File Nos. 33-4382 & 811-4626
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
THE CASCADES TRUST
(Exact Name of Registrant as Specified in Charter)
380 Madison Avenue, Suite 2300
New York, New York 10017
(Address of Principal Executive Offices)
(212) 697-6666
(Registrant's Telephone Number)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
Important Notice
Please Read Immediately
Aquila
Group of Funds
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300, New York, New York 10017
Notice of Annual Meeting of
Shareholders to Be Held
on June 13, 2008
To Shareholders of the Trust:
The purpose of this Notice is to advise you that an Annual Meeting of the
Shareholders of Tax-Free Trust of Oregon (the "Trust"), the only series of the
Cascades Trust, will be held:
Place: (a) at the World Forestry Center
Cheatam Hall
4033 SW Canyon Road
Portland, Oregon;
Time: (b) on Friday, June 13, 2008
at 2:00 p.m. Pacific Daylight Time;
Purposes: (c) for the following purposes:
(i) to elect eight Trustees; each Trustee elected will hold
office until the next annual meeting of the Trust's
shareholders or until his or her successor is duly
elected (Annual Meeting Proposal No. 1);
(ii) to ratify (that is, to approve) or reject the selection
of Tait, Weller & Baker LLP as the Trust's independent
registered public accounting firm for the fiscal year
ending September 30, 2008 (Annual Meeting Proposal No.
2);
(iii) to act upon any other matters which may properly come
before the Annual Meeting at the scheduled time and
place or any adjourned meeting or meetings.
Who Can Vote
What Shares: (d) To vote at the Annual Meeting, you must have
been a shareholder on the Trust's records at the close of
business on March 17, 2008 (the "record date"). Also, the
number of shares of each of the Trust's outstanding classes
of shares that you held at that time and the respective net
asset values of each class of shares at that time determine
the number of votes you may cast at the Annual Meeting (or
any adjourned meeting or meetings).
By order of the Board of Trustees,
EDWARD M. W. HINES
Secretary
May 5, 2008
Please Note:
If you do not expect to attend the Annual Meeting, please vote by any of three
ways: by the Internet, by telephone or by completing the enclosed proxy card and
returning it in the accompanying stamped envelope. To avoid unnecessary expense
to the Trust, we request your cooperation in voting no matter how large or small
your holding may be.
Important Notice
Please Read Immediately
Aquila
Group of Funds
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300, New York, New York 10017
Notice of Special Meeting of
Shareholders to Be Held
on June 13, 2008
To Shareholders of the Trust:
The purpose of this Notice is to advise you that a Special Meeting of the
Shareholders of Tax-Free Trust of Oregon (the "Trust"), the only series of the
Cascades Trust, will be held:
Place: (a) at the World Forestry Center
Cheatam Hall
4033 SW Canyon Road
Portland, Oregon;
Time: (b) on Friday, June 13, 2008
at 3:00 p.m. Pacific Daylight Time;
Purposes: (c) for the following purposes:
(i) to act upon a new Advisory and Administration Agreement
(Special Meeting Proposal No. 1)
(ii) to act upon a new Sub-Advisory Agreement (Special
Meeting Proposal No. 2)
Who Can Vote
What Shares: (d) To vote at the Special Meeting, you must have
been a shareholder on the Trust's records at the close of
business on March 17, 2008 (the "record date"). Also, the
number of shares of each of the Trust's outstanding classes
of shares that you held at that time and the respective net
asset values of each class of shares at that time determine
the number of votes you may cast at the Special Meeting (or
any adjourned meeting or meetings).
By order of the Board of Trustees,
EDWARD M. W. HINES
Secretary
May 5, 2008
Please Note:
If you do not expect to attend the Special Meeting, please vote by any of three
ways: by the Internet, by telephone or by completing the enclosed proxy card and
returning it in the accompanying stamped envelope. To avoid unnecessary expense
to the Trust, we request your cooperation in voting no matter how large or small
your holding may be.
Tax-Free Trust of Oregon
380 Madison Avenue, Suite 2300,
New York, New York 10017
Joint Proxy Statement
Introduction
The two Notices preceding this Joint Proxy Statement are to advise you of
the times, place and purposes of an Annual Meeting of the Shareholders of
Tax-Free Trust of Oregon (the "Trust"), the only series of the Cascades Trust,
and a Special Meeting of the Shareholders that will take place immediately after
the Annual Meeting. The purpose of this Joint Proxy Statement is to give you
information on which you may base your voting decisions at both meetings.
The Trust's Manager (the "Manager") is Aquila Investment Management LLC,
380 Madison Avenue, Suite 2300, New York, NY 10017, a subsidiary of the Trust's
founder, Aquila Management Corporation. The Trust's principal underwriter (the
"Distributor") is Aquila Distributors, Inc., 380 Madison Avenue, Suite 2300, New
York, NY 10017. The Trust's Investment Sub-Adviser is FAF Advisors, Inc. (the
"Sub-Adviser"), 800 Nicollet Mall, Minneapolis, Minnesota 55402, with a local
office at 555 S.W. Oak Street, Portland, Oregon 97204.
A copy of the Trust's most recent annual report will be sent to you without
charge upon written request to the Distributor, at the above address, or by
calling 800-437-1020 toll-free or 212-697-6666.
These Notices and Joint Proxy Statement are first being mailed on or about
May 5, 2008.
You should read this Joint Proxy Statement prior to voting. If your shares
are registered in the name of your broker or someone other than yourself, you
may authorize that person to vote your shares. If your shares are registered in
your name, then you may vote in one of three ways:
(1) Proxy Cards
The enclosed proxy cards authorize the persons named (or their substitutes)
to vote your shares; the Trust calls these persons the "proxy holders." There
are two proxy cards, one for each meeting. As to the election of Trustees you
may authorize the proxy holders to vote your shares for the entire slate
indicated below by marking the appropriate box on the proxy card for the Annual
Meeting or by merely signing and returning your proxy card with no instructions.
Or you may withhold the authority of the proxy holders to vote on the election
of Trustees by marking the appropriate box. Also, you may withhold that
authority as to any particular nominee by following the instructions on the
proxy card.
As to the other matters listed on each proxy card, you may direct the proxy
holders to vote your shares on a proposal by marking the appropriate box "For"
or "Against" or instruct them not to vote your shares on a proposal by marking
the "Abstain" box. If you return your signed proxy card and do not mark a box on
the proposal, the proxy holders will vote your shares for that proposal.
(2) Internet Voting
To vote your shares by the Internet, please contact the Trust at the
Internet address shown on your proxy cards. You will be prompted to enter the
control numbers on your proxy cards. Follow the instructions on the screen,
using your proxy cards as guides. If you vote by the Internet, you need not
return the proxy cards by mail.
(3) Telephone Voting
To vote your shares by telephone, call the toll-free number on your proxy
cards. You will be prompted to enter the control numbers on your proxy cards.
Follow the recorded instructions using your proxy cards as guides. If you vote
by phone, you need not return the proxy cards by mail.
General Information
You may end the power of the proxy holders to vote your shares at either
meeting by: (i) so notifying the Trust in writing; (ii) signing a new and
different proxy card (if the Trust receives it before the old one is used);
(iii) voting your shares at the meeting in person or by your duly appointed
agent; or (iv) calling the toll free number provided or contacting the Trust's
Internet address, both of which are detailed on your proxy card, entering your
control number and revoking your previous vote.
Proxies for shares held by brokers in "street name" and not voted or marked
as abstentions will be counted for purposes of determining quorums at the
meetings. They will be counted as present at the meeting in determining voting
results, and will therefore have the same effect as negative votes on all
proposals to come before either meeting. Quorums for the two meetings will be
determined separately.
The Trust is sending you the Notices and Joint Proxy Statement in
connection with the solicitation by its Trustees of proxies to be used at the
Annual Meeting and Special Meeting to be held at the times and place and for the
purposes indicated in the Notices or any adjourned meeting or meetings. Whenever
it is stated in this Joint Proxy Statement that a matter is to be acted on at
the Annual or Special Meeting, this means the meeting held at the scheduled time
or any adjourned meeting or meetings.
The Trust pays the costs of the solicitation. Proxies are being solicited
by the use of the mails; they may also be solicited by telephone, facsimile and
personal interviews. Brokerage firms, banks and others may be requested to
forward these Notices and Joint Proxy Statement to beneficial owners of the
Trust's shares so that these owners may authorize the voting of their shares.
The Trust will pay these firms their out-of-pocket expenses for doing so.
Because your vote is important, the Trust may telephone you to urge you to vote.
On the record date, the Trust had three classes of shares outstanding. All
shareholders of the Trust are entitled to vote at the Annual Meeting and the
Special Meeting. Each shareholder on the record date is entitled to one vote for
each dollar (and a proportionate fractional vote for each fraction of a dollar)
of net asset value (determined as of the record date) represented by full and
fractional shares of any class held on the record date.
On the record date, the net asset value per share of each of the Trust's
outstanding classes of shares was as follows: Class A Shares, $10.58; Class C
Shares, $10.57; and Class Y Shares, $10.58. Both meetings are expected to act
only upon matters that affect the Trust as a whole: at the Annual Meeting, the
election of Trustees and the selection of an independent registered public
accounting firm, and at the Special Meeting, action on a new Advisory and
Administration Agreement and Sub-Advisory Agreement. On matters that affect the
Trust as a whole, all shareholders of the Trust, including the shareholders of
all classes of shares of the Trust, are entitled to vote at the meeting.
On the record date, the total number of shares outstanding for each class
of shares was as follows: Class A Shares, 31,261,160; Class C Shares, 1,985,735;
and Class Y Shares, 5,139,390.
On the record date, the following holders held 5% or more of a class of the
Trust's outstanding shares. On the basis of information received from the
institutional holders, the Trust's management believes that all of the shares
indicated are held by them for the benefit of clients.
Name and address Number of shares Percent of class
of the holder of record
Institutional 5% shareholders
Merrill, Lynch,
Pierce, Fenner &
Smith, Inc.,
4800 Deer Lake
Drive East,
Jacksonville, FL 192,266 Class C Shares 9.68%
Charles Schwab and Company
101 Montgomery Street
San Francisco, CA 1,122,969 Class Y Shares 21.85%
NFS LLC FEBO
South Valley Bank and
Trust
P.O. Box 1784
Medford, OR 292,939 Class Y Shares 5.70%
Additional 5% shareholders
The Trust's management is not aware of any other person beneficially owning
more than 5% of any class of its outstanding shares as of such date.
Election of Trustees
(Proposal No. 1)
at the Annual Meeting
At the Annual Meeting, eight Trustees are to be elected. Each Trustee
elected will serve until the next annual meeting or until his or her successor
is duly elected. The nominees selected by the Trustees are named in the table
below. See "Introduction" above for information as to how you can vote your
shares in the election of Trustees.
The following material includes information about each nominee and each
officer of the Trust. All shares of the Trust listed as owned by the Trustees
are Class A Shares unless indicated otherwise. All of the nominees are presently
Trustees and were elected by the shareholders in April, 2007. All nominees have
consented to serve if elected.
Nominees(1)
Number of
Positions Held Portfolios Other Directorships
with in Fund Held by Trustee
Trust and Complex (The position held is
Name, Address(2) Length of Principal Occupation(s) Overseen a directorship unless
and Date of Birth Service(3) During Past 5 Years by Trustee indicated otherwise.)
- ------------------ ---------- ------------------- ---------- ---------------------
Interested
Trustees(4)
Diana P. Herrmann Vice Chair of Vice Chair and Chief Executive 12 ICI Mutual Insurance
New York, NY the Board of Officer of Aquila Management Company
(02/25/58) Trustees since Corporation, Founder of the
2003, President Aquila Group of Funds ((5)) and
since 1998 and parent of Aquila Investment
Trustee since Management LLC, Manager since
1994 2004, President and Chief
Operating Officer since 1997, a
Director since 1984, Secretary since
1986 and previously its Executive
Vice President, Senior Vice President
or Vice President, 1986-1997; Chief
Executive Officer and Vice Chair
since 2004 and President, Chief
Operating Officer and Manager of the
Manager since 2003; Chair, Vice
Chair, President, Executive Vice
President or Senior Vice President of
funds in the Aquila 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; Governor, Investment
Company Institute (a trade
organization for the U.S. fund
industry dedicated to protecting
shareholder interests and educating
the public about investing) and head
of its Small Funds Committee since
2004; active in charitable and
volunteer organizations.
John W. Mitchell Trustee since Principal of M & H Economic 1 Oregon Mutual Insurance
Portland, OR 1999 Consultants; Economist, Western
(07/13/44) Region, for U. S. Bancorp 1998 -
2007; 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
James A. Gardner Chair of the President, Gardner Associates, 1 None
Terrebonne, OR Board of an investment and real estate
(07/22/43) Trustees since firm, since 1989; Founding
2005 and Partner and Chairman, Ranch of
Trustee since the Canyons, a real estate
1986 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.
Gary C. Cornia Trustee since Director, Romney Institute of 4 Lincoln Institute of
Orem, UT 2002 Public Management, Marriott Land Policy, Cambridge,
(06/24/48) School of Management, Brigham MA
Young University, 2004 -
present; Professor, Marriott
School of Management, 1980 -
present; Past President, the
National Tax Association;
Fellow, Lincoln Institute of
Land Policy, 2002 - present;
Associate Dean, Marriott School
of Management, Brigham Young
University, 1991-2000; Utah
Governor's Tax Review Committee
since 1993.
Edmund P. Jensen Trustee since President and CEO, VISA 1 BMG-Seltec, a software
Portland, OR 2003 International, 1994-1999; company; Portland Family
(04/13/37) director: Phoenix Technologies, a of Funds, a community
Tech/BIOS company, 2000-2005; investment bank.
Corillian Corp., a banking
software company, 2000-2002;
Trintech, a payment software
company, 1999-2002.
Timothy J. Leach Trustee since UC Berkeley Haas School of 3 None
Orinda, CA 2005 and Business, Executive Education
(08/28/55) 2001-2002 Lecturer since 2006; member,
Oxford Financial LLC Investment
Policy Council since January
2007; Expert Affiliate, LECG LLC
since June 2007; Regional Chief
Executive Officer, US Trust
Company, N.A., 2005-2006;
Executive Vice President & Chief
Investment Officer, U.S. Trust
Company, New York, NY, 2004-2005;
Executive Vice President & Chief
Investment Officer, Private Asset
Management Group, Wells Fargo
Bank, San Francisco, CA,
1999-2003.
Ralph R. Shaw Trustee since President, Shaw Management 1 Schnitzer Steel
Portland, OR 2000 Company, an investment counseling Industries, Inc.,
(08/23/38) firm, 1980 - present; General Telestream, Inc., BMG
Partner, Shaw Venture Partners,
Seltec Corporation, 1983 - 2005; Shaw
Venture Rentrak Corporation, Partners
II, 1987 - 2005; and One-to-One
Interactive.
Shaw Venture Partners III, 1994 -
2005 (US Bancorp, parent of the
Sub-Adviser, was a limited partner in
these three ventures).
Nancy Wilgenbusch Trustee since President, Marylhurst University 1 Chair, Oregon Regional
Marylhurst, OR 2002 since 1984; member, former Chair, Advisory Board for
(09/17/47) Portland Branch of the Federal PacifiCorp; West Coast
Reserve Bank of San Francisco; Bank's Board; director,
active board member of a number Cascade Corporation, a
of civic organizations. leading international
manufacturer of lift
truck attachments.
Other Individuals
Trustees Emeritus(6)
Lacy B. Herrmann Founder and Founder and Chairman of the N/A N/A
New York, NY Chairman Board, Aquila Management
(05/12/29) Emeritus since Corporation, the sponsoring
2005; Chairman organization and parent of the
of the Board Manager or Administrator and/or
of Trustees Adviser or Sub-Adviser to each
1985-2004 and fund of the Aquila Group of
Trustee, Funds; Chairman of the Manager or
1985-2005 Administrator and/or Adviser or
Sub-Adviser to each since 2004;
Founder and Chairman Emeritus of
each fund in the Aquila Group of
Funds; previously Chairman and a
Trustee of each fund in the
Aquila Group of Funds since its
establishment until 2004 or 2005;
Director of the Distributor since
1981 and formerly Vice President
or Secretary, 1981-1998; Trustee
Emeritus, Brown University and
the Hopkins School; active in
university, school and charitable
organizations.
Vernon R. Alden Trustee Retired; former director or N/A N/A
Boston, MA Emeritus trustee of various Fortune 500
(04/07/23) since 2006 companies, including Colgate-Palmolive
and McGraw Hill; formerly President of
Ohio University and Associate Dean of
the Harvard University Graduate School
of Business Administration; Trustee,
Narragansett Insured Tax- Free Income
Fund, 1992-2002 and Tax-Free Trust of
Oregon, 1988-2001; member of several
Japan-related advisory councils,
including Chairman of the Japan Society
of Boston; trustee of various cultural,
educational and civic organizations.
David B. Frohnmayer Trustee President, University of Oregon N/A N/A
Eugene, OR Emeritus since 1994; former Dean of the
(07/09/40) since 2003 University of Oregon Law School
and former Attorney General of the
State of Oregon; Trustee, Tax-Free
Trust of Oregon, 1997-2003.
Raymond H. Lung Trustee Retired; trustee, Qualivest Group N/A N/A
Portland, OR Emeritus of Funds, 1994-1997; former
(12/24/26) since 2005 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;
Trustee, Tax-Free Trust of Oregon,
1992-2005.
Patricia L. Moss Trustee President and Chief Executive N/A N/A
Bend, OR Emeritus Officer, Cascade Bancorp and Bank
(07/23/53) since 2005 of the Cascades since 1998;
Trustee, Tax-Free Trust of Oregon,
2002-2005; active in community and
educational organizations.
Officers
Charles E. Executive Executive Vice President of all N/A N/A
Childs, III Vice funds in the Aquila Group of Funds
New York, NY President and the Manager and the Manager's
(04/01/57) since 2003 parent since 2003; formerly Senior
Vice President, corporate development,
Vice President, Assistant Vice
President and Associate of the
Manager's parent since 1987; Senior
Vice President, Vice President or
Assistant Vice President of the Aquila
Money-Market Funds, 1988-2003.
James M. McCullough Senior Vice Senior Vice President or Vice N/A N/A
Portland, OR (06/11/45) President President of Aquila Rocky Mountain
since 1999 Equity Fund and Tax-Free Trust of
Oregon; 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 since N/A N/A
New York, NY (06/18/44) President 1998, Registered Principal since
since 2002 1993, Senior Vice President,
1997-1998 and Vice President,
1993-1997; Senior Vice President,
Aquila Three Peaks High Income
Fund, Aquila Rocky Mountain Equity
Fund and five Aquila Municipal
Bond Funds; Vice President,
Churchill Cash Reserves Trust,
1995-2001.
Sally J. Church Vice Vice President, Tax-Free Trust of N/A N/A
Portland, OR President Oregon since 2002 and 1989-1997;
(10/17/48) since 2002 retired, 1997-2002; Vice President
of Aquila Cascadia Equity Fund,
1996-1997.
Christine L. Neimeth Vice Vice President of Aquila Rocky N/A N/A
Portland, OR President Mountain Equity Fund and Tax-Free
(02/10/64) since 1998 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.
Robert W. Anderson Chief Chief Compliance Officer of the N/A N/A
New York, NY (08/23/40) Compliance Trust and each of the other funds
Officer in the Aquila Group of Funds, the
since 2004 Manager and the Distributor since
and 2004, Compliance Officer of the
Assistant Manager or its predecessor and
Secretary current parent 1998-2004;
since 2000 Assistant Secretary of the Aquila
Group of Funds since 2000.
Joseph P. DiMaggio Chief Chief Financial Officer of the N/A N/A
New York, NY Financial Aquila Group of Funds since 2003
(11/06/56) Officer and Treasurer since 2000.
since 2003
and
Treasurer
since 2000
Edward M. W. Hines Secretary Shareholder of Butzel Long, a N/A N/A
New York, NY since 1985 professional corporation, counsel
(12/16/39) to the Trust, since 2007; Partner of
Hollyer Brady Barrett & Hines LLP, its
predecessor as counsel, 1989-2007;
Secretary of the Aquila Group of Funds.
John M. Herndon Assistant Assistant Secretary of the Aquila N/A N/A
New York, NY (12/17/39) Secretary Group of Funds since 1995 and Vice
since 1995 President of the three Aquila
Money-Market Funds since 1990; Vice
President of the Manager or its
predecessor and current parent since
1990.
Lori A. Vindigni Assistant Assistant Treasurer of the Aquila N/A N/A
New York, NY Treasurer Group of Funds since 2000;
(11/02/66) since 2000 Assistant Vice President of the
Manager or its predecessor and current
parent since 1998; Fund Accountant for
the Aquila 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) or by visiting the EDGAR Database at the SEC's
internet site at www.sec.gov.
(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) Ms. Herrmann is an interested person of the Trust as an officer of the
Trust, as a director, officer and shareholder of the Manager's corporate parent,
as an officer and Manager of the Manager, and as a shareholder and director of
the Distributor. Ms. Herrmann is the daughter of Lacy B. Herrmann, the Founder
and Chairman Emeritus of the Fund. Mr. Mitchell is an interested person as a
security holder of the Sub-Adviser's parent.
(5) In this material Pacific Capital Cash Assets Trust, Pacific Capital U.S.
Government Securities Cash Assets Trust and Pacific Capital Tax-Free Cash Assets
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 Municipal Bond
Funds"; Aquila Rocky Mountain Equity Fund is an equity fund; Aquila Three Peaks
High Income Fund is a high income corporate bond fund; considered together,
these 12 funds are called the "Aquila Group of Funds."
(6) A Trustee Emeritus may attend Board meetings but has no voting power.
Securities Holdings of the Trustees
(as of 12/31/07)
Dollar Range of Aggregate Dollar Range of Ownership in
Name of Ownership in Tax-Free the Aquila Group of Funds
Trustee Trust of Oregon(1) Overseen by Trustee(1)
- ------- --------------- -------------------
Interested Trustees
Diana P. Herrmann C E
John W. Mitchell D D
Non-interested Trustees
James A. Gardner C C
Gary C. Cornia D E
Edmund P. Jensen C C
Timothy J. Leach B B
Ralph R. Shaw C C
Nancy Wilgenbusch C C
(1) A. None
B. $1-$10,000
C. $10,001-$50,000
D. $50,001-$100,000
E. over $100,000
None of the non-interested Trustees or their immediate family members holds
of record or beneficially any securities of the Manager, the Sub-Adviser or the
Distributor.
The Trust does not currently pay fees to any of the Trust's officers or to
Trustees affiliated with the Manager or the Sub-Adviser. For its fiscal year
ended September 30, 2007, the Trust paid a total of $237,990 in compensation and
reimbursement of expenses to the Trustees. No other compensation or remuneration
of any type, direct or contingent, was paid by the Trust to its Trustees.
The Trust is one of the twelve funds in the Aquila Group of Funds,
which consist of three money-market funds, seven tax-free municipal bond funds,
a high income corporate bond fund and an equity fund. The following table lists
the compensation of all nominees for Trustee who received compensation from the
Trust or from other funds in the Aquila Group of Funds during the Trust's fiscal
year. None of such nominees has any pension or retirement benefits from the
Trust or any of the other funds in the Aquila Group of Funds.
Compensation
from all Number of
funds in the boards on
Compensation Aquila which the
From the Group of Trustee now
Name Trust Funds serves
James A.
Gardner $39,500 $39,500 1
Gary C.
Cornia $23,667 $67,376 4
Edmund P.
Jensen $23,000 $23,000 1
Timothy J.
Leach $23,500 $46,286 3
John W.
Mitchell $21,000 $21,000 1
Ralph R.
Shaw $31,500 $31,500 1
Nancy
Wilgenbusch $23,500 $23,500 1
Class A Shares may be purchased without a sales charge by certain of the
Trust's Trustees and officers.
The Trust's Manager is a wholly-owned subsidiary of Aquila Management
Corporation ("AMC"), founder of each fund in the Aquila Group of Funds. As of
March 31, 2008, these funds had aggregate assets of approximately $5.0 billion,
of which approximately $2.2 billion consisted of assets of the tax-free
municipal bond funds. AMC's address is the same as that of the Manager. AMC,
which was founded in 1984, is currently controlled by Mr. Lacy B. Herrmann and
his wife, Mrs. Elizabeth B. Herrmann, directly and through certain trusts,
although it is anticipated that these arrangements will change as described in
Proposal No. 1 at the Special Meeting. During the fiscal year ended September
30, 2007, the Trust paid $1,691,629 in management fees.
During the fiscal year ended September 30, 2007, $522,486 was paid under
Part I of the Trust's Distribution Plan to Qualified Recipients with respect to
the Class A Shares, of which $24,847 was retained by the Distributor. With
respect to Class C Shares, during the same period $219,428 was paid under Part
II of the Plan and $73,143 was paid under the Shareholder Services Plan. Of
these total payments of $292,571, the Distributor received $69,481. All of such
payments were for compensation.
During the fiscal year ended September 30, 2007, the Trust paid $15,795 to
Butzel Long, a professional corporation ("Butzel Long"), independent counsel to
the Trust, and $65,934 to Hollyer Brady Barrett & Hines LLP, predecessor to
Butzel Long, for legal services. Edward M.W. Hines, Secretary of the Trust, is a
shareholder of Butzel Long, and was a partner of Hollyer Brady Barrett & Hines
LLP.
The Distributor currently handles the distribution of the shares of the
funds in the Aquila Group of Funds, including the Trust. Under the Distribution
Agreement, the Distributor is responsible for the payment of certain printing
and distribution costs relating to prospectuses and reports as well as the costs
of supplemental sales literature, advertising and other promotional activities.
The shares of the Distributor are owned 24% by Diana P. Herrmann, 74% by Mr.
Herrmann and other members of his immediate family, and the balance by Aquila
Management Corporation.
Other Information on Trustees
The Trustees have appointed a standing Audit Committee consisting of all of
the Trustees who are "independent" and are not "interested persons" of the
Trust, as that term is defined in the Investment Company Act of 1940. The
members of the Audit Committee are Gary C. Cornia, James A. Gardner, Edmund P.
Jensen, Timothy J. Leach, Ralph R. Shaw and Nancy Wilgenbusch. The Committee (i)
selects the Trust's independent registered public accounting firm (subject to
shareholder ratification); (ii) reviews the methods, scope and result of audits
and the fees charged; and (iii) reviews the adequacy of the Trust's internal
accounting procedures and controls. Selection of the independent registered
public accounting firm is also ratified by the Board of Trustees. The Audit
Committee held four meetings during the Trust's last fiscal year. The Board of
Trustees has adopted a written charter for the Audit Committee.
During the Trust's last fiscal year, the Board of Trustees held four
meetings. Each current Trustee was present for at least 75% of the total number
of Board meetings and meetings of committees of which such Trustee was a member.
The Trust's policy is that all Trustees who can do so attend the Annual
Meeting. At the last Annual Meeting all of the Trustees were present.
The Trust has a Nominating Committee, consisting of all of the
non-"interested" Trustees. The Nominating Committee held one meeting during the
last fiscal year. The committee will consider nominees recommended by the
shareholders who may send recommendations to the committee in care of the
Manager at 380 Madison Avenue, New York, NY 10017. Recommendations of nominees
from shareholders are not treated differently than proposals from other sources.
The charter of the Nominating Committee is available on the Trust's website at
www.aquilafunds.com.
Shareholder communications intended for the Board of Trustees (or one or
more specified Trustees) may be sent to them in care of the Manager at the above
address.
Since the beginning of the Trust's most recently completed fiscal year, no
Trustee purchased or sold more than 1% of the outstanding shares of any class of
shares of the Manager, Sub-Adviser or the parents or subsidiaries of either.
Vote Required
To be elected, each nominee must receive the affirmative votes of a
majority of the shares present at the Annual Meeting.
Ratification or Rejection
of Selection of
Independent Registered Public Accounting Firm
(Proposal No. 2)
at the Annual Meeting
Tait, Weller & Baker LLP ("TWB"), which is currently serving as the
Trust's independent registered public accounting firm, has been selected by the
Trust's Audit Committee and ratified by the Board of Trustees, including a
majority of the non-"interested" Trustees, as the Trust's independent registered
public accounting firm for the fiscal year ending September 30, 2008. Such
selection is submitted to the shareholders for ratification or rejection.
The following table represents fees for professional audit services
rendered by TWB for the audit of the Trust's annual financial statements, and
fees billed for other services rendered by TWB, for the fiscal years ended
September 30, 2006 and 2007.
2006 2007
Audit Fees $18,000 $18,000
Audit related fees 0 0
------- ------
Audit and audit related fees $18,000 18,000
Tax fees (1) 3,000 3,000
All other fees 0 0
------ ------
Total $21,000 $21,000
====== ======
(1) Tax fees consisted of fees for tax consultation and tax compliance services.
TWB did not perform any services during the last fiscal year for the
Trust's investment adviser (the Manager) or any entity controlling, controlled
by or under common control with the Manager that provides services to the Trust.
All audit and non-audit services performed by TWB on behalf of the
Trust or non-audit services performed on behalf of affiliated entities within
the investment company complex where such engagement relates directly to the
operations and financial reporting of the Trust are pre-approved by the Audit
Committee. Services to be considered between meetings of the Committee are
pre-approved by a selected member of the Committee in accordance with applicable
regulations and subject to additional procedures established by the Committee.
The Audit Committee has reviewed all services performed and fees
charged by TWB and has accepted TWB's representation that it is independent in
recommending re-appointment of it for the fiscal year ending September 30, 2008.
TWB has no direct or indirect financial interest in the Trust, the
Manager or the Sub-Adviser. It is expected that representatives of TWB will not
be present at the meeting but will be available should any matter arise
requiring their presence.
Vote Required
Approval requires the affirmative votes of a majority of the shares
present at the Annual Meeting.
Consideration of
A New Advisory and Administration Agreement
(Proposal No. 1 of the Special Meeting)
Background and Reasons for the Proposals
The Manager is the Trust's investment adviser under an Advisory and
Administration Agreement (the "Current Advisory Agreement"). Its investment
advisory duties, including portfolio management, have been delegated to the
Sub-Adviser, FAF Advisors, Inc., under a sub-advisory agreement (the "Current
Sub-Advisory Agreement"; together with the current Advisory Agreement, the
"Current Agreements") described below. The Current Advisory Agreement was
approved by the shareholders of the Trust on October 31, 1997. The Current
Sub-Advisory Agreement was also approved by the shareholders on October 31,
1997. Both have been renewed annually thereafter by the Board of Trustees, most
recently on April 21, 2007.
The Manager is a wholly-owned subsidiary of AMC. AMC, which was founded
in 1984, is currently controlled by Mr. Lacy B. Herrmann ("LBH") and his wife,
Mrs. Elizabeth B. Herrmann ("EBH"), directly and through certain trusts. These
ownership arrangements are described in detail below. Collectively, the current
owners of the shares of AMC are called the "Owners."
The Owners wish to ensure, to the maximum extent possible, the ongoing
continuity of management of the Manager and the Trust. Consistent with their
estate planning and tax objectives, they have sought through prudent planning to
structure an orderly generational transition of ownership changes of AMC among
the Owners (the "Transaction").
Although the proposed changes in ownership of AMC will not result in
any changes in the day-to-day operation of the Trust, the services provided to
it, the investment approach or style of the Manager with respect to the Trust,
or any increase in its advisory fees, the changes could be considered to result
in an "assignment" of the Current Advisory Agreement under the provisions of the
1940 Act. The 1940 Act provides generally that an advisory agreement of a mutual
fund must provide for its automatic termination in the event of an assignment
(as that term is defined in the 1940 Act), such as when a controlling block of
the Trust's investment adviser's voting securities is transferred. Under the
1940 Act, a person who does not own more than 25% of the voting securities of a
company shall be presumed not to control such company, while control is presumed
in an owner of more than 25%. As required by the 1940 Act, the Current Advisory
Agreement provides that in the event of an assignment, it terminates. Under the
current ownership arrangements such an assignment could also occur upon the
deaths of certain of the Owners. The Current Sub-Advisory Agreement contains a
provision that states that it terminates if the Current Advisory Agreement
terminates, and it also provides for its termination upon its assignment, which,
as with the Current Advisory Agreement, would occur upon the proposed ownership
changes.
In order to provide continuity of management services to the Trust, on
March 2, 2008, the Trustees approved a new advisory and administration agreement
(the "New Advisory Agreement") for the Trust between the Manager and the Trust,
which will replace the Current Advisory Agreement when it terminates by reason
of the expected assignment. At the same time, the Trustees also approved a new
Sub-Advisory Agreement (the "New Sub-Advisory Agreement"; together with the New
Advisory Agreement, the "New Agreements") with the Sub-Adviser which will
replace the Current Sub-Advisory Agreement which will terminate by its terms
when the Current Advisory Agreement terminates. The Trustees are recommending
that shareholders of the Trust approve the New Agreements for the Trust. As
described below, the New Agreements are substantially identical to the Current
Agreements.
Under the 1940 Act a fund cannot enter into an advisory agreement, such
as the New Advisory Agreement, unless the shareholders of that fund vote to
approve the new agreement. The Shareholders must also approve the New
Sub-Advisory Agreement. The Trustees have carefully considered the matter, and
have concluded that it is appropriate to approve the New Advisory Agreement and
the New Sub-Advisory Agreement. Under the New Advisory Agreement, the Manager
shall continue, following the Transaction, to manage the Trust on the same terms
as are now in effect, thereby promoting stability of the Trust's management. No
change in the Trust's advisory fees or expenses is being proposed. Furthermore,
no changes are being proposed with respect to the services provided for the
Trust, the investment approach or style of the Manager with respect to the
Trust, or the personnel or operations of the Manager.
Information Regarding the Manager
The Manager is the Trust's investment adviser under the Current
Advisory Agreement. The Manager provides for investment supervision, including
supervising continuously the investment program of the Trust and the composition
of its portfolio, determining what securities will be purchased or sold by the
Trust and arranging for the purchase and the sale of securities held in the
portfolio of the Trust, and, at the Manager's expense, providing for pricing of
the Trust's portfolio daily. The Manager is also responsible for administrative
services, including providing for the maintenance of the headquarters of the
Trust, overseeing relationships between the Trust and the service providers to
the Trust and providing other administrative services.
Names, Addresses and Principal Occupations of Each Manager of the Manager
LBH is the Founder and Chairman Emeritus of each of the funds in the
Aquila Group of Funds. He previously served as Chairman of the Board of Trustees
of each of the funds in the Aquila Group of Funds. Additionally, LBH is the
Founder and Chairman of the Board of AMC (the sponsoring organization and parent
of the Manager or the administrator of each of the funds in the Aquila Group of
Funds), as well as the Chairman of the Manager. LBH has served as a Director of
the Aquila Group of Funds' distributor since 1981. LBH is a Trustee Emeritus of
Brown University and the Hopkins School, and remains active in university,
school and charitable organizations.
EBH is a Director of AMC and a Manager of the Manager. She does not
have any other position with AMC or the Manager. She is active with various
charitable and volunteer organizations. EBH is the wife of LBH.
Diana P. Herrmann ("DPH") is President and, in some instances, Vice
Chair of each of the funds in the Aquila Group of Funds. She serves as Vice
Chair, President, Chief Executive Officer and Director of AMC; Chief Executive
Officer, Vice Chair, President, Chief Operating Officer and Manager of the
Manager; and as Director of the distributor. She previously served as Trustee to
the Reserve Money-Market Funds (1999-2000) and Reserve Private Equity Series
(1998-2000). DPH currently serves as Governor, Investment Company Institute and
head of its Small Funds Committee, as well as Director of ICI Mutual Insurance
Company. She is active in charitable and volunteer organizations. DPH is the
daughter of LBH and EBH.
The address of each of the Managers of the Manager is c/o Aquila
Investment Management LLC, 380 Madison Avenue, Suite 2300, New York, NY 10017.
The Transaction
At the time of the Transaction, the AMC shares will be divided into two
classes: voting (the "Voting Shares") and non-voting (the "Non-Voting Shares").
Prior to dividing its share capital into two classes of shares, AMC has one
class of common shares, all of which are Voting Shares. 99.5% of the Voting
Shares are held directly by or in trust for the benefit of members of the
Herrmann family. The Voting Shares are held as follows:
Owner Direct Ownership Indirect Ownership* Total
LBH 24.9% 20.0% 44.9%
EBH 27.5% -- 27.5%
DPH 4.9% 20.0% 24.9%
Conrad B. Herrmann ("CBH") -- 0.2% 0.2%
Catherine E. Wolff ("CEW") -- 2.0% 2.0%
Other 0.5% -- 0.5%
Total 100.0%
* Indicates Voting Shares for which the indicated Owner has voting rights but
does not directly own.
o LBH currently holds 24.9% of the Voting Shares directly; additionally
in his role as trustee (with voting rights) of a family trust for the
benefit of Conrad B. Herrmann ("CBH") (the "CBH Trust"), his son, LBH
holds voting rights with respect to an additional 20.0% of the Voting
Shares.
o EBH currently holds 27.5% of the Voting Shares directly.
o DPH holds 4.9% of the Voting Shares directly and, through her position
as trustee (with voting rights) of a family trust for her benefit (the
"DPH Trust"), holds voting rights with respect to an additional 20.0%
of the Voting Shares.
o CBH serves as trustee (with voting rights) of a trust for his own
benefit, and through his role as trustee (with voting rights) of that
trust holds voting rights with respect to 0.2% of the Voting Shares.
o Two family trusts (the "Family Trusts") hold 2.0% of the Voting Shares;
Catherine E. Wolff ("CEW"), a first cousin of DPH and CBH, currently
serves as trustee (with voting rights) of the Family Trusts.
In connection with their estate planning, LBH and EBH wish to (i)
transfer ownership of some of their Voting Shares, and (ii) appoint a new
trustee to serve as trustee for one of the trusts. Upon the consummation of the
Transaction, the ownership of the Voting Shares would be as follows:
Owner Direct Ownership Indirect Ownership* Total
LBH 24.9% -- 24.9%
T. Randolph Harris ("TRH") -- 24.9% 24.9%
EBH -- -- --
DPH 4.9% 20.0% 24.9%
CBH -- 0.2% 0.2%
CEW -- 24.6% 24.6%
Other 0.5% -- 0.5%
Total 100.0%
* Indicates Voting Shares for which the indicated Owner has voting rights but
does not directly own.
o LBH will continue to hold 24.9% of the Voting Shares directly.
o 24.9% of the Voting Shares previously held by EBH will be held in a
trust for the benefit of EBH (the "EBH Trust"), with T. Randolph Harris
("TRH") serving as trustee (with voting rights).
o DPH's ownership will remain unchanged, such that she will continue to
hold, either directly or through her position as trustee (with voting
rights) of the DPH Trust, 24.9% of the Voting Shares.
o CBH's ownership will remain unchanged, such that he will continue to
hold voting rights with respect to 0.2% of the Voting Shares through
his position as trustee (with voting rights) of a trust for his own
benefit.
o CEW will replace LBH as trustee of the CBH Trust, such that she will
serve as trustee (with voting rights) with respect to 20.0% of the
Voting Shares. The Family Trusts will hold 4.6% of the Voting Shares
(including 2.6% of the Voting Shares previously held by EBH), with CEW
continuing as trustee (with voting rights) of the Family Trusts.
Through her position as trustee (with voting rights) of the CBH Trust
and of the Family Trusts, CEW will serve as trustee (with voting
rights) with respect to 24.6% of the Voting Shares in the aggregate.
Upon consummation of the Transaction, no individual will hold with
power to vote, directly or indirectly, more than 24.9% of the Voting Shares. As
previously stated, the Transaction will not result in any changes in the Trust's
advisory fees and expenses, the services provided, the investment approach or
style of the Manager with respect to the Trust, or the personnel or operations
of the Manager.
Although the Owners currently intend to consummate the Transaction, the
Transaction may not necessarily occur. For example, approval or disapproval by
the Trust's shareholders of the New Advisory Agreement, taken together with
consents or approvals of other funds in the Aquila Group of Funds, could affect
whether or not the Transaction occurs. It is possible, however, that the Owners
may proceed with the Transaction even if new contracts are approved by less than
all of the funds in the Aquila Group of Funds for which the Manager serves as
investment adviser (either because the shareholders of one or more of such funds
do not approve such fund's new advisory agreement or because LBH or EBH dies
before approvals are obtained from all such funds). AMC currently expects that
the Transaction will occur during the fourth quarter of 2008 (or upon the
earlier death of either LBH or EBH, as described below), but the Transaction
could be delayed. If for some reason the Transaction does not occur, the
automatic termination of the Current Agreements will not occur and the New
Agreements will not be entered into, even if they have been approved by the
Trust's shareholders.
Performance of the Current Advisory Agreement is currently guaranteed
by AMC. If the Transaction occurs, AMC will provide an identical guarantee of
performance of the New Advisory Agreement.
Notwithstanding the foregoing, if one or more of LBH or EBH dies after
the Trust's shareholders approve the New Advisory Agreement but before the
Manager obtains the approval or consent of all of the other funds in the Aquila
Group of Funds for which the Manager serves as investment adviser, the surviving
Herrmann family members may elect to proceed with the contemplated direct and
indirect ownership changes (as modified to reflect such deaths, as described
below), and the approval by the Trust's shareholders will be considered to have
approved the entry into the New Advisory Agreement after such death and the
resulting direct and indirect ownership changes. In such event, the ownership of
the Voting Shares would be as follows:
(A) If LBH dies before EBH:
Owner Direct Ownership Indirect Ownership Total
LBH -- -- --
BAS and then TRH -- 24.9% 24.9%
EBH 24.9% -- 24.9%
DPH 4.9% 20.0% 24.9%
CBH -- 0.2% 0.2%
CEW -- 24.6% 24.6%
Other 0.5% -- 0.5%
Total 100.0%
o 24.9% of the Voting Shares will be held first in LBH's estate, with
Barbara A. Sloan ("BAS") serving as executor (with voting rights), and
then in a marital trust for the benefit of EBH, with TRH serving as
trustee (with voting rights).
o EBH will hold 24.9% of the Voting Shares directly.
o DPH's ownership will remain unchanged, such that she will continue to
hold, either directly or through her position as trustee (with voting
rights) of the DPH Trust, 24.9% of the Voting Shares.
o CBH's ownership will remain unchanged, such that he will continue to
hold voting rights with respect to 0.2% of the Voting Shares through
his position as trustee (with voting rights) of a trust for his own
benefit.
o CEW will replace LBH as trustee of the CBH Trust, such that she serves
as trustee (with voting rights) with respect to 20.0% of the Voting
Shares. The Family Trusts will hold 4.6% of the Voting Shares, with CEW
continuing as trustee (with voting rights) of the Family Trusts.
Through her position as trustee (with voting rights) of the CBH Trust
and of the Family Trusts, CEW will serve as trustee (with voting
rights) with respect to 24.6% of the Voting Shares in the aggregate.
In such event, no individual will hold, directly or indirectly, more than
24.9% of the Voting Shares. The changes in ownership of the Voting Shares
will not result in any changes in the Trust's advisory fees and expenses,
services provided, the investment approach or style of the Manager with
respect to the Trust, or personnel or operations of the Manager (except
that LBH would no longer serve as a Manager or officer).
(B) If EBH dies before LBH:
Owner Direct Ownership Indirect Ownership Total
LBH 24.9% -- 24.9%
EBH -- -- --
BAS and then TRH -- 24.9% 24.9%
DPH 4.9% 20.0% 24.9%
CBH -- 0.2% 0.2%
CEW -- 24.6% 24.6%
Other 0.5% -- 0.5%
Total 100.0%
o LBH will continue to hold 24.9% of the Voting Shares directly.
o 24.9% of the Voting Shares will be held first in EBH's estate, with BAS
serving as executor (with voting rights), and then in a marital trust
for the benefit of LBH, with TRH serving as trustee (with voting
rights).
o DPH's ownership will remain unchanged, such that she will continue to
hold, either directly or through her position as trustee (with voting
rights) of the DPH Trust, 24.9% of the Voting Shares.
o CBH's ownership will remain unchanged, such that he will continue to
hold voting rights with respect to 0.2% of the Voting Shares through
his position as trustee (with voting rights) of a trust for his own
benefit.
o CEW will replace LBH as trustee of the CBH Trust, such that she serves
as trustee (with voting rights) with respect to 20.0% of the Voting
Shares. The Family Trusts will hold 4.6% of the Voting Shares, with CEW
continuing as trustee (with voting rights) of the Family Trusts.
Through her position as trustee (with voting rights) of the CBH Trust
and of the Family Trusts, CEW will serve as trustee (with voting
rights) with respect to 24.6% of the Voting Shares in the aggregate.
In such event, no individual will hold, directly or indirectly, more than
24.9% of the Voting Shares. The changes in ownership of the Voting Shares
will not result in any changes in the Trust's advisory fees and expenses,
services provided, the investment approach or style of the Manager with
respect to the Trust, or personnel or operations of the Manager (except
that EBH would no longer serve as a Manager).
Basis for the Trustees' Approval of the New Advisory Agreement.
The Board of Trustees and the independent Trustees approved the renewal
until June 30, 2009 of the Current Advisory Agreement in March, 2008 at a
meeting called and held for that purpose at which a majority of the independent
Trustees were present in person. They additionally approved the New Advisory
Agreement at that meeting.
In connection with the renewal of the Current Advisory Agreement, the
following materials were considered:
o Copies of the agreement to be renewed;
o A term sheet describing the material terms of the agreement;
o The Annual Report of the Trust for the year ended September 30, 2007;
o A report, prepared by the Manager and provided to the Trustees in
advance of the meeting for the Trustees' review, containing data about
the performance of the Trust, data about its fees, expenses and
purchases and redemptions of capital stock together with comparisons of
such data with similar data about other comparable funds, as well as
data as to the profitability of the Manager; and
o Quarterly materials reviewed at prior meetings on the Trust's performance,
operations, portfolio and compliance.
The Trustees considered the Current Advisory Agreement separately as
well as in conjunction with the Current Sub-Advisory Agreement to determine
their combined effects on the Trust. The Trustees reviewed materials relevant
to, and considered, the factors set forth below, and as to the agreement reached
the conclusions described.
The nature, extent, and quality of the services provided by the Manager.
The Manager has provided all administrative services to the Trust. The
Board considered the nature and extent of the Manager's supervision of
third-party service providers, including the Trust's shareholder servicing agent
and custodian. The Board considered that the Manager had established and
maintained a strong culture of ethical conduct and regulatory compliance.
The Manager has arranged for the Sub-Adviser to provide local
management of the Trust's portfolio.
The Board considered that the Manager had provided all services the
Board deemed necessary or appropriate, including the specific services that the
Board has determined are required for the Trust, given that its purpose is to
provide shareholders with as high a level of current income exempt from Oregon
state and regular Federal income taxes as is consistent with preservation of
capital.
The Board concluded that a commendable quality of services was provided
and that the Trust would be well served if they continued. Evaluation of this
factor weighed in favor of renewal of the Current Advisory Agreement.
The investment performance of the Trust and the Manager.
The Board reviewed each aspect of the Trust's performance and compared
its performance with that of its local competitors, with national averages and
with benchmark indices. It was noted that the materials provided by the Manager
indicated that compared to the five largest competitive Oregon funds, the Trust
has had an average annual return that is comparable to that of its peers for the
one-year period, but below that of its peers for the five- and ten-year periods,
with rates of return explained in part by the Trust's generally higher-quality
portfolio and generally shorter average maturities. The Trust considers its
local competitors to be Oregon-oriented funds that invest chiefly in
high-quality Oregon municipal obligations.
The Board concluded that the performance of the Trust was acceptable in
light of market conditions, the length of its average maturities, its investment
objectives and its long-standing emphasis on minimizing risk. Evaluation of this
factor indicated to the Trustees that renewal of the Current Advisory Agreement
would be appropriate.
The costs of the services to be provided and profits to be realized by the
Manager and its affiliates from their relationships with the Trust.
The information provided in connection with renewal contained expense
data for the Trust and its local competitors as well as data for all
single-state tax-free municipal bond funds nationwide, including data for all
such front-end sales charge funds of a comparable asset size. The materials also
showed the profitability to the Manager of its services to the Trust.
The Board compared the expense and fee data with respect to the Trust
to similar data about other funds that it found to be relevant. The Board
concluded that the expenses of the Trust and the fees paid were similar to and
were reasonable as compared to those being paid by single-state tax-free
municipal bond funds nationwide and by the Trust's local competitors.
The Board considered that the foregoing indicated the appropriateness
of the costs of the services to the Trust, which was being well managed as
indicated by the factors considered previously.
The Board further concluded that the profitability to the Manager did
not argue against approval of the fees to be paid under the Current Advisory
Agreement.
The extent to which economies of scale would be realized as the Trust grows.
Data provided to the Trustees showed that the Trust's average net asset
size had trended lower in recent years. The Trustees also noted that the
materials indicated that the Trust's fees were already lower than what those of
its peers would be at comparable asset levels, including those with breakpoints.
Evaluation of this factor indicated to the Board that the Current Advisory
Agreement should be renewed without addition of breakpoints at this time.
Benefits derived or to be derived by the Manager and its affiliates from their
relationships with the Trust.
The Board observed that, as is generally true of most fund complexes,
the Manager and its affiliates, by providing services to a number of funds or
other investment clients including the Trust, were able to spread costs as they
would otherwise be unable to do. The Board noted that while that produces
efficiencies and increased profitability for the Manager and its affiliates, it
also makes their services available to the Trust at favorable levels of quality
and cost which are more advantageous to the Trust than would otherwise have been
possible.
In connection with approval of the New Advisory Agreement and
recommendation that the shareholders of the Trust approve that agreement, the
Trustees noted that that agreement is substantially the same as the Current
Advisory Agreement except for its starting date and accordingly the materials
considered in connection with the Annual Review, and the reasons for renewing
the Current Advisory Agreement, apply to the New Advisory Agreement as well. In
addition, as noted above, in addressing the desirability of replacing the
Current Advisory Agreement with the New Advisory Agreement, the Trustees
considered a wide range of information relevant to the ongoing and future
continuity of management of the Trust, including:
|X| representations by representatives of AMC and the Manager that the proposed
change of control was not expected to result in a change in the personnel
or operations of the Manager or Sub-Adviser;
|X| representations from representatives of AMC and the Manager that the
investment approach or style of the Manager and the Sub-Adviser with
respect to the Trust, or the services provided by them to the Trust, would
not change.
|X| the fact that the Transaction will not result in any change to the advisory
fees paid by the Trust or the Trust's total expense ratio;
|X| the fact that the Transaction will not result in a change in the costs of
the services to be provided by the Manager; and |X| the fact that the Trust
has operated in compliance with its investment objective and restrictions.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees, concluded
that the New Advisory Agreement should be approved and recommended that the
shareholders of the Trust vote to approve the New Advisory Agreement for an
initial one-year term.
Description of the New Advisory Agreement
The Manager provides the Trust with local advisory services. Under the
New Advisory Agreement, the Trust will pay the Manager a fee payable monthly and
computed on the net asset value of the Trust as of the close of business each
business day at the annual rate of 0.50 of 1% of such net asset value, provided,
however, that for any day that the Trust pays or accrues a fee under the
Distribution Plan of the Trust based upon the assets of the Trust, the annual
advisory fee is payable at the annual rate of 0.40 of 1% of such net asset
value.
The proposed New Advisory Agreement for the Trust is substantially
identical to the Current Advisory Agreement. For a complete understanding of the
proposed New Advisory Agreement, please refer to the form of New Advisory
Agreement provided as Appendix A.
Action Requested
THE TRUSTEES OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST
VOTE TO APPROVE THE NEW ADVISORY AGREEMENT FOR THE TRUST.
Vote Required
The favorable vote of the holders of a majority (as defined in the 1940
Act) of the outstanding shares of the Trust is required for the approval of this
Proposal No. 3. Under the 1940 Act, the vote of the holders of a majority of the
outstanding shares of the Trust means the vote of the holders of the lesser of
(a) 67% or more of the shares of the Trust present at the Meeting or represented
by proxy if the holders of more than 50% of such shares are so present or
represented, or (b) more than 50% of the outstanding shares of the Trust, with
one (1) vote for each dollar (and a proportionate fractional vote for each
fraction of a dollar) of net asset value (determined as of the record date)
represented by full and fractional shares of all of the Trust's four outstanding
classes of shares.
If necessary or desirable, the meeting can be adjourned by the
affirmative vote of a majority of the shares present in person or by proxy. In
voting for an adjournment, the proxies will consider all relevant factors,
including possible delay of receipt of proxies and whether or not a substantial
number of negative votes have been cast with respect to any proposal. The
proxies of shareholders who have voted by proxy against a proposal will be voted
against adjournment.
If this proposal is not approved by the shareholders the Board of
Trustees will consider what further action is appropriate, which could include
calling another shareholder meeting.
Consideration of
A New Sub-Advisory Agreement
(Proposal No. 2 of the Special Meeting)
See the information under Proposal No. 1 for the reasons for this proposal.
Information About The Sub-Adviser
The Sub-Adviser, FAF Advisors, Inc. is a registered investment adviser
and subsidiary of U.S. Bank National Association. U.S. Bank National Association
is a separate entity and a wholly owned subsidiary of U.S. Bancorp ("USB"), 800
Nicollet Mall, Minneapolis, Minnesota 55402. USB is the 6th largest commercial
bank in the United States. USB operates 2,512 banking offices, 4,870 ATMs, and
provides a comprehensive line of banking, brokerage, insurance, investment,
mortgage, trust and payment services products to consumers, businesses and
institutions. USB is headquartered in Minneapolis, Minnesota and primarily
serves the Midwest and West. At September 30, 2007, on a pro forma combined
basis, USB and its consolidated subsidiaries had consolidated assets of
approximately $227.6 billion, consolidated deposits of $122.7 billion and
shareholder equity of $20.8 billion.
Mr. Michael Hamilton, with the position of Director and Senior
Portfolio Manager, is the officer of the Sub-Adviser who manages the Trust's
portfolio. He has been employed by the parent company of the Sub-Adviser and its
predecessors since 1989. He has been associated with the Trust since 1994,
assisting in administration and credit analysis. Mr. Hamilton has managed
municipal bond common trust funds, individual municipal bond portfolios, taxable
portfolios, and money market funds. He holds a B.A. from The College of Idaho
and an M.B.A. from Western Washington University.
Other Information About FAF Advisors, Inc.
US Bank National Association owns 100% of the common stock shares of
FAF Advisors, Inc.
The names, addresses, and principal occupations of the principal
executive officer and each director of FAF Advisors, Inc. are as follows:
Name and Address of FAF Position with FAF Advisors, Inc.
Advisors, Inc. Director
Thomas S. Schreier, Jr. Chief Executive Officer and Chief Investment Officer
800 Nicollet Mall
Minneapolis, MN 55402
Joseph M. Ulrey, III Chief Financial Officer and Treasurer
800 Nicollet Mall
Minneapolis, MN 55402
Charles R. Manzoni, Jr. General Counsel and Secretary
800 Nicollet Mall
Minneapolis, MN 55402
Basis for the Trustees' Approval of the New Sub-Advisory Agreement.
The Board of Trustees and the independent Trustees approved the renewal
until June 30, 2009 of the Current Sub-Advisory Agreement in March, 2008 at a
meeting called and held for that purpose at which a majority of the independent
Trustees were present in person. They additionally approved the New Sub-Advisory
Agreement at that meeting.
In connection with the renewal of the Current Sub-Advisory Agreement,
the following materials were considered:
o Copies of the agreement to be renewed;
o A term sheet describing the material terms of the agreement;
o The Annual Report of the Trust for the year ended September 30, 2007;
o A report, prepared by the Manager and provided to the Trustees in advance
of the meeting for the Trustees' review, containing data about the
performance of the Trust, data about its fees, expenses and purchases and
redemptions of capital stock together with comparisons of such data with
similar data about other comparable funds, as well as data as to the
profitability of the Sub-Adviser; and
o Quarterly materials reviewed at prior meetings on the Trust's performance,
operations, portfolio and compliance.
The Trustees considered the Current Sub-Advisory Agreement separately
as well as in conjunction with Current Advisory Agreement to determine their
combined effects on the Trust. The Trustees reviewed materials relevant to, and
considered, the factors set forth below, and as to the agreement reached the
conclusions described.
The nature, extent, and quality of the services provided by the Sub-Adviser.
The Manager has arranged for the Sub-Adviser to provide local
management of the Trust's portfolio. The Trustees noted that the Sub-Adviser
employs Mr. Michael S. Hamilton as portfolio manager for the Trust, and has
provided facilities for credit analysis of the Trust's portfolio securities. Mr.
Hamilton, based in Portland, Oregon, has provided local information regarding
specific holdings in the Trust's portfolio. The portfolio manager has also been
available to and has met with the brokerage and financial planner community and
with investors and prospective investors to provide them with information
generally about the Trust's portfolio, with which to assess the Trust as an
investment vehicle for residents of Oregon in light of prevailing interest rates
and local economic conditions.
The Board considered that the Sub-Adviser had provided all services the
Board deemed necessary or appropriate, including the specific services that the
Board has determined are required for the Trust, given that its purpose is to
provide shareholders with as high a level of current income exempt from Oregon
state and regular Federal income taxes as is consistent with preservation of
capital. It noted that compared to other Oregon state-specific municipal bond
funds, the portfolio of the Trust was of significantly higher quality and
contained no securities subject to the alternative minimum tax.
The Board concluded that a commendable quality of services was provided
and that the Trust would be well served if they continued. Evaluation of this
factor weighed in favor of renewal of the Current Sub-Advisory Agreement.
The investment performance of the Trust and the Sub-Adviser.
The Board reviewed each aspect of the Trust's performance and compared
its performance with that of its local competitors, with national averages and
with benchmark indices. It was noted that the materials provided by the Manager
indicated that compared to the five largest competitive Oregon funds, the Trust
has had an average annual return that is comparable to that of its peers for the
one-year period, but below that of its peers for the five- and ten-year periods,
with rates of return explained in part by the Trust's generally higher-quality
portfolio and generally shorter average maturities. The Trust considers its
local competitors to be Oregon-oriented funds that invest chiefly in
high-quality Oregon municipal obligations.
The Board concluded that the performance of the Trust was acceptable in
light of market conditions, the length of its average maturities, its investment
objectives and its long-standing emphasis on minimizing risk. Evaluation of this
factor indicated to the Trustees that renewal of the Current Sub-Advisory
Agreement would be appropriate.
The costs of the services to be provided and profits to be realized by
Sub-Adviser and its affiliates from their relationships with the Trust.
The information provided in connection with renewal contained expense
data for the Trust and its local competitors as well as data for all
single-state tax-free municipal bond funds nationwide, including data for all
such front-end sales charge funds of a comparable asset size. The materials also
showed the profitability to the Sub-Adviser of its services to the Trust.
The Board compared the expense and fee data with respect to the Trust
to similar data about other funds that it found to be relevant. The Board
concluded that the expenses of the Trust and the fees paid were similar to and
were reasonable as compared to those being paid by single-state tax-free
municipal bond funds nationwide and by the Trust's local competitors.
The Board considered that the foregoing indicated the appropriateness
of the costs of the services to the Trust, which was being well managed as
indicated by the factors considered previously.
The Board further concluded that the profitability to the Sub-Adviser
did not argue against approval of the fees to be paid under the Current
Sub-Advisory Agreement.
The extent to which economies of scale would be realized as the Trust grows.
Data provided to the Trustees showed that the Trust's average net asset
size had trended lower in recent years. The Trustees also noted that the
materials indicated that the Trust's fees were already lower than what those of
its peers would be at comparable asset levels, including those with breakpoints.
Evaluation of this factor indicated to the Board that the Current Sub-Advisory
Agreement should be renewed without addition of breakpoints at this time.
Benefits derived or to be derived by the Sub-Adviser and its affiliates from
their relationships with the Trust.
The Board observed that, as is generally true of most fund complexes,
the Sub-Adviser and its affiliates, by providing services to a number of funds
or other investment clients including the Trust, were able to spread costs as
they would otherwise be unable to do. The Board noted that while that produces
efficiencies and increased profitability for Sub-Adviser and its affiliates, it
also makes their services available to the Trust at favorable levels of quality
and cost which are more advantageous to the Trust than would otherwise have been
possible.
In connection with approval of the New Sub-Advisory Agreement and
recommendation that the shareholders of the Trust approve it, the Trustees noted
that that agreement is substantially the same as the Current Sub-Advisory
Agreement except for its starting date and accordingly the materials considered
in connection with the Annual Review, and the reasons for renewing the Current
Sub-Advisory Agreement, apply to the New Sub-Advisory Agreement as well. In
addition, as noted above, in addressing the desirability of replacing the
Current Sub-Advisory Agreement with the New Sub-Advisory Agreement, the Trustees
considered a wide range of information relevant to the ongoing and future
continuity of management of the Trust, including:
|X| representations by representatives of the Sub-Adviser that the proposed
change of control of the Manager was not expected to result in a change in
the personnel or operations of the Sub-Adviser;
|X| representations from representatives of the Sub-Adviser that the investment
approach or style of the Sub-Adviser with respect to the Trust, or the
services provided by it to the Trust, would not change.
|X| the fact that the Transaction will not result in any change to the advisory
fees paid by the Trust or the Trust's total expense ratio;
|X| the fact that the Transaction will not result in a change in the costs of
the services to be provided by the Sub-Adviser; and,
|X| the fact that the Trust has operated in compliance with its investment
objective and restrictions.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees, concluded
that the New Sub-Advisory Agreement should be approved and recommended that the
shareholders of the Trust vote to approve the New Sub-Advisory Agreement for an
initial one-year term.
Description of the New Sub-Advisory Agreement
The Sub-Adviser provides the Trust with local advisory services. Under
the New Sub-Advisory Agreement, the Manager will pay the Sub-Advisor a fee
payable monthly and computed on the net asset value of the Trust as of the close
of business each business day at the annual rate of 0.23 of 1% of such net asset
value, provided, however, that for any day that the Trust pays or accrues a fee
under the Distribution Plan of the Trust based upon the assets of the Trust, the
annual advisory fee is payable at the annual rate of 0.18 of 1% of such net
asset value.
The proposed New Sub-Advisory Agreement is substantially identical to
the Current Sub-Advisory Agreement. For a complete understanding of the New
Sub-Advisory Agreement, please refer to the form of New Sub-Advisory Agreement
provided as Appendix B.
Action Requested
THE TRUSTEES OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST
VOTE TO APPROVE THE NEW SUB-ADVISORY AGREEMENT FOR THE TRUST.
Vote Required
The vote required is the same as that for Proposal No. 1 of the Special
Meeting. Please refer to the description provided under Proposal No. 1.
General
Proposals No. 1 and No. 2 are designed to operate together. Neither
separately will have the intended results. Accordingly, the proposed New
Advisory Agreement and the proposed New Sub-Advisory Agreement will not go into
effect unless shareholders approve both Proposals No. 1 and 2. If these
proposals are not both approved, the current arrangements will remain in effect.
The Board of Trustees will consider what further action is appropriate, which
could include calling another shareholder meeting.
Shareholder Proposals
Under the proxy rules of the Securities and Exchange Commission,
shareholder proposals meeting tests contained in those rules may, under certain
conditions, be included in the Trust's proxy statement and proxy card for a
particular annual meeting. One of these conditions relates to the timely receipt
by the Trust of any such proposal. Under these rules, proposals submitted for
inclusion in the proxy material for the Trust's next annual meeting after the
meeting to which this Proxy Statement relates must be received by the Trust not
less than 120 days before the anniversary of the date of this Proxy Statement.
Accordingly, a shareholder proposal intended to be presented at the Trust's 2008
annual meeting must be received by the Trust by December 26, 2008, in order to
be included in the Trust's proxy material relating to that meeting. The date for
such submission could change, depending on the scheduled date for the next
annual meeting; if so, shareholders will be notified.
The fact that the Trust receives a shareholder proposal in a timely manner
does not insure its inclusion in the Trust's proxy material, since there are
other requirements in the proxy rules relating to such inclusion.
A shareholder wishing to provide notice of a proposal in the manner
prescribed by Rule 14a-4 (c)(1) under the Securities Exchange Act of 1934 must
submit written notice of the proposal to the Trust by March 12, 2009.
Other Business
The Trust does not know of any other matter which will come up for action
at the Annual Meeting. If any other matter or matters properly come up for
action at the Annual Meeting, including any adjournment of the Annual Meeting,
the proxy holders will vote the shares which your proxy card, Internet or
telephone vote entitles them to vote, in accordance with their judgment on such
matter or matters, except as noted. That is, by signing and returning your proxy
card or by voting by the Internet or telephone, you give the proxy holders
discretionary authority as to any such matter or matters.
The Trust does not know of any other matter which will come up for action
at the Special Meeting. If any other matter or matters properly come up for
action at the Special Meeting, including any adjournment of the Special Meeting,
the proxy holders will vote the shares which your proxy card, Internet or
telephone vote entitles them to vote, in accordance with their judgment on such
matter or matters except as noted. That is, by signing and returning your proxy
card or by voting by the Internet or telephone, you give the proxy holders
discretionary authority as to any such matter or matters.
Appendix A
TAX-FREE TRUST OF OREGON
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of ______ __, 2008 by and between The Cascades
Trust (the "Business Trust"), a Massachusetts business trust, 380 Madison
Avenue, Suite 2300, New York, New York 10017 and AQUILA INVESTMENT MANAGEMENT
LLC (the "Manager"), a Delaware limited liability company, 380 Madison Avenue,
Suite 2300, New York, New York 10017
W I T N E S S E T H:
WHEREAS, the Business Trust and the Manager wish to enter into an Advisory
and Administration Agreement referred to hereafter as "this Agreement," with
respect to a portfolio of the Business Trust entitled Tax-Free Trust of Oregon
(the "Trust").
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. In General
The Manager shall perform (at its own expense) the functions set forth more
fully herein for the Trust.
2. Duties and Obligations of the Manager
(a) Investment Advisory Services Subject to the succeeding provisions of
this section and subject to the direction and control of the Board of Trustees
of the Trust, the Manager shall:
(i) supervise continuously the investment program of the Trust and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the Trust;
(iii) arrange for the purchase and the sale of securities held in the portfolio
of the Trust;
(iv) at its expense provide for pricing of the Trust's portfolio daily using a
pricing service or other source of pricing information satisfactory to the Trust
and, unless otherwise directed by the Board of Trustees, provide for pricing of
the Trust's portfolio at least quarterly using another such source satisfactory
to the Trust; and
Subject to the provisions of Section 5 hereof, the Manager may at its own
expense delegate to a qualified organization ("Sub-Adviser"), affiliated or not
affiliated with the Manager, any or all of the above duties. Any such delegation
of the duties set forth in (i), (ii) or (iii) above shall be by a written
agreement (the "Sub-Advisory Agreement") approved as provided in Section 15 of
the Investment Company Act of 1940.
(b) Administration. Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the Trust, the
Manager shall provide all administrative services to the Trust other than those
relating to its investment portfolio delegated to a Sub-Adviser of the Trust
under a Sub-Advisory Agreement; as part of such administrative duties, the
Manager shall:
(i) provide office space, personnel, facilities and equipment for the
performance of the following functions and for the maintenance of the
headquarters of the Trust;
(ii) oversee all relationships between the Trust and any sub-adviser, transfer
agent, custodian, legal counsel, auditors and principal underwriter, including
the negotiation of agreements in relation thereto, the supervision and
coordination of the performance of such agreements, and the overseeing of all
administrative matters which are necessary or desirable for the effective
operation of the Trust and for the sale, servicing or redemption of the Trust's
shares;
(iii) either keep the accounting records of the Trust, including the computation
of net asset value per share and the dividends (provided that if there is a
Sub-Adviser, daily pricing of the Trust's portfolio shall be the responsibility
of the Sub-Adviser under the Sub-Advisory Agreement) or, at its expense and
responsibility, delegate such duties in whole or in part to a company
satisfactory to the Trust;
(iv) maintain the Trust's books and records, and prepare (or assist counsel and
auditors in the preparation of) all required proxy statements, reports to the
Trust's shareholders and Trustees, reports to and other filings with the
Securities and Exchange Commission and any other governmental agencies, and tax
returns, and oversee the insurance relationships of the Trust;
(v) prepare, on behalf of the Trust and at the Trust's expense, such
applications and reports as may be necessary to register or maintain the
registration of the Trust and/or its shares under the securities or "Blue-Sky"
laws of all such jurisdictions as may be required from time to time;
(vi) respond to any inquiries or other communications of shareholders of the
Trust and broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Trust's shareholder servicing and transfer
agent or distributor, oversee such shareholder servicing and transfer agent's or
distributor's response thereto.
(c) Compliance with Requirements. Any investment program furnished, and any
activities performed, by the Manager or by a Sub-Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by: (1) the Investment Company Act of 1940 (the "Act") and any rules or
regulations in force thereunder; (2) any other applicable laws, rules and
regulations; (3) the Declaration of Trust and By-Laws of the Trust as amended
from time to time; (4) any policies and determinations of the Board of Trustees
of the Trust; and (5) the fundamental policies of the Trust, as reflected in its
registration statement under the Act or as amended by the shareholders of the
Trust.
(d) Best Efforts; Responsibility. The Manager shall give the Trust the
benefit of its best judgment and effort in rendering services hereunder, but the
Manager shall not be liable for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon (i)
its own investigation and research or (ii) investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith by the Manager or a Sub-Adviser.
(e) Other Customers. Nothing in this Agreement shall prevent the Manager or
any officer thereof from acting as investment adviser, sub-adviser,
administrator or manager for any other person, firm, or corporation, and shall
not in any way limit or restrict the Manager or any of its officers,
stockholders or employees from buying, selling or trading any securities for its
own or their own accounts or for the accounts of others for whom it or they may
be acting, provided, however, that the Manager expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
(f) Order Allocation. In connection with any duties for which it may become
responsible to arrange for the purchase and sale of the Trust's portfolio
securities, the Manager shall select, and shall cause any Sub-Adviser to select,
such broker-dealers ("dealers") as shall, in the Manager's judgment, implement
the policy of the Trust to achieve "best execution," i.e., prompt, efficient,
and reliable execution of orders at the most favorable net price. The Manager
shall cause the Trust to deal directly with the selling or purchasing principal
or market maker without incurring brokerage commissions unless the Manager
determines that better price or execution may be obtained by paying such
commissions; the Trust expects that most transactions will be principal
transactions at net prices and that the Trust will incur little or no brokerage
costs. The Trust understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread between the bid
and asked prices. In allocating transactions to dealers, the Manager is
authorized and shall authorize any Sub-Adviser, to consider, in determining
whether a particular dealer will provide best execution, the dealer's
reliability, integrity, financial condition and risk in positioning the
securities involved, as well as the difficulty of the transaction in question,
and thus need not pay the lowest spread or commission available if the Manager
determines in good faith that the amount of commission is reasonable in relation
to the value of the brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the Manager's overall
responsibilities. If, on the foregoing basis, the transaction in question could
be allocated to two or more dealers, the Manager is authorized, in making such
allocation, to consider whether a dealer has provided research services, as
further discussed below. Such research may be in written form or through direct
contact with individuals and may include quotations on portfolio securities and
information on particular issuers and industries, as well as on market,
economic, or institutional activities. The Trust recognizes that no dollar value
can be placed on such research services or on execution services and that such
research services may or may not be useful to the Trust and may be used for the
benefit of the Manager or its other clients. The Manager shall cause the
foregoing provisions, in substantially the same form, to be included in any
Sub-Advisory Agreement.
(g) Registration Statement; Information. It is agreed that the Manager shall
have no responsibility or liability for the accuracy or completeness of the
Trust's Registration Statement under the Act and the Securities Act of 1933,
except for information supplied by the Manager for inclusion therein. The
Manager shall promptly inform the Trust as to any information concerning the
Manager appropriate for inclusion in such Registration Statement, or as to any
transaction or proposed transaction which might result in an assignment of the
Agreement.
(h) Liability for Error. The Manager shall not be liable for any error in
judgment or for any loss suffered by the Trust or its security holders in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Nothing in this Agreement shall, or
shall be construed to, waive or limit any rights which the Trust may have under
federal and state securities laws which may impose liability under certain
circumstances on persons who act in good faith.
(j) Indemnification. The Trust shall indemnify the Manager to the full
extent permitted by the Trust's Declaration of Trust. 3. Allocation of Expenses
The Manager shall, at its own expense, provide office space, facilities,
equipment, and personnel for the performance of its functions hereunder and
shall pay all compensation of Trustees, officers, and employees of the Trust who
are affiliated persons of the Manager.
The Trust agrees to bear the costs of preparing and setting in type
its prospectuses, statements of additional information and reports to its
shareholders, and the costs of printing or otherwise producing and distributing
those copies of such prospectuses, statements of additional information and
reports as are sent to its shareholders. All costs and expenses not expressly
assumed by the Manager under this sub-section or otherwise by the Manager,
administrator or principal underwriter or by any Sub-Adviser shall be paid by
the Trust, including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation of its Trustees other
than those affiliated with the Manager or such adviser, administrator or
principal underwriter and expenses of all its Trustees; (v) legal and audit
expenses; (vi) custodian and transfer agent, or shareholder servicing agent,
fees and expenses; (vii) expenses incident to the issuance of its shares
(including issuance on the payment of, or reinvestment of, dividends); (viii)
fees and expenses incident to the registration under Federal or State securities
laws of the Trust or its shares; (ix) expenses of preparing, printing and
mailing reports and notices and proxy material to shareholders of the Trust; (x)
all other expenses incidental to holding meetings of the Trust's shareholders;
and (xi) such non-recurring expenses as may arise, including litigation
affecting the Trust and the legal obligations for which the Trust may have to
indemnify its officers and Trustees.
4. Compensation of the Manager The Trust agrees to pay the Manager, and the
Manager agrees to accept as full compensation for all services rendered by the
Manager as such, an annual fee payable monthly and computed on the net asset
value of the Trust as of the close of business each business day at the annual
rate of 0.50 of 1% of such net asset value provided, however, that for any day
that the Trust pays or accrues a fee under the Distribution Plan of the Trust
based upon the assets of the Trust, the annual fee shall be payable at the
annual rate of 0.40 of 1% of such net asset value.
5. Termination of Sub-Advisory Agreement
The Sub-Advisory Agreement may provide for its termination by the
Manager upon reasonable notice, provided, however, that the Manager agrees not
to terminate the Sub-Advisory Agreement except in accordance with such
authorization and direction of the Board of Trustees, if any, as may be in
effect from time to time.
6. Duration and Termination of this Agreement
(a) Duration. This Agreement shall become effective on the day it is
approved by the shareholders of the Trust and shall, unless terminated as
hereinafter provided, continue in effect until the June 30 next preceding the
first anniversary of the effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (1) by a vote of the Trust's Board of Trustees, including a vote
of a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, with votes cast
in person at a meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the outstanding
voting securities of the Trust and by such a vote of the Trustees.
(b) Termination. This Agreement may be terminated by the Manager at any time
without penalty upon giving the Trust sixty days' written notice (which notice
may be waived by the Trust) and may be terminated by the Trust at any time
without penalty upon giving the Manager sixty days' written notice (which notice
may be waived by the Manager), provided that such termination by the Trust shall
be directed or approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the Act) of the
voting securities of the Trust outstanding and entitled to vote. The portions of
this Agreement which relate to providing investment advisory services (Sections
2(a), (c), (d) and (e)) shall automatically terminate in the event of the
assignment (as defined in the Act) of this Agreement, but all other provisions
relating to providing services other than investment advisory services shall not
terminate, provided however, that upon such an assignment the annual fee payable
monthly and computed on the net asset value of the Trust as of the close of
business each business day shall be reduced to the annual rate of 0.27 of 1% of
such net asset value and provided further, that for any day that the Trust pays
or accrues a fee under the Distribution Plan of the Trust based upon the assets
of the Trust, the annual fee shall be payable at the annual rate of 0.22 of 1%
of such asset value.
7. Disclaimer of Shareholder Liability
The Manager understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Manager represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.
8. Notices of Meetings
The Trust agrees that notice of each meeting of the Board of
Trustees of the Trust will be sent to the Manager and that the Trust will make
appropriate arrangements for the attendance (as persons present by invitation)
of such person or persons as the Manager may designate.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
ATTEST: THE CASCADES TRUST
________________________ By:___________________________________
ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
_______________________ By:___________________________________
Appendix B
TAX-FREE TRUST OF OREGON
SUB-ADVISORY AGREEMENT
THIS AGREEMENT, made as of _______ __, 2008 by and between Aquila
Investment Management LLC, a Delaware limited liability company (the "Manager"),
380 Madison Avenue, Suite 2300, New York, New York 10017 and FAF Advisors, Inc.
(the "Sub-Adviser"), 800 Nicollet Mall, Minneapolis, Minnesota 55402
W I T N E S S E T H :
WHEREAS, Tax-Free Trust of Oregon (the "Trust") is a series of The
Cascades Trust, a Massachusetts business trust which is registered under the
Investment Company Act of 1940 (the "Act") as an open-end, non-diversified
management investment company;
WHEREAS, the Manager has entered into an Advisory and Administration
Agreement as of the date hereof with the Trust (the "Advisory and Administration
Agreement") pursuant to which the Manager shall act as investment adviser with
respect to the Trust; and
WHEREAS, pursuant to paragraph 2 of the Advisory and Administration
Agreement, the Manager wishes to retain the Sub-Adviser for purposes of
rendering investment advisory services to the Manager in connection with the
Trust upon the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. In General
The Manager hereby appoints the Sub-Adviser to render, to the Manager
and to the Trust, investment research and advisory services as set forth below
under the supervision of the Manager and subject to the approval and direction
of the Board of Trustees of the Trust. The Sub-Adviser shall, all as more fully
set forth herein, act as managerial investment adviser to the Trust with respect
to the investment of the Trust's assets, and supervise and arrange the purchase
of securities for and the sale of securities held in the portfolio of the Trust.
2. Duties and Obligations of the Sub-Adviser With Respect To Investment of the
Assets of the Trust
(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Manager and the Board of Trustees of the Trust,
the Sub-Adviser shall:
(i) supervise continuously the investment program of the Trust and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the Trust;
(iii) arrange for the purchase and the sale of securities held in the
portfolio of the Trust;
(iv) at its expense provide for pricing of the Trust's portfolio daily using
a pricing service or other source of pricing information satisfactory
to the Trust and, unless otherwise directed by the Board of Trustees,
provide for pricing of the Trust's portfolio at least quarterly using
another such source satisfactory to the Trust; and
(v) consult with the Manager in connection with its duties hereunder.
(b) Any investment program furnished by the Sub-Adviser under this
section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the Investment Company Act of 1940 (the "Act") and
any rules or regulations in force thereunder; (2) any other applicable laws,
rules and regulations; (3) the Declaration of Trust and By-Laws of the Trust as
amended from time to time; (4) any policies and determinations of the Board of
Trustees of the Trust; and (5) the fundamental policies of the Trust, as
reflected in its registration statement under the Act or as amended by the
shareholders of the Trust.
(c) The Sub-Adviser shall give to the Manager and to the Trust the
benefit of its best judgment and effort in rendering services hereunder, but the
Sub-Adviser shall not be liable for any loss sustained by reason of the adoption
of any investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon (i)
its own investigation and research or (ii) investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith by the Sub-Adviser.
(d) Nothing in this Agreement shall prevent the Sub-Adviser or any
affiliated person (as defined in the Act) of the Sub-Adviser from acting as
investment adviser or manager for any other person, firm or corporation and
shall not in any way limit or restrict the Sub-Adviser or any such affiliated
person from buying, selling or trading any securities for its own or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however, that the Sub-Adviser expressly represents that, while acting
as Sub-Adviser, it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Trust under this
Agreement.
(e) In connection with its duties to arrange for the purchase and sale
of the Trust's portfolio securities, the Sub-Adviser shall select such
broker-dealers ("dealers") as shall, in the Sub-Adviser's judgment, implement
the policy of the Trust to achieve "best execution," i.e., prompt, efficient,
and reliable execution of orders at the most favorable net price. The
Sub-Adviser shall cause the Trust to deal directly with the selling or
purchasing principal or market maker without incurring brokerage commissions
unless the Sub-Adviser determines that better price or execution may be obtained
by paying such commissions; the Trust expects that most transactions will be
principal transactions at net prices and that the Trust will incur little or no
brokerage costs. The Trust understands that purchases from underwriters include
a commission or concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread between the bid
and asked prices. In allocating transactions to dealers, the Sub-Adviser is
authorized to consider, in determining whether a particular dealer will provide
best execution, the dealer's reliability, integrity, financial condition and
risk in positioning the securities involved, as well as the difficulty of the
transaction in question, and thus need not pay the lowest spread or commission
available if the Sub-Adviser determines in good faith that the amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by the dealer, viewed either in terms of the particular
transaction or the Sub-Adviser's overall responsibilities. If, on the foregoing
basis, the transaction in question could be allocated to two or more dealers,
the Sub-Adviser is authorized, in making such allocation, to consider (i)
whether a dealer has provided research services, as further discussed below.
Such research may be in written form or through direct contact with individuals
and may include quotations on portfolio securities and information on particular
issuers and industries, as well as on market, economic, or institutional
activities. The Trust recognizes that no dollar value can be placed on such
research services or on execution services and that such research services may
or may not be useful to the Trust and may be used for the benefit of the
Sub-Adviser or its other clients.
(f) The Sub-Adviser agrees to maintain, and to preserve for the periods
prescribed, such books and records with respect to the portfolio transactions of
the Trust as are required by applicable law and regulation, and agrees that all
records which it maintains for the Trust on behalf of the Manager shall be the
property of the Trust and shall be surrendered promptly to the Trust or the
Manager upon request.
(g) The Sub-Adviser agrees to furnish to the Manager and to the Board
of Trustees of the Trust such periodic and special reports as each may
reasonably request.
(h) It is agreed that the Sub-Adviser shall have no responsibility or
liability for the accuracy or completeness of the Trust's Registration Statement
under the Act and the Securities Act of 1933, except for information supplied by
the Sub-Adviser for inclusion therein. The Sub-Adviser shall promptly inform the
Trust as to any information concerning the Sub-Adviser appropriate for inclusion
in such Registration Statement, or as to any transaction or proposed transaction
which might result in an assignment (as defined in the Act) of this Agreement.
(i) The Sub-Adviser shall not be liable for any error in judgment or
for any loss suffered by the Trust or its security holders in connection with
the matters to which this Agreement relates, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. Nothing in this Agreement shall, or shall be construed to, waive or
limit any rights which the Trust may have under federal and state securities
laws which may impose liability under certain circumstances on persons who act
in good faith.
(j) To the extent that the Manager is indemnified under the Trust's
Declaration of Trust with respect to the services provided hereunder by the
Sub-Adviser, the Manager agrees to provide the Sub-Adviser the benefits of such
indemnification.
3. Allocation of Expenses
The Sub-Adviser shall bear all of the expenses it incurs in fulfilling
its obligations under this Agreement. In particular, but without limiting the
generality of the foregoing: the Sub-Adviser shall furnish, at the Sub-Adviser's
expense, all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Sub-Adviser
shall supply, or cause to be supplied, to any investment adviser, administrator
or principal underwriter of the Trust all necessary financial information in
connection with such adviser's, administrator's or principal underwriter's
duties under any agreement between such adviser, administrator or principal
underwriter and the Trust. The Sub-Adviser will also pay all compensation of the
Trust's officers, employees, and Trustees, if any, who are affiliated persons of
the Sub-Adviser.
4. Compensation of the Sub-Adviser
The Manager agrees to pay the Sub-Adviser, and the Sub-Adviser agrees
to accept as full compensation for all services rendered by the Sub-Adviser as
such, a management fee payable monthly and computed on the net asset value of
the Trust as of the close of business each business day at the annual rates of
0.23 of 1% of such net asset value, provided, however, that for any day that the
Trust pays or accrues a fee under the Distribution Plan of the Trust based upon
the assets of the Trust, the annual fee shall be payable at the annual rate of
0.18 of 1% of such net asset value.
5. Duration and Termination
(a) This Agreement shall become effective on the day it is approved by
the shareholders of the Trust and shall, unless terminated as hereinafter
provided, continue in effect until the June 30 next preceding the first
anniversary of the effective date of this Agreement, and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (1) by a vote of the Trust's Board of Trustees, including a vote
of a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, with votes cast
in person at a meeting called for the purpose of voting on such approval, or (2)
by a vote of the holders of a "majority" (as so defined) of the outstanding
voting securities of the Trust and by such a vote of the Trustees.
(b) This Agreement may be terminated by the Sub-Adviser at any time
without penalty upon giving the Manager and the Trust sixty days' written notice
(which notice may be waived). This Agreement may be terminated by the Manager or
the Trust at any time without penalty upon giving the Sub-Adviser sixty days'
written notice (which notice may be waived by the Sub-Adviser), provided that
such termination by the Trust shall be directed or approved by a vote of a
majority of its Trustees in office at the time or by a vote of the holders of a
majority (as defined in the Act) of the voting securities of the Trust
outstanding and entitled to vote. This Agreement shall automatically terminate
in the event of its assignment (as defined in the Act) or the termination of the
Advisory and Administration Agreement. The Sub-Adviser agrees that it will not
exercise its termination rights for at least three years from the effective date
of this Agreement, except for regulatory reasons.
6. Notices of Meetings
The Manager agrees that notice of each meeting of the Board of Trustees
of the Trust will be sent to the Sub-Adviser and that Sub-Adviser will make
appropriate arrangements for the attendance (as persons present by invitation)
of such person or persons as the Sub-Adviser may designate.
7. Special Provisions
(a) For the duration of this Agreement, the Sub-Adviser will not cause
or permit any Converted Fund, as hereafter defined, to offer or sell its shares
directly to retail customers, but shall restrict such offers or sales to
institutions acting for investors in a fiduciary, advisory, agency, custodial or
similar capacity. A Converted Fund is an investment company registered under the
Investment Company Act of 1940 which (i) is provided with portfolio management
by the Sub-Adviser or any affiliate thereof; (ii) has acquired, otherwise than
by portfolio purchases in the normal course of business, assets previously held
in a common trust fund managed by the Sub-Adviser or its predecessors in
interest, including Qualivest Capital Management, Inc. or any affiliate thereof;
and (iii) invests in municipal securities issued by the State of Oregon or its
political subdivisions.
(b) The Sub-Adviser, under the supervision of the Manager, shall
provide at its expense portfolio management particularly qualified to manage
investments in which the Trust primarily invests, and such portfolio management
shall be located in the state of issuers of such investments.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunto affixed, all as of the day and year first above written.
ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
By:
- ------------------- -----------------------------
ATTEST: FAF ADVISORS, INC.
By:
- ------------------- -----------------------------
IMPORTANT NOTICE
PLEASE READ IMMEDIATELY
Tax-Free Trust of Oregon
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS and
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on June 13, 2008
PROXY STATEMENT
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
Your Proxy Vote is important!
And now you can Vote your Proxy on the PHONE or the INTERNET.
It saves Money! Telephone and Internet voting saves postage costs. Savings which
can help minimize expenses.
It saves Time! Telephone and Internet voting is instantaneous - 24 hours a day.
It's Easy! Just follow these simple steps:
1. Read your Proxy Statement and have it at hand.
2. Call toll-free 1-866-241-6192, or go to website: www.proxy-direct.com
3. Follow the recorded or on-screen directions.
4. Do not mail your Proxy Card when you vote by phone or Internet.
Please detach at perforation before mailing.
PROXY PROXY
AQUILA GROUP OF FUNDS
TAX-FREE TRUST OF OREGON
Proxy for Annual Meeting of Shareholders - June 13, 2008
Proxy Solicited on Behalf of the Board of Trustees
The shareholder(s) of Tax-Free Trust of Oregon (the "Trust") whose signature(s)
appear(s) below does/do hereby appoint DIANA P. HERRMANN, CHARLES E. CHILDS, III
and EDWARD M. W. HINES, or any of them, as attorneys and proxies of the
undersigned, with full power of substitution, to attend the Annual Meeting of
Shareholders of the Trust to be held on Friday, June 13, 2008 at the World
Forestry Center, Cheatam Hall, 4033 SW Canyon Road, Portland, Oregon, at 2:00
p.m. Pacific Daylight Time, and all adjournments thereof, and thereat to vote
the shares held in the name of the undersigned on the record date for said
meeting on the matters listed on the reverse side. Such shares are entitled to
one vote for every dollar of net asset value represented by the share balance
printed below.
Management recommends a vote FOR all nominees in Proposal 1 and FOR Proposal 2.
The shares represented hereby will be voted as indicated on the reverse or FOR
if no choice is indicated.
VOTE VIA THE TELEPHONE: 1-866-241-6192
VOTE VIA THE INTERNET: www.proxy-direct.com
Note: PLEASE SIGN EXACTLY AS YOUR NAMES(S) APPEAR(S) ON THIS
PROXY CARD. When signing as custodian, attorney, executor,
administrator, trustee, guardian, etc., please sign your
title as such. Joint owners should each sign.
------------------------------------------------
Signature
-------------------------------------------------
Signature (if held jointly)
-------------------------------------------------
Date_____________________________________________
Yes No
-- --
I plan to attend the Annual Meeting in Portland. [__] [__]
-- --
I plan to attend the outreach meeting in Eugene. [__] [__]
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED ABOVE.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before
mailing.
Please read the proxy statement prior to voting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS IN THIS EXAMPLE:
TAX-FREE TRUST OF OREGON ANNUAL MEETING
1. Election of Trustee Nominees:
01. Gary C. Cornia 02. James A. Gardner 03. Diana P. Herrmann* 04.
Edmund P. Jensen 05. Timothy J. Leach 06. John W. Mitchell* 07. Ralph
R. Shaw 08. Nancy Wilgenbusch
*Interested Trustees
To withhold authority to vote for one or more (but not all) nominees,
mark "For All Except" and write the nominee number(s) and/or name(s) on
the line below.
2. Action on selection of Tait, Weller & Baker LLP as independent
registered public accounting firm. (Annual Meeting Proposal No. 2 in
Proxy Statement)
As to any other matter said proxies shall vote in accordance with their
best judgment.
For All Withhold All For All Except
-- -- --
[--] [--] [--]
Annual Meeting Attendance - You are encouraged to attend the Annual Meeting of
Shareholders. If you can attend, please so indicate on the proxy card or e-mail
us at info@aquilafunds.com
HAS YOUR ADDRESS CHANGED DO YOU HAVE ANY COMMENTS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED ON THE REVERSE SIDE.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
Your Proxy Vote is important!
And now you can Vote your Proxy on the PHONE or the INTERNET.
It saves Money! Telephone and Internet voting saves postage costs. Savings which
can help minimize expenses.
It saves Time! Telephone and Internet voting is instantaneous - 24 hours a day.
It's Easy! Just follow these simple steps:
1. Read your Proxy Statement and have it at hand.
2. Call toll-free 1-866-241-6192, or go to website: www.proxy-direct.com
3. Follow the recorded or on-screen directions.
4. Do not mail your Proxy Card when you vote by phone or Internet.
Please detach at perforation before mailing.
PROXY PROXY
AQUILA GROUP OF FUNDS
TAX-FREE TRUST OF OREGON
Proxy for Special Meeting of Shareholders - June 13, 2008
Proxy Solicited on Behalf of the Board of Trustees
The shareholder(s) of Tax-Free Trust of Oregon (the "Trust") whose signature(s)
appear(s) below does/do hereby appoint DIANA P. HERRMANN, CHARLES E. CHILDS, III
and EDWARD M. W. HINES, or any of them, as attorneys and proxies of the
undersigned, with full power of substitution, to attend the Special Meeting of
Shareholders of the Trust to be held on Friday, June 13, 2008 at the World
Forestry Center, Cheatam Hall, 4033 SW Canyon Road, Portland, Oregon, at 3:00
p.m. Pacific Daylight Time, and all adjournments thereof, and thereat to vote
the shares held in the name of the undersigned on the record date for said
meeting on the matters listed on the reverse side. Such shares are entitled to
one vote for every dollar of net asset value represented by the share balance
printed below.
Management recommends a vote FOR the Special Meeting proposals 1 and 2. The
shares represented hereby will be voted as indicated on the reverse or FOR if no
choice is indicated.
VOTE VIA THE TELEPHONE: 1-866-241-6192
VOTE VIA THE INTERNET: www.proxy-direct.com
Note: PLEASE SIGN EXACTLY AS YOUR NAMES(S) APPEAR(S) ON THIS
PROXY CARD. When signing as custodian, attorney, executor,
administrator, trustee, guardian, etc., please sign your
title as such. Joint owners should each sign.
Signature
-------------------------------------------------
Signature (if held jointly)
-------------------------------------------------
Date_____________________________________________
Yes No
-- --
I plan to attend the Special Meeting in Portland. [__] [__]
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED ABOVE.
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR
PROXY TODAY
Please detach at perforation before
mailing.
Please read the proxy statement prior to voting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS IN THIS EXAMPLE:
1. Action on a new Advisory and Administration Agreement. (Special Meeting
Proposal No. 1 in Proxy Statement)
2. Action on a new Sub-Advisory Agreement. (Special Meeting Proposal No. 2
in Proxy Statement)
As to any other matter said proxies shall vote in accordance with their
best judgment.
For Against Abstain
-- -- --
[--] [--] [--]
Special Meeting Attendance - You are encouraged to attend the Special Meeting of
Shareholders. If you can attend, please so indicate on the proxy card or e-mail
us at info@aquilafunds.com
HAS YOUR ADDRESS CHANGED DO YOU HAVE ANY COMMENTS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED ON THE REVERSE SIDE.