurance Corporation Insured) 1,395,000 5.000%, 06/01/2017 ............................... Aaa/AAA 1,489,163 Southwestern Oregon Community College District (MBIA Corporation Insured) 1,120,000 6.000%, 06/01/2025 ............................... Aaa/AAA 1,278,200 Tillamook County, Oregon School District #9 (Financial Security Assurance Insured) 3,000,000 5.250%, 06/15/2022 ............................... Aaa/AAA 3,198,750 Tualatin Hills Park and Recreation District, Oregon (MBIA Corporation Insured) 2,470,000 5.750%, 03/01/2012 ............................... Aaa/AAA 2,633,638 2,000,000 5.750%, 03/01/2015 ............................... Aaa/AAA 2,132,500 Umatilla County, Oregon (Financial Guaranty Insurance Corporation Insured) 2,000,000 5.600%, 10/01/2015 ............................... Aaa/AAA 2,245,000 Umatilla County, Oregon School District #8R Hermiston (AMBAC Indemnity Corporation Insured) 700,000 6.100%, 12/01/2012 ............................... Aaa/AAA 741,125 Umatilla County, Oregon School District #16R (Pendleton) (Financial Guaranty Insurance Corporation Insured) 1,550,000 5.500%, 07/01/2012 ............................... Aaa/NR 1,794,125 Wasco County, Oregon School District #12 (Financial Security Assurance Insured) 1,135,000 6.000%, 06/15/2015 ............................... Aaa/AAA 1,354,906 1,400,000 5.500%, 06/15/2017 ............................... Aaa/AAA 1,641,500 1,790,000 5.500%, 06/15/2020 ............................... Aaa/AAA 2,096,538 Washington & Clackamas Counties, School District #23 (Tigard) (MBIA Corporation Insured) $ 4,700,000 5.375%, 06/15/2014 ............................... Aaa/NR $ 5,322,750 2,500,000 5.375%, 06/15/2020 ............................... Aaa/NR 2,743,750 Washington & Clackamas Counties, School District #23J (Tigard) 1,000,000 5.650%, 06/01/2015 ............................... Aa3/NR 1,113,750 Washington County, Oregon 1,000,000 5.000%, 06/01/2017 ............................... Aa2/NR 1,067,500 Washington County, Oregon School District #15 (Forest Grove) (Financial Security Assurance Insured) 2,285,000 5.375%, 06/15/2014 ............................... Aaa/NR 2,556,344 1,760,000 5.375%, 06/15/2016 ............................... Aaa/NR 1,953,600 2,000,000 5.000%, 06/15/2021 ............................... Aaa/NR 2,085,000 Washington County, Oregon School District #48J (Beaverton) 1,175,000 5.500%, 06/01/2006 ............................... Aa2/AA- 1,206,408 1,130,000 5.600%, 06/01/2007 ............................... Aa2/AA- 1,160,872 1,000,000 6.150%, 06/01/2008 ............................... Aa2/AA- 1,007,520 1,415,000 5.700%, 06/01/2008 ............................... Aa2/AA- 1,453,729 1,440,000 6.000%, 06/01/2011 ............................... Aa2/AA- 1,482,624 2,000,000 5.125%, 01/01/2015 ............................... Aa2/AA- 2,172,500 1,620,000 5.125%, 01/01/2016 ............................... Aa2/AA- 1,751,625 Washington County, Oregon School District #48J (Beaverton) (Financial Guaranty Insurance Corporation Insured) 2,700,000 5.375%, 06/01/2019 ............................... Aaa/AAA 2,980,125 Washington, Clackamas, & Yamhill County, Oregon School District #88JT (Financial Security Assurance Insured) 585,000 6.100%, 06/01/2012 ............................... Aaa/AAA 633,994 2,315,000 6.100%, 06/01/2012 ............................... Aaa/AAA 2,508,881 2,055,000 5.125%, 06/15/2012 ............................... Aaa/NR 2,273,344 Washington, Multnomah & Yamhill County, Oregon School District #1J 1,295,000 5.250%, 06/01/2013 ............................... Aa3/NR 1,450,400 Washington & Yamhill, Oregon County School District #58J (AMBAC Indemnity Corporation Insured) $ 70,000 6.600%, 11/01/2004 ............................... Aaa/AAA $ 70,301 80,000 6.600%, 11/01/2005 ............................... Aaa/AAA 80,334 90,000 6.600%, 11/01/2006 ............................... Aaa/AAA 90,376 Yamhill County, Oregon School District #29J (Newberg) (Financial Security Assurance Insured) 2,000,000 5.350%, 06/01/2006 ............................... Aaa/AAA 2,055,000 Yamhill County, Oregon School District #29J (Newberg) (MBIA Corporation Insured) 2,850,000 5.250%, 06/15/2017 ............................... Aaa/NR 3,138,563 3,765,000 5.250%, 06/15/2020 ............................... Aaa/NR 4,085,025 ------------- Total State of Oregon General Obligation Bonds ... 249,708,728 ------------- STATE OF OREGON REVENUE BONDS - 40.9% -------------------------------------------------------- AIRPORT REVENUE BONDS - 0.7% -------------------------------------------------------- Port of Portland, Oregon Airport (AMBAC Indemnity Corporation Insured) 3,000,000 5.500%, 07/01/2024 ............................... Aaa/AAA 3,213,750 ------------- CERTIFICATES OF PARTICIPATION REVENUE BONDS - 4.5% -------------------------------------------------------- Oregon State Department of Administration Services (AMBAC Indemnity Corporation Insured) 500,000 5.375%, 05/01/2014 ............................... Aaa/AAA 562,500 950,000 5.000%, 11/01/2019 ............................... Aaa/AAA 1,004,625 1,120,000 5.000%, 05/01/2021 ............................... Aaa/AAA 1,171,800 1,500,000 5.800%, 05/01/2024 ............................... Aaa/AAA 1,725,000 3,945,000 6.000%, 05/01/2026 ............................... Aaa/AAA 4,729,069 Oregon State Department of Administrative Services (Financial Security Assurance Insured) 1,300,000 5.500%, 11/01/2012 ............................... Aaa/AAA 1,512,875 1,135,000 5.000%, 05/01/2015 ............................... Aaa/AAA 1,248,500 Oregon State Department of Administration Services (MBIA Corporation Insured) 1,530,000 5.375%, 11/01/2016 ............................... Aaa/AAA 1,679,175 4,250,000 5.500%, 11/01/2020 ............................... Aaa/AAA 4,675,000 Washington County, Oregon Educational Services 645,000 5.625%, 06/01/2016 ............................... A1/NR 669,994 Washington County, Oregon Educational Services (MBIA Corporation Insured) $ 830,000 5.750%, 06/01/2025 ............................... Aaa/AAA $ 883,950 ------------- Total Certificates of Participation Revenue Bonds ...... 19,862,488 ------------- HOSPITAL REVENUE BONDS - 7.6% -------------------------------------------------------- Clackamas County, Oregon Hospital Facilities Authority (Legacy Health System) 2,000,000 5.250%, 02/15/2017 ............................... Aa3/AA 2,100,000 2,980,000 5.250%, 02/15/2018 ............................... Aa3/AA 3,110,375 Clackamas County, Oregon Hospital Facilities Authority (Legacy Health System) (MBIA Corporation Insured) 2,650,000 4.750%, 02/15/2011 ............................... Aaa/AAA 2,878,562 Clackamas County, Oregon Hospital Facility (Legacy Health System) 4,000,000 5.250%, 05/01/2021 ............................... Aa3/AA 4,150,000 Clackamas County, Oregon Hospital Facilities Authority (Mary's Woods) 3,480,000 6.625%, 05/15/2029 ............................... NR/NR* 3,640,950 Deschutes County, Oregon Hospital Facilities Authority (Cascade Health) 2,000,000 5.600%, 01/01/2027 ............................... A1/NR 2,077,500 3,000,000 5.600%, 01/01/2032 ............................... A1/NR 3,112,500 Douglas County, Oregon Hospital Facilities Authority (Catholic Health) (MBIA Corporation Insured) 535,000 5.600%, 11/15/2005 ............................... Aaa/AAA 573,119 Medford, Oregon Hospital Authority (Asante Health Systems) (MBIA Corporation Insured) 1,020,000 5.000%, 08/15/2018 ............................... Aaa/AAA 1,074,825 State of Oregon Health Housing Educational & Cultural Facilities Auth. (Peacehealth) (AMBAC Indemnity Corporation Insured) 2,300,000 5.250%, 11/15/2017 ............................... Aaa/AAA 2,518,500 1,850,000 5.000%, 11/15/2026 ............................... Aaa/AAA 1,891,625 1,430,000 5.000%, 11/15/2032 ............................... Aaa/AAA 1,438,937 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 $ 1,052,940 3,885,000 5.750%, 08/01/2019 ............................... Aaa/AAA 4,092,304 ------------- Total Hospital Revenue Bonds ........................... 33,712,137 ------------- HOUSING, EDUCATIONAL, AND CULTURAL REVENUE BONDS - 6.3% -------------------------------------------------------- Clackamas Community College District (MBIA Corporation Insured) 1,865,000 5.700%, 06/01/2016 ............................... Aaa/AAA 2,079,475 Multnomah County, Oregon Educational Facility (University of Portland) 1,000,000 6.000%, 04/01/2020 ............................... NR/BBB+ 1,075,000 Oregon Health Sciences University (MBIA Corporation Insured) 3,000,000 5.250%, 07/01/2022 ............................... Aaa/AAA 3,198,750 Oregon Health Sciences University (MBIA Corporation Insured) 4,500,000 5.250%, 07/01/2015 ............................... Aaa/AAA 4,854,375 13,790,000 zero coupon, 07/01/2021 .......................... Aaa/AAA 5,877,987 State of Oregon Housing and Community Services 235,000 5.900%, 07/01/2012 ............................... Aa2/NR 247,337 500,000 6.700%, 07/01/2013 ............................... Aa2/NR 505,000 245,000 6.050%, 07/01/2020 ............................... Aa2/NR 259,700 785,000 6.000%, 07/01/2020 ............................... Aa2/NR 835,044 1,880,000 5.400%, 07/01/2027 ............................... Aa2/NR 1,943,450 1,125,000 6.875%, 07/01/2028 ............................... Aa2/NR 1,131,469 State of Oregon Housing and Community Services (MBIA Corporation Insured) 1,500,000 5.450%, 07/01/2024 ............................... Aaa/AAA 1,516,875 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- 1,055,000 State of Oregon Housing Finance Authority 935,000 6.800%, 07/01/2013 ............................... AA2/A+ 936,496 Oregon St. Facilities Authority Revenue College Housing $ 1,000,000 5.300%, 10/01/2022 ............................... NR/BBB $ 1,000,000 City of Salem, Oregon Educational Facilities (Willamette University) 1,000,000 6.000%, 04/01/2010 ............................... A2/NR 1,026,570 ------------- Total Housing, Educational, and Cultural Revenue Bonds ....................................... 27,542,528 ------------- PUERTO RICO MUNICIPAL FINANCE AGENCY - 1.4% -------------------------------------------------------- Puerto Rico Municipal Finance Agency (Financial Security Assurance Insured) 500,000 5.250%, 8/01/2016 ................................ Aaa/AAA 555,625 5,000,000 5.250%, 8/01/2020 ................................ Aaa/AAA 5,431,250 ------------- Total Puerto Rico Municipal Finance Agency Revenue Bonds ....................................... 5,986,875 ------------- TRANSPORTATION REVENUE BONDS - 4.6% -------------------------------------------------------- State of Oregon Department of Transportation (Light Rail) (MBIA Corporation Insured) 2,000,000 6.000%, 06/01/2005 ............................... Aaa/AAA 2,106,820 Oregon St. Department Transportation Highway Usertax 1,000,000 5.500%, 11/15/2014 ............................... Aa1/AA+ 1,151,250 3,025,000 5.500%, 11/15/2018 ............................... Aa1/AA+ 3,384,219 2,555,000 5.375%, 11/15/2018 ............................... Aa1/AA+ 2,807,306 4,545,000 5.125%, 11/15/2026 ............................... Aa1/AA+ 4,669,987 Tri-County Metropolitan Transportation District 1,440,000 5.750%, 08/01/2016 ............................... Aa3/AA+ 1,652,400 1,775,000 5.000%, 09/01/2016 ............................... Aa3/AA+ 1,928,094 Tri-County Metropolitan Transportation District (LOC: Morgan Guaranty Trust) 2,500,000 5.400%, 06/01/2019 ............................... NR/AA- 2,606,250 ------------- Total Transportation Revenue Bonds ..................... 20,306,326 ------------- 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 1,877,800 1,765,000 5.750%, 06/15/2020 ............................... Aaa/NR 1,979,006 Portland Oregon Revenue District Urban (AMBAC Indemnity Corporation Insured) $ 1,420,000 5.000%, 06/15/2016 ............................... Aaa/NR $ 1,549,575 Portland, Oregon Urban Renewal Tax Allocation (AMBAC Indemnity Corporation Insured) (Convention Center) 1,150,000 5.750%, 06/15/2018 ............................... Aaa/NR 1,312,438 2,000,000 5.450%, 06/15/2019 ............................... Aaa/NR 2,190,000 ------------- Total Urban Renewal Revenue Bonds ...................... 8,908,819 ------------- UTILITY REVENUE BONDS - 2.0% -------------------------------------------------------- Emerald Peoples Utility District, Oregon (Financial Security Assurance Insured) 1,455,000 5.250%, 11/1/2022 ................................ Aaa/NR 1,558,669 City of Eugene, Oregon Electric Utility (Financial Security Assurance Insured) 1,060,000 5.250%, 08/01/2014 ............................... Aaa/AAA 1,179,250 1,600,000 5.000%, 08/01/2018 ............................... Aaa/AAA 1,694,000 City of Eugene, Oregon Electric Utility 1,400,000 5.800%, 08/01/2019 ............................... A1/AA- 1,470,322 City of Eugene, Oregon Trojan Nuclear Project 1,665,000 5.900%, 09/01/2009 ............................... Aa1/AA- 1,670,428 Northern Wasco County, Oregon Public Utility Development (Financial Guaranty Insurance Corporation Insured) 1,000,000 5.625%, 12/01/2022 ............................... Aaa/AAA 1,077,500 ------------- Total Utility Revenue Bonds ............................ 8,650,169 ------------- WATER AND SEWER REVENUE BONDS - 10.9% -------------------------------------------------------- Bend Oregon Sewer Revenue (AMBAC Indemnity Corporation Insured) 1,130,000 5.150%, 10/01/2014 ............................... Aaa/NR 1,234,525 City of Klamath Falls Water (Financial Security Assurance Insured) 1,100,000 6.100%, 06/01/2014 ............................... Aaa/AAA 1,148,532 1,575,000 5.500%, 07/01/2016 ............................... Aaa/AAA 1,850,625 City of Klamath Wastewater (AMBAC Indemnity Corporation Insured) $ 1,545,000 5.650%, 06/01/2020 ............................... Aaa/AAA $ 1,714,950 Lebanon, Oregon Wastewater (Financial Security Assurance Insured) 1,000,000 5.700%, 03/01/2020 ............................... Aaa/AAA 1,117,500 City of Portland Sewer (Financial Guaranty Insurance Corporation Insured) 2,900,000 5.750%, 08/01/2019 ............................... Aaa/AAA 3,291,500 City of Portland Sewer (Financial Security Assurance Insured) 2,760,000 5.250%, 06/01/2017 ............................... Aaa/AAA 3,063,600 3,470,000 5.000%, 06/01/2021 ............................... Aaa/AAA 3,647,838 City of Portland Sewer (MBIA Corporation Insured) 2,500,000 5.250%, 06/01/2016 ............................... Aaa/AAA 2,671,875 Portland Water System 1,440,000 5.500%, 08/01/2015 ............................... Aa1/NR 1,487,304 7,420,000 5.500%, 08/01/2019 ............................... Aa1/NR 8,208,375 1,185,000 5.500%, 08/01/2020 ............................... Aa1/NR 1,299,056 Salem Oregon Water & Sewer (Financial Security Assurance Insured) 1,000,000 5.375%, 06/01/2015 ............................... Aaa/AAA 1,157,500 1,970,000 5.375%, 06/01/2016 ............................... Aaa/AAA 2,162,075 3,025,000 5.500%, 06/01/2020 ............................... Aaa/AAA 3,308,594 Washington County, Oregon Clean Water Services (Financial Guaranty Insurance Corporation Insured) 995,000 5.000%, 10/01/2013 ............................... Aaa/AAA 1,095,744 3,525,000 5.125%, 10/01/2017 ............................... Aaa/AAA 3,815,813 Washington County Unified Sewer Agency (AMBAC Indemnity Corporation Insured) 2,120,000 5.900%, 10/01/2006 ............................... Aaa/AAA 2,224,707 315,000 5.900%, 10/01/2006 ............................... Aaa/AAA 328,885 2,500,000 6.125%, 10/01/2012 ............................... Aaa/AAA 2,629,025 750,000 6.125%, 10/01/2012 ............................... Aaa/AAA 788,708 ------------- Total Water and Sewer Revenue Bonds .................... 48,246,731 ------------- OTHER REVENUE BONDS - 0.9% -------------------------------------------------------- Baker County Pollution Control (Ash Grove Cement West Project) (Small Business Administration Insured) $ 355,000 6.200%, 07/01/2004 ............................... Aaa/NR $ 359,846 380,000 6.300%, 07/01/2005 ............................... Aaa/NR 384,936 Multnomah County School District #1J, Special Obligations 1,000,000 5.000%, 03/01/2007 ............................... A1/A 1,014,730 Oregon State Department of Administration Services (Lottery Revenue) (Financial Security Assurance Insured) 2,000,000 5.750%, 04/01/2014 ............................... Aaa/AAA 2,292,500 ------------- Total Other Revenue Bonds .............................. 4,052,012 ------------- Total State of Oregon Revenue Bonds .............. 180,481,835 ------------- Total Municipal Bonds (cost $402,812,777**) .......... 97.4% 430,190,563 Other assets less liabilities ........................ 2.6 11,307,307 ------ ------------- Net Assets ........................................... 100.0% $ 441,497,870 ====== =============
(*) Any security not rated (NR) 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. (***) On October 9, 2003 S&P rating changed from AA to AA-. PORTFOLIO ABBREVIATIONS: ------------------------ AMBAC - American Municipal Bond Assurance Corp. LOC - Letter of Credit MBIA - Municipal Bond Investors Assurance See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2003 ASSETS Investments at value (cost $402,812,777) ............................................ $430,190,563 Cash ................................................................................ 4,277,635 Interest receivable ................................................................. 6,566,966 Receivable for Trust shares sold .................................................... 2,060,354 Receivable for investment securities sold ........................................... 60,000 Other assets ........................................................................ 12,915 ------------ Total assets ........................................................................ 443,168,433 ------------ LIABILITIES Payable for Trust shares redeemed ................................................... 940,775 Dividends payable ................................................................... 323,621 Distribution fees payable ........................................................... 183,314 Management fees payable ............................................................. 142,009 Accrued expenses .................................................................... 80,844 ------------ Total liabilities ................................................................... 1,670,563 ------------ NET ASSETS ............................................................................. $441,497,870 ============ Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $.01 per share .. $ 399,999 Additional paid-in capital .......................................................... 412,339,258 Net unrealized appreciation on investments (note 4) ................................. 27,377,786 Accumulated net realized gain on investments ........................................ 809,306 Undistributed net investment income ................................................. 571,521 ------------ $441,497,870 ============ CLASS A Net Assets .......................................................................... $360,543,812 ============ Capital shares outstanding .......................................................... 32,660,665 ============ Net asset value and redemption price per share ...................................... $ 11.04 ============ Offering price per share (100/96 of $11.04 adjusted to nearest cent) ................ $ 11.50 ============ CLASS C Net Assets .......................................................................... $ 43,864,024 ============ Capital shares outstanding .......................................................... 3,977,030 ============ Net asset value and offering price per share ........................................ $ 11.03 ============ 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) ....................................... $ 11.03* ============ CLASS Y Net Assets .......................................................................... $ 37,090,034 ============ Capital shares outstanding .......................................................... 3,362,209 ============ Net asset value, offering and redemption price per share ............................ $ 11.03 ============
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2003 INVESTMENT INCOME: Interest income ...................................... $ 20,136,732 Management fees (note 3) ............................. $ 1,673,961 Distribution and service fees (note 3) ............... 875,894 Transfer and shareholder servicing agent fees ........ 195,996 Trustees' fees and expenses (note 8) ................. 125,501 Shareholders' reports and proxy statements ........... 95,448 Legal fees ........................................... 81,101 Registration fees and dues ........................... 34,695 Custodian fees ....................................... 31,495 Auditing fees ........................................ 29,392 Insurance ............................................ 20,269 Miscellaneous ........................................ 41,301 ------------ 3,205,053 Expenses paid indirectly (note 6) .................... (35,318) ------------ Net expenses ......................................... 3,169,735 ------------ Net investment income ................................ 16,966,997 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from securities transactions 811,685 Change in unrealized appreciation on investments ..... (2,884,993) ------------ Net realized and unrealized gain (loss) on investments (2,073,308) ------------ Net change in net assets resulting from operations ... $ 14,893,689 ============
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ OPERATIONS: Net investment income ...................................... $ 16,966,997 $ 15,989,370 Net realized gain (loss) from securities transactions 811,685 820,660 Change in unrealized appreciation on investments ........... (2,884,993) 13,993,923 ------------- ------------- Change in net assets resulting from operations ........... 14,893,689 30,803,953 ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 10): Class A Shares: Net investment income ...................................... (14,363,419) (14,128,754) Net realized gain on investments ........................... (695,373) (498,294) Class C Shares: Net investment income ...................................... (1,129,376) (661,883) Net realized gain on investments ........................... (59,624) (24,704) Class Y Shares: Net investment income ...................................... (1,405,437) (1,122,356) Net realized gain on investments ........................... (65,668) (38,173) ------------- ------------- Change in net assets from distributions .................. (17,718,897) (16,474,164) ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 7): Proceeds from shares sold .................................. 83,776,003 73,069,033 Reinvested dividends and distributions ..................... 11,642,913 10,576,448 Cost of shares redeemed .................................... (53,577,493) (40,530,088) ------------- ------------- Change in net assets from capital share transactions ..... 41,841,423 43,115,393 ------------- ------------- Change in net assets ...................................... 39,016,215 57,445,182 NET ASSETS: Beginning of period ......................................... 402,481,655 345,036,473 ------------- ------------- End of period* .............................................. $ 441,497,870 $ 402,481,655 ============= ============= * Includes undistributed net investment income of: .......... $ 571,521 $ 502,757 ============= =============
See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION Tax-Free Trust of Oregon (the "Trust") is a separate portfolio of The Cascades Trust. The Cascades Trust (the "Business Trust") is an open-end investment company, which was organized on October 17, 1985, as a Massachusetts business trust and is authorized to issue an unlimited number of shares. The Trust is a non-diversified portfolio which commenced operations on June 16, 1986 and until April 5, 1996, offered only one class of shares. On that date, the Trust began offering two additional classes of shares, Class C and Class Y shares. All shares outstanding prior to that date were designated as Class A shares and are sold with a front-payment sales charge and bear an annual distribution 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. Class C Shares, together with a pro-rata portion of all Class C Shares acquired through reinvestment of dividends and other distributions paid in additional Class C Shares, automatically convert to Class A Shares after 6 years. 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. As of the report date, 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 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 is 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 exceeds 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 discounts on all fixed-income securities. The Fund's officers determined 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. The Trust recorded an adjustment to increase the cost of securities and increase accumulated undistributed net investment income by $277,321 to reflect the cumulative effect of this change up to the date of adoption. 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. (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 year ended September 30, 2003, service fees on Class A Shares amounted to $525,564, of which the Distributor retained $20,491. Under another part of the Plan, the Trust is authorized to make payments with respect to Class C Shares to Qualified Recipients which have rendered assistance in the distribution and/or retention of the Trust's Class C shares or servicing of shareholder accounts. These payments are made at the annual rate of 0.75% of the Trust's net assets represented by Class C Shares and for the year ended September 30, 2003, amounted to $262,748. In addition, under a Shareholder Services Plan, the Trust is authorized to make service fee payments with respect to Class C Shares to Qualified Recipients for providing personal services and/or maintenance of shareholder accounts. These payments are made at the annual rate of 0.25% of the Trust's net assets represented by Class C Shares and for the year ended September 30, 2003, amounted to $87,582. The total of these payments made with respect to Class C Shares amounted to $350,330, of which the Distributor retained $44,541. Specific details about the Plans are more fully defined in the Trust's Prospectus and Statement of Additional Information. Under a Distribution Agreement, the Distributor serves as the exclusive distributor of the Trust's shares. Through agreements between the Distributor and various broker-dealer firms ("dealers"), the Trust's shares are sold primarily through the facilities of these dealers having offices within Oregon, with the bulk of sales commissions inuring to such dealers. For the year ended September 30, 2003, total commissions on sales of Class A Shares amounted to $1,305,487 of which the Distributor received $243,014. c) OTHER RELATED PARTY TRANSACTIONS For the year ended September 30, 2003 the Trust incurred $79,221 of legal fees allocable to Hollyer Brady Smith & Hines LLP, counsel to the Trust for legal services in conjunction with the Fund's ongoing operations. The Secretary of the Trust is a Partner of Hollyer Brady Smith & Hines LLP. 4. PURCHASES AND SALES OF SECURITIES During the year ended September 30, 2003, purchases of securities and proceeds from the sales of securities aggregated $84,312,038 and $48,908,915, respectively. At September 30, 2003, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $27,958,229, and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $210,419 for a net unrealized appreciation of $27,747,810. The tax cost of the Trust's securities at September 30, 2003 equals $402,442,753. 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. 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. 6. 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. 7. CAPITAL SHARE TRANSACTIONS Transactions in Capital Shares of the Trust were as follows:
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT ----------- ------------ ----------- ------------ CLASS A SHARES: Proceeds from shares sold ... 4,290,731 $ 47,160,565 4,559,335 $ 48,860,722 Reinvested dividends and distributions ............ 881,039 9,639,480 860,102 9,227,559 Cost of shares redeemed ..... (3,581,928) (39,235,022) (3,122,090) (33,568,282) ----------- ------------ ----------- ------------ Net change ............... 1,589,842 17,565,023 2,297,347 24,519,999 ----------- ------------ ----------- ------------ CLASS C SHARES: Proceeds from shares sold ... 2,166,804 23,820,080 1,279,711 13,712,695 Reinvested dividends and distributions ............ 71,346 780,271 42,016 450,607 Cost of shares redeemed ..... (588,665) (6,451,056) (176,382) (1,890,476) ----------- ------------ ----------- ------------ Net change ............... 1,649,485 18,149,295 1,145,345 12,272,826 ----------- ------------ ----------- ------------ CLASS Y SHARES: Proceeds from shares sold ... 1,167,839 12,795,358 972,682 10,495,616 Reinvested dividends and distributions ............ 111,651 1,223,162 83,730 898,282 Cost of shares redeemed ..... (722,204) (7,891,415) (473,970) (5,071,330) ----------- ------------ ----------- ------------ Net change ............... 557,286 6,127,105 582,442 6,322,568 ----------- ------------ ----------- ------------ Total transactions in Trust shares ...................... 3,796,613 $ 41,841,423 4,025,134 $ 43,115,393 =========== ============ =========== ============
8. TRUSTEES' FEES AND EXPENSES During the fiscal year ended September 30, 2003 there were eleven Trustees, two of whom are affiliated with the Manager and are not paid any trustee fees. Each Trustee's fees paid during the year averaged approximately $8,050 for carrying out responsibilities and attendance at regularly scheduled Board Meetings. If additional or special meetings are scheduled for the Trust, separate meeting fees are paid for each such meeting to those Trustees in attendance. The Trust also covers Trustees' expenses such as travel, accommodations, and meals incurred in connection with attendance at regularly scheduled or special Board Meetings and outreach meetings of Shareholders. For the fiscal year ended September 30, 2003 such meeting-related expenses averaged approximately $5,175 per Trustee. 9. SECURITIES TRADED ON A WHEN-ISSUED BASIS The Trust may purchase or sell securities on a when-issued basis. When-issued transactions arise when securities are purchased or sold by the Trust with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Trust at the time of entering into the transaction. Beginning on the date the Trust enters into a when-issued transaction, cash or other liquid securities are segregated in an amount equal to or greater than the value of the when-issued transaction. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. 10. 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 portion of the dividends may, under some circumstances, be subject to taxes at ordinary income and/or capital gain rates. For certain shareholders, some dividend income may, under some circumstances, be subject to the alternative minimum tax. The tax character of distributions during the fiscal years ended September 30, 2003 and 2002 is as follows: Distributions from Year Ended September 30, 2003 2002 ----------- ------------ Net tax-exempt income $16,878,780 $15,633,548 Ordinary income 28,432 19,956 Capital gain 811,685 820,660 ----------- ----------- $17,718,897 $16,474,164 =========== =========== As of September 30, 2003, the components of distributable earnings on a tax basis were as follows: Accumulated net realized gain $ 811,685 Unrealized appreciation 27,747,810 Undistributed tax-exempt income 522,741 ----------- $29,082,236 =========== The difference between book basis and tax basis unrealized appreciation is attributable primarily to wash sales and premium/discount adjustments. TAX-FREE TRUST OF OREGON FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A -------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------- 2003 2002 2001 2000 1999 ------ ------ ------ ------ ------ Net asset value, beginning of period ....................... $11.12 $10.72 $10.29 $10.27 $10.86 ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + ................................. 0.45 0.48 0.49 0.50 0.50 Net gain (loss) on securities (both realized and unrealized) ............................. (0.06) 0.41 0.44 0.02 (0.56) ------ ------ ------ ------ ------ Total from investment operations ........................ 0.39 0.89 0.93 0.52 (0.06) ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income .................... (0.45) (0.47) (0.49) (0.50) (0.51) Distributions from capital gains ........................ (0.02) (0.02) (0.01) - (0.02) ------ ------ ------ ------ ------ Total distributions ..................................... (0.47) (0.49) (0.50) (0.50) (0.53) ------ ------ ------ ------ ------ Net asset value, end of period ............................. $11.04 $11.12 $10.72 $10.29 $10.27 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) ................. 3.65% 8.59% 9.18% 5.26% (0.62)% Ratios/supplemental data Net assets, end of period (in millions) .................. $361 $345 $309 $289 $309 Ratio of expenses to average net assets .................. 0.71% 0.71% 0.72% 0.71% 0.71% Ratio of net investment income to average net assets ..... 4.11% 4.45% 4.62% 4.93% 4.70% Portfolio turnover rate .................................. 12% 11% 17% 20% 16% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .................. 0.70% 0.69% 0.70% 0.70% 0.68%
- ------------- + Per share amounts have been calculated using the monthly average shares method. See accompanying notes to financial statements. TAX-FREE TRUST OF OREGON FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C -------------------------------------------------- YEAR ENDED SEPTEMBER 30, -------------------------------------------------- 2003 2002 2001 2000 1999 ------ ------ ------ ------ ------ Net asset value, beginning of period ................ $11.11 $10.71 $10.28 $10.27 $10.85 ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + .......................... 0.36 0.38 0.39 0.41 0.41 Net gain (loss) on securities (both realized and unrealized) ...................... (0.06) 0.42 0.45 0.02 (0.55) ------ ------ ------ ------ ------ Total from investment operations ................. 0.30 0.80 0.84 0.43 (0.14) ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ............. (0.36) (0.38) (0.40) (0.42) (0.42) Distributions from capital gains ................. (0.02) (0.02) (0.01) -- (0.02) ------ ------ ------ ------ ------ Total distributions .............................. (0.38) (0.40) (0.41) (0.42) (0.44) ------ ------ ------ ------ ------ Net asset value, end of period ...................... $11.03 $11.11 $10.71 $10.28 $10.27 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .......... 2.77% 7.67% 8.26% 4.27% (1.38)% Ratios/supplemental data Net assets, end of period (in millions) .......... $43.9 $25.9 $12.7 $5.8 $3.0 Ratio of expenses to average net assets .......... 1.55% 1.55% 1.56% 1.55% 1.56% Ratio of net investment income to average net assets ............................ 3.22% 3.56% 3.70% 4.03% 3.84% Portfolio turnover rate .......................... 12% 11% 17% 20% 16% 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% 1.54% 1.53%
CLASS Y -------------------------------------------------- YEAR ENDED SEPTEMBER 30, -------------------------------------------------- 2003 2002 2001 2000 1999 ------ ------ ------ ------ ------ Net asset value, beginning of period ................ $11.11 $10.72 $10.28 $10.27 $10.85 ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income + .......................... 0.47 0.49 0.50 0.52 0.52 Net gain (loss) on securities (both realized and unrealized) ....................... (0.06) 0.41 0.45 0.01 (0.56) ------ ------ ------ ------ ------ Total from investment operations ................. 0.41 0.90 0.95 0.53 (0.04) ------ ------ ------ ------ ------ Less distributions (note 10): Dividends from net investment income ............. (0.47) (0.49) (0.50) (0.52) (0.52) Distributions from capital gains ................. (0.02) (0.02) (0.01) -- (0.02) ------ ------ ------ ------ ------ Total distributions .............................. (0.49) (0.51) (0.51) (0.52) (0.54) ------ ------ ------ ------ ------ Net asset value, end of period ...................... $11.03 $11.11 $10.72 $10.28 $10.27 ====== ====== ====== ====== ====== Total return (not reflecting sales charge) .......... 3.80% 8.65% 9.45% 5.32% (0.39)% Ratios/supplemental data Net assets, end of period (in millions) .......... $37.1 $31.2 $23.8 $20.5 $17.0 Ratio of expenses to average net assets .......... 0.56% 0.56% 0.57% 0.56% 0.56% Ratio of net investment income to average net assets ............................. 4.26% 4.59% 4.76% 5.08% 4.86% Portfolio turnover rate .......................... 12% 11% 17% 20% 16% The expense ratios after giving effect to the expense offset for uninvested cash balances were: Ratio of expenses to average net assets .......... 0.55% 0.54% 0.55% 0.54% 0.53%
- ------------- + Per share amounts have been calculated using the monthly average shares method. See accompanying notes to financial statements. ADDITIONAL INFORMATION (UNAUDITED) TRUSTEES(1) AND OFFICERS
NUMBER OF POSITIONS PORTFOLIOS OTHER DIRECTORSHIPS HELD WITH IN FUND HELD BY TRUSTEE NAME, TRUST AND PRINCIPAL COMPLEX (THE POSITION HELD IS ADDRESS(2) LENGTH OF OCCUPATION(S) OVERSEEN A DIRECTORSHIP UNLESS AND DATE OF BIRTH SERVICE(3) DURING PAST 5 YEARS BY TRUSTEE INDICATED OTHERWISE.) - ----------------- ------- ------------------- ---------- ---------------------- INTERESTED TRUSTEES(4) Lacy B. Herrmann Chairman Founder and Chairman of the 12 Director or trustee, OCC New York, NY of the Board Board, Aquila Management Accumulation Trust, Oppenheimer (05/12/29) of Trustees Corporation, the sponsoring Quest Value Funds Group, since 1985 organization and Manager or Oppenheimer Small Cap Value Administrator and/or Adviser or Fund, Oppenheimer Midcap Fund, Sub-Adviser to each fund of the and Oppenheimer Rochester Group Aquila(sm) Group of Funds(5) and of Funds. Founder, Chairman of the Board of Trustees and (currently or until 1998) President of each since its establishment, beginning in 1984; Director of the Distributor since 1981 and formerly Vice President or Secretary, 1981-1998; President and a Director, STCM Management Company, Inc., sponsor and investment adviser to Capital Cash Management Trust since 1973; Trustee Emeritus, Brown University and active in university, school and charitable organizations. Diana P. Herrmann Trustee since President and Chief Operating 7 None New York, NY 1994 and Officer of the Manager since (02/25/58) President 1997, a Director since 1984, since 1998 Secretary since 1986 and previously its Executive Vice President, Senior Vice President or Vice President, 1986-1997; President, Senior Vice President or Executive Vice President of funds in the Aquila(sm) Group of Funds since 1986; Director of the Distributor since 1997; trustee, Reserve Money-Market Funds, 1999-2000 and Reserve Private Equity Series, 1998-2000; active in mutual fund and trade organizations and in charitable and volunteer organizations. Raymond H. Lung Trustee since Retired; trustee, Qualivest 1 None Portland, OR 1992 Group of Funds, 1994-1997; (12/24/26) former Executive Vice President and Executive Trust Officer, U.S. National Bank of Oregon; previously active in bank trade organizations and director of certain Pacific Northwest companies. John W. Mitchell Trustee since Principal of M & H Economic 1 None Portland, OR 1999 Consultants; Economist, Western (07/13/44) Region, for U. S. Bancorp since 1998; Chief Economist, U.S. Bancorp, Portland, Oregon, 1983-1998; member, Oregon Governor's Council of Economic Advisors, 1984-1998; Chairman, Oregon Governor's Technical Advisory Committee for Tax Review in 1998. NON-INTERESTED TRUSTEES Gary C. Cornia Trustee since Professor, Marriott School of 4 None Orem, UT 2002 Management, Brigham Young (06/24/48) University, 1980-present; President, the National Tax Association; Chair of the Executive Committee, the International Center for Land Policy Studies and Training Institute, Taipei, Taiwan; formerly Associate Dean, Marriott School of Management, Brigham Young University, 1991-2000; Chair, Utah Governor's Tax Review Committee, 1993-2003; member, Governor's Tax Review Committee since 2003; Faculty Associate, the Land Reform Training Institute, Taipei, Taiwan and The Lincoln Institute of Land Policy, Cambridge, Massachusetts. David B. Frohnmayer Trustee since President, University of Oregon 1 Umpqua Holding Eugene, OR 1997 since 1994; former Dean of the Company (07/09/40) University of Oregon Law School and former Attorney General of the State of Oregon. James A. Gardner Trustee since President, Gardner Associates, 1 None Terrebonne, OR 1986 an investment and real estate (07/06/43) firm, since 1989; Partner, the Canyons Ranch, a real estate firm, since 1991; President Emeritus, Lewis and Clark College and Law School; director, Oregon High Desert Museum since 1989, Vice Chairman since 2002; active in civic, business, educational and church organizations in Oregon. Edmund P. Jensen Trustee since President and CEO, VISA 1 None Portland, OR 2003 International, 1994-1999; (4/13/37) director: Phoenix Technologies, a Tech/BIOS company, 2000 - present; BMG-Select, a software company, 2000 - present; Corillian Corp., a banking software company, 2000 - 2002; Trintech, a payment software company, 1999 - 2002. Patricia L. Moss Trustee since President and Chief Executive 1 Cascade Bancorp and Bend, OR 2002 Officer, Cascade Bancorp & Bank Bank of the Cascades (07/23/53) of the Cascades since 1998, and Executive Vice President & director, Chief Financial Officer, Chief Operating Officer, 1987-1998; active in community and educational organizations. Ralph R. Shaw Trustee since President, Shaw Management 1 Schnitzer Steel Industries, Portland, OR 2000 Company, an investment Inc., Magni Systems, Inc., (08/23/38) counseling firm, since 1980, Severon Corporation (formerly General Partner, Shaw Venture Micromonitors, Inc.), Integra Partners since 1983, Shaw Telecom, Inc. (formerly OGIT Venture Partners II since 1987 Communications, Inc.), Dendreon and Shaw Venture Partners III Corporation (formerly Activated since 1994 (US Bancorp, parent Cell Therapy, Inc.), LaTIS, of the Sub-Adviser, is a limited Inc., Telestream, Inc., 3PF.com, partner in the last three Inc. (formerly ComAlliance, ventures). Inc.), BMG Seltec Corp. Nancy Wilgenbusch Trustee since President, Marylhurst University 1 Chair, Oregon Regional Advisory Marylhurst, OR 2002 since 1984; member, Ethics Board for PacifiCorp ; member, (09/17/47) Committee of the American PacifiCorp Advisory Board for Institute of Certified Public Scottish Power, an international Accountants; active board member energy company; member, West of a number of civic Coast Bank's Board; director, organizations. Cascade Corporation, a leading international manufacturer of lift truck attachments; former Chair, Portland Branch of the Federal Reserve Bank of San Francisco. OFFICERS James M. McCullough Senior Vice Senior Vice President or Vice N/A N/A Portland, OR President President of Aquila Rocky (06/11/45) since 1999 Mountain Equity Fund and four Aquila Bond Funds; Senior Vice President of the Distributor since 2000; Director of Fixed Income Institutional Sales, CIBC Oppenheimer & Co. Inc., Seattle, WA, 1995-1999. Jerry G. McGrew Senior Vice President of the Distributor N/A N/A New York, NY President since since 1998, Registered Principal (06/18/44) 2002 since 1993, Senior Vice President, 1997-1998 and Vice President, 1993-1997; Senior Vice President, Aquila Rocky Mountain Equity Fund and five Aquila Bond Funds since 1995; Vice President, Churchill Cash Reserves Trust, 1995-2001. Sally J. Church Vice President Vice President, Tax-Free Trust N/A N/A Portland, OR since 2002 of Oregon since 2002 and (10/17/48) 1989-1997; retired, 1997-2002; Vice President of Aquila Cascadia Equity Fund, 1996-1997. Christine L. Neimeth Vice President Vice President of Aquila Rocky N/A N/A Portland, OR since 1998 Mountain Equity Fund and (02/10/64) Tax-Free Trust of Oregon; Management Information Systems consultant, Hillcrest Ski and Sport, 1997; Institutional Municipal Bond Salesperson, Pacific Crest Securities, 1996; active in college alumni and volunteer organizations. Joseph P. DiMaggio Chief Financial Chief Financial Officer of the N/A N/A New York, NY Officer since Aquila(sm) Group of Funds since (11/06/56) 2003 and 2003 and Treasurer since 2000; Treasurer since Controller, Van Eck Global 2000 Funds, 1993-2000. Edward M. W. Hines Secretary since Partner, Hollyer Brady Smith & N/A N/A New York, NY 1985 Hines LLP, legal counsel to the (12/16/39) Trust, since 1989; Secretary of the Aquila(sm) Group of Funds. Robert W. Anderson Assistant Compliance Officer of the N/A N/A New York, NY Secretary Manager since 1998 and Assistant (08/23/40) since 2000 Secretary of the Aquila(sm) Group of Funds since 2000; trustee, Alpha Strategies Fund since July, 2002; Consultant, The Wadsworth Group, 1995-1998. John M. Herndon Assistant Assistant Secretary of the N/A N/A New York, NY Secretary since Aquila(sm) Group of Funds since (12/17/39) 1995 1995 and Vice President of the four Aquila Money-Market Funds since 1990; Vice President of the Manager since 1990. Lori A. Vindigni Assistant Assistant Treasurer of the N/A N/A New York, NY Treasurer since Aquila(sm) Group of Funds since (11/02/66) 2000 2000; Assistant Vice President of the Manager since 1998; Fund Accountant for the Aquila(sm) Group of Funds, 1995-1998.
- ------------- (1) The Trust's Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling 800-437-1020 (toll free). (2) The mailing address of each Trustee and officer is c/o Tax-Free Trust of Oregon, 380 Madison Avenue, New York, NY 10017. (3) Each Trustee holds office until the next annual meeting of shareholders or until his or her successor is elected and qualifies. The term of office of each officer is one year. (4) Mr. Herrmann is an interested person of the Trust as that term is defined in the 1940 Act as an officer of the Trust and a director, officer and shareholder of the Manager and as a shareholder and director of the Distributor. Ms. Herrmann is an interested person of the Trust as an officer of the Trust, as a director, officer and shareholder of the Manager and as a shareholder and director of the Distributor. Each is also an interested person as a member of the immediate family of the other. Mr. Lung and Mr. Mitchell are interested persons as security holders of the Sub-Adviser's parent. (5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S. Government Securities Cash Assets Trust, Pacific Capital Tax-Free Cash Assets Trust and Capital Cash Management Trust, each of which is a money-market fund, are called the "Aquila Money-Market Funds"; Hawaiian Tax-Free Trust, Tax-Free Trust of Arizona, Tax-Free Trust of Oregon, Tax-Free Fund of Colorado, Churchill Tax-Free Fund of Kentucky, Narragansett Insured Tax-Free Income Fund and Tax-Free Fund For Utah, each of which is a tax-free municipal bond fund, are called the "Aquila Bond Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; considered together, these 12 funds are called the "Aquila(sm) Group of Funds." SHAREHOLDER MEETING RESULTS (UNAUDITED) The Annual Meeting of Shareholders of Tax-Free Trust of Oregon (the "Trust") was held on May 19, 2003. The holders of shares representing approximately 82% of the total net asset value of the shares entitled to vote were present in person or by proxy. At the meeting, the following matters were voted upon and approved by the shareholders (the resulting votes are presented below). 1. To elect Trustees. Number of Votes: TRUSTEE FOR WITHHELD ------- --- -------- Lacy B. Herrmann 30,708,149 289,072 Gary C. Cornia 30,762,839 234,382 David B. Frohnmayer 30,712,191 285,031 James A. Gardner 30,721,340 275,881 Diana P. Herrmann 30,701,935 295,286 Raymond H. Lung 30,727,020 270,201 John W. Mitchell 30,753,889 243,332 Patricia L. Moss 30,784,666 212,555 Ralph R. Shaw 30,763,318 233,903 Nancy Wilgenbusch 30,764,631 232,590 2. To ratify the selection of KPMG LLP as the Trust's independent auditors. Number of Votes: FOR AGAINST ABSTAIN --- ------- ------- 30,415,913 113,083 468,225 FEDERAL TAX STATUS OF DISTRIBUTIONS (UNAUDITED) This information is presented in order to comply with a requirement of the Internal Revenue Code AND NO CURRENT ACTION ON THE PART OF SHAREHOLDERS IS REQUIRED. For the fiscal year ended September 30, 2003, $16,853,873 of dividends paid by Tax-Free Trust of Oregon, constituting 95.20% of total dividends paid during fiscal 2003, were exempt-interest dividends; $820,660 of dividends paid by the Trust constituting 4.64% of total dividends paid during the fiscal year were capital gain distributions; and the balance was ordinary dividend income. Prior to January 31, 2004, shareholders will be mailed IRS Form 1099-DIV which will contain information on the status of distributions paid for the 2003 CALENDAR YEAR. PRIVACY NOTICE (UNAUDITED) OUR PRIVACY POLICY. In providing services to you as an individual who owns or is considering investing in shares of a fund of the Aquila(SM) Group of Funds, we collect certain nonpublic personal information about you. Our policy is to keep this information strictly safeguarded and confidential, and to use or disclose it only as necessary to provide services to you or as otherwise permitted by law. Our privacy policy applies equally to former shareholders and persons who inquire about a fund. INFORMATION WE COLLECT. "Nonpublic personal information" is personally identifiable financial information about you as an individual or your family. The kinds of nonpublic personal information we have about you may include the information you provide us on your share purchase application or in telephone calls or correspondence with us, and information about your fund transactions and holdings, how you voted your shares and the account where your shares are held. INFORMATION WE DISCLOSE. We disclose nonpublic personal information about you to companies that provide necessary services to your fund, such as the fund's transfer agent, distributor, investment adviser or sub-adviser and to our affiliates, as permitted or required by law, or as authorized by you. We also may disclose this information to another fund of the Aquila(SM) Group of Funds or its distributor, or to the broker-dealer that holds your fund shares, under agreements that permit them to use the information only to provide you information about your fund, other funds in the Aquila(SM) Group of Funds or new services we are offering which may be of interest to you. Any other use is strictly prohibited. We do not sell information about you or any of our fund shareholders to anyone. HOW WE SAFEGUARD YOUR INFORMATION. We restrict access to nonpublic personal information about you to only those persons who need it to provide services to you or who are permitted by law to receive it. We maintain physical, electronic and procedural safeguards to protect the confidentiality of all nonpublic personal information we have about you. If you have any questions regarding our Privacy Policy, please contact us at 1-800-437-1020. INFORMATION AVAILABLE (UNAUDITED) Much of the information that the funds in the Aquila(sm) Group of Funds produce is automatically sent to you and all other shareholders. Specifically, you are routinely sent the entire list of portfolio of securities of your fund twice a year in the semi-annual and annual reports you receive. You should know, however, that we prepare, and have available, portfolio listings at the end of each quarter. Whenever you may be interested in seeing a listing of your trust's portfolio other than in your shareholder reports, please check our website (www.aquilafunds.com) or call us at 1-800-437-1020. 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 Street U.S. Bancorp Tower Portland, Oregon 97204 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Gary C. Cornia David B. Frohnmayer James A. Gardner Diana P. Herrmann Edmund P. Jensen 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 Joseph P. DiMaggio, Chief Financial Officer and 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. 760 Moore Road King of Prussia, Pennsylvania 19406 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 1111 Polaris Parkway Columbus, Ohio 43240 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. ANNUAL REPORT SEPTEMBER 30, 2003 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 ITEM 2. CODE OF ETHICS. (a) As of September 30, 2003 (the end of the reporting period) the Trust has adopted a code of ethics that applies to the Trust's principal executive officer(s)and principal financial officer(s) and persons performing similar functions ("Covered Officers") as defined in the Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002.; (f)(1) Pursuant to Item 10(a)(1), a copy of the Trust's Code of Ethics that applies to the Trust's principal executive officer(s) and principal financial officer(s) and persons performing similar functions is included as an exhibit to its annual report on this Form N-CSR; (f)(2) The text of the Trust's Code of Ethics that applies to the Trust's principal executive officer(s) and principal financial officer(s) and persons performing similar functions has been posted on its Internet website which can be found at the Trust's Internet address at aquilafunds.com. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1)(ii) The Board of Trustees of the Fund has determined that it does not have at least one audit committee financial expert serving on its audit committee. The Fund does not have such a person serving on the audit committee because none of the persons currently serving as Trustees happens to have the technical accounting and auditing expertise included in the definition of "audit committee financial expert" recently adopted by the Securities and Exchange Commission in connection with this Form N-CSR, and the Board has not heretofore deemed it necessary to seek such a person for election to the Board. The primary mission of the Board, which is that of oversight over the operations and affairs of the Fund, confronts the Trustees with a wide and expanding range of issues and responsibilities. The Trustees believe that, accordingly, it is essential that the Board's membership consist of persons with as extensive experience as possible in fulfilling the duties and responsibilities of mutual fund directors and audit committee members and, ideally, with extensive experience and background relating to the economic and financial sectors and securities in which the Fund invests, including exposure to the financial and accounting matters commonly encountered with respect to those sectors and securities. The Board believes that its current membership satisfies those criteria. It recognizes that it would also be helpful to have a member with the relatively focused accounting and auditing expertise reflected in the applicable definition of "audit committee financial expert," just as additional members with similarly focused technical expertise in other areas relevant to the Fund's operations and affairs would also contribute added value. However, the Board believes that the Fund is better served, and its assets better employed, by a policy of hiring experts in various areas, including the specialized area of technical accounting and auditing matters, if and as the Board identifies the need, rather than by seeking to expand its numbers by adding technical experts in the areas constituting its domain of responsibility. The Fund's Audit Committee Charter explicitly authorizes the Committee to retain such experts as it deems necessary in fulfilling its duties under the Charter. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. 905: Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) as of a date within 90 days of the fling of this report, the registrant's chief financial and executive officers have concluded that the disclosure controls and procedures of the registrant are appropriately designed to ensure that information required to be disclosed in the registrant's reports that are filed under the Securities Exchange Act of 1934 are accumulated and communicated to registrant's management, including its principal executive officer(s) and principal financial officer(s), to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002. (a)(2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TAX-FREE TRUST OF OREGON By: /s/ Lacy B. Herrmann - --------------------------------- Chairman of the Board December 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- President December 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Chief Financial Officer December 8, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Lacy B. Herrmann - --------------------------------- Lacy B. Herrmann Chairman of the Board December 8, 2003 By: /s/ Diana P. Herrmann - --------------------------------- Diana P. Herrmann President December 8, 2003 By: /s/ Joseph P. DiMaggio - ----------------------------------- Joseph P. DiMaggio Chief Financial Officer December 8, 2003 TAX-FREE TRUST OF OREGON EXHIBIT INDEX (a)(1) Aquila Group of Funds Code of Ethics for Principal Executive and Senior Financial Officers under Section 406 of the Sarbanes-Oxley Act of 2002. (a) (2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940. EX-99.CERT 2 tfto306cert.txt 302 CERTIFICATION EX-99.CERT CERTIFICATIONS I, Lacy B. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Tax-Free Trust of Oregon; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 8, 2003 /s/ Lacy B. Herrmann - ---------------------- Title: Chairman of the Board I, Diana P. Herrmann, certify that: 1. I have reviewed this report on Form N-CSR of Tax-Free Trust of Oregon; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 8, 2003 /s/ Diana P. Herrmann - ---------------------- Title: President I, Joseph P. DiMaggio, certify that: 1. I have reviewed this report on Form N-CSR of Tax-Free Trust of Oregon; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements, other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report ("Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 8, 2003 /s/ Joseph P. DiMaggio - ------------------------ Title: Chief Financial Officer EX-99.906 3 tfto906cert.txt 906 CERTIFICATION CERTIFICATION Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (subsections and (b) of section 1350, chapter 63 of title 18,United States Code), each of the undersigned officers of Tax-Free Trust of Oregon, do hereby certify to such officer's knowledge, that: The report on Form N-CSR of Tax-Free Trust of Oregon for the period ended September 30, 2003 (the "Form N-CSR")fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Tax-Free Trust of Oregon. Dated: December 8, 2003 /s/ Lacy B. Herrmann --------------------- Lacy B. Herrmann Chairman of the Board Tax-Free Trust of Oregon Dated: September 8, 2003 /s/ Diana P. Herrmann ---------------------- President Tax-Free Trust of Oregon Dated: September 8, 2003 /s/ Joseph P. DiMaggio ----------------------- Chief Financial Officer Tax-Free Trust of Oregon A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Tax-Free Trust of Oregon and will be retained by Tax-Free Trust of Oregon and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. EX-99.CODE ETH 4 sarbanes.txt SARBANES-OXLEY CODE OF ETHICS AQUILASM GROUP OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS UNDER SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 I. Covered Officers/Purpose of the Code This is the code of ethics (the "Code") for the investment companies within the Aquilasm Group of Funds (collectively, "Funds" and each, a "Fund," each of which is detailed in Exhibit A). It applies to the Fund's Principal Executive Officer(s) and Principal Financial Officer(s) (the "Covered Officers," each of whom is listed in Exhibit B), for the purpose of promoting: * honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; * full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; * compliance with applicable laws and governmental rules and regulations; * the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and * accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the Fund. The Fund's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. * * * * Each Covered Officer must: = not use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; * not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; There are some conflict of interest situations that should always be discussed with the general counsel of the Fund ("General Counsel"), if material. Examples of these include: * service as a director on the board of any public or private company; * the receipt of any non-nominal gifts; * the receipt of any entertainment from any company with which the Fund has current or prospective business dealings unless such entertainment is business- related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; * any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; * a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance * Each Covered Officer should familiarize himself/herself with the disclosure requirements generally applicable to the Fund; * each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Trustees and auditors, and to governmental regulators and self-regulatory organizations; * each Covered Officer should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and * it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: * upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code; * annually thereafter affirm to the Board that he/she has complied with the requirements of the Code; * not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and * notify the Chair of the Audit Committee of the Fund promptly if he/she knows of any violation of this Code. Failure to do so is itself a violation of this Code. * file at least annually a complete and accurate Funds' Trustees and Officers Questionnaire. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers1 sought by the Chairman of the Board or the President will be considered by the Audit Committee (the "Committee"). The Funds will follow these procedures in investigating and enforcing this Code: * The General Counsel will take all appropriate action to investigate any potential violations reported to him; *if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; * any matter that the General Counsel believes is a violation will be reported to the Committee; * if the Committee concurs that a violation has occurred, it will inform the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; * the Committee will be responsible for granting waivers, as appropriate; and * any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment adviser's and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act and the adviser's more detailed policies and procedures set forth in their respective codes are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit B, must be approved or ratified by a majority vote of the Board, including a majority of independent Trustees. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and the General Counsel, and if deemed appropriate by the Board, with other Funds in the complex where the Funds share a common Covered Officer. VIII. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Exhibit A Funds Covered by this Code of Ethics Aquila Cascadia Equity Fund Aquila Rocky Mountain Equity Fund Capital Cash Management Trust Cash Assets Trust series, consisting of Pacific Capital Cash Assets Trust Pacific Capital Tax-Free Cash Assets Trust Pacific Capital U.S. Government Cash Assets Trust Churchill Cash Reserves Trust Churchill Tax-Free Trust Hawaiian Tax-Free Trust Narragansett Insured Tax-Free Income Fund Prime Cash Fund Tax-Free Fund For Utah Tax-Free Fund of Colorado Tax-Free Trust of Arizona Tax-Free Trust of Oregon Exhibit B Persons Covered by this Code of Ethics The following officers of each Fund, and the identities of such officers as of October 1, 2003: Chairman Lacy B. Herrmann President Diana P. Herrmann Treasurer and Chief Financial Officer Joseph P. DiMaggio -----END PRIVACY-ENHANCED MESSAGE-----