-----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, RIUnQiIcE1YwgzlP46NrTAaSOdf4ZcSiKo/L7q0S7G0doBxpaDrk9YVRgy9biDqt 9CjfKjXFdygsAMtx9fpcBA== 0000791049-96-000009.txt : 19960607 0000791049-96-000009.hdr.sgml : 19960607 ACCESSION NUMBER: 0000791049-96-000009 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960423 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASCADES TRUST CENTRAL INDEX KEY: 0000791049 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 136868231 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-04626 FILM NUMBER: 96549458 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-30B-2 1 (TAX-FREE TRUST OF OREGON LOGO--LOGO OF TREE, SNOW-CAPPED MOUNTAIN AND SUN) TAX-FREE TRUST OF OREGON SEMI-ANNUAL REPORT "BACK TO BASICS" April 10, 1996 Dear Investor: OBSERVATIONS ABOUT 1995 The year 1995 was an extraordinary one in the securities market. As measured by various popular indexes, the stock market produced what would be considered "once in a lifetime" returns. The dazzle of spectacular price increases among common stocks in 1995 attracted the attention and participation of many investors. With stock price gains generally of the magnitude of 25% or more in a year, we can see why. Although bond prices, including those of municipal securities, also experienced considerable gains, these were distinctly overshadowed by what happened in the stock markets. Consequently, with all the stock price excitement, many investors were distracted from their longer-term financial planning goals. As we all know - but sometimes forget - things do not continuously grow to the sky. ANOTHER YEAR - 1996 Here we are at the early stage of another year - 1996. Accordingly, it is well to consider the risk/reward characteristics of one's investments in light of longer-term investment goals and what might occur in this calendar year. Few people, including ourselves, are very good at crystal ball gazing with the securities markets. Nevertheless, we still would hazard an opinion that the magnitude of positive returns experienced in the stock markets in 1995 will NOT be repeated in 1996. As a result, we feel it prudent that all investors, including all current shareholders of the Trust, think seriously about the orientation of their investment funds. One should think about what might be the desirable risk/reward relationship of one's assets this year, as such orientation or allocation suits one's longer-term investment goals and objectives. BACK TO BASICS It is always important to remember that stocks and bonds are entirely different types of investments. They are appropriate for different type investment objectives. Stocks are attractive for capital growth prospects while bonds are primarily used for capital preservation - and, for tax-free income in the case of municipal bonds. Individual equity securities can appreciate in value significantly during one time period and then, when a disappointing earnings report comes out, can just as easily drop in price by 20% - 30% IN JUST ONE DAY in the highly volatile marketplace that currently exists. Municipal bonds, on the other hand, generally don't fluctuate in price very significantly, unless they have long maturities or are of low quality. They just plod along from year to year, producing a relatively high level of capital preservation and a consistent and relatively decent level of annual tax-free income return. Moreover, with the relatively high level of credit safety that is inherent to municipal securities, this kind of investment gives you a comfort level you can count on in terms of protection of your investment and consistency of income stream, particularly over the longer-term time span in which your investment should be viewed. Therefore, with those investors having as a key investment goal the preservation of capital and a consistent monthly income stream, then Tax-Free Trust of Oregon could well be the investment vehicle that could serve one best. QUALITY OF PORTFOLIO Quality is the most important ingredient in providing the means to protect investment capital. That is why the investment portfolio of Tax-Free Trust of Oregon has been constructed with such a high quality orientation. Of the nine separate credit ratings assignable to municipal securities by the nationally renown credit rating services, we only invest in the top four ratings. [PIE CHART GRAPHIC with following information:]
PORTFOLIO DISTRIBUTION BY QUALITY (By Credit Rating) AAA 45.3% Below A & Not Rated* 1.9% A 6.6% AA 46.2% *ANY SECURITY NOT RATED MUST BE DETERMINED BY THE INVESTMENT 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.
It is worth emphasizing that at March 31, 1996, 98.1% of the Trust's assets were ranked in the top three ratings - AAA, AA, AND A. This represents EXCEPTIONALLY high quality standards. Consequently, the level of capital preservation offered to the Trust's shareholders is of the highest order. Moreover, the Trust's local Investment Adviser, Qualivest Capital Management, Inc., is constantly reviewing each and every security in the portfolio as to its creditworthiness. We want shareholders to have the comfort of "SLEEPING WELL AT NIGHT" knowing that someone is paying close attention to the quality orientation of their investment in the Trust. SHARE PRICE STABILITY In viewing the value of one's investment in the Trust, it is essential that regard be given to a reasonable time span. Unless one limits the maturity of fixed-income securities to one year or less, there will ALWAYS be fluctuations in price as market conditions vary. 2 A key goal that management has is to provide shareholders with a high level of share price stability over a reasonable time period. The accompanying chart illustrates the performance of the Trust's share price since inception on June 16, 1986. [BAR CHART GRAPHIC with the following information:]
SHARE NET ASSET VALUE Date Share Net Asset Value In dollars 6/16/86 9.60 9/30/86 9.82 3/31/87 10.12 9/30/87 9.11 3/31/88 9.56 9/30/88 9.67 3/31/89 9.61 9/30/89 9.76 3/31/90 9.76 9/30/90 9.67 3/31/91 9.93 9/30/91 10.15 3/31/92 10.19 9/30/92 10.48 3/31/93 10.70 9/30/93 10.95 3/31/94 10.35 9/30/94 10.20 3/31/95 10.37 9/30/95 10.55 3/31/96 10.50
We believe this goal of share price stability has been achieved quite well over the years. In accomplishing this goal, the quality composition of the investment portfolio is an important element. Also, however, the maturity structure of the portfolio is a key ingredient. The Trust presently holds securities with very short maturities, but also some with quite long maturities. However, the average maturity at March 31, 1996 was 15.1 years. This helps contain fluctuations in share price - up or down - to a modest nature. Another factor in creating share price stability is diversification - diversification by number of issues, by numerous municipal issuers, by nature of projects financed and by geographic location within Oregon. The diversification employed by the Trust encompasses all these elements. At March 31, 1996, there were 194 separate securities in the investment portfolio. RATE OF RETURN We consistently try to provide shareholders with a good level of DOUBLE TAX-FREE income - as high as possible commensurate with the degree of capital preservation we strive to achieve. The accompanying chart shows the average level of DOUBLE TAX-FREE income distributed to shareholders over the past 12-month period, as measured against the maximum public offering price. Since shareholders are subject to the payment of income tax at Federal tax levels as well as payments of State of Oregon income tax, we have also shown in this chart the rate of taxable income return one would have had to earn over the course of the 12-month period in order to equate to the DOUBLE TAX-FREE income return generated by the Trust. 3 [BAR CHART GRAPHIC with following information:]
TAX-FREE TRUST OF OREGON'S DOUBLE TAX-FREE DISTRIBUTION RATE* AS COMPARED TO THE TAXABLE EQUIVALENT RATE AN INVESTOR WOULD HAVE TO EARN AT VARIOUS TAX BRACKETS. Rate of Return Tax Bracket Double Tax-Free Taxable Equivalent Distribution Rate Rate 28% 5.03% 7.68% 31% 5.03% 8.01% 36% 5.03% 8.64% 39.6% 5.03% 9.15% * For the period 4/1/95-3/31/96
No matter which Federal income tax bracket applies, you can readily see that there is quite a difference between the taxable and the DOUBLE TAX-FREE return levels. It is important to note that it would not have been possible over the past 12-month period to find taxable fixed-income investments that would produce the same level of after tax return as that of the Trust, unless one settled for a lesser quality and higher risk taxable investment. SIZE OF TRUST'S ASSETS We are pleased to report that at March 31, 1996, the total net asset size of Tax-Free Trust of Oregon was $305,980,789. Such asset size helps keep the Trust's expense ratio for its operations reasonable and below the industry average for similar-type municipal bond funds. OUR APPRECIATION We thank all shareholders for their continued loyalty and for the confidence placed in the management of Tax-Free Trust of Oregon. You can be assured that we will constantly try our best to merit your continuing support. Sincerely, /s/ Lacy B. Herrmann Lacy B. Herrmann President and Chairman of the Board of Trustees 4
TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS MARCH 31, 1996 (UNAUDITED) RATING FACE STATE OF OREGON GENERAL OBLIGATION MOODY'S/ AMOUNT BONDS (50.6%) S&P VALUE City of Albany (MBIA Corporation Insured), $ 150,000 6.400%, 11/01/1999 Aaa/AAA $ 150,327 460,000 6.500%, 11/01/2000 Aaa/AAA 461,002 2,195,000 6.625%, 11/01/2009 Aaa/AAA 2,197,831 Port of Astoria (MBIA Corporation Insured) 410,000 6.200%, 02/01/2004 Aaa/AAA 426,912 1,250,000 6.600%, 09/01/2011 Aaa/AAA 1,309,375 City of Beaverton 910,000 5.950%, 04/01/2003 Aa/AA- 968,012 520,000 6.600%, 06/01/2003 NR/AA- 546,000 960,000 6.050%, 04/01/2004 Aa/AA- 1,021,200 560,000 6.600%, 06/01/2004 NR/AA- 588,000 1,020,000 6.150%, 04/01/2005 Aa/AA- 1,085,025 500,000 5.000%, 06/01/2005 Aa/AA- 499,375 1,080,000 6.250%, 04/01/2006 Aa/AA- 1,148,850 Clackamas County School District #115 (AMBAC Indemnity Corporation Insured) 600,000 5.600%, 06/01/2006 Aaa/AAA 627,750 615,000 5.700%, 06/01/2007 Aaa/AAA 642,675 1,000,000 6.150%, 06/01/2014 Aaa/AAA 1,038,750 Clackamas and Washington County School District #3J 2,000,000 5.850%, 08/01/2006 A1/AA- 2,112,500 5,000,000 5.875%, 08/01/2009 A1/AA- 5,168,750 1,150,000 5.875%, 10/01/2009 A1/AA- 1,198,875 Clackamas, Multnomah and Washington County School District #7J 1,000,000 7.100%, 06/15/2009 Aaa/NR 1,100,000 250,000 7.100%, 06/15/2010 Aaa/NR 275,000 1,500,000 5.700%, 06/15/2010 Aa/NR 1,524,375 Columbia Gorge Community College District (Financial Security Assurance Insured) 1,200,000 5.400%, 06/01/2013 Aaa/AAA 1,165,500 Deschutes and Jefferson County School District #2J (MBIA Corporation Insured) 3,700,000 5.600%, 06/01/2009 Aaa/AAA 3,760,125
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON GENERAL RATINGS AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE Hood River County School District (AMBAC Indemnity Corporation Insured) 2,000,000 5.650%, 06/01/2008 Aaa/AAA 2,070,000 Jackson County School District #549C (Financial Security Assurance Insured) 1,150,000 5.300%, 06/01/2008 Aaa/AAA 1,162,937 Josephine County School District #7 (Grants Pass) (Financial Guaranty Insurance Corporation Insured) 2,700,000 5.700%, 06/01/2013 Aaa/AAA 2,689,875 Jefferson County School District #509J (Financial Security Assurance Insured) 1,750,000 5.500%, 06/15/2013 Aaa/AAA 1,725,937 Lane County School District #4J 2,000,000 5.375%, 7/01/2009 Aa/NR 2,002,500 Lane County School District #52J (Financial Guaranty Insurance Corporation Insured) 750,000 6.400%, 12/01/2009 Aaa/AAA 815,625 Lincoln County Oregon School District (Financial Guaranty Insurance Corporation Insured) 1,245,000 5.250%, 06/15/2009 Aaa/NR 1,195,200 Lincoln County (MBIA Corporation Insured) 1,000,000 5.375%, 02/01/2010 Aaa/AAA 1,006,250 Malheur County Jail Bonds (MBIA Corporation Insured) 1,345,000 6.300%, 12/01/2012 Aaa/AAA 1,427,381 Marion and Clackamas County Union High School District #7J (Financial Security Assurance Insured) 1,340,000 6.000%, 06/01/2013 Aaa/AAA 1,391,925 Multnomah County 1,245,000 5.100%, 10/01/2007 Aa1/NR 1,252,781 1,000,000 5.200%, 10/01/2008 Aa1/NR 1,006,250 Multnomah County School District #1 3,225,000 6.500%, 12/15/2000 Aa/A+ 3,305,625 1,180,000 6.600%, 12/15/2001 Aa/A+ 1,209,500 3,725,000 6.800%, 12/15/2004 Aa/A+ 3,822,781 Multnomah County School District #1J 1,000,000 5.000%, 03/01/2007 Aa/A+ 983,750 Multnomah County School District #4 1,330,000 5.900%, 01/01/2005 A1/A+ 1,411,462
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON GENERAL RATINGS AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE Multnomah County School District #40 4,100,000 5.625%, 06/01/2012 NR/AA- 4,130,750 Metropolitan Service District Refunding (Oregon Convention Center) 4,320,000 6.250%, 01/01/2013 Aa/AA+ 4,492,800 Oak Lodge Water District (AMBAC Indemnity Corporation Insured) 215,000 7.300%, 12/01/2005 Aaa/AAA 252,087 215,000 7.300%, 12/01/2006 Aaa/AAA 250,475 215,000 7.400%, 12/01/2007 Aaa/AAA 250,206 State of Oregon 5,000,000 7.000%, 12/01/2011 Aa/AA- 5,400,000 State of Oregon Alternate Energy Project Series A 1,530,000 4.900%, 01/01/2004 Aa/AA- 1,533,825 1,000,000 6.400%, 01/01/2008 Aa/AA- 1,051,250 State of Oregon Board of Higher Education 900,000 6.200%, 10/15/2007 Aa/AA- 958,500 3,195,000 6.400%, 10/01/2011 Aa/AA- 3,342,768 2,000,000 6.250%, 10/15/2012 Aa/AA- 2,072,500 2,150,000 6.500%, 10/01/2017 Aa/AA- 2,249,437 2,890,000 6.000%, 10/15/2018 Aa/AA- 2,947,800 State of Oregon Elderly & Disabled Housing 725,000 6.250%, 08/01/2013 Aa/AA- 754,906 State of Oregon Veterans' Welfare 900,000 11.250%, 04/01/1998 Aa/AA- 1,022,625 875,000 7.500%, 03/01/2000 Aa/AA- 916,133 505,000 9.000%, 04/01/2008 Aa/AA- 619,887 700,000 9.200%, 10/01/2008 Aa/AA- 955,500 565,000 8.000%, 11/01/2012 Aa/AA- 607,375 7,150,000 6.875%, 12/01/2013 Aa/AA- 7,677,312 500,000 6.875%, 12/01/2014 Aa/AA- 536,250 1,000,000 7.000%, 12/01/2015 Aa/AA- 1,075,000 Pacific Communities Hospital District (Financial Guaranty Insurance Corporation Insured) 200,000 6.500%, 12/01/2003 Aaa/AAA 203,874 380,000 6.500%, 12/01/2005 Aaa/AAA 387,360
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON GENERAL RATINGS AMOUNT OBLIGATION BONDS (CONTINUED) MOODY'S/S&P VALUE Polk County School District #2 (Financial Security Assurance Insured) 1,000,000 5.400%, 06/01/2012 Aaa/AAA 977,500 Polk, Marion, and Benton County School District #13J (Financial Guaranty Insurance Corporation Insured) 1,000,000 5.500%, 12/01/2008 Aaa/AAA 1,026,250 City of Portland 1,625,000 4.500%, 11/01/2004 Aaa/NR 1,584,375 1,480,000 5.100%, 10/01/2009 Aaa/NR 1,435,600 2,000,000 7.125%, 10/01/2010 Aaa/NR 2,175,000 City of Portland (Limited) 2,500,000 5.250%, 06/01/2015 Aa/NR 2,409,375 Portland Community College District 3,500,000 6.000%, 07/01/2012 A1/AA 3,591,875 Port of Portland 1,000,000 4.500%, 03/01/2006 Aa/AA+ 948,750 City of Salem 1,000,000 5.875%, 01/01/2007 A1/A+ 1,033,750 City of Springfield Advanced Refunding 275,000 8.600%, 06/01/2003 A/NR 277,224 Tri-County Metropolitan Transportation District 6,100,000 6.000%, 07/01/2012 Aa/AA+ 6,290,625 Tualatin Hills Park and Recreation District (MBIA Corporation Insured) 2,970,000 5.750%, 03/01/2010 Aaa/AAA 3,003,412 Umatilla County School District #8R (AMBAC Indemnity Corporation Insured) 700,000 6.100%, 12/01/2012 Aaa/AAA 729,750 Wasco County School District #9 (AMBAC Indemnity Corporation Insured) 700,000 5.500%, 06/01/2008 Aaa/AAA 716,625 Washington County 2,500,000 6.200%, 12/01/2007 Aa/AA 2,659,375 2,110,000 6.000%, 12/01/2013 Aa/AA 2,183,850 Washington County School District #88J (Financial Security Assurance Insured) 2,900,000 6.100%, 06/01/2012 Aaa/AAA 3,026,875
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON GENERAL OBLIGATION RATINGS AMOUNT BONDS (CONTINUED) MOODY'S/S&P VALUE Washington and Clackamas County School District #23J 1,675,000 6.625%, 01/01/2005 NR/NR* 1,796,437 1,000,000 5.650%, 06/01/2015 A1/NR 992,500 720,000 6.625%, 01/01/2008 NR/NR* 772,200 2,000,000 5.400%, 01/01/2010 A1/NR 1,985,000 Washington & Multnomah County School District #48J 1,175,000 5.500%, 06/01/2006 Aa/AA- 1,216,125 1,440,000 4.500%, 09/01/2006 Aa/AA- 1,378,800 1,130,000 5.600%, 06/01/2007 Aa/AA- 1,172,375 1,000,000 6.150%, 06/01/2008 Aa/AA- 1,046,250 1,415,000 5.700%, 06/01/2008 Aa/AA- 1,468,062 525,000 6.300%, 09/01/2009 Aaa/AAA 568,312 1,440,000 6.000%, 06/01/2011 Aa/AA- 1,494,000 2,010,000 6.500%, 09/01/2001 Aaa/AAA 2,195,925 250,000 5.750%, 09/01/2012 Aaa/AAA 261,875 Washington & Yamhill County School District #58J (AMBAC Indemnity Corporation Insured) 70,000 6.600%, 11/01/2004 Aaa/AAA 70,757 80,000 6.600%, 11/01/2005 Aaa/AAA 80,797 90,000 6.600%, 11/01/2006 Aaa/AAA 90,871 Wolf Creek Highway Water Disrtict 505,000 6.900%, 12/01/2005 NR/AA 540,350 Yamhill County School District #29J (Financial Security Assurance Insured) 2,000,000 5.350%, 06/01/2006 Aaa/AAA 2,030,000 500,000 6.100%, 06/01/2011 Aaa/AAA 525,625 Total State of Oregon General Obligation Bonds 154,941,080 STATE OF OREGON REVENUE BONDS (48.1%) AIRPORT REVENUE BONDS (2.5%) Port of Portland Airport (Financial Guaranty Insurance Corporation Insured) 500,000 5.500%, 07/01/2006 Aaa/AAA 509,375 Port of Portland Airport (MBIA Corporation Insured) 600,000 6.400%, 07/01/2003 Aaa/AAA 648,000 3,530,000 6.750%, 07/01/2009 Aaa/AAA 3,816,812 2,425,000 6.750%, 07/01/2015 Aaa/AAA 2,615,968 Total Airport Revenue Bonds 7,590,155
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE CERTIFICATE OF PARTICIPATION REVENUE BONDS (9.8%) Oregon State Department Of Administration Services (AMBAC Indemnity Corporation Insured) 5,805,000 5.500%, 11/01/2020 Aaa/AAA 5,587,312 Multnomah County Certificate of Participation Health Facilities Lease Purchase Program 1,000,000 5.200%, 07/01/2005 Aa/NR 1,002,500 Multnomah County Certificate of Participation Juvenile Justice Center, 3,100,000 6.000%, 08/01/2012 Aa/A 3,173,625 State of Oregon Certificate of Participation (AMBAC Indemnity Corporation Insured) 3,100,000 7.500%, 09/01/2015 Aaa/AAA 3,526,250 State of Oregon Certificate of Participation (MBIA Corporation Insured) 2,150,000 7.050%, 01/15/2006 Aaa/AAA 2,348,875 1,250,000 5.700%, 01/15/2010 Aaa/AAA 1,262,500 2,750,000 6.200%, 11/01/2012 Aaa/AAA 2,856,562 1,150,000 7.200%, 01/15/2015 Aaa/AAA 1,277,937 1,000,000 5.500%, 01/15/2015 Aaa/AAA 972,500 550,000 5.500%, 01/15/2015 Aaa/AAA 534,875 600,000 7.200%, 03/01/2015 Aaa/AAA 663,750 1,000,000 5.800%, 03/01/2015 Aaa/AAA 1,000,000 2,000,000 6.250%, 11/01/2019 Aaa/AAA 2,080,000 Southwestern Oregon Community College District (AMBAC Indemnity Corporation Insured) 1,000,000 5.600%, 06/01/2016 Aaa/AAA 988,750 City of Portland Certificate of Participation 1,100,000 7.250%, 04/01/2008 NR/NR* 1,190,750 Washington County Educational Services, Certificates of Participation 645,000 5.625%, 06/01/2016 A1/NR 631,293 Washington County Educational Services, Certificates of Participation (MBIA Corporation Insured) 830,000 5.750%, 06/01/2025 Aaa/AAA 820,662 Total Certificate of Participation Revenue Bonds 29,918,141
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE HOSPITAL REVENUE BONDS (5.0%) Clackamas Hospital Facilities Authority (Adventist Health System/West) (MBIA Corporation Insured) 2,000,000 6.350%, 03/01/2009 Aaa/AAA 2,120,000 Clackamas Hospital Facilites Authority (Kaiser Permanente) 2,400,000 6.500%, 04/01/2011 Aa3/AA 2,508,000 Clackamas Hospital Facilites Authority (Sisters of Providence Hospital) 500,000 6.375%, 10/01/2004 A1/AA- 535,625 Douglas County Hospital Facilities Authority (Catholic Health) (MBIA Corporation Insured) 535,000 5.600%, 11/15/2005 Aaa/AAA 551,718 Medford Hosptial Facilities Authority (Rogue Valley Health Services) (MBIA Corporation Insured) 500,000 6.800%, 12/01/2011 Aaa/AAA 540,000 1,685,000 6.750%, 12/01/2020 Aaa/AAA 1,802,950 Portland Hospital Facilities Authority (Legacy Health Systems) (AMBAC Indemnity Corporation Insured) 900,000 6.500%, 05/01/2004 Aaa/AAA 976,500 Western Lane County Hospital Facilities Authority (Sisters of St. Joseph Hospital) (MBIA Corporation Insured) 1,000,000 5.625%, 08/01/2007 Aaa/AAA 1,033,750 1,450,000 7.125%, 08/01/2017 Aaa/AAA 1,604,062 3,765,000 5.750%, 08/01/2019 Aaa/AAA 3,722,643 Total Hospital Revenue Bonds 15,395,248 HOUSING, EDUCATIONAL, AND CULTURAL REVENUE BONDS (7.7%) State of Oregon Housing Finance Agency, 1,000,000 6.800%, 07/01/2013 A1/A+ 1,037,500 State of Oregon Housing and Community Services, 500,000 5.100%, 07/01/2007 Aa/NR 486,875 1,670,000 5.200%, 07/01/2009 Aa/NR 1,613,637 920,000 6.750%, 07/01/2012 Aa/NR 968,300 500,000 6.700%, 07/01/2013 Aa/NR 509,375 500,000 6.350%, 07/01/2014 Aa/NR 513,125 1,100,000 6.800%, 07/01/2016 Aa/NR 1,160,500 1,945,000 6.750%, 07/01/2016 Aa/NR 1,981,468
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE 3,500,000 6.875%, 07/01/2028 Aa/NR 3,675,000 State of Oregon Housing, Educational and Cultural Facilities Authority (Lewis & Clark College) (MBIA Corporation Insured) 1,130,000 7.125%, 07/01/2020 Aaa/AAA 1,264,187 State of Oregon Housing, Educational and Cultural Facilities Authority (OMSI), 800,000 5.900%, 10/01/2006 A1/NR 808,656 State of Oregon Housing, Educational and Cultural Facilities Authority (Reed College), 2,145,000 6.750%, 07/01/2021 NR/A+ 2,391,675 Oregon Health Sciences University Revenue (AMBAC Insured) 4,500,000 5.250%, 07/15/2015 Aaa/AAA 4,224,375 City of Salem Educational Facilities (Willamette University), 1,000,000 6.000%, 04/01/2010 A/NR 1,040,000 1,740,000 6.750%, 04/01/2011 NR/NR* 1,914,000 Total Housing, Educational, and Cultural Revenue Bonds 23,588,673 TRANSPORTATION REVENUE BONDS (2.9%) Port of Morrow, 2,600,000 6.375%, 04/01/2008 Aaa/NR 2,830,750 State of Oregon Department of Transportation (Light Rail) (MBIA Corporation Insured), 2,000,000 6.000%, 06/01/2005 Aaa/AAA 2,145,000 Port of St. Helens, 95,000 7.750%, 02/01/2006 Baa/1NR 105,806 Tri-County Metropolitan Transportation District 3,680,000 5.700%, 08/01/2013 A1/AA 3,680,000 Total Transportation Revenue Bonds 8,761,556 URBAN RENEWAL REVENUE BONDS (.6%) Keiser Urban Renewal Agency, 950,000 5.400%, 07/01/2008 NR/A- 927,437 City of Portland Urban Renewal, 300,000 9.000%, 12/01/2002 A/NR 308,247
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE City of Wilsonville Urban Renewal, 500,000 5.850%, 06/01/2004 Baa1/NR 500,450 Total Urban Renewal Revenue Bonds 1,736,134 UTILITY REVENUE BONDS (7.1%) Emerald Peoples Utility District (AMBAC Indemnity Corporation Insured), 700,000 6.700%, 11/01/2005 Aaa/AAA 770,000 145,000 7.200%, 11/01/2006 Aaa/AAA 147,441 35,000 7.200%, 11/01/2006 Aaa/AAA 35,732 3,860,000 7.350%, 11/01/2013 Aaa/AAA 3,921,374 Emerald Peoples Utility District Electic Systems (Financial Security Assurance Insured) 1,000,000 6.750%, 11/01/2016 Aaa/AAA 1,107,500 City of Eugene Electric Utility 610,000 6.650%, 08/01/2009 A1/AA 645,837 660,000 6.650%, 08/01/2010 A1/AA 696,300 1,000,000 6.000%, 08/01/2011 A1/AA 1,023,750 700,000 6.700%, 08/01/2011 A1/AA 736,750 500,000 5.000%, 08/01/2017 A1/AA 454,375 1,400,000 5.800%, 08/01/2019 A1/AA 1,396,500 City of Eugene Trojan Nuclear Project 3,865,000 5.900%, 09/01/2009 Aa/AA 3,865,115 Marion County Solid Waste and Electric (AMBAC Indemnity Corporation Insured), 1,445,000 7.500%, 10/01/2004 Aaa/AAA 1,494,072 4,335,000 7.700%, 10/01/2009 Aaa/AAA 4,500,120 Northern Wasco County Public Utility Developement (AMBAC Indemnity Corporation Insured), 1,000,000 5.625%, 12/01/2022 Aaa/AAA 977,500 Total Utility Revenue Bonds 21,772,366 WATER AND SEWER REVENUE BONDS (10.4%) City of Canby Sewer (Financial Security Assurance Insured), 500,000 6.250%, 12/01/2017 Aaa/AAA 518,125 City of Eugene Water, 780,000 6.550%, 08/01/2004 A1/AA- 800,194 365,000 6.600%, 08/01/2005 A1/AA- 374,486
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE City of Klamath Falls Water (Financial Security Assurance Insured), 1,100,000 6.100%, 06/01/2014 Aaa/AAA 1,139,875 City of Oregon City Sewer, 750,000 6.875%, 10/01/2019 NR/NR* 762,187 City of Portland Sewer, 2,400,000 4.900%, 03/01/2005 A1/A+ 2,397,000 3,150,000 5.100%, 03/01/2007 A1/A+ 3,130,312 1,500,000 6.050%, 06/01/2009 A1/A+ 1,591,875 City of Portland Sewer (Financial Guaranty Insurance Corporation Insured), 2,725,000 6.000%, 10/01/2008 Aaa/AAA 2,878,281 500,000 6.000%, 10/01/2012 Aaa/AAA 515,625 2,855,000 6.250%, 06/01/2015 Aaa/AAA 2,987,043 Portland Water System Revenue 3,000,000 5.550%, 08/01/2014 Aa/1NR 2,928,750 1,440,000 5.550%, 08/01/2015 Aa1/NR 1,396,800 Washington County Unified Sewer Agency (AMBAC Indemnity Corporation Insured), 1,040,000 6.800%, 11/01/2004 Aaa/AAA 1,123,200 2,120,000 5.900%, 10/01/2006 Aaa/AAA 2,247,200 1,115,000 5.900%, 10/01/2006 Aaa/AAA 1,181,900 2,500,000 6.125%, 10/01/2012 Aaa/AAA 2,600,000 750,000 6.125%, 10/01/2012 Aaa/AAA 780,000 Washington County Unified Sewer Agency 2,195,000 7.000%, 11/01/2009 Aaa/AAA 2,387,062 Total Water and Sewer Revenue Bonds 31,739,915 OTHER REVENUE BONDS (2.1%) Baker County Pollution Control (Ash Grove Cement West Project) (Small Business Administration Insured), 355,000 6.200%, 07/01/2004 Aaa/NR 368,312 380,000 6.300%, 07/01/2005 Aaa/NR 394,250 State of Oregon Bond Bank 500,000 6.800%, 01/01/2011 Aaa/NR 542,500 1,000,000 6.700%, 01/01/2011 Aaa/NR 1,082,500
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TAX-FREE TRUST OF OREGON STATEMENT OF INVESTMENTS FACE STATE OF OREGON RATINGS AMOUNT REVENUE BONDS (CONTINUED) MOODY'S/S&P VALUE Oregon Economic Development Commission (Consolidated Freightways) 1,500,000 7.000%, 04/01/2004 Aa3/BBB- 1,507,755 City of Portland 2,465,000 4.650%, 04/01/2004 Aa/NR 2,428,054 Total Other Revenue Bonds 6,323,371 Total State of Oregon Revenue Bonds 146,825,559 Total State of Oregon 301,766,639 PUERTO RICO Puerto Rico Housing Finance Corporation (GNMA Collateralized) 115,000 7.800%, 10/15/2021 Aaa/AAA 120,031 Total Puerto Rico 120,031 Total Municipal Bonds - 98.7% (Cost - $291,607,267**) 301,886,670 Other assets in excess of liabilities - 1.3% 4,094,119 Net Assets - 100% $305,980,789 (*) Any security not rated must be determined by the Investment Adviser to have sufficient quality to be ranked in the top four credit ratings if a credit rating were to be assigned by a rating service. (**) Cost for Federal tax purposes is $290,657,743.
See accompanying notes to financial statements. 15
TAX-FREE TRUST OF OREGON STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1996 (UNAUDITED) ASSETS Investments at value (cost - $291,607,267) $ 301,886,670 Cash 371,074 Interest receivable 3,969,154 Receivable for Trust shares sold 228,618 Other assets 7,188 Total assets 306,462,704 LIABILITIES Payable for Trust shares redeemed 121,908 Distribution fees payable 113,649 Adviser and Administrator fees payable 97,638 Dividends payable 86,986 Accrued expenses 61,734 Total liabilities 481,915 NET ASSETS (equivalent to $10.50 per share on 29,147,816 shares outstanding) $ 305,980,789 Net Assets consist of: Capital Stock - Authorized an unlimited number of shares, par value $0.01 per share $ 291,478 Additional paid-in capital 294,909,884 Accumulated net realized gain on investments 500,024 Net unrealized appreciation on investments 10,279,403 $ 305,980,789 Net Asset Value, redemption price per share $ 10.50 Offering price per share (100/96 of $10.50 adjusted to nearest cent) $ 10.94
See accompanying notes to financial statements. 16
TAX-FREE TRUST OF OREGON STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED) INVESTMENT INCOME: Interest income $8,908,492 Expenses: Investment Adviser fees (note B) $308,623 Administrator fees (note B) 308,623 Distribution fees (note B) 231,713 Transfer and shareholder servicing agent fees 100,000 Legal fees 43,000 Trustees' fees and expenses 40,000 Shareholders' reports and proxy statements 32,500 Audit and accounting fees 13,000 Custodian fees (note F) 12,725 Registration fees and dues 10,000 Insurance 3,500 Miscellaneous 17,496 1,121,180 Expenses paid indirectly (note F) (12,725) Net expenses 1,108,455 Net investment income 7,800,037 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from securities transactions 500,024 Change in unrealized appreciation on investments (1,853,193) Net realized and unrealized gain (loss) on investments (1,353,169) Net increase in net assets resulting from operations $ 6,446,868
See accompanying notes to financial statements. 17
TAX-FREE TRUST OF OREGON STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) SIX MONTHS YEAR ENDED ENDED MARCH SEPTEMBER 31, 1996 30, 1995 OPERATIONS: Net investment income $ 7,800,037 $ 16,542,189 Net realized gain from securities transactions 500,024 301,287 Change in unrealized appreciation on investments (1,853,193) 11,027,760 Net increase in net assets resulting from operations 6,446,868 27,871,236 DISTRIBUTIONS TO SHAREHOLDERS (NOTE E): Net investment income ($0.27 and $0.55 per share, respectively) (7,800,037) (16,257,162) Net realized gain from securities transactions ($0.01 and $0.04 per share, respectively) (292,145) (1,341,034) Total distributions (8,092,182) (17,598,196) Net increase (decrease) from investment activities (1,645,314) 10,273,040 TRUST SHARE TRANSACTIONS: SHARES SIX MONTHS YEAR ENDED ENDED MARCH SEPTEMBER 31, 1996 30, 1995 Shares sold 936,398 2,396,282 9,980,290 24,616,407 Shares issued through reinvestment of dividends 435,542 978,995 4,636,314 10,024,851 Shares redeemed (1,647,131) (4,963,693) (17,544,601) (50,676,823) Decrease in shares and net assets derived from Trust share transactions (275,191) (1,588,416) (2,927,997) (16,035,565) Net decrease in net assets (4,573,311) (5,762,525) NET ASSETS: Beginning of period 310,554,100 316,316,625 End of period $305,980,789 $310,554,100
See accompanying notes to financial statements. 18 TAX-FREE TRUST OF OREGON NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Tax-Free Trust of Oregon (the "Trust") is a separate non-diversified 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 commenced operations on June 16, 1986. The Trust is authorized to issue an unlimited number of shares and, since its inception, has issued only one class of shares, to which these financial statements relate. It is anticipated that the Trust will begin offering two additional classes of shares during the second calendar quarter of 1996. The shares outstanding at that time will be designated as Class A Shares and, as is the case now, will be sold with a front-end sales charge and bear a service fee. Class C Shares will be sold with no front-end sales charge but will be assessed a contingent deferred sales charge if redeemed within 12 months from the time of purchase and a level charge for service and distribution fees. Class Y Shares will be offered only to institutions acting for investors in a fiduciary, advisory, agency, custodial or similar capacity, and will not be offered directly to retail customers, and will be sold at net asset value with no sales charge, no redemption fee, no contingent deferred sales charge and no service or distribution fees. All classes of shares will have identical rights and privileges except 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 privilege of each class. The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles for investment companies. (1) 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 was 60 days or less, or by amortizing their unrealized appreciation or depreciation on the 61st day prior to maturity, if their term to maturity at purchase exceeded 60 days. (2) 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 premiums and accretion of discounts of securities purchased at other than par with less than 60 days to maturity. (3) 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. (4) USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts 19 of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. NOTE B - MANAGEMENT ARRANGEMENTS AND FEES AND OTHER TRANSACTIONS WITH AFFILIATES: Management affairs of the Trust are conducted through two separate management arrangements. Qualivest Capital Management, Inc. (the "Adviser") became Investment Adviser to the Trust in June, 1986. In this role, under an Investment Advisory Agreement, the Adviser supervises the Trust's investments and provides various services to the Trust, including maintenance of the Trust's accounting books and records, for which it is entitled to receive a fee which is payable monthly and computed at the annual rate of 0.20% of the Trust's average daily net assets. The Trust also has an Administration Agreement with its founder and sponsor, Aquila Management Corporation (the "Administrator"). Under this Agreement, the Administrator provides all administrative services, other than those relating to the management of the Trust's investments. This includes providing the office of the Trust and all related services as well as overseeing the activities of all the various support organizations to the Trust such as the shareholder servicing agent, custodian, legal counsel, auditors and distributor. For its services, the Administrator is entitled to receive a fee which is payable monthly and computed at the annual rate of 0.20% of the Trust's average daily net assets. Specific details as to the nature and extent of the services provided by the Adviser and the Administrator are more fully defined in the Trust's Prospectus and Statement of Additional Information. The Adviser and the Administrator each agrees that the above fees shall be reduced, but not below zero, by an amount equal to its pro-rata portion (determined on the basis of the respective fees computed as described above) of the amount, if any, by which the total expenses of the Trust in any fiscal year, exclusive of taxes, interest and brokerage fees, shall exceed the lesser of (i) 2.5% of the first $30 million of average annual net assets of the Trust plus 2% of the next $70 million of such assets and 1.5% of its average annual net assets in excess of $100 million, or (ii) 25% of the Trust's total annual investment income. The payment of the above fees at the end of any month will be reduced or postponed so that at no time will there be any accrued but unpaid liability under this expense limitation. No such reduction in fees was required during the six months ended March 31, 1996. For the six months ended March 31, 1996, the Trust incurred fees under the Advisory Agreement and Administration Agreement of $308,623 and $308,623, respectively. Under a Distribution Agreement, Aquila Distributors, Inc. (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. However, for the six months ended March 31, 1996, the Distributor received sales commissions in the amount of $28,920. Effective June 1, 1994 the Trust adopted a Distribution Plan (the "Plan") pursuant to Rule 12bb1 (the "Rule") under the Investment Company Act of 1940. The Plan authorizes the Trust to make service fee payments at the annual rate of 0.15% of the average net assets of the Trust to broker-dealers or others selected by the Distributor, including, but not limited to, any principal underwriter of the Trust, 20 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. During the six months ended March 31, 1996, service fees amounted to $231,713, of which the Distributor received $4,512. Specific details about the Plan are more fully defined in the Trust's Prospectus and Statement of Additional Information. NOTE C - PURCHASES AND SALES OF SECURITIES: During the six months ended March 31, 1996, purchases of securities and proceeds from the sales of securities aggregated $19,477,114 and $16,587,570, respectively. At March 31, 1996, aggregate gross unrealized appreciation for all securities in which there is an excess of market value over tax cost amounted to $12,235,069 and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over market value amounted to $1,006,142 for a net unrealized appreciation of $11,228,927. NOTE D - 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. One such development, Measure 5, a 1990 amendment to the Oregon Constitution, limits the taxing and spending authority of certain Oregon governmental entities. Although it may have an adverse effect on the general financial condition of these entities and may impair the ability of certain Oregon issuers' to pay interest and principal on their obligations, experience over the history of the amendment would indicate a low probability of this happening. NOTE E - DISTRIBUTIONS: The Trust declares dividends daily from net investment income and makes payments monthly in additional shares at the net asset value per share or in cash, at the shareholder's option. Net realized capital gains, if any, are distributed annually. 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 reporting and Federal income tax reporting requirements, distributions made by the Trust may not be the same as the Trust's net investment income, and/or net realized securities gains. Further, a small portion of the dividends may, under some circumstances, be subject to ordinary income taxes. Also, annual capital gains distributions, if any, are taxable. NOTE F - CUSTODIAN FEES: The Trust has negotiated an expense offset arrangement with its custodian wherein it receives credit toward the reduction of custodian fees whenever there are uninvested cash balances. During the six months ended March 31, 1996, the Trust's custodian fees amounted to $12,725, all of which was offset by such credits. The Trust could have invested its cash balances in an income-producing asset if it had not agreed to a reduction in fees under the expense offset arrangement with the custodian. 21
TAX-FREE TRUST OF OREGON FINANCIAL HIGHLIGHTS (UNAUDITED) For a share outstanding throughout each period SIX MONTHS ENDED MARCH 31, YEAR ENDED SEPTEMBER 30, 1996 1995 1994 1993 1992 1991 Net Asset Value, Beginning of Period $10.55 $10.20 $10.95 $10.48 $10.15 $9.67 Income from Investment Operations: Net investment income 0.27 0.55 0.56 0.58 0.65 0.62 Net gain (loss) on securities (both realized and unrealized) (0.04) 0.39 (0.75) 0.50 0.29 0.49 Total from Investment Operations 0.23 0.94 (0.19) 1.08 0.94 1.11 Less Distributions: Dividends from net investment income (0.27) (0.55) (0.56) (0.58) (0.61) (0.63) Distributions from capital gains (0.01) (0.04) ( -- ) ( -- ) (0.03) ( -- ) Total Distri- butions (0.28) (0.59) (0.56) (0.61) (0.61) (0.63) Net Asset Value, End of Period $10.50 $10.55 $10.20 $10.95 $10.48 $10.15 Total Return (not reflecting sales load) 2.20%# 9.52% (1.77)% 10.64% 9.51% 11.83% Ratios/Supplemental Data Net Assets, End of Period (in thousands) $305,981 $310,554 $316,317 $331,018 $249,953 $189,734 Ratio of Expenses to Average Net Assets 0.72%* 0.71% 0.68% 0.66% 0.66% 0.71% Ratio of Net Investment Income to Average Net Assets 5.04%* 5.38% 5.28% 5.46% 5.87% 6.30% Portfolio Turnover Rate 6% 13% 11% 8% 11% 21% Net investment income per share and the ratios of income and expenses to average net assets without the expense offset in custodian fees for uninvested cash balances would have been: Net Investment Income $0.27 $0.55 $0.56 $0.58 $0.65 $0.62 Ratio of Expenses to Average Net Assets 0.73%* 0.73% 0.70% 0.68% 0.66% 0.73% Ratio of Net Investment Income to Average Net Assets 5.03%* 5.37% 5.26% 5.44% 5.87% 6.28% #Not annualized. *Annualized.
See accompanying notes to financial statements. 22 REPORT ON THE SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) A Special Meeting of Shareholders of the Tax-Free Trust of Oregon was held on November 27, 1995. On the record date for this meeting, 29,441,928 shares of the Trust were outstanding and entitled to vote and the holders of 16,751,076 shares (56.9%) entitled to vote were present in person or by proxy at the meeting. At the meeting, the shareholders voted upon and approved an amendment to the Trust's Declaration of Trust to authorize the creation of additional classes of shares (votes for: 14,788,047 (88.3%); votes against: 933,138 (5.6%); abstentions: 1,029,891 (6.1%); broker non-votes: 0 (0.0%)). 23 INVESTMENT ADVISER QUALIVEST CAPITAL MANAGEMENT, INC. A subsidiary of U.S. Bancorp and its subsidiary, United States National Bank of Oregon 111 S.W. Fifth Avenue U.S. Bancorp Tower Portland, Oregon 97204 ADMINISTRATOR AND FOUNDER AQUILA MANAGEMENT CORPORATION 380 Madison Avenue, Suite 2300 New York, New York 10017 BOARD OF TRUSTEES Lacy B. Herrmann, Chairman Vernon R. Alden Warren C. Coloney James A. Gardner Diana P. Herrmann Ann R. Leven Raymond H. Lung Richard C. Ross OFFICERS Lacy B. Herrmann, President W. Dennis Cheroutes, Senior Vice President Sally Wilson Church, Vice President Nancy Kayani, Vice President Rose F. Marotta, Chief Financial Officer Richard F. West, Treasurer Edward M.W. Hines, Secretary DISTRIBUTOR AQUILA DISTRIBUTORS, INC. 380 Madison Avenue, Suite 2300 New York, New York 10017 TRANSFER AND SHAREHOLDER SERVICING AGENT ADMINISTRATIVE DATA MANAGEMENT CORP. 581 Main Street Woodbridge, New Jersey 07095-1198 CUSTODIAN BANK ONE TRUST COMPANY, N.A. 100 East Broad Street Columbus, Ohio 43271 INDEPENDENT AUDITORS KPMG PEAT MARWICK LLP 345 Park Avenue New York, New York 10154 Further information is contained in the Prospectus, which must precede or accompany this report. SEMI-ANNUAL REPORT MARCH 31, 1996 TAX-FREE TRUST OF OREGON A tax-free income investment (TAX-FREE TRUST OF OREGON LOGO - LOGO OF TREE, SNOW-CAPPED MOUNTAIN AND SUN) (AQUILA LOGO - LOGO OF EAGLE) One of the AQUILAsm Group of Funds -----END PRIVACY-ENHANCED MESSAGE-----