TAX-FREE TRUST OF OREGON
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of October 31, 1997 by and
between The Cascades Trust (the "Business Trust"), a
Massachusetts business trust, 000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000 and AQUILA MANAGEMENT
CORPORATION (the "Manager"), a New York corporation, 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 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 (i) whether a dealer has provided
research services, as further discussed below; and (ii)
whether a dealer has sold shares of the Trust. 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
and expenses of its Trustees other than those affiliated
with the Manager or such adviser, administrator or
principal underwriter; (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 MANAGEMENT CORPORATION
_______________________ By:______________________________
