<PAGE>
As filed with the Securities and Exchange Commission on August 31, 1995
Registration No. 2-91683
811-4054
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on September 30,
1995, pursuant to Rule 488.
No filing fee is due because the Registrant has previously registered an
indefinite number of shares under Rule 24f-2; a Rule 24f-2 notice for the
year ended September 30, 1994 was filed on November 29, 1994.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for New York Tax-Exempt Fund,
a series of Quest for Value Family of Funds
and
Prospectus for Oppenheimer New York Tax-Exempt Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
Cross Reference Sheet
Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of Document
- --------- ---------------------------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
OPNY and the Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between OPNY and the Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of New York Tax-Exempt Fund; Annual Report of New
York Tax-Exempt Fund; Comparison Between OPNY and the Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about New York Tax-Exempt
Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information; Statement of
Additional Information about New York Tax-Exempt Fund; Annual
Report of New York Tax-Exempt Fund at 7/31/94; Semi-Annual
Report of New York Tax-Exempt Fund at 1/31/95; Registrant's
Annual Report at 9/30/94; Semi-Annual Report of Registrant at
3/31/95
Part C of
Form N-14
Item No. Other Information Heading
- --------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ X / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oppenheimer New York Tax-Exempt Fund
- ------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
New York Tax-Exempt Fund,
a series of Quest for Value Family of Funds
- ------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- ------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
- ------------------------------------------------------------------
(1) Amount previously paid:
- ------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------
(4) Date Filed:
- -----------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
merge\360Nqvn14.a
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NEW YORK TAX-EXEMPT FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 3, 1995
To the Shareholders of New York Tax-Exempt Fund:
Notice is hereby given that a Special Meeting of the Shareholders of New
York Tax-Exempt Fund (the "Fund"), a series of Quest for Value Family of
Funds (the "Trust"), an open-end, management investment company, will be
held at One World Financial Center, New York, New York 10281 on the 40th
Floor, at _____ A.M., New York time, on November 3, 1995, and any
adjournments thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon approval of the Agreement and Plan of
Reorganization dated as of ____, 1995 (the "Reorganization
Agreement") by and among Oppenheimer New York Tax-Exempt Fund
("OPNY"), the Trust on behalf, of the Fund, and Quest for Value
Advisors, investment adviser to the Fund, and the transactions
contemplated thereby (the "Reorganization"), including (i) the
transfer of substantially all the assets of the Fund to OPNY in
exchange for Class A shares of OPNY, (ii) the distribution of such
shares of OPNY to shareholders of the Fund in complete liquidation
of the Fund, and (iii) the cancellation of the outstanding shares of
the Fund (the "Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Shareholders of record at the close of
business on September 7, 1995 are entitled to notice of, and to vote at,
the Meeting. Please read the Proxy Statement and Prospectus carefully
before telling us, through your proxy or in person, how you wish your
shares to be voted. The Board of Trustees of the Trust recommends a vote
in favor of the Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE
ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Deborah Kaback, Secretary
_________, 1995
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NEW YORK TAX-EXEMPT FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
PROXY STATEMENT
--------------------------
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to shareholders of
New York Tax-Exempt Fund (the "Fund"), a series of Quest for Value Family
of Funds (the "Trust"), an open-end management investment company, in
connection with the solicitation by the Board of Trustees of the Trust
(the "Board") of proxies to be used at the Special Meeting of Shareholders
of the Fund, to be held at One World Financial Center, New York, New York
10281 on the 40th Floor at ___ A.M., New York time, on November 3, 1995,
and any adjournments thereof (the "Meeting"). It is expected that this
Proxy Statement and Prospectus will be mailed to shareholders on or about
____, 1995.
At the Meeting, shareholders of the Fund will be asked to consider and
vote upon approval of the Agreement and Plan of Reorganization, dated as
of _____, 1995 (the "Reorganization Agreement"), by and among Oppenheimer
Tax-Free Bond Fund ("OPNY"), an open-end, management investment company,
the Trust, on behalf of the Fund, and Quest for Value Advisors ("QVA"),
investment adviser to the Fund, and the transactions contemplated by the
Reorganization Agreement (the "Reorganization"). The Reorganization
Agreement provides for the transfer of substantially all the assets of the
Fund to OPNY in exchange for Class A shares of OPNY and the assumption by
OPNY of certain liabilities of the Fund, the distribution of such shares
of OPNY to shareholders of the Fund in complete liquidation of the Fund
and the cancellation of the outstanding shares of the Fund. A copy of the
Reorganization Agreement is attached hereto as Exhibit A and is
incorporated by reference herein. As a result of the proposed
Reorganization, each shareholder of the Fund will receive that number of
Class A shares of OPNY having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the Fund. This
transaction is being structured as a tax-free reorganization. See
"Approval of the Reorganization."
OPNY currently offers Class A, Class B and Class C shares. Class A shares
are sold with a sales charge imposed at the time of purchase (certain
purchases aggregating $1.0 million or more are not subject to a sales
charge, but may be subject to a contingent deferred sales charge ("CDSC")
if redeemed within 18 months from the end of the calendar month when
purchased); Class B shares are sold without a front-end sales charge but
may be subject to a CDSC if redeemed within six years of the date of
purchase; and Class C shares are sold without a front end sales charge but
may be subject to a CDSC if not held for one year. Shareholders of the
Fund will receive Class A shares of OPNY and no sales charge will be
imposed on the OPNY Class A shares received by the Fund's shareholders.
OPNY is a mutual fund that seeks the maximum current income exempt from
Federal, New York State and New York City income taxes for individual
investors that is consistent with preservation of capital. Under normal
market conditions, OPNY invests at least 80% of its total assets in
municipal securities and at least 65% of its total assets in New York
municipal securities. However, in times of unstable economic or market
conditions, OPNY may deem it advisable to invest temporarily an unlimited
amount of its total assets in certain taxable instruments. OPNY also uses
hedging instruments to seek to reduce the risks of market fluctuations
that affect the value of the securities it holds.
OPNY has filed with the U.S. Securities and Exchange Commission (the
"SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of shares of OPNY to be offered
to the shareholders of the Fund pursuant to the Reorganization Agreement.
This Proxy Statement and Prospectus relating to the Reorganization also
constitutes a Prospectus of OPNY filed as part of such Registration
Statement. Information contained or incorporated by reference herein
relating to OPNY has been prepared by and is the responsibility of OPNY.
Information contained or incorporated by reference herein relating to the
Fund has been prepared by and is the responsibility of the Fund.
This Proxy Statement and Prospectus sets forth concisely information about
OPNY that a prospective investor should know before voting on the
Reorganization.
The following documents have been filed with the SEC, are incorporated by
reference, and are available without charge upon written request to Quest
for Value Distributors ("QVD"), the general distributor for the Fund, at
P. O. Box 3567, Church Street Station, New York, New York 10277-1296, or
by calling the toll-free number for the Fund shown above: (i) a Prospectus
for the Fund, dated December 1, 1994; and (ii) a Statement of Additional
Information about the Fund, dated December 1, 1994.
The following documents have been filed with the SEC, are incorporated by
reference herein, and are available without charge upon written request
to the transfer and shareholder servicing agent for OPNY, Oppenheimer
Shareholder Services ("OSS"), P.O. Box 5270, Denver, Colorado 80217, or
by calling the toll-free number for OPNY shown above: (i) a Prospectus for
OPNY dated January 27, 1995, as supplemented July 14, 1995; (ii) a
Statement of Additional Information about OPNY, dated January 27, 1995,
as supplemented July 14, 1995 (the "OPNY Additional Statement"), which
contains more detailed information about OPNY and its management, and
(iii) a Statement of Additional Information relating to the Reorganization
described in this Proxy Statement and Prospectus (the "Additional
Statement"), dated ____, 1995 and filed as part of the OPNY Registration
Statement on Form N-14.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of OPNY or the Fund are not deposits or obligations of any bank,
are not guaranteed by any bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated _______, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<S> <C>
COMPARATIVE FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . .
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parties to the Reorganization. . . . . . . . . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Consequences of the Reorganization . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . . . . . .
Investment Advisory and Distribution Plan Fees . . . . . . . . . . .
Purchases, Exchanges and Redemptions . . . . . . . . . . . . . . . .
PRINCIPAL RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . .
APPROVAL OF THE REORGANIZATION (The Proposal). . . . . . . . . . . . .
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . . .
Board Approval of the Reorganization . . . . . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Aspects of the Reorganization. . . . . . . . . . . . . . . . . .
Capitalization Table (Unaudited) . . . . . . . . . . . . . . . . . .
COMPARISON BETWEEN OPNY AND THE FUND . . . . . . . . . . . . . . . . .
Comparison of Investment Objectives, Policies and Restrictions . . .
Special Investment Methods . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . .
Additional Comparative Information . . . . . . . . . . . . . . . . .
INFORMATION CONCERNING THE MEETING . . . . . . . . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Record Date; Vote Required; Share Information. . . . . . . . . . . .
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs of the Solicitation and the Reorganization . . . . . . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Information. . . . . . . . . . . . . . . . . . . . . . . .
Public Information . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A - Agreement and Plan of Reorganization, dated as of _____,
1995, by and among Oppenheimer Tax-Free Bond Fund, Quest for
Value Family of Funds, on behalf of National Tax-Exempt Fund,
and Quest for Value Advisors . . . . . . . . . . . . . A-1
EXHIBIT B - Purchase Price Formula Pursuant to the Acquisition
Agreement . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
<PAGE>
COMPARATIVE FEE TABLES
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges is
substantially the same for both OPNY and the Fund (collectively the
"Funds"), except as noted below. Shareholders of the Fund will receive
Class A shares of OPNY. OPNY also offers Class B and Class C shares.
Oppenheimer New York
Tax-Exempt Fund
Class A Class B Class C
Transaction Charges
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee None None None
New York Tax-Exempt Fund
Maximum Sales Charge on Purchases 4.75%
(as a % of offering price)
Sales Charge on Reinvested Dividends None
Deferred Sales Charge None
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee $5.00
(1)If you invest more than $1 million in Class A shares, although you will
generally not pay an initial sales charge, you may have to pay a sales
charge of up to 1.0% if you sell your shares within 18 calendar months
from the end of the calendar month during which you purchased those
shares. This deferred sales charge will be waived for shares acquired
in the Reorganization.
(2)If you redeem Class B shares within six years of the beginning of the
month in which you purchase them, you may have to pay a contingent
deferred sales charge starting at 5.0% in the first year and declining
thereafter.
(3)If you redeem Class C shares within 12 months of the beginning of the
calendar month of buying them, you may have to pay a 1.0% contingent
deferred sales charge.
Expenses of the Fund and OPNY; Pro Forma Expenses
The funds each pay a variety of expenses directly for management of their
assets, administration, distribution of their shares and other services,
and those expenses are reflected in the net asset value per share of each
of OPNY and the Fund. The following calculations are based on the
expenses of the Fund and Class A expenses of OPNY for the 6 months ended
March 31, 1995 and the 12 months ended September 30, 1994. These amounts
are shown as a percentage of the average net assets of the Fund and of
Class A shares of OPNY for those periods. The pro forma fees reflect what
the fee schedule would have been at March 31, 1995 and September 30, 1994
if the Reorganization had occurred on either of those dates.
<TABLE>
<CAPTION>
6 Months Ended March 31, 199512 Months Ended September 30, 1994
Oppenheimer Oppenheimer
New York Tax- New York New York Tax- New York
Exempt Fund/ Tax-Exempt Exempt Fund/ Tax-Exempt
Class A Fund(1) Class A Fund(1)
<S> <C> <C> <C> <C>
Management Fee 0.52% 0.35% 0.51% 0.35%
12b-1 Fee 0.24% 0.10% 0.24% 0.10%
Other Expenses 0.14% 0.55% 0.11% 0.55%
Total Fund Net Operating Expenses0.90% 1.00% 0.86% 1.00%
Total Fund Gross Operating Expenses0.90% 1.16% 0.86% 1.08%
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Combined Fund
6 Months Ended 12 Months Ended
March 31, 1995 September 30, 1994
<S> <C> <C>
Management Fee 0.52% 0.51%
12b-1 Fee 0.24% 0.24%
Other Expenses 0.14% 0.11%
Total Fund Operating Expenses0.90% 0.86%
</TABLE>
(1)"Management Fees" and "Other Expenses" have been restated to reflect
certain voluntary expense limitations and waivers in effect since April
30, 1995: (a) a voluntary expense undertaking by QVA to limit the
Fund's annualized operating expenses to no more than 1.00% of average
daily net assets, and (b) a waiver of a portion of the management fee
to effectuate such limitation. Expense limitations and waivers prior
to April 30, 1995 were higher, with actual management fees charged
representing 0.24% and 0.21%, respectively, of average daily net assets
for the six months ended March 31, 1995 and the year ended September
30, 1994, respectively. Actual "Other Expenses" represented 0.56% and
0.47%, respectively, of average daily net assets for such six month
and one-year periods, respectively. Without such voluntary expense
limitations and waivers, the Fund's management fee would have been
0.50% of average daily net assets for each such period. "12b-1 Fees"
have been restated to reflect the rate in effect since September 1,
1994. Actual 12b-1 fee payments were 0.10% and 0.01%, respectively,
of average daily net assets for the six months ended March 31, 1995 and
the year ended September 30, 1994, respectively. Quest for Value
Distributors, Inc. ("QFD"), the Fund's distributor, has no present
intention of charging the full service fee of 0.25% of average annual
net assets.
Hypothetical Expenses
To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have been created. Assume that you
make a $1,000 investment in either the Fund or OPNY or the new combined
fund and that the annual return is 5% and that the operating expenses for
each fund are the ones shown in the chart above for the 12 months ended
September 30, 1994 and the 6 months ended March 31, 1995.
For the 12 months ended September 30, 1994, if you were to redeem your
shares at the end of each period shown below, your investment would incur
the following expenses by the end of each period shown:
12 months ended September 30, 1994
1 year 3 years 5 years 10 years
Oppenheimer New York
Tax-Exempt Fund
Class A Shares $56 $74 $ 93 $149
Class B Shares $67 $82 $110 $155(1)
Class C Shares $27 $52 $ 90 $195(2)
New York Tax-
Exempt Fund $54 $69 $ 84 $129
Pro Forma Combined
Fund
Class A Shares $56 $74 $ 93 $149
Class B Shares $67 $82 $109 $155(1)
Class C Shares $27 $52 $ 90 $195(2)
If you did not redeem your investment, it would incur the following
expenses:
12 months ended September 30, 1994
1 year 3 years 5 years 10 years
Oppenheimer New York
Tax-Exempt Fund
Class A Shares $56 $74 $93 $149
Class B Shares $17 $52 $89 $154(1)
Class C Shares $17 $52 $90 $195(2)
New York Tax-
Exempt Fund $54 $69 $84 $129
Pro Forma Combined
Fund
Class A Shares $56 $74 $93 $149
Class B Shares $17 $52 $90 $155(1)
Class C Shares $17 $52 $90 $195(2)
For the six months ended March 31, 1995, if you were to redeem your shares
at the end of each period show below, your investment would incur the
following expenses by the end of each period shown:
6 months ended March 31, 1995
1 year 3 years 5 years 10 years
Oppenheimer New York
Tax-Exempt Fund
Class A Shares $56 $75 $ 94 $152
Class B Shares $67 $83 $111 $158(1)
Class C Shares $27 $53 $ 91 $198(2)
New York Tax-
Exempt Fund $56 $75 $ 95 $153
Pro Forma Combined
Fund
Class A Shares $56 $75 $ 94 $152
Class B Shares $67 $83 $111 $158(1)
Class C Shares $27 $53 $ 91 $198(2)
If you did not redeem your investment, it would incur the following
expenses:
6 months ended March 31, 1995
1 year 3 years 5 years 10 years
Oppenheimer New York
Tax-Exempt Fund
Class A Shares $56 $75 $95 $153
Class B Shares $17 $53 $91 $158(1)
Class C Shares $17 $53 $91 $198(2)
New York Tax-
Exempt Fund $56 $75 $95 $153
Pro Forma Combined
Fund
Class A Shares $56 $75 $94 $153
Class B Shares $17 $53 $91 $158(1)
Class C Shares $17 $53 $91 $198(2)
(1)The Class B expenses in years seven through ten for OPNY are based on
the OPNY Class A expenses shown above, because OPNY automatically
converts Class B shares into Class A shares after six years. Long-term
Class B shareholders of OPNY could pay the economic equivalent of more
than the maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge and
contingent deferred sales charge. The automatic conversion of OPNY
Class B shares to OPNY Class A shares is designed to minimize the
likelihood that this will occur.
(2)Because of the asset-based sales charge imposed on Class C shares of
OPNY, long-term shareholders of Class C shares could bear expenses that
would be the economic equivalent of an amount greater than the maximum
front-end sales charges permitted under applicable regulatory
requirements.
SYNOPSIS
The following is a synopsis of certain information contained or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of the Fund to assist them
in determining whether to approve the Reorganization. This synopsis is
only a summary and is qualified in its entirety by the more detailed
information contained or incorporated by reference in this Proxy Statement
and Prospectus and the Exhibits hereto. Shareholders should carefully
review this Proxy Statement and Prospectus and the Exhibits hereto in
their entirety and, in particular, the current Prospectus of OPNY which
accompanies this Proxy Statement and Prospectus and is incorporated by
reference herein.
Parties to the Reorganization
OPNY is a diversified, open-end, management investment company organized
as a Massachusetts business trust in 1984. OPNY is located at Two World
Trade Center, New York, New York 10048-0203. Oppenheimer Management
Corporation ("OMC") acts as investment adviser to OPNY. Oppenheimer Funds
Distributor, Inc. ("OFDI"), a subsidiary of OMC, acts as the distributor
of OPNY's shares. Additional information about OPNY is set forth below.
The Fund is a series of Quest for Value Family of Funds (the "Trust"), an
open-end, management investment company organized as a Massachusetts
business trust in 1987. The Fund commenced operations on August 14, 1990.
The Fund is located at One World Financial Center, New York, New York
10281. QVA acts as investment adviser to the Fund. QVD acts as the
distributor of the Fund's shares. QVA and QVD are majority-owned
subsidiaries of Oppenheimer Capital, an institutional investment manager.
OMC is not related to Oppenheimer Capital, nor its affiliated, the
brokerage firm Oppenheimer & Co., Inc. Additional information about the
Fund is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of the Fund to OPNY in exchange for Class A shares of OPNY
and the assumption by OPNY of certain liabilities of the Fund. The
Reorganization Agreement also provides for the distribution of OPNY Class
A shares to the Fund shareholders in complete liquidation of the Fund.
As a result of the Reorganization, each Fund shareholder will receive that
number of full and fractional OPNY Class A shares equal in value to such
shareholder's pro rata interest in the net assets transferred to OPNY as
of the Valuation Date (as hereinafter defined). For further information
about the Reorganization, see "Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the Reorganization -
Reasons for the Reorganization," the Board, including the trustees who are
not "interested persons" of the Trust (the "Independent Trustees"), as
that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), has concluded that the Reorganization is in the best
interests of the Fund and its shareholders and that the interests of
existing Fund shareholders will not be diluted as a result of the
Reorganization, and recommends approval of the Reorganization by Fund
shareholders. The Board of Trustees of OPNY has also approved the
Reorganization and determined that the interests of the existing
shareholders of OPNY will not be diluted as a result of the
Reorganization. If the Reorganization is not approved, the Fund will
continue in existence and the Board will determine whether to pursue
alternative actions. "Approval of the Reorganization" sets forth certain
information with respect to the background of the Reorganization,
including other transactions and agreements entered into, or contemplated
to be entered into, by OMC, QVA and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of a
majority of the outstanding shares of the Fund represented in person or
by proxy at the Meeting and entitled to vote at the Meeting. See
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, the Fund and OPNY
will have received an opinion to the effect that the Reorganization will
qualify as a tax-free reorganization for Federal income tax purposes. As
a result of such tax-free reorganization, no gain or loss would be
recognized by the Fund, OPNY, or the shareholders of either fund for
Federal income tax purposes as a result of the Reorganization. For
further information about the tax consequences of the Reorganization, see
"Approval of the Reorganization - Tax Aspects of the Reorganization"
below.
Investment Objectives and Policies
The investment objectives of OPNY and the Fund are similar. OPNY seeks
the maximum current income, and the Fund seeks as high a level of current
income, exempt from Federal, New York State and New York City individual
income taxes as is consistent with preservation of capital. Both funds
seek their investment objective by investing, under normal market
conditions, at least 80% of their respective total (as to OPNY) or net (as
to the Fund) assets in Municipal Obligations, and at least 65% of their
respective total (as to OPNY) or net (as to the Fund) assets in New York
Municipal Obligations.
Municipal Obligations are debt obligations issued by states, territories
and possessions of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities or multi-
state agencies or authorities, the interest from which is, in the opinion
of bond counsel to the issuer, exempt from Federal income tax. New York
Municipal Obligations are obligations of the State of New York and its
political subdivisions, and their respective agencies, authorities or
instrumentalities, the interest from which is, in the opinion of bond
counsel to the issuer, not subject to New York individual income tax.
The Fund invests primarily in Municipal Obligations and New York Municipal
Obligations rated investment grade or, if unrated, determined by QVA to
be of comparable quality. [Effective August 29, 1995,] no more than 25%
of OPNY's total assets may be invested in Municipal Obligations rated
below investment grade (or, if unrated, judged by OMC to be comparable to
municipal securities rated below investment grade).
Each of the funds may also write covered calls (and, as to the Fund, write
covered puts) to seek income. Each of the funds may use hedging
instruments to try to manage investment risks. OPNY may also use certain
derivative investments, such as inverse floating rate municipal bonds, to
seek income.
Although the respective investment objectives of the Fund and OPNY are
generally similar, shareholders of the Fund should consider certain
differences in the policies, practices and restrictions employed to seek
to achieve such objectives. See "Comparison Between OPNY and the Fund -
Investment Objectives and Policies."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from their investment
advisers pursuant to the terms of their respective investment advisory
agreements. The management fee is payable to the investment advisers
monthly and is computed on the net asset value of each fund as of the
close of business each day.
OPNY pays a management fee which declines on additional assets as OPNY
increases its assets, at the annual rate of 0.60% of the first $200
million of net assets, 0.55% of the next $100 million, 0.50% of the next
$200 million, 0.45% of the next $250 million, 0.40% of the next $250
million, and 0.35% of net assets over $1 billion. The Fund pays QVA a
management fee at the annual rate of 0.50% of net assets.
OPNY, for each of its Class A, Class B and Class C shares, and the Fund
have each adopted separate service and/or distribution plans pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to the plans, Class A shares of
OPNY are authorized to reimburse, and Class B and Class shares of OPNY and
shares of the Fund are authorized to compensate, OFDI and QVD,
respectively, on a quarterly basis for costs incurred by such distributor
in connection with the distribution of shares and the servicing of
shareholder accounts that hold the fund's shares. The current maximum
annual fee payable by shares of OPNY and the Fund pursuant to their
service and/or distribution plans is: (i) as to Class A shares of OPNY and
the Fund, an annual 0.25% (as a service fee), (ii) as to Class B shares
of OPNY, an annual 1.00% (consisting of a 0.25% service fee and 0.75%
annual "asset-based sales charge") and (iii) as to Class C shares of OPNY,
an annual 1.00% (consisting of a 0.25% service fee and 0.75% annual
"asset-based sales charge"), respectively, of average annual net assets.
The Fund is authorized to pay QVD a maximum service fee at the annual rate
of 0.25% of the Fund's net assets. Prior to September 1, 1994, QVD
assumed all distribution-related expenses without compensation from the
Fund. Since September 1, 1994, the Fund has paid QVD a service fee under
the 12b-1 plan at the annual rate of 0.10% of average annual net assets.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of OPNY may be made through the
distributor for OPNY or through any dealer, broker or financial
institution that has a sales agreement with OFDI. Initial purchases of
shares of the Fund must be made through a broker or dealer having a sales
agreement with QVD; subsequent purchases may also be made directly through
QVD by mailing payments to the Fund's transfer agent. In addition, a
shareholder of OPNY may purchase shares automatically from an account at
a domestic bank or other financial institution under the "OppenheimerFunds
AccountLink" service. Class A shares of both OPNY and the Fund are sold
subject to an initial sales charge. Class B and Class C shares of OPNY
are generally sold without a front-end sales charge but may be subject to
a CDSC upon redemption as described below. See "Comparative Fee Tables -
- - Transaction Charges," above for a complete description of such sales
charges.
The Class A shares of OPNY to be issued under the Reorganization Agreement
will be issued by OPNY at net asset value without a sales charge. The
sales charge on Class A shares of OPNY will only affect shareholders of
the Fund to the extent that they desire to make additional purchases of
Class A shares of OPNY in addition to the shares which they will receive
as a result of the Reorganization. Future dividends and capital gain
distributions of OPNY, if any, may be reinvested without sales charge into
Class A shares of OPNY or of any other fund within the OppenheimerFunds
family. OPNY has undertaken that any Fund shareholders entitled to a
waiver of sales charges or an exemption from sales charges pursuant to
Fund policy as stated in its Prospectus dated December 1, 1994 shall
continue to be entitled to such waiver or exemption as a shareholder of
OPNY, or any other Oppenheimer fund upon appropriate prospectus disclosure
by that fund, after the Reorganization so long as they continue to meet
the applicable eligibility criteria.
Exchanges. Shareholders of OPNY and the Fund may exchange their shares
at net asset value for shares of the same class of mutual funds
distributed by OFDI and QVD, respectively, subject to certain conditions.
For purposes of the exchange privilege, shares without a class designation
are considered as "Class A" shares. OPNY offers automatic exchange plans
providing for systematic exchanges from OPNY of a specified amount for
shares of other funds within the OppenheimerFunds family.
Redemptions. Class A shares of OPNY and shares of the Fund may be
redeemed without charge at their respective net asset values per share
calculated after the redemption order is received and accepted. Certain
large investments in Class A shares of OPNY that were exempt from the
front-end sales charge upon purchase may be subject to a CDSC upon
redemption. Such CDSC will be waived for shares issued pursuant to the
Reorganization. See "Comparative Fee Tables - Transaction Charges,"
above. Class B shares of OPNY may be redeemed at their net asset value
per share, subject to a maximum CDSC of 5.0% for redemptions occurring
within six years of purchase. Class C shares of OPNY may be redeemed at
their net asset value per share, subject to a CDSC of 1% if such shares
are redeemed during the first 12 months following their purchase.
Shareholders of OPNY may reinvest redemption proceeds of Class A shares
on which an initial sales charge was paid, or Class B shares that were
purchased by reinvesting dividends or distributions or that were subject
to the Class B CDSC when redeemed, within six months of a redemption at
net asset value in Class A shares of OPNY or any of numerous mutual funds
within the OppenheimerFunds family. This reinvestment privilege is not
available for Class C shares of OPNY. Shareholders of the Fund that
reinvest redemption proceeds in another fund in the Quest Fund family
within 60 days will be reinstated as a shareholder with the same
privileges regarding the non-payment of sales charges that apply to
exchanges. This reinvestment privilege may be exercised only once each
calendar year.
Shareholders of the funds may redeem their shares by written request or
by telephone request in certain stated amounts, or they may arrange to
have share redemption proceeds wired, for a fee, to a pre-designated
account at a U.S. bank or other financial institution that is an automated
clearing house ("ACH") member. Checkwriting privileges on Fund shares and
on Class A shares of OPNY are also available. Upon 30 days' notice, the
Fund may redeem accounts that, because of redemptions, are valued at less
than $500. OPNY may redeem accounts valued at less than $200 if the
account has fallen below such stated amount for reasons other than market
value fluctuations. OPNY and the Fund offer automatic withdrawal plans
providing for systematic withdrawals of a specified amount from the fund
account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in OPNY,
shareholders should carefully consider the following summary of risk
factors relating to both OPNY and the Fund, in addition to the other
information set forth in this Proxy Statement and Prospectus. A more
complete description of risk factors for each fund is set forth in the
documents incorporated by reference herein, including the Prospectuses of
the funds and their respective Statements of Additional Information. As
a general matter, OPNY and the Fund are intended for investors seeking
current income exempt from Federal income tax and not for investors
seeking capital appreciation. There is no assurance that either OPNY or
the Fund will achieve its investment objective and investment in the funds
is subject to investment risks, including the possible loss of the
principal amount invested.
Investments in Municipal Obligations
Both funds seek their investment objective by investing at least 80% of
their respective total (as to OPNY) or net (as to the Fund) assets in
Municipal Obligations and at least 65% of their total (as to OPNY) or net
(as to the Fund) assets in New York Municipal Obligations.
Because both funds concentrate their investments in New York Municipal
Obligations, a default or financial crisis relating to any of such issuers
could adversely affect the market value and marketability of such
obligations and the interest income and repayment of principal from them
to the Fund. OPNY is classified as a diversified investment company under
the Investment Company Act of 1940. The Fund is a non-diversified
investment company whereby the proportion of its assets that may be
invested in the securities of a single issuer is not limited by the
Investment Company Act. The investment in the Fund therefore will entail
greater risk than an investment in a diversified investment company, such
as OPNY, because a higher percentage of investments among fewer issuers
may result in greater fluctuation in the total market value of the fund's
portfolio, and economic, political or regulatory developments may have a
greater impact on the value of the Fund's portfolio than would be the case
if the portfolio were diversified among more issuers.
Dividends paid by either fund derived from interest attributable to
municipal obligations will be exempt from Federal and New York individual
income taxes. Any dividends derived from net interest income on taxable
investments will be taxable as ordinary income (and any capital gains
distributions will be taxable as capital gains) when distributed to
shareholders.
Under normal market conditions, OPNY may invest up to 20% of its assets
in taxable investments, including certain temporary defensive investments,
hedging instruments, repurchase agreements and private activity municipal
securities (the interest from which may be subject to Federal alternative
minimum tax). The Fund expects to maintain liquidity through the purchase
of short-term municipal obligations rated at the time of purchase within
the two highest ratings assigned by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("Standard & Poor's") or Fitch
Investors Service, Inc. ("Fitch"). In times of unstable economic or
market conditions, both funds may assume a temporary defensive position
by investing some or all of their assets in short-term taxable money
market instruments, including repurchase agreements. To the extent either
fund assumes a temporary defensive position, a portion of its
distributions may be subject to Federal and state income taxes and it may
not achieve its objective.
The Fund invests primarily in Municipal Obligations rated at the time of
purchase within the four highest ratings assigned by Moody's, Standard &
Poor's or Fitch. These ratings are referred to as "investment grade."
[Effective August 29, 1995,] OPNY may invest up to 25% of its total assets
in municipal obligations rated less than investment grade at the time of
purchase. Municipal Obligations rated less than investment grade have an
increased credit risk that the issuer may not make interest or principal
payments as they become due. A subsequent downgrade in a rating to less
than investment grade will not require either the Fund or OPNY to dispose
of a security.
Inverse Floaters. OPNY may invest in inverse floater variable rate bonds,
a type of "derivative investment." In general, a derivative investment
is a specially-designed investment whose performance is linked to the
performance of another investment or security, such as an option, future
or index. In the broadest sense, derivative investments include exchange-
traded options and futures contracts, which both OPNY and the Fund may use
for hedging purposes. Other derivative investments, such as inverse
floaters, offer the potential for increased income and principal value.
Yields on inverse floaters move in the opposite direction as short-term
interest rates change. A risk of inverse floaters is that their market
value could be expected to vary to a much greater extent than the market
value of other municipal securities that are not derivative investments
but that have similar credit quality, redemption provisions and
maturities. OPNY anticipates that under normal circumstances it will
invest no more than 10% of its total assets in inverse floaters.
Credit Risk and Interest Rate Risk
The values of municipal securities will vary as a result of changing
evaluations by rating services and investors of the ability of the issuers
of such securities to meet interest and principal payments. Such values
will also change in response to changes in prevailing interest rates.
Should interest rates rise, the values of outstanding municipal securities
will probably decline and (if purchased at principal amount) would sell
at a discount. If interest rates fall, the values of outstanding
municipal securities will probably increase and (if purchased at principal
amount) would sell at a premium. Changes in the values of municipal
securities owned by the Fund or OPNY arising from these or other factors
will not affect interest income derived from those securities but will
affect the Fund's and OPNY's net asset values per share.
Neither OPNY nor the Fund will invest 25% or more of its total assets in
any one industry. It is possible that the Fund from time to time will
invest more than 25% of its total assets in a particular segment of the
municipal securities market, such as hospital revenue bonds, housing
agency bonds, industrial development bonds or airport bonds, or in
securities the interest on which is paid from revenues of a similar type
of project. In such circumstances, economic, business, political or other
changes affecting one bond (such as proposed legislation affecting the
financing of a project; shortages or price increases of needed materials;
or declining markets or needs for the projects) might also affect other
bonds in the same segment, thereby potentially increasing market risk.
OPNY will not invest more than 25% of its total assets in securities
paying interest from revenues of similar types of projects. Neither the
Fund nor OPNY will invest more than 25% of its respective total assets in
securities of issuers located in the same state.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may invest up to 10% of their respective net assets in
repurchase agreements having a maturity beyond seven days. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the funds may experience costs
or delays in disposing of the collateral and may experience losses if
there is any delay in doing so. The Fund has no present intention of
entering into repurchase agreements, except for temporary defensive
purposes.
Options, Futures and Interest Rate Swaps
The funds may purchase and sell certain kinds of put and call options,
futures, and options on futures, securities and broadly-based municipal
bond indices. OPNY may also enter into interest rate swap agreements with
respect to securities it holds, for hedging purposes. These instruments
are all referred to as "hedging instruments". The funds may use certain
of these instruments, such as writing covered call and put options, to
generate income in the form of premiums received from the purchaser of the
option. Hedging instruments and their special risks are described below
in "Comparison Between OPNY and the Fund".
Loans of Portfolio Securities
To raise cash for liquidity purposes, OPNY may lend its portfolio
securities to certain types of eligible borrowers approved by the Board
of Trustees. Each loan must be collateralized in accordance with
applicable regulatory requirements. After any loan, the value of the
securities loaned must not exceed 25% of the value of OPNY's total assets.
There are some risks in connection with securities lending. OPNY might
experience a delay in receiving additional collateral to secure a loan,
or a delay in recovery of the loaned securities. OPNY presently does not
intend to engage in loans of securities in excess 5% of the value of its
total assets. The Fund is authorized to lend its portfolio securities,
but has no present intention of doing so.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
Oppenheimer Capital, the parent of QVA, the current investment adviser to
the Trust, in the course of a review of its business, recently concluded
that it should concentrate on its core investment management business and
not continue in the retail distribution of mutual funds. The retail
mutual fund market requires significant assets per fund to cover normal
costs, significant capital, investment in new products and services,
financing for Class B and Class C shares and sales support. Certain funds
advised by QVA other than the Fund offer Class B and Class C shares.
Sometime after this determination was made, representatives of OMC
approached Oppenheimer Capital about acquiring certain of its mutual fund
assets. Representatives of OMC, Oppenheimer Capital, QVD and QVA held
meetings beginning in April, 1995. Following the negotiation of the terms
of an acquisition agreement and related agreements, an acquisition
agreement (the "Acquisition Agreement") was executed by OMC, Oppenheimer
Capital, QVD and QVA on August 17, 1995.
The Reorganization described in this Proxy Statement and Prospectus is one
aspect of the overall Acquisition (as hereinafter defined) contemplated
by the Acquisition Agreement described below. The consummation of the
Acquisition is one condition, among others, to the closing of the
Reorganization. Accordingly, unless the parties otherwise agree, the
Reorganization may not be effected, despite shareholder approval, if the
Acquisition does not close. In such case, the Fund will continue in
existence and the Board will take such further action as it, in its
discretion, deems necessary or advisable.
Acquisition Agreement
The Acquisition Agreement contemplates the sale to OMC of substantially
all the assets (the "Purchased Assets") of the Companies relating to
twelve Quest For Value mutual funds (the "Acquired Funds") and the
assumption by OMC of certain liabilities of the Companies with respect to
the Acquired Funds (the "Assumed Liabilities") (the foregoing, the
"Acquisition"). The Acquisition Agreement contemplates that six of the
Acquired Funds (including the Fund) will be reorganized with certain
mutual funds currently advised by OMC (the "Reorganized Funds") and the
remaining six Acquired Funds will enter into investment advisory
agreements with OMC (or its designee) and OMC (or its designee) will
thereupon enter into subadvisory agreements with QVA for the benefit of
each such fund (the "Continuing Funds").
A condition to OMC's obligation to close under the Acquisition Agreement
(the "Acquisition Closing") is the approval of the reorganizations of the
Reorganized Funds (including the Reorganization described in this Proxy
Statement and Prospectus) and approval of the investment advisory
agreements and subadvisory agreements with the Continuing Funds by
shareholders that have in the aggregate at least 75% of the closing net
assets of all Acquired Funds. A condition to the obligation of the
Companies to close under the Acquisition Agreement is that the directors
or trustees of the Continuing Funds and the Reorganized Funds have adopted
a resolution that for a period of three years after the Acquisition
Closing, at least 75% of the members of the board of each such fund will
not be interested persons of the investment adviser or sub-adviser of such
fund or interested persons of QVA, the predecessor investment adviser as
to the Continuing Funds. The Acquisition Agreement sets forth certain
other closing conditions.
The purchase price for the Purchased Assets will be calculated pursuant
to the formula set forth in Exhibit B hereto. If the Acquisition had been
consummated on July 31, 1995, QVA estimates that the purchase price would
have been approximately $____ million. The actual purchase price may be
[higher or] lower depending upon changes in the net asset value of the
Acquired Funds.
Board Approval of the Reorganization.
At its meeting on June 22, 1995, the Board, including the Independent
Trustees, unanimously approved the Reorganization and the Reorganization
Agreement, determined that the Reorganization is in the best interests of
the Fund and its shareholders and resolved to recommend that Fund
shareholders vote for approval of the Reorganization. The Board further
determined that the Reorganization would not result in dilution of the
Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed, with
the assistance of independent legal counsel, materials furnished by OMC
and QVA. These materials included financial statements as well as other
written information regarding OMC and its personnel, operations, and
financial condition. The Board also reviewed the same type of information
about QVA. Consideration was given to comparative information concerning
other mutual funds with similar investment objectives, including
information prepared by Lipper Analytical Services, Inc. The Board also
considered information with respect to the relative performance of the
funds. The Board also reviewed and discussed the terms and provisions of
the investment advisory agreement pursuant to which OMC provides
management services to OPNY and compared it to the existing management
arrangements for the Fund as well as the management arrangements of other
mutual funds, particularly with respect to the allocation of various types
of expenses, levels of fees and resulting expense ratios.
In reaching its determination, the Board gave careful consideration to the
following factors, among others: the Reorganization would afford the
shareholders of the Fund the capabilities and resources of OMC and its
affiliates in the area of investment management, distribution, shareholder
servicing and marketing; the ability of the shareholders of the Fund to
exchange their shares for a wider variety of portfolios within the
OppenheimerFunds family with differing investment objectives than are
currently available to shareholders of the Fund; the terms and conditions
of the Reorganization (including that there would be no sales charge
imposed in effecting the Reorganization, that the Reorganization was
intended to qualify as a tax-free exchange, and that all expenses of the
Reorganization would be paid by QVA and OMC in the amounts incurred by the
respective fund); and the substantial similarity of the investment
objectives, policies and methods of the Fund and OPNY.
The Board also considered that the Class A annual operating expenses of
OPNY are lower, as a percentage of assets, and would be lower on a pro
forma basis after giving effect to the Reorganization, than the operating
expenses of the Fund, which will result in a savings to Fund shareholders.
The current expense ratio for the Fund, based on voluntary expense
limitations and fee waivers in effect since April 30, 1995, is 1.00% of
average daily net assets. For the six months ended March 31, 1995 and the
12 months ended September 30, 1994, the expense ratios for OPNY were 0.90%
and 0.86%, respectively, of average annual net assets for Class A shares.
For the six months ended March 31, 1995 and the 12 months ended September
30, 1994, on a pro forma basis, after giving effect to the Reorganization,
the expense ratio for OPNY as the surviving fund would be 0.90% and 0.86%,
respectively, of average annual net assets for Class A shares.
In addition, the Board determined that the purchase, exchange and
redemption procedures and privileges provided by OPNY are comparable to
those of the Fund and that Fund shareholders currently exempt from payment
of certain transaction-based sales charges will continue to be so exempt
as shareholders of OPNY.
The OPNY Board of Trustees, including the trustees who are not "interested
persons" of OPNY, unanimously approved the Reorganization and the
Reorganization Agreement and determined that the Reorganization is in the
best interests of OPNY and its shareholders. The OPNY Board further
determined that the Reorganization would not result in dilution of the
OPNY's shareholders' interests. The OPNY Board considered, among other
things, that an increase in OPNY's asset base as a result of the
Reorganization should benefit OPNY shareholders due to the economies of
scale available to a larger fund. These economies of scale should result
in lower costs per account for each OPNY shareholder through lower
operating expenses and transfer agency expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified in its
entirety by reference to the Reorganization Agreement (a copy of which is
set forth in full as Exhibit A to this Proxy Statement and Prospectus).
The Reorganization Agreement contemplates a reorganization under which (i)
substantially all of the assets of the Fund would be transferred to OPNY
in exchange for Class A shares of OPNY and the assumption by OPNY of
certain liabilities of the Fund, (ii) the Class A shares of OPNY would be
distributed among shareholders of the Fund in complete liquidation of the
Fund and (iii) the outstanding shares of the Fund would be cancelled.
Prior to the Closing Date (as hereinafter defined), the Fund will endeavor
to discharge all of its liabilities and obligations when and as due prior
to such date. OPNY will not assume any liabilities or obligations of the
Fund other than those reflected on an unaudited statement of assets and
liabilities of the Fund prepared as of the Valuation Date and that are
agreed to by OPNY. In this regard, the Fund will retain a cash reserve
(the "Cash Reserve") in an amount which is deemed sufficient in the
discretion of the Board for the payment of (a) the Fund's expenses of
liquidation and (b) its liabilities, other than those assumed by OPNY.
The number of full and fractional Class A shares of OPNY to be issued to
the Fund will be determined on the basis of their relative net asset
values per share, computed as of the close of business of the New York
Stock Exchange, Inc. on ______________, 1995 or at such time on such
earlier or later date as may be mutually agreed upon in writing (the
"Valuation Date"). The Closing Date for the Reorganization will be the
next business day following the Valuation Date.
OMC will utilize the valuation procedures set forth in the Prospectus and
Statement of Additional Information of OPNY to determine the value of the
Fund's assets to be transferred to OPNY pursuant to the Reorganization,
the value of OPNY's assets and the net asset value of Class A shares of
OPNY. Such values will be computed by OMC as of the Valuation Date in a
manner consistent with its regular practice in pricing OPNY.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, after the closing, OPNY will
be in compliance with all of its investment policies and restrictions.
The Fund will recognize capital gain or loss on any sales made pursuant
to this condition. As noted in "Tax Aspects of the Reorganization" below,
if the Fund realizes net gain from the sale of securities, such gain, to
the extent not offset by capital loss carry-forwards, will be distributed
to shareholders prior to the Closing Date and will be taxable to
shareholders as capital gain.
Contemporaneously with the closing or as soon thereafter as is
practicable, the Fund will be liquidated and the Fund will distribute or
cause to be distributed pro rata to Fund shareholders of record as of the
close of business on the Valuation Date the full and fractional Class A
shares of OPNY received by the Fund. Upon such liquidation, all issued
and outstanding shares of the Fund will be cancelled on the Fund's books
and Fund shareholders will have no further rights as shareholders of the
Fund. To assist the Fund in the distribution of OPNY shares, OPNY will,
in accordance with a shareholder list supplied by the Fund, cause OPNY's
transfer agent to credit and confirm an appropriate number of Class A
shares of OPNY to each shareholder of the Fund. Certificates for shares
of OPNY will be issued upon written request of a former shareholder of the
Fund but only for whole shares with fractional shares credited to the name
of the shareholder on the books of OPNY. Former shareholders of the Fund
who wish certificates representing their shares of OPNY must, after
receipt of their confirmations, make a written request to Oppenheimer
Shareholder Services, P.O. Box 5270, Denver, Colorado 80217. Shareholders
of the Fund holding certificates representing their shares will not be
required to surrender their certificates to anyone in connection with the
Reorganization. After the Reorganization, however, it will be necessary
for such shareholders to surrender such certificates in order to redeem,
transfer or exchange any shares of OPNY. After the closing of the
Reorganization, the Fund will not conduct any business expect in
connection with the winding up of its affairs.
Under the Reorganization Agreement, within one year after the Closing
Date, the Fund shall: either (i) transfer any remaining amount of the Cash
Reserve to OPNY, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders of the
Fund who were such on the Valuation Date. Such remaining amount shall be
deemed to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per
share of the number of Fund shares outstanding on the Valuation Date.
The consummation of the Reorganization is subject to the conditions set
forth in the Reorganization Agreement, including, without limitation,
approval of the Reorganization by the Fund's shareholders.
Notwithstanding approval of the Fund's shareholders, the Reorganization
may be terminated at any time at or prior to the Closing Date: (i) by
mutual written consent of the Trust, on behalf of the Fund, and OPNY, (ii)
by the Trust, on behalf of the Fund, or OPNY if the closing shall not have
occurred on or before February 29, 1996 or, if later, two business days
after the date of any Fund shareholders' meeting called for the purpose
of approving the Reorganization which was convened prior to ____ but
adjourned to a date after _______, or (iii) by the Trust, on behalf of the
Fund, or OPNY upon a material breach by the other (and, with respect to
termination by OPNY, a material breach by QVA) of any representation,
warranty, covenant or agreement contained therein to be performed on or
prior to the Closing Date, if a condition therein expressed to be
precedent to the obligations of the terminating party has not been met and
it reasonably appears that it will not or cannot be met prior to the
Closing Date, or the Acquisition is not consummated. Termination of the
Reorganization Agreement will terminate all obligations of the parties
thereto (other than a confidentiality obligation of OPNY with respect to
information relating to the Fund and the obligation of OPNY to return
certain books and records to the Fund) without liability except, in the
event of a termination pursuant to (iii) above, any party in breach (other
than a breach due to Fund shareholders not approving the Reorganization)
of the Reorganization Agreement (or the Acquisition Agreement, if
applicable) will, upon demand, reimburse the non-breaching party for all
reasonable out-of-pocket fees and expenses incurred in connection with the
transactions contemplated by the Reorganization Agreement.
Approval of the Reorganization will require the vote specified below in
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the shareholders
of the Fund, the trustees of the Trust will consider other possible
courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, the Fund will declare a dividend in an
amount large enough so that it will have declared a dividend of all of its
investment company taxable income and net capital gain, if any, for the
taxable period ending with its dissolution (determined without regard to
any deduction for dividends paid). Such dividends will be included in the
taxable income of the Fund's shareholders as ordinary income and capital
gain, respectively.
The exchange of the assets of the Fund for Class A shares of OPNY and the
assumption by OPNY of certain liabilities of the Fund is intended to
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund has represented to Price Waterhouse LLP, tax adviser
to the Fund, that to the Fund's knowledge, there is no plan or intention
by any Fund shareholder who owns 5% or more of the Fund's outstanding
shares, and, to the Fund's best knowledge, there is no plan or intention
on the part of the remaining Fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of OPNY shares received in the
transaction that would reduce the Fund shareholders' ownership of Class
A shares of OPNY to a number of shares having a value, as of the Closing
Date, of less than 50% of the value of all the formerly outstanding Fund
shares as of the same date. The Fund and OPNY have each further
represented to the fact that, as of the Closing Date, the Fund and OPNY
will qualify as regulated investment companies or will meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, OPNY and the Fund
will receive the opinion of Price Waterhouse LLP to the effect that, based
on the Reorganization Agreement, the above representations, existing
provisions of the Code, Treasury Regulations issued thereunder, current
Revenue Rulings, Revenue Procedures and court decisions, for Federal
income tax purposes:
1. The transfer of substantially all of the Fund's assets in
exchange for Class A shares of OPNY and the assumption by OPNY of
certain identified liabilities of the Fund followed by the
distribution by the Fund of Class A shares of OPNY to the Fund
shareholders in exchange for their Fund shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code,
and the Fund and OPNY will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by OPNY upon the receipt of
the assets of the Fund solely in exchange for Class A shares of OPNY
and the assumption by OPNY of the identified liabilities of the Fund.
3. No gain or loss will be recognized by the Fund upon the transfer
of the assets of the Fund to OPNY in exchange for Class A shares of
OPNY and the assumption by OPNY of the identified liabilities or upon
the distribution of Class A shares of OPNY to the Fund shareholders
in exchange for the Fund shares.
4. No gain or loss will be recognized by the Fund shareholders upon
the exchange of the Fund shares for the Class A shares of OPNY.
5. The aggregate tax basis for Class A shares of OPNY received by
each Fund shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Fund shares held by each such Fund
shareholder immediately prior to the Reorganization.
6. The holding period of Class A shares of OPNY to be received by
each Fund shareholder will include the period during which the Fund
shares surrendered in exchange therefor were held (provided such Fund
shares were held as capital assets on the date of the
Reorganization).
7. The tax basis of the assets of the Fund acquired by OPNY will be
the same as the tax basis of such assets of the Fund immediately
prior to the Reorganization.
8. The holding period of the assets of the Fund in the hands of OPNY
will include the period during which those assets were held by the
Fund.
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the Federal
income tax consequences of the Reorganization, shareholders of the Fund
should also consult their tax advisers as to state and local tax
consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of OPNY and the Fund and
indicates the pro forma combined capitalization as of March 31, 1995 as
if the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer New York
Tax-Exempt Fund
Class A Shares $668,475,384 54,841,749 $12.19
Class B Shares $ 83,030,989 6,808,905 $12.19
New York Tax-Exempt
Fund $30,705,617 2,901,816 $10.58
Pro Forma Combined
Fund
Class A Shares $699,172,290 57,360,668 $12.19
Class B Shares $ 83,030,989 6,808,905 $12.19
Class C Shares
- ------------------
* Reflects issuance of 2,518,919 Class A shares of OPNY in a tax-free
exchange for the net assets of the Fund, aggregating $30,705,617 for
shares of the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at March 31, 1995 would have been 0.90% with respect to
Class A shares and 1.67% with respect to Class B shares.
COMPARISON BETWEEN OPNY AND THE FUND
Comparative information about OPNY and the Fund is presented below.
Complete information about OPNY and the Fund is set forth in their
respective Prospectuses (which, as to OPNY, accompanies this Proxy
Statement and Prospectus) and is incorporated herein by reference. To
obtain additional copies, see "Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
OPNY seeks the maximum current income, and the Fund seeks as high a level
of current income, exempt from Federal, New York State and New York City
individual income taxes as is consistent with preservation of capital.
Both funds seek their investment objective by investing, under normal
market conditions, at least 80% of total (as to OPNY) or net (as to the
Fund) assets in Municipal Obligations, and at least 65% of total (as o
OPNY) or net (as to the Fund) assets in New York Municipal Obligations.
Municipal Obligations are debt obligations issued by or on behalf of the
states, the District of Columbia, their political subdivisions or any
commonwealths, territories or possessions of the United States, or their
respective agencies, instrumentalities or authorities, the interest from
which is not subject to Federal individual income tax in the opinion of
bond counsel to the respective issuer at the time of issue. New York
Municipal Obligations are obligations of the State of New York and its
political subdivisions, and their respective agencies, authorities or
instrumentalities, the interest from which is, in the opinion of bond
counsel to the issuer, not subject to New York individual income tax.
Dividends paid by either fund derived from interest attributable to
municipal obligations will be exempt from Federal and New York individual
income taxes. Any dividends derived from net interest income on taxable
investments will be taxable as ordinary income (and any capital gains
distributions will be taxable as capital gains) when distributed to
shareholders.
Under normal market conditions, OPNY may invest up to 20% of its assets
in taxable investments, including certain temporary defensive investments,
hedging instruments, repurchase agreements and private activity municipal
securities (the interest from which may be subject to Federal alternative
minimum tax). The Fund expects to maintain liquidity through the purchase
of short-term municipal obligations rated at the time of purchase within
the two highest ratings assigned by Moody's, Standard & Poor's or Fitch.
In times of unstable economic or market conditions, both funds may assume
a temporary defensive position by investing some or all of their assets
in short-term taxable money market instruments, including repurchase
agreements. To the extent either fund assumes a temporary defensive
position, a portion of its distributions may be subject to Federal and
state income taxes and it may not achieve its objective.
The Fund invests primarily in Municipal Obligations rated at the time of
purchase within the four highest ratings assigned by Moody's, Standard &
Poor's or Fitch. These ratings are referred to as "investment grade."
[Effective August 29, 1995,] OPNY may invest up to 25% of its total assets
in municipal obligations rated less than investment grade at the time of
purchase. Municipal Obligations rated less than investment grade have
an increased credit risk that the issuer may not make interest or
principal payments as they become due. A subsequent downgrade in a rating
to less than investment grade will not require either the Fund or OPNY to
dispose of a security.
Floating Rate and Variable Rate Obligations. Some of the municipal
securities both funds may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
Inverse Floaters. OPNY may invest in inverse floater variable rate bonds,
a type of derivative investment, because they offer the potential for
increased income and principal value. Yields on inverse floaters move in
the opposite direction as short-term interest rates change. OPNY
anticipates that under normal circumstances it will invest no more than
10% of its total assets in inverse floaters. A risk of inverse floaters
is that their market value could be expected to vary to a much greater
extent than the market value of other municipal securities that are not
derivative investments but that have similar credit quality, redemption
provisions and maturities.
Municipal Lease Obligations. Both the Fund and OPNY may invest in
municipal lease obligations. Lease obligations have developed as a means
for government issuers to acquire property and equipment without the
necessity of complying with the constitutional and statutory requirements
generally applicable for the issuance of debt. Certain lease obligations
contain "non-appropriation" clauses. Consequently, continued lease
payments on those lease obligations are dependent on future legislative
actions. If such legislative actions do not occur, the holders of the
lease obligation may experience difficulty in exercising their rights,
including disposition of the property. Certain of these lease obligations
may be deemed to be "illiquid" securities and their purchase would be
limited as described below in "Special Investment Methods - Illiquid and
Restricted Securities."
Participation Interests. Both funds may purchase participation interests
in municipal securities. A participation interest gives the fund an
undivided interest in the municipal obligation in proportion to its
investment. Participation interests are primarily dependent upon the
creditworthiness of the borrower for payment of interest and principal.
Participation interests may backed by letters of credit or guarantees to
assure repayment of principal, or may be collateralized by U.S. Government
securities. Certain participation interests, other than those with puts
exercisable within seven days, may be illiquid. See "Special Investment
Methods - Illiquid and Restricted Securities," below.
Non-Diversification. The Fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940 so that the
proportion of its assets that may be invested in the securities of a
single issuer is not limited by the Investment Company Act. OPNY is a
"diversified" investment company. However, both the Fund and OPNY intend
to conduct their operations so that each will qualify as a "regulated
investment company" for purposes of the Internal Revenue Code, which will
relieve both funds from liability for Federal income tax to the extent
that more than 90% of their respective earnings are distributed to
shareholders. Among the requirements for qualification as a "regulated
investment company" are that: (1) not more than 25% of the market value
of the fund's total assets will be invested in the securities of a single
issuer, and (2) with respect to 50% of the market value of the fund's
total assets, not more than 5% of the market value of its total assets may
be invested in the securities of a single issuer and the fund must not own
more than 10% of the outstanding voting securities of a single issuer.
Special Investment Methods
OPNY and the Fund may use the special investment methods summarized below.
When-Issued Securities. Both funds may purchase municipal obligations at
a stated price and yield on a "when-issued" basis, that is, for delivery
to the fund upon issuance, which may be later than the normal settlement
date for such securities. The funds generally would not pay for such
securities or start earning interest on them until they are received. At
time of delivery, the value of the securities may be more or less than
their value at the time of the transaction. Failure of the issuer to
deliver a security purchased by a fund on a when-issued basis may result
in the fund missing an opportunity to make an alternative investment. The
funds will maintain cash, U.S. Government securities or other liquid high
grade debt obligations in a segregated account with its custodian bank
equal in value to its respective obligation to purchase such securities.
Stand-By Commitments and Puts. The funds may acquire "stand-by
commitments" or "puts" with respect to municipal obligations held in their
portfolios. Under a stand-by commitment or put option, a fund would have
the right to sell specified securities at a specified price on demand to
the issuing broker-dealer or bank. The funds will acquire stand-by
commitments solely to facilitate portfolio liquidity and do not intend to
exercise their rights thereunder for trading purposes. The funds may pay
for stand-by commitments if such action is deemed necessary, thus
increasing to a degree the cost of the underlying municipal obligation and
similarly decreasing such security's yield to investors. Gains realized
in connection with stand-by commitments will be taxable. The funds may
purchase and exercise puts on municipal obligations. Puts give a fund the
right to sell securities held in the fund's portfolio at a specified
exercise price on a specified date. Any premium paid for the put is lost
if the put is not exercised.
Illiquid and Restricted Securities. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. OPNY and the
Fund will not invest more than 10% of their respective net assets in
illiquid or restricted securities. Illiquid securities include repurchase
agreements maturing in more than seven days, or certain participation
interests other than those with puts exercisable within seven days. In
addition, OPNY may not invest any portion of its assets in securities the
public sale of which would require registration under the Securities Act
of 1933.
Repurchase Agreements. Both OPNY and the Fund may enter into repurchase
agreements of seven days or less without limit, and may invest up to 10%
of their respective net assets in repurchase agreements having a maturity
beyond seven days. The Fund, however, has no present intention of
entering into repurchase agreements. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale price on
the delivery date, the fund may experience costs or delays in disposing
of the collateral and may experience losses if there is any delay in doing
so.
Loans of Portfolio Securities. Both funds are authorized to lend their
portfolio securities. The Fund has no present intention of doing so.
OPNY presently does not intend to engage in loans of portfolio securities
in excess of 5% of its total assets. See "Principal Risk Factors - Loans
of Portfolio Securities" on page ___, above.
Hedging. As described below, both OPNY and the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options on
futures. OPNY may (but the Fund cannot) enter into interest rate swap
agreements with respect to securities held by it. These are all referred
to as "hedging instruments." The funds do not use hedging instruments for
speculative purposes. OPNY may only purchase a call or put if, after such
purchase, the value of all call and put options held by OPNY would not
exceed 5% of OPNY's total assets. Other limits on the use of hedging
instruments are described in the funds' Prospectuses and Statements of
Additional Information.
Both funds may buy and sell options and futures to try to manage their
exposure to the possibility that the prices of their portfolio securities
may decline, or to establish a position in the market as a temporary
substitute for purchasing individual securities, or to try to manage their
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the funds'
portfolio against price fluctuations. Other hedging strategies, such as
buying futures and call options and writing put options, tend to increase
the funds' exposure to the securities market. Writing put options or
covered call options may also provide income to the fund for liquidity
purposes or raise cash for the fund to distribute to shareholders. OPNY
may purchase interest rate swaps where OPNY and another party exchange
their right to receive or their obligation to pay interest on a security.
OPNY may not enter into swaps with respect to more than 25% of its total
assets.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If the investment adviser to the fund uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the fund's return. The fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future or
option. Options trading involves the payment of premiums and has special
tax effects on the fund. There are also special risks in particular
hedging strategies. If a covered call written by the fund is exercised
on an investment that has increased in value, the fund will be required
to sell the investment at the call price and will not be able to realize
any profit if the investment has increased in value above the call price.
Interest rate swaps are subject to credit risks (if the other party fails
to meet its obligations) and also to interest rate risks. OPNY could be
obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes.
Investment Restrictions
Both OPNY and the Fund have certain investment restrictions that, together
with their respective investment objectives, are fundamental policies
changeable only by shareholder approval. Their investment restrictions
are substantially the same, except as follows.
OPNY cannot:
1. borrow money in excess of 10% of the value of its total assets or make
any investment when borrowings exceed 5% of the value of its total assets;
it may borrow only as a temporary measure for extraordinary or emergency
purposes; or
2. with respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer nor acquire
more than 10% of the total value of the outstanding voting securities of
any one issuer (in both cases, this restriction does not apply to
securities of the U.S. Government or its agencies or instrumentalities).
The Fund cannot:
1. borrow money in excess of 1/3 of the value of its total assets (the
Fund may borrow from banks only as a temporary measure for extraordinary
or emergency purposes and will make no additional investments while such
borrowings exceed 5% of its total assets).
Additional Comparative Information
General
For a discussion of the organization and operation of OPNY, including
brokerage practices, see "Investment Objective and Policies" and "How the
Fund is Managed" in OPNY's current prospectus and "Brokerage Policies of
the Fund" in the OPNY current Statement of Additional Information. For
a discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives of the Fund," "Investment
Restrictions and Techniques," "Investment Management Agreement" and
"Additional Information" in the Fund's current prospectus.
Financial Information
For certain financial information about OPNY and the Fund, see (as to
OPNY) "Financial Highlights" and "Performance of the Fund" in the OPNY
current prospectus and (as to the Fund) "Financial Highlights" in the Fund
current prospectus.
Management of OPNY and the Fund
For information about the management of OPNY and the Fund, including their
respective Boards of Trustees, investment advisers, portfolio managers and
distributors, see (as to OPNY) "Expenses" and "How the Fund is Managed"
in the OPNY current prospectus and (as to the Fund) "Investment Management
Agreement," Distribution Plan," "Portfolio Transactions and Turnover" and
"Additional Information" in the Fund current prospectus.
Description of Shares of OPNY and the Fund
For a description of the classes of shares of OPNY and the Fund, including
voting rights, restrictions on disposition and potential liability
associated with their ownership, see (as to OPNY) "How the Fund is
Managed" in the OPNY current prospectus and Statement of Additional
Information and (as to the Fund) "Additional Information" in the Fund
current prospectus.
Dividends, Distributions and Taxes
Both funds declare dividends from net investment income daily, distribute
dividends monthly, and distribute any net short-term or long-term capital
gains annually. For a discussion of the policies of OPNY and the Fund
with respect to dividends and distributions, and a discussion of the tax
consequences of an investment in OPNY and the Fund, see (as to OPNY)
"Dividends, Capital Gains and Taxes" in the OPNY current prospectus and
(as to the Fund) "Dividends and Distributions" and "Tax Status" in the
Fund current prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of OPNY and the Fund may be purchased,
redeemed and exchanged, see (as to OPNY) "How to Buy Shares," "How to Sell
Shares," "Exchanges of Shares," "Special Investor Services," "Service Plan
for Class A Shares," "Distribution and Service Plan for Class B Shares"
and "Distribution and Service Plan for Class C Shares" in the OPNY current
prospectus and "How to Buy Shares," "How to Redeem Shares," "Exchanging
Shares" and "Additional Information" in the Fund current prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as to
OPNY) "How the Fund is Managed" in the OPNY current prospectus and (as to
the Fund) "Additional Information" in the Fund current prospectus.
OPNY Performance
OPNY does not maintain a fixed dividend rate and there can be no assurance
as to the payment of any dividends or the realization of any capital
gains. A discussion of the performance of OPNY's Class A and Class B
shares for the fiscal year ended September 30, 1994 is set forth under
"Management's Discussion of Performance" in the OPNY prospectus that
accompanies this Proxy Statement and Prospectus. See also "Comparing the
Fund's Performance to the Market" in the OPNY prospectus for a graph of
the performance of a hypothetical $10,000 investment in Class A or Class
B shares of OPNY compared with the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment
grade municipal bonds that is widely regarded as a measure of the
performance of the general municipal bond market. Index performance
reflects the reinvestment of dividends but does not consider the effect
of capital gains or transaction costs, and none of the data above shows
the effect of taxes. Also, OPNY's performance reflects the effect of OPNY
business and operating expenses. While index comparisons may be useful
to provide a benchmark for OPNY's performance, it should be noted that
OPNY's investments are not limited to the securities in any one index and
the index data does not reflect any assessment of the risk of the
investments included in the index.
Information regarding the Fund's performance is set forth in the Fund's
Annual Report dated July 31, 1994 and Semi-Annual Report dated January 31,
1995, copies of which may be obtained from QVD (see "Miscellaneous -
Financial Information") and which are incorporated herein by reference.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at One World Financial Center, New York, New York
10281 on the 40th Floor at _____ A.M., New York time, on ________, 1995
and any adjournments thereof. At the Meeting, shareholders of the Fund
will be asked to consider and vote upon the Reorganization Agreement, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A shares
of OPNY, the distribution of such shares to the shareholders of the Fund
in complete liquidation of the Fund and the cancellation of the
outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on September 7, 1995 as the
record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Meeting. The affirmative vote
of a majority of the outstanding shares of the Fund represented in person
or by proxy at the Meeting and entitled to vote at the Meeting is required
for approval of the Proposal. Each shareholder will be entitled to one
vote for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only shareholders
of the Fund will vote on the Reorganization. The vote of shareholders of
OPNY is not being solicited to approve the Reorganization Agreement.
At the close of business on the Record Date, there were approximately
_____________ shares of the Fund issued and outstanding. The presence in
person or by proxy of the holders of a majority of such shares constitutes
a quorum for the transaction of business at the Meeting. The Meeting will
not be held until the date and time at which a quorum exists for the
shares of the Fund. As of the close of business on the Record Date, there
were approximately ____________ shares of the Fund issued and outstanding.
[To the knowledge of the Fund, as of the Record Date, no person owned of
record or beneficially owned 5% or more of its outstanding shares.] [To
the knowledge of OPNY, as of the Record Date, no person owned of record
or beneficially owned 5% or more of its outstanding Class A, Class B or
Class C shares.] [As of the Record Date, the officers and Trustees of
OPNY, and the officers and Trustees of the Fund, beneficially owned as a
group less than 1% of the outstanding shares of each class of OPNY and of
the Fund, respectively.]
Proxies
The enclosed form of proxy, if properly executed and returned, will be
voted (or counted as an abstention or withheld from voting) in accordance
with the choices specified thereon, and will be included in determining
whether there is quorum to conduct the Meeting. The proxy will be voted
in favor of the Proposal unless a choice is indicated to vote against or
to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions are
received, the broker-dealer may (if permitted under applicable stock
exchange rules), as record holder, vote such shares on the Proposal in the
same proportion as that broker-dealer votes street account shares for
which voting instructions were received in time to be voted. If a
shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the Proposal.
The proxy may be revoked at any time prior to the voting thereof by: (i)
writing to the Secretary of the Trust at One World Financial Center, New
York, New York 10281; (ii) attending the Meeting and voting in person; or
(iii) signing and returning a new proxy (if returned and received in time
to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be evenly apportioned
between QVA and OMC. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of the
fund issuing the document. In addition to the solicitation of proxies by
mail, proxies may be solicited by officers and employees of QVA, the
Trust's investment adviser, or QVA's affiliates, personally or by
telephone or telegraph. In addition to the solicitation of proxies by
mail, proxies may be solicited by officers and employees of QVA, the
Trust's investment adviser, or QVA's affiliates, personally or by
telephone or telegraph. In addition, QVA has retained D.F. King & Co.,
Inc., 77 Water Street, New York, New York 10005 to assist in the
solicitation of proxies primarily by contacting shareholders by telephone
and telegram for a fee not to exceed $____, plus reasonable out-of-pocket
expenses. The cost for such proxy solicitor will be shared by QVA and
OMC. Brokerage houses, banks and other fiduciaries may be requested to
forward soliciting material to the beneficial owners of shares of the Fund
and to obtain authorization for the execution of proxies. For those
services, if any, they will be reimbursed by the Trust for their
reasonable out-of-pocket expenses.
With respect to the Reorganization, OMC and QVA will share the cost of the
tax opinion. Any other out-of-pocket expenses of OPNY and the Fund
associated with the Reorganization, including legal, accounting and
transfer agent expenses, will be borne by OMC and QVA, respectively, in
the amounts so incurred by the respective fund.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by the surviving fund in its
financial statements similar to a pooling without restatement. Further
financial information as to the Fund is contained in (i) its current
Prospectus, which is available without charge upon written request to QVD
at P.O. Box 3567, Church Street Station, New York, New York 10277-1296 or
by calling the toll-free number shown on the front cover of this Proxy
Statement and Prospectus, and is incorporated herein, and (ii) its audited
financial statements as of July 31, 1994, which are included in the
Additional Statement. Financial information for OPNY is contained in its
current Prospectus accompanying this Proxy Statement and Prospectus and
incorporated herein, and in its audited financial statements as of
September 30, 1994 and unaudited financial statements as of March 31, 1995
which are included in the Additional Statement.
Public Information
Additional information about OPNY and the Fund is available, as
applicable, in the following documents which are incorporated herein by
reference: (i) OPNY's Prospectus dated January 27, 1995, supplemented July
14, 1995, accompanying this Proxy Statement and Prospectus and
incorporated herein; (ii) the Fund's Prospectus dated December 1, 1994,
which may be obtained without charge by writing to QVD at the address
given in the preceding paragraph; (iii) OPNY's Annual Report as of
September 30, 1994, and Semi-Annual Report dated March 31, 1995, which may
be obtained without charge by writing to OSS at the address indicated
above; and (iv) the Fund's Annual Report as of July 31, 1994, and Semi-
Annual Report as of January 31, 1995 which may be obtained without charge
by writing to QVD. All of the foregoing documents and the Statements of
Additional Information referred to below may be obtained by calling the
toll-free number for OPNY or the Fund on the cover of this Proxy Statement
and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which incorporates by reference the OPNY Statement
of Additional Information, and the Fund's Prospectus dated December 1,
1994 and its Statement of Additional Information dated December 1, 1994:
the organization and operation of OPNY and the Fund; more information on
investment policies, practices and risks; information about OPNY's and the
Fund's respective Boards of Trustees and their responsibilities; a further
description of the services provided by OPNY's and the Fund's investment
adviser, distributor, and transfer and shareholder servicing agent;
dividend policies; tax matters; an explanation of the method of
determining the offering price of the shares of OPNY and the Fund;
purchase, redemption and exchange programs; and distribution arrangements.
OPNY and the Fund are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith,
file reports and other information with the SEC. Proxy material, reports
and other information about OPNY and the Fund which are of public record
can be inspected and copied at public reference facilities maintained by
the SEC in Washington, D.C. and certain of its regional offices, and
copies of such materials can be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters.
By Order of the Board of Trustees
Deborah Kaback, Secretary
_______, 1995 360
MERGE\QFVF360.D
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this ____ day of _____, 1995, by and among Oppenheimer New York Tax-
Exempt Fund ("Oppenheimer Fund"), a Massachusetts business trust, Quest
for Value Family of Funds, a Massachusetts business trust ("Quest For
Value") on behalf of New York Tax-Exempt Fund ("Quest Portfolio"), a
series of Quest For Value, and Quest for Value Advisors ("Quest
Advisors"), a Delaware general partnership which serves as investment
adviser to the Quest Portfolio.
This Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treas. Reg. Section 1.368-2(g), for
a reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization ("Reorganization") will
consist of the transfer to the Oppenheimer Fund of substantially all of
the assets of the Quest Portfolio in exchange for the assumption by the
Oppenheimer Fund of all stated liabilities of the Quest Portfolio and the
issuance by the Oppenheimer Fund of shares of beneficial interest of the
Oppenheimer Fund ("shares") to be distributed, after the Closing Date (as
hereinafter defined), to the shareholders of the Quest Portfolio in
liquidation of the Quest Portfolio as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement. To the extent
necessary to effectuate the transactions contemplated by this Agreement,
or as the context of representations, warranties, covenants and other
agreements set forth in this Agreement may require, all references in this
Agreement to the Quest Portfolio shall include Quest For Value.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE QUEST PORTFOLIO
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, on the
Closing Date, the Quest Portfolio will assign, deliver and otherwise
transfer its assets as set forth in paragraph 1.2 ("Quest Portfolio
Assets") to the Oppenheimer Fund, and the Oppenheimer Fund will in
exchange therefor assume Quest Portfolio's stated liabilities on the
Closing Date as set forth in paragraph 1.3 and deliver to the Quest
Portfolio the number of each class of shares of the Oppenheimer Fund,
including fractional Oppenheimer Fund shares, determined by dividing the
value of the Quest Portfolio Assets, net of such stated liabilities,
represented by shares of each class of the Quest Portfolio computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net
asset value of each class of shares of the Oppenheimer Fund, computed in
the manner and as of the time and date set forth in paragraph 2.2. Such
transactions shall take place at the closing provided for in paragraph 3.1
("Closing").
1.2 (a) The Quest Portfolio Assets shall consist of all property
and rights, including without limitation all cash, cash equivalents,
securities and dividend and interest receivables owned by the Quest
Portfolio, and any deferred or prepaid expenses shown as an asset on the
Quest Portfolio's books on the Closing Date. Notwithstanding the
foregoing, the Quest Portfolio Assets shall exclude a cash reserve (the
"Cash Reserve") to be retained by the Quest Portfolio sufficient in its
discretion for the payment of the expenses of the Quest Portfolio's
dissolution and its liabilities, but not in excess of the amount
contemplated by paragraph 7.12.
(b) Promptly following the signing of this Agreement, the Quest
Portfolio will provide the Oppenheimer Fund with a list of its assets as
of the most reasonably practical date. On the Closing Date, the Quest
Portfolio will provide the Oppenheimer Fund with a list of the Quest
Portfolio Assets to be assigned, delivered and otherwise transferred to
the Oppenheimer Fund and of the stated liabilities to be assumed by the
Oppenheimer Fund pursuant to this Agreement.
1.3 The Quest Portfolio will endeavor to discharge of all of its
liabilities and obligations when and as due prior to the Closing Date.
An unaudited Statement of Assets and Liabilities of the Quest Portfolio
will be prepared by the Treasurer of the Quest Portfolio, as of the
Valuation Date, which Statement shall be prepared in conformity with
generally accepted accounting principles consistently applied from the
prior audited period. On the Closing Date, the Oppenheimer Fund shall
assume such stated liabilities, expenses, costs, charges and reserves set
forth on such Statement as shall be agreed to by Oppenheimer Fund.
1.4 In order for the Quest Portfolio to comply with Section
852(a)(1) of the Code and to avoid having any investment company taxable
income or net capital gain (as defined in Section 852(b)(2) and 1222(11)
of the Code, respectively) in the short taxable year ending with its
dissolution, the Quest Portfolio will on or before the Closing Date (a)
declare a dividend in an amount large enough so that it will have declared
dividends of all of its investment company taxable income and net capital
gain, if any, for such taxable year (determined without regard to any
deduction for dividends paid) and (b) distribute such dividend.
1.5 Contemporaneously with the Closing, the Quest Portfolio will be
liquidated (except for the Cash Reserve) and the Quest Portfolio will
distribute or cause to be distributed the Oppenheimer Fund shares of each
class received by the Quest Portfolio pursuant to paragraph 1.1 pro rata
to the appropriate shareholders of record of each class determined as of
the close of business on the Valuation Date as defined in paragraph 2.1.
Upon such liquidation all issued and outstanding shares of the Quest
Portfolio will be cancelled on the Quest Portfolio's books and the Quest
Portfolio Shareholders will have no further rights as such Shareholders.
The Oppenheimer Fund will not issue certificates representing the shares
of the Oppenheimer Fund in connection with such exchange.
1.6 After the Closing, the Quest Portfolio shall not conduct any
business except in connection with the winding up of its affairs and shall
file, or make provision for filing of, all reports it is required by law
to file. After the Closing, Quest For Value may be dissolved and
deregistered as an investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). Within one year after the Closing, the
Quest Portfolio shall (a) either pay or make provision for payment of all
of its liabilities and taxes, and (b) either (i) transfer any remaining
amount of the Cash Reserve to the Oppenheimer Fund, if such remaining
amount (as reduced by the estimated cost of distributing it to
shareholders) is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of the Quest Portfolio on the
Valuation Date. Such remaining amount shall be deemed to be material if
the amount to be distributed, after deduction of the estimated expenses
of the distribution, equals or exceeds one cent per share of the Quest
Portfolio outstanding on the Valuation Date.
1.7 Copies of all books and records of or pertaining to the Quest
Portfolio, including those in connection with its obligations under the
1940 Act, the Code, State blue sky laws or otherwise in connection with
this Agreement, will promptly after the Closing be delivered to officers
of the Oppenheimer Fund or their designee. Quest For Value and Quest
Advisors shall have access to such books and records upon reasonable
request during normal business hours.
2. THE CALCULATION
2.1 The value of the Quest Portfolio Assets shall be the value of
such assets computed as of the close of business of the New York Stock
Exchange on ___________, 1995, or at such time on such earlier or later
date as may be mutually agreed upon in writing (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures
set forth in the Oppenheimer Fund's then current prospectus and statement
of additional information.
2.2 The net asset value of each class of shares of the Oppenheimer
Fund shall be the net asset value per share computed on the Valuation
Date, using the valuation procedures set forth in the Oppenheimer Fund's
then current prospectus and statement of additional information.
2.3 The number of each class of Oppenheimer Fund shares (including
fractional shares, if any) to be issued hereunder shall be determined by
dividing the value of the Quest Portfolio Assets, net of the liabilities
assumed by the Oppenheimer Fund pursuant to paragraph 1.1 attributable to
that class, determined in accordance with paragraph 2.1, by the net asset
value of an Oppenheimer Fund share of a similar class determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made by Oppenheimer
Management Corporation in accordance with its regular practice in pricing
the Oppenheimer Fund. The Oppenheimer Fund shall cause Oppenheimer
Management Corporation to deliver to the Quest Portfolio a copy of its
valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date (the "Closing Date") shall be the next business
day following the Valuation Date. The Closing shall be held in a location
mutually agreeable to all the parties hereto. All acts taking place at the
Closing shall be deemed to take place simultaneously as of 9:00 a.m.
Eastern time on the Closing Date unless otherwise agreed by the parties.
3.2 Portfolio securities held by the Quest Portfolio and represented
by a certificate or written instrument shall be presented by it or on its
behalf to Citibank, N.A. (the "Custodian"), custodian for the Oppenheimer
Fund, for examination no later than five business days preceding the
Valuation Date. Such portfolio securities (together with any cash or
other assets) shall be delivered by the Quest Portfolio to the Custodian
for the account of the Oppenheimer Fund on or before the Closing Date in
conformity with applicable custody provisions under the 1940 Act and duly
endorsed in proper form for transfer in such condition as to constitute
good delivery thereof in accordance with the custom of brokers. The
portfolio securities shall be accompanied by all necessary federal and
state stock transfer stamps or a check of the appropriate purchase price
of such stamps. Portfolio securities and instruments deposited with a
securities depository, as defined in Rule 17f-4 under the 1940 Act, or
with a qualified foreign custodian under Rule 17f-5 of the 1940 Act shall
be delivered on or before the Closing Date by book entry in accordance
with customary practices of such depositories and the Custodian. The cash
delivered shall be in the form of a Federal Funds wire, payable to the
order of "Citibank, N.A.", Custodian for Oppenheimer New York Tax-Exempt
Fund.
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on such Exchange or elsewhere
shall be disrupted so that, in the judgment of both the Oppenheimer Fund
and the Quest Portfolio, accurate appraisal of the value of the net assets
of the Oppenheimer Fund or the Quest Portfolio Assets is impracticable,
the Valuation Date shall be postponed until the first business day after
the day when trading shall have been fully resumed without restriction or
disruption and reporting shall have been restored.
3.4 The Quest Portfolio shall deliver to the Oppenheimer Fund or its
designee (a) at the Closing a list, certified by its Secretary, of the
names, addresses and taxpayer identification numbers of the Quest
Portfolio Shareholders (as hereinafter defined) and the number of each
class of outstanding Quest Portfolio shares owned by each such
shareholder, all as of the Valuation Date (the "Quest Portfolio
Shareholders"), and (b) as soon as practicable after the Closing all
original documentation (including Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Quest
Portfolio Shareholders' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Oppenheimer Fund
shall issue and deliver to Quest Portfolio a confirmation evidencing
delivery of each class of Oppenheimer Fund shares to be credited on the
Closing Date to the Quest Portfolio or provide evidence reasonably
satisfactory to the Quest Portfolio that such Oppenheimer Fund shares have
been credited to Quest Portfolio's account on the books of the Oppenheimer
Fund. At the Closing each party shall deliver to the other such bills of
sale, assignments, assumption agreements, receipts or other documents as
such other party or its counsel may reasonably request to effect the
consummation of the transactions contemplated by the Agreement.
4. COVENANTS OF THE OPPENHEIMER FUND AND THE QUEST PORTFOLIO
4.1 The Oppenheimer Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being understood
that such ordinary course of business will include customary dividends and
other distributions and such changes that have been approved by
shareholders of the Oppenheimer Fund at a shareholders meeting prior to
the Closing of which Quest Portfolio has been advised.
4.2 The Oppenheimer Fund will prepare and file with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"), relating
to the Oppenheimer Fund shares to be issued to the Quest Portfolio
Shareholders pursuant to the Reorganization ("Registration Statement").
The Quest Portfolio will provide the Oppenheimer Fund with the Proxy
Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. The Quest Portfolio will further provide the
Oppenheimer Fund with such other information and documents relating to the
Quest Portfolio as are reasonably necessary for the preparation of the
Registration Statement.
4.3 The Quest Portfolio will call a meeting of its shareholders to
consider and act upon the Reorganization, including this Agreement, and
take all other action necessary to obtain approval of the transactions
contemplated herein. The Quest Portfolio will prepare, with such
assistance from the Oppenheimer Fund as may be mutually agreed to, the
notice of meeting, form of proxy and proxy statement and prospectus
(collectively "Proxy Materials") to be used in connection with such
meeting provided that the Oppenheimer Fund will furnish the Quest
Portfolio with a current effective prospectus relating to the Oppenheimer
Fund shares for inclusion in the Proxy Materials and with such other
information relating to the Oppenheimer Fund as is reasonably necessary
for the preparation of the Proxy Materials.
4.4 Prior to the Closing Date, the Quest Portfolio will assist the
Oppenheimer Fund in obtaining such information as the Oppenheimer Fund
reasonably requests concerning the beneficial ownership of the shares of
the Quest Portfolio.
4.5 Subject to the provisions of this Agreement, the Oppenheimer
Fund and the Quest Portfolio will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
4.6 As promptly as practicable, but in any case within 60 days after
the Closing Date, the Quest Portfolio shall furnish or cause to be
furnished to the Oppenheimer Fund, such information as the Oppenheimer
Fund reasonably requests to enable the Oppenheimer Fund to determine the
Quest Portfolio's earnings and profits for federal income tax purposes
that will be carried over to the Oppenheimer Fund pursuant to Section 381
of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Quest for Value shall prepare and file all federal and other tax returns
and reports of the Quest Portfolio required by law to be filed with
respect to all periods ending on or before the Closing Date but not
theretofore filed.
4.8 The Oppenheimer Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
Act and such of the state Blue Sky and securities laws as it may deem
appropriate in order to continue its operations after the Closing Date.
4.9 Until the third anniversary of the Closing Date, the Oppenheimer
Fund will use its best efforts to assure that at least 75% of the Trustees
of the Oppenheimer Fund will not be "interested persons" of the investment
adviser for the Oppenheimer Fund or Quest Advisors, as the term
"interested person" is defined by the 1940 Act.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Oppenheimer Fund represents and warrants to the Quest
Portfolio as follows:
(a) The Oppenheimer Fund is an unincorporated voluntary association
validly existing and in good standing under the laws of the Commonwealth
of Massachusetts, and has the power and authority to own its properties
and to carry on its business as it is now conducted;
(b) The Oppenheimer Fund is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of each class of the
Oppenheimer Fund have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and
state securities laws. Shares of each class of the Oppenheimer Fund are
registered in all jurisdictions in which they are required to be
registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and the
Oppenheimer Fund is not subject to any stop order and is fully qualified
to sell its shares in each state in which its shares have been registered;
(d) The current prospectus and statement of additional information
of the Oppenheimer Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(e) At the Closing Date, the Oppenheimer Fund will have title to the
Oppenheimer Fund's assets, subject to no liens, security interests or
other encumbrances except those incurred in the ordinary course of
business.
(f) The Oppenheimer Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
any provision of the Oppenheimer Fund's Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease or
other undertakings to which the Oppenheimer Fund is a party or by which
it is bound;
(g) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against the Oppenheimer Fund or
any of its properties or assets, except as previously disclosed in writing
to the Quest Portfolio. The Oppenheimer Fund knows of no facts that might
form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely affect, its business or its
ability to consummate the transactions contemplated herein;
(h) The Statement of Assets and Liabilities, Statement of Operations
and Statement of Changes in Net Assets as of June 30, 1995 of the
Oppenheimer Fund examined by KPMG Peat Marwick LLP (a copy of which has
been furnished to the Quest Portfolio), fairly present, in all material
respects, the financial condition of the Oppenheimer Fund as of such date
in conformity with generally accepted accounting principles consistently
applied, and as of such date there were no known liabilities of the
Oppenheimer Fund (contingent or otherwise) not disclosed therein that
would be required in conformity with generally accepted accounting
principles to be disclosed therein;
(i) All issued and outstanding Oppenheimer Fund shares of each class
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund under
"How the Fund is Managed - Organization and History;"
(j) The Oppenheimer Fund has the power to enter into this Agreement
and carry out its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action on the part of the Oppenheimer Fund, and this Agreement
constitutes a valid and binding obligation of the Oppenheimer Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles;
(k) The Oppenheimer Fund shares of each class to be issued and
delivered to the Quest Portfolio, for the account of the Quest Portfolio
Shareholders, pursuant to the terms of this Agreement will at the Closing
Date have been duly authorized and, when so issued and delivered, will be
duly and validly issued Oppenheimer Fund shares, and will be fully paid
and non-assessable with no personal liability attaching to the ownership
thereof except as otherwise set forth in the current statement of
additional information for the Oppenheimer Fund under "How the Fund is
Managed - Organization and History," and no shareholder of Oppenheimer
Fund will have any preemptive right or right of subscription or purchase
in respect thereof;
(l) Since June 30, 1995, there has not been (i) any material adverse
change in the Oppenheimer Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or that have been approved by shareholders of the Oppenheimer
Fund or (ii) any incurrence by the Oppenheimer Fund of any indebtedness
except indebtedness incurred in the ordinary course of business. For the
purposes of this subparagraph, neither a decline in net asset value per
share of any class of the Oppenheimer Fund nor the redemption of
Oppenheimer Fund shares by Oppenheimer Fund shareholders, shall constitute
a material adverse change;
(m) All material Federal and other tax returns and reports of the
Oppenheimer Fund required by law to have been filed, have been filed, and
all Federal and other taxes shown as due or required to be shown as due
on said returns and reports have been paid or provision has been made for
the payment thereof, and to the best of the Oppenheimer Fund's knowledge
no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(n) For each taxable year of its operation, the Oppenheimer Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of the Oppenheimer Fund to
continue to meet the requirements of Subchapter M of the Code;
(o) Since June 30, 1995, there has been no change by the Oppenheimer
Fund in accounting methods, principles, or practices, including those
required by generally accepted accounting principles, except as disclosed
in writing to the Quest Portfolio or as set forth in the financial
statements of the Oppenheimer Fund covering such period;
(p) The information furnished or to be furnished by the Oppenheimer
Fund for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with Federal securities
and other laws and regulations applicable thereto; and
(q) The Proxy Statement and Prospectus to be included in the
Registration Statement (only insofar as it relates to the Oppenheimer
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
such statements were made, not materially misleading.
5.2 Quest for Value, on behalf of the Quest Portfolio, represents and
warrants to the Oppenheimer Fund as follows:
(a) The Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) Quest For Value is a duly registered, open-end, management
investment company, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect and its current
Prospectus and Statement of Additional Information conform in all material
respects to the requirements of the 1933 Act and the 1940 Act and the
regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(c) All of the issued and outstanding shares of each class of the
Quest Portfolio have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and
state securities laws. Shares of each class of the Quest Portfolio are
registered in all jurisdictions in which they are required to be
registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and the
Quest Portfolio is not subject to any stop order and is fully qualified
to sell its shares in each state in which its shares have been registered;
(d) The Quest Portfolio is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of (i) any
provision of Quest For Value's Declaration of Trust or By-Laws or (ii) of
any agreement, indenture, instrument, contract, lease or other undertaking
to which the Quest Portfolio is a party or by which it is bound (other
than any violations that individually or in the aggregate would not have
a material adverse effect on the Quest Portfolio);
(e) The Quest Portfolio has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to it prior to or as of the Closing Date;
(f) Except as otherwise disclosed in writing to and acknowledged by
the Oppenheimer Fund prior to the date of this Agreement, no litigation,
administrative proceeding, investigation, examination or inquiry of or
before any court or governmental body is presently pending, or to its
knowledge, threatened relating to the Quest Portfolio or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business.
The Quest Portfolio knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects, or is likely to materially and
adversely affect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statements of Assets and Liabilities, Statements of
Operations and Statements of Changes in Net Assets of the Quest Portfolio
as of October 31, 1994, and April 30, 1995 examined by Price Waterhouse
LLP (copies of which have been furnished to the Oppenheimer Fund) fairly
present, in all material respects, the Quest Portfolio's financial
condition as of such dates, its results of operations for such periods and
changes in its net assets for such periods in conformity with generally
accepted accounting principles, and as of such dates there were no known
liabilities of the Quest Portfolio (contingent or otherwise) not disclosed
therein that would be required in conformity with generally accepted
accounting principles to be disclosed therein. All liabilities
(contingent and otherwise) as of the Closing Date known to the Quest
Portfolio will be set forth on the unaudited Statement of Assets and
Liabilities referred to in paragraph 1.3.
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in the Quest Portfolio's
financial condition, assets, liabilities or business, other than changes
occurring in the ordinary course of business, or any incurrence by the
Quest Portfolio of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed in writing
to and acknowledged by the Oppenheimer Fund prior to the date of this
Agreement and prior to the Closing Date. All liabilities of the Quest
Portfolio (contingent and otherwise) are reflected in the unaudited
statement described in paragraph 1.3 above. For the purpose of this
subparagraph (h), neither a decline in the Quest Portfolio's net asset
value per share nor a decrease in the Quest Portfolio's size due to
redemptions by Quest Portfolio shareholders shall constitute a material
adverse change;
(i) At the Closing Date, all federal and other tax returns and
reports of the Quest Portfolio required by law to be filed on or before
the Closing Date shall have been filed, there are no claims, levies,
liabilities or amounts due for corporate, excise, income or other federal,
state or local taxes outstanding or threatened against Quest Portfolio
(other than those reflected on its most recent financial statements) and
to the best of Quest For Value's knowledge there are no facts that might
form the basis for such proceedings, no such return is currently under
audit and no assessment has been asserted with respect to any such return;
(j) For each taxable year since its inception, the Quest Portfolio
has met all the requirements of Subchapter M of the Code for qualification
and treatment as a "regulated investment company" as defined therein and
will be in compliance with said requirements at and as of the Closing
Date;
(k) All issued and outstanding shares of each class of the Quest
Portfolio are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof. All such shares of each class will,
at the time of Closing, be held by the persons and in the amounts set
forth in the list of shareholders submitted to the Oppenheimer Fund
pursuant to paragraph 3.4. The Quest Portfolio does not have outstanding
any options, warrants or other rights to subscribe for or purchase any of
its shares of any class, nor is there outstanding any security convertible
into any of its shares of any class except for class B shares of the Quest
Portfolio which convert into class A shares of the Quest Portfolio as
described in the current prospectus of the Quest Portfolio.
(l) At the Closing Date, the Quest Portfolio will have title to the
Quest Portfolio Assets, subject to no liens, security interests or other
encumbrances, and full right, power and authority to assign, deliver and
otherwise transfer the Quest Portfolio Assets hereunder, and upon delivery
and payment for the Quest Portfolio Assets, the Oppenheimer Fund will
acquire title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act;
(m) Quest For Value has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of Quest For Value, and
subject to the approval of Quest Portfolio's shareholders, this Agreement
constitutes a valid and binding obligation of Quest For Value, enforceable
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles. No other
consents, authorizations or approvals are necessary in connection with the
performance of this Agreement.
(n) On the effective date of the Registration Statement, at the time
of the meeting of Quest Portfolio's shareholders and on the Closing Date,
the Proxy Materials (exclusive of the currently effective Oppenheimer Fund
prospectus and statement of additional information incorporated therein)
will (i) comply in all material respects with the provisions of the 1933
Act, the Securities Exchange Act of 1934 ("1934 Act") and the 1940 Act and
the regulations thereunder and (ii) not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which such statements were made, not misleading. Any
other information furnished or to be furnished by Quest Portfolio for use
in the Registration Statement or in any other manner that may be necessary
in connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with applicable
federal securities and other laws and all regulations thereunder;
(o) Quest Portfolio will, on or prior to the Closing Date, declare
one or more dividends or other distributions to shareholders that,
together with all previous dividends and other distributions to
shareholders, shall have the effect of distributing to the shareholders
all of its investment company taxable income and net capital gain, if any,
through the Closing Date (computed without regard to any deduction for
dividends paid);
(p) Quest Portfolio has maintained or has caused to be maintained
on its behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section 31 of
the 1940 Act and the Rules thereunder;
(q) Quest Portfolio is not acquiring Oppenheimer Fund shares to be
issued hereunder for the purpose of making any distribution thereof other
than in accordance with the terms of this Agreement;
(r) As of the Closing Date no violation of applicable federal, state
and local statute, law or regulation, exists that individually, or in the
aggregate, would have a material adverse effect on the business or
operations of Quest Portfolio;
(s) As of the Closing Date the Quest Portfolio is in compliance with
its investment objective(s), policies and restrictions as described in its
current prospectus and statement of additional information;
(t) There are no unresolved or outstanding shareholder claims or
complaints related to Quest Portfolio and there will be no such claims or
complaints as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date;
(u) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such calculations
have been done in accordance with the provisions of Rule 2a-4 under the
1940 Act.
5.3 Quest Advisors represents and warrants to the Oppenheimer Fund
as follows:
(a) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date no violation of applicable federal, state and local
statute, law or regulation, exists that individually, or in the aggregate,
would have a material adverse effect on the business or operations of
Quest Portfolio.
(b) To the best knowledge of Quest Advisors after due inquiry,
assuming fulfillment of the conditions precedent to the consummation of
the Reorganization, Quest Portfolio has the right, power, legal capacity
and authority to enter into the Reorganization contemplated by this
Agreement.
(c) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date Quest Portfolio is in compliance with its investment
objective(s), policies and restrictions as described in its current
prospectus and statement of additional information.
(d) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date there are no outstanding breaches by Quest Portfolio
of any agreement, indenture, instrument, contract, lease or other
undertaking to which it is a party, or by which it is bound (other than
any breaches that individually or in the aggregate would not have a
material adverse effect on the Quest Portfolio).
(e) To the best knowledge of Quest Advisors upon due inquiry, there
are no unresolved or outstanding shareholder claims or inquiries related
to Quest Portfolio and there will be no such claims or inquiries as of
the Closing Date other than as disclosed by Quest Advisors in writing to
Oppenheimer Fund prior to the Closing Date.
(f) Quest Advisors is not aware of any threatened or pending
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body relating to the Quest
Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect the Quest Portfolio's
business or its ability to consummate the transactions herein
contemplated.
(g) Quest Advisors is not aware of any outstanding or threatened
private claims or litigation relating to Quest Portfolio. Quest Advisors
knows of no facts that might form the basis for such proceedings.
(h) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such calculations
have been done in accordance with the provisions of Rule 2a-4 under the
1940 Act.
(i) There are no claims, levies or liabilities for corporate,
excise, income or other federal, state or local taxes outstanding or
threatened against Quest Portfolio, other than those reflected in its most
recent audited financial statements. Quest Advisors knows of no facts
that might form the basis for such proceedings.
(j) To the best knowledge of Quest Advisors after due inquiry, there
have been no material adverse changes in Quest Portfolio's financial
condition, assets, liabilities or business, other than those reflected in
its most recent audited financial statements and all liabilities of Quest
Portfolio (contingent and otherwise) known to Quest Advisors have been
reported in writing to and accepted by Oppenheimer Fund prior to the
Closing Date. A reduction in net assets due to shareowner redemptions
will not be deemed to be a material adverse change.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE QUEST PORTFOLIO
The obligations of Quest Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by Oppenheimer Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of Oppenheimer Fund contained
in this Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 Oppenheimer Fund shall have delivered to Quest Portfolio a
certificate executed in Oppenheimer Fund's name by Oppenheimer Fund's
President, Vice President or Secretary and, Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to Quest Portfolio and dated
as of the Closing Date, to the effect that the representations and
warranties of Oppenheimer Fund made in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters
as Quest Portfolio shall reasonably request;
6.3 Quest Portfolio shall have received a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to the Oppenheimer
Fund, dated as of the Closing Date, in a form reasonably satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Quest Portfolio,
covering the following points:
That (a) Oppenheimer Fund is a an unincorporated voluntary
association duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts, and has the
power to own all of its properties and assets and to carry on its
business as presently conducted (Massachusetts counsel may be relied
upon in delivering such opinion); (b) Oppenheimer Fund is a duly
registered, open-end, management investment company and its
registration with the Commission as an investment company under the
1940 Act is in full force and effect; (c) this Agreement has been
duly authorized, executed and delivered by the Oppenheimer Fund and
assuming due authorization, execution and delivery of this Agreement
by Quest Portfolio, is a valid and binding obligation of Oppenheimer
Fund enforceable against Oppenheimer Fund in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) Oppenheimer
Fund shares to be issued to Quest Portfolio shareholders as provided
by this Agreement are duly authorized and upon delivery of such
shares to Quest Portfolio will be validly issued and outstanding and
fully paid and non-assessable (except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History") and no
shareholder of Oppenheimer Fund has any preemptive rights to
subscription or purchase in respect thereof (Massachusetts counsel
may be relied upon in delivering such opinion); (e) the execution and
delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Oppenheimer Fund's
Declaration of Trust and By-Laws or any provision of any material
agreement (known to such counsel) to which Oppenheimer Fund is a
party or by which it is bound or, to the knowledge of such counsel,
result in the acceleration of any material obligation or the
imposition of any material penalty under any agreement, judgment or
decree to which Oppenheimer Fund is a party or by which it is bound;
(f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or any state is required for the consummation by
Oppenheimer Fund of the transactions contemplated herein, except such
as have been obtained under the 1933 Act , the 1934 Act and the 1940
Act and such as may be required under state securities laws; (g) only
insofar as they relate to Oppenheimer Fund, the descriptions in the
Proxy Materials of statutes, legal and governmental proceedings and
contracts and other documents, if any, are accurate and fairly
present the information required to be shown; (h) such counsel does
not know of any legal or governmental proceedings, only insofar as
they relate to Oppenheimer Fund, existing on or before the date of
mailing of the Proxy Materials or the Closing Date that are required
to be described in the Registration Statement or in any documents
that are required to be filed as exhibits to the Registration
Statement that are not described as required; and (i) to the best
knowledge of such counsel, no material litigation or administrative
proceedings or investigation of or before any court or governmental
body is presently pending or overtly threatened as to Oppenheimer
Fund or any of its properties or assets and Oppenheimer Fund is not
a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects its business, other than as previously disclosed
in the Registration Statement.
6.4 All proceedings taken by Oppenheimer Fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to Quest Portfolio and
its counsel, Gordon Altman Butowsky Weitzen Shalov & Wein.
6.5 As of the Closing Date, there shall be no material change in the
investment objective, policies and restrictions nor any increase in the
investment management fees, fees payable pursuant to Oppenheimer Fund's
12b-1 plans of distribution or sales loads of Oppenheimer Fund from those
described in the Prospectus and Statement of Additional Information of
Oppenheimer Fund dated May 30, 1995 as supplemented July 14, 1995, except
as may have been approved by shareholders of the Oppenheimer Fund.
6.6 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND
The obligations of Oppenheimer Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Quest Portfolio of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of Quest For Value, on behalf
of Quest Portfolio, and Quest Advisors contained in this Agreement shall
be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2 Quest Portfolio shall have delivered to Oppenheimer Fund a
statement of Quest Portfolio Assets and its liabilities, together with a
list of Quest Portfolio's securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of Quest
Portfolio;
7.3 Quest Portfolio shall have delivered to Oppenheimer Fund at the
Closing a letter from Price Waterhouse LLP dated the Closing Date stating
that (a) such firm has performed a limited review of the federal and state
income tax returns of Quest Portfolio for each of the last three taxable
years and, based on such limited review, nothing came to their attention
that caused them to believe that such returns did not properly reflect,
in all material aspects, the federal and state income tax liabilities of
Quest Portfolio for the periods covered thereby, (b) for the period
___________, 199__ to and including the Closing Date, such firm has
performed a limited review (based on unaudited financial data) to
ascertain the amount of applicable federal, state and local taxes and has
determined that same either have been paid or reserves have been
established for payment of such taxes, and, based on such limited review,
nothing came to their attention that caused them to believe that the taxes
paid or reserves set aside for payment of such taxes were not adequate in
all material respects for the satisfaction of all federal, state and local
tax liabilities for the period from ___________, 199___ to and including
the Closing Date and (c) based on such limited reviews, nothing came to
their attention that caused them to believe that Quest Portfolio would not
qualify as a regulated investment company for federal income tax purposes
for any such year or period;
7.4 Quest Portfolio shall have delivered to Oppenheimer Fund at the
Closing a certificate executed in Quest For Value's name by the President,
Vice President or Secretary and the Treasurer or Assistant Treasurer of
Quest For Value, in form and substance satisfactory to Oppenheimer Fund
and dated as of the Closing Date, to the effect that the representations
and warranties of Quest for Value, on behalf of Quest Portfolio, made in
this Agreement are true and correct at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as Oppenheimer Fund shall
reasonably request. Such a certificate shall also be delivered to
Oppenheimer Fund as executed by Quest Advisors with respect to its
representations and warranties made in paragraph 5.3.
7.5 Oppenheimer Fund shall have received at the Closing a favorable
opinion dated as of the Closing Date of Gordon Altman Butowsky Weitzen
Shalov & Wein, counsel to Quest For Value, in a form satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Oppenheimer Fund
covering the following points:
That (a) Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association, duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and to carry on its business as presently conducted
(Massachusetts counsel may be relied upon in delivering such
opinion); (b) Quest For Value is registered as an investment company
under the 1940 Act, and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and delivered
by Quest For Value on behalf of Quest Portfolio and, assuming due
authorization, execution and delivery of this Agreement by
Oppenheimer Fund, is a valid and binding obligation of Quest For
Value enforceable against Quest For Value in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Quest For Value's
Declaration of Trust or By-Laws or any provision of any material
agreement (known to such counsel) to which Quest For Value is a party
or by which it is bound or, to the knowledge of such counsel, result
in the acceleration of any material obligation or the imposition of
any material penalty under any agreement, judgment or decree to which
Quest For Value is a party or by which it is bound; (e) to the
knowledge of such counsel, no consent, approval, authorization or
order of any court or governmental authority of the United States or
any state is required for the consummation by Quest For Value of the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act and such as may be
required under state securities laws; (f) only insofar as they relate
to Quest For Value, the descriptions in the Proxy Materials of
statutes, legal and governmental proceedings and contracts and other
documents, if any, are accurate and fairly present the information
required to be shown; (g) such counsel does not know of any legal or
governmental proceedings, only insofar as they relate to Quest For
Value, existing on or before the date of mailing the Proxy Materials
or the Closing Date that are required to be described in the
Registration Statement or in any documents that are required to be
filed as exhibits to the Registration Statement that are not
described as required; and (h) to the best knowledge of such counsel,
no material litigation or administrative proceedings or investigation
of or before any court or governmental body is presently pending or
overtly threatened as to Quest For Value or any of its properties or
assets and Quest Portfolio is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business,
other than as previously disclosed in the Registration Statement.
7.6 Between the date hereof and the Closing Date, Quest For Value
shall provide Oppenheimer Fund and its representatives reasonable access
during regular business hours and upon reasonable notice to the books and
records of or relating to Quest Portfolio, including without limitation
the books and records of Quest For Value, as Oppenheimer Fund may
reasonably request. All such information obtained by Oppenheimer Fund
and its representatives shall be held in confidence and may not be used
for any purpose other than in connection with the transaction contemplated
hereby. In the event that the transaction contemplated by this Agreement
is not consummated, Oppenheimer Fund and its representatives will
promptly return to Quest For Value all documents and copies thereof with
respect to Quest Portfolio obtained from Quest For Value during the course
of such investigation.
7.7 Quest For Value, on behalf of Quest Portfolio shall have
delivered to Oppenheimer Fund, pursuant to paragraph 5.2(g), copies of the
most recent financial statements of Quest Portfolio certified by Price
Waterhouse LLP.
7.8 On the Closing Date, the Quest Portfolio Assets shall include
no assets that Oppenheimer Fund, by reason of charter limitations or
otherwise, may not properly acquire.
7.9 All proceedings taken by Quest For Value and Quest Portfolio in
connection with the transactions contemplated by the Agreement and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to Oppenheimer Fund and its counsel, Gordon Altman Butowsky
Weitzen Shalov & Wein.
7.10 The stated liabilities, expenses, costs, charges and reserves
reflected on the unaudited Statement of Assets and Liabilities of the
Quest Portfolio referred to in paragraph 1.3 shall have been agreed to by
the Oppenheimer Fund.
7.11 The Registration Statement, including the Proxy Materials filed
as a part thereof, shall have been approved by the Board of Trustees of
the Oppenheimer Fund.
7.12 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND AND
QUEST PORTFOLIO
The obligations of Quest Portfolio and Oppenheimer Fund hereunder are
each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of Quest Portfolio and certified copies of the resolutions
evidencing such approval shall have been delivered to Oppenheimer Fund;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no-action" positions or any exemptive orders from such federal
and state authorities) deemed necessary by Oppenheimer Fund or Quest For
Value on behalf of Quest Portfolio to permit consummation, in all material
respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or permit
would not involve risk of a material adverse effect on the assets or
properties of Oppenheimer Fund or Quest Portfolio.
8.4 The Registration Statement on Form N-14 shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act;
8.5 Quest Portfolio shall have declared and paid a dividend or
dividends and/or other distributions that, together with all previous such
dividends or distributions, shall have the effect of distributing to the
Quest Portfolio Shareholders all of Quest Portfolio's investment company
taxable income (computed without regard to any deduction for dividends
paid) and all of its net capital gain (after reduction for any capital
loss carry-forward and computed without regard to any deduction for
dividends paid) for all taxable years ending on or before the Closing
Date; and
8.6 The parties shall have received a favorable opinion from Price
Waterhouse LLP (based on such representations as such firm shall
reasonably request), addressed to Oppenheimer Fund and Quest Portfolio,
which opinion may be relied upon by the shareholders of Oppenheimer Fund
and Quest Portfolio, substantially to the effect that, for federal income
tax purposes:
(a) The transfer of substantially all of Quest Portfolio's assets
in exchange for Oppenheimer Fund Shares and the assumption by
Oppenheimer Fund of certain identified liabilities of Quest Portfolio
followed by the distribution by Quest Portfolio of Oppenheimer Fund
Shares to the Quest Portfolio Shareholders in exchange for their
Quest Portfolio shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code and Quest Portfolio and
Oppenheimer Fund will each be a "party to the reorganization" within
the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by Oppenheimer Fund upon the
receipt of the assets of Quest Portfolio solely in exchange for
Oppenheimer Fund Shares and the assumption by Oppenheimer Fund of the
identified liabilities of Quest Portfolio;
(c) No gain or loss will be recognized by Quest Portfolio or Quest
For Value upon the transfer of the assets of Quest Portfolio to
Oppenheimer Fund in exchange for Oppenheimer Fund Shares and the
assumption by Oppenheimer Fund of the identified liabilities or upon
the distribution of Oppenheimer Fund Shares to the Quest Portfolio
Shareholders in exchange for the Quest Portfolio shares;
(d) No gain or loss will be recognized by the Quest Portfolio
Shareholders upon the exchange of the Quest Portfolio shares for the
Oppenheimer Fund Shares;
(e) The aggregate tax basis for Oppenheimer Fund Shares received by
each Quest Portfolio Shareholder pursuant to the reorganization will
be the same as the aggregate tax basis of the Quest Portfolio Shares
held by each such Quest Portfolio Shareholder immediately prior to
the reorganization;
(f) The holding period of Oppenheimer Fund Shares to be received by
each Quest Portfolio Shareholder will include the period during which
the Quest Portfolio Shares surrendered in exchange therefor were held
(provided such Quest Portfolio Shares were held as capital assets on
the date of the Reorganization);
(g) The tax basis of the assets of Quest Portfolio acquired by
Oppenheimer Fund will be the same as the tax basis of such assets to
Quest Portfolio immediately prior to the Reorganization; and
(h) The holding period of the assets of Quest Portfolio in the hands
of Oppenheimer Fund will include the period during which those
assets were held by Quest Portfolio.
Notwithstanding anything herein to the contrary, neither Oppenheimer Fund
nor Quest Portfolio may waive the material conditions set forth in this
paragraph 8.6 although the actual wording of such opinion may differ to
the extent agreed to by Oppenheimer Fund and Quest Portfolio.
9. BROKERAGE FEES AND EXPENSES
9.1 Oppenheimer Fund and Quest For Value on behalf of Quest
Portfolio each represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 (a) Oppenheimer Fund shall bear its expenses incurred in
connection with entering into and carrying out the provisions of this
Agreement, including legal, accounting and Commission registration fees
and Blue Sky expenses. Quest Advisors (or a party other than Oppenheimer
Fund) shall bear Quest Portfolio's expenses incurred in connection with
entering into and carrying out the provisions of this Agreement, including
legal and accounting fees, printing, filing and proxy solicitation
expenses and portfolio transfer taxes (if any) incurred in connection with
the consummation of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not
consummated by reason of Quest Portfolio's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Quest Portfolio's obligations specified in
this Agreement), Quest Advisor's (or a party other than Oppenheimer Fund)
only obligation hereunder shall be to reimburse Oppenheimer Fund for all
reasonable out-of-pocket fees and expenses incurred by Oppenheimer Fund
in connection with those transactions, including legal, accounting and
filing fees.
(c) In the event the transactions contemplated herein are not
consummated by reason of Oppenheimer Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Oppenheimer Fund's obligations specified in
the Agreement), Oppenheimer Fund's only obligations hereunder shall be to
reimburse Quest Portfolio for all reasonable out-of-pocket fees and
expenses incurred by Quest Portfolio in connection with those
transactions, including legal, accounting and filing fees, and to comply
with the provisions of paragraph 7.6 hereof.
10. ENTIRE AGREEMENT: SURVIVAL OF WARRANTIES
10.1 Oppenheimer Fund, Quest For Value, on behalf of Quest Portfolio
and Quest Advisors agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement
constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Quest For Value, on behalf of
Quest Portfolio, and Oppenheimer Fund;
(b) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, by notice to the other, without liability to the
terminating party on account of such termination (providing the
termination party is not otherwise in default or in breach of this
Agreement) if the Closing shall not have occurred on or before December
31, 1995, or if later, two business days after the date of any Quest
Portfolio shareowner's meeting called for the purpose of approving the
Agreement which was convened prior to ___________, 199___ but adjourned
to a date after ____________ 199___; or
(c) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, in writing without liability to the terminating party on
account of such termination (provided the terminating party is not
otherwise in material default or breach of the Agreement), if (i) the
other party shall fail to perform in any material respect its agreements
contained herein required to be performed on or prior to the Closing Date,
(ii) Quest Advisors, Quest For Value or the Quest Portfolio, or the
Oppenheimer Fund, respectively, materially breaches or shall have breached
any of its representations, warranties or covenants contained herein,
(iii) the Quest Portfolio Shareholders fail to approve the Agreement, (iv)
any other condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears that
it will not or cannot be met or (v) the acquisition contemplated by that
certain Acquisition Agreement (the "Acquisition Agreement") dated August
17, 1995 between Oppenheimer Management Corporation, Quest Advisors, Quest
for Value Distributors and Oppenheimer Capital is not consummated.
11.2 (a) Termination of this Agreement pursuant to paragraphs
11.1(a) or (b) shall terminate all obligations of the parties hereunder
(other than Oppenheimer Fund's obligations under paragraph 7.6) and there
shall be no liability for damages on the part of the Oppenheimer Fund,
Quest Portfolio or Quest Advisors or the trustees, directors or officers
of Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any other party
or its trustees, directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1(c)
shall terminate all obligations of the parties hereunder (other than
Oppenheimer Fund's obligations under paragraph 7.6) and there shall be no
liability for damages on the part of Oppenheimer Fund, Quest Portfolio or
Quest Advisors or the trustees, directors or officers of Oppenheimer Fund,
Quest Portfolio or Quest Advisors, to any other party or its trustees,
directors or officers, except that any party in breach of this Agreement
(or, as to a termination pursuant to paragraph 11.1(c)(v), in breach of
the Acquisition Agreement) shall, upon demand, reimburse the non-breaching
party or parties for all reasonable out-of-pocket fees and expenses
incurred in connection with the transactions contemplated by this
Agreement, including legal, accounting and filing fees. For the purposes
of this paragraph 11.2(b), the non-fulfillment of the condition set forth
in paragraph 8.1 shall not be deemed a breach entitling a party to
reimbursement of expenses and fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized
officers of Quest For Value, Oppenheimer Fund and Quest Advisors;
provided, however, that following the meeting of Quest Portfolio's
shareholders called by Quest Portfolio pursuant to paragraph 4,2, no such
amendment may have the effect of changing the provisions for determining
the number of Oppenheimer Fund Shares to be issued to the Quest Portfolio
Shareholders under this Agreement to the detriment of such Shareholders
without their further approval.
13. INDEMNIFICATION
13.1 Oppenheimer Fund will indemnify and hold harmless, Quest For
Value, Quest Advisors, their trustees, directors, officers and
shareholders against any and all claims to the extent such claims are
based upon, arise out of or relate to any untruthful or inaccurate
representations made by Oppenheimer Fund in this Agreement or any breach
by Oppenheimer Fund of any warranty or any failure to perform or comply
with any of its obligations, covenants, conditions or agreements set forth
in this Agreement, including those set forth in paragraph 1.3.
13.2 Quest Advisors will indemnify and hold harmless Quest For Value,
Oppenheimer Fund and Oppenheimer Fund's trustees, officers and
shareholders against any and all claims to the extent such claims are
based upon, arise out of or relate to any untruthful or inaccurate
representation made by Quest For Value on behalf of Quest Portfolio or
Quest Advisors in this Agreement or any breach by Quest Portfolio or Quest
Advisors of any warranty or any failure by Quest Portfolio to perform or
comply with any of its obligations, covenants, conditions or agreements
set forth in this Agreement.
13.3 As used in this section 13, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands, claims,
penalties, assessments, judgments, actions, proceedings and suits of
whatever kind and nature and all costs and expenses (including, without
limitation, reasonable attorneys' fees).
13.4 Promptly after the receipt by any party (the "Indemnified
Party"), of notice of any claim by a third party which may give rise to
indemnification hereunder, the Indemnified Party shall notify the party
against whom a claim for indemnification may be made hereunder (the
"Indemnifying Party"), in reasonable detail of the nature and amount of
the claim. The Indemnifying Party shall be entitled to assume, at its
sole cost and expense (unless it is subsequently determined that the
Indemnifying Party did not have the obligation to indemnify the
Indemnified Party under such circumstances), and shall have sole control
of the defense and settlement of such action or claim; provided, however,
that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and, in connection therewith, to employ counsel at
its own expense; and
(b) without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld, the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement that
requires any action other than the payment of money.
In the event the Indemnifying Party elects to assume control of the
defense of any such action in accordance with the foregoing provisions,
(I) the Indemnifying Party shall not be liable to Indemnified Party for
any legal fees, costs and expenses incurred by the Indemnified Party in
connection with the defense thereof arising after the date the
Indemnifying Party elects to assume control of such defense and (ii)
Indemnified Party shall fully cooperate with the Indemnifying Party in
such defense. If the Indemnifying Party does not assume control of the
defense of such claim in accordance with the foregoing provisions, the
Indemnified Party shall have the right to defend such claim, in which case
the Indemnifying Party shall pay all reasonable costs and expenses of
such defense plus interest on the cost of defense from the date paid at
a rate equal to the prime commercial rate of interest as in effect from
time to time at Citibank, N.A. The Indemnified Party shall conduct such
defense in good faith and shall have the right to settle the matter with
the prior written consent of the Indemnifying Party which shall not be
reasonably withheld.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express courier
addressed to Oppenheimer Fund at Two World Trade Center, 34th Floor, New
York, New York 10048-0203 Attention: Andrew J. Donohue with a copy to
Ronald Feiman, Esq. at Gordon Altman Butowsky Weitzen Shalov & Wein, 114
West 47th Street, New York, New York 10036; to Quest For Value at One
World Financial Center, New York, New York 10281 Attention: Thomas Duggan,
with a copy to Stuart Strauss, Esq. at Gordon Altman Butowsky Weitzen
Shalov & Wein, 114 West 47th Street, New York, New York 10036.
15. HEADINGS: COUNTERPARTS: GOVERNING LAW: ASSIGNMENT, LIMITATION OF
LIABILITY
15.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other
parties. Except as provided in the following sentence, nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or
by reason of this Agreement. A shareholder of Quest Portfolio who becomes
a shareholder of Oppenheimer Fund on the Closing Date and continues to be
a shareholder of Oppenheimer Fund, shall be entitled to the benefits and
may enforce the provisions of paragraph 4.9 hereof except insofar as
paragraph 4.9 relates to the election of trustees; and the persons
designated in paragraphs 13.1 and 13.2 hereof shall be entitled to the
benefits and may enforce the provisions of section 13 hereof.
15.5 The obligations and liabilities of Oppenheimer Fund hereunder
are solely those of Oppenheimer Fund. It is expressly agreed that
shareholders, trustees, nominees, officers, agents or employees of
Oppenheimer Fund shall not be personally liable hereunder. The execution
and delivery of this Agreement have been authorized by the trustees of
Oppenheimer Fund and signed by authorized by the officers of Oppenheimer
Fund acting as such, and neither such authorization by such trustees nor
such execution and delivery by such officers shall be deemed to have been
made by any of the, individually or to impose any liability on any of them
personally.
15.6 The obligations and liabilities of the Quests For Value on
behalf of Quest Portfolio hereunder are solely those of the Quest
Portfolio and not of any other series of Quest For Value. It is expressly
agreed that shareholders, trustees, nominees, officers, agents, or
employees of Quest For Value and Quest Portfolio shall not be personally
liable hereunder. The execution and delivery of this Agreement have been
authorized by the trustees of Quest For Value and signed by authorized
officers of Quest For Value acting as such, and neither such authorization
by such trustees nor such execution and delivery by such officers shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
By: ________________________________
QUEST FOR VALUE FAMILY OF FUNDS
By: ____________________________
QUEST FOR VALUE ADVISORS
By: ____________________________
LEGAG\QUEST.NYT
<PAGE>
EXHIBIT B
The aggregate purchase price for the Purchased Assets and Assumed
Liabilities will be an amount equal to the sum of (i) the Initial Purchase
Payment (as hereinafter defined) payable in cash at the Acquisition
Closing, (ii) the aggregate amount of all unamortized prepaid commissions
as of the business day immediately preceding the Acquisition Closing which
relate to the Acquired Funds (excluding those with respect to Citibank,
N.A.) payable in cash at the Acquisition Closing, (iii) the amount payable
by OMC in respect of the right, title and interest of Citibank, N.A. to
certain commissions, (iv) the Deferred Purchase Payment (as hereinafter
defined) and (v) the aggregate amount of the Assumed Liabilities.
The "Initial Purchase Payment" shall be an amount equal to the sum of (x)
225% of the Annualized Fee Amount (as hereinafter defined) of each
Reorganized Fund and (y) 270% of the Annualized Fee Amount of each
Continuing Fund (excluding the Quest for Value Officers Fund). The
"Annualized Fee Amount" of an Acquired Fund shall equal the product of (i)
such Acquired Fund's Closing Net Assets (as hereinafter defined) and (ii)
the annual advisory fee payable to QVA by such Acquired Fund at the rate
indicated in the most recent prospectus for such Acquired Fund at the
Acquisition Closing (plus any applicable annual administrative fee)
"Closing Net Assets" for an Acquired Fund shall mean the aggregate net
asset value of such Acquired Fund as of the close of business on the last
business date preceding the Acquisition Closing.
The "Deferred Purchase Payment" shall be an amount equal to the aggregate
amounts determined for all Reorganized Funds pursuant to the following
formula: the Closing Payment (as hereinafter defined) times the
Applicable Percentage (as hereinafter defined). The "Closing Payment"
shall be the aggregate amount calculated for all Reorganized Funds
pursuant to clause (x) of the Initial Purchase Payment formula. The
"Applicable Percentage" shall be 100% if the Continuing Net Asset
Percentage (as hereinafter defined) is 75% or more, 0% if the Continuing
Net Asset Percentage is 50% or less and the percentage determined in
accordance with the following formula if the Continuing Net Asset
Percentage is between 75% and 50%: 100% - (4) (75% - Continuing Net
Asset Percentage). The "Continuing Net Asset Percentage" shall equal the
percentage obtained by dividing the Anniversary Net Assets (as hereinafter
defined) by the Closing Net Assets. The "Anniversary Net Assets" shall
mean the most recently determined aggregate net asset values of all
Reorganized Funds as of 8:00 p.m. on the first anniversary of the
Acquisition Closing of each account of the Reorganized Funds which are
eligible to be included in Anniversary Net Assets in accordance with the
principles set forth in the Acquisition Agreement.
MERGE\QFVF360.D
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NEW YORK TAX-EXEMPT FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD _______, 1995
The undersigned shareholder of New York Tax-Exempt Fund (the "Fund"), a
series of Quest for Value Family of Funds (the "Trust"), does hereby
appoint _____________________, and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of substitution, to attend the
Special Meeting of Shareholders of the Fund to be held on _______, 1995,
at One World Financial Center, New York, New York 10281 on the 40th Floor
at ___ A.M., New York time, and at all adjournments thereof, and to vote
the shares held in the name of the undersigned on the record date for said
meeting on the Proposal specified on the reverse side. Said attorneys-in-
fact shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS
INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
______, 1995 by an among Oppenheimer New York Tax-Exempt Fund, the
Trust, on behalf of the Fund, and Quest for Value Advisors, and the
transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A
shares of Oppenheimer New York Tax-Exempt Fund and the assumption by
Oppenheimer New York Tax-Exempt Fund of certain liabilities of the
Fund, the distribution of such shares to the shareholders of the Fund
in complete liquidation of the Fund, the cancellation of the
outstanding shares of the Fund and the termination of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
MERGE\QFVF360.D
<PAGE>
OPPENHEIMER NEW YORK
TAX-EXEMPT FUND
Prospectus dated August 29, 1995
Oppenheimer New York Tax-Exempt Fund (the "Fund") is a mutual fund with
the investment objective of seeking the maximum current income exempt from
Federal, New York State and New York City income taxes for individual
investors that is consistent with preservation of capital. The Fund seeks
to achieve this objective by investing in municipal obligations, the
income from which is tax-exempt as described above. However, in times of
unstable economic or market conditions, the Fund's investment manager may
deem it advisable to temporarily invest a portion of the Fund's assets in
certain taxable instruments. The Fund may also use certain hedging
instruments in an effort to reduce the risks of market fluctuations that
affect the value of the securities the Fund holds. You should carefully
review the risks associated with an investment in the Fund. Please refer
to "Investment Policies and Strategies" for more information about the
types of securities the Fund invests in and the risks of investing in the
Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in the
August 29, 1995 Statement of Additional Information. For a free copy,
call Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-
800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
(logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction fees. The following tables are provided
to help you understand your direct expenses of investing in the Fund and
your share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses during its
last fiscal year ended September 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages
22 through 41, for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge
on Purchases (as a %
of offering price) 4.75% None None
- --------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None None
- --------------------------------------------------------------
Deferred Sales Charge
(as a % of the lower of
the original purchase
price or redemption
proceeds) None(1) 5% in the first1% if shares
year, decliningare redeemed
to 1% in the within 12 months
sixth year and of purchase(2)
eliminated
thereafter(2)
- --------------------------------------------------------------
Exchange Fee None None None
<FN>
- -----------------------
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How to Buy
Shares - Class A Shares," below.
(2) See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class C Shares," below, for information on contingent
deferred sales charges.
</TABLE>
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (referred to in this Prospectus as the "Manager").
The rates of the Manager's fees are set forth in "How the Fund is
Managed," below. The Fund has other regular expenses for services, such
as transfer agent fees, custodial fees paid to the bank that holds its
portfolio securities, audit fees and legal expenses. Those expenses are
detailed in the Fund's Financial Statements in the Statement of Additional
Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Plan Fees for Class A
shares are service plan fees (maximum of 0.25% of average annual net
assets of the class); for Class B and Class C shares the 12b-1 Fees are
the service plan fee (0.25% of average annual net assets of the class) and
the annual asset-based sales charge of 0.75%. These plans are described
in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during the
Fund's fiscal year ended September 30, 1994; therefore, the Annual Fund
Operating Expenses for Class C shares are estimates of amounts that would
have been payable if Class C shares had been outstanding during that
period.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Management Fees 0.51% 0.51% 0.51%
12b-1 Plan Fees 0.24% 1.00% 1.00%
Other Expenses 0.11% 0.14% 0.14%
Total Fund Operating
Expenses 0.86% 1.65% 1.65%
</TABLE>
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the Annual Fund Operating
Expenses table above. If you were to redeem your shares at the end of
each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------
Class A Shares $56 $74 $ 93 $149
- -----------------------------------------------------------------
Class B Shares $67 $82 $110 $155
- -----------------------------------------------------------------
Class C Shares $27 $52 $90 $195
If you did not redeem your investment, it would incur the following expenses:
Class A Shares $56 $74 $93 $149
- -----------------------------------------------------------------
Class B Shares $17 $52 $90 $155
- -----------------------------------------------------------------
Class C Shares $17 $52 $90 $195
<FN>
_______________________
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge on Class
B and Class C shares, long-term shareholders of Class B and Class C shares
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulatory requirements. For Class B
shareholders, the automatic conversion of Class B shares to Class A Shares
is designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class C
Shares" on page 22 for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek the maximum current income exempt from Federal, New
York State and New York City income taxes for individual investors that
is consistent with preservation of capital.
- What Does the Fund Invest In? Under normal market conditions, the
Fund (1) will invest at least 65% of its total assets in municipal bonds,
municipal notes and other debt obligations issued by or on behalf of New
York State and its agencies or authorities, the interest on which is not
subject to New York State individual income tax, and (2) will invest at
least 80% of its total assets in municipal bonds, municipal notes and
other debt obligations issued by or on behalf of the State of New York,
other states and the District of Columbia, the interest from which is not
subject to Federal individual income tax. The Fund may also use hedging
instruments and some derivative investments in an effort to protect
against market risks. These investments are more fully explained in
"Investment Objective and Policies," starting on page 10.
- Who Manages the Fund? The Fund's investment advisor is Oppenheimer
Management Corporation, which (including a subsidiary) manages investment
company portfolios having over $35 billion in assets at June 30, 1995.
The Fund's portfolio manager, who is employed by the Manager, is primarily
responsible for the selection of the Fund's securities, is Robert E.
Patterson. The Manager is paid an advisory fee by the Fund, based on its
net assets. The Fund's Board of Trustees, elected by shareholders,
oversees the investment advisor and the portfolio manager. Please refer
to "How the Fund is Managed," starting on page 12 for more information
about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments are subject to changes in their value from a
number of factors such as changes in general bond market movements, the
change in value of particular bonds because of an event affecting the
issuer, or changes in interest rates that can affect bond prices. These
changes affect the value of the Fund's investments and its price per
share. The Fund may invest in "inverse floater" variable rate bonds, a
type of derivative investment whose yields move in the opposite direction
as short-term interest rates change.
While the Manager tries to reduce risks by diversifying investments
and by carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objective and your shares may
be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 10
for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 22 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All three classes have the same investment portfolio
but different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75%, and reduced for larger purchases. Class B
shares and Class C shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge if redeemed
within 6 years or 12 months, respectively, of purchase. There are also
annual asset-based sales charges on Class B and Class C shares. Please
review "How To Buy Shares" starting on page 22 for more details, including
a discussion about which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer. Please refer to "How To Sell Shares" on page 34. The Fund also
offers exchange privileges to other OppenheimerFunds, described in "How
to Exchange Shares" on page 36.
- How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax-equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those
yields and returns can be compared to the returns (over similar periods)
of other funds. Of course, other funds may have different objectives,
investments, and levels of risk. The Fund's performance can also be
compared to a broad market index, which we have done on page 21. Please
remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial information
about the Fund, including per share data and expense ratios and other data
based on the Fund's average net assets. This information has been audited
by KPMG Peat Marwick LLP, the Fund's independent auditors, whose report
on the Fund's financial statements for the fiscal year ended September 30,
1994 is included in the Statement of Additional Information. The
information for the six months ended March 31, 1995 is unaudited. Class
C shares of the Fund were not publicly offered during the periods shown.
Accordingly, no information on Class C shares is included in the table or
in the Fund's financial statements for the fiscal year ended September 30,
1994.
</TABLE>
<TABLE>
<CAPTION>
Class A
------- -----------------------------------------------------------------------------
Six Months
Ended
March 31,
1995 Year Ended September 30,
(Unaudited) 1994 1993 1992 1991 1990 1989
--------- ------ --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87 $ 11.91
--------- ------ --------- --------- --------- --------- ------
Income (loss) from
investment operations:
Net investment income .36 .74 .73 .79 .81 .83 .84(2)
Net realized and
unrealized gain (loss)
on investments .27 (1.46) 1.01 .47 .64 (.25) .01
--------- ------ --------- --------- --------- --------- ------
Total income (loss) from
investment operations .63 (.72) 1.74 1.26 1.45 .58 .85
Dividends and distributions
to shareholders:
Dividends from net
investment income (.36) (.71) (.75) (.75) (.81) (.83) (.83)
Dividends in excess of net
investment income -- (.01) -- -- -- -- --
Distributions from net
realized gain on
investments -- (.03) (.08) (.13) (.04) (.01) (.06)
Distributions in excess of
net realized gain on
investments -- (.11) -- -- -- -- --
--------- ------ --------- --------- --------- --------- ------
Total dividends and
distributions to
shareholders (.36) (.86) (.83) (.88) (.85) (.84) (.89)
--------- ------ --------- --------- --------- --------- ------
Net asset value, end
of period $ 12.19 $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87
========= ====== ========= =========
========= ========= ======
Total Return, at Net
Asset Value(3) 5.44% (5.55)% 14.33% 10.72% 12.93% 4.95% 6.91%
--------- ------ --------- --------- --------- --------- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 668,467 $687,233 $ 756,934 $ 530,260 $ 349,480 $ 250,012 $197,321
--------- ------ --------- --------- --------- --------- ------
Average net assets
(in thousands) $ 648,096 $738,747 $ 652,327 $ 436,876 $ 292,134 $ 227,504 $156,572
--------- ------ --------- --------- --------- --------- ------
Number of shares
outstanding at end of
period (in thousands) 54,842 57,644 56,087 42,119 28,617 21,533 16,618
--------- ------ --------- --------- --------- --------- ------
Ratios to average
net assets:
Net investment income 6.00%(4) 5.68% 5.66% 6.33% 6.81% 6.97% 7.07%
Expenses .90%(4) .86% .91% .96% .96% .99% .98%(2)
--------- ------ --------- --------- --------- --------- ------
Portfolio turnover rate 6.3%(6) 9.4%(5) 39.1% 30.5% 8.9% 13.3% 11.8%
(Continued) Class B
------------------------------------------------------------------------------------------
Ten Months Six Months Year
Ended Ended Ended
Sept. 30, March 31, 1995 Sept. 30,
1988 1987 1986 1985 (Unaudited) 1994 1993(1)
--------- --------- --------- --------- --------- ------ ------
Per Share Operating Data:
Net asset value, beginning
of period $ 11.60 $ 12.51 $ 10.98 $ 10.32 $ 11.93 $ 13.50 $13.07
--------- --------- --------- --------- --------- ------ ------
Income (loss) from
investment operations:
Net investment income .88(2) .90(2) .86 .76 .31 .64 .36
Net realized and
unrealized gain (loss)
on investments .45 (.79) 1.62 .67 .27 (1.45) .44
--------- --------- --------- --------- --------- ------ ------
Total income (loss) from
investment operations 1.33 .11 2.48 1.43 .58 (.81) .80
Dividends and distributions
to shareholders:
Dividends from net
investment income (.94) (.88) (.86) (.77) (.32) (.60) (.37)
Dividends in excess of net
investment income -- -- -- -- -- (.02) --
Distributions from net
realized gain on
investments (.08) (.14) (.09) -- -- (.03) --
Distributions in excess of
net realized gain on
investments -- -- -- -- -- (.11) --
--------- --------- --------- --------- --------- ------ ------
Total dividends and
distributions to
shareholders (1.02) (1.02) (.95) (.77) (.32) (.76) (.37)
--------- --------- --------- --------- --------- ------ ------
Net asset value, end
of period $ 11.91 $ 11.60 $ 12.51 $ 10.98 $ 12.19 $ 11.93 $13.50
========= ========= ========= =========
========= ====== ======
Total Return, at Net
Asset Value(3) 11.48% .29% 22.73% 13.37% 4.95% (6.22)% 6.56%
--------- --------- --------- --------- --------- ------ ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 116,931 $ 79,479 $ 50,810 $ 28,166 $ 83,030 $73,943 $40,958
--------- --------- --------- --------- --------- ------ ------
Average net assets
(in thousands) $ 95,996 $ 65,102 $ 42,907 $ 15,240 $ 75,172 $61,008 $20,454
--------- --------- --------- --------- --------- ------ ------
Number of shares
outstanding at end of
period (in thousands) 9,817 6,851 4,061 2,565 6,809 6,200 3,033
--------- --------- --------- --------- --------- ------ ------
Ratios to average
net assets:
Net investment income 7.48% 7.33% 7.10% 8.05%(4) 5.21%(4) 4.88% 4.45%(4)
Expenses .90%(2) .67%(2) .86% 1.00%(4) 1.67%(4) 1.65% 1.73%(4)
--------- --------- --------- --------- --------- ------ ------
Portfolio turnover rate 11.7% 22.9% 29.7% 126.3% 6.3%(6) 9.4%(5) 39.1
</TABLE>
1. For the period from March 1, 1993 (inception of offering) to September 30,
1993.
2. Net investment income would have been $.83, $.87 and $.88 absent the
voluntary assumption of expenses, resulting in an expense ratio of 1.00%,
1.02% and .85% for 1989, 1988 and 1987.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $145,939,745 and $73,796,519,
respectively.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the six months ended March 31, 1995 were $45,588,316 and $72,870,419,
respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek maximum current
income exempt from Federal, New York State and New York City income taxes
for individual investors consistent with preservation of capital. Toward
that objective, the Fund may use certain hedging instruments (discussed
below) in an effort to protect against market risks. Since market risks
are inherent in all securities to varying degrees, assurance cannot be
given that the Fund will achieve its investment objective.
Investment Policies and Strategies. Under normal market conditions, the
Fund attempts to invest 100% of its assets, and as a matter of fundamental
policy to invest at least 80% of its assets, in Municipal Securities. In
addition, under normal market conditions, as a matter of fundamental
policy, the Fund will invest at least 65% of its total assets in New York
Municipal Securities.
Dividends paid by the Fund derived from interest attributable to New
York Municipal Securities will be exempt from Federal, New York State and
New York City individual income taxes. Dividends derived from interest
on Municipal Securities of other governmental issuers will be exempt from
Federal income tax for individuals, but will be subject to New York State
and New York City individual income taxes. Any net interest income on
taxable investments will be taxable as ordinary income when distributed
to shareholders (see "Dividends, Capital Gains, and Taxes" below).
- Municipal Securities. Municipal Securities are municipal bonds and
municipal notes and municipal commercial paper issued by or on behalf of
the State of New York, other states and the District of Columbia, their
political subdivisions or any commonwealths, territories or possessions
of the United States, or their respective agencies, instrumentalities or
authorities, the interest on which is, in the opinion of bond counsel to
the respective issuer at the time of issue, not subject to Federal
individual income tax. New York Municipal Securities are obligations of
the State of New York and its political subdivisions, and their respective
agencies, authorities or instrumentalities, the interest from which is,
in the opinion of bond counsel to the respective issuer at the time of
issue, not subject to New York individual income tax. No independent
investigation has been made by the Manager as to the users of proceeds of
bond offerings or the application of such proceeds.
"Municipal bonds" are Municipal Securities that have a maturity when
issued of one year or more and "municipal notes" are Municipal Securities
that have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest) and "revenue obligations" (payable only
from the revenues derived from a particular facility or class of
facilities, or specific excise tax or other revenue source). The Fund may
invest in Municipal Securities of both classifications. See "Investment
Objective and Policies" in the Statement of Additional Information for
further information about the Fund's investment policies and about
Municipal Securities.
- Special Considerations - New York Municipal Securities. Because
the Fund concentrates its investments in New York Municipal Securities,
a default or financial crisis relating to any of such issuers could
adversely affect the market value and marketability of such Municipal
Securities and the interest income and repayment of principal to the Fund
from them. Investors should consider these matters and the financial
difficulties experienced in past years by New York State and certain of
its agencies and subdivisions (particularly New York City), as well as
economic trends in New York, summarized in the Statement of Additional
Information under "Special Investment Considerations - New York Municipal
Securities." In addition, the Fund's portfolio securities are affected
by general changes in interest rates, which result in changes in the value
of portfolio securities held by the Fund, which can be expected to vary
inversely to changes in prevailing interest rates.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
The Fund's Board of Trustees may change non-fundamental policies
without shareholder approval, although significant changes will be
described in amendments to this Prospectus. Fundamental policies are those
that cannot be changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding voting
shares (and this term is explained in the Statement of Additional
Information).
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described immediately below); (ii) hedging
instruments (described in "Hedging," below); (iii) repurchase agreements
(explained below); and (iv) municipal securities issued to benefit a
private user ("Private Activity Municipal Securities"), the interest from
which may be subject to Federal alternative minimum tax (see "Taxes,"
below, and "Private Activity Municipal Securities" in the Statement of
Additional Information).
For temporary defensive purposes, the Fund may invest up to 100% of
its total assets in "Temporary Investments," including: (i) obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; (ii) corporate debt securities rated within the three
highest grades by Moody's or Standard & Poor's; (iii) commercial paper
rated "A-1" by Standard & Poor's or "Prime-1" by Moody's; and (iv)
certificates of deposit of domestic banks with assets of $1 billion or
more. The Fund may hold Temporary Investments pending the investment of
proceeds from the sale of Fund shares or portfolio securities, or to meet
anticipated redemptions.
- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet the interest and principal payments. Such values will also change
in response to changes in interest rates. Should interest rates rise, the
values of outstanding Municipal Securities will probably decline and (if
purchased at principal amount) would sell at a discount. If interest
rates fall, the values of outstanding Municipal Securities will probably
increase and (if purchased at principal amount) would sell at a premium.
Changes in the values of the Fund's Municipal Securities from these or
other factors will not affect interest income derived from these
securities but will affect the Fund's net asset value per share.
- Municipal Lease Obligations. The Fund may invest in certificates
of participation that represent a proportionate interest in or right to
the lease-purchase payment made under municipal lease obligations. While
some municipal lease securities may be deemed to be "illiquid" securities
(the purchase of which would be limited as described below in "Illiquid
and Restricted Securities"), from time to time the Fund may invest more
than 5% of its net assets in municipal lease obligations that the Manager
has determined to be liquid under guidelines set by the Board of Trustees.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 90-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a type
of derivative investment whose yields move in the opposite direction as
short-term interest rates change. As interest rates rise, inverse
floaters produce less current income. Their price may be more volatile
than the price of a comparable fixed-rate security. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal securities that pay
interest that depends on an external pricing mechanism, also a type of
derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
- Ratings of Municipal Securities. Municipal Securities purchased
by the Fund must be rated within the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), Fitch Investors Service, Inc. ("Fitch"), or, if unrated, judged
by the Manager to be of comparable quality to Municipal Securities rated
within such grades. See Appendix B of the Statement of Additional
Information for a description of these rating categories. Municipal
Securities rated either "Baa" or "MIG2" by Moody's, or "BBB" or "SP-2" by
S&P, or "BBB" or "F-3" by Fitch, although investment-grade, may be subject
to greater market fluctuations and risks of loss of income and principal
than higher-rated Municipal Securities and may be considered to have
speculative characteristics. Investments in unrated Municipal Securities
will not exceed 20% of the Fund's total assets.
A reduction in the rating of a security after its purchase by the
Fund will not require the Fund to dispose of such security. Securities
that have fallen below investment grade have a greater risk that the
ability of the issuers of such securities to meet their debt obligations
will be impaired. It is anticipated that the Municipal Securities
purchased for the Fund's portfolio will generally be those having
relatively longer maturities (approximately 7 to 30 years), but the Fund
may invest in Municipal Securities having a broad range of maturities.
The foregoing ratings restrictions do not apply to banks in which the
Fund's cash is kept.
The Fund's Board of Trustees and shareholders have changed the Fund's
current investment policy with respect to the ratings of Municipal
Securities purchased by the Fund. The Fund is permitted to invest up to
25% of the Fund's total assets in Municipal Securities rated below
"investment grade," that is, below the four highest rating categories of
Moody's Investors Service, Inc., Standard & Poor's Corporation or Fitch
Investors Service, Inc. Although the yield in non-investment grade
Municipal Securities tends to be higher than that of higher grade
municipal securities, there is an increased credit risk potential that
issuers of non-investment grade Municipal Securities may not be able to
make interest or principal payments as they become due.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally will not engage in
the trading of securities for the purpose of realizing short-term gains,
but the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield. The "Financial Highlights," above,
show the Fund's portfolio turnover rate during past fiscal years. While
short-term trading increases portfolio turnover, the Fund incurs little
or no brokerage costs because most of the Fund's portfolio transactions
are principal trades without brokerage commissions.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. "When-issued" or
"delayed delivery" refer to securities whose terms and indenture are
available and for which a market exists, but which are not available for
immediate delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and
settlement, no payment is made for the security and no interest accrues
to the buyer from the investment. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involves a risk of loss if the value of the security declines
prior to the settlement date.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. As a matter of fundamental policy, the Fund
may not invest in securities that have a restriction on their resale. The
Fund will not invest more than 10% of its net assets in illiquid or
restricted securities (that limit may increase to 15% if certain state
laws are changed or the Fund's shares are no longer sold in those states).
The Fund's percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional purchasers.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. The Fund must receive collateral for a loan.
These loans are limited to not more than 25% of the Fund's net assets and
are subject to other conditions described in the Statement of Additional
Information. The Fund presently does not intend to lend its portfolio
securities, but if it does, the value of securities loaned is not expected
to exceed 5% of the value of its total assets in the coming year.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options on
futures and broadly-based municipal bond indices, or enter into interest
rate swap agreements. These are all referred to as "hedging instruments."
The Fund does not use hedging instruments for speculative purposes, and
has limits on the use of them, described below. The hedging instruments
the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the possibility
that the prices of its portfolio securities may decline, or to establish
a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that relate
to (1) broadly-based municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are described in
"Hedging With Options and Futures Contracts" in the Statement of
Additional Information.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal
bond indices, Municipal Bond Index Futures or Interest Rate Futures, or
to terminate its obligation on a call the Fund previously wrote. The Fund
may write (that is, sell) covered call options. When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase put options. Buying a put on a investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to (1) securities that the Fund owns, (2) broadly-based municipal bond
indices, (3) Municipal Bond Index Futures or (4) Interest Rate Futures.
The Fund can buy a put on a Municipal Bond Future or Interest Rate Future
whether or not the Fund owns the particular Future in its portfolio. The
Fund may not sell a put other than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the Fund's
total assets may be subject to calls; (2) calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), or traded in the over-the-counter market; (3) each
call the Fund writes must be "covered" while is outstanding: that means
the Fund must own the investment on which the call was written or it must
own other securities that are acceptable for the escrow arrangements
required for calls; (4) the Fund may write calls on Futures contracts it
owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if
the call is exercised; (5) a call or put option may not be purchased if
the value of all of the Fund's put and call options would exceed 5% of the
Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to pay
interest on a security. For example, they may swap a right to receive
floating rate payments for fixed rate payments. The Fund enters into
swaps only on securities it owns. The Fund may not enter into swaps with
respect to more than 25% of its total assets. Also, the Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
Income from interest rate swaps may be taxable.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell
the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price.
Interest rate swaps are subject to credit risks (if the other party fails
to meet its obligations) and also to interest rate risks. The Fund could
be obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes. These risks are described in
greater detail in the Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these fundamental
policies, the Fund cannot do any of the following:
- Invest in securities or any other investment other than the types
described in "Investment Objective and Policies," above;
- With respect to 75% of its assets, purchase securities issued or
guaranteed by any one issuer (other than the U.S. Government or its
agencies or instrumentalities), if more than 5% of the Fund's total assets
would be invested in securities of that issuer or the Fund would then own
more than 10% of that issuer's voting securities;
- Invest more than 25% of its assets in any industry; however, for
the purposes of this restriction, Municipal Securities and U.S. Government
obligations are not considered to be part of any single industry;
- Make loans, except that the Fund may (i) purchase debt securities
described in "Investment Objective and Policies" and repurchase
agreements, and (ii) lend its portfolio securities as described in "Loans
of Portfolio Securities";
- Borrow money in excess of 10% of the value of its total assets or
make any investment when borrowings exceed 5% of the value of its total
assets; it may borrow only as a temporary measure for extraordinary or
emergency purposes;
- Pledge, mortgage or otherwise encumber, transfer or assign any of
its assets to secure a debt; collateral arrangements for premium and
margin payments in connection with hedging instruments are not deemed to
be a pledge of assets;
- Buy or sell futures contracts other than Interest Rate Futures or
Municipal Bond Index Futures; or
- Underwrite securities or invest in securities subject to
restrictions on resale.
All of the percentage restrictions described above and in the Statement
of Additional Information apply only at the time of investment and require
no action by the Fund as a result of subsequent changes in value of the
investments or the size of the Fund. A supplementary list of investment
restrictions is contained in "Investment Restrictions" in the Statement
of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1984 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to
remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only shares of
a particular class vote on matters that affect that class alone. Shares
are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement establishes the fees paid by
the Fund to the Manager and describes the expenses that the Fund pays to
conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The Portfolio Manager of the Fund is Robert E.
Patterson, a Senior Vice President of the Manager. He has been the person
principally responsible for the day-to-day management of the Fund's
portfolio since November, 1985, and is an officer and portfolio manager
of other OppenheimerFunds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.60% of the first $200 million of
aggregate net assets, 0.55% of the next $100 million, 0.50% of the next
$200 million, 0.45% of the next $250 million, 0.40% of the next $250
million, and 0.35% of net assets in excess of $1 billion. The Fund's
management fee for its last fiscal year ended September 30, 1994 was 0.51%
of average annual net assets for both its Class A and Class B shares,
which may be higher than the rate paid by some other mutual funds.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it incurs
relatively little expense for brokerage. From time to time, however, it
may use brokers when buying portfolio securities. When deciding which
brokers to use, the Manager is permitted by the investment advisory
agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor for the
Fund. The Distributor also distributes the shares of other mutual funds
managed by the Manager (the "OppenheimerFunds") and is sub-distributor for
funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free number shown
below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return", "average annual total return", "standardized yield", "dividend
yield", "yield" and "tax-equivalent yield" to illustrate its performance.
The performance of each class of shares is shown separately, because the
performance of each class will usually be different as a result of the
different kinds of expenses each class bears. This performance
information may be useful to help you see how your investment has done and
to compare it to other funds or to a market index, as we have done below.
It is important to understand that the fund's total returns represent
past performance and should not be considered to be predictions of future
returns or performance. This performance data is described below, but
more detailed information about how total returns are calculated is
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they include the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown. When total returns are shown for Class C shares,
they also include the effect of the contingent deferred sales charge.
Total returns may also be quoted "at net asset value", without considering
the effect of the sales charge, and those returns would be reduced if
sales charges were deducted.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of taxes. It is calculated by dividing that portion of the yield
that is tax-exempt by a factor equal to one minus the applicable tax rate.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the fiscal year
ended September 30, 1994, the Fund was affected by aggressive increases
in short-term interest rates by the Federal Reserve Board. The Fund's
focus on call protection (which prevents the issuer of the bond from
calling or redeeming it before maturity) and on bond quality helped
moderate price fluctuations. The Fund continued to maintain a strong
position in higher quality bonds that the Manager considered to be related
to essential services backed by predictable revenue streams, such as
transportation, utilities, housing and hospitals. In the opinion of the
Manager, the Fund is diversified both by geographic location and by market
sector within New York.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund held from the inception of the Class until September
30, 1994. In the case of Class A shares, performance is measured over a
ten-year period, and in the case of Class B shares, from the inception of
the Class on March 1, 1993. In both cases, all dividends and capital
gains distributions were reinvested in additional shares. The graph
reflects the deduction of the 4.75% current maximum initial sales charge
on Class A shares and the maximum 5% contingent deferred sales charge on
Class B shares. Class C shares were not publicly offered during the
fiscal year ended September 30, 1994. Accordingly, no information on
Class C shares is presented in the graphs below.
Because the Fund invests in a variety of Municipal Securities, the
Fund's performance is compared to the performance of the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment
grade municipal bonds widely regarded as a measure of the performance of
the general municipal bond market.
Index performance reflects the reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the Lehman Brothers Municipal Bond Index. Moreover,
the index performance data does not reflect any assessment of the risk of
the investments included in the index.
Comparison of Change in Value
of $10,000 Hypothetical Investments in
Class A and Class B Shares of
Oppenheimer New York Tax-Exempt Fund and
Lehman Brothers Municipal Bond Index
(Graph)
Average Annual Total Return of Class A and Class B shares of the Fund at
9/30/94(1)
A Shares 1-Year 5-Year 10-Year
<10.04%> 6.18% 9.07%
B Shares 1-Year Life:
<10.90%> <2.77%>
- ----------------------
(1) The inception date of the Fund (Class A shares) was 8/16/84. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 4.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on 3/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5%
contingent deferred sales charges, respectively, for the 1-year period and
the life of the class. The ending account value in the graph is net of
the applicable 5% and 4% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, you will not pay an initial sales charge, but
if you sell any of those shares within 18 months after your purchase, you
may pay a contingent deferred sales charge, which will vary depending on
the amount you invested. Sales charges are described below in "Class A
Shares."
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares. As described below, the Fund
automatically converts Class B shares into Class A shares after 6 years.
Long-term Class B shareholders could pay the economic equivalent of more
than the maximum front-end sales charge allowed under applicable
regulations, because of the effect of the asset-based sales charge and the
contingent deferred sales charge. The automatic conversion of Class B
shares to Class A shares is designed to minimize the likelihood that this
will occur. See "Class B Shares," below.
- Class C Shares. When you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%. Please refer to "Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B and/or Class C shares). If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase only one class
of shares and not a combination of shares of different classes.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term investment. While future financial needs cannot
be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also
depend on how much you invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time, offset
the effect of paying an initial sales charge on your investment (which
reduces the amount of your investment dollars used to buy shares for your
account), compared to the effect over time of higher class-based expenses
on shares of Class B or Class C for which no initial sales charge is paid.
- Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares less than six years), you
should probably consider purchasing Class C shares rather than Class A or
Class B shares. This is because there is no initial sales charge on Class
C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $250,000 for a period less
than six years, Class C shares might not be as advantageous as Class A
shares. This is because the annual asset-based sales charge on Class C
shares (and the contingent deferred sales charges that apply if you redeem
Class C shares within a year of purchase) might have a greater impact on
your account during the period than the initial sales charge that would
apply if Class A shares were purchased instead at the applicable reduced
Class A sales charge rate.
For most investors who invest $500,000 or more, in most cases, Class
A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B, or orders
for more than $1 million of Class C shares from a single investor.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class A shares will likely be more
advantageous than Class B or Class C shares. This is because of the
effect of expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A shares
under the Fund's Right of Accumulation. Class B shares may be appropriate
for smaller investments held for the longer term because there is no
initial sales charge on Class B shares and Class B shares held six years
following their purchase convert into Class A shares.
Of course, all of these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical investment
over time, using the assumed annual performance return stated above, and
you should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available to Class B or Class C
shareholders, or other features (such as Automatic Withdrawal Plans) might
not be advisable (because of the effect of the contingent deferred sales
charge for Class B and Class C shareholders), you should carefully review
how you plan to use your investment account before deciding which class
of shares to buy. For example, share certificates are not available for
Class B or Class C shares and if you are considering using your shares as
collateral for a loan, that may be a factor to consider. Also,
checkwriting privileges are not available for Class B and Class C shares.
Also, because not all OppenheimerFunds currently offer Class B or Class
C shares, and because exchanges are permitted only to the same class of
shares in other OppenheimerFunds, you should consider how important the
exchange privilege is likely to be for you.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class rather than another class. It is important that investors
understand that the purpose of the contingent deferred sales charges and
asset-based sales charges for Class B and Class C shares are the same as
the purpose of the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions it pays to dealers and
financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
- How Are Shares Purchased? You can buy shares several ways: through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure
to specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "Oppenheimer
Funds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217.
If you don't list a dealer on the application, the Distributor will act
as your agent in buying the shares. However, we recommend that you
discuss your investment first with a financial advisor, to be sure it is
appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink" below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day the New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price may be net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Amount of Purchase Front-End Front-End Commission
Sales Charge Sales Charge as
as a as a Percentage
Percentage Percentage of Offering
of Offering of Amount Price
Price Invested
- -------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------
$50,000 or more
but less than
$100,000 4.50% 4.71% 4.00%
- -------------------------------------------------------------------
$100,000 or more
but less than
$250,000 3.50% 3.63% 3.00%
- -------------------------------------------------------------------
$250,000 or more
but less than
$500,000 2.50% 2.56% 2.25%
- -------------------------------------------------------------------
$500,000 or more
but less than
$1 million 2.00% 2.04% 1.80%
- -------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. Shares of any
OppenheimerFunds that offer only one class of shares that has no
designation are considered "Class A Shares" for this purpose. However,
the Distributor pays dealers of record commissions on such purchases in
an amount equal to the sum of 1.0% of the first $2.5 million, plus 0.50%
of the next $2.5 million, plus 0.25% of share purchases over $5 million.
That commission will be paid only on the amount of those purchases in
excess of $1 million that were not previously subject to a front-end sales
charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or on behalf of your children who are minors, under
trust or custodial accounts. A fiduciary can count all shares purchased
for a trust, estate or other fiduciary account (including one or more
employee benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other OppenheimerFunds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also count Class A and Class B shares of OppenheimerFunds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A and Class B shares of the Fund and other
OppenheimerFunds during a 13-month period, you reduce the sales charge
rate that applies to your purchases of Class A shares. The total amount
of your intended purchases of both Class A and Class B shares will
determine the reduced sales charge rate for the Class A shares purchased
during that period. This can include purchases made up to 90 days before
the date of the Letter. More information is contained in the Application
and in "Reduced Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made
available to their clients; or
- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor to sell shares of defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party,
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor, or
- shares purchased and paid for with the proceeds of shares redeemed
in the prior 12 months from a mutual fund (other than a fund managed by
the Manager or any of its subsidiaries) on which an initial sales charge
or contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver. There is a further discussion of this policy in "Reduced
Sales Charges" in the Statement of Additional Information.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below); or
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month
(and no further commission will be payable if the shares are redeemed
within 18 months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements) for its other
expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will not be applied to shares purchased in certain types of
transactions nor will it apply to Class B shares redeemed in certain
circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information.
Waivers for Redemptions of Shares in Certain Cases. The Class B
contingent deferred sales charge will be waived for redemptions of shares
in the following cases:
- Following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales Charges"
in the Statement of Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per
year. Both fees are computed on the average annual net assets of Class
B shares, determined as of the close of each regular business day. The
asset-based sales charge allows investors to buy Class B shares without
a front-end sales charge while allowing the Distributor to compensate
dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September 30, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $3,030,109 (equal to 4.10% of the Fund's net assets represented by
Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for expenses it incurred before the Plan was
terminated.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
Because the Distributor's actual expenses in selling Class C shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class C shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for certain expenses it
incurred before the plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B shares, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying a sales charge. This privilege applies
only to Class A shares you purchased subject to an initial sales charge
and to Class A or Class B shares or on which you paid a contingent
deferred sales charge when you redeemed them. It does not apply to Class
C shares. You must be sure to ask the Distributor for this privilege when
you send your payment. Please consult the Statement of Additional
Information for more details.
How to Sell Shares
You can arrange to take money out of your account on any regular business
day by selling (redeeming) some or all of your shares. Your shares will
be sold at the next net asset value calculated after your order is
received and accepted by the Transfer Agent. The Fund offers you a number
of ways to sell your shares: in writing, by using Checkwriting or by
telephone. You can also set up an Automatic Withdrawal Plan to redeem
shares on a regular basis, as described above. If you have questions
about any of these procedures, and especially if you are redeeming shares
in a special situation, such as due to the death of the owner, please call
the Transfer Agent first, at 1-800-525-7048, for assistance.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The redemption check is not payable to all shareholders listed on
the account statement
- The redemption check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of the New York Stock Exchange that day, which is
normally 4:00 P.M., but which may be earlier on some days. You may not
redeem shares held under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. If you previously signed a signature card to establish
Checkwriting in one of the other OppenheimerFunds, you may call 1-800-525-
7048 to request Checkwriting for an account in this Fund that has the same
registration as that other fund account.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 10 days.
- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain OppenheimerFunds
at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B and/or Class C shares,
and a list can be obtained by calling the Distributor at 1-800-525-7048.
In some cases, sales charges may be imposed on exchange transactions.
Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase of
shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request by that is in
proper form by the close of the New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. However, either
fund may delay the purchase of shares of the fund you are exchanging into
up to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of portfolio securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- For tax purposes, exchanges of shares involve a redemption of the
shares of the fund you own and a purchase of shares of the other fund,
which may result in a capital gain or loss. For more information about
taxes affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of the New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities, obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely in the Statement of
Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays such dividends to shareholders monthly. Normally, dividends are paid
on or about the tenth business day of each month, but the Board of
Trustees can change that date. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares
will generally be higher.
For the fiscal year ended September 30, 1994, the Fund maintained the
practice, to the extent consistent with the amount of the Fund's net
investment income and other distributable income, of attempting to pay
dividends on Class A shares at a constant level, although the amount of
such dividends was subject to change from time to time depending on market
conditions, the composition of the Fund's portfolio and expenses borne by
the Fund or borne separately by that Class. The practice of attempting
to pay dividends on Class A shares at a constant level requires the
Manager, consistent with the Fund's investment objective and investment
restrictions, to monitor the Fund's portfolio and select higher yielding
securities when deemed appropriate to maintain necessary net investment
income levels. The Fund anticipates paying dividends at the targeted
dividend level from net investment income and other distributable income
without any impact on the Fund's net asset value per share. The Board of
Trustees may change the Fund's targeted dividend level at any time,
without prior notice to shareholders; the Fund does not otherwise have a
fixed dividend rate and there can be no assurance as to the payment of any
dividends or the realization of any capital gains.
Capital Gains. Although the Fund does not seek capital gains, it may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions out of any net short- or long-term capital gains
in December. The Fund may make supplemental distributions of dividends
and capital gains following the end of its fiscal year (which ends
September 30th). Long-term capital gains will be separately identified
in the tax information the Fund sends you after the end of the year.
Short-term capital gains are treated as dividends for tax purposes. There
can be no assurance that the Fund will pay any capital gains distributions
in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest all distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive all distributions in cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
- Reinvest your distributions in another OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders. Dividends paid from short-term capital
gains and net investment income are taxable as ordinary income. Dividends
paid from net investment income earned by the Fund on Municipal Securities
will be excludable from your gross income for Federal income tax purposes.
A portion of the dividends paid by the Fund may be an item of tax
preference if you are subject to the alternative minimum tax.
Distributions are subject to Federal income tax and may be subject to
state and/or local taxes. Your distributions are taxable when paid,
whether you reinvest them in additional shares or take them in cash. Every
year the Fund will send you and the IRS a statement showing the amount of
each taxable distribution you received in the previous year.
- "Buying a Dividend". When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- Taxes on Transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
- Returns of Capital. In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
Graphic material included in Prospectus of Oppenheimer New York Tax-
Exempt Fund: "Comparison of Total Return of Oppenheimer New York Tax-
Exempt Fund and the Lehman Bros. Municipal Bond Index - Change in Value
of a $10,000 Hypothetical Investment"
Linear Graphs will be included in the Prospectus of Oppenheimer New
York Tax-Exempt Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in (i) Class
A shares of the Fund for the ten years ended September 30, 1994, and (ii)
Class B shares of the Fund from March 1, 1993 (the date Class B shares
were first publicly-offered) to September 30, 1994, and comparing such
values with the same investments over the same time periods in the Lehman
Brothers Municipal Bond Index. Since no Class C shares of the Fund were
outstanding until after September 30, 1994, no figures are included for
this class. Set forth below are the relevant data points that will appear
on the linear graph. Additional information with respect to the
foregoing, including a description of the Lehman Brothers Municipal Bond
Index, is set forth in the Prospectus under "Fund Information -
Management's Discussion of Performance."
<TABLE>
<CAPTION>
Oppenheimer
New York
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class A Municipal
(Period) Ended Shares Bond Index
<S> <C> <C>
09/30/84 $ 9,525 $10,000
09/30/85 $11,257 $11,624
09/30/86 $13,882 $14,489
09/30/87 $13,973 $14,566
09/30/88 $15,648 $16,457
09/30/89 $16,806 $17,885
09/30/90 $17,638 $19,101
09/30/91 $19,908 $21,621
09/30/92 $22,019 $23,880
03/01/93 $23,563 $25,487
09/30/93 $25,175 $26,925
09/30/94 $23,833 $26,268
Oppenheimer
New York
Tax-Exempt Lehman
Fund Brothers
Fiscal Year Class B Municipal
(Period) Ended Shares(1) Bond Index
03/01/93 $10,000 $10,000
09/30/93 $10,596 $10,564
09/30/94 $ 9,601 $10,306
<FN>
____________________
(1)For the period from March 1, 1993 (commencement of class) to September
30, 1994.
</TABLE>
<PAGE>
Oppenheimer New York Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given
or made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc., or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
(OppenheimerFunds Logo)
PR360.001.0895 * Printed on recycled paper
<PAGE>
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
September __, 1995
___________________________________
This Statement of Additional Information of Oppenheimer New York Tax-
Exempt Fund consists of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer New York Tax-Exempt
Fund dated August 29, 1995, filed herewith and incorporated herein by
reference.
2. Oppenheimer New York Tax-Exempt Fund's Annual Report as of September
30, 1994 and its Semi-Annual Report as of March 31, 1995, filed herewith
and incorporated herein by reference.
3. Prospectus of New York Tax-Exempt Fund dated December 1, 1994, filed
herewith and incorporated herein by reference.
4. Statement of Additional Information of New York Tax-Exempt Fund dated
December 1, 1994, filed herewith and incorporated herein by reference.
5. New York Tax-Exempt Fund's Annual Report as of July 31, 1994 and its
Semi-Annual Report as of January 1, 1995, filed herewith and incorporated
herein by reference.
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read in
conjunction with the Proxy Statement and Prospectus, which may be obtained
by written request to Oppenheimer Shareholder Services ("OSS"), P.O. Box
5270, Denver, Colorado 80217, or by calling OSS at the toll-free number
shown above.
merge\360ptb
<PAGE>
Oppenheimer New York Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated August 29, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated August 29, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
Contents
Page
About The Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Special Investment Considerations -
New York Municipal Securities 5
Other Investment Techniques and Strategies 11
Other Investment Restrictions17
How the Fund is Managed 18
Organization and History 18
Trustees and Officers of the Fund 19
The Manager and Its Affiliates 23
Brokerage Policies of the Fund 24
Performance of the Fund 26
Distribution and Service Plans 30
About Your Account
How To Buy Shares 32
How To Sell Shares 38
How To Exchange Shares 42
Dividends, Capital Gains and Taxes 44
Additional Information About the Fund 47
Financial Information About the Fund
Independent Auditors' Report 48
Financial Statements 49
Appendix A: Description of Ratings Categories A-1
Appendix B: Tax-Equivalent Yield Chart B-1
Appendix C: Industry Classifications C-1
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund may invest, as well as the strategies the Fund may use
to try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
used in the Prospectus.
Municipal Securities
- Municipal Bonds. The principal classifications of long-term
municipal bonds are "general obligation" and "revenue" or "industrial
development" bonds.
- General Obligation Bonds. Issuers of general obligation bonds
include states, counties, cities, towns, and regional districts. The
proceeds of these obligations are used to fund a wide range of public
projects, including construction or improvement of schools, highways and
roads, and water and sewer systems. The basic security behind general
obligation bonds is the issuer's pledge of its full faith and credit and
taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to the rate or amount of special assessments.
- Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Housing finance
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
- Industrial Development Bonds. Industrial development bonds,
which are considered municipal bonds if the interest paid is exempt from
federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports, and pollution control. These bonds
are also used to finance public facilities such as airports, mass transit
systems, ports, and parking. The payment of the principal and interest
on such bonds is dependent solely on the ability of the facility's user
to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.
- Municipal Notes. Municipal Securities having a maturity when
issued of less than one year are generally known as municipal notes.
Municipal notes generally are used to provide for short-term working
capital needs and include:
- Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use of business taxes, and are payable from these specific future
taxes.
- Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue, such as
federal revenues available under the Federal revenue sharing programs.
- Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the notes.
- Construction Loan Notes. Construction loan notes are sold to
provide construction financing. After successful completion and
acceptance, many projects receive permanent financing through the Federal
Housing Administration.
- Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is
issued by state and local governments or their agencies to finance
seasonal working capital needs or as short-term financing in anticipation
of longer-term financing.
- Municipal Lease Obligations. From time to time the Fund may invest
5% in municipal lease obligations, some of which may be illiquid and
others which the Manager has determined to be liquid under guidelines set
by the Board of Trustees. Those guidelines require the Manager to
evaluate: (1) the frequency of trades and price quotations for such
securities; (2) the number of dealers or other potential buyers willing
to purchase or sell such securities; (3) the availability of market-
makers; and (4) the nature of the trades for such securities. The Manager
will also evaluate the likelihood of a continuing market for such
securities throughout the time they are held by the Fund and the credit
quality of the instrument. Municipal leases may take the form of a lease
or an installment purchase contract issued by a state or local government
authority to obtain funds to acquire a wide variety of equipment and
facilities. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power
is pledged, a lease obligation is ordinarily backed by the municipality's
covenant to budget for, appropriate and make the payments due under the
lease obligation. However, certain lease obligations contain "non-
appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. In
addition to the risk of "non-appropriation," municipal lease securities
do not yet have a highly developed market to provide the degree of
liquidity of conventional municipal bonds. Municipal leases, like other
municipal debt obligations, are subject to the risk of non-payment. The
ability of issuers of municipal leases to make timely lease payments may
be adversely affected in general economic downturns and as relative
governmental cost burdens are reallocated among federal, state and local
governmental units. Such non-payment would result in a reduction of
income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the
net asset value of the Fund.
- Private Activity Municipal Securities. The Tax Reform Act of 1986
(the "Tax Reform Act") reorganized, as well as amended, the rules
governing tax exemption for interest on Municipal Securities. The Tax
Reform Act generally does not change the tax treatment of bonds issued in
order to finance governmental operations. Thus, interest on obligations
issued by or on behalf of state or local government, the proceeds of which
are used to finance the operations of such governments (e.g., general
obligation bonds) continues to be tax-exempt. However, the Tax Reform Act
further limited the use of tax-exempt bonds for non-governmental (private)
purposes. More stringent restrictions were placed on the use of proceeds
of such bonds. Interest on certain private activity bonds (other than
those specified as "qualified" tax-exempt private activity bonds, e.g.,
exempt facility bonds including certain industrial development bonds,
qualified mortgage bonds, qualified Section 501(c)(3) bonds, qualified
student loan bonds, etc.) is taxable under the revised rules.
Interest on certain private activity bonds issued after August 7,
1986, which continues to be tax-exempt, will be treated as a tax
preference item subject to the alternative minimum tax (discussed below)
to which certain taxpayers are subject. Further, a private activity bond
which would otherwise be a qualified tax-exempt private activity bond will
not, under Internal Revenue Code Section 147(a), be a qualified bond for
any period during which it is held by a person who is a "substantial user"
of the facilities or by a "related person" of such a substantial user.
This "substantial user" provision is applicable primarily to exempt
facility bonds, including industrial development bonds. The Fund may not
be an appropriate investment for entities which are "substantial users"
(or persons related thereto) of such exempt facilities, and such persons
should consult their own tax advisers before purchasing shares. A
"substantial user" of such facilities is defined generally as a "non-
exempt person who regularly uses part of a facility" financed from the
proceeds of exempt facility bonds. Generally, an individual will not be
a "related person" under the Internal Revenue Code unless such investor
or the investor's immediate family (spouse, brothers, sisters and
immediate descendants) own directly or indirectly in the aggregate more
than 50% in value of the equity of a corporation or partnership which is
a "substantial user" of a facility financed from the proceeds of exempt
facility bonds. In addition, the Tax Reform Act revised downward the
limitations as to the amount of private activity bonds which each state
may issue, which will reduce the supply of such bonds. The value of the
Fund's portfolio could be affected if there is a reduction in the
availability of such bonds. That value may also be affected by a 1988
U.S. Supreme Court decision upholding the constitutionality of the
imposition of a Federal tax on the interest earned on Municipal Securities
issued in bearer form.
A Municipal Security is treated as a taxable private activity bond
under a test for: (a) a trade or business use and security interest, or
(b) a private loan restriction. Under the trade or business use and
security interest test, an obligation is a private activity bond if: (i)
more than 10% of bond proceeds are used for private business purposes and
(ii) 10% or more of the payment of principal or interest on the issue is
directly or indirectly derived from such private use or is secured by the
privately used property or the payments related to the use of the
property. For certain types of uses, a 5% threshold is substituted for
this 10% threshold. (The term "private business use" means any direct or
indirect use in a trade or business carried on by an individual or entity
other than a state or municipal governmental unit.) Under the private
loan restriction, the amount of bond proceeds which may be used to make
private loans is limited to the lesser of 5% or $5.0 million of the
proceeds. Thus, certain issues of Municipal Securities could lose their
tax-exempt status retroactively if the issuer fails to meet certain
requirements as to the expenditure of the proceeds of that issue or use
of the bond-financed facility.
The Federal alternative minimum tax is designed to ensure that all
taxpayers pay some tax, even if their regular tax is zero. This is
accomplished in part by including in taxable income certain tax preference
items in arriving at alternative minimum taxable income. The Tax Reform
Act made tax-exempt interest from certain private activity bonds a tax
preference item for purposes of the alternative minimum tax on individuals
and corporations. Any exempt-interest dividend paid by a regulated
investment company will be treated as interest on a specific private
activity bond to the extent of its proportionate share of the interest on
such bonds received by the regulated investment company. The Treasury is
authorized to issue regulations implementing this provision. In addition,
corporate taxpayers subject to the alternative minimum tax may, under some
circumstances, have to include exempt-interest dividends in calculating
their alternative minimum taxable income in situations where the "adjusted
current earnings" of the corporation exceeds its alternative minimum
taxable income. The Fund may hold Municipal Securities the interest on
which (and thus a proportionate share of the exempt-interest dividends
paid by the Fund) will be subject to the alternative minimum tax on
individuals and corporations. The Fund anticipates that under normal
circumstances it will not purchase any such securities in an amount
greater than 20% of the Fund's total assets.
- Ratings of Municipal Securities. Moody's and S&P's ratings (see
Appendix A) represent their respective opinions of the quality of the
Municipal Securities they undertake to rate. However, such ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different
yields, while Municipal Securities of the same maturity and coupon with
different ratings may have the same yield. Investment in lower quality
securities may produce a higher yield than securities rated in the higher
rating categories described in the Prospectus (or judged by the Manager
to be of comparable quality). However, the added risk of lower quality
securities might not be consistent with a policy of preservation of
capital.
Subsequent to its purchase by the Fund, a Municipal Security may
cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. Neither event requires the Fund to sell the
security, but Oppenheimer Management Corporation (the "Manager") will
consider such events in determining whether the Fund should continue to
hold the security. To the extent that ratings given by Moody's or S&P
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the Fund's investment policies.
Special Investment Considerations - New York Municipal Securities. As
explained in the Prospectus, the Trust is highly sensitive to the fiscal
stability of New York State (the "State") and its subdivisions, agencies,
instrumentalities or authorities, including New York City, which issue the
Municipal Securities in which the Trust concentrates its investments. The
following information on risk factors in concentrating in New York
Municipal Securities is only a summary, based on publicly available
information, and official statements relating to offerings of New York
issuers of Municipal Securities prior to January 18, 1995, and no
representation is made as to the accuracy of such information.
- - New York City
- General. More than any other municipality, the fiscal health of
New York City (the "City") has a significant effect on the fiscal health
of the State. The national economic downturn which began in July 1990
adversely affected the local economy which had been declining since late
1989. In order to achieve a balanced budget as required by the laws of
the State for the 1992 fiscal year, the City increased taxes and reduced
services during the 1991 fiscal year to close a then projected gap of $3.3
billion in the 1992 fiscal year which resulted from, among other things,
lower than projected tax revenue of approximately $1.4 billion, reduced
State aid for the City and greater than projected increases in legally
mandated expenditures, including public assistance and Medicaid
expenditures. Beginning in calendar year 1992, the improvement in the
national economy helped stabilize conditions in the City. Employment
losses moderated toward year-end and real Gross City Product ("GCP")
increased, boosted by strong wage gains. The City's current four-year
financial plan assumes that, after noticeable improvements in the City's
economy during calendar year 1994, economic growth will slow in calendar
years 1995 and 1996 with local employment increasing modestly. In
December 1994, the City experienced substantial shortfalls in payments of
non-property tax revenues from those forecasted. Through December 1994,
collections of non-property taxes were approximately $200 million lower
than projected.
For each of the 1981 through 1994 fiscal years, the City achieved
balanced operating results as reported in accordance with then applicable
generally accepted accounting principles ("GAAP"). The City was required
to close substantial budget gaps in recent years in order to maintain
balanced operating results. For fiscal year 1995, the City adopted a
budget which halted the trend in recent years of substantial increases in
City spending from one year to the next. There can be no assurance that
the City will continue to maintain a balanced budget as required by State
law without additional tax or other revenue increases or reductions in
City services, which could adversely affect the City's economic base.
The Mayor is responsible for preparing the City's four-year financial
plan, including the City's current financial plan for the 1995 through
1998 fiscal years (the "1995-1998 Financial Plan", "Financial Plan" or
"City Plan").
The City Comptroller and other agencies and public officials have
issued reports and made public statements which, among other things, state
that projected revenues may be different from those forecast in the City
Plan. In addition, the Control Board staff and others have questioned
whether the City has the capacity to generate sufficient revenues in the
future to provide the level of services included in the City Plan. It is
reasonable to expect that such reports and statements will continue to be
issued and to engender public comment.
- 1995-1998 Financial Plan. On October 25, 1994, the City published
the City Plan for the 1995-1998 fiscal years which is a proposed
modification to a financial plan submitted to the Control Board on July
8, 1994 (the "July City Plan") and which relates to the City, the Board
of Education ("BOE") and the City University of New York ("CUNY").
The City's July City Plan set forth proposed actions for the 1995
fiscal year to close a previously projected gap of approximately $2.3
billion for the 1995 fiscal year, which included City actions aggregating
$1.9 billion, a $288 million increase in State actions over the 1994 and
1995 fiscal years, and a $200 million increase in Federal assistance. The
City actions included proposed agency actions aggregating $1.1 billion,
including productivity savings; tax and fee enforcement initiatives;
service reductions; and savings from the restructuring of City services.
City actions also included savings of $45 million resulting from proposed
tort reform, the projected transfer to the 1995 fiscal year of $171
million of the projected 1994 fiscal year surplus, savings of $200 million
for employee health care costs, $51 million in reduced pension costs,
savings of $225 million from refinancing City bonds and $65 million from
the proposed sale of certain City assets.
The 1995-1998 City Plan published on October 25, 1994 reflects actual
receipts and expenditures and changes in forecast revenues and
expenditures since the July City Plan and projects revenues and
expenditures for the 1995 fiscal year balanced in accordance with GAAP.
For the 1995 fiscal year, the City Plan includes actions to offset an
additional potential $1.1 billion budget gap, resulting principally from
a $104 million decrease in the $171 million projected surplus from the
1994 fiscal year to be transferred to the 1995 fiscal year, due primarily
to lower projected tax revenues for the 1994 fiscal year; reductions in
projected tax revenues for the 1995 fiscal year totalling $170 million;
$60 million of increased City pension contributions resulting from lower
than expected earnings on pension fund assets for the 1994 fiscal year;
a $166 million shortfall in projected increased Federal assistance due
primarily to the failure to enact national health care reform; the failure
of the State Legislature to approve tort reform; the failure to achieve
the projected savings of $200 million for employee health care costs; a
$165 million increase in projected overtime expenditures; and additional
agency spending requirements, primarily for increased costs for foster
care and homeless services, and other decreased projected revenues.
The gap closing measures for the 1995 fiscal year include additional
proposed agency actions aggregating $851 million, which together with the
$1.1 billion of agency actions proposed in the July City Plan, are
substantial and may be difficult to implement. The City Plan is subject
to the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives. In addition, legislation
has been adopted by the State Legislature that would impose a maintenance
of effort requirement on the level of funding required of the City for the
BOE. This legislation has not been forwarded to the Governor for
signature. If enacted into law, this legislation would require the City
to increase its fiscal year 1995 funding for the BOE by approximately $500
million over the amount included in the 1995-1998 City Plan, and could
also result in increased funding for the BOE in subsequent years.
The City Plan also sets forth projections for the 1996 through 1998
fiscal years and outlines a proposed gap-closing program to close
projected budget gaps of $1.0 billion, $1.5 billion and $2.0 billion for
the 1996 through 1998 fiscal years, respectively, after successful
implementation of the $1.1 billion gap-closing program for the 1995 fiscal
year. These projections take into account expected increases in Federal
and State assistance. Various actions proposed in the City Plan,
including the proposed continuation of the personal income tax surcharge
and the proposed increase in State aid, are subject to approval by the
Governor and the State Legislature, and the proposed increase in Federal
aid is subject to approval by Congress and the President. The State
Legislature has in previous legislative sessions failed to approve
proposals for the State assumption of certain Medicaid costs and
reallocation in State education aid, thereby increasing the uncertainty
as to the receipt of the State assistance included in the City Plan. If
these actions cannot be implemented, the City will be required to take
other actions to decrease expenditures or increase revenues to maintain
a balanced financial plan.
In January, 1993, the City announced settlement with a coalition of
municipal unions covering approximately 44% of the City's workforce.
Subsequently, the City reached agreement with all but four of its major
bargaining units under terms generally consistent with the coalition
agreement. Taken together, these agreements cover approximately 95% of
the City's workforce. Contract disputes with the four major bargaining
units that did not reach agreement with the City are in arbitration. The
City Plan reflects the costs associated with these settlements, provides
for similar increases for all City-funded employees, and provides no
additional wage increases for City employees after the 1995 fiscal year.
In the event of a collective bargaining impasse, the terms of wage
settlements could be determined through the impasse procedure in the New
York City Collective Bargaining Law, which can impose a binding
settlement.
The City's projections set forth in the City Plan are based on
various assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly affect
the City's ability to balance its budget as required by State law and to
meet its annual cash flow and financial requirements. Such assumptions
and contingencies include the timing and pace of any regional and local
economic recovery, the impact of real estate tax revenues on the real
estate market, wage increases for City employees consistent with those
assumed in the City Plan, employment growth, the results of a pending
actuarial audit of the City's pension system which is expected to
significantly increase the City's annual pension costs, the ability to
implement proposed reductions in City personnel and other cost reduction
initiatives, which may require in certain cases the cooperation of the
City's municipal unions, and provision of State and Federal aid and
mandate relief.
Implementation of the City Plan is also dependent upon the City's
ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1995 through 1998
contemplates the issuance of $11.3 billion of general obligation bonds
primarily to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make other capital investments. In addition, the
City issues revenue and tax anticipation notes to finance its seasonal
working capital requirements. The success of projected public sales of
City bonds and notes will be subject to prevailing market conditions, and
no assurance can be given that such sales will be completed. If the City
were unable to sell its general obligation bonds and notes, it would be
prevented from meeting its planned capital and operating expenditures.
- Ratings. In 1975, Standard & Poor's suspended its A rating of City
bonds. This suspension remained in effect until March 1981, at which time
the City received an investment grade rating of BBB from Standard &
Poor's. On July 2, 1985, Standard & Poor's revised its rating of City
bonds upward to BBB+ and on November 19, 1987, to A-. Moody's ratings of
City bonds were revised in November 1981 from B (in effect since 1977) to
Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A
and again in February 1991 to Baa1. Since July 15, 1993, Fitch has rated
City bonds A-.
On January 17, 1995, mayor Rudolph Giuliani announced that the City
would borrow money to help close its budget gap instead of turning to the
BOE to find savings this school year, which announcement resulted in
Standard & Poor's placing City bonds on a negative credit watch. Standard
& Poor's further indicated that it would reconsider the City's bond rating
in April 1995.
Such ratings reflect only the views of these rating agencies, from
which an explanation of the significance of such ratings may be obtained.
There is no assurance that such ratings will continue for any given period
of time or that they will not be revised downward or withdrawn entirely.
Any such downward revision or withdrawal could have an adverse effect on
the market prices of bonds.
- Outstanding Net Indebtedness. As of September 30, 1994, the City
and the Municipal Assistance Corporation for the City of New York had,
respectively, $21.218 billion and $4.146 billion of outstanding net long-
term debt.
The City depends on the State for State aid both to enable the City
to balance its budget and to meet its cash requirements. If the State
experiences revenue shortfalls or spending increases beyond its
projections during its 1995 fiscal year or subsequent years, such
developments could result in reductions in anticipated State aid to the
City. In addition, there can be no assurance that State budgets in future
fiscal years will be adopted by the April 1 statutory deadline and that
there will not be adverse effects on the City's cash flow and additional
City expenditures as a result of such delays.
- Litigation. The City is a defendant in a significant number of
lawsuits. Such litigation includes, but is not limited to, routine
litigation incidental to the performance of its government and other
functions, actions commenced and claims asserted against the City arising
out of alleged constitutional violations, alleged torts, alleged breaches
of contracts and other violations of law and condemnation proceedings and
other tax and miscellaneous actions. While the ultimate outcome and
fiscal impact, if any, on the proceedings and claims are not currently
predictable, adverse determination in certain of them might have a
material adverse effect upon the City's ability to carry out the City
Plan. As of June 30, 1994, the City estimated its potential future
liability on account of all outstanding claims to be approximately $2.6
billion.
- - New York State
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State economy has grown more slowly
than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are
varied and complex, in many cases involving national and international
developments beyond the State's control. Part of the reason for the long-
term relative decline in the State economy has been attributed to the
combined State and local tax burden, which is one of the highest in the
nation. The existence of this tax burden limits the State's ability to
impose higher taxes in the event of future financial difficulties.
Recently, the State has been relatively successful in bringing the rate
of growth in the public sector in the State in line with changes in the
private economy.
As a result of the national and regional economic recession, the
State's tax receipts for its 1991 and 1992 fiscal years were substantially
lower than projected, which resulted in reductions in State aid to
localities for the State's 1992 and 1993 fiscal years from amounts
previously projected and increases in certain states taxes and fees. The
State completed its 1993 fiscal year with a positive margin of $671
million in the General Fund, which was deposited into a tax refund reserve
account. The State's economy, as measured by employment, started to
recover near the start of the 1993 calendar year and the State completed
its 1994 fiscal year with a cash-basis balanced budget in the State's
General Fund (the major operating fund of the State), after depositing
$1.5 billion in various reserve funds.
The State's 1994-95 Financial Plan, which is based upon the enacted
State budget, projects a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions,
which include increased State education aid and State assumption of
certain costs previously paid by the City and restoration of certain prior
year revenue sharing reductions. However, the State Legislature failed
to enact a substantial portion of the proposed State assumption of local
Medicaid costs, other significant mandate relief items, and the proposed
tort reform legislation, which would have provided the City with
additional savings. The State's second quarterly update was released on
October 28, 1994. It projects a year-end surplus in the General Fund of
$14 million. The update revises the projected General Fund receipt and
disbursements contained in the 1994-95 State Financial Plan as revised by
the first quarterly update issued on July 29, 1994. Receipts are now
projected at $34.054 billion, a decreased of $267 million from the State's
first quarterly update, reflecting primarily recent weakness in the
financial services sector. The State's estimated disbursements are
projected at $33.967 billion, a decrease of $281 million from July,
attributable largely to anticipated decreases in social services spending.
However, the State Division of the Budget cautioned that its projections
were subject to the risk that increases in interest rates could impede
economic growth. It has been reported the State will face a potential
budget gap for its 1995-96 fiscal year which could approximate $4 billion.
As a result, the State would be required to take actions to increase
receipts and/or reduce disbursements from projected levels when it
proposes its budget for the 1995-96 fiscal year, which could result in
reductions in State aid to localities.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain state programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
- Ratings. On January 13, 1992, Standard & Poor's reduced its
ratings on the State's general obligation bonds from A to A- and, in
addition, reduced its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. Standard & Poor's
also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's
raised its outlook to positive and, on June 27, 1994, confirmed its A-
rating.
On January 6, 1992, Moody's reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from
A to Baa1. On June 27, 1994, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness.
Ratings reflect only the respective views of such organizations. See
"New York City - Ratings," above on page 8.
- Litigation.
Abandoned Property Law. On May 31, 1988, the Supreme Court of the
United States took jurisdiction of a claim of the State of Delaware that
certain unclaimed dividends, interest and other distributions made by
issuers of securities and held by New York-based brokers incorporated in
Delaware for beneficial owners who cannot be identified or located, had
been, and were being, wrongfully taken by the State of New York pursuant
to New York's Abandoned Property Law (State of Delaware v. State of New
York). Texas intervened, claiming a portion of such distributions and
similar property taken by the State of New York from New York-based banks
and depositories incorporated in Delaware. All other states and the
District of Columbia moved to intervene. In a decision dated March 30,
1993, the United States Supreme Court granted all pending motions of the
states and the District of Columbia to intervene and remanded the case to
a Special Master for further proceedings consistent with the Court's
decision. The Court determined that the abandoned property should be
remitted first to the state of the beneficial owner's last known address,
if ascertainable and, if not, then to the state of incorporation of the
intermediary bank, broker or depository. New York and Delaware have
executed a settlement agreement which provides for payments by New York
to Delaware of $35 million in the State's 1993-94 fiscal year and five
annual payments thereafter of $33 million. New York and Massachusetts
have executed a settlement agreement which provides for aggregate payments
by New York of $23 million, payable over five consecutive years. The
claims of the other states and the District of Columbia remain.
Public Authority Financing Programs. On June 30, 1994, the Court of
Appeals unanimously affirmed the rulings of the trial court and the
Appellate Division on favor of the State in case of Schulz et al. v. State
of New York, et al. (commencement May 24, 1993) and upheld the
constitutionality of certain highway, bridge and mass transportation
bonding programs of the New York State Thruway Authority and the
Metropolitan Transportation Authority authorized by Chapter 56 of the Laws
of 1993.
In upholding the State's position, the Court of Appeals found that,
because the State itself does not become "indebted" in financing
arrangements with public authorities where the State's obligation to make
payments is subject to appropriation, such as lease-purchase and
contractual-obligation financing arrangements described in the State's
Annual Information Statement, those financing arrangements do not
constitute indebtedness of the State for purposes of the State
constitutional limits on debt and are thus not required to be submitted
to the voters for approval at a general election.
Plaintiffs' motion for reargument before the Court of Appeals was
denied on September 1, 1994. The time for appeal to the United States
Supreme Court by petition for a writ of certiorari has not yet expired.
Medicaid Cases. In Matter of New York Association of Homes and
Services for the Aging, Inc. v. Commissioner, by decision dated June 30,
1994, the Court of Appeals held invalid the State Department of Health's
retroactive application to rate years 1989 through 1991 of the nursing
home Medicaid reimbursement rate recalibration adjustment set forth in 10
NYCRR Section 86-2.31(a).
Other Investment Techniques and Strategies
- When-Issued and Delayed Delivery Transactions. As stated in the
Prospectus, the Fund may purchase securities on a "when-issued" basis, and
may purchase or sell such securities on a "delayed delivery" basis.
Although the Fund will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Fund may dispose of a commitment prior
to settlement. "When-issued" or "delayed delivery" refers to securities
whose terms and indenture are available and for which a market exists, but
which are not available for immediate delivery. When such transactions
are negotiated the price (which is generally expressed in yield terms) is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure to do so may result
in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous. If the Fund chooses to (i) dispose of the right to
acquire a when-issued security prior to its acquisition or (ii) dispose
of its right to deliver or receive against a forward commitment, it may
incur a gain or loss. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security purchased,
or if a sale, the proceeds to be received in determining its net asset
value.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates in a direction other than that expected by the
Manager before settlement will affect the value of such securities and may
cause loss to the Fund.
When-issued transactions and forward commitments can be used by the
Fund as a defensive technique to use against anticipated changes in
interest rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its portfolio
on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and
rising prices, the Fund might sell portfolio securities and purchase the
same or similar securities on a when-issued or forward commitment basis,
thereby obtaining the benefit of currently higher cash yields.
- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank or U.S. branch of a foreign bank with total
domestic assets of a least $1 billion or broker-dealer with net capital
of at least $50 million which has been designated a primary dealer in
government securities) for delivery on an agreed-on future date. The
resale price exceeds the purchase price by an amount that reflects an
agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. The majority of these transactions run
from day to day, and delivery pursuant to resale typically will occur
within one to five days of the purchase. Repurchase agreements are
considered loans under the Investment Company Act, collateralized by the
underlying security. The Fund's repurchase agreements require that at all
times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. Additionally, the Manager will
continuously monitor the collateral's value and will impose
creditworthiness requirements to confirm that the vendor is financially
sound.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal the market value
of the loaned securities and must consist of cash, bank letters of credit,
securities of the U.S. Government or its agencies or instrumentalities,
or other cash equivalents in which the Fund is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the letter.
Such terms and the issuing bank must be satisfactory to the Fund. The
Fund receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of: (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term
debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's custodian and administrative fees. The terms of the
Fund's loans must meet certain tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter. Income from securities loans is not
included in the exempt-interest dividends paid by the Fund. The Fund will
not enter into any securities loans having a duration of more than one
year.
- Hedging. As described in the Prospectus, the Fund may employ one
or more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Interest Rate Futures or Municipal Bond
Index Futures, (ii) buy puts on such Futures or securities, or (iii) write
covered calls on securities, Interest Rate Futures or Municipal Bond Index
Futures (as described in the Prospectus). Covered calls may also be
written on debt securities to attempt to increase the Fund's income. When
hedging to permit the Fund to establish a position in the debt securities
market as a temporary substitute for purchasing individual debt securities
(which the Fund will normally purchase, and then terminate that hedging
position), the Fund may: (i) buy Interest Rate Futures or Municipal Bond
Index Futures, or (ii) buy calls on such Futures or on securities. The
Fund's strategy of hedging with Futures and options on Futures will be
incidental to the Fund's activities in the underlying cash market.
Additional information about the covered calls and hedging instruments the
Fund may use is provided below.
- Writing Covered Call Options. When the Fund writes a call on
a security, it receives a premium and agrees to sell the underlying
investment to a purchaser of a corresponding call during the call period
(usually not more than nine months) at a fixed exercise price (which may
differ from the market price of the underlying investment) regardless of
market price changes during the call period. To terminate its obligation
on a call it has written, the Fund may purchase a corresponding call in
a "closing purchase transaction." A profit or loss will be realized,
depending upon whether the net of the option transaction costs and the
premium received on the call written was more or less than the price of
the call subsequently purchased. A profit may also be realized if the
call lapses unexercised, because the Fund retains the underlying
investment and the premium received. Any such profits are considered
short-term gains for Federal tax purposes, as are premiums on lapsed
calls, and when distributed by the Fund are taxable as ordinary income.
If the Fund could not effect a closing purchase transaction due to a lack
of a market, it would have to hold the underlying investment until the
call lapsed or were exercised.
- Interest Rate Futures. The Fund may buy and sell futures
contracts relating to debt securities ("Interest Rate Futures") and
municipal bond indices ("Municipal Bond Index Futures," discussed below).
An Interest Rate Future obligates the seller to deliver and the purchaser
to take the related debt securities at a specified price on a specified
date. No amount is paid or received upon the purchase or sale of an
Interest Rate Future.
The Fund may concurrently buy and sell Futures contracts in the
expectation that the Future purchased will outperform the Future sold.
For example, the Fund might simultaneously buy Municipal Bond Futures and
sell U.S. Treasury Bond Futures. This type of transaction would be
profitable to the Fund if municipal bonds, in general, outperform U.S.
Treasury bonds. Risks of this type of Futures strategy include the
possibility that the Manager does not correctly assess the relative
durations of the investments underlying the Futures, with the result that
the strategy changes the overall duration of the Fund's portfolio in a
manner that increases the volatility of the Fund's price per share.
Duration is a volatility measure that refers to the expected percentage
change in the value of a bond resulting from a change in general interest
rates (measured by each 1% change in the rates on U.S. Treasury
securities). For example, if a bond has an effective duration of three
years, a 1% increase in general interest rates would be expected to cause
the bond to decline about 3%.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment, equal to a specified percentage of
the contract amount, with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's Custodian
in an account registered in the futures broker's name; however, the
futures broker can gain access to that account only under specified
conditions. As the Future is marked to market to reflect changes in its
market value, subsequent margin payments, called variation margin, will
be made to and from the futures broker on a daily basis. At any time
prior to the expiration of the Future, the Fund may elect to close out its
position by taking an opposite position, at which time a final
determination of variation margin is made and additional cash is required
to be paid by or released to the Fund. Any gain or loss is then realized.
Although Interest Rate Futures by their terms call for settlement by the
delivery of debt securities, in most cases the obligation is fulfilled
by entering into an offsetting transaction. All futures transactions are
effected through a clearinghouse associated with the exchange on which the
contracts are traded.
- Municipal Bond Index Futures. A "municipal bond index" assigns
relative values to the municipal bonds in the index, and is used as the
basis for trading long-term municipal bond futures contracts. Municipal
Bond Index Futures are similar to Interest Rate Futures except that
settlement is made in cash. The obligation under such contracts may also
be satisfied by entering into an offsetting contract to close out the
futures position. Net gain or loss on options on Municipal Bond Index
Futures depends on the price movements of the securities included in the
index. The strategies which the Fund employs regarding Municipal Bond
Index Futures are similar to those described above with regard to Interest
Rate Futures.
- Purchasing Calls and Puts. When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium and,
except as to calls on Municipal Bond Index Futures, has the right to buy
the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price. The
Fund benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of
the exercise price plus the transaction costs and premium paid for the
call, and the call is exercised. If the call is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration
date and the Fund will lose its premium payment and the right to purchase
the underlying investment.
When the Fund purchases a call or put on a municipal bond index,
Municipal Bond Index Future or Interest Rate Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the debt securities market
generally) rather than on price movements in individual futures contracts.
When the Fund buys a put, it pays a premium and, except as to puts
on municipal bond indices, has the right to sell the underlying investment
to a seller of a corresponding put on the same investment during the put
period at a fixed exercise price. Buying a put on a debt security,
Interest Rate Future or Municipal Bond Index Future the Fund owns enables
the Fund to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling
such underlying investment at the exercise price to a seller of a
corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit).
An option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular
option. The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause it to sell underlying investments, thus increasing its turnover rate
in a manner beyond its control. The exercise by the Fund of puts may also
cause the sale of underlying investments, also causing turnover, since the
underlying investment might be sold for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a call or a put or sells a call. Premiums paid for options
are small in relation to the market value of the related investments and,
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could cause the Fund's net asset
value to be more sensitive to changes in the value of the underlying
investments.
- Additional Information about Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written calls traded on exchanges, or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the calls or upon the
Fund's entering into a closing purchase transaction. An option position
may be closed out only on a market which provides secondary trading for
options of the same series and there is no assurance that a liquid
secondary market will exist for any particular option. When the Fund
writes an over-the-counter("OTC") option, it intends to into an
arrangement with a primary U.S. Government securities dealer, which would
establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option. This formula price would generally be
based on a multiple of the premium received for the option, plus the
amount by which the option is exercisable below the market price of the
underlying security ("in-the-money"). For any OTC option the Fund writes,
it will treat as illiquid (for purposes of its restriction on illiquid
securities, stated in the Prospectus) the mark-to-market value of any OTC
option held by it. The Securities and Exchange Commission is evaluating
the general issue of whether or not OTC options should be considered as
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
portfolio turnover rate. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a call or put, sells a call, or buys or sells an
underlying investment in connection with the exercise of a call or put.
Such commissions may be higher on a relative basis than those which would
apply to direct purchases or sales of such underlying investments.
Premiums paid for options as to underlying investments are small in
relation to the market value of such investments and consequently, put and
call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options thereon as established by the Commodities
Futures Trading Commission ("CFTC"). In particular, the Fund is excluded
from registration as a "commodity pool operator" if it complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and
related options premiums for a bona fide hedging position. However, under
the Rule the Fund must limit its aggregate Futures margin and related
option premiums to no more than 5% of the Fund's net assets for hedging
strategies that are not considered bona fide hedging strategies under the
Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through
one or more brokers. Thus, the number of options which the Fund may write
or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund
or an affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found to be
in violation of those limits and may impose certain other sanctions. Due
to requirements under the Investment Company Act, when the Fund purchases
an Interest Rate Future or Municipal Bond Index Future, the Fund will
maintain, in a segregated account or accounts with its Custodian, cash or
readily marketable short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the investments
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Hedging Instruments and Covered Calls. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Interest Rate Futures and Municipal Bond
Index Futures, held for less than three months, whether or not they were
purchased on the exercise of a call held by the Fund; (ii) writing calls
on investments held less than three months; (iii) purchasing calls or puts
which expire in less than three months; (iv) effecting closing
transactions with respect to calls or puts purchased less than three
months previously; and (v) exercising puts or calls held by the Fund for
less than three months.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to Futures and options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
and Municipal Bond Index Futures that the prices of such Futures or the
applicable index will correlate imperfectly with the behavior of the cash
(i.e., market value) prices of the Fund's securities. The ordinary
spreads between prices in the cash and futures markets are subject to
distortions due to differences in the natures of those markets. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures market depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation
by speculators in the futures market may cause temporary price
distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of debt securities being hedged and movements in the price of the
Hedging Instruments, the Fund may use Hedging Instruments in a greater
dollar amount than the dollar amount of debt securities being hedged if
the historical volatility of the prices of such debt securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that where the Fund has used Hedging Instruments in
a short hedge, the market may advance and the value of debt securities
held in the Fund's portfolio may decline. If this occurred, the Fund
would lose money on the Hedging Instruments and also experience a decline
in value of its debt securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio of debt securities will tend to move in the same
direction as the indices upon which the Hedging Instruments are based.
If the Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Interest Rate Futures,
Municipal Bond Index Futures and/or calls on such Futures or debt
securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the debt securities purchased.
Other Investment Restrictions
The Fund's significant investment restrictions are described in the
Prospectus. The following investment restrictions are also fundamental
policies of the Fund, and, together with the fundamental policies and
investment objective described in the Prospectus, can be changed only by
the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, such a "majority" vote is defined as the
vote of the holders of the lesser of: (i) 67% or more of the shares
present or represented by proxy at such meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) Invest in
real estate, but the Fund may invest in Municipal Securities or other
permitted securities secured by real estate or interests therein; (2)
Purchase securities other than Hedging Instruments on margin; however, the
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; (3) Make short sales of
securities; (4) Invest in or hold securities of any issuer if those
officers and trustees of the Fund or its adviser beneficially owning
individually more than .5% of the securities of such issuer together own
more than 5% of the securities of such issuer; or (5) Invest in securities
of any other investment company, except in connection with a merger with
another investment company.
- Diversification. For purposes of diversification under the
Investment Company Act and the investment restrictions set forth in the
Prospectus and above, the identification of the "issuer" of a Municipal
Security depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the subdivision, and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond,
if that bond is backed only by the assets and revenues of the
nongovernmental user, then such nongovernmental user would be deemed the
sole issuer. However, if in either case the creating government or some
other entity guarantees the security, such a guarantee would be considered
a separate security and would be treated as an issue of such government
or other agency. In applying these restrictions to its investments, the
Manager will consider a nongovernmental user of facilities financed by
industrial development bonds as being in a particular industry, despite
the fact that there is no industry concentration limitation as to
Municipal Securities. Although this application of the restriction is not
technically a fundamental policy of the Fund, it will not be changed
without shareholder approval. The Manager has no present intention of
investing more than 25% of the Fund's assets in securities paying interest
from revenues of similar type projects. This is not a fundamental policy,
and therefore may be changed without shareholder approval. Should any
such change be made, the Prospectus and/or this Statement of Additional
Information will be supplemented accordingly.
For purposes of the Fund's policy not to concentrate its assets,
described under restriction number (3) in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix C to this
Statement of Additional Information. This is not a fundamental policy.
How the Fund is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees or directors of
Oppenheimer Fund, Oppenheimer Growth Fund, Oppenheimer Global Fund,
Oppenheimer Money Market Fund, Inc., Oppenheimer U.S. Government Trust,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Discovery Fund,
Oppenheimer Target Fund, Oppenheimer Asset Allocation Fund, Oppenheimer
Global Emerging Growth Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Tax-Free Bond Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Multi-Sector Income
Trust and Oppenheimer Multi-Government Trust (collectively, the "New York-
based OppenheimerFunds). Messrs. Spiro, Donohue, Bowen, Zack, Bishop and
Farrar respectively, hold the same offices with the other New York-based
OppenheimerFunds as with the Fund. As of June 26, 1995, the officers and
Trustees of the Fund as a group owned of record or beneficially 3.09% of
the Class A shares of the Fund and less than 1% of the Class B shares of
the Fund. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager
for which an officer of the Fund (Andrew J. Donohue) is a trustee, other
than the shares beneficially owned under that plan by the officers of the
Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age 69
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership);
Chairman of Avatar Holdings Inc. (real estate development).
Leo Cherne, Trustee, Age 82
122 East 42nd Street, New York, New York 10168
Chairman Emeritus of the International Rescue Committee
(philanthropic organization); formerly Executive Director of The
Research Institute of America.
Robert G. Galli, Trustee, Age 62
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee, Age 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and a
Director of Spy Magazine, L.P.
Elizabeth B. Moynihan, Trustee; Age 65
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institute), the Institute of Fine Arts (New York
University) and the National Building Museum; a member of the
Trustees Council, Preservation League of New York State; a member of
the Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company), and Fidelity
Life Association (mutual life insurance company); formerly Chairman
of the Board of ICL, Inc. (information systems) and President and
Chief Executive Officer of The Conference Board, Inc. (international
economic and business research).
Edward V. Regan, Trustee; Age 65
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health
care provider); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age 63
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age 83
50 Overlook Road, Ossining, NY 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
(a closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, President and Trustee; Age 69
Chairman Emeritus and a director of the Manager; formerly Chairman
of the Manager and the Distributor.
Pauline Trigere, Trustee; Age 82
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age 64
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order)
Counsellor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S. Department
of Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a partner in Kraft & McManimon (a
law firm), an officer of First Investors Corporation (a broker-
dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), and a director and an officer of First
Investors Family of Funds and First Investors Life Insurance Company.
Robert E. Patterson, Vice President and Portfolio Manager; Age 52
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
George C. Bowen, Treasurer; Age 58
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Secretary and Treasurer of SSI and SFSI;
an officer of other OppenheimerFunds.
Robert G. Zack, Assistant Secretary; Age 47
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Messrs. Galli and
Spiro) received the total amounts shown below (i) from the Fund, during
its fiscal year ended September 30, 1994, and (ii) from all 17 of the New
York-based OppenheimerFunds (including the Fund) listed in the first
paragraph of this section (and from Oppenheimer Global Environment Fund,
a former New York-based OppenheimerFund), for services in the positions
shown:
<TABLE>
<CAPTION>
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part From All
Name and from of Fund New York-based
Position Fund Expenses OppenheimerFunds1
<S> <C> <C> <C>
Leon Levy $9,548 $3,812 $141,000.00
Chairman and
Trustee
Leo Cherne $4,661 $1,861 $ 68,800.00
Audit Committee
Member and
Trustee
Benjamin Lipstein$5,838 $2,331 $ 86,200.00
Study Committee
Member and Trustee
Elizabeth B. Moynihan$4,104 $1,639 $ 60,625.00
Study Committee
Member2 and Trustee
Kenneth A. Randall$5,310 $2,120 $ 78,400.00
Audit Committee
Member and Trustee
Edward V. Regan$3,809 $1,521 $ 56,275.00
Audit Committee
Member2 and Trustee
Russell S. Reynolds, Jr.$3,531 $1,410 $ 52,100.00
Trustee
Sidney M. Robbins$8,273 $3,303 $122,100.00
Study Committee
Chairman, Audit
Committee Vice-Chairman
and Trustee
Pauline Trigere $3,531 $1,410 $ 52,100.00
Trustee
Clayton K. Yeutter$3,531 $1,410 $ 52,100.00
Trustee
______________________
1 For the 1994 calendar year.
2 Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during that
Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based OppenheimerFunds for at least 15 years to be eligible for the
maximum payment. Because each Trustee's retirement benefits will depend
on the amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor can
we estimate the number of years of credited service that will be used to
determine those benefits. No payments have been made by the Fund under
the plan as of September 30, 1994.
- Major Shareholders. As of June 26, 1995, no person owned of record
or is known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A, Class B or Class C shares.
The Manager and Its Affiliates. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company controlled by Massachusetts Mutual
Life Insurance Company. OAC is also owned in part by certain of the
Manager's directors and officers, some of whom may also serve as officers
of the Fund, and two of whom (Messrs. Galli and Spiro) serve as Trustees
of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
- The Investment Advisory Agreement. A management fee is payable
monthly to the Manager under the terms of the investment advisory
agreement between the Manager and the Fund, and is computed on the
aggregate net assets of the Fund as of the close of business each day.
The investment advisory agreement between the Manager and the Fund
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration for the Fund, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and the composition of proxy materials
and registration statements for continuous public sale of shares of the
Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
fees to certain Trustees, legal and audit expenses, custodian and transfer
agent expenses, share issuance costs, certain printing and registration
costs, brokerage commissions, and non-recurring expenses, such as
litigation.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has voluntarily
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee, but excluding taxes, interest, brokerage
commissions, distribution plan payments and extraordinary expenses such
as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Currently, the
most stringent state expense limitation is imposed by California, and
limits the Fund's expenses (with specific exclusions) to 2.5% of the first
$30 million of average annual net assets, 2% of the next $70 million, and
1.5% of average annual net assets in excess of $100 million. The Manager
reserves the right to change or eliminate the undertaking at any time.
Any assumption of the Fund's expenses under that limitation would lower
the Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
For the fiscal years ended September 30, 1992, 1993 and 1994 the
management fees paid by the Fund to the Manager were $2,432,697,
$3,486,365, and $4,074,417, respectively.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Manager is not liable for any loss sustained
by reason of any investment of Fund assets made with due care and in good
faith. The advisory agreement permits the Manager to act as investment
adviser for any other person, firm or corporation and to use the name
"Oppenheimer" in connection with one or more additional companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
- The Distributor. Under its General Distributor's Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (excluding payments under the
Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders), are borne by the Distributor. During the fiscal years
ended September 30, 1992, 1993 and 1994, the aggregate sales charges on
sales of the Fund's Class A shares were $6,102,413, $8,118,017 and
$2,933,373, respectively, of which the Distributor and an affiliated
broker-dealer retained in the aggregate $1,165,277, $1,410,798 and
$551,881 in those respective years. During the Fund's fiscal year ended
September 30, 1994, the contingent deferred sales charge collected on the
Fund's Class B shares totaled $149,477, all of which the Distributor
retained. Class C shares were not publicly offered during this fiscal
period, and no contingent deferred sales charges were collected. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager and the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon new recommendations from the
Manager's portfolio managers. In certain instances, portfolio managers
may directly place trades and allocate brokerage, also subject to the
provisions of the advisory agreement and the procedures and rules
described above. In each case, brokerage is allocated under the
supervision of the Manager's executive officers. As most purchases made
by the Fund are principal transactions at net prices, the Fund incurs
little or no brokerage costs. The Fund usually deals directly with the
selling or purchasing principal or market maker without incurring charges
for the services of a broker on its behalf unless it is determined that
better price or execution may be obtained by utilizing the services of a
broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
The Fund seeks to obtain prompt execution of orders at the most favorable
net price. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that (i) the trade is not from the broker's own inventory, (ii)
the trade was not executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Other funds advised by the Manager have investment objectives and
policies similar to those of the Fund. Such other funds may purchase or
sell the same securities at the same time as the Fund, which could affect
the supply or price of such securities. If two or more of such funds
purchase the same security on the same day from the same dealer, the
Manager may average the price of the transactions and allocate the average
among such funds.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "average annual total return", "total return,"
and "total return at net asset value" of an investment in each class of
Fund shares may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those
calculations is set forth below. No yield and total return calculations
are presented below for Class B shares because no shares of that class
were publicly issued during the Fund's fiscal year ending September 30,
1994.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A, Class B and Class C
shares of the Fund are affected by portfolio quality, portfolio maturity,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
- Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield") for
a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 5.24% and 4.72%, respectively.
- Tax-Equivalent Yield. The Fund's "tax-equivalent yield" adjusts
the Fund's current yield, as calculated above, by a stated combined
Federal, state and city tax rate. The tax equivalent yield is based on
a 30-day period, and is computed by dividing the tax-exempt portion of the
Fund's current yield (as calculated above) by one minus a stated income
tax rate and adding the result to the portion (if any) of the Fund's
current yield that is not tax exempt. The tax equivalent yield may be
used to compare the tax effects of income derived from the Fund with
income from taxable investments at the tax rates stated. Appendix B
includes a tax equivalent yield table, based on various effective tax
brackets for individual taxpayers. Such tax brackets are determined by
a taxpayer's Federal, state and city taxable income (the net amounts
subject to Federal and state income taxes after deductions and
exemptions). The tax equivalent yield table assumes that the investor is
taxed at the highest bracket, regardless of whether a switch to non-
taxable investments would cause a lower bracket to apply. For taxpayers
with income above certain levels, otherwise allowable itemized deductions
are limited. The Fund's tax-equivalent yields (after expense assumptions
by the Manager) for its Class A and Class B shares for the 30-day period
ended September 30, 1994, for an individual New York City resident in the
47.05% combined tax bracket were 9.90% and 8.91%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A, Class B or Class C share dividends
derived from net investment income during a stated period. Distribution
return includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares and Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
September 30, 1994, were 5.79% and 6.08% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended September 30, 1994, was
5.30%. Distribution returns for the 30-day period ended September 30,
1994 are the same as the above-quoted dividend yields. No portion of the
Class A or Class B dividends for the three months ended September 30, 1994
were derived from realized capital gains.
- Total Return Information
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return" calculation
measures the change in value of a hypothetical investment of $1,000 over
an entire period of years. Its calculation uses some of the same factors
as average annual total return, but it does not average the rate of return
on an annual basis. Total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as discussed below). For Class B shares, payment of the contingent
deferred sales charge of 5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter is applied, as described in the
Prospectus. For Class C shares, the payment of the 1.0% contingent
deferred sales charge is applied to the investment result for the one-year
period (or less). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period.
The "average annual total return" on an investment in Class A shares
of the Fund for the one, five and ten year periods ended September 30,
1994 were -10.04%, 6.18% and 9.07%, respectively. The cumulative "total
return" on Class A shares for the ten year period ended September 30, 1994
was 138.24%. The average annual total returns on an investment in Class
B shares for the fiscal year ended September 30, 1994 and for the period
March 1, 1993 (the date Class B shares were first publicly offered)
through September 30, 1994 were -10.63% and -2.56%, respectively. The
cumulative total return on Class B shares for the period March 1, 1993
through September 30, 1994 was -4.02%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent sales
charges) and takes into consideration the reinvestment of dividends and
capital gains distributions.
The average annual total returns at net asset value for Class A
shares for the one, five and ten-year periods ended September 30, 1994
were -5.55%, 7.22% and 9.6%, respectively. The cumulative total return
at net asset value for Class A shares for the ten-year period ended
September 30, 1994 was 150.13%.
The average annual total returns at net asset value for Class B
shares for the fiscal year ended September 30, 1994 and for the period
March 1, 1993 (the date Class B shares were first publicly offered)
through September 30, 1994 were -6.22% and -0.23%, respectively. The
cumulative total return at net asset value for Class B shares for the
period March 1, 1993 through September 30, 1994 was -0.36%.
- Other Performance Comparisons. From time to time the Fund may
publish the ranking of its Class A, Class B or Class C shares by Lipper
Analytical Services, Inc. ("Lipper"), a widely-recognized independent
mutual fund monitoring service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their
performance for various periods based on categories relating to investment
objectives. The performance of the Fund's classes is ranked against (i)
all other funds, excluding money market funds, and (ii) all other New York
municipal bond funds. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gains distributions and
income dividends but do not take sales charges or taxes into
consideration. From time to time the Fund may include in its
advertisement and sales literature performance information about the Fund
cited in other newspapers and periodicals such as The New York Times,
which may include performance quotations from other sources, including
Lipper and Morningstar.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based upon risk-adjusted
investment returns. Investment return measures a fund's three, five and
ten-year average annual total returns (when available) in excess of 90-day
U.S. Treasury bill returns after considering sales charges and expenses.
Risk measures fund performance below 90-day U.S. Treasury bill monthly
returns. Risk and return are combined to produce star rankings reflecting
performance relative to the average fund in a given fund's category. Five
stars is the "highest" ranking (top 10%), four stars is "above average"
(next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). Morningstar
ranks the Class A, Class B and Class C shares of the Fund in relation to
other rated municipal bond funds. Rankings are subject to change.
Investors may also wish to compare the Fund's Class A, Class B or
Class C return to the return on fixed income investments available from
banks and thrift institutions, such as certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed
or variable time deposits, and various other instruments such as Treasury
bills. However, the Fund's returns and share price are not guaranteed and
will fluctuate daily, while bank depository obligations may be insured by
the FDIC and may provide fixed rates of return, and Treasury bills are
guaranteed as to principal and interest by the U.S. government. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class C shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to a particular class.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the
OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. These ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds services
to those of other mutual fund families selected by the rating or ranking
services, and may be based upon the opinions of the rating or ranking
service itself, using its own research or judgment, or based upon surveys
of investors, brokers, shareholders or others. in relation to other equity
funds.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, a
Distribution and Service Plan for Class B shares and a Distribution and
Service Plan for Class C shares under Rule 12b-1 of the Investment Company
Act pursuant to which the Fund makes payments to the Distributor in
connection with the distribution and/or servicing of the shares of that
class as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for Class B shares and for Class C shares,
that vote was cast by the Manager as the sole initial holder of Class B
shares and of Class C shares of the Fund.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Any Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. In addition, because Class B
shares automatically convert into Class A shares after six years, the Fund
is required by an exemptive order issued by the Securities and Exchange
Commission to obtain the approval of Class B as well as Class A
shareholders for a proposed amendment to the Class A Plan that would
materially increase the amount to be paid by Class A shareholders under
the Class A Plan. Such vote must be by a "majority" of the Class A and
Class B shares (as defined in the Investment Company Act), voting
separately by class. None of the Plans may be amended to increase
materially the amount of payments to be made unless such amendment is
approved by shareholders of the class affected by the amendment. All
material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan or Class
C Plan shall also include the distribution costs for that quarter, and
such costs for previous fiscal periods that are carried forward, as
explained in the Prospectus and below. Those reports, including the
allocations on which they are based, will be subject to the review and
approval of the Independent Trustees in the exercise of their fiduciary
duty. Each Plan further provides that while it is in effect, the
selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of such Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate allowed under the Plans and set no minimum amount.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totaled $1,780,777, all of which was paid by the Distributor
to Recipients, including $26,802 paid to an affiliate of the Distributor.
Any unreimbursed expenses incurred with respect to Class A shares for any
fiscal year by the Distributor may not be recovered in subsequent years.
Payments received by the Distributor under the Plan for Class A shares
will not be used to pay any interest expense, carrying charge, or other
financial costs, or allocation of overhead by the Distributor.
The Class B Plan and the Class C Plan allow the service fee payment
to be paid by the Distributor to Recipients in advance for the first year
such shares are outstanding, and thereafter on a quarterly basis, as
described in the Prospectus. Service fee payments by the Distributor to
Recipients will be made (i) in advance for the first year Class B and
Class C shares are outstanding, following the purchase of shares, in an
amount equal to 0.25% of the net asset value of the shares purchased by
the Recipient or its customers and (ii) thereafter, on a quarterly basis,
computed as of the close of business each day at an annual rate of .25%
of the average daily net asset value of Class B shares and Class C shares
respectively, held in accounts of the Recipient or its customers. An
exchange of shares does not entitle the Recipient to an advance service
fee payment. In the event Class B shares or Class C shares are redeemed
during the first year such shares are outstanding, the Recipient will be
obligated to repay a pro rata portion of such advance payment to the
Distributor. For the fiscal year ended September 30, 1994, payments made
under the Class B Plan totaled $612,760, of which the Distributor paid
$902 to an affiliate of the Distributor and retained $582,434 as
reimbursement for Class B sales commissions and service fee advances, as
well as financing costs; the balance of such Class B Plan payments was
paid by the Distributor to Recipients not affiliated with the Distributor.
Since Class C shares were not outstanding during the Fund's fiscal year
ended September 30, 1994, no payments were made under the Class C Plan.
Although the Class B Plan and the Class C Plan permit the Distributor
to retain both the asset-based sales charges and the service fees on Class
B and Class C shares, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently intends to
pay the service fee to Recipients in the manner described above. A
minimum holding period may be established from time to time under the
Class B Plan and the Class C Plan by the Board. Initially, the Board has
set no minimum holding period. All payments under the Class B and Class
C plans are subject to the limitations imposed by the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. on
payments of asset-based sales charges and service fees.
The Class B and Class C Plans provide for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund during that
period. Such payments are made in recognition that the Distributor (i)
pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus, (ii) may
finance such commissions and/or the advance of the service fee payment to
Recipients under those Plans, or may provide such financing from its own
resources, or from an affiliate, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales literature,
advertising and prospectuses (other than those furnished to current
shareholders), state "blue sky" registration fees and certain other
distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
any order for $500,000 or more of Class B shares or $1 million or more of
Class C shares on behalf of a single investor (not including dealer
"street name" or omnibus accounts) because generally it will be more
advantageous for that investor to purchase Class A shares of the Fund
instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on such shares will be
reduced by incremental expenses borne solely by those classes, including
the asset-based sales charge to which both classes of shares are subject.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal
Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event
for the holder under Federal income tax law. If such a revenue ruling or
opinion is no longer available, the automatic conversion feature may be
suspended, in which event no further conversions of Class B shares would
occur while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the holder, and
absent such exchange, Class B shares might continue to be subject to the
asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of the New York Stock Exchange (the "NYSE")
on each day that the NYSE is open by dividing the value of the Fund's net
assets attributable to a class by the total number of shares of that class
that are outstanding. The NYSE normally closes at 4:00 P.M. New York
time, but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The NYSE's most recent
annual holiday schedule states that it will close on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than NYSE members may conduct trading in Municipal
Securities on certain days on which the NYSE is closed (including weekends
and holidays) or after 4:00 P.M. on a regular business day). Because the
Fund's net asset values will not be calculated on those days, the Fund's
net asset value per Class A, Class B or Class C shares may be
significantly affected at times when shareholders may not purchase or
redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued as
in (i) above, if available, or at the mean between "bid" and "asked"
prices obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a remaining
maturity in excess of 60 days are valued at the mean between the "bid" and
"asked" prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having
a maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have
a remaining maturity of 60 days or less are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (vi) money market-type debt
securities having a maturity of less than one year when issued that having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
In the case of Municipal Securities, when last sale information is
not generally available, such pricing procedures may include "matrix"
comparisons to the prices for comparable instruments on the basis of
quality, yield, maturity, and other special factors involved (such as the
tax-exempt status of the interest paid by Municipal Securities). The
Fund's Board of Trustees has authorized the Manager to employ a pricing
service, bank or broker-dealer experienced in such matters to price any
of the types of securities described above. The Trustees will monitor the
accuracy of such pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Puts, calls, Interest Rate Futures and Municipal Bond Index Futures
are valued at the last sales price on the principal exchange on which they
are traded or on NASDAQ, as applicable, or if there were no sales that
day, in accordance with (i), above. When the Fund writes an option, an
amount equal to the premium received is included in the Fund's Statement
of Assets and Liabilities as an asset, and an equivalent deferred credit
is included in the liability section. The deferred credit is adjusted
("marked-to-market") to reflect the current market value of the call.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on
such shares on the day the Fund receives Federal Funds for such purchase
through the ACH system before the close of the NYSE. The NYSE normally
closes at 4:00 P.M. but may close earlier on certain days. The proceeds
of ACH transfers are normally received by the Fund three days after the
ACH transfer is initiated. The Distributor and the Fund are not
responsible for any delays. If the Federal Funds are received after the
close of the NYSE, dividends will begin to accrue on the next regular
business day after such Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction of expenses realized by the Distributor and dealers making such
sales. In the instances discussed in the Prospectus in which no sales
charge is imposed, that policy has been adopted because the Distributor
or dealer or broker incurs little or no selling expenses in such
circumstances. The term "immediate family" refers to one's spouse,
children, grandchildren, parents, grandparents, parents-in-law, siblings,
a spouse's siblings and a sibling's spouse.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Bond Fund
Oppenheimer Strategic Income & Growth Fund
and, the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent (referred to as a "Letter")
is an investor's statement in writing to the Distributor of the intention
to purchase Class A shares or Class A and Class B shares of the Fund (and
other OppenheimerFunds during a 13-month period (the "Letter of Intent
period"), which may, at the investor's request, include purchases made up
to 90 days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor to
count the Class A and Class B shares purchased under the Letter to obtain
the reduced sales charge rate on purchases of Class A shares of the Fund
(and other OppenheimerFunds) that applies under the Right of Accumulation
to current purchases of Class A shares. Each purchase of Class A shares
under the Letter will be made at the public offering price applicable to
a single lump-sum purchase of shares in the intended amount, as described
in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000
purchase). Any dividends and capital gains distributions on the escrowed
shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares acquired subject to
a contingent deferred sales charge, and (c) Class A or B shares acquired
by reinvestment of dividends and distributions or acquired in exchange for
either (i) Class A shares of one of the other OppenheimerFunds that were
acquired subject to a Class A initial or contingent deferred sales charge
or (ii) Class B shares of one of the other OppenheimerFunds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds.
An application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of such shares is less than $500 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of such shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or may set requirements for permission to
increase the investment, and other terms and conditions so that the shares
would not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity
with applicable rules of the Securities and Exchange Commission. The Fund
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net assets of the Fund during
any 90-day period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value
it portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the
redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable, as
described below, at the net asset value next computed the Transfer Agent
receives the reinvestment order. The shareholder must ask the Distributor
for such privilege at the time of reinvestment. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment will
not alter any capital gains tax payable on that gain. If there has been
a capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under
the Internal Revenue Code, if the redemption proceeds of Fund shares on
which a sales charge was paid are reinvested in shares of the Fund or
another of the OppenheimerFunds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the
shares acquired by the reinvestment of the redemption proceeds. The Fund
may amend, suspend or cease offering this reinvestment privilege at any
time as to shares redeemed after the date of such amendment, suspension
or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B or the Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of the New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the broker or dealer
from its customer prior to the time the Exchange closed (normally that is
4:00 P.M., but may be earlier some days) and the order was transmitted to
and received by the Distributor prior to its close of business (normally
5:00 P.M.). Ordinarily, for accounts redeemed by a broker-dealer under
this procedure, payment will be made within three business days after the
shares have been redeemed upon the Distributor's receipt of the required
redemption documents in proper form, with the signature(s) of the
registered owners guaranteed on the redemption document as described in
the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
and Class C shareholders should not establish withdrawal plans, because
of the imposition of the contingent deferred sales charge on such
withdrawals (except where the Class B or Class C contingent deferred sales
charge is waived as described in "Waivers of Class B Sales Charge" or
"Waivers of Class C Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus, and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class of shares without a class
designation are deemed "Class A" shares for this purpose. All of the
OppenheimerFunds offer Class A shares, but only the following
OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Bond Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund
Only the following other OppenheimerFunds offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C shares available only by
exchange)
Oppenheimer Strategic Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer Target Fund
Oppenheimer Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer International Bond Fund
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund. Shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a contingent
deferred sales charge). However, if the Distributor receives, at the time
of purchase, notice that shares of Oppenheimer Money Market Fund, Inc. are
being purchased with the redemption proceeds of other mutual funds (other
than other money market funds) that are not part of the OppenheimerFunds
family, those shares of Oppenheimer Money Market Fund, Inc. may be
exchanged for shares of other OppenheimerFunds at net asset value without
paying a sales charge.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the OppenheimerFunds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the OppenheimerFunds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent
deferred sales charge. However, shares of Oppenheimer Money Market Fund,
Inc. purchased with the redemption proceeds of shares of other mutual
funds (other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may subsequently be
exchanged for shares of other OppenheimerFunds without being subject to
an initial or contingent deferred sales charge, whichever is applicable.
To qualify for that privilege, the investor or the investor's dealer must
notify the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege. The Class
C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase
of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or shares covered by a share
certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Shares purchased through dealers or brokers
normally are paid for by the third business day following the placement
of the purchase order. Shares redeemed through the regular redemption
procedure will be paid dividends through and including the day on which
the redemption request is received by the Transfer Agent in proper form.
Dividends will be declared on shares repurchased by a dealer or broker for
three business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C Shares," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower as a result of the
asset-based sales charge on Class B and Class C shares, and Class B and
Class C dividends will also differ in amount as a consequence of any
difference in net asset value between Class A, Class B and Class C shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
hedging instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset values of Class A, Class B and Class C shares will
be reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Long-term capital gains distributions, if any are taxable
as long-term capital gains whether received in cash or reinvested and
regardless of how long Fund shares have been held. There is no fixed
dividend rate (although the Fund may have a targeted dividend rate for
Class A shares) and there can be no assurance as to the payment of any
dividends or the realization of any capital gains.
Tax Status of the Fund's Dividends and Distributions. The Fund intends
to qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest
dividends which are derived from net investment income earned by the Fund
on Municipal Securities will be excludable from gross income of
shareholders for Federal income tax purposes. Net investment income
includes the allocation of amounts of income from the Municipal Securities
in the Fund's portfolio which are free from Federal income taxes. This
allocation will be made by the use of one designated percentage applied
uniformly to all income dividends made during the Fund's tax year. Such
designation will normally be made following the end of each fiscal year
as to income dividends paid in the prior year. The percentage of income
designated as tax-exempt may substantially differ from the percentage of
the Fund's income that was tax-exempt for a given period. All of the
Fund's dividends (excluding capital gains distributions) paid during 1994
were exempt from Federal and New York income taxes. A portion of the
exempt-interest dividends paid by the Fund may be an item of tax
preference for shareholders subject to the alternative minimum tax. The
amount of any dividends attributable to tax preference items for purposes
of the alternative minimum tax will be identified when tax information is
distributed by the Fund. 10.2% of the Fund's dividends (excluding
distributions) paid during 1994 were a tax preference item for
shareholders subject to the alternative minimum tax.
A shareholder receiving a dividend from income earned by the Fund
from one or more of: (1) certain taxable temporary investments (such as
certificates of deposit, repurchase agreements, commercial paper and
obligations of the U.S. government, its agencies and instrumentalities);
(2) income from securities loans; (3) income or gains from options or
Futures; or (4) an excess of net short-term capital gain over net long-
term capital loss from the Fund, treats the dividend as a receipt of
either ordinary income or long-term capital gain in the computation of
gross income, regardless of whether the dividend is reinvested. The
Fund's dividends will not be eligible for the dividends-received deduction
for corporations. Shareholders receiving Social Security benefits should
be aware that exempt-interest dividends are a factor in determining
whether such benefits are subject to Federal income tax. Losses realized
by shareholders on the redemption of Fund shares within six months of
purchase (which period may be shortened by regulation) will be disallowed
for Federal income tax purposes to the extent of exempt-interest dividends
received on such shares.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital
gains available for distribution to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue as income each year a portion of the
discount at which the security was purchased even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
and Class C shareholders should be aware that as of the date of this
Statement of Additional Information, only certain OppenheimerFunds offer
Class B or Class C shares. To elect this option, a shareholder must
notify the Transfer Agent in writing and either have an existing account
in the fund selected for reinvestment or must obtain a prospectus for that
fund and an application from the Distributor to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the OppenheimerFunds may
be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and the Custodian have been and will continue to be unrelated
to and unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in a manner
uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer New York Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the nine-year
period then ended and the ten-month period ended September 30, 1985. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1994, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the nine-year period then ended
and the ten-month period ended September 30, 1985, in conformity with generally
accepted accounting principles.
October 21, 1994
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.6%
- ---------------------------------------------------------------------------------------------------------------------------------
NEW YORK--76.9% City of New York General Obligation Bonds:
Series A, 7.75%, 8/15/16 Baa1/A- $ 2,500,000 $ 2,737,152
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 2,014,670
Series B, FSA Insured, 8.638%, 10/1/07(1) Aaa/AAA 7,500,000 7,231,462
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,300,505
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 767,514
7.482%, 8/1/08(1) NR/NR 9,250,000 7,575,305
8.245%, 8/1/13(1) Baa1/A- 5,000,000 4,155,170
8.245%, 8/1/14(1) Baa1/A- 8,150,000 6,742,234
---------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System:
Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,219,317
Prerefunded, Series A, 7.625%, 7/1/20 AAA/BBB 1,475,000 1,679,425
Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,311,788
Series U, 6.375%, 7/1/08 Baa1/BBB 3,000,000 2,961,834
Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 9,872,478
Cornell University System, FGIC Insured,
6.875%, 7/1/14 Aa/AA 7,000,000 7,291,837
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,141,974
Judicial Facilities Lease, Escrowed
to Maturity, MBIA Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,586,035
Pooled Capital Program, Prerefunded,
FGIC Insured, 7.80%, 12/1/05 Aaa/AAA 8,145,000 8,827,045
Rockefeller University System,
MBIA Insured, 7.375%, 7/1/14 Aaa/AAA 4,000,000 4,295,555
Revenue Refunding Bonds:
City University System:
Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,014,114
Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,102,657
Fordham University System,
FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 5,700,000 5,289,389
State University Educational Facilities System:
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 19,718,305
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,060,108
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,940,519
Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ 15,230,000 17,034,068
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,314,196
---------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,168,866
Revenue Refunding Bonds:
5.125%, 1/1/14 A1/A 1,000,000 849,551
5.25%, 1/1/22 A1/A 2,500,000 2,053,837
---------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority
of New York Revenue Bonds:
Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,007,234
Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 11,723,581
---------------------------------------------------------------------------------------------------
New York City Health and Hospital Corp.
Revenue Refunding Bonds, Series A,
AMBAC Insured, 7.595%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 6,549,206
</TABLE>
4 Oppenheimer New York Tax-Exempt Fund
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York City Housing Development Corp.
Multi-Family Housing Revenue Bonds:
1985 First Series, FHA Insured, 9.875%, 10/1/17 Aa/AA $ 500,000 $ 518,653
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,045,199 2,928,446
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 2,011,262 2,018,292
---------------------------------------------------------------------------------------------------
New York City Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,640,580
6.125%, 1/1/24 A/A/A- 3,000,000 2,784,918
---------------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority
Revenue Bonds, Water and Sewer System:
Prerefunded, Series A,
MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,811,586
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000 4,320,170
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,846,709
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 5,936,935
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 11,500,000 13,256,751
---------------------------------------------------------------------------------------------------
New York State Energy Research and
Development Authority:
Electric Facilities Revenue Bonds:
Consolidated Edison Co. of New York Project:
Series B, 6.375%, 12/1/27 Aa3/A+ 10,000,000 9,651,749
Series C, 7.25%, 11/1/24 Aa3/A+ 3,450,000 3,620,864
Long Island Lighting Co.:
Series A, 7.15%, 12/1/20 Ba1B+ 7,500,000 7,481,332
Series C, 6.90%, 8/1/22 Ba1/BB+/NR 9,200,000 8,901,081
Gas Facilities Revenue Bonds,
Brooklyn Union Gas Co. Project:
Series B, 10.546%, 7/1/26(1) A1/A/A 6,000,000 6,217,487
Series D, MBIA Insured, 7.569%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,439,272
Pollution Control Revenue Bonds,
Orange and Rockland Utilities, Inc. Project,
10.25%, 10/1/14 Baa1/A-/A+ 1,700,000 1,734,000
---------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,566,570
Revenue Refunding Bonds:
New York City Health Facility:
Series A, 7.90%, 11/1/99 Baa/A- 3,500,000 3,843,826
Series A, 8%, 11/1/08 Baa/A- 3,240,000 3,646,785
State University Construction, Escrowed
to Maturity, Prerefunded, Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,052,674
---------------------------------------------------------------------------------------------------
New York State Local Government
Assistance Corp. Revenue Bonds:
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 4,812,962
Prerefunded, Series C, 7%, 4/1/21 Aaa/AAA/AAA 9,455,000 10,513,771
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,022,560
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,177,801
Revenue Refunding Bonds:
Series B, 5.50%, 4/1/21 A/A/A+ 12,800,000 11,091,160
Series C, 5%, 4/1/21 A/A/A+ 15,000,000 11,951,159
</TABLE>
5 Oppenheimer New York Tax-Exempt Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York State Medical Care
Facilities Finance Agency:
Revenue Bonds:
Hospital and Nursing Home Mortgage:
Series B, FHA Insured, 6.20%, 8/15/22 NR/AAA $11,470,000 $10,873,581
Series C, FHA Insured, 6.375%, 8/15/29 NR/AAA 10,000,000 9,620,979
Long-Term Health Care,
Series C, CGIC Insured, 6.40%, 11/1/14 Aaa/AAA 3,000,000 3,006,168
Mental Health Services Facilities
Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 6,200,000 6,993,860
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,526,967
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,000,000
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 824,447
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 2,800,000 3,229,346
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,210,954
St. Francis Hospital Project,
Series 1988A, FGIC Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,924,640
Saint Luke's-Roosevelt Hospital Center Mtg.,
Prerefunded, Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,429,542
Revenue Refunding Bonds:
Hospital Mtg., Series A,
FHA Insured, 5.25%, 8/15/14 Aa/AAA 16,940,000 14,594,621
Mental Health Services Facilities
Improvement Project:
Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,635,627
Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,705,236
---------------------------------------------------------------------------------------------------
New York State Mortgage Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,715,000 1,807,568
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,760,000 1,822,880
8.334%, 10/1/24(1) NR/NR 9,000,000 5,678,135
Homeowner Mortgage:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,343,532
Series GG, 7.60%, 10/1/18 Aa/NR 280,000 287,583
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,125,164
---------------------------------------------------------------------------------------------------
New York State Power Authority:
Revenue Bonds, Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,557,287
Revenue Refunding Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,076,168
---------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 8,999,829
---------------------------------------------------------------------------------------------------
New York State Urban Development Corp.,
Correctional Facilities Capital Project:
Revenue Bonds:
Prerefunded, Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,061,483
Prerefunded, Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,202,696
Revenue Refunding Bonds:
5.50%, 1/1/15 Baa1/BBB/A 10,000,000 8,699,229
5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,013,853
---------------------------------------------------------------------------------------------------
Onondaga County, New York Resources Recovery
Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa/NR/A- 14,500,000 14,451,758
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE> 7
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) Port Authority of New York and New Jersey,
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- $ 8,775,000 $ 9,096,761
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,441,595
Sixty-Third Series, 7.875%, 3/1/24 A1/AA-/AA- 9,000,000 9,502,596
Eighty-Fifth Series, 5.375%, 3/1/28 A1/AA-/AA- 9,000,000 7,555,680
---------------------------------------------------------------------------------------------------
Suffolk County, New York General Obligation
Refunding Bonds, Southwest Sewer District,
Escrowed to Maturity, Prerefunded, Series B,
22.875%, 2/1/95 NR/AAA 2,500,000 2,655,395
---------------------------------------------------------------------------------------------------
Triborough Bridge and Tunnel Authority
of New York General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 Aa/A+ 13,130,000 11,237,468
Series A, 5%, 1/1/15 Aa2/A+ 7,500,000 6,286,778
Series B, 0%, 1/1/09 Aa2/A+ 3,925,000 1,605,800
Series B, 0%, 1/1/16 Aa2/A+ 2,540,000 644,266
Series B, 0%, 1/1/17 Aa2/A+ 13,045,000 3,095,343
Series X, 6%, 1/1/14 Aa2/A+ 14,510,000 13,871,065
Series Y, 5.50%, 1/1/17 Aa2/A+ 5,000,000 4,453,135
------------
585,474,039
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--21.7% Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, Escrowed to Maturity,
Prerefunded, 10.25%, 7/1/09 Aaa/AAA 500,000 674,951
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,387,472
5.25%, 7/1/18 Baa1/A 20,000,000 16,823,898
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,712,679
YCNS, FSA Insured, 8.021%, 7/1/20(1) Aaa/AAA 11,500,000 9,974,111
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,643,611
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,026,346
Series W, 7.385%, 7/1/10(1) Baa1/A 9,000,000 7,361,333
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,525,828
---------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series O, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,554
Series O, 7.125%, 7/1/14 Baa1/A- 3,235,000 3,434,288
Series P, 7%, 7/1/21 Baa1/A- 6,000,000 6,213,215
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,099,005
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,519,149
Series U, 6%, 7/1/14 Baa1/A- 8,025,000 7,572,718
---------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank and Finance
Agency Single Family Mtg. Revenue Bonds,
Homeownership--Fourth Portfolio,
Prerefunded, FHA Insured, 8.50%, 12/1/18 Aaa/NR 1,580,000 1,904,532
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
U.S. POSSESSIONS (CONTINUED) Puerto Rico Housing Finance Corp. Single
Family Mtg. Revenue Bonds, Prerefunded,
GNMA Collateral, 6.85%, 10/15/24 Aaa/AAA $ 3,250,000 $ 3,328,958
---------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical and Environmental
Pollution Control Revenue Bonds:
American Airlines, Inc. Project,
Series A, 8.75%, 12/1/25 Baa1/A+ 850,000 894,734
Warner Lambert Co. Project, 7.60%, 5/1/14 AA/NR/AAA 3,000,000 3,335,067
---------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority
Guaranteed Public Education and Health Facilities:
Revenue Bonds:
Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA 6,000,000 6,561,065
Prerefunded, Series L, 6.875%, 7/1/21 Aaa/A 6,000,000 6,647,825
Revenue Refunding Bonds:
Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,089,118
Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,523,581
---------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, 7.039%, 1/16/15(1) Aaa/AAA 11,000,000 8,577,271
------------
165,590,309
------------
Total Municipal Bonds and Notes (Cost $779,391,028) 751,064,348
==========================================================
==========================================================
=============
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
City of New York Cultural Resources Revenue
Refunding Bonds, American Museum of Natural
History, Series A, MBIA Insured, 3.35%(2)
(Cost $1,200,000) Aaa/AAA 1,200,000 1,200,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $780,591,028) 98.8%
752,264,348
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 8,911,968
----------- ------------
NET ASSETS 100.0% $761,176,316
===========
============
</TABLE>
(1) Represents the current interest rate for a
variable rate bond. Variable rate bonds known as
"inverse floaters" pay interest at a rate that
varies inversely with short-term interest rates.
As interest rates rise, inverse floaters produce
less current income. Their price may be more
volatile than the price of a comparable fixed-rate
security.
(2) Floating or variable rate obligation
maturing in more than one year. The interest rate,
which is based on specific, or an index of, market
interest rates, is subject to change periodically
and is the effective rate on September 30, 1994.
A demand feature allows the recovery of principal
at any time, or at specified intervals not
exceeding one year, on up to 30 days notice.
See accompanying Notes to Financial Statements.
8 Oppenheimer New York Tax-Exempt Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
ASSETS Investments, at value (cost $780,591,028)--see accompanying statement $752,264,348
--------------------------------------------------------------------------------------------------
Cash 782,054
--------------------------------------------------------------------------------------------------
Receivables:
Interest 13,783,056
Shares of beneficial interest sold 1,123,453
--------------------------------------------------------------------------------------------------
Other 22,259
------------
Total assets 767,975,170
==========================================================
==========================================================
============
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 3,431,982
Dividends 2,646,422
Distribution and service plan fees--Note 4 487,162
Other 233,288
------------
Total liabilities 6,798,854
==========================================================
==========================================================
============
NET ASSETS $761,176,316
============
==========================================================
==========================================================
============
COMPOSITION OF Paid-in capital $786,272,600
NET ASSETS --------------------------------------------------------------------------------------------------
Undistributed net investment income 1,685,934
--------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 1,544,462
--------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (28,326,680)
------------
Net assets $761,176,316
============
==========================================================
==========================================================
============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $687,233,355 and 57,643,750 shares of beneficial interest outstanding) $11.92
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $12.51
--------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $73,942,961 and 6,199,583 shares of beneficial interest outstanding) $11.93
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer New York Tax-Exempt Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
INVESTMENT INCOME Interest $ 52,336,632
==========================================================
==========================================================
============
EXPENSES Management fees--Note 4 4,074,417
--------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 1,780,777
Class B--Note 4 612,760
--------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 487,979
--------------------------------------------------------------------------------------------------
Shareholder reports 133,381
--------------------------------------------------------------------------------------------------
Trustees' fees and expenses 81,122
--------------------------------------------------------------------------------------------------
Custodian fees and expenses 56,356
--------------------------------------------------------------------------------------------------
Legal and auditing fees 48,479
--------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 13,281
Class B 14,549
--------------------------------------------------------------------------------------------------
Other 86,167
------------
Total expenses 7,389,268
==========================================================
==========================================================
============
NET INVESTMENT INCOME 44,947,364
==========================================================
==========================================================
============
REALIZED AND UNREALIZED Net realized gain on investments 1,578,448
GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878)
-----------
Net realized and unrealized loss on investments (91,361,430)
==========================================================
==========================================================
============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(46,414,066)
============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
============
<S> <C> <C> <C>
OPERATIONS Net investment income $ 44,947,364 $ 37,419,311
--------------------------------------------------------------------------------------------------
Net realized gain on investments 1,578,448 10,840,246
--------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878) 42,115,874
------------ ------------
Net increase (decrease) in net assets resulting from operations (46,414,066) 90,375,431
==========================================================
==========================================================
============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.7155 and $.75 per share, respectively) (41,273,404) (37,617,756)
SHAREHOLDERS Class B ($.6033 and $.37 per share, respectively) (2,926,006) (558,098)
--------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) (464,748) --
Class B ($.0201 per share) (32,947) --
--------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.0260 and $.078 per share, respectively) (1,480,818) (3,645,107)
Class B ($.0260 per share) (97,630) --
--------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) (6,524,436) --
Class B ($.1144 per share) (430,153) --
==========================================================
==========================================================
============
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 22,278,985 179,235,850
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 40,649,454 39,841,699
==========================================================
==========================================================
============
NET ASSETS Total increase (decrease) (36,715,769) 267,632,019
--------------------------------------------------------------------------------------------------
Beginning of year 797,892,085 530,260,066
----------- -----------
End of year (including undistributed net investment
income of $1,685,934 and $1,237,047, respectively) $761,176,316 $797,892,085
============
============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer New York Tax-Exempt Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990 1989 1988
==========================================================
==========================================================
============
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.50 $12.59 $12.21 $11.61 $11.87 $11.91 $11.60
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .74 .73 .79 .81 .83 .84(2) .88(2)
Net realized and unrealized
gain (loss) on investments (1.46) 1.01 .47 .64 (.25) .01 .45
-------- --------- -------- ------- -------- ------- ------
Total income (loss) from
investment operations (.72) 1.74 1.26 1.45 .58 .85 1.33
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.71) (.75) (.75) (.81) (.83) (.83) (.94)
Dividends in excess
of net investment income (.01) -- -- -- -- -- --
Distributions from net
realized gain on investments (.03) (.08) (.13) (.04) (.01) (.06) (.08)
Distributions in excess of net
realized gain on investments (.11) -- -- -- -- -- --
-------- --------- -------- ------- -------- ------- ------
Total dividends and
distributions to shareholders (.86) (.83) (.88) (.85) (.84) (.89) (1.02)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 $13.50 $12.59 $12.21 $11.61 $11.87 $11.91
======== ========= ======== =======
======== ======= ======
==========================================================
==========================================================
============
Total Return, at Net Asset Value(3) (5.55)% 14.33% 10.72% 12.93% 4.95% 6.91%
11.48%
==========================================================
==========================================================
============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $687,233 $756,934 $530,260 $349,480 $250,012 $197,321 $116,931
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $738,747 $652,327 $436,876 $292,134 $227,504 $156,572 $95,996
- --------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 57,644 56,087 42,119 28,617 21,533 16,618 9,817
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.68% 5.66% 6.33% 6.81% 6.97% 7.07% 7.48%
Expenses .86% .91% .96% .96% .99% .98%(2) .90%(2)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 9.4% 39.1% 30.5% 8.9% 13.3% 11.8% 11.7%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- -----------------
TEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1987 1986 1985 1994 1993(1)
==========================================================
========================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.51 $10.98 $10.32 $13.50 $13.07
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .90(2) .86 .76 .64 .36
Net realized and unrealized
gain (loss) on investments (.79) 1.62 .67 (1.45) .44
-------- -------- ------- -------- -------
Total income (loss) from
investment operations .11 2.48 1.43 (.81) .80
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.88) (.86) (.77) (.60) (.37)
Dividends in excess
of net investment income -- -- -- (.02) --
Distributions from net
realized gain on investments (.14) (.09) -- (.03) --
Distributions in excess of net
realized gain on investments -- -- -- (.11) --
------- -------- -------- ------- --------
Total dividends and
distributions to shareholders (1.02) (.95) (.77) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.60 $12.51 $10.98 $11.93 $13.50
======= ======== ======== =======
========
==========================================================
========================================================
Total Return, at Net Asset Value(3) .29% 22.73% 13.37% (6.22)% 6.56%
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $79,479 $50,810 $28,166 $73,943 $40,958
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $65,102 $42,907 $15,240 $61,008 $20,454
- ------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 6,851 4,061 2,565 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.33% 7.10% 8.05%(4) 4.88% 4.45%(4)
Expenses .67%(2) .86% 1.00%(4) 1.65% 1.73%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 22.9% 29.7% 126.3% 9.4% 39.1%
</TABLE>
(1) For the period from March 1, 1993 (inception of offering) to September 30,
1993.
(2) Net investment income would have been $.83, $.87 and $.88 absent the
voluntary assumption of expenses, resulting in an expense ratio of 1.00%,
1.02% and .85% for 1989, 1988 and 1987, respectively.
(3) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
(4) Annualized.
(5) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $145,939,745 and $73,796,519,
respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
1. SIGNIFICANT Oppenheimer New York Tax-Exempt Fund (the Fund) is registered under the Investment Company
Act of
ACCOUNTING POLICIES 1940, as amended, as a diversified, open-end management investment company. The Fund's
investment
advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
------------------------------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time) on each
trading
day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of
Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service
are valued by averaging the mean between the bid and asked prices obtained from two active market
makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less
are valued at cost (or last determined market value) adjusted for amortization to maturity of any
premium or discount. Securities for which market quotes are not readily available are valued under
procedures established by the Board of Trustees to determine fair value in good faith.
------------------------------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other than
those attributable
to a specific class) and gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses directly attributable
to a specific class are charged against the operations of that class.
------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the Internal
Revenue
Code applicable to regulated investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss carryovers, to shareholders.
Therefore, no federal income tax provision is required.
------------------------------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan for the Fund's
independent trustees. Benefits are based on years of service and fees paid to each trustee during the
years of service. During the year ended September 30, 1994, a provision of $23,148 was made for the
Fund's projected benefit obligations, resulting in an accumulated liability of $127,766. No payments
have been made under the plan.
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class
A and
Class B shares from net investment income each day the New York Stock Exchange is open for business
and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
------------------------------------------------------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October 1,
1993, the Fund adopted
Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund
changed the classification of distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts have been reclassified to reflect a decrease
in
paid-in capital of $2,595,004, an increase in undistributed net investment income of $287,909, and a
decrease in undistributed capital loss on investments of $2,307,095. During the year ended September
30, 1994, in accordance with Statement of Position 93-2, undistributed net investment income was
decreased by $89,281 and undistributed capital gain was increased by $89,281.
------------------------------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date). Original issue discount on securities purchased is amortized over the life of the
respective securities, in accordance with federal income tax requirements. Realized gains and
losses on investments and unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes. For bonds acquired after
April 30, 1993, accrued market discount is recognized at maturity or disposition as taxable ordinary
income. Taxable ordinary income is realized to the extent of the lesser of gain or accrued market
discount.
</TABLE>
13 Oppenheimer New York Tax-Exempt Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
================
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest of each
BENEFICIAL INTEREST class. Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 8,954,607 $115,070,127 18,532,060 $238,699,747
Dividends and distributions reinvested 2,804,397 35,919,371 2,235,515 28,846,483
Redeemed (10,201,903) (128,710,513) (6,800,016) (88,310,380)
----------- ------------ ---------- ------------
Net increase 1,557,101 $ 22,278,985 13,967,559 $179,235,850
-----------------------------------------------------------------------------------------------------
Class B:
Sold 3,489,946 $ 44,671,139 3,044,196 $ 39,986,285
Dividends and distributions reinvested 183,542 2,334,544 22,045 292,115
Redeemed (507,286) (6,356,229) (32,860) (436,701)
----------- ------------ ---------- ------------
Net increase 3,166,202 $ 40,649,454 3,033,381 $ 39,841,699
=========== ============
========== ============
</TABLE>
(1) For the year ended September 30, 1993 for
Class A shares and for the period from March 1,
1993 (inception of offering) to September 30,
1993 for Class B shares.
<TABLE>
<S> <C>
==========================================================
==========================================================
================
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments of $28,326,680 was
composed of gross
LOSSES ON INVESTMENTS appreciation of $18,530,958, and gross depreciation of $46,857,638.
==========================================================
==========================================================
================
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
agreement with the
AND OTHER TRANSACTIONS Fund which provides for an annual fee of .60% on the first $200 million of net assets,
.55% on the
WITH AFFILIATES next $100 million, .50% on the next $200 million, .45% on the next $250 million, .40% on
the next
$250 million and .35% on net assets in excess of $1 billion.
For the year ended September 30, 1994, commissions (sales charges paid by investors) on
sales of Class A shares totaled $2,933,373, of which $551,881 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended September 30, 1994, OFDI received contingent deferred sales
charges of $149,477 upon redemption of Class B shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total
costs of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the personal service and
maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers,
banks and other financial institutions. In addition, Class B shares are subject to an asset-based
sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its
own resources at the time of sale and associated financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue payment of
the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior
to termination or discontinuance of the plan. During the year ended September 30, 1994, OFDI paid
$26,802 and $902, respectively to an affiliated broker/dealer as reimbursement for Class A and
Class B personal service and maintenance expenses and retained $582,434 as reimbursement for Class
B
sales commissions and service fee advances, as well as financing costs.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
==========================================================
==========================================================
================
Municipal Bonds and Notes--98.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York--78.0% City of New York General Obligation Bonds:
Inverse Floater, 6.395%, 8/1/08(1) Baa1/A- $ 9,250,000 $ 7,839,032
Inverse Floater, 7.194%, 8/1/13(1) Baa1/A- 5,000,000 4,368,629
Inverse Floater, 7.195%, 8/1/14(1) Baa1/A- 8,150,000 7,102,871
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,341,294
Series A, 7.75%, 8/15/16 Baa1/A- 2,500,000 2,693,730
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 1,990,266
Series B, FSA Insured, Inverse Floater,
5.892%, 10/1/07(1) Aaa/AAA 7,500,000 7,441,522
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 752,134
----------------------------------------------------------------------------------------------------------------
City of New York Health & Hospital Corp. Revenue
Refunding Bonds, Series A, AMBAC Insured,
Inverse Floater, 6.94%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 7,140,074
----------------------------------------------------------------------------------------------------------------
City of New York Housing Development Corp
Multifamily Housing Revenue Bonds:
1985 Fst. Series, FHA Insured, 9.875%, 10/1/17 Aa/AA 500,000 518,943
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,022,809 2,848,224
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 1,996,592 1,876,849
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Civil Facility Revenue Bonds, USTA National Tennis
Center Project, FSA Insured, 6.375%, 11/15/14 Aaa/AAA 1,500,000 1,558,572
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,842,225
6.125%, 1/1/24 A/A/A- 3,000,000 2,897,478
----------------------------------------------------------------------------------------------------------------
City of New York Municipal Water Finance
Authority Water & Sewer System Revenue Bonds:
Prerefunded, Series A, MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,825,258
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,887,400
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 17,250,000 19,982,794
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 6,226,916
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000
4,582,169
----------------------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System, Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,335,952
City University System, Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,674,893
City University System, Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 10,230,670
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,143,626
Judicial Facilities Lease, Escrowed to Maturity,
MBIA-IBC Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,615,123
Pooled Capital Program, Prerefunded, FGIC
Insured, 7.80%, 12/1/05 Aaa/AAA/AAA 8,145,000 8,963,425
Rockefeller University System, MBIA Insured,
7.375%, 7/1/14 Aaa/AAA 4,000,000 4,305,035
Revenue Refunding Bonds:
City University System, Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,330,521
City University System, Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,559,951
Fordham University System, FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 9,100,000
8,886,467
New York University, Series A, MBIA Insured, 5%, 7/1/09 Aaa/AAA 9,000,000
8,266,491
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State University Educational Facilities System:
(continued) Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ $ 15,230,000 $ 17,063,189
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,943,837
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 20,344,550
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,311,285
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,397,974
----------------------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,197,338
Revenue Refunding Bonds, 5.125%, 1/1/14 A1/A 1,000,000 894,401
Refunding Bonds, 5.25%, 1/1/22 A1/A 2,500,000 2,200,342
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,159,472
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 12,341,311
----------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development
Authority Electric Facilities Revenue Bonds:
Long Island Lighting Co., Series A, 7.15%, 12/1/20 Ba1/BB+ 7,500,000 7,112,197
Long Island Lighting Co., Series C, 6.90%, 8/1/22 Ba1/BB+ 9,200,000 8,451,781
Brooklyn Union Gas Co. Project, Series B, Inverse
Floater, 9.271%, 7/1/26(1) A1/A/A 6,000,000 6,330,294
Brooklyn Union Gas Co. Project, Series D, MBIA
Insured, Inverse Floater, 7.126%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,616,870
----------------------------------------------------------------------------------------------------------------
New York State Environmental Facilities Corp
Pollution Control Revenue Bonds, State Water
Revolving Fund--New York City Municipal Water,
5.875%, 6/15/14 Aa/A-/AA 14,050,000 13,826,196
----------------------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,379,694
Revenue Refunding Bonds, New York City Health
Facility, Series A, 7.90%, 11/1/99 Baa/BBB+ 3,500,000 3,825,643
Revenue Refunding Bonds, New York City Health
Facility, Series A, 8%, 11/1/08 Baa/BBB+ 3,240,000 3,596,458
Revenue Refunding Bonds, State University
Construction, Escrowed to Maturity, Prerefunded,
Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,058,364
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Bonds:
Prerefunded, Series C, 7%, 4/1/21(2) Aaa/AAA/AAA 9,455,000 10,586,403
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,244,358
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 5,069,366
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,818,401
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Refunding Bonds, Series B, 5.50%, 4/1/21 A/A/A+ 13,000,000 11,894,778
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York New York State Local Government Assistance Corp
(continued) Revenue Refunding Bonds, Series C, 5%, 4/1/21 A/A/A+ $ 15,000,000 $
12,707,325
----------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency:
Revenue Bonds:
Long-Term Health Care, Series C, CGIC Insured,
6.40%, 11/1/14 Aaa/AAA 3,000,000 3,049,317
Mental Health Services Facilities Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 3,000,000 3,337,656
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 4,235,000 4,885,572
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 813,136
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,463,517
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,080,734
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,239,172
Saint Luke's Hospital Center Mtg., Prerefunded,
Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,434,432
St. Francis Hospital Project, Series 1988A, FGIC
Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,930,155
Revenue Refunding Bonds:
Hospital Insured Mtg., Series A, FHA Insured,
5.25%, 8/15/14 Aa/AAA 16,940,000 15,297,428
Mental Health Services Facilities Improvement
Project, Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,821,306
Mental Health Services Facilities Improvement
Project, Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,884,940
----------------------------------------------------------------------------------------------------------------
New York State Mtg. Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,700,000 1,788,743
Homeowner Mtg.:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,356,578
Series GG, 7.60%, 10/1/18 Aa/NR 175,000 179,868
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,134,800
Inverse Floater, 5.342%, 10/1/24(1) NR/NR 9,000,000 6,131,816
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,720,000 1,785,372
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Bonds,
Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,602,970
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Refunding
Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,067,279
----------------------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 9,611,290
----------------------------------------------------------------------------------------------------------------
New York State Urban Development Corp.:
Revenue Bonds:
Correctional Facilities Capital Project, Prerefunded,
Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,206,750
Correctional Facilities Capital Project, Prerefunded,
Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,065,552
Revenue Refunding Bonds:
Correctional Facilities Project, 5.50%, 1/1/15 Baa1/BBB/A 10,000,000 9,018,610
Correctional Facilities Project, 5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,634,484
</TABLE>
8 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
----------------------------------------------------------------------------------------------------------------
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Onondaga County, New York Resources Recovery
(continued) Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa2/NR/A- $ 15,600,000 $ 15,221,573
----------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- 8,775,000 8,961,301
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,432,515
----------------------------------------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority of New York
General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 A1/AA-/AA- 9,000,000 9,456,758
Series A, 5%, 1/1/12 Aa/A+ 15,755,000 14,288,885
Series A, 5%, 1/1/15 Aa/A+ 7,500,000 6,693,989
Series B, Zero Coupon, 1/1/09 Aa/A+ 3,925,000 1,766,830
Series B, Zero Coupon, 1/1/16 Aa/A+ 2,540,000 731,502
Series B, Zero Coupon, 1/1/17 Aa/A+ 13,045,000 3,530,667
Series X, 6%, 1/1/14 Aa/A+ 14,510,000 14,556,243
Series Y, 5.50%, 1/1/17 Aa/A+ 15,000,000 14,111,339
------------
585,973,440
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Puerto Rico Commonwealth Aqueduct & Sewer
Possessions--20.8% Authority Revenue Bonds, Escrowed to Maturity,
10.25%, 7/1/09 Aaa/AAA 500,000 674,690
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
5.25%, 7/1/18 Baa1/A 20,000,000 17,741,840
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,715,685
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,810,434
YCNS, FSA Insured, Inverse Floater, 7.432%, 7/1/20(1) Aaa/AAA 11,500,000
10,661,603
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,850,418
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,069,086
Series W, Inverse Floater, 6.406%, 7/1/10(1) Baa1/A 9,000,000 7,920,665
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,558,612
----------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series 0, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,457
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,306,042
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,738,348
Series U, 6%, 7/1/14 Baa1/A- 7,025,000 6,898,487
----------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank & Finance Agency Single
Family Mtg. Revenue Bonds, Homeownership--
Fourth Portfolio, Prerefunded, FHA Insured,
8.50%, 12/1/18 Aaa/NR 1,580,000 1,919,510
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, American
Airlines, Inc. Project, Series A, 8.75%, 12/1/25 Baa1/BB+ 850,000 886,018
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, Warner Lambert
Co. Project, 7.60%, 5/1/14 Aaa/NR 3,000,000 3,261,621
</TABLE>
9 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Possessions Puerto Rico Public Buildings Authority Guaranteed
(continued) Public Education & Health Facilities:
Revenue Bonds, Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA $ 6,000,000 $ 6,531,053
Revenue Bonds, Prerefunded, Series L, 6.875%, 7/1/21 Aaa/AAA 5,400,000 6,060,355
Revenue Refunding Bonds, Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,893,788
----------------------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority Revenue
Guaranteed Refunding Bonds, Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,474,053
----------------------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, Inverse Floater, 6.51%, 1/16/15(1) Aaa/AAA 11,000,000 9,611,238
------------
156,343,003
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $746,701,277) 98.8% 742,316,443
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.2 9,180,247
------ ------------
Net Assets 100.0% $751,496,690
====== ============
1. Represents the current interest rate for a variable rate bond. Variable rate bonds known as ``inverse
floaters'' pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price may be more volatile than the price of a comparable
fixed-rate security. The multiplier for these inverse floaters is 1. Inverse floaters amount to $76,164,614 or
10.1% of the Fund's net assets, at March 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
2. Securities with an aggregate market value of $1,959,408 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts, as follows:
Type of Contract Number of Contracts Face Amount
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 6/95 600 $60,000,000
The market value of the open contracts was $62,343,750 at March 31, 1995, with a net unrealized gain of
$1,227,343.
</TABLE>
<TABLE>
<CAPTION>
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
Industry Market Value Percent
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation $135,221,975 18.2%
Education 123,672,603 16.7
General Obligation Bonds 122,418,290 16.4
Utilities 116,210,817 15.6
Lease/Rental 86,570,544 11.7
Special Tax Bonds 72,171,324 9.7
Hospitals 36,851,406 5.0
Pollution Control 23,511,142 3.2
Housing 21,540,703 2.9
Industrial Development 4,147,639 0.6
------------ -----
$742,316,443 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Assets Investments, at value (cost $746,701,277)--see accompanying statement $742,316,443
----------------------------------------------------------------------------------------------------------------
Cash 101,953
----------------------------------------------------------------------------------------------------------------
Receivables:
Interest 13,075,610
Shares of beneficial interest sold 1,066,221
----------------------------------------------------------------------------------------------------------------
Other 37,032
------------
Total assets 756,597,259
----------------------------------------------------------------------------------------------------------------
Liabilities Payables and other liabilities:
Dividends 2,581,635
Shares of beneficial interest redeemed 1,850,754
Distribution and service plan fees--Note 5 434,000
Transfer and shareholder servicing agent fees--Note 5 28,711
Trustees' fees 5,384
Other 200,085
------------
Total liabilities 5,100,569
==========================================================
==========================================================
================
Net Assets $751,496,690
============
==========================================================
==========================================================
================
Composition of Paid-in capital $761,699,818
Net Assets ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,195,467
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (5,786,418)
----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (5,612,177)
----------------------------------------------------------------------------------------------------------------
Net assets $751,496,690
============
==========================================================
==========================================================
================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on
net assets of $668,466,673 and 54,841,749 shares of beneficial interest outstanding) $ 12.19
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $ 12.80
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $83,030,017 and 6,808,905 shares of beneficial interest outstanding) $ 12.19
</TABLE>
See accompanying Notes to Financial Statements
11 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Investment Income Interest $24,891,143
==========================================================
==========================================================
================
Expenses Management fees--Note 5 1,872,377
----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 744,433
Class B--Note 5 375,961
----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 298,722
----------------------------------------------------------------------------------------------------------------
Shareholder reports 81,829
----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 40,853
----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 35,359
----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 22,638
----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 5,777
Class B 2,719
----------------------------------------------------------------------------------------------------------------
Other 39,203
-----------
Total expenses 3,519,871
==========================================================
==========================================================
================
Net Investment Income 21,371,272
==========================================================
==========================================================
================
Realized and Net realized loss on investments (7,330,880)
Unrealized ----------------------------------------------------------------------------------------------------------------
Gain (Loss) Net change in unrealized appreciation or depreciation on investments 22,714,503
on Investments -----------
Net realized and unrealized gain on investments 15,383,623
==========================================================
==========================================================
================
Net Increase in Net Assets Resulting From Operations $ 36,754,895
============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1995 Year Ended
(Unaudited) Sept. 30, 1994
==========================================================
==========================================================
================
<S> <C> <C>
Operations Net investment income $ 21,371,272 $ 44,947,364
----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (7,330,880) 1,578,448
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 22,714,503 (92,939,878)
------------- -------------
Net increase (decrease) in net assets resulting from operations 36,754,895 (46,414,066)
==========================================================
==========================================================
================
Dividends and Dividends from net investment income:
Distributions to Class A ($.3576 and $.7155 per share, respectively) (19,849,704) (41,273,404)
Shareholders Class B ($.3135 and $.6033 per share, respectively) (2,012,035) (2,926,006)
----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) -- (464,748)
Class B ($.0201 per share) -- (32,947)
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.026 per share) -- (1,480,818)
Class B ($.026 per share) -- (97,630)
----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) -- (6,524,436)
Class B ($.1144 per share) -- (430,153)
==========================================================
==========================================================
================
Beneficial Net increase (decrease) in net assets resulting from
Interest Class A beneficial interest transactions--Note 2 (31,840,644) 22,278,985
Transactions ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class B beneficial interest transactions--Note 2 7,267,862 40,649,454
==========================================================
==========================================================
================
Net Assets Total decrease (9,679,626) (36,715,769)
----------------------------------------------------------------------------------------------------------------
Beginning of period 761,176,316 797,892,085
------------ ------------
End of period (including undistributed net investment income
of $1,195,467 and $1,685,934, respectively) $ 751,496,690 $ 761,176,316
=============
=============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Financial Highlights
----------------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------------- --------------------------------
Six Months Six Months
Ended Ended Year Ended
March 31, 1995 Year Ended September 30, March 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994 1993(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87 $ 11.93 $ 13.50 $ 13.07
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .74 .73 .79 .81 .83 .31 .64 .36
Net realized and unrealized gain
(loss) on investments .27 (1.46) 1.01 .47 .64 (.25) .27 (1.45) .44
------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .63 (.72) 1.74 1.26 1.45 .58 .58 (.81) .80
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.71) (.75) (.75) (.81) (.83) (.32) (.60) (.37)
Dividends in excess of net
investment income -- (.01) -- -- -- -- -- (.02) --
Distributions from net realized
gain on investments -- (.03) (.08) (.13) (.04) (.01) -- (.03) --
Distributions in excess of net
realized gain on investments -- (.11) -- -- -- -- -- (.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.36) (.86) (.83) (.88) (.85) (.84) (.32) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.19 $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 12.19 $ 11.93 $ 13.50
====== ====== ====== ====== ====== ======
====== ====== ======
==========================================================
==========================================================
================
Total Return, at Net Asset Value(2) 5.44% (5.55)% 14.33% 10.72% 12.93% 4.95% 4.95% (6.22)%
6.56%
==========================================================
==========================================================
================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $668,467 $687,233 $756,934 $530,260 $349,480 $250,012 $83,030 $73,943
$40,958
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $648,096 $738,747 $652,327 $436,876 $292,134 $227,504 $75,172 $61,008
$20,454
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 54,842 57,644 56,087 42,119 28,617 21,533 6,809 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.00%(3) 5.68% 5.66% 6.33% 6.81% 6.97% 5.21%(3) 4.88%
4.45%(3)
Expenses .90%(3) .86% .91% .96% .96% .99% 1.67%(3) 1.65% 1.73%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 6.3% 9.4% 39.1% 30.5% 8.9% 13.3% 6.3% 9.4% 39.1%
1. For the period from March 1, 1993 (inception of offering) to September 30, 1993.
2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with
all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the
market value of portfolio securities owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the six months ended March 31, 1995 were $45,588,316 and
$72,870,419, respectively. See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
- - Moody's Investor Services, Inc. The ratings of Moody's Investors
Service, Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca and C. Municipal Bonds rated "Aaa" are judged to be of the
"best quality." The rating of Aa is assigned to bonds which are of "high
quality by all standards," but as to which margins of protection or other
elements make long-term risks appear somewhat larger than "Aaa" rated
Municipal Bonds. The "Aaa" and "Aa" rated bonds comprise what are
generally known as "high grade bonds." Municipal Bonds which are rated
"A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment at
some time in the future. Municipal Bonds rated "Baa" are considered
"medium grade" obligations. They are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. Bonds which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this
class. Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small. Bonds which are rated "Caa" are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest. Bonds which are rated "Ca" represent
obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. Bonds which are rated
"C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups
which Moody's believes possess the strongest investment attributes are
designated Aa1, A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above,
Municipal Bonds rated by Moody's which have a demand feature that provides
the holder with the ability to periodically tender ("put") the portion of
the debt covered by the demand feature, may also have a short-term rating
assigned to such demand feature. The short-term rating uses the symbol
VMIG to distinguish characteristics which include payment upon periodic
demand rather than fund or scheduled maturity dates and potential reliance
upon external liquidity, as well as other factors. The highest investment
quality is designated by the VMIG 1 rating and the lowest by VMIG 4.
- - Standard & Poor's Corporation. The ratings of Standard & Poor's
Corporation ("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade),
A (Good Grade), BBB (Medium Grade), BB, B, CCC, CC, and C (speculative
grade). Bonds rated in the top four categories (AAA, AA, A, BBB) are
commonly referred to as "investment grade." Municipal Bonds rated AAA are
"obligations of the highest quality." The rating of AA is accorded
issues with investment characteristics "only slightly less marked than
those of the prime quality issues." The rating of A describes "the third
strongest capacity for payment of debt service." Principal and interest
payments on bonds in this category are regarded as safe. It differs from
the two higher ratings because, with respect to general obligations bonds,
there is some weakness, either in the local economic base, in debt burden,
in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness
might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds, debt service coverage is
good, but not exceptional. Stability of the pledged revenues could show
some variations because of increased competition or economic influences
on revenues. Basic security provisions, while satisfactory, are less
stringent. Management performance appears adequate. The BBB rating is
the lowest "investment grade" security rating. The difference between A
and BBB ratings is that the latter shows more than one fundamental
weakness, or one very substantial fundamental weakness, whereas the former
shows only one deficiency among the factors considered. With respect to
revenue bonds, debt coverage is only fair. Stability of the pledged
revenues could show variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB"
have less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which would lead to
inadequate capacity to meet timely interest and principal payments. Bonds
rated "B" have a greater vulnerability to default, but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. Bonds rated "CCC"
have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically
are debt subordinated to senior debt which is assigned on actual or
implied "CCC" debt rating.
Bonds rated "C" typically are debt subordinated to senior debt which
is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued. Bonds rated "D" are in payment
default. The "D" rating category is used when interest payments or
principal payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will
be made during the grace period. The "D" rating also will be used upon
the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
- - Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds
are AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds
rated AAA are judged to be of the "highest credit quality." The rating
of AA is assigned to bonds of "very high credit quality." Municipal Bonds
which are rated A by Fitch are considered to be of "high credit quality."
The rating of BBB is assigned to bonds of "satisfactory credit quality."
The A and BBB rated bonds are more vulnerable to adverse changes in
economic conditions than bonds with higher ratings. Bonds rated AAA, AA,
A and BBB are considered to be of investment grade quality. Bonds rated
below BBB are considered to be of speculative quality. The ratings of
"BB" is assigned to bonds considered by Fitch to be "speculative." The
rating of "B" is assigned to bonds considered by Fitch to be "highly
speculative." Bonds rated "CCC" have certain identifiable characteristics
which, if not remedied, may lead to default. Bonds rated "CC" are
minimally protected. Default in payment of interest and/or principal
seems probable over time. Bonds rated "C" are in imminent default in
payment of interest or principal. Bonds rated "DDD", "DD" and "D" are in
default on interest and/or principal payments. DDD represents the highest
potential for recovery on these bonds, and D represents the lowest
potential for recovery.
Municipal Notes
- Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established
and broad-based access to the market for financing. Notes bearing the
designation "MIG-2" are of high quality with ample margins of protection,
although not as large as notes rated "MIG." Such short-term notes which
have demand features may also carry a rating using the symbol VMIG as
described above, with the designation MIG-1/VMIG 1 denoting best quality,
with superior liquidity support in addition to those characteristics
attributable to the designation MIG-1.
- S&P's rating for Municipal Notes due in three years or less are SP-
1, SP-2, and SP-3. SP-1 describes issues with a very strong capacity to
pay principal and interest and compares with bonds rated A by S&P; if
modified by a plus sign, it compares with bonds rated AA or AAA by S&P.
SP-2 describes issues with a satisfactory capacity to pay principal and
interest, and compares with bonds rated BBB by S&P. SP-3 describes issues
that have a speculative capacity to pay principal and interest.
- Fitch's rating for Municipal Notes due in three years or less are
F-1+, F-1, F-2, F-3, F-S and D. F-1+ describes notes with an
exceptionally strong credit quality and the strongest degree of assurance
for timely payment. F-1 describes notes with a very strong credit quality
and assurance of timely payment is only slightly less in degree than
issues rated F-1+. F-2 describes notes with a good credit quality and a
satisfactory assurance of timely payment, but the margin of safety is not
as great for issues assigned F-1+ or F-1 ratings. F-3 describes notes
with a fair credit quality and an adequate assurance of timely payment,
but near-term adverse changes could cause such securities to be rated
below investment grade. F-S describes notes with weak credit quality.
Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations. The
Moody's, S&P and Fitch corporate debt ratings shown do not differ
materially from those set forth above for Municipal Bonds.
Commercial Paper
- Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior
capacity for repayment of short-term promissory obligations. Issuers
rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. Issuers rated Prime-3 have an acceptable capacity
for repayment of short-term promissory obligations. Issuers rated Not
Prime do not fall within any of the Prime rating categories.
- S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B,
C, and D. A-1 indicates that the degree of safety regarding timely
payment is strong. A-2 indicates capacity for timely payment is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1. A-3 indicates an adequate capacity for timely
payments. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations. B indicates only speculative capacity for timely payment.
C indicates a doubtful capacity for payment. D is assigned to issues in
default.
- Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
<PAGE>
APPENDIX B
TAX EQUIVALENT YIELD TABLES
The equivalent yield tables below compare tax-free income with taxable
income under Federal, New York State and New York City income tax rates
effective January 1, 1995. Combined taxable income refers to the net
amount subject to Federal, New York State and New York City income tax
after deductions and exemptions. The tables assume that an investor's
highest tax bracket applies to the change in taxable income resulting from
a switch between taxable and non-taxable investments, that the investor
is not subject to the Alternative Minimum Tax and that New York State and
local income tax payments are fully deductible for Federal income tax
purposes. They do not reflect the phaseout of itemized deductions and
personal exemptions at higher income levels, resulting in higher effective
tax rates and tax equivalent yields.
New York State Residents
Combined Taxable Income
<TABLE>
<CAPTION>
An Oppenheimer New York
Tax-Exempt Fund Yield
Single ReturnJoint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13,000 $ 19,000 19.72% 4.36% 4.98% 5.61%
$ 19,000 $ 25,000 20.57% 4.41% 5.04% 5.67%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 4.46% 5.09% 5.73%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 5.26% 6.01% 6.76%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 5.49% 6.27% 7.06%
$117,950 $256,500 $143,600 $256,500 40.86% 5.92% 6.76% 7.61%
$256,500 $256,500 44.19% 6.27% 7.17% 8.06%
New York State Residents
Combined Taxable Income
An Oppenheimer New York
Tax-Exempt Fund Yield
Single ReturnJoint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 13,000 $ 19,000 19.72% 6.23% 6.85% 7.47%
$ 19,000 $ 25,000 20.57% 6.29% 6.92% 7.55%
$ 13,000 $ 23,350 $ 25,000 $ 39,000 21.45% 6.37% 7.00% 7.64%
$ 23,350 $ 56,550 $ 39,000 $ 94,250 33.47% 7.52% 8.27% 9.02%
$ 56,550 $117,950 $ 94,250 $143,600 36.24% 7.84% 8.63% 9.41%
$117,950 $256,500 $143,600 $256,500 40.86% 8.45% 9.30% 10.15%
$256,500 $256,500 44.19% 8.96% 9.85% 10.75%
</TABLE>
<PAGE>
New York City Residents
Combined Taxable Income
<TABLE>
<CAPTION>
An Oppenheimer New York
Tax-Exempt Fund Yield
Single ReturnJoint Return of:
Combined 3.5% 4.0% 4.5%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
<S> <C> <C> <C> <C> <C> <C> <C>
$ 15,000 $ 19,000 22.14% 4.50% 5.14% 5.78%
$ 19,000 $ 25,000 22.99% 4.54% 5.19% 5.84%
$ 25,000 $ 27,000 23.88% 4.60% 5.25% 5.91%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 4.62% 5.28% 5.94%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 5.46% 6.23% 7.01%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 5.46% 6.24% 7.02%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 5.70% 6.51% 7.32%
$ 60,000 $117,950 $108,000 $143,600 38.59% 5.70% 6.51% 7.33%
$117,950 $256,500 $143,600 $256,500 43.04% 6.14% 7.02% 7.90%
$256,500 $256,500 46.24% 6.51% 7.44% 8.37%
New York City Residents
Combined Taxable Income
An Oppenheimer New York
Tax-Exempt Fund Yield
Single ReturnJoint Return of:
Combined 5.0% 5.5% 6.0%
Effective Is Approximately
Not Not Tax Equivalent to a Taxable
Over Over Over Over Bracket Yield of:
$ 15,000 $ 19,000 22.14% 6.42% 7.06% 7.71%
$ 19,000 $ 25,000 22.99% 6.49% 7.14% 7.79%
$ 25,000 $ 27,000 23.88% 6.57% 7.23% 7.88%
$ 15,000 $ 23,350 $ 27,000 $ 39,000 24.26% 6.60% 7.26% 7.92%
$ 23,350 $ 25,000 $ 39,000 $ 45,000 35.84% 7.79% 8.57% 9.35%
$ 25,000 $ 56,550 $ 45,000 $ 94,250 35.88% 7.80% 8.58% 9.36%
$ 56,550 $ 60,000 $ 94,250 $108,000 38.55% 8.14% 8.95% 9.76%
$ 60,000 $117,950 $108,000 $143,600 38.59% 8.14% 8.96% 9.77%
$117,950 $256,500 $143,600 $256,500 43.04% 8.78% 9.66% 10.53%
$256,500 $256,500 46.24% 9.30% 10.23% 11.16%
</TABLE>
<PAGE>
Appendix C
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
ANNUAL REPORT SEPTEMBER 30, 1994
(OPPENHEIMERFUNDS(R) LOGO)
[PHOTO OF TWO PEOPLE SKIING]
"WITH TODAY'S HIGHER TAXES, WE WORRIED
THAT THE INCOME FROM OUR INVESTMENTS
WOULDN'T BE ENOUGH.
"THIS FUND HAS GIVEN US WHAT WE NEED--
TAX-FREE INCOME.
"WE CAN KEEP MORE OF WHAT WE EARN, WHILE
OUR INVESTMENT HELPS BUILD NEW YORK."
<PAGE> 2
FUND FACTS
IN THIS REPORT:
ANSWERS TO TIMELY
QUESTIONS YOU SHOULD
ASK YOUR FUND'S
MANAGERS.
* HOW DID THE FEDERAL RESERVE'S MOVES TO RAISE INTEREST RATES AFFECT THE
FUND'S INVESTMENT STRATEGY AND RETURNS FOR THE PAST YEAR?
* WHAT'S THE OUTLOOK FOR THE MUNICIPAL MARKET OVERALL AND THE NEW YORK
MARKET IN PARTICULAR?
* WHAT KINDS OF BONDS OFFER BUYING OPPORTUNITIES TODAY?
<TABLE>
<CAPTION>
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
<S> <C>
1 The Fund's objective is to seek high current income exempt
from federal, New York State and New York City income taxes
consistent with preservation of capital.
- --------------------------------------------------------------------------------
2 Standardized yields for the 30 days ended September 30, 1994
for Class A and Class B shares were 5.24% and 4.72%,
respectively.(1)
- --------------------------------------------------------------------------------
3 Total return at net asset value for the 12-month period ended
September 30, 1994 was -5.55% for Class A shares and -6.22%
for Class B shares.(2)
- --------------------------------------------------------------------------------
4 Average annual total returns for Class A shares for the 1-,
5-, and 10-year periods ended September 30, 1994 were -10.04%,
6.18%, and 9.07%, respectively. For Class B shares, average
annual total returns for the 1-year period ended September 30,
1994 and since inception of the Class on March 1, 1993 were
-10.90% and -2.77%, respectively.(3)
- --------------------------------------------------------------------------------
5 "Although the past six months have been a challenging period
for bond investors, we believe that the longer-term outlook
for the municipal bond market is positive. The New York
municipal market has historically outperformed the national
market and should continue to do so, given the improvements
in New York State finances. While the market may be subject
to short-term volatility, both the fundamental and technical
factors to support solid long-term performance are definitely
in place."
</TABLE>
Portfolio Manager Bob Patterson, September 30, 1994
(1) Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 9/30/94, divided by the
maximum offering price for Class A shares at the end of the period, compounded
semiannually and then annualized. Falling net asset values will tend to
artificially raise yields.
(2) Based on the change in net asset value per share from 9/30/93 to 9/30/94,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
(3) Average annual total returns are based on a hypothetical investment held
until 9/30/94, after deducting the current maximum initial sales charge of
4.75% for Class A shares and the contingent deferred sales charge of 5%
(1-year) and 4% (since inception) for Class B shares. The Fund's maximum sales
charge rate for Class A shares was lower during a portion of some of the
periods shown, and actual investment results will be different as a result of
the change.
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than the original cost. A
portion of the Fund's distributions may be subject to income taxes. For
investors subject to the alternative minimum tax, a portion of the Fund's
distributions may increase that tax.
2 Oppenheimer New York Tax-Exempt Fund
<PAGE> 3
REPORT TO SHAREHOLDERS
Oppenheimer New York Tax-Exempt Fund met its objectives well for the year ended
September 30, 1994, providing a level of tax-free income that many taxable
investments of comparable quality are unable to match on an after-tax basis.
Standardized yields for Class A and Class B shares were 5.24% and
4.72%, respectively, for the 30-day period ended September 30, 1994.(4)
The Fund was, of course, affected by aggressive increases in short-term
interest rates by the Federal Reserve Board. As in the past, however, your
managers' consistent focus on bond quality, call protection, and
diversification continued to help moderate price fluctuations.
At this writing, the market's fundamentals are strong and getting
stronger. The Fed's actions have helped keep possible inflation in check,
while the market's supply and demand characteristics are positive. The
supply of municipal bonds is running more than 40% below last year's pace,
while demand for tax-free securities is rising, driven by both rising taxes and
the high volume of bond calls nationwide expected over the next 12 to 18
months. This combination of low inflation, shrinking bond supply, and mounting
demand should provide support for bond prices.
Just as important, the finances of New York State continue to improve,
providing your managers with opportunities to add several attractive issues to
the portfolio.
Throughout the year, focus was maintained on high-quality, essential
service issues diversified by sector across the state and backed by stable,
predictable revenue streams, as well as on bonds offering significant call
protection.
Looking ahead, we believe that the New York municipal market offers
substantial value to investors. The fundamentals for long-term performance are
in place, and your managers will continue to look for opportunities to buy
value at attractive prices--the best way to produce long-term investment gains.
We appreciate your confidence in the managers of Oppenheimer New York
Tax-Exempt Fund, and we look forward to continuing to help you meet your
investment goals in the future.
- -------------------
Donald W. Spiro
President
Oppenheimer New York Tax-Exempt Fund
October 21, 1994
(4) See footnote 1, page 2.
3 Oppenheimer New York Tax-Exempt Fund
<PAGE> 4
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.6%
- ---------------------------------------------------------------------------------------------------------------------------------
NEW YORK--76.9% City of New York General Obligation Bonds:
Series A, 7.75%, 8/15/16 Baa1/A- $ 2,500,000 $ 2,737,152
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 2,014,670
Series B, FSA Insured, 8.638%, 10/1/07(1) Aaa/AAA 7,500,000 7,231,462
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,300,505
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 767,514
7.482%, 8/1/08(1) NR/NR 9,250,000 7,575,305
8.245%, 8/1/13(1) Baa1/A- 5,000,000 4,155,170
8.245%, 8/1/14(1) Baa1/A- 8,150,000 6,742,234
---------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System:
Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,219,317
Prerefunded, Series A, 7.625%, 7/1/20 AAA/BBB 1,475,000 1,679,425
Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,311,788
Series U, 6.375%, 7/1/08 Baa1/BBB 3,000,000 2,961,834
Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 9,872,478
Cornell University System, FGIC Insured,
6.875%, 7/1/14 Aa/AA 7,000,000 7,291,837
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,141,974
Judicial Facilities Lease, Escrowed
to Maturity, MBIA Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,586,035
Pooled Capital Program, Prerefunded,
FGIC Insured, 7.80%, 12/1/05 Aaa/AAA 8,145,000 8,827,045
Rockefeller University System,
MBIA Insured, 7.375%, 7/1/14 Aaa/AAA 4,000,000 4,295,555
Revenue Refunding Bonds:
City University System:
Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,014,114
Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,102,657
Fordham University System,
FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 5,700,000 5,289,389
State University Educational Facilities System:
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 19,718,305
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,060,108
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,940,519
Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ 15,230,000 17,034,068
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,314,196
---------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,168,866
Revenue Refunding Bonds:
5.125%, 1/1/14 A1/A 1,000,000 849,551
5.25%, 1/1/22 A1/A 2,500,000 2,053,837
---------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority
of New York Revenue Bonds:
Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,007,234
Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 11,723,581
---------------------------------------------------------------------------------------------------
New York City Health and Hospital Corp.
Revenue Refunding Bonds, Series A,
AMBAC Insured, 7.595%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 6,549,206
</TABLE>
4 Oppenheimer New York Tax-Exempt Fund
<PAGE> 5
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York City Housing Development Corp.
Multi-Family Housing Revenue Bonds:
1985 First Series, FHA Insured, 9.875%, 10/1/17 Aa/AA $ 500,000 $ 518,653
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,045,199 2,928,446
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 2,011,262 2,018,292
---------------------------------------------------------------------------------------------------
New York City Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,640,580
6.125%, 1/1/24 A/A/A- 3,000,000 2,784,918
---------------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority
Revenue Bonds, Water and Sewer System:
Prerefunded, Series A,
MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,811,586
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000 4,320,170
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,846,709
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 5,936,935
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 11,500,000 13,256,751
---------------------------------------------------------------------------------------------------
New York State Energy Research and
Development Authority:
Electric Facilities Revenue Bonds:
Consolidated Edison Co. of New York Project:
Series B, 6.375%, 12/1/27 Aa3/A+ 10,000,000 9,651,749
Series C, 7.25%, 11/1/24 Aa3/A+ 3,450,000 3,620,864
Long Island Lighting Co.:
Series A, 7.15%, 12/1/20 Ba1B+ 7,500,000 7,481,332
Series C, 6.90%, 8/1/22 Ba1/BB+/NR 9,200,000 8,901,081
Gas Facilities Revenue Bonds,
Brooklyn Union Gas Co. Project:
Series B, 10.546%, 7/1/26(1) A1/A/A 6,000,000 6,217,487
Series D, MBIA Insured, 7.569%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,439,272
Pollution Control Revenue Bonds,
Orange and Rockland Utilities, Inc. Project,
10.25%, 10/1/14 Baa1/A-/A+ 1,700,000 1,734,000
---------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,566,570
Revenue Refunding Bonds:
New York City Health Facility:
Series A, 7.90%, 11/1/99 Baa/A- 3,500,000 3,843,826
Series A, 8%, 11/1/08 Baa/A- 3,240,000 3,646,785
State University Construction, Escrowed
to Maturity, Prerefunded, Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,052,674
---------------------------------------------------------------------------------------------------
New York State Local Government
Assistance Corp. Revenue Bonds:
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 4,812,962
Prerefunded, Series C, 7%, 4/1/21 Aaa/AAA/AAA 9,455,000 10,513,771
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,022,560
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,177,801
Revenue Refunding Bonds:
Series B, 5.50%, 4/1/21 A/A/A+ 12,800,000 11,091,160
Series C, 5%, 4/1/21 A/A/A+ 15,000,000 11,951,159
</TABLE>
5 Oppenheimer New York Tax-Exempt Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) New York State Medical Care
Facilities Finance Agency:
Revenue Bonds:
Hospital and Nursing Home Mortgage:
Series B, FHA Insured, 6.20%, 8/15/22 NR/AAA $11,470,000 $10,873,581
Series C, FHA Insured, 6.375%, 8/15/29 NR/AAA 10,000,000 9,620,979
Long-Term Health Care,
Series C, CGIC Insured, 6.40%, 11/1/14 Aaa/AAA 3,000,000 3,006,168
Mental Health Services Facilities
Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 6,200,000 6,993,860
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,526,967
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,000,000
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 824,447
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 2,800,000 3,229,346
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,210,954
St. Francis Hospital Project,
Series 1988A, FGIC Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,924,640
Saint Luke's-Roosevelt Hospital Center Mtg.,
Prerefunded, Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,429,542
Revenue Refunding Bonds:
Hospital Mtg., Series A,
FHA Insured, 5.25%, 8/15/14 Aa/AAA 16,940,000 14,594,621
Mental Health Services Facilities
Improvement Project:
Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,635,627
Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,705,236
---------------------------------------------------------------------------------------------------
New York State Mortgage Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,715,000 1,807,568
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,760,000 1,822,880
8.334%, 10/1/24(1) NR/NR 9,000,000 5,678,135
Homeowner Mortgage:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,343,532
Series GG, 7.60%, 10/1/18 Aa/NR 280,000 287,583
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,125,164
---------------------------------------------------------------------------------------------------
New York State Power Authority:
Revenue Bonds, Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,557,287
Revenue Refunding Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,076,168
---------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 8,999,829
---------------------------------------------------------------------------------------------------
New York State Urban Development Corp.,
Correctional Facilities Capital Project:
Revenue Bonds:
Prerefunded, Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,061,483
Prerefunded, Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,202,696
Revenue Refunding Bonds:
5.50%, 1/1/15 Baa1/BBB/A 10,000,000 8,699,229
5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,013,853
---------------------------------------------------------------------------------------------------
Onondaga County, New York Resources Recovery
Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa/NR/A- 14,500,000 14,451,758
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE> 7
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C> <C>
NEW YORK (CONTINUED) Port Authority of New York and New Jersey,
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- $ 8,775,000 $ 9,096,761
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,441,595
Sixty-Third Series, 7.875%, 3/1/24 A1/AA-/AA- 9,000,000 9,502,596
Eighty-Fifth Series, 5.375%, 3/1/28 A1/AA-/AA- 9,000,000 7,555,680
---------------------------------------------------------------------------------------------------
Suffolk County, New York General Obligation
Refunding Bonds, Southwest Sewer District,
Escrowed to Maturity, Prerefunded, Series B,
22.875%, 2/1/95 NR/AAA 2,500,000 2,655,395
---------------------------------------------------------------------------------------------------
Triborough Bridge and Tunnel Authority
of New York General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 Aa/A+ 13,130,000 11,237,468
Series A, 5%, 1/1/15 Aa2/A+ 7,500,000 6,286,778
Series B, 0%, 1/1/09 Aa2/A+ 3,925,000 1,605,800
Series B, 0%, 1/1/16 Aa2/A+ 2,540,000 644,266
Series B, 0%, 1/1/17 Aa2/A+ 13,045,000 3,095,343
Series X, 6%, 1/1/14 Aa2/A+ 14,510,000 13,871,065
Series Y, 5.50%, 1/1/17 Aa2/A+ 5,000,000 4,453,135
------------
585,474,039
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--21.7% Puerto Rico Commonwealth Aqueduct and Sewer
Authority Revenue Bonds, Escrowed to Maturity,
Prerefunded, 10.25%, 7/1/09 Aaa/AAA 500,000 674,951
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,387,472
5.25%, 7/1/18 Baa1/A 20,000,000 16,823,898
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,712,679
YCNS, FSA Insured, 8.021%, 7/1/20(1) Aaa/AAA 11,500,000 9,974,111
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway and
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,643,611
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,026,346
Series W, 7.385%, 7/1/10(1) Baa1/A 9,000,000 7,361,333
---------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,525,828
---------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series O, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,554
Series O, 7.125%, 7/1/14 Baa1/A- 3,235,000 3,434,288
Series P, 7%, 7/1/21 Baa1/A- 6,000,000 6,213,215
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,099,005
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,519,149
Series U, 6%, 7/1/14 Baa1/A- 8,025,000 7,572,718
---------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank and Finance
Agency Single Family Mtg. Revenue Bonds,
Homeownership--Fourth Portfolio,
Prerefunded, FHA Insured, 8.50%, 12/1/18 Aaa/NR 1,580,000 1,904,532
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
RATINGS: MOODY'S/
S&P'S/FITCH'S FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
==========================================================
==========================================================
=============
<S> <C> <C> <C>
U.S. POSSESSIONS (CONTINUED) Puerto Rico Housing Finance Corp. Single
Family Mtg. Revenue Bonds, Prerefunded,
GNMA Collateral, 6.85%, 10/15/24 Aaa/AAA $ 3,250,000 $ 3,328,958
---------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical and Environmental
Pollution Control Revenue Bonds:
American Airlines, Inc. Project,
Series A, 8.75%, 12/1/25 Baa1/A+ 850,000 894,734
Warner Lambert Co. Project, 7.60%, 5/1/14 AA/NR/AAA 3,000,000 3,335,067
---------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority
Guaranteed Public Education and Health Facilities:
Revenue Bonds:
Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA 6,000,000 6,561,065
Prerefunded, Series L, 6.875%, 7/1/21 Aaa/A 6,000,000 6,647,825
Revenue Refunding Bonds:
Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,089,118
Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,523,581
---------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, 7.039%, 1/16/15(1) Aaa/AAA 11,000,000 8,577,271
------------
165,590,309
------------
Total Municipal Bonds and Notes (Cost $779,391,028) 751,064,348
==========================================================
==========================================================
=============
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
City of New York Cultural Resources Revenue
Refunding Bonds, American Museum of Natural
History, Series A, MBIA Insured, 3.35%(2)
(Cost $1,200,000) Aaa/AAA 1,200,000 1,200,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $780,591,028) 98.8%
752,264,348
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 8,911,968
----------- ------------
NET ASSETS 100.0% $761,176,316
===========
============
</TABLE>
(1) Represents the current interest rate for a
variable rate bond. Variable rate bonds known as
"inverse floaters" pay interest at a rate that
varies inversely with short-term interest rates.
As interest rates rise, inverse floaters produce
less current income. Their price may be more
volatile than the price of a comparable fixed-rate
security.
(2) Floating or variable rate obligation
maturing in more than one year. The interest rate,
which is based on specific, or an index of, market
interest rates, is subject to change periodically
and is the effective rate on September 30, 1994.
A demand feature allows the recovery of principal
at any time, or at specified intervals not
exceeding one year, on up to 30 days notice.
See accompanying Notes to Financial Statements.
8 Oppenheimer New York Tax-Exempt Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
ASSETS Investments, at value (cost $780,591,028)--see accompanying statement $752,264,348
--------------------------------------------------------------------------------------------------
Cash 782,054
--------------------------------------------------------------------------------------------------
Receivables:
Interest 13,783,056
Shares of beneficial interest sold 1,123,453
--------------------------------------------------------------------------------------------------
Other 22,259
------------
Total assets 767,975,170
==========================================================
==========================================================
============
LIABILITIES Payables and other liabilities:
Shares of beneficial interest redeemed 3,431,982
Dividends 2,646,422
Distribution and service plan fees--Note 4 487,162
Other 233,288
------------
Total liabilities 6,798,854
==========================================================
==========================================================
============
NET ASSETS $761,176,316
============
==========================================================
==========================================================
============
COMPOSITION OF Paid-in capital $786,272,600
NET ASSETS --------------------------------------------------------------------------------------------------
Undistributed net investment income 1,685,934
--------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 1,544,462
--------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (28,326,680)
------------
Net assets $761,176,316
============
==========================================================
==========================================================
============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $687,233,355 and 57,643,750 shares of beneficial interest outstanding) $11.92
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $12.51
--------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $73,942,961 and 6,199,583 shares of beneficial interest outstanding) $11.93
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer New York Tax-Exempt Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
============
INVESTMENT INCOME Interest $ 52,336,632
==========================================================
==========================================================
============
EXPENSES Management fees--Note 4 4,074,417
--------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 1,780,777
Class B--Note 4 612,760
--------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 487,979
--------------------------------------------------------------------------------------------------
Shareholder reports 133,381
--------------------------------------------------------------------------------------------------
Trustees' fees and expenses 81,122
--------------------------------------------------------------------------------------------------
Custodian fees and expenses 56,356
--------------------------------------------------------------------------------------------------
Legal and auditing fees 48,479
--------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 13,281
Class B 14,549
--------------------------------------------------------------------------------------------------
Other 86,167
------------
Total expenses 7,389,268
==========================================================
==========================================================
============
NET INVESTMENT INCOME 44,947,364
==========================================================
==========================================================
============
REALIZED AND UNREALIZED Net realized gain on investments 1,578,448
GAIN (LOSS) ON INVESTMENTS --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878)
-----------
Net realized and unrealized loss on investments (91,361,430)
==========================================================
==========================================================
============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(46,414,066)
============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
============
<S> <C> <C> <C>
OPERATIONS Net investment income $ 44,947,364 $ 37,419,311
--------------------------------------------------------------------------------------------------
Net realized gain on investments 1,578,448 10,840,246
--------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (92,939,878) 42,115,874
------------ ------------
Net increase (decrease) in net assets resulting from operations (46,414,066) 90,375,431
==========================================================
==========================================================
============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.7155 and $.75 per share, respectively) (41,273,404) (37,617,756)
SHAREHOLDERS Class B ($.6033 and $.37 per share, respectively) (2,926,006) (558,098)
--------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) (464,748) --
Class B ($.0201 per share) (32,947) --
--------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.0260 and $.078 per share, respectively) (1,480,818) (3,645,107)
Class B ($.0260 per share) (97,630) --
--------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) (6,524,436) --
Class B ($.1144 per share) (430,153) --
==========================================================
==========================================================
============
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 22,278,985 179,235,850
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 40,649,454 39,841,699
==========================================================
==========================================================
============
NET ASSETS Total increase (decrease) (36,715,769) 267,632,019
--------------------------------------------------------------------------------------------------
Beginning of year 797,892,085 530,260,066
----------- -----------
End of year (including undistributed net investment
income of $1,685,934 and $1,237,047, respectively) $761,176,316 $797,892,085
============
============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer New York Tax-Exempt Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990 1989 1988
==========================================================
==========================================================
============
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $13.50 $12.59 $12.21 $11.61 $11.87 $11.91 $11.60
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .74 .73 .79 .81 .83 .84(2) .88(2)
Net realized and unrealized
gain (loss) on investments (1.46) 1.01 .47 .64 (.25) .01 .45
-------- --------- -------- ------- -------- ------- ------
Total income (loss) from
investment operations (.72) 1.74 1.26 1.45 .58 .85 1.33
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.71) (.75) (.75) (.81) (.83) (.83) (.94)
Dividends in excess
of net investment income (.01) -- -- -- -- -- --
Distributions from net
realized gain on investments (.03) (.08) (.13) (.04) (.01) (.06) (.08)
Distributions in excess of net
realized gain on investments (.11) -- -- -- -- -- --
-------- --------- -------- ------- -------- ------- ------
Total dividends and
distributions to shareholders (.86) (.83) (.88) (.85) (.84) (.89) (1.02)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.92 $13.50 $12.59 $12.21 $11.61 $11.87 $11.91
======== ========= ======== =======
======== ======= ======
==========================================================
==========================================================
============
Total Return, at Net Asset Value(3) (5.55)% 14.33% 10.72% 12.93% 4.95% 6.91%
11.48%
==========================================================
==========================================================
============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $687,233 $756,934 $530,260 $349,480 $250,012 $197,321 $116,931
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $738,747 $652,327 $436,876 $292,134 $227,504 $156,572 $95,996
- --------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 57,644 56,087 42,119 28,617 21,533 16,618 9,817
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.68% 5.66% 6.33% 6.81% 6.97% 7.07% 7.48%
Expenses .86% .91% .96% .96% .99% .98%(2) .90%(2)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 9.4% 39.1% 30.5% 8.9% 13.3% 11.8% 11.7%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- -----------------
TEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1987 1986 1985 1994 1993(1)
==========================================================
========================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.51 $10.98 $10.32 $13.50 $13.07
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .90(2) .86 .76 .64 .36
Net realized and unrealized
gain (loss) on investments (.79) 1.62 .67 (1.45) .44
-------- -------- ------- -------- -------
Total income (loss) from
investment operations .11 2.48 1.43 (.81) .80
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.88) (.86) (.77) (.60) (.37)
Dividends in excess
of net investment income -- -- -- (.02) --
Distributions from net
realized gain on investments (.14) (.09) -- (.03) --
Distributions in excess of net
realized gain on investments -- -- -- (.11) --
------- -------- -------- ------- --------
Total dividends and
distributions to shareholders (1.02) (.95) (.77) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.60 $12.51 $10.98 $11.93 $13.50
======= ======== ======== =======
========
==========================================================
========================================================
Total Return, at Net Asset Value(3) .29% 22.73% 13.37% (6.22)% 6.56%
- ------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $79,479 $50,810 $28,166 $73,943 $40,958
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $65,102 $42,907 $15,240 $61,008 $20,454
- ------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 6,851 4,061 2,565 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.33% 7.10% 8.05%(4) 4.88% 4.45%(4)
Expenses .67%(2) .86% 1.00%(4) 1.65% 1.73%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 22.9% 29.7% 126.3% 9.4% 39.1%
</TABLE>
(1) For the period from March 1, 1993 (inception of offering) to September 30,
1993.
(2) Net investment income would have been $.83, $.87 and $.88 absent the
voluntary assumption of expenses, resulting in an expense ratio of 1.00%,
1.02% and .85% for 1989, 1988 and 1987, respectively.
(3) Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
(4) Annualized.
(5) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the year ended September 30, 1994 were $145,939,745 and $73,796,519,
respectively.
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
1. SIGNIFICANT Oppenheimer New York Tax-Exempt Fund (the Fund) is registered under the Investment Company
Act of
ACCOUNTING POLICIES 1940, as amended, as a diversified, open-end management investment company. The Fund's
investment
advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class
B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
------------------------------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time) on each
trading
day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of
Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service
are valued by averaging the mean between the bid and asked prices obtained from two active market
makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less
are valued at cost (or last determined market value) adjusted for amortization to maturity of any
premium or discount. Securities for which market quotes are not readily available are valued under
procedures established by the Board of Trustees to determine fair value in good faith.
------------------------------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other than
those attributable
to a specific class) and gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses directly attributable
to a specific class are charged against the operations of that class.
------------------------------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the Internal
Revenue
Code applicable to regulated investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss carryovers, to shareholders.
Therefore, no federal income tax provision is required.
------------------------------------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement plan for the Fund's
independent trustees. Benefits are based on years of service and fees paid to each trustee during the
years of service. During the year ended September 30, 1994, a provision of $23,148 was made for the
Fund's projected benefit obligations, resulting in an accumulated liability of $127,766. No payments
have been made under the plan.
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately for Class
A and
Class B shares from net investment income each day the New York Stock Exchange is open for business
and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
------------------------------------------------------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective October 1,
1993, the Fund adopted
Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund
changed the classification of distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts have been reclassified to reflect a decrease
in
paid-in capital of $2,595,004, an increase in undistributed net investment income of $287,909, and a
decrease in undistributed capital loss on investments of $2,307,095. During the year ended September
30, 1994, in accordance with Statement of Position 93-2, undistributed net investment income was
decreased by $89,281 and undistributed capital gain was increased by $89,281.
------------------------------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date). Original issue discount on securities purchased is amortized over the life of the
respective securities, in accordance with federal income tax requirements. Realized gains and
losses on investments and unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax purposes. For bonds acquired after
April 30, 1993, accrued market discount is recognized at maturity or disposition as taxable ordinary
income. Taxable ordinary income is realized to the extent of the lesser of gain or accrued market
discount.
</TABLE>
13 Oppenheimer New York Tax-Exempt Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
================
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest of each
BENEFICIAL INTEREST class. Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 8,954,607 $115,070,127 18,532,060 $238,699,747
Dividends and distributions reinvested 2,804,397 35,919,371 2,235,515 28,846,483
Redeemed (10,201,903) (128,710,513) (6,800,016) (88,310,380)
----------- ------------ ---------- ------------
Net increase 1,557,101 $ 22,278,985 13,967,559 $179,235,850
-----------------------------------------------------------------------------------------------------
Class B:
Sold 3,489,946 $ 44,671,139 3,044,196 $ 39,986,285
Dividends and distributions reinvested 183,542 2,334,544 22,045 292,115
Redeemed (507,286) (6,356,229) (32,860) (436,701)
----------- ------------ ---------- ------------
Net increase 3,166,202 $ 40,649,454 3,033,381 $ 39,841,699
=========== ============
========== ============
</TABLE>
(1) For the year ended September 30, 1993 for
Class A shares and for the period from March 1,
1993 (inception of offering) to September 30,
1993 for Class B shares.
<TABLE>
<S> <C>
==========================================================
==========================================================
================
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments of $28,326,680 was
composed of gross
LOSSES ON INVESTMENTS appreciation of $18,530,958, and gross depreciation of $46,857,638.
==========================================================
==========================================================
================
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
agreement with the
AND OTHER TRANSACTIONS Fund which provides for an annual fee of .60% on the first $200 million of net assets,
.55% on the
WITH AFFILIATES next $100 million, .50% on the next $200 million, .45% on the next $250 million, .40% on
the next
$250 million and .35% on net assets in excess of $1 billion.
For the year ended September 30, 1994, commissions (sales charges paid by investors) on
sales of Class A shares totaled $2,933,373, of which $551,881 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended September 30, 1994, OFDI received contingent deferred sales
charges of $149,477 upon redemption of Class B shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total
costs of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the personal service and
maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers,
banks and other financial institutions. In addition, Class B shares are subject to an asset-based
sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its
own resources at the time of sale and associated financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue payment of
the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior
to termination or discontinuance of the plan. During the year ended September 30, 1994, OFDI paid
$26,802 and $902, respectively to an affiliated broker/dealer as reimbursement for Class A and
Class B personal service and maintenance expenses and retained $582,434 as reimbursement for Class
B
sales commissions and service fee advances, as well as financing costs.
</TABLE>
14 Oppenheimer New York Tax-Exempt Fund
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer New York Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994,
and the related statement of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the nine-year
period then ended and the ten-month period ended September 30, 1985. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1994, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer New York Tax-Exempt Fund as of September 30, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the nine-year period then ended
and the ten-month period ended September 30, 1985, in conformity with generally
accepted accounting principles.
October 21, 1994
15 Oppenheimer New York Tax-Exempt Fund
<PAGE> 16
FEDERAL INCOME TAX INFORMATION (Unaudited)
In early 1995, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1994.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
A capital gain distribution of $.1404 per share was paid on December
10, 1993, of which $.0893 was designated as a "capital gain distribution" for
federal income tax purposes. Whether received in stock or cash, the capital
gain distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains). Both
short-term and long-term capital gain distributions are subject to federal,
state and local taxes.
None of the dividends paid by the Fund during the fiscal year ended
September 30, 1994 are eligible for the corporate dividend-received deduction.
The dividends were derived from interest on municipal bonds and are not subject
to federal income tax. To the extent a shareholder is subject to any state or
local tax laws, some or all of the dividends received may be taxable.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
16 Oppenheimer New York Tax-Exempt Fund
<PAGE> 17
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
<TABLE>
<S> <C>
==========================================================
==========================================================
================
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Leo Cherne, Trustee
Edmund T. Delaney, Trustee
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Donald W. Spiro, Trustee and President
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
==========================================================
==========================================================
================
INVESTMENT ADVISOR Oppenheimer Management Corporation
==========================================================
==========================================================
================
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
==========================================================
==========================================================
================
TRANSFER AND SHAREHOLDER Oppenheimer Shareholder Services
SERVICING AGENT
==========================================================
==========================================================
================
CUSTODIAN OF Citibank, N.A.
PORTFOLIO SECURITIES
==========================================================
==========================================================
================
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
==========================================================
==========================================================
================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
</TABLE>
This is a copy of a report to shareholders of
Oppenheimer New York Tax-Exempt Fund. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer New York Tax-Exempt Fund. For material
information concerning the Fund, see the
Prospectus.
17 Oppenheimer New York Tax-Exempt Fund
<PAGE> 18
OPPENHEIMERFUNDS FAMILY
<TABLE>
<S> <C>
==========================================================
==========================================================
================
OppenheimerFunds offers over 35 funds designed to fit virtually every investment goal. Whether
you're investing for retirement, your children's education or tax-free income, we have the funds to
help you seek your objective.
When you invest with OppenheimerFunds, you can feel comfortable knowing that you are investing
with a respected financial institution with over 30 years of experience in helping people just like
you reach their financial goals. And you're investing with a leader in global, growth stock and
flexible fixed income investments--with over 1.8 million shareholder accounts and more than $26
billion under Oppenheimer's management and that of our affiliates.
As an OppenheimerFunds shareholder, you can easily exchange shares of eligible funds of the same
class by mail or by telephone for a small administrative fee.1 For more information on
OppenheimerFunds, please contact your financial advisor or call us at 1-800-525-7048 for a prospectus.
You may also write us at the address shown on the back cover. As always, please read the prospectus
carefully before you invest.
==========================================================
==========================================================
================
STOCK FUNDS Discovery Fund Global Fund
Global Emerging Growth Fund(2) Oppenheimer Fund
Time Fund Value Stock Fund
Target Fund Gold & Special Minerals Fund
Growth Fund(3)
==========================================================
==========================================================
================
STOCK & BOND FUNDS Main Street Income & Growth Fund Equity Income Fund
Total Return Fund Asset Allocation Fund
Global Growth & Income Fund
==========================================================
==========================================================
================
BOND FUNDS High Yield Fund Strategic Short-Term Income Fund
Champion High Yield Fund Investment Grade Bond Fund
Strategic Income & Growth Fund Mortgage Income Fund
Strategic Income Fund U.S. Government Trust
Strategic Diversified Income Fund Limited-Term Government Fund
Strategic Investment Grade Bond Fund
==========================================================
==========================================================
================
TAX-EXEMPT FUNDS New York Tax-Exempt Fund(4) New Jersey Tax-Exempt Fund(4)
California Tax-Exempt Fund(4) Tax-Free Bond Fund
Pennsylvania Tax-Exempt Fund(4) Insured Tax-Exempt Bond Fund
Florida Tax-Exempt Fund(4) Intermediate Tax-Exempt Bond Fund
==========================================================
==========================================================
================
MONEY MARKET FUNDS Money Market Fund Cash Reserves
</TABLE>
(1) The fee is waived for PhoneLink exchanges
between existing accounts. Exchange privileges are
subject to change or termination.
(2) Formerly Oppenheimer Global Bio-Tech Fund
and Oppenheimer Global Environment Fund.
(3) Formerly Special Fund.
(4) Available only to residents of those states.
OppenheimerFunds are distributed by Oppenheimer
Funds Distributor, Inc., Two World Trade Center,
New York, NY 10048-0203. (C) Copyright 1994
Oppenheimer Management Corporation. All rights
reserved.
18 Oppenheimer New York Tax-Exempt Fund
<PAGE> 19
'Talk to a Customer Service
Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m., and
Saturday from 10:00 a.m.
to 2:00 p.m. ET.
Make account transactions with a
Customer Service Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m. ET.
Get automated information or
make automated transcactions.
24 hours a day, 7 days a week.
Service for the hearing impaired.
Monday through Friday from
8:30 a.m. to 8:00 p.m. ET.
Hear timely and insightful
messages on the economy and
issues that affect your finances.
24 hours a day, 7 days a week.
"Just as OppenheimerFunds offers over 35 different mutual funds designed to
help meet virtually every investment need, Oppenheimer Shareholder Services
offers a variety of services to satisfy your individual needs. Whenever you
require help, we're only a toll-free phone call away.
"For personalized assistance
and account information, call our General
Information number to speak with our
knowledgeable Customer Service
Representatives and get the help you need. [Photograph of
"When you want to make account Barbara Hennigar
transactions, it's easy for you to redeem Chief Executive Officer
shares, exchange shares, or conduct Oppenheimer Shareholder
AccountLink transactions, simply by calling Services.]
our Telephone Transactions number.
"And for added convenience,
OppenheimerFunds' Phone Link, an automated
voice response system is available 24 hours
a day, 7 days a week. PhoneLink gives you access to a variety of fund,
account, and market information. You can even make purchases,
- ------------ exchanges and redemptions using your touch-tone phone. Of
1 9 9 3 course, PhoneLink will always give you the option to
AWARD of speak with a Customer Service Representative during the hours
EXCELLENCE shown to the left.
[LOGO] icsa "When you invest in OppenheimerFunds, you know
- ------------ you'll receive a high level of customer service. The
International International Customer Service Association knows it, too, as
Customer it awarded Oppenheimer Shareholder Services a 1993 Award of
Service Excellence for consistenly demonstrating superior customer
Association service.
"Whatever your needs, we're ready to assist you."
[Logo] OppenheimerFunds(R) -------------------
Oppenheimer Funds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 377
Hackensack, NJ
--------------------
<PAGE>
- ------------------------------------
Oppenheimer New York Tax-Exempt Fund
Semiannual Report March 31, 1995
- ------------------------------------
"We want an
investment
that won't
add to
our income
taxes."
[LOGO] Oppenheimer Funds(R)
<PAGE>
Yield
- ---------------------------------
Standardized Yield
- ---------------------------------
For the 30 Days Ended 3/31/95:(1)
Class A
- ---------------------------------
5.03%
- ---------------------------------
Class B
- ---------------------------------
4.51%
- ---------------------------------
This Fund is for people who need an investment
that's exempt from income taxes.
- --------------------------------------------------------------------------------
How Your Fund Is Managed
- --------------------------------------------------------------------------------
Oppenheimer New York Tax-Exempt Fund invests primarily in a diversified
portfolio of investment grade New York tax-free municipal bonds. As a Fund
shareholder, you receive income that is free from federal, New York State, and
New York City income taxes.(2) Your dividends don't increase your income the way
taxable investments do, so you can keep more of what you earn.
- --------------------------------------------------------------------------------
Performance
- --------------------------------------------------------------------------------
Total returns at net asset value for the 6 months ended 3/31/95 for Class A and
B shares were 5.44% and 4.95%, respectively.(3)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-, 5- and 10-year periods ended 3/31/95 were -0.13%,
6.75% and 8.55%, respectively. For Class B shares, average annual total returns
for the 1-year period ended 3/31/95 and since inception of the Class on 3/1/93
were -0.88% and 0.86%, respectively.(4)
- --------------------------------------------------------------------------------
Outlook
- --------------------------------------------------------------------------------
"The New York municipal market continues to offer substantial value to
investors. New York bonds are delivering attractive returns today, and we
believe that the fundamentals for long-term performance--positive supply and
demand characteristics, an improving state economy, and generally positive
interest rate outlook--are in place."
Robert Patterson, Portfolio Manager
March 31, 1995
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
1. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 3/31/95, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
2. A portion of the distributions paid by the Fund may be subject to federal and
state income taxes. For investors subject to federal and/or state alternative
minimum tax (AMT), the Fund's distributions may increase this tax. Capital gains
distributions, if any, are taxed as capital gains.
3. Based on the change in net asset value per share from 9/30/94 to 3/31/95,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
4. Class A returns show results of hypothetical investments on 4/1/94, 4/1/90
and 4/1/85 (inception of class), after deducting the current maximum initial
sales charge of 4.75%. Class B returns show results of hypothetical investments
on 4/1/94 and 3/1/93 (inception of class) and the deduction of the applicable
contingent deferred sales charge of 5% (1-year) and 3% (since inception). An
explanation of the different total returns is in the Fund's prospectus.
2 Oppenheimer New York Tax-Exempt Fund
<PAGE>
[PHOTOGRAPH]
Donald W. Spiro
President
Oppenheimer New York
Tax-Exempt Fund
[PHOTOGRAPH]
Jon S. Fossel
Chairman and CEO
Oppenheimer
Management
Corporation
Dear OppenheimerFunds Shareholder,
To see how greatly the municipal market has improved since our last
report--issued in one of the worst years for bonds on record--we need look no
further than the market's reaction to the Federal Reserve's most recent
short-term rate increase in February. While the markets had already anticipated
this move, unlike previous rate increases, long-term interest rates continued to
decline and bonds rallied further. While the Fed could possibly raise rates
again, we believe that this positive environment will likely last throughout
1995--an outlook supported by a number of considerations.
Most important, concerns about the impact of inflation on bond prices are
fading fast. The Fed's actions to fend off inflation seem to have had the
desired effect. By most indicators--commodity prices, consumer spending, housing
starts, and many others--economic growth is slowing to a pace that can be
sustained without reigniting inflation or causing a recession.
That's good news for municipal bondholders, and it gets even better. At
current prices, intermediate and long-term municipal bonds are producing some of
the best real, inflation-adjusted returns in years. With the actual inflation
rate running at about 3 percent today, many tax-free investors are clearly being
rewarded.
These positives are enhanced by another development: a marked shift in the
municipal bond market's supply and demand dynamics. While demand for tax-free
securities appears to be returning to its long-term upward trend, municipal bond
supplies are being constrained. Not only have higher interest rates caused the
volume of new tax-free issues to fall from 1994 levels, the high volume of bond
calls, in which issuers redeem bonds before their scheduled maturities, is
producing municipal bond shortages nationwide. This combination of growing
demand and shrinking supply is providing strong support to municipal bond
prices.
As the Fed concludes its tightening efforts--and recent events suggest that
point is near--long-term interest rates will likely stay within their current
range, and could possibly decline further as the economy slows. Of course, there
is a possibility of rising rates later this year if future economic reports
indicate that the economy isn't slowing as quickly as it seems to be today;
however, we believe that over the longer term, the downward trend of rates will
continue.
Of course, no one can predict the future with perfect clarity, especially
when looking ahead involves forecasting interest rates. The bond markets are
always subject to fluctuations and, as we saw in 1994, the shifts sometimes can
be sharp. Overall, however, we believe the outlook for the bond markets today
appears positive.
On the following pages, your portfolio manager discusses the trends in
place today and the outlook for your Fund in more detail. We appreciate your
confidence in OppenheimerFunds, and will continue to do our best to help you
meet your long-term investment objectives.
Donald W. Spiro Jon S. Fossel
April 24, 1995
3 Oppenheimer New York Tax-Exempt Fund
<PAGE>
Q + A [PHOTOGRAPH]-Robert Patterson, [PHOTOGRAPH]-The trading desk
Portfolio Manager
An interview with your Fund's manager.
Q Is the
municipal
market
improving?
Much has happened in the New York municipal market over the past year. What were
the most important factors affecting the Fund's performance?
Many factors combined to make the past year one of the most challenging that
tax-free investors have seen in decades, but one factor stands out:
the Federal Reserve's efforts to fend off inflation, which drove interest rates
up and bond prices down. The Fed's actions affected all municipal bonds and bond
funds, and this Fund was no exception.
Since November of 1994, the bond market has staged a rally, as it became
clear that the Fed's actions were working. With inflation fears largely out of
the way, the general tone of the municipal market is becoming more positive
every day, and recent Fund returns reflect it.
Did those developments cause you to change your investment strategy?
Not in any significant way. Our objective is to provide shareholders with a
high level of tax-free income from a portfolio of New York municipal bonds. To
do that, we presently keep the Fund's duration--a technical measure of a
portfolio's sensitivity to changing interest rates--slightly longer than those
of many other funds.
The longer-term results should benefit shareholders, as investors recognize
the fundamental positives--low inflation, reduced supply and increasing demand,
and improving issuer credit quality--at work in the New York municipal market
today.
Of course, within this strategic framework, we made some adjustments to
position the portfolio somewhat more defensively.(1)
What adjustments did you make?
We reduced the Fund's average maturity slightly, focusing on bonds in the
20-year maturity range. All other things being equal, the shorter a bond's
maturity, the less sensitive it is to changing interest rates. We selectively
reduced our exposure to electric utilities, particularly those with less than
competitive retail rates in an increasingly tough regulatory environment.
[PHOTOGRAPH]-Len Darling, Executive VP, Director of Fixed Income Investments,
with Jon Fossel, CEO and Chairman, Oppenheimer Management Corporation
1. The Fund's portfolio is subject to change.
4 Oppenheimer New York Tax-Exempt Fund
<PAGE>
A The
general
tone of the
municipal
market is
becoming
more
positive
every day.
What other kinds of bonds are you focusing on today?
We're continuing to find good values in New York higher education issues,
supporting public colleges and universities, including Fordham and NYU, as well
as in the transportation and environmental areas. We added to our position in
Triborough Bridge and Tunnel Authority bonds, as well as in New York City
Municipal Water Finance Authority.
Some analysts are predicting that a record amount of municipal bonds will be
called in 1995. How are you managing calls?
Bond calls, which allow issuers to redeem bonds before their scheduled maturity
and replace them with lower-yielding issuers, are a fact of life in the
municipal market. Because interest rates are currently much lower than they were
in the mid-1980s, when many of the municipal bonds outstanding today were
issued, it's possible that some bonds in the portfolio will be called.
We manage this by staying on top of the portfolio at all times, trying to
anticipate calls, and by seeking to buy bonds that offer both attractive yields
and significant call protection.
What's your outlook for the New York market going forward?
Our long-term outlook is very constructive. The positives at work on the
national level--low inflation, reduced municipal bond supply, and rising demand
for tax-free securities driven by rising tax burdens--are, if anything, even
stronger here.
Although the New York economy faces its share of challenges--particularly
in New York City--it remains one of the nation's largest state economies and
its second-largest issuer of municipal securities.
This combination of shrinking supply and mounting demand should provide
solid support for New York municipal bond prices. |_|
[PHOTOGRAPH]-Robert Patterson
5 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
==========================================================
==========================================================
================
Municipal Bonds and Notes--98.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York--78.0% City of New York General Obligation Bonds:
Inverse Floater, 6.395%, 8/1/08(1) Baa1/A- $ 9,250,000 $ 7,839,032
Inverse Floater, 7.194%, 8/1/13(1) Baa1/A- 5,000,000 4,368,629
Inverse Floater, 7.195%, 8/1/14(1) Baa1/A- 8,150,000 7,102,871
Prerefunded, Series F, 8.25%, 11/15/17 Aaa/A- 7,820,000 9,341,294
Series A, 7.75%, 8/15/16 Baa1/A- 2,500,000 2,693,730
Series B, 8.25%, 6/1/07 Baa1/A- 1,750,000 1,990,266
Series B, FSA Insured, Inverse Floater,
5.892%, 10/1/07(1) Aaa/AAA 7,500,000 7,441,522
Series F, 8.25%, 11/15/17 Baa1/A- 680,000 752,134
----------------------------------------------------------------------------------------------------------------
City of New York Health & Hospital Corp. Revenue
Refunding Bonds, Series A, AMBAC Insured,
Inverse Floater, 6.94%, 2/15/23(1) Aaa/AAA/AAA 8,300,000 7,140,074
----------------------------------------------------------------------------------------------------------------
City of New York Housing Development Corp
Multifamily Housing Revenue Bonds:
1985 Fst. Series, FHA Insured, 9.875%, 10/1/17 Aa/AA 500,000 518,943
Glenn Garden Project, 6.50%, 1/15/18 NR/NR 3,022,809 2,848,224
Keith Plaza Project, 6.50%, 2/15/18 NR/NR 1,996,592 1,876,849
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Civil Facility Revenue Bonds, USTA National Tennis
Center Project, FSA Insured, 6.375%, 11/15/14 Aaa/AAA 1,500,000 1,558,572
----------------------------------------------------------------------------------------------------------------
City of New York Industrial Development Agency
Revenue Bonds, Terminal One Group Assn.:
6%, 1/1/15 A/A/A- 5,000,000 4,842,225
6.125%, 1/1/24 A/A/A- 3,000,000 2,897,478
----------------------------------------------------------------------------------------------------------------
City of New York Municipal Water Finance
Authority Water & Sewer System Revenue Bonds:
Prerefunded, Series A, MBIA Insured, 7.25%, 6/15/15 Aaa/AAA 7,000,000 7,825,258
Prerefunded, Series B, 6.375%, 6/15/22 A/A-/A 2,650,000 2,887,400
Prerefunded, Series C, 7.75%, 6/15/20 Aaa/A- 17,250,000 19,982,794
Series B, 6.375%, 6/15/22 A/A-/A 6,100,000 6,226,916
Series B, AMBAC Insured, 5.375%, 6/15/19 Aaa/AAA/AAA 5,000,000
4,582,169
----------------------------------------------------------------------------------------------------------------
Dormitory Authority of the State of New York:
Revenue Bonds:
City University System, Series A, 5.75%, 7/1/18 Baa1/BBB 2,500,000 2,335,952
City University System, Series C, 6%, 7/1/16 Baa1/BBB 9,000,000 8,674,893
City University System, Series V, 5.60%, 7/1/10 Baa1/BBB 10,880,000 10,230,670
Department of Health, Prerefunded, 7.70%, 7/1/20 Aaa/BBB 2,750,000 3,143,626
Judicial Facilities Lease, Escrowed to Maturity,
MBIA-IBC Insured, 7.375%, 7/1/16 Aaa/AAA 2,300,000 2,615,123
Pooled Capital Program, Prerefunded, FGIC
Insured, 7.80%, 12/1/05 Aaa/AAA/AAA 8,145,000 8,963,425
Rockefeller University System, MBIA Insured,
7.375%, 7/1/14 Aaa/AAA 4,000,000 4,305,035
Revenue Refunding Bonds:
City University System, Second Series A, 5.75%, 7/1/18 Baa1/BBB 6,750,000 6,330,521
City University System, Series B, 6%, 7/1/14 Baa1/BBB 10,875,000 10,559,951
Fordham University System, FGIC Insured, 5.75%, 7/1/15 Aaa/AAA/AAA 9,100,000
8,886,467
New York University, Series A, MBIA Insured, 5%, 7/1/09 Aaa/AAA 9,000,000
8,266,491
</TABLE>
6 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State University Educational Facilities System:
(continued) Prerefunded, Series B, 7.25%, 5/15/15 Aaa/BBB+ $ 15,230,000 $ 17,063,189
Prerefunded, Series B, 7.25%, 5/15/15 NR/AAA 1,735,000 1,943,837
Series A, 5.25%, 5/15/15 Baa1/BBB+ 23,090,000 20,344,550
Series A, 5.25%, 5/15/21 Baa1/BBB+ 5,010,000 4,311,285
Series B, 7%, 5/15/16 Baa1/BBB+ 9,020,000 9,397,974
----------------------------------------------------------------------------------------------------------------
Grand Central District Management Assn., Inc.,
New York Business District Capital Improvement:
Revenue Bonds, Prerefunded, 6.50%, 1/1/22 Aaa/AAA 2,000,000 2,197,338
Revenue Refunding Bonds, 5.125%, 1/1/14 A1/A 1,000,000 894,401
Refunding Bonds, 5.25%, 1/1/22 A1/A 2,500,000 2,200,342
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Commuter Facilities, Series A,
MBIA Insured, 6.125%, 7/1/12 Aaa/AAA 4,090,000 4,159,472
----------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority of New York
Revenue Bonds, Transportation Facilities Service
Contracts, 6%, 7/1/21 Baa1/BBB 12,950,000 12,341,311
----------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development
Authority Electric Facilities Revenue Bonds:
Long Island Lighting Co., Series A, 7.15%, 12/1/20 Ba1/BB+ 7,500,000 7,112,197
Long Island Lighting Co., Series C, 6.90%, 8/1/22 Ba1/BB+ 9,200,000 8,451,781
Brooklyn Union Gas Co. Project, Series B, Inverse
Floater, 9.271%, 7/1/26(1) A1/A/A 6,000,000 6,330,294
Brooklyn Union Gas Co. Project, Series D, MBIA
Insured, Inverse Floater, 7.126%, 7/8/26(1) Aaa/AAA/A 2,000,000 1,616,870
----------------------------------------------------------------------------------------------------------------
New York State Environmental Facilities Corp
Pollution Control Revenue Bonds, State Water
Revolving Fund--New York City Municipal Water,
5.875%, 6/15/14 Aa/A-/AA 14,050,000 13,826,196
----------------------------------------------------------------------------------------------------------------
New York State Housing Finance Agency:
Revenue Bonds, Service Contracts, Series D,
5.375%, 3/15/23 Baa1/BBB 9,000,000 7,379,694
Revenue Refunding Bonds, New York City Health
Facility, Series A, 7.90%, 11/1/99 Baa/BBB+ 3,500,000 3,825,643
Revenue Refunding Bonds, New York City Health
Facility, Series A, 8%, 11/1/08 Baa/BBB+ 3,240,000 3,596,458
Revenue Refunding Bonds, State University
Construction, Escrowed to Maturity, Prerefunded,
Series A, 7.90%, 11/1/06 Aaa/AAA 1,750,000 2,058,364
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Bonds:
Prerefunded, Series C, 7%, 4/1/21(2) Aaa/AAA/AAA 9,455,000 10,586,403
Prerefunded, Series D, 6.75%, 4/1/21 Aaa/AAA/AAA 4,700,000 5,244,358
Series A, 5.375%, 4/1/14 A/A/A+ 5,500,000 5,069,366
Series C, 5.50%, 4/1/22 A/A/A+ 16,175,000 14,818,401
----------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corp
Revenue Refunding Bonds, Series B, 5.50%, 4/1/21 A/A/A+ 13,000,000 11,894,778
</TABLE>
7 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York New York State Local Government Assistance Corp
(continued) Revenue Refunding Bonds, Series C, 5%, 4/1/21 A/A/A+ $ 15,000,000 $
12,707,325
----------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency:
Revenue Bonds:
Long-Term Health Care, Series C, CGIC Insured,
6.40%, 11/1/14 Aaa/AAA 3,000,000 3,049,317
Mental Health Services Facilities Improvement Project:
Prerefunded, Series A, 8.875%, 8/15/07 Aaa/AAA 3,000,000 3,337,656
Prerefunded, Series B, 7.875%, 8/15/20 Aaa/AAA 4,235,000 4,885,572
Series A, 7.70%, 2/15/18 Baa1/BBB+ 765,000 813,136
Series A, 8.875%, 8/15/07 Baa1/BBB+ 6,800,000 7,463,517
Series A, FGIC Insured, 6.375%, 8/15/17 Aaa/AAA/AAA 5,000,000 5,080,734
Series B, 7.875%, 8/15/20 Baa1/BBB+ 2,020,000 2,239,172
Saint Luke's Hospital Center Mtg., Prerefunded,
Series B, FHA Insured, 7.45%, 2/15/29 Aaa/AAA 7,500,000 8,434,432
St. Francis Hospital Project, Series 1988A, FGIC
Insured, 7.625%, 11/1/21 Aaa/AAA/AAA 2,690,000 2,930,155
Revenue Refunding Bonds:
Hospital Insured Mtg., Series A, FHA Insured,
5.25%, 8/15/14 Aa/AAA 16,940,000 15,297,428
Mental Health Services Facilities Improvement
Project, Series F, 5.375%, 2/15/14 Baa1/BBB+ 6,600,000 5,821,306
Mental Health Services Facilities Improvement
Project, Series F, FSA Insured, 5.25%, 2/15/21 Aaa/AAA 4,400,000 3,884,940
----------------------------------------------------------------------------------------------------------------
New York State Mtg. Agency Revenue Bonds:
Eighth Series C, Verex Pool Insured, 8.40%, 10/1/17 Aa/NR 1,700,000 1,788,743
Homeowner Mtg.:
Series 1, 7.95%, 10/1/21 Aa/NR 2,270,000 2,356,578
Series GG, 7.60%, 10/1/18 Aa/NR 175,000 179,868
Series UU, FHA Insured, 7.75%, 10/1/23 Aa/NR 2,000,000 2,134,800
Inverse Floater, 5.342%, 10/1/24(1) NR/NR 9,000,000 6,131,816
Ninth Series B, Verex Pool Insured, 8.30%, 10/1/17 Aa/NR 1,720,000 1,785,372
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Bonds,
Series Y, 6.50%, 1/1/11 Aa/AA- 2,500,000 2,602,970
----------------------------------------------------------------------------------------------------------------
New York State Power Authority Revenue Refunding
Bonds, Series V, 8%, 1/1/17 Aa/AA- 5,580,000 6,067,279
----------------------------------------------------------------------------------------------------------------
New York State Thruway Authority Revenue Bonds,
Service Contract, Series A, 5.75%, 1/1/19 A1/A 10,000,000 9,611,290
----------------------------------------------------------------------------------------------------------------
New York State Urban Development Corp.:
Revenue Bonds:
Correctional Facilities Capital Project, Prerefunded,
Series G, 7%, 1/1/17 Aaa/NR 2,000,000 2,206,750
Correctional Facilities Capital Project, Prerefunded,
Series G, 7.25%, 1/1/14 Aaa/NR 3,650,000 4,065,552
Revenue Refunding Bonds:
Correctional Facilities Project, 5.50%, 1/1/15 Baa1/BBB/A 10,000,000 9,018,610
Correctional Facilities Project, 5.50%, 1/1/18 Baa1/BBB/A 17,490,000 15,634,484
</TABLE>
8 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
----------------------------------------------------------------------------------------------------------------
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Onondaga County, New York Resources Recovery
(continued) Agency Revenue Bonds, Resources Recovery
Facilities Project, 7%, 5/1/15 Baa2/NR/A- $ 15,600,000 $ 15,221,573
----------------------------------------------------------------------------------------------------------------
Port Authority of New York & New Jersey
Consolidated Revenue Bonds:
Sixty Series, 8.25%, 4/1/23 A1/AA-/AA- 8,775,000 8,961,301
Sixty-Second Series, 8%, 12/1/23 A1/AA-/AA- 1,370,000 1,432,515
----------------------------------------------------------------------------------------------------------------
Triborough Bridge & Tunnel Authority of New York
General Purpose Revenue Bonds:
Series A, 5%, 1/1/12 A1/AA-/AA- 9,000,000 9,456,758
Series A, 5%, 1/1/12 Aa/A+ 15,755,000 14,288,885
Series A, 5%, 1/1/15 Aa/A+ 7,500,000 6,693,989
Series B, Zero Coupon, 1/1/09 Aa/A+ 3,925,000 1,766,830
Series B, Zero Coupon, 1/1/16 Aa/A+ 2,540,000 731,502
Series B, Zero Coupon, 1/1/17 Aa/A+ 13,045,000 3,530,667
Series X, 6%, 1/1/14 Aa/A+ 14,510,000 14,556,243
Series Y, 5.50%, 1/1/17 Aa/A+ 15,000,000 14,111,339
------------
585,973,440
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Puerto Rico Commonwealth Aqueduct & Sewer
Possessions--20.8% Authority Revenue Bonds, Escrowed to Maturity,
10.25%, 7/1/09 Aaa/AAA 500,000 674,690
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation
Refunding Bonds:
5.25%, 7/1/18 Baa1/A 20,000,000 17,741,840
Prerefunded, 7.70%, 7/1/20 NR/AAA 5,000,000 5,715,685
Series A, 6%, 7/1/14 Baa1/A 12,000,000 11,810,434
YCNS, FSA Insured, Inverse Floater, 7.432%, 7/1/20(1) Aaa/AAA 11,500,000
10,661,603
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bonds:
Prerefunded, Series S, 6.50%, 7/1/22 NR/AAA 13,500,000 14,850,418
Prerefunded, Series T, 6.50%, 7/1/22 NR/AAA 2,790,000 3,069,086
Series W, Inverse Floater, 6.406%, 7/1/10(1) Baa1/A 9,000,000 7,920,665
----------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Infrastructure
Financing Authority Special Tax Revenue Bonds,
Series A, 7.75%, 7/1/08 Baa1/BBB+ 6,000,000 6,558,612
----------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority:
Revenue Bonds:
Prerefunded, Series 0, 7.125%, 7/1/14 Baa1/AAA 6,145,000 6,759,457
Series T, 6%, 7/1/16 Baa1/A- 7,500,000 7,306,042
Revenue Refunding Bonds:
Series N, 5%, 7/1/12 Baa1/A- 6,545,000 5,738,348
Series U, 6%, 7/1/14 Baa1/A- 7,025,000 6,898,487
----------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank & Finance Agency Single
Family Mtg. Revenue Bonds, Homeownership--
Fourth Portfolio, Prerefunded, FHA Insured,
8.50%, 12/1/18 Aaa/NR 1,580,000 1,919,510
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, American
Airlines, Inc. Project, Series A, 8.75%, 12/1/25 Baa1/BB+ 850,000 886,018
----------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical & Environmental
Pollution Control Revenue Bonds, Warner Lambert
Co. Project, 7.60%, 5/1/14 Aaa/NR 3,000,000 3,261,621
</TABLE>
9 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Ratings: Moody's/ Face Market Value
S&P's/Fitch's Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Possessions Puerto Rico Public Buildings Authority Guaranteed
(continued) Public Education & Health Facilities:
Revenue Bonds, Prerefunded, Series J, 7.25%, 7/1/17 Aaa/AAA $ 6,000,000 $ 6,531,053
Revenue Bonds, Prerefunded, Series L, 6.875%, 7/1/21 Aaa/AAA 5,400,000 6,060,355
Revenue Refunding Bonds, Series M, 5.75%, 7/1/15 Baa1/A 11,500,000 10,893,788
----------------------------------------------------------------------------------------------------------------
Puerto Rico Public Buildings Authority Revenue
Guaranteed Refunding Bonds, Series L, 5.75%, 7/1/16 Baa1/A 12,100,000 11,474,053
----------------------------------------------------------------------------------------------------------------
Puerto Rico Telephone Authority Revenue Bonds,
MBIA Insured, Inverse Floater, 6.51%, 1/16/15(1) Aaa/AAA 11,000,000 9,611,238
------------
156,343,003
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $746,701,277) 98.8% 742,316,443
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.2 9,180,247
------ ------------
Net Assets 100.0% $751,496,690
====== ============
1. Represents the current interest rate for a variable rate bond. Variable rate bonds known as ``inverse
floaters'' pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price may be more volatile than the price of a comparable
fixed-rate security. The multiplier for these inverse floaters is 1. Inverse floaters amount to $76,164,614 or
10.1% of the Fund's net assets, at March 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
2. Securities with an aggregate market value of $1,959,408 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts, as follows:
Type of Contract Number of Contracts Face Amount
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 6/95 600 $60,000,000
The market value of the open contracts was $62,343,750 at March 31, 1995, with a net unrealized gain of
$1,227,343.
</TABLE>
<TABLE>
<CAPTION>
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
Industry Market Value Percent
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation $135,221,975 18.2%
Education 123,672,603 16.7
General Obligation Bonds 122,418,290 16.4
Utilities 116,210,817 15.6
Lease/Rental 86,570,544 11.7
Special Tax Bonds 72,171,324 9.7
Hospitals 36,851,406 5.0
Pollution Control 23,511,142 3.2
Housing 21,540,703 2.9
Industrial Development 4,147,639 0.6
------------ -----
$742,316,443 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Assets Investments, at value (cost $746,701,277)--see accompanying statement $742,316,443
----------------------------------------------------------------------------------------------------------------
Cash 101,953
----------------------------------------------------------------------------------------------------------------
Receivables:
Interest 13,075,610
Shares of beneficial interest sold 1,066,221
----------------------------------------------------------------------------------------------------------------
Other 37,032
------------
Total assets 756,597,259
----------------------------------------------------------------------------------------------------------------
Liabilities Payables and other liabilities:
Dividends 2,581,635
Shares of beneficial interest redeemed 1,850,754
Distribution and service plan fees--Note 5 434,000
Transfer and shareholder servicing agent fees--Note 5 28,711
Trustees' fees 5,384
Other 200,085
------------
Total liabilities 5,100,569
==========================================================
==========================================================
================
Net Assets $751,496,690
============
==========================================================
==========================================================
================
Composition of Paid-in capital $761,699,818
Net Assets ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,195,467
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (5,786,418)
----------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (5,612,177)
----------------------------------------------------------------------------------------------------------------
Net assets $751,496,690
============
==========================================================
==========================================================
================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on
net assets of $668,466,673 and 54,841,749 shares of beneficial interest outstanding) $ 12.19
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $ 12.80
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $83,030,017 and 6,808,905 shares of beneficial interest outstanding) $ 12.19
</TABLE>
See accompanying Notes to Financial Statements
11 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
Investment Income Interest $24,891,143
==========================================================
==========================================================
================
Expenses Management fees--Note 5 1,872,377
----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 744,433
Class B--Note 5 375,961
----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 298,722
----------------------------------------------------------------------------------------------------------------
Shareholder reports 81,829
----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 40,853
----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 35,359
----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 22,638
----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 5,777
Class B 2,719
----------------------------------------------------------------------------------------------------------------
Other 39,203
-----------
Total expenses 3,519,871
==========================================================
==========================================================
================
Net Investment Income 21,371,272
==========================================================
==========================================================
================
Realized and Net realized loss on investments (7,330,880)
Unrealized ----------------------------------------------------------------------------------------------------------------
Gain (Loss) Net change in unrealized appreciation or depreciation on investments 22,714,503
on Investments -----------
Net realized and unrealized gain on investments 15,383,623
==========================================================
==========================================================
================
Net Increase in Net Assets Resulting From Operations $ 36,754,895
============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31, 1995 Year Ended
(Unaudited) Sept. 30, 1994
==========================================================
==========================================================
================
<S> <C> <C>
Operations Net investment income $ 21,371,272 $ 44,947,364
----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (7,330,880) 1,578,448
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 22,714,503 (92,939,878)
------------- -------------
Net increase (decrease) in net assets resulting from operations 36,754,895 (46,414,066)
==========================================================
==========================================================
================
Dividends and Dividends from net investment income:
Distributions to Class A ($.3576 and $.7155 per share, respectively) (19,849,704) (41,273,404)
Shareholders Class B ($.3135 and $.6033 per share, respectively) (2,012,035) (2,926,006)
----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0081 per share) -- (464,748)
Class B ($.0201 per share) -- (32,947)
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.026 per share) -- (1,480,818)
Class B ($.026 per share) -- (97,630)
----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments:
Class A ($.1144 per share) -- (6,524,436)
Class B ($.1144 per share) -- (430,153)
==========================================================
==========================================================
================
Beneficial Net increase (decrease) in net assets resulting from
Interest Class A beneficial interest transactions--Note 2 (31,840,644) 22,278,985
Transactions ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class B beneficial interest transactions--Note 2 7,267,862 40,649,454
==========================================================
==========================================================
================
Net Assets Total decrease (9,679,626) (36,715,769)
----------------------------------------------------------------------------------------------------------------
Beginning of period 761,176,316 797,892,085
------------ ------------
End of period (including undistributed net investment income
of $1,195,467 and $1,685,934, respectively) $ 751,496,690 $ 761,176,316
=============
=============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Financial Highlights
----------------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------------- --------------------------------
Six Months Six Months
Ended Ended Year Ended
March 31, 1995 Year Ended September 30, March 31, 1995 Sept. 30,
(Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994 1993(1)
==========================================================
==========================================================
================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 11.87 $ 11.93 $ 13.50 $ 13.07
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .74 .73 .79 .81 .83 .31 .64 .36
Net realized and unrealized gain
(loss) on investments .27 (1.46) 1.01 .47 .64 (.25) .27 (1.45) .44
------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .63 (.72) 1.74 1.26 1.45 .58 .58 (.81) .80
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.36) (.71) (.75) (.75) (.81) (.83) (.32) (.60) (.37)
Dividends in excess of net
investment income -- (.01) -- -- -- -- -- (.02) --
Distributions from net realized
gain on investments -- (.03) (.08) (.13) (.04) (.01) -- (.03) --
Distributions in excess of net
realized gain on investments -- (.11) -- -- -- -- -- (.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.36) (.86) (.83) (.88) (.85) (.84) (.32) (.76) (.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.19 $ 11.92 $ 13.50 $ 12.59 $ 12.21 $ 11.61 $ 12.19 $ 11.93 $ 13.50
====== ====== ====== ====== ====== ======
====== ====== ======
==========================================================
==========================================================
================
Total Return, at Net Asset Value(2) 5.44% (5.55)% 14.33% 10.72% 12.93% 4.95% 4.95% (6.22)%
6.56%
==========================================================
==========================================================
================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $668,467 $687,233 $756,934 $530,260 $349,480 $250,012 $83,030 $73,943
$40,958
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $648,096 $738,747 $652,327 $436,876 $292,134 $227,504 $75,172 $61,008
$20,454
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 54,842 57,644 56,087 42,119 28,617 21,533 6,809 6,200 3,033
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.00%(3) 5.68% 5.66% 6.33% 6.81% 6.97% 5.21%(3) 4.88%
4.45%(3)
Expenses .90%(3) .86% .91% .96% .96% .99% 1.67%(3) 1.65% 1.73%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 6.3% 9.4% 39.1% 30.5% 8.9% 13.3% 6.3% 9.4% 39.1%
1. For the period from March 1, 1993 (inception of offering) to September 30, 1993.
2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with
all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one full year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the
market value of portfolio securities owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the six months ended March 31, 1995 were $45,588,316 and
$72,870,419, respectively. See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
1. Significant Oppenheimer New York Tax-Exempt Fund (the Fund) is registered under the Investment Company Act of
1940, as
Accounting amended, as a diversified, open-end management investment company. The Fund's investment advisor is
Oppenheimer
Policies Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class A shares are
sold
with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge. Both classes
of shares have identical rights to earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting
rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
----------------------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which such information is regularly reported are valued at the
last sale price of the day or, in the absence of sales, at values based on the closing bid or asked price or the
last sale price on the prior trading day. Long-term and short-term ``non-money market'' debt securities are
valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued
by the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is
satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or
under consistently applied procedures established by the Board of Trustees to determine fair value in good
faith. Short-term ``money market type'' debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or
discount. Forward contracts are valued based on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior trading date if it is within the
spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid
or asked price closest to the last reported sale price is used.
----------------------------------------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly attributable to a specific class
are charged against the operations of that class.
----------------------------------------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable
to
regulated investment companies and to distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no federal income or excise tax provision
is required.
----------------------------------------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan for the Fund's independent
trustees. Benefits are based on years of service and fees paid to each trustee during the years of service.
During the six months ended March 31, 1995, a provision of $27,338 was made for the Fund's projected benefit
obligations, and a payment of $2,786 was made to a retired trustee, resulting in an accumulated liability of
$152,318 at March 31, 1995.
----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class B shares
from net investment income each day the New York Stock Exchange is open for business and pay such dividends
monthly. Distributions from net realized gains on investments, if any, will be declared at least once each year.
----------------------------------------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may
differ for financial statement and tax purposes primarily because of premium amortization. The character of the
distributions made during the year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that the income or realized gain (loss)
was recorded by the Fund. Effective October 1, 1993, the Fund adopted Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions
by
Investment Companies. As a result, the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and distributions determined in accordance
with income tax regulations.
</TABLE>
15 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
1. Significant Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade date).
Accounting Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an
Policies identified cost basis, which is the same basis used for federal income tax purposes. Original issue discount on
(continued) securities purchased is amortized over the life of the respective securities, in accordance with federal income
tax requirements. For bonds acquired after April 30, 1993, accrued market discount is recognized at maturity
or
disposition as taxable ordinary income. Taxable ordinary income is realized to the extent of the lesser of gain
or accrued market discount.
==========================================================
==========================================================
================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31, 1995 Year Ended September 30, 1994
------------------------------- ---------------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Sold 2,747,484 $ 32,217,228 8,954,607 $ 115,070,127
Dividends and distributions reinvested 1,211,816 14,101,602 2,804,397 35,919,371
Redeemed (6,761,301) (78,159,474) (10,201,903) (128,710,513)
---------- ------------ ----------- -------------
Net increase (decrease) (2,802,001) $(31,840,644) 1,557,101 $ 22,278,985
========== ============
=========== =============
---------------------------------------------------------------------------------------------------------------
Class B
Sold 1,048,103 $ 12,298,511 3,489,946 $ 44,671,139
Dividends and distributions reinvested 112,544 1,310,991 183,542 2,334,544
Redeemed (551,325) (6,341,640) (507,286) (6,356,229)
---------- ------------ ----------- -------------
Net increase 609,322 $ 7,267,862 3,166,202 $ 40,649,454
========== ============
=========== =============
</TABLE>
<TABLE>
<CAPTION>
==========================================================
==========================================================
================
<S> <C>
3. Unrealized At March 31, 1995, net unrealized depreciation on investments of $5,612,177 was composed of gross
appreciation
Gains and of $22,999,296, and gross depreciation of $28,611,473.
Losses on
Investments
==========================================================
==========================================================
================
4. Futures The Fund may buy and sell interest rate futures contracts in order to gain exposure to or protect against
Contracts changes in interest rates. The Fund may also buy or write put or call options on these futures contracts. The
Fund generally sells futures contracts to hedge against increases in interest rates and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is required to deposit either cash or
securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day. The variation margin payments are
equal
to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes
a realized gain or loss when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin requirements on open
futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a
receivable or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the possibility that
there may be an illiquid market and that a change in the value of the contract or option may not correlate with
changes in the value of the underlying securities. At March 31, 1995, the Fund had outstanding futures contracts
to sell debt securities as follows:
Expiration Number of Valuation as of Unrealized
Date Futures Contracts March 31, 1995 Appreciation
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts. 6/95 600 $62,343,750 $1,227,343
</TABLE>
16 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
5. Management Management fees paid to the Manager were in accordance with the investment advisory agreement with the
Fund
Fees And Other which provides for an annual fee of .60% on the first $200 million of net assets, .55% on the next $100
million,
Transactions .50% on the next $200 million, .45% on the next $250 million, .40% on the next $250 million and .35% on
net
With Affiliates assets in excess of $1 billion.
For the six months ended March 31, 1995, commissions (sales charges paid by investors) on
sales of Class A shares totaled $665,711, of which $120,859 was retained by Oppenheimer Funds Distributor,
Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales charges
advanced to broker/dealers by OFDI on sales of the Fund's Class B shares totaled $408,272, of which $11,029
was
paid to an affiliated broker/dealer. During the six months ended March 31, 1995, OFDI received contingent
deferred sales charges of $114,419 upon redemption of Class B shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs of
providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets annually
to reimburse OFDI for costs incurred in connection with the personal service and maintenance of accounts that
hold shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition,
Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to reimburse OFDI for
sales commissions paid from its own resources at the time of sale and associated financing costs. In the event
of termination or discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue
payment of the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior
to termination or discontinuance of the plan. During the six months ended March 31, 1995, OFDI paid $11,496
and
$1,970, respectively, to an affiliated broker/dealer as reimbursement for Class A and Class B personal service
and maintenance expenses and retained $321,488 as reimbursement for Class B sales commissions and service
fee
advances, as well as financing costs.
</TABLE>
17 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Oppenheimer New York Tax-Exempt Fund
---------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C>
Officers and Trustees Leon Levy, Chairman of the Board of Trustees
Leo Cherne, Trustee
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Donald W. Spiro, Trustee and President
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
==========================================================
==========================================================
================
Investment Advisor Oppenheimer Management Corporation
==========================================================
==========================================================
================
Distributor Oppenheimer Funds Distributor, Inc.
==========================================================
==========================================================
================
Transfer and Shareholder Oppenheimer Shareholder Services
Servicing Agent
==========================================================
==========================================================
================
Custodian of Citibank, N.A.
Portfolio Securities
==========================================================
==========================================================
================
Independent Auditors KPMG Peat Marwick LLP
==========================================================
==========================================================
================
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have been taken from the records of the Fund without examination
by the independent auditors.
This is a copy of a report to shareholders of Oppenheimer New York Tax-Exempt Fund. This report must
be
preceded or accompanied by a Prospectus of Oppenheimer New York Tax-Exempt Fund. For material
information
concerning the Fund, see the Prospectus.
</TABLE>
18 Oppenheimer New York Tax-Exempt Fund
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------------
OppenheimerFunds Family
---------------------------------------------------------------------------------------------------------------
==========================================================
==========================================================
================
<S> <C> <C>
OppenheimerFunds offers over 35 funds designed to fit virtually every investment goal. Whether
you're investing for retirement, your children's education or tax-free income, we have the funds to
help you seek your objective.
When you invest with OppenheimerFunds, you can feel comfortable knowing that you are investing
with a respected financial institution with over 30 years of experience in helping people just like
you reach their financial goals. And you're investing with a leader in global, growth stock and
flexible fixed income investments--with over 2.4 million shareholder accounts and more than $30
billion under Oppenheimer's management and that of our affiliates.
At OppenheimerFunds, we don't charge a fee to exchange shares of eligible funds of the same
class. And you can exchange shares easily by mail or by telephone.1 For more information on
OppenheimerFunds, please contact your financial advisor or call us at 1-800-525-7048 for a
prospectus. You may also write us at the address shown on the back cover. As always, please read the
prospectus carefully before you invest.
==========================================================
==========================================================
================
Stock Funds Discovery Fund Global Fund
Global Emerging Growth Fund(2) Oppenheimer Fund
Time Fund Value Stock Fund
Target Fund Gold & Special Minerals Fund
Growth Fund(3)
==========================================================
==========================================================
================
Stock & Bond Funds Main Street Income & Growth Fund Equity Income Fund
Total Return Fund Asset Allocation Fund
Global Growth & Income Fund
==========================================================
==========================================================
================
BondFunds High Yield Fund Strategic Short-Term Income Fund
Champion High Yield Fund Investment Grade Bond Fund
Strategic Income & Growth Fund Mortgage Income Fund
Strategic Income Fund U.S. Government Trust
Strategic Diversified Income Fund Limited-Term Government Fund
Strategic Investment Grade Bond Fund
==========================================================
==========================================================
================
Tax-Exempt Funds New York Tax-Exempt Fund(4) New Jersey Tax-Exempt Fund(4)
California Tax-Exempt Fund(4) Tax-Free Bond Fund
Pennsylvania Tax-Exempt Fund(4) Insured Tax-Exempt Bond Fund
Florida Tax-Exempt Fund(4) Intermediate Tax-Exempt Bond Fund
==========================================================
==========================================================
================
Money Market Funds Money Market Fund Cash Reserves
1. Exchange privileges are subject to change or termination.
2. Formerly Global Bio-Tech Fund.
3. Formerly Special Fund.
4. Available only to residents of certain states.
OppenheimerFunds are distributed by Oppenheimer Funds Distributor, Inc., Two World Trade Center,
New York, NY10048-0203.
(C) Copyright 1995 Oppenheimer Management Corporation. All rights reserved.
</TABLE>
19 Oppenheimer New York Tax-Exempt Fund
<PAGE>
Information
General Information
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET
- -------------------------------------
1-800-525-7048
- -------------------------------------
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
- -------------------------------------
1-800-852-8457
- -------------------------------------
PhoneLink
24 hours a day, automated
information and transactions
- -------------------------------------
1-800-533-3310
- -------------------------------------
Telecommunications Device
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
- -------------------------------------
1-800-843-4461
- -------------------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
- -------------------------------------
1-800-835-3104
- -------------------------------------
RS0865.001.0595 May 31, 1995
[PHOTOGRAPH]
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services
"How may I help you?"
As an OppenheimerFunds shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- --------------------------------------------------------------------------------
[LOGO] Oppenheimer Funds(R) ---------------
Oppenheimer Funds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 314
Farmingdale, NY
---------------
<PAGE>
/ / NATIONAL TAX-EXEMPT FUND
/ / CALIFORNIA TAX-EXEMPT FUND
/ / NEW YORK TAX-EXEMPT FUND
December 1, 1994
The National, California and New York Tax-Exempt Funds (the "Funds")
are portfolios of Quest for Value Family of Funds, a mutual fund organized in
series form. The Funds are managed by Quest for Value Advisors ("Quest
Advisors"). Total assets under the management of Quest Advisors and its
parent, Oppenheimer Capital, amounted to approximately $29 billion on
September 30, 1994. The National Tax-Exempt Fund is a diversified municipal
bond fund. The California Tax-Exempt Fund is a diversified municipal bond
fund that invests primarily in debt obligations issued by the State of
California, its municipalities and public authorities. The New York
Tax-Exempt Fund is a non-diversified municipal bond fund that invests
primarily in debt obligations issued by the State of New York, its
municipalities and public authorities.
This Prospectus sets forth basic information about the Funds, including
applicable sales and distribution fees, that you should understand before
investing. You should read it carefully and retain it for future reference. A
Statement of Additional Information dated December 1, 1994 for the Funds (the
"SAI") has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference in this Prospectus. You can obtain a copy of the SAI
without charge by contacting our Transfer Agent, at the address or telephone
number listed on the back cover.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND THE SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
QUEST FOR VALUE IS A REGISTERED SERVICE MARK OF OPPENHEIMER CAPITAL
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchase (as a percentage of offering price).... 4.75 4.75 4.75
Deferred Sales Load........................................................... none none none
Maximum Sales Load Imposed on Reinvested Dividend............................. none none none
Redemption Fee................................................................ none none none
Exchange Fee.................................................................. $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES*
(AS PERCENTAGE OF AVERAGE NET ASSETS)
Management fee (after waiver)................................................... .50% .45% .46%
12b-1 Fee (after waiver)........................................................ .10% .10% .10%
Other Expenses.................................................................. .28% .45% .44%
----- ----- -----
TOTAL FUND OPERATING EXPENSES AFTER EXPENSE ASSUMPTIONS*........................ .88% 1.00%
1.00%
</TABLE>
*The expenses listed above for the California and New York Tax-Exempt Funds have
been restated to reflect the voluntary expense limitations currently in effect
for the Funds. The expenses stated for the National Tax-Exempt Fund reflect
what the actual expenses of that Fund would have been for the fiscal year ended
July 31, 1994 if Quest Advisors had not waived a portion of its fee and if the
service fee of .10% of average net assets which Quest for Value Distributors
("Quest Distributors") has been charging since September 1, 1994 had been in
effect for the entire fiscal year. Quest Advisors may make voluntary waivers of
its management fee and may assume expenses. Currently expenses of the Funds are
limited so that annualized operating expenses do not exceed 1.00% of average
daily net assets of the California and New York Tax-Exempt Funds; these expense
limitations are voluntary and may be discontinued at any time. Portions of the
management fee were waived for the fiscal year ended July 31, 1994. Without
such waivers, the management fee would have been at the annual rate of .50% of
average net assets and the ratio of operating expenses to average net assets
would have been as follows: National Tax-Exempt Fund -- .88%, California
Tax-Exempt Fund -- 1.05% and New York Tax-Exempt Fund -- 1.04% (if the service
fee of .10% of average net assets had been in effect for the entire fiscal
year). Quest Distributors has no present intention of charging the full service
fee of .25% of average net assets.
EXAMPLE: You would pay the following expenses over the indicated periods in
each of the Funds on a $1,000 investment assuming (1) payment of the
maximum sales charge (2) a 5% annual return and (3) redemption at the
end of the time period
<TABLE>
<S> <C> <C> <C>
1 year...................................................................... $ 56.05 $ 57.22 $ 57.22
3 years..................................................................... 74.23 77.83 77.83
5 years..................................................................... 93.94 100.13 100.13
10 years.................................................................... 150.78 164.15 164.15
</TABLE>
The purpose of the table is to assist you in understanding the various costs and
expenses that you would bear, whether directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investment Management
Agreement" and "Distribution Plan".
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF ACTUAL OR FUTURE EXPENSES
OR PERFORMANCE AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP, independent
accountants, and should be read in conjunction with the financial statements and
related notes thereto appearing in the Statement of Additional Information.
Further information regarding the performance of each Fund is available in the
Funds' Annual Report. Annual reports may be obtained without charge by calling
the Fund at (800) 232-FUND.
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------------- -------------------------------------------
NET DISTRIBUTIONS
REALIZED TO
AND DIVIDENDS TO SHAREHOLDERS
NET ASSET UNREALIZED SHAREHOLDERS FROM NET
VALUE, NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED GAIN TOTAL
NET ASSET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT ON DIVIDENDS
AND VALUE, END
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS
DISTRIBUTIONS OF PERIOD
NATIONAL TAX-EXEMPT FUND
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
YEAR ENDED
JULY 31,
1994 $ 11.29 $ 0.61 $ (0.38) $ 0.23 $ (0.61) $ (0.24) $ (0.85) $ 10.67
1993 11.08 0.68 0.23 0.91 (0.68) (0.02) (0.70) 11.29
1992 10.22 0.73 0.86 1.59 (0.73) -- (0.73) 11.08
AUGUST 14, 1990
(3) TO JULY 31,
1991 10.00(4) 0.65 0.22 0.87 (0.65) -- (0.65) 10.22
<CAPTION>
RATIOS
---------------------------------------------
RATIO OF NET RATIO OF NET
NET ASSETS OPERATING INVESTMENT
END OF EXPENSES TO INCOME (LOSS) TO PORTFOLIO
TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
RETURN (000'S) ASSETS ASSETS RATE
<S> <C> <C> <C> <C> <C>
YEAR ENDED
1994 2.01% $ 93,530 0.43%(1,2) 5.51%(1,2) 45%
1993 8.51% 110,397 0.20%(2) 6.01%(2) 19%
1992 16.22% 49,303 0.02%(2) 6.80%(2) 10%
AUGUST 14, 1990
(3) TO JULY 31,
1991 8.95% 13,231 0.00%(2,5) 6.97%(2,5) 8%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $106,274,260.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF
ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OTHER OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT THE
RATIO OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN .78% AND 5.16%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1994, .85% AND 5.36% ,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1993, 1.03% AND 5.79%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1992 AND 1.75% AND 5.22%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD AUGUST 14, 1990 (COMMENCEMENT OF
OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
</TABLE>
CALIFORNIA TAX-EXEMPT FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
YEAR ENDED
JULY 31,
1994 $ 11.15 $ 0.57 $ (0.39) $ 0.18 $ (0.57) $ (0.16) $ (0.73) $ 10.60
1993 10.86 0.64 0.30 0.94 (0.64) (0.01) (0.65) 11.15
1992 10.23 0.69 0.63 1.32 (0.69) -- (0.69) 10.86
AUGUST 14, 1990
(3) TO JULY 31,
1991 10.00(4) 0.63 0.23 0.86 (0.63) -- (0.63) 10.23
<S> <C> <C> <C> <C> <C>
YEAR ENDED
1994 1.52% $ 29,024 0.61%(1,2) 5.18%(1,2) 32%
1993 9.06% 37,414 0.29%(2) 5.78%(2) 24%
1992 13.37% 18,643 0.09%(2) 6.45%(2) 12%
AUGUST 14, 1990
(3) TO JULY 31,
1991 8.89% 4,320 0.00%(2,5) 6.65%(2,5) 20%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $34,790,898.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF
ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OTHER OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT THE
RATIO OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN .95% AND 4.84%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1994, .94% AND 5.13% RESPECTIVELY,
FOR THE YEAR ENDED JULY 31, 1993, 1.46% AND 5.08%, RESPECTIVELY, FOR THE
YEAR ENDED JULY 31, 1992 AND 3.90% AND 2.75%, ANNUALIZED, RESPECTIVELY, FOR
THE PERIOD AUGUST 14, 1990 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
</TABLE>
NEW YORK TAX-EXEMPT FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
YEAR ENDED
JULY 31,
1994 $ 11.26 $ 0.58 $ (0.43) $ 0.15 $ (0.58) $ (0.01) $ (0.59) 10.82
1993 10.98 0.65 0.31 0.96 (0.65) (0.03) (0.68) 11.26
1992 10.05 0.70 0.93 1.63 (0.70) -- (0.70) 10.98
AUGUST 14, 1990
(3) TO JULY 31,
1991 10.00(4) 0.64 0.05 0.69 (0.64) -- (0.64) 10.05
<S> <C> <C> <C> <C> <C>
YEAR ENDED
1994 1.36% $ 32,210 0.65%(1,2) 5.20%(1,2) 49%
1993 9.17% 37,342 0.37%(2) 5.84%(2) 7%
1992 16.93% 18,754 0.13%(2) 6.70%(2) 31%
AUGUST 14, 1990
(3) TO JULY 31,
1991 7.16% 7,828 0.00%(2,5) 6.90%(2,5) 6%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $37,362,620.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF
ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OTHER OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE
RATIO OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN .94% AND 4.91%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1994, .99% AND 5.22%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1993, 1.19% AND 5.64%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1992 AND 2.54% AND 4.36%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD AUGUST 14, 1990 (COMMENCEMENT OF
OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
- ----------------------
*ASSUMES REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, BUT DOES NOT REFLECT
DEDUCTIONS FOR SALES CHARGES. AGGREGATE (NOT ANNUALIZED) TOTAL RETURN IS SHOWN
FOR ANY PERIOD SHORTER THAN ONE YEAR.
</TABLE>
3
<PAGE>
- ---------------------------------------------
INVESTMENT OBJECTIVES
OF THE FUNDS
The Funds seek as high a level of current income exempt from various income
taxes as is consistent with the preservation of capital. Quest Advisors manages
each Fund in accordance with the investment objectives described below.
Quest Advisors' fixed income investment policy is overseen by Robert J.
Bluestone, Managing Director and Director of Fixed Income Management for
Oppenheimer Capital. Mr. Bluestone has been with Oppenheimer Capital since 1986.
The investments of the Funds are managed by Matthew Greenwald, Vice President of
Oppenheimer Capital and Quest for Value Family of Funds. Mr. Greenwald has been
portfolio manager of the Funds since inception and has been a fixed income
portfolio manager and analyst for Oppenheimer Capital since 1989. From 1984-1989
he was a fixed income portfolio manager with PaineWebber's Mitchell Hutchins
Asset Management.
NATIONAL TAX-EXEMPT FUND seeks income exempt from Federal income taxes primarily
through a diversified portfolio of municipal obligations.
CALIFORNIA TAX-EXEMPT FUND seeks income primarily through a diversified
portfolio of municipal obligations exempt from Federal income tax and California
personal income tax ("California municipal obligations").
NEW YORK TAX-EXEMPT FUND seeks income primarily through a non-diversified
portfolio of municipal obligations exempt from Federal income tax and New York
State and City personal income taxes ("New York municipal obligations").
Each Fund will invest primarily in municipal bonds rated at the time of
purchase within the four highest ratings assigned by Moody's Investor's Service,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") or by Fitch Municipal
Division ("Fitch") or, if unrated, which are of comparable quality in the
opinion of Quest Advisors. See the Appendix to the SAI for a description of such
ratings.
Municipal obligations are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities or multi-state agencies
or authorities, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal income tax. The Funds may invest in various
types of municipal obligations, including municipal bonds, participation
interests in municipal obligations, tax-exempt commercial paper and short-term
municipal notes. Municipal bonds are classified as general obligation bonds and
revenue bonds. General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular facility or
class of facilities or from the proceeds of a special excise or other specific
revenue source, such as tolls from a toll bridge, but not from the general
taxing power. Included within the revenue bonds category are participations in
lease obligations or installment purchase contracts (hereinafter collectively
"lease obligations") of municipalities. State and local agencies or authorities
issue lease obligations to acquire equipment and facilities. Short-term
municipal notes, which may be either general obligation or revenue securities,
and tax-exempt commercial paper, may be issued in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal obligations may bear
fixed, variable or floating rates of interest.
The investment objectives of each Fund are fundamental policies which cannot
be changed without a majority vote of its shareholders. Except
4
<PAGE>
as indicated, investment policies and techniques are not fundamental and may be
adjusted by Quest Advisors at any time, usually in response to its perception of
developments in the securities markets.
It is a fundamental policy of each Fund that it will invest at least 80% of
the value of its net assets (except when Quest Advisors determines that a
temporary defensive position should be maintained) in municipal obligations not
subject to the alternative minimum tax ("AMT") discussed below. It is a
fundamental policy of the California Tax-Exempt Fund that at least 65% of its
net assets will be invested in California municipal obligations. It is a
fundamental policy of the New York Tax-Exempt Fund that at least 65% of its net
assets will be invested in New York municipal obligations.
Although the Funds invest primarily in municipal bonds, under normal
conditions the Funds expect to maintain liquidity through the purchase of short-
term municipal obligations rated at the time of purchase within the two highest
ratings assigned by Moody's, S&P or Fitch. However, pending investment, to
maintain liquidity, or when Quest Advisors determines that unusual market
conditions exist, the Funds may hold cash and may invest in taxable money market
instruments, including repurchase agreements. The average maturity of the Funds
will vary based on market conditions. It is anticipated, however, that the
average weighted maturity of each Fund generally will be greater than 20 years.
Under the Tax Reform Act of 1986, interest on municipal obligations defined as
"private activity bonds" issued after August 7, 1986 becomes an item of "tax
preference," subject to the alternative minimum tax when received by a person
subject to that tax ("AMT Bonds"). Private activity bonds include bonds issued
to finance such projects as airports, housing projects, resource recovery
programs, solid waste disposal facilities, student loan programs, and water and
sewage projects. Because interest income on AMT Bonds may be taxable to certain
investors, such municipal obligations generally will provide somewhat higher
yields at the time of issue than municipal obligations of comparable quality and
maturity which are not subject to AMT.
- ---------------------------------------------
RISK FACTORS AND SPECIAL INVESTMENT
CONSIDERATIONS
The Funds are permitted to invest in municipal obligations with a broad range
of maturities. If general market interest rates are increasing, the prices of
municipal obligations ordinarily will decrease. In a market of decreasing
interest rates, the opposite will generally be true. Further, the longer the
maturity and the lower the rating of a municipal obligation, the higher the rate
of interest generally paid on such a security and the greater the impact of
fluctuations in interest rates.
Municipal obligations rated Baa by Moody's, BBB by S&P or BBB by Fitch are
described by those rating agencies as having speculative elements. The Funds are
not obligated to dispose of securities that fall below the above stated ratings
due to changes by the rating agencies.
It is possible that a Fund from time to time will invest more than 25% of its
assets in a particular segment of the municipal securities market, such as
hospital revenue bonds, housing agency bonds, industrial development bonds or
airport bonds, or in securities the interest on which is paid from revenues of a
similar type of project. In such circumstances, economic, business, political or
other changes affecting one bond (such as proposed legislation affecting the
financing of a project; shortages or price increases of needed materials; or
declining markets or needs for the projects) might also affect other bonds in
the same segment, thereby potentially increasing market risk. The National
Tax-Exempt Fund will not invest more than 25% of its total assets in issuers
located in the
5
<PAGE>
same state. The California and New York Tax-Exempt Funds will not invest more
than 25% of their assets in issuers of any State other than California and New
York, respectively.
The New York Tax-Exempt Fund is non-diversified as that term is defined in the
Investment Company Act of 1940 but intends to continue to qualify as a
"regulated investment company" for Federal income tax purposes. This means that
more than 5% of such Fund's total assets may be invested in any one issuer, but
only if at the close of each fiscal quarter the aggregate amount of such
holdings does not exceed 50% of the value of its total assets and no more than
25% of the value of its total assets is invested in the securities of a single
issuer. In determining the issuer of a municipal obligation, each state and each
political subdivision, agency and instrumentality of each state and each multi-
state agency of which such state is a member is considered to be a separate
issuer. Where securities are backed only by the assets and revenues of a
particular instrumentality, facility or subdivision, such entity is considered
the issuer. As a non-diversified investment company, the New York Tax-Exempt
Fund may present greater risks than diversified companies because the Fund can
invest in a smaller number of issuers. The California and the New York
Tax-Exempt Funds are more susceptible to factors adversely affecting issuers of
California and New York municipal obligations, respectively, than would be a
comparable municipal securities portfolio having a lesser degree of geographic
concentration.
Certain California municipal obligations may be obligations of issuers which
rely on property taxes as a source of revenue. Amendments in recent years to the
California Constitution and statutes that limit the taxing and spending
authority of California governmental entities may impair the ability of the
issuers of some California municipal obligations to maintain debt service on
their securities. Other measures affecting the taxing or spending authority of
California or its political subdivisions may be approved or enacted in the
future. The State of California has had certain fiscal and economic problems
that could affect the ability of issuers of California municipal obligations to
meet their financial commitments. See the SAI for a more detailed discussion of
the risks involved in investing in California municipal obligations.
New York State and New York City face long-term economic problems that could
seriously affect their ability and that of other issuers of New York municipal
obligations to meet their financial commitments. Certain issuers of New York
municipal obligations have experienced serious financial difficulties in recent
years which have at times jeopardized the credit standing and impaired the
borrowing abilities of all New York issuers. A recurrence of the financial
difficulties experienced by such issuers could result in defaults or declines in
the market values of their existing obligations. The occurrence of any such
default could adversely affect the market value and marketability of all New
York municipal obligations and consequently could affect the net asset value of
the New York Tax-Exempt Fund. See the SAI for a more detailed discussion of the
risks of investing in New York municipal obligations.
Lease obligations may have risks not normally associated with general
obligation or other revenue bonds. Lease obligations and conditional sale
contracts (which may provide for title to the leased asset to pass eventually to
the issuer), have developed as a means for government issuers to acquire
property and equipment without the necessity of complying with the
constitutional and statutory requirements generally applicable for the issuance
of debt. Certain lease obligations contain "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money
6
<PAGE>
is appropriated for such purposes by the appropriate legislative body on an
annual or other periodic basis. Consequently, continued lease payments on those
lease obligations containing "non-appropriation" clauses are dependent on future
legislative actions. If such legislative actions do not occur, the holders of
the lease obligation may experience difficulty in exercising their rights,
including disposition of the property.
In addition, lease obligations may not have the depth of marketability
associated with other municipal obligations, and as a result, certain of such
lease obligations may be considered illiquid securities. To determine whether or
not the Funds will consider such securities to be illiquid (each Fund may not
invest more than 10% of its net assets in illiquid securities), the following
guidelines have been established to determine the liquidity of a lease
obligation. The factors to be considered in making the determination include:
(1) the frequency of trades and quoted prices for the obligation; (2) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers; (3) the willingness of dealers to undertake to make a
market in the security; and (4) the nature of the marketplace trades, including
the time needed to dispose of the security, the method of soliciting offers, and
the mechanics of the transfer.
OPTIONS AND FUTURES. Different uses of futures and options have different risk
and return characteristics. Generally, selling futures contracts, purchasing put
options and writing call options are strategies designed to protect against
falling security prices and can limit potential gains if prices rise. Purchas-
ing futures contracts, purchasing call options and writing put options are
strategies whose returns tend to rise and fall together with securities prices
and can cause losses if prices fall. If securities prices remain unchanged over
time, option writing strategies tend to be profitable while option buying
strategies tend to be unprofitable. Currently, each of the Funds intend to
engage only in options and futures on debt securities and on debt security
indexes and options on futures contracts. Any income realized from the use of
options and futures will be taxable to shareholders. The Funds will not enter
into any leveraged futures transactions.
Shares of the Funds are not suitable for tax-exempt institutions or for
retirement plans qualified under the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), because such investors are unable to benefit from
the tax-exempt character of the Funds' dividends.
The value of the Funds' shares will fluctuate and on redemption the value of
your shares may be more or less than your investment. A description of the
Funds' investment techniques and of certain investment restrictions is included
under "Investment Restrictions" and "Investment Techniques".
- ---------------------------------------------
HOW TO BUY SHARES
The initial purchase of shares must be made through a broker or dealer having
a sales agreement with Quest for Value Distributors ("Quest Distributors"), an
affiliate of Quest Advisors. Subsequent purchases of shares may also be made
directly through Quest Distributors by mailing your payment to it at the Funds'
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8505, Boston, MA
02266-8505. The minimum initial investment is $1,000 and subsequent investments
must be at least $250. There are no minimums for shares purchased under an
Automatic Investment Plan. Shares are sold at the public offering price -- the
net asset value next determined after receipt of a purchase order, plus the
applicable sales charge, if any. Shares of the California Tax-Exempt Fund may be
sold only in California; shares of the New York Tax-Exempt Fund may be sold only
in New York, New Jersey, Connecticut or Florida.
7
<PAGE>
The following table sets forth the sales charges applicable to the Funds.
<TABLE>
<CAPTION>
AS A % OF PERCENT OF
AS A % NET ASSET OFFERING PRICE
OF OFFERING VALUE PER RE-ALLOWED TO
PRICE SHARE SELLING DEALERS
--------------- -------------- -------------------
<S> <C> <C> <C>
Less than $50,000... 4.75% 4.99% 4.25%
$50,000 but less
than $100,000..... 4.50% 4.71% 4.00%
$100,000 but less
than $250,000..... 3.50% 3.63% 3.15%
$250,000 but less
than $500,000..... 2.75% 2.83% 2.50%
$500,000 but less
than $1,000,000... 2.00% 2.04% 1.75%
$1,000,000 but less
than $5,000,000... 1.00% 1.01% 90%
More than
$5,000,000........ .30% .30% .30%
</TABLE>
The entire sales charge may be re-allowed to dealers who achieve certain
levels of sales or who have rendered coordinated sales support efforts. Such
dealers may be deemed to be "underwriters".
OTHER DEALER COMPENSATION. Quest Distributors will provide additional
compensation to dealers in connection with sales of shares of the Funds and
other mutual funds distributed by Quest Distributors ("Quest Funds") including
promotional gifts (which may include gift certificates, dinners and other
items), financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public and advertising
campaigns and payment for travel, food, lodging and entertainment expenses
incurred by invited registered representatives and their guests in connection
with sales meetings (which may be held in resort locations). In some instances,
these incentives may be made available only to certain dealers whose
representatives have sold or are expected to sell significant amounts of shares.
If a registered representative of a securities dealer that has approved
participation in Quest Distributors' Advisory and Retirement Planning Council
sells more that $500,000 or $1 million (net of redemptions) of any open-end
investment company distributed by Quest Distributors and managed by Quest
Advisors other than Quest Cash Reserves, Inc. in the 1994 calendar year, such
dealer firm is eligible to send the representative and a guest to a sales
conference to be held by Quest Distributors at a luxury resort; individual sales
of Class A shares of other Quest Funds in the amount of $1 million or more that
are purchased at net asset value and sales of Class C shares of other Quest
Funds will count as one-half their amount for determining eligibility.
REDUCED SALES CHARGES. There are several ways you may qualify for reduced sales
charges. You should notify the Transfer Agent or your Dealer if you qualify.
COMBINED PURCHASE: Purchases by related accounts may be combined to determine
the appropriate sales charge. Related accounts are: all accounts in the name of
a single individual and/or of that individual's spouse or children under 21
years of age and all accounts of a fiduciary purchasing for a single trust, and
all accounts for which a single person (e.g., investment advisor, trust
department, etc.) exercises investment discretion.
RIGHTS OF ACCUMULATION: In determining the applicable level of sales charge, the
value of shares you purchase may be added to the greater of the cost or market
value of the Class A (if purchased with a sales charge or acquired by exchange
for shares on which a sales charge was paid), B and C shares you hold of any
Quest Fund.
LETTER OF INTENT: Shares valued at $50,000 or more, purchased during a 13-month
period, may be purchased under a Letter of Intent whereby the initial shares
purchased qualify for the reduced sales charge applicable to the aggregate
amount of the projected purchase. The initial purchase must
8
<PAGE>
be at least 5% of the intended purchase. An appropriate number of shares will be
held by the Transfer Agent to cover any sales charge due if less than the
indicated amount is actually purchased during the 13-month period.
GROUP PURCHASES: The following table sets forth the applicable sales charge for
purchases made by members of associations formed for any purpose other than the
purchase of securities:
<TABLE>
<CAPTION>
AS A % AS A % OF NET PERCENT OF OFFERING
OF OFFERING ASSET VALUE PRICE RE-ALLOWED TO
NUMBER OF MEMBERS PRICE PER SHARE SELLING DEALERS
- --------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
9 or less............ 3.00% 3.09% 2.60%
Between 10 & 49...... 2.00% 2.04% 1.65%
Between 50 & 249..... 1.25% 1.27% 1.00%
250 or more.......... 1.00% 1.01% 0.90%
</TABLE>
Purchases made under this provision do not qualify under any other reduced
sales charge provision such as Rights of Accumulation or Letter of Intent.
NET ASSET VALUE PURCHASES: No sales charge will be applied to the following
transactions: purchases by persons who for at least 90 days have been directors,
trustees, officers or full-time employees of any Quest Funds, Quest Advisors and
their affiliates, their relatives or any trust, pension, profit sharing or other
benefit plan for any of them; purchases by any account under the management of
Oppenheimer Capital, the parent of Quest Advisors, or by persons who are
directors or trustees of such accounts; purchases made with the proceeds of
maturing principal of any Quest Unit Investment Laddered Trust Series
("QUILTS"); purchases by an employee of a broker-dealer or bank having a dealer
or agency agreement pertaining to Quest Fund shares; purchases by trust
companies and bank trust departments for funds over which they exercise
exclusive discretionary investment authority and charge an account management
fee and which are held in a fiduciary, agency, advisory, custodial or similar
capacity; purchases by registered investment advisors for their clients for whom
they charge an account management fee; accounts opened for shareholders by
dealers where the amounts invested represent the redemption proceeds from
investment companies distributed by an entity other than Quest Distributors if
such redemption has occurred no more than 60 days prior to the purchase of
shares of the Funds and the shareholder paid a sales charge or a contingent
deferred sales charge on the redeemed account. Shares sold at net asset value
will be included in the asset base upon which payments under a Fund's
Distribution Plan and Agreement are determined.
---------------------
The sale of shares will be suspended during any period when the determination
of net asset value is suspended, and may be suspended by the Board of Trustees
of a Fund whenever the Board judges it to be in the best interest of the Fund to
do so. Quest Distributors, in its sole discretion, may accept or reject any
purchase order.
- ---------------------------------------------
DETERMINING NET ASSET VALUE
The value of Fund shares is determined by adding up the value of all security
holdings and other assets of the Fund, deducting the Fund's liabilities, and
dividing the result by the number of shares outstanding. The value of a Fund's
portfolio securities and other assets is based on market values determined by
procedures established by the Board of Trustees of the Fund. Fund securities for
which market quotations are readily available are valued at their bid prices,
based on prices provided by a pricing service using a computerized matrix
system. When market quotations are not readily available, securities are valued
by the pricing system service based upon appraisals derived from information
from recognized dealers. If such value cannot be established, securities are
9
<PAGE>
valued at fair value as determined by procedures adopted by the Funds' Board of
Trustees. Short-term investments with remaining maturities of less than 60 days
are valued at amortized cost. The calculation is made as of the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE") on
each day the NYSE is open. (Close is currently 4:00 p.m. Eastern Time.) The
value that is calculated is known as the net asset value per share, which will
fluctuate daily. See the SAI, Determination of Net Asset Value.
PERFORMANCE INFORMATION. From time to time the Funds may advertise yield, tax
equivalent yield and total return figures, based on historical earnings. The
figures are not intended to indicate future performance. "Yield" is calculated
by dividing the net investment income for the stated period by the value, at
maximum offering price on the last day of the period, of the average number of
shares entitled to receive dividends during the period. The yield formula
assumes that net investment income is earned at a constant rate and reinvested
semi-annually. Tax equivalent yield is calculated by assuming that the portion
of a Fund's net investment income that is exempt from Federal income taxation
(and in the case of the New York and California Tax-Exempt Funds, New York and
California income taxation, respectively) is increased by an amount sufficient
to offset the benefit of tax exemptions at the stated income tax rate. "Total
return" refers to the average annual compounded rates of return over some
representative period that would equate an initial amount invested at the
beginning of a stated period to the ending redeemable value of the investment,
after giving effect to the reinvestment of all dividends and distributions and
deductions of expenses during the period. A Fund also may advertise its total
return over different periods of time, by means of aggregate, average, year by
year, or other types of total return figures. In addition, reference in
advertisements may be made to ratings and rankings among similar funds by
independent evaluators such as Lipper Analytical Services, Inc. or Morningstar,
and the performance of the Funds may be compared to recognized indices of market
performance.
- ---------------------------------------------
HOW TO REDEEM SHARES
You may redeem shares on any day the Funds are open for business (normally
when the NYSE is open) using the Procedures described below. See
"Determination of Net Asset Value" in the SAI for the days on which the NYSE
will be closed. Payment of the redemption proceeds normally will be made within
seven days of the receipt by the Fund of the redemption request.
DEALER REDEMPTION. Your redemption requests may be handled by your securities
dealer who is responsible for providing the necessary documentation to the
Transfer Agent and who may impose a charge for its services. Requests received
by your dealer prior to the Close of the NYSE and transmitted to the Transfer
Agent by its close of business that day will receive that day's net asset value
per share.
REGULAR REDEMPTION. You may send a redemption request by mail to the Transfer
Agent and will receive the net asset value of the shares being redeemed which is
next determined after your request is received in "good form." "Good form" means
the request is signed in the name in which the account is registered and the
signature is guaranteed by any "eligible guarantor". Eligible guarantors include
member firms of a national securities exchange, commercial banks, savings
associations and credit unions. Special requirements exist for corporations,
trusts and similar accounts. Shareholders who hold stock certificates should
call the Transfer Agent for instructions on the appropriate redemption
procedure.
10
<PAGE>
EXPEDITED REDEMPTIONS: The Application enables you to authorize certain
expedited redemption procedures. You and your account representative will
automatically receive the ability to redeem or exchange shares by telephone
unless you indicate otherwise on the application.
BY TELEPHONE: the proceeds of redemption will either be mailed to you or wired
(minimum $1,000) to a designated account of any bank that is a member of the
Federal Reserve wire system. This account must be designated on your
application. Changes in a designated bank account must be in writing with a
signature guarantee.
BY AUTOMATIC WITHDRAWAL PLAN (MINIMUM $50): If your account has a value of at
least $5,000 you may establish an automatic withdrawal plan whereby an amount
specified by you (minimum $50) will be sent to you on a monthly or quarterly
basis. Dividends and distributions on your shares must be reinvested.
BY CHECK DRAFT (MINIMUM $250): A service fee of $10 is imposed for drafts under
$250. Your checks are drafts drawn on State Street. When your draft is
presented, State Street as your agent redeems a sufficient number of whole and
fractional shares to cover the amount of the draft. You cannot close out your
account by check redemption, because your shares continue to earn dividends and
fluctuate in value until the draft is presented.
The Funds will normally mail or wire your redemption proceeds the day after
your redemption is processed. Payments for redemption of shares which have been
recently purchased by check may be delayed until the check has cleared, which
may take up to 15 days. To avoid this collection period, you can wire federal
funds to pay for purchases.
REINSTATEMENT PRIVILEGE. If you have redeemed your shares for cash and you
subsequently reinvest in a Quest Fund with a sales charge, you will have to pay
another sales charge unless, within 60 days of redemption, you reinvest all or
part of the proceeds of your redemption in shares of any Quest Fund. See
"Exchanges" above. You may exercise this privilege only once each calendar year
and any realized gain on the redemption is a taxable event for you.
Redemption procedures may be suspended and payment postponed during any period
when the NYSE is closed other than for customary weekend or holiday closings or
the SEC has determined an emergency exists or has otherwise permitted such
suspension or postponement. The Funds reserve the right to redeem any account
which, because of redemptions, holds shares with a total value of less than
$500. Your Fund will give you 30 days' notice to increase your account value to
at least $500. Redemption proceeds will be mailed to you.
- ---------------------------------------------
EXCHANGING SHARES
You may exchange your shares for Class A shares of any Quest Fund at the
prices next determined after the Transfer Agent receives your request. Each
exchange represents the sale of shares of one fund and the purchase of shares
of another, which may produce a gain or loss for tax purposes.
You need not pay any sales charge differential between funds on the
exchange of shares purchased with a sales charge if:
1. You have held the shares being exchanged for
at least 31 days;
2. The shares being exchanged were acquired
through the reinvestment of dividends or distributions; or
3. The shares being exchanged were themselves
the proceeds of an exchange from a Quest Fund with the same or higher sales
charge.
11
<PAGE>
A service fee (currently $5) will be charged for administrative services in
connection with an exchange. The exchange feature may be modified or
discontinued at any time, upon notice to shareholders in accordance with
applicable rules adopted by the SEC. Your exchange may be processed only if the
shares of the fund to be acquired are eligible for sale in your state and if the
amount of your transaction meets the minimum requirements for that fund. The
exchange privilege is only available in states in which it may be legally
offered.
---------------------
Because excessive trading (including short-term "market timing" trading) can
hurt a Fund's performance, each Fund may refuse any exchange orders (1) if they
appear to be market-timing transactions involving significant portions of a
Fund's assets or (2) from any shareholder account if the shareholder or his or
her broker-dealer has been advised that previous use of the exchange privilege
is considered excessive. Accounts under common ownership or control, including
those with the same taxpayer ID number and those administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
considered one account for this purpose.
Quest Distributors and the Fund's transfer agent will employ reasonable
procedures for telephone redemptions and exchanges to confirm that the
instructions received from shareholders or their account representatives are
genuine, and if they do not, Quest Distributors or the transfer agent may be
liable for any losses due to unauthorized or fraudulent instructions.
Shareholders will be required to provide their name, address, social security
number and other identifying information. Account representatives must identify
themselves and their firm and Quest Distributors will confirm that such firm has
a valid selling agreement with Quest Distributors and that the representative is
authorized to act on behalf of the firm.
IF YOU HAVE ANY QUESTIONS ON EXCHANGE OR REDEMPTION PROCEDURES, CALL YOUR
DEALER OR OUR TRANSFER AGENT.
- ---------------------------------------------
INVESTMENT RESTRICTIONS
The Funds are subject to certain investment restrictions which are
fundamental policies changeable only by shareholder vote. A Fund may not: (a)
invest more than 25% of its total assets (valued at the time of investment)
in any one industry classification used by the Funds for investment purposes,
(b) borrow money in excess of 33 1/3% of the value of the Fund's total assets
(a Fund may borrow from banks only as a temporary measure for extraordinary
or emergency purposes and will make no additional investments while such
borrowings exceed 5% of its total assets), (c) invest more than 10% of the
Fund's assets in illiquid securities including securities for which there is
no readily available market, and repurchase agreements which have a maturity
of longer than seven days, or participation interests, other than those with
puts exercisable within seven days. Other investment restrictions are
described in the SAI.
- ---------------------------------------------
INVESTMENT TECHNIQUES
The investment techniques or instruments described below are used for
investment programs of the Funds.
WHEN-ISSUED SECURITIES. All Funds may purchase municipal obligations at a stated
price and yield on a "when-issued" basis, that is, for delivery to the Fund upon
issuance, which may be later than the normal settlement date for such
securities. The
12
<PAGE>
Fund generally would not pay for such securities or start earning interest on
them until they are received. At time of delivery, the value of the securities
may be more or less than their value at the time of the transaction. Failure of
the issuer to deliver a security purchased by a Fund on a when-issued basis may
result in the Fund's missing an opportunity to make an alternative investment. A
Fund will maintain cash, U.S. Government securities or other liquid high grade
debt obligations in a segregated account with its custodian bank equal in value
to its obligation to purchase such securities.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. Certain of the obligations in which
the Funds may invest may be variable or floating rate obligations on which the
interest rate is adjusted at predesignated periodic intervals (variable rate) or
when there is a change in the market rate of interest on which the interest rate
payable on the obligation is based (floating rate). Variable or floating rate
obligations may include a demand feature which entitles the purchaser to demand
prepayment of the principal amount prior to stated maturity. Also, the issuer
may have a corresponding right to prepay the principal amount prior to maturity.
PARTICIPATION INTERESTS. The Funds may purchase participation interests in
municipal obligations (such as industrial development bonds) from banks. A
participation interest gives the Fund an undivided interest in the municipal
obligation in the proportion that the Fund's participation interest bears to the
total principal amount of the municipal obligation. These instruments may have
fixed, floating or variable rates of interest. If the participation interest is
unrated, or has been given a rating below that which otherwise is permissible
for purchase by the Fund, the participation interest must be backed by an
irrevocable letter of credit or guarantee of a bank that the Board of Trustees
has determined meets prescribed quality standards, or the payment obligation
otherwise must be collateralized by U.S. Government securities.
STAND-BY COMMITMENTS AND PUTS. The Funds may acquire "stand-by commitments"
or "puts" with respect to municipal obligations held in its portfolio. Under
a stand-by commitment or put option, a Fund would have the right to sell
specified securities at a specified price on demand to the issuing
broker-dealer or bank. The Funds will acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their rights
thereunder for trading purposes. The Funds anticipate that stand-by
commitments will be available from brokers, dealers and banks without the
payment of any direct or indirect consideration. The Fund may pay for
stand-by commitments if such action is deemed necessary, thus increasing to a
degree the cost of the underlying municipal obligation and similarly
decreasing such security's yield to investors. Gains realized in connection
with stand-by commitments will be taxable. The Funds may purchase and
exercise puts on municipal obligations. Puts give a Fund the right to sell
securities held in the Fund's portfolio at a specified exercise price on a
specified date. Any premium paid for the put is lost if the put is not
exercised.
OPTIONS AND FUTURES: The Funds may buy and sell options and futures on debt
securities and debt security indexes and options on futures to hedge their
investments against changes in value or as a temporary substitute for purchases
or sales of actual securities. When each Fund anticipates a significant market
or market sector advance, the purchase of a futures contract affords a hedge
against not participating in the advance at a time when the Fund is not fully
invested ("anticipatory hedge"). Such a purchase of a futures contract would
serve as a temporary substitute for the purchase of individual securities, which
may be purchased in an orderly fashion once the market has stabilized. As
individual
13
<PAGE>
securities are purchased, an equivalent amount of futures contracts could be
terminated by offsetting sales. A Fund may sell futures contracts in
anticipation of or during a general market or market sector decline or increase
in interest rates that may adversely affect the market value of the Fund's
securities ("defensive hedge"). To the extent that a Fund's portfolio of
securities changes in value in correlation with the underlying security or
index, the sale of futures contracts would substantially reduce the risk to the
Fund of a market decline and by so doing, provide an alternative to the
liquidation of securities positions in the Fund with attendant transaction
costs. All options purchased or sold by a Fund will be traded on a U.S.
commodities exchange or will result from separate, privately negotiated
transactions with a primary government or municipal securities dealer recognized
by the Board of Governors of the Federal Reserve System or with other
broker-dealers approved by the Fund's Board. If writing or selling put options,
a Fund will maintain in a segregated account at its Custodian liquid assets with
a value equal to at least the exercise price of the option to secure its
obligation to pay for the underlying security. As a result, the Fund forgoes the
opportunity of trading the segregated assets or writing calls against those
assets. There may not be a complete correlation between the price of options or
futures and the market prices of the underlying securities. The Fund may lose
the ability to profit from an increase in the market value of the underlying
securities or may lose its premium payment. If due to a lack of a market the
Fund could not effect a closing purchase transaction with respect to an OTC
option, it would have to hold the callable securities until the call lapsed or
was exercised. So long as Commodities Futures Trading Commission rules so
require, a Fund will not enter into any futures or options contract unless such
transactions are for bona-fide hedging purposes or for other purposes only if
the aggregate initial margins and premiums required to establish such
non-hedging positions would not exceed 5% of the liquidation value of the Fund's
total assets.
ADDITIONAL INVESTMENT TECHNIQUES. The Funds are authorized to but do not
presently intend to enter into repurchase agreements or to loan portfolio
securities. In the event that a Fund intends in the future to engage in any of
these transactions, appropriate disclosures will be made to existing and
prospective shareholders.
- ---------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Funds declare daily dividends of their net investment income,
consisting of interest earned less estimated expenses, and pay dividends
monthly. Shareholders of the Funds will be entitled to receive the dividend
declared on the day after the Transfer Agent receives payment for their
shares. Distributions from net capital gains, if any, for all Funds normally
are declared and paid annually, subsequent to the end of their fiscal year.
If required by tax laws to avoid excise or other taxes, dividends and/or
capital gains distributions may be made more frequently.
REINVESTMENT OPTIONS. You can receive your dividends and capital gains
distributions either in cash or in additional Fund shares without a sales
charge. You will be subject to tax, if applicable, on such distributions. See
the SAI for a description of how to change your election.
- ---------------------------------------------
TAX STATUS
FEDERAL TAXES. The Funds intend to qualify for taxation as regulated investment
companies under the provisions of Subchapter M of the Internal Revenue Code. As
such the Funds will not be taxed on their taxable net investment income or net
14
<PAGE>
realized capital gains, if any, to the extent they have been distributed to
their shareholders. Shortly after the end of each year, the Funds will inform
shareholders of the amount and nature of net income and capital gains. Except
for dividends from taxable investments, capital gains and market discounts, as
discussed below, the Funds anticipate that substantially all dividends paid will
not be subject to Federal income tax. Dividends derived from taxable
investments, together with distributions from any net realized short-term
securities gains, are subject to Federal income tax as ordinary dividend income,
whether or not reinvested. Distributions from net realized long-term securities
gains of the Funds generally are subject to Federal income tax as long-term
capital gains for citizens or residents of the United States. If the Funds
acquire bonds at a discount below the principal amount and subsequently derive
gains on the sale of such bonds, a portion of such gains will be treated as
ordinary income. No dividend paid by the Funds will qualify for the
dividends-received deduction for corporations. Interest on "private activity"
municipal obligations issued on or after August 8, 1986 is a preference item for
purposes of the alternative minimum tax for both individual and corporate
shareholders. In the event that a Fund invests in such obligations, the portion
of an exempt-interest dividend of the Fund that is allocable to such municipal
obligations will be treated as a preference item to shareholders for purposes of
the alternative minimum tax. In addition, a portion of the interest received by
corporate shareholders with respect to municipal obligations, whether or not
private activity bonds, will be taken into account in computing the alternative
minimum tax. Dividends distributed by the National Tax-Exempt Fund may not be
exempt from state or local taxation.
STATE TAXES. Shareholders will receive notification annually stating the portion
of a Fund's tax-exempt income attributable to issuers in each state.
CALIFORNIA TAXES. If at the close of each quarter of its fiscal year, at least
50% of the value of the total assets of the California Tax-Exempt Fund consists
of California municipal obligations, then the Fund will be qualified to pay
dividends to its shareholders that are exempt from California personal income
tax ("California exempt interest dividends") to the extent they represent
interest on California or certain Federal obligations held by the Fund. These
dividends will not be exempt from California franchise tax or California
corporate income tax. Consequently, the total amount of California exempt
interest dividends paid by the California Tax-Exempt Fund to all of its non-
corporate shareholders with respect to any fiscal year cannot exceed their
proportionate share of the interest received by the Fund during such year on
California municipal obligations less any Fund expenses. Other distributions by
the California Tax-Exempt Fund, including capital gain distributions, are
taxable under California law as ordinary income.
NEW YORK STATE AND NEW YORK CITY TAXES. Exempt interest dividends derived from
interest on qualifying New York municipal obligations will be exempt from New
York State and New York City personal income taxes, but not from corporate
franchise taxes. Dividends and distributions derived from taxable income and
capital gains are not exempt from New York State and New York City taxes.
The above information is a summary of the tax treatment that will be applied
to a Fund and its distributions. The discussion does not purport to deal with
all of the Federal, state and local tax consequences applicable to an investment
in a Fund or to all categories of investors, some of which may be subject to
special rules. The exclusion from gross income of interest on municipal
obligations for California State, New York State and New York City personal
income tax purposes, as the case may be, may not necessarily result in an
exemption
15
<PAGE>
under the income tax laws of any other state or local government. See the SAI
for more information about taxes. If you have any questions, you should contact
your tax advisor, particularly in connection with state and local taxes.
- ---------------------------------------------
INVESTMENT MANAGEMENT AGREEMENT
Quest Advisors manages the Funds' investments and business affairs, subject
to the supervision of the Fund's Board of Trustees. Quest Advisors is a
majority-owned subsidiary of Oppenheimer Capital, a registered investment
advisor, whose employees perform all investment management services rendered
to the Funds.
Under the Agreement, Quest Advisors is entitled to a management fee computed
at an annual rate of .50% of the average daily net assets of the Funds. Each of
the Funds is authorized to reimburse Quest Advisors on a cost basis for
bookkeeping and accounting services performed on behalf of the Fund.
Each Fund is responsible for bearing organization expenses, taxes,
registration fees and certain distribution expenses; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses; custodian and transfer agent fees; and
insurance premiums and trade association dues. Quest Advisors will reimburse
each Fund for the amount, if any, by which its aggregate ordinary operating
expenses incurred in any calendar year exceed the most restrictive expense
limitations (currently, 2 1/2% of the first $30 million of net assets, 2% of the
next $70 million of net assets and 1 1/2% of the remaining average net assets)
imposed upon the Fund in states in which its shares are then eligible for sale.
A portion of the management fees were waived for the Funds for the fiscal year
ended July 31, 1994. Currently, expenses are limited so that annualized
operating expenses do not exceed 1.00% of the average daily net assets of the
California and New York Tax-Exempt Funds. Such voluntary waivers and assumptions
may be discontinued at any time. Without such waivers and assumptions, the
management fee would be at the annual rate of .50% of average net assets.
Oppenheimer Financial Corp., a holding company, holds a 33% interest in
Oppenheimer Capital, a registered investment advisor. Oppenheimer Capital L.P.,
a Delaware limited partnership whose units are traded on the NYSE and of which
Oppenheimer Financial Corp. is the sole general partner, owns the remaining 67%
interest. Oppenheimer Capital has operated as an investment advisor since 1968.
- ---------------------------------------------
DISTRIBUTION PLAN
Each Fund is authorized to pay Quest Distributors a maximum service fee at
the annual rate of .25% of each Fund's average net assets under a Plan and
Agreement of Distribution pursuant to Rule 12b-1 (a "12b-1 Plan") under the
Investment Company Act of 1940 for services and expenses incurred in
connection with the distribution of shares of the Fund and shareholder
servicing. Currently, Quest Distributors is charging the Funds a service fee
at the annual rate of .10% of average net assets. The fee will be paid by
Quest Distributors to broker dealers or others for the provision of personal,
continuing services to shareholders, including such matters as responding to
shareholder inquiries concerning the status of their accounts and assistance
in account maintenance matters such as changes in addresses. The SAI contains
more information about the Investment Management Agreement and the 12b-1 Plan.
16
<PAGE>
- ---------------------------------------------
PORTFOLIO TRANSACTIONS AND TURNOVER
Although Quest Advisors cannot accurately predict a Fund's annual turnover
rate, it is anticipated that each Fund will have an annual turnover rate
(excluding turnover of securities having a maturity of one year or less) of
100% or less. The turnover rate will not be a limiting factor when a Fund
deems it desirable to sell or purchase securities. Therefore, depending on
market conditions, a Fund's annual portfolio turnover rate may exceed 100% in
particular years. Brokerage costs are not incurred in connection with
municipal obligations; however, mark-ups to dealers are paid. These may be
considered transaction costs which will be increased by any increase in
turnover rate. To the extent that the Funds pay brokerage commissions, which
it is not expected that they will do, Quest Advisors may select Oppenheimer &
Co., Inc. ("Opco"), an affiliate of Quest Advisors, to execute transactions
for the Funds, provided that the commissions, fees or other remuneration
received by Opco are reasonable and fair compared to those paid to other
brokers in connection with comparable transactions. When selecting
broker-dealers other than Opco, Quest Advisors may consider their record of
sales of shares of the Funds.
- ---------------------------------------------
ADDITIONAL INFORMATION
ORGANIZATION OF THE FUNDS. The National, California and New York Tax-Exempt
Funds are portfolios of Quest for Value Family of Funds (the "Trust"), an
open-end investment management company in series form organized as a
Massachusetts business trust on April 17, 1987. The other portfolios of the
Trust are the Opportunity Fund, the Small Capitalization Fund, the U.S.
Government Income Fund, the Investment Quality Income Fund, the Growth and
Income Fund and the Officers Fund. The Trust may establish additional portfolios
which may have different investment objectives from those stated in this
prospectus.
The Trust is not required to hold annual shareholder meetings, although
special meetings may be called for a specific Fund or group of Funds as a whole
as required by applicable law or as requested in writing by holders of 10% or
more of the outstanding shares of the Fund. For matters affecting only one
portfolio of the Trust only the shareholders of that portfolio are entitled to
vote. For matters affecting all the portfolios, but affecting them differently,
separate votes by portfolio are required.
Under Massachusetts law shareholders could, in certain circumstances, be held
personally liable as partners for obligations of the Trust. The Declaration of
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and its portfolios and requires that notice of such
disclaimer be given in each instrument entered into or executed by the Trust on
behalf of its portfolios. The Declaration of Trust also provides for
indemnification out of the Trust's property for any shareholder held personally
liable for any of the obligations of the Trust. Thus, the risk of loss to a
shareholder from being held personally liable for the obligations of the Trust
is limited to the unlikely circumstance in which the Trust would be unable to
meet its obligations.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The custodian of the
assets, transfer agent and shareholder servicing agent for the Funds is State
Street Bank and Trust Company (the "Custodian"). Cash balances of the Funds with
the Custodian in excess of $100,000 are unprotected by Federal deposit
insurance. Such uninsured balances may at times be substantial.
SHAREHOLDER INQUIRIES. You may telephone 1-800-232-FUND for inquiries concerning
the Funds,
17
<PAGE>
including purchase and sale of shares of the Funds as well as inquiries
concerning dividends and account statements. If you prefer, you may write to
State Street Bank and Trust Company, P.O. Box 8505, Boston, MA 02266-8505.
Written inquiries concerning management and investment policies of the Funds may
be directed to Quest for Value Advisors, One World Financial Center, New York,
New York 10281. No stock certificates will be issued unless specifically
requested in writing.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent of the Funds for
former shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, L.P. who acquire shares of any Quest Fund, and the shareholder
servicing agent for former shareholders of the Unified Funds and Liquid Green
Trusts, accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as custodian or
trustee, accounts which have a Money Master or Money Manager brokerage account,
and accounts for which Unified Management Corporation is the dealer of record.
SPECIAL ARRANGEMENTS FOR FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS, UNIFIED
FUNDS AND LIQUID GREEN TRUSTS:
PURCHASES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS: All shareholders of the
AMA Family of Funds who acquired shares of any Quest Fund pursuant to the
combination of a Quest Fund with a portfolio of the AMA Family of Funds who were
shareholders of the AMA Family of Funds on February 28, 1991, are able to make
future purchases of any of the Funds at net asset value without a sales charge,
provided they continuously own shares of a Quest Fund.
PURCHASES BY SHAREHOLDERS OF THE UNIFIED FUNDS AND THE LIQUID GREEN
TRUSTS: Shareholders who acquired shares of any Quest Fund pursuant to the
combination of several Quest Funds (including the National Tax-Exempt Fund) with
portfolios of the Unified Funds and Liquid Green Trusts, are able to make
purchases of any Quest Fund at net asset value without a sales charge, provided
that such shareholders continuously own shares of a Quest Fund subsequent to
their acquisition of shares of a Quest Fund in the above described transactions.
REDEMPTIONS BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS, UNIFIED FUNDS AND
LIQUID GREEN TRUSTS: While they have no present intention to do so, in the event
that Quest Distributors imposes a charge on redemptions in the future, no
redemption fees will be imposed upon redemption of shares of any Quest Fund by
former shareholders of the Unified Funds or Liquid Green Trusts who are entitled
to purchase shares of Quest Funds at net asset value. (See How to Buy Shares --
Purchases by Shareholders of the Unified Funds and Liquid Green Trusts).
EXCHANGES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS, UNIFIED FUNDS AND
LIQUID GREEN TRUSTS: All former shareholders of the AMA Family of Funds who
acquired shares of any Quest Fund pursuant to the combination of a Quest Fund
with a portfolio of the AMA Family of Funds who were shareholders of the AMA
Family of Funds on February 28, 1991 and shareholders of the Unified Funds and
the Liquid Green Trusts who qualify to purchase shares of Quest Funds at net
asset value (see Purchases by Shareholders of the Unified Funds and the Liquid
Green Trusts, above) will be able to make exchanges into any other Quest Fund
without a sales charge provided they continuously own shares of a Quest Fund.
They will pay a service fee (currently $5.00) for administrative services in
connection with an exchange into a non-money market fund.
18
<PAGE>
APPLICATION TERMS AND CONDITIONS
IMPORTANT INFORMATION ABOUT TAXPAYER IDENTIFICATION NUMBERS. Because of
important changes made to the Internal Revenue Code, we must be certain that we
have a record of your correct Social Security Number or other taxpayer
identification number. If you have not certified that you have provided us with
the correct number, your account will be subject to special Federal income tax
withholding (called "backup withholding"); the law will then require us to
withhold 36% of each taxable dividend or capital gain distribution paid to you
in cash or reinvested in your account and will require us to withhold 36% of any
redemption. The amount withheld is paid to the Internal Revenue Service toward
the amount of Federal income taxes you owe. The Funds will not return to you an
amount withheld due to your failure to provide a correct certified number. In
addition, you may be subject to a $50.00 I.R.S. penalty. THEREFORE, PLEASE
INCLUDE YOUR CORRECT SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER ON
EACH FUND APPLICATION.
The following sets forth examples of what identification number to list:
<TABLE>
<CAPTION>
TYPE OF ACCOUNT TAXPAYER NUMBER TO BE
REGISTRATION USED
- --------------------------- ---------------------------
<S> <C>
Individual Account Social Security Number of
Applicant
Joint Account Social Security number of
Person Reporting Tax
Custodian Account for a Social Security Number of
minor Minor
Corporation, Partnership, Taxpayer Identification
Trust, Estate, Pension, Number
Broker, Etc.
Nonresident Alien None required
</TABLE>
LETTER OF INTENT. Shares currently owned can be applied toward completion of a
Letter of Intent and will be valued at net asset value on the effective date.
That value will remain as such for the life of this Letter of Intent. Only
shares purchased after the effective date (which can be up to 90 days prior to
signing) can qualify for the reduced offering price.
Shares equal to 5% of the dollar amount specified in the Letter of Intent will
be retained by the Transfer Agent by placing a restriction against transfer or
redemption of such shares, until the total purchases equal the aggregate amount
specified in the Letter, or, if the total purchases are less than such amount,
until the additional sales charge is paid. At that time, the shares will be
released.
However, purchases of shares disposed of prior to completion of the purchase
requirement under the Letter of Intent will be disregarded in determining the
amount required to complete the Investment Commitment.
If the intended investment is not completed, the purchaser must pay Quest
Distributors an amount equal to the difference between the amounts paid for
these purchases and the amounts that would have been paid in applicable sales
charges. If the shareholder does not pay the additional amount within 20 days
after written request by Quest Distributors or the Investor's broker, Quest
Distributors will redeem an appropriate number of the retained shares that will
realize the additional amount. Quest Distributors is hereby and irrevocably
appointed attorney to give instructions to redeem any or all of such retained
shares, with full power of substitution in the premises.
The registered owner, whether or not the person who signed the Letter or
purchased the shares (for example, the donee of a gift), holds the shares
registered in his or her name subject to the terms of the Letter of Intent.
Share purchases of Quest Cash Reserves, Inc. and those of other Quest funds
made without a sales charge are not eligible to be included.
A Letter of Intent must be referred to by any broker when placing orders for
the purchaser or any related parties. Quest Distributors must be notified of any
change in the broker of record.
WITHDRAWAL PLAN PROVISIONS. Periodic withdrawal payments will be made by
redemption of shares held in uncertificated form two business days before the
end of the month. Payments will be
19
<PAGE>
mailed on the first business day of the next month. Redemption of shares will
reduce or may even liquidate your account. For this reason, payments cannot be
considered a yield or holds the shares registered in his or her name subject to
the terms of the Letter of Intent.
Share purchases of Quest Cash Reserves, Inc. and those of other Quest funds
made without a sales charge are not eligible to be included.
A Letter of Intent must be referred to by any broker when placing orders for
the purchaser or any related parties. Quest Distributors must be notified of any
change in the broker of record.
WITHDRAWAL PLAN PROVISIONS. Periodic withdrawal payments will be made by
redemption of shares held in uncertificated form two business days before the
end of the month. Payments will be mailed on the first business day of the next
month. Redemption of shares will reduce or may even liquidate your account. For
this reason, payments cannot be considered a yield or income on the Investment.
Income dividends and capital gains distributions will be received in shares at
net asset value. Total payout option involves payments of varying amounts. Each
payment is calculated by dividing the current net asset value of the shares in
the account by the number of payments remaining to the end of the period
selected. Payments from the total payout option will cease at the end of the
period selected and the account will be completely exhausted.
You may terminate the Plan at any time by written notice to State Street Bank
and Trust Company ("State Street"), or State Street may terminate the Plan at
any time upon receiving directions to that effect from the Fund. State Street
will also terminate the Plan upon receipt of evidence satisfactory to it of your
death or legal incapacity. Upon termination of the Plan by you, State Street, or
the Fund, shares remaining unredeemed will be held in an uncertificated account
in your name, and the account will continue as a dividend-reinvestment
uncertificated account unless and until proper instructions are received from
you, your executor or guardian, or as otherwise appropriate.
State Street shall incur no liability to you for any action taken or omitted
by State Street in good faith. In the event that State Street shall cease to act
as transfer agent for the Fund, you will be deemed to have appointed any
successor transfer agent as your Agent in administering the Plan.
MISCELLANEOUS. These terms shall be construed according to the laws of the State
of New York.
The broker-dealer represented on the Application must have an effective sales
agreement with Quest for Value Distributors signed by a principal of the firm.
The broker further represents that it has informed the investor of the terms and
conditions relating to the options elected.
If the investor does not sign the Application, the broker represents that the
form is completed in accordance with the investor's instructions and agrees to
indemnify the Fund, its servicing agent, and Quest for Value for any loss or
liability resulting from acting upon such instructions.
20
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
TWO WORLD FINANCIAL CENTER QUEST FOR VALUE
NEW YORK, NEW YORK 10080 TAX EXEMPT FUNDS
- ---------------------------------------------
CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses................. 2
Financial Highlights..................... 3
Investment Objectives of the Funds....... 4
Risk Factors and Special Investment / / NATIONAL TAX-EXEMPT FUND
Considerations........................... 5 / / CALIFORNIA TAX-EXEMPT FUND
How to Buy Shares........................ 7 / / NEW YORK TAX-EXEMPT FUND
Determining Net Asset Value.............. 9
How to Redeem Shares..................... 10
Exchanging Shares........................ 11
Investment Restrictions.................. 12
Investment Techniques.................... 12
Dividends and Distributions.............. 14
Tax Status............................... 14
Investment Management Agreement.......... 16
Distribution Plan........................ 16
Portfolio Transactions and Turnover...... 17
Additional Information................... 17
Application Terms and Conditions......... 19
</TABLE>
INVESTMENT ADVISOR:
QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NY 10281
TRANSFER AGENT:
STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8505
BOSTON, MA 02266-8505
GENERAL DISTRIBUTOR:
QUEST FOR VALUE DISTRIBUTORS
P.O. BOX 3567
CHURCH STREET STATION DECEMBER 1, 1994
NEW YORK, NY 10277-1296
(800) 232-FUND PROSPECTUS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
Each a Series of QUEST FOR VALUE FAMILY OF FUNDS (the "Trust")
One World Financial Center
New York, New York 10281
(800) 232-FUND
This Statement of Additional Information (the "Additional Statement") is not a
Prospectus. Investors should understand that this Additional Statement should be
read in conjunction with the Prospectus (the "Prospectus") dated December 1,
1994, of the National, California and New York Tax-Exempt Funds which may be
obtained by written request to State Street Bank and Trust Company ("State
Street"), P.O. Box 1912, Boston, MA 02105 or by calling (800) 232-FUND.
The date of this Additional Statement is December 1, 1994
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
TABLE OF CONTENTS
Investment of the Trust's Assets . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors and Special Considerations Regarding
New York Municipal Obligations . . . . . . . . . . . . . . . . . . . . . . . .11
Risk Factors and Special Considerations Regarding
California Municipal Obligations . . . . . . . . . . . . . . . . . . . . . . .15
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Investment Management and Other Services . . . . . . . . . . . . . . . . . . .23
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . .26
Portfolio Yield and Total Return Information . . . . . . . . . . . . . . . . .26
Distribution Expense Plan. . . . . . . . . . . . . . . . . . . . . . . . . . .32
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Description of Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
2
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The investment objective and policies of each Fund (the "Fund(s)") are
described in the Prospectus. A further description of each Fund's investments
and investment methods appears below.
RATINGS OF DEBT OBLIGATIONS. Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P") and Fitch Municipal Division ("Fitch") are
private services that provide ratings of the credit quality of debt obligations,
including issues of municipal securities. A description of the range of ratings
assigned to municipal securities by Moody's, S&P and Fitch is included in
Appendix A to this Statement of Additional Information. The Funds may use these
ratings in determining whether to purchase, sell or hold a security. These
ratings represent Moody's, S&P's and Fitch's opinions as to the quality of the
municipal securities that they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal securities with the same maturity, interest rate and
rating may have different market prices. Subsequent to its purchase by a Fund,
an issue of municipal securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. Quest for
Value Advisors (the "Advisor"), investment adviser to the Funds, will consider
such an event in determining whether the Fund should continue to hold the
obligation.
Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax (and also, when available,
from the federal alternative minimum tax) are rendered by bond counsel to the
issuing authorities at the time of issuance. Neither the Funds nor the Advisor
will review the proceedings relating to the issuance of municipal securities or
the basis for such opinions. An issuer's obligations under its municipal
securities are subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors (such as the federal
bankruptcy laws) and federal, state and local laws that may be enacted to extend
the time for payment of principal or interest, or both, or to impose other
constraints upon enforcement of such obligations. There also is the possibility
that, as a result of litigation or other conditions, the power or ability of
issuers to meet their obligations for the payment of principal of and interest
on their municipal securities may be materially adversely affected.
MUNICIPAL NOTES. For liquidity purposes, pending investment in municipal bonds,
or on a temporary or defensive basis due to market conditions, the Funds may
invest in tax-exempt short-term debt obligations (maturing in one year or less).
These obligations, known as "municipal notes," include tax, revenue and bond
anticipation notes, construction loan notes and tax-exempt commercial paper
which are issued to obtain funds for various public purposes; the interest from
these Notes is also exempt from federal income taxes. A Fund will limit its
investments in municipal notes to those which are rated, at the time of
purchase, within the two highest grades assigned by Moody's or the two highest
grades assigned by S&P or if unrated, which are of comparable quality in the
opinion of the Advisor.
MUNICIPAL BONDS. Municipal bonds include debt obligations of a state, a
territory, or a possession of the United States, or any political subdivision
thereof (e.g., counties, cities, towns, villages, districts, authorities) or the
District of Columbia issued to obtain funds for various purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which
3
<PAGE>
municipal bonds may be issued include the refunding of outstanding obligations,
obtaining funds for general operating expenses and the obtaining of funds to
loan to public or private institutions for the construction of facilities such
as education, hospital and housing facilities. In addition, certain types of
private activity bonds may be issued by or on behalf of public authorities to
obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
Such obligations are included within the term municipal bonds if the interest
paid thereon is at the time of issuance, in the opinion of the issuer's bond
counsel, exempt from federal income tax. The current federal tax laws, however,
substantially limit the amount of such obligations that can be issued in each
state.
The two principal classifications of municipal bonds are "general
obligation" and limited obligation or "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest, whereas revenue bonds are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise tax or other specific revenue
source. Private activity bonds that are municipal bonds are in most cases
revenue bonds and do not generally constitute the pledge of the credit of the
issuer of such bonds. The credit quality of private activity revenue bonds is
usually directly related to the credit standing of the industrial user involved.
There are, in addition, a variety of hybrid and special types of municipal
obligations as well as numerous differences in the collateral security of
municipal bonds, both within and between the two principal classifications
described above.
WHEN-ISSUED SECURITIES. As stated in the Prospectus, the Funds may purchase
municipal securities on a "when-issued" basis. A security purchased on a when-
issued basis is recorded as an asset on the commitment date and is subject to
changes in market value generally based upon changes in the level of interest
rates. Thus, upon delivery, its market value may be higher or lower than its
cost, and this may increase or decrease the Fund's net asset value. When a Fund
commits to purchase securities on a when-issued basis, its custodian will set
aside in a segregated account cash, U.S. government securities or other liquid
high-grade debt securities with a market value equal to the amount of the
commitment. If necessary, additional assets will be placed in the account daily
so that the value of the account will equal or exceed the amount of the Fund's
purchase commitment. Failure of the issuer to deliver the security may result in
the Fund's missing an opportunity to make an alternative investment.
HEDGING AND OPTION INCOME STRATEGIES. The Funds may attempt to enhance income
through the use of options and futures on debt securities and on indexes of debt
securities and options on futures, to attempt to hedge the Funds' investments,
that is, reduce the overall level of investment risk that would normally be
expected to be associated with their investments. Any income realized from the
use of options and futures would be taxable to shareholders. Use of these
instruments is subject to the applicable regulations of the Securities and
Exchange Commission ("SEC"), the several options and futures exchanges upon
which options and futures contracts are traded, the Commodity Futures Trading
Commission ("CFTC") and the various state regulatory authorities.
A Fund's use of options and futures contracts would involve certain
investment risks and transaction costs to which it might not otherwise be
subject. Such risks include (1) dependence on the Advisor's ability to predict
movements in the prices of individual securities, fluctuations in the general
4
<PAGE>
securities markets or market sectors and movements in interest rates, (2)
imperfect correlation between movements in the price of options, futures
contracts or options thereon and movements in the price of the securities hedged
or used for cover, (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon are different from those needed
to select the securities in which a Fund invests, (4) lack of assurance that a
liquid secondary market will exist for any particular option, futures contract
or option thereon at any particular time and (5) the possible need to defer
closing out of certain options, futures contracts and options thereon in order
to continue to qualify for the beneficial tax treatment afforded "regulated
investment companies" under the Internal Revenue Code of 1986, as amended
("Internal Revenue Code").
COVER FOR HEDGING AND OPTION INCOME STRATEGIES. The Funds will not use leverage
in their hedging strategies. In the case of transactions entered into as a
hedge, a Fund will hold securities or other options or futures positions whose
values are expected to offset ("cover") its obligations under the hedging
strategies. A Fund will not enter into a hedging or option income strategy that
exposes the Fund to an obligation to another party unless it owns either (1) an
offsetting ("covered") position in securities or other options or futures
contracts or (2) cash, receivables and short-term debt securities with a value
sufficient to cover its potential obligations. Each Fund will comply with
guidelines established by the SEC with respect to coverage of hedging and option
income strategies by mutual funds and, if the guidelines so require, will set
aside cash and/or liquid, high-grade debt securities in a segregated account
with its custodian in the amount prescribed. Securities or other options or
futures positions used for cover and securities held in a segregated account
cannot be sold or closed out while the hedging or option income strategy is
outstanding, unless they are replaced with similar assets.
OPTIONS STRATEGIES. The Funds may purchase put and call options on debt
securities in which they are authorized to invest. However, exchange-traded or
liquid over-the-counter options ("OTC") on municipal debt securities are not
currently available. A Fund may purchase call options on debt securities that
the Advisor intends to include in the Fund's portfolio in order to fix the cost
of a future purchase. Call options also may be used as a means of participating
in an anticipated price increase of a security on a more limited risk basis than
would be possible if the security itself were purchased. In the event of a
decline in the price of the underlying security, use of this strategy would
serve to limit the potential loss to the Fund to the option premium paid;
conversely, if the market price of the underlying security increases above the
exercise price and the Fund either sells or exercises the option, any profit
eventually realized will be reduced by the premium. A Fund may purchase put
options in order to hedge against a decline in the market value of securities
held in its portfolio. The put option enables the Fund to sell the underlying
security at the predetermined exercise price; thus, the potential for loss to
the Fund below the exercise price is limited to the option premium paid. If the
market price of the underlying security is higher than the exercise price of the
put option, any profit the Fund realizes on the sale of the security would be
reduced by the premium paid for the put option less any amount for which the put
option may be sold.
The Funds may write covered call and put options on debt securities in
which they are authorized to invest for hedging or to increase income in the
form of premiums received from the purchaser of the options. Because it can be
expected that a call option will be exercised if the market value of the
underlying security increases to a level greater than the exercise price, the
Funds will write covered call options on securities generally when the Advisor
believes that the premium, received by a
5
<PAGE>
Fund, plus anticipated appreciation in the market price of the underlying
security up to the exercise price of the option, will be greater than the total
appreciation in the price of the security. The strategy may be used to provide
limited protection against a decrease in the market price of the security, in an
amount equal to the premium received for writing the call option less any
transaction costs. Thus, in the event that the market price of the underlying
security held by a Fund declines, the amount of such decline will be offset
wholly or in part by the amount of the premium received by the Fund. If,
however, there is an increase in the market price of the underlying security and
the option is exercised, the Fund would be obligated to sell the security at
less than its market value. In addition, the Fund could lose the ability to
participate in an increase in the value of such securities because such an
increase would likely be offset by an increase in the cost of closing out the
call option (or could be negated if the buyer chose to exercise the call option
at an exercise price below the securities' current market value).
A put option gives the purchaser of the option the right to sell, and the
writer (seller) the obligation to buy, the underlying security at the exercise
price during the option period. So long as the obligation of the writer
continues, the writer may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring it to make payment of the exercise
price against delivery of the underlying security. The operation of put options
in other respects, including their related risks and rewards, is substantially
identical to that of call options. Generally, a Fund would write covered put
options on securities in circumstances where the Advisor believes that the
market price of the securities will not decline below the exercise price less
the premiums received. If the put option is not exercised, the Fund will realize
income in the amount of the premium received. This technique could be used to
enhance current return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying security would
decline below the exercise price less the premiums received, in which case, the
Fund would expect to suffer a loss.
In the event that options on indexes of municipal and non-municipal debt
securities become available, the Funds may purchase and write put and call
options on such indexes in much the same manner as the more traditional options
discussed above, except that index options may serve as a hedge against overall
fluctuations in the debt securities markets (or market sectors) rather than
anticipated increases or decreases in the value of a particular security. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities in which the Fund invests.
RISK FACTORS AND SPECIAL CHARACTERISTICS OF OPTIONS TRADING. A Fund may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If the Fund wishes to terminate its obligation to purchase
or sell securities under a put or call option it has written, the Fund may
purchase a put or call option of the same series (that is, an option identical
in its terms to the option previously written); this is known as a closing
purchase transaction. Conversely, in order to terminate its right to purchase or
sell specified securities under a call or put option it has purchased, the Fund
may write an option of the same series as the option held; this is known as a
closing sale transaction. Closing transactions essentially permit the Fund to
realize profits or limit losses on its options positions prior to the exercise
or expiration of the option. Whether a profit or loss is realized from a closing
transaction depends on the price movement of the underlying index or security
and the market value of the option.
6
<PAGE>
In considering the use of options to enhance income or to hedge a Fund's
securities, particular note should be taken of the following:
(1) The value of an option position will reflect, among other things, the
current market price of the underlying security, the time remaining until
expiration, the relationship of the exercise price to the market price, the
historical price volatility of the underlying security and general market
conditions. For this reason, the successful use of options as a hedging strategy
depends upon the Advisor's ability to forecast the direction of price
fluctuations in the underlying securities market or, in the case of securities
index options, fluctuation in the market sector represented by the securities
index selected.
(2) Options normally have expiration dates of up to nine months. The
exercise price of an option may be below, equal to or above the current market
value of the underlying security. Options that expire unexercised have no value.
Unless an option purchased by the Fund is exercised or unless a closing
transaction is effected with respect to that position, a loss will be realized
in the amount of the premium paid.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options. Most exchange-
listed options relate to stocks. Exchange markets for options on debt securities
exist but are relatively new and the ability to establish and close out
positions on the exchanges is subject to the maintenance of a liquid secondary
market. Closing transactions may be effected with respect to options traded in
the OTC markets (currently the primary markets for options on debt securities)
only by negotiating directly with the other party to the option contract or in a
secondary market for the option if such market exists. Although the Funds intend
to purchase or write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market will
exist for any particular option at any specific time. In such event, it may not
be possible to effect closing transactions with respect to certain options, with
the result that a Fund would have to exercise those options that it has
purchased in order to realize any profit. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because a Fund must maintain a covered position
with respect to any call option it writes on a security or securities index, the
Fund may not sell the underlying security in the case of an option on a security
or invest the cash or cash equivalents used to cover a securities index option
during the period it is obligated under the option. This requirement may impair
the Fund's ability to sell a security or make an investment at a time when such
a sale or investment might be advantageous.
(4) Securities index options are settled exclusively in cash. If a Fund
writes a call option on an index, the Fund will not know in advance the
difference, if any, between the closing value of the index on the exercise date
and the exercise price of the option itself and thus will not know the amount of
cash payable upon settlement. In addition, a holder of an index option who
exercises it before the closing index value for that day is available runs the
risk that the level of the underlying index may subsequently change. For
example, in the case of a call option, if such a change causes the closing index
value to fall below the exercise price of the option on the index, the
exercising holder will be required to pay the difference between the closing
index value and the exercise price of the option.
7
<PAGE>
(5) The Funds' activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, the Funds also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.
FUTURES STRATEGIES. The Funds may purchase and sell futures contracts and
options on such futures contracts as a hedge against anticipated interest rate
changes, market movements, or future risk management. A Fund may sell futures
contracts on debt securities and debt security indexes in anticipation of a
general market or market sector decline that could adversely affect the market
value of the Fund's securities. To the extent that a portion of the Fund's
securities correlates with a given index, the sale of futures contracts on that
index could reduce the risks associated with a market decline and thus provide
an alternative to the liquidation of securities positions. The Fund may purchase
futures contracts if a significant market or market sector advance is
anticipated. Such a purchase of a futures contract would serve as a temporary
substitute for the purchase of individual securities, which may then be
purchased in an orderly fashion. As such purchases are made, an equivalent
amount of futures would be liquidated by offsetting sales. This strategy may
minimize the effect of all or part of an increase in the market price of
securities that the Fund intends to purchase. A rise in the price of the
securities should be in part or wholly offset by gains in the futures position.
A Fund may purchase a call option on a futures contract as a means of
obtaining temporary exposure to market appreciation at limited risk. This
strategy is analogous to the purchase of a call option on an individual debt
security, in that it can be used as a temporary substitute for a position in the
security itself. As in the case of a purchase of a futures contract, a Fund may
purchase a call option on a futures contract to hedge against a market advance
in securities that the Fund plans to acquire at a future date. A Fund may write
covered call options on futures as a partial hedge against a decline in the
prices of bonds held in its portfolio. This is analogous to writing covered call
options on securities. The Funds also may purchase put options on futures
contracts. The purchase of put options on futures contracts is analogous to the
purchase of protective put options on individual securities where a level of
protection is sought below which no additional economic loss would be incurred
by the Fund.
The Funds may use futures contracts to hedge their portfolio against
changes in the general level of interest rates. A Fund may purchase a debt
futures contract when it intends to purchase debt securities but has not yet
done so. This strategy may minimize the effect of all or part of an increase in
the market price of the debt security that the Fund intends to purchase in the
future. A rise in the price of the debt security prior to its purchase may
either be offset by an increase in the value of the futures contract purchased
by the Fund or avoided by taking delivery of the debt securities under the
futures contract. Conversely, a fall in the market price of the underlying debt
security may result in a corresponding decrease in the value of the futures
position. The Fund may sell a debt futures contract in order to continue to
receive the income from a debt security, while endeavoring to avoid part or all
of the decline in market value of that security that would accompany an increase
in interest rates.
A Fund may purchase a call option on a futures contract to hedge against a
market advance in debt securities that the Fund plans to acquire at a future
date. The purchase of a call option on a futures contract is analogous to the
purchase of a call option on an individual debt security which can be used as a
temporary substitute for a position in the security itself. A Fund also may
write covered
8
<PAGE>
call options on debt futures as a partial hedge against a decline in the price
of debt securities held in the Fund's portfolio or purchase put options on debt
futures in order to hedge against a decline in the value of debt securities held
in the Fund's portfolio.
Each Fund must operate within certain restrictions as to its positions in
futures and options under a rule adopted by the Commodity Futures Trading
Commission ("CFTC") under the Commodity Exchange Act (the "CEA"), which excludes
each Fund from registration with the CFTC as a "commodity pool operator" (as
defined under the CEA). Under those restrictions, a Fund may not enter into any
futures or options contract unless such transactions are for bona fide hedging
purposes, or for other purposes only if the aggregate initial margins and
premiums required to establish such non-hedging positions would not exceed 5% of
the liquidation value of its assets. Each Fund may use futures and options
thereon for bona fide hedging or for other purposes within the meaning and
intent of the applicable provisions of the CEA.
RISK FACTORS AND SPECIAL CHARACTERISTICS OF FUTURES TRADING. No price is paid
upon entering into futures contracts. Instead, upon entering into a futures
contract, a Fund is required to deposit with its Custodian in a segregated
account in the name of the futures broker through which the transaction is
effected an amount of cash, U.S. government securities or other liquid, high-
grade debt instruments generally equal to 10% or less of the contract value.
This amount is known as "initial margin." When writing a call option on a
futures contract, margin also must be deposited in accordance with applicable
exchange rules. Subsequent payments, called "variation margin," to and from the
broker, are made on a daily basis as the value of the futures position varies, a
process known as "marking to the market". For example, when a Fund purchases a
contract and the value of the contract rises, the Fund receives from the broker
a variation margin payment equal to that increase in value. Conversely, if the
value of the futures position declines, the Fund is required to make a variation
margin payment to the broker equal to the decline in value. Unlike margin in
securities transactions, future contracts margin does not involve borrowing to
finance the futures transactions. Rather, futures contracts margin is in the
nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied.
Holders and writers of futures positions and options on futures positions
can enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, a futures position or
related options position with the same terms as the position or option held or
written. Positions in futures contracts may be closed only on an exchange or
board of trade providing a secondary market for such futures contracts. A public
market now exists on the Chicago Board of Trade for futures contracts on the
Municipal Bond Index, comprising 40 long-term municipal bonds. Additional
municipal bond index futures contracts, of course, may be developed and traded
in the future.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may prevent the liquidation of unfavorable positions. Futures or related
options prices could move to the daily limit for several
9
<PAGE>
consecutive trading days with little or no trading and thereby prevent prompt
liquidation of positions and subject some traders to substantial losses. In such
event, it may not be possible for a Fund to close a position and, in the event
of adverse price movements, the Fund would have to make daily cash payments of
variation margin (except in the case of purchased options). However, in the
event futures contracts have been used to hedge portfolio securities, such
securities will not be sold until the contracts can be terminated. In such
circumstances, an increase in the price of the securities, if any, may partially
or completely offset losses on the futures contract. However, there is no
guarantee that the price of the securities will, in fact, correlate with the
price movements in the contracts and thus provide an offset to losses on the
contracts.
In considering the Funds' use of futures contracts and related options,
particular note should be taken of the following:
(1) Successful use by the Funds of futures contracts and related options
will depend upon the Advisor's ability to predict movements in the direction of
the interest rate markets, which requires different skills and techniques than
predicting changes in the prices of individual securities. Moreover, futures
contracts relate not to the current level of the underlying instrument but to
the anticipated levels at some point in the future; thus, for example, trading
of municipal bond index futures may not reflect the trading of the securities
that are used to formulate the index or even actual fluctuations in the index
itself. There is, in addition, the risk that the movements in the price of the
futures contract will not correlate with the movements in prices of the
securities being hedged. For example, if the price of a municipal bond index
futures contract moves less than the price of the securities that are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the securities being hedged has moved in an unfavorable direction, a Fund would
be in a better position than if it had not hedged at all. If the price of the
securities being hedged has moved in a favorable direction, this advantage may
be partially offset by losses in the futures position. If the price of the
futures contract moves more than the price of the underlying securities, a Fund
will experience either a loss or a gain on the future that may or may not be
completely offset by movements in the price of the securities that are the
subject of the hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in the futures
position and the securities being hedged, movements in the prices of futures
contracts may not correlate perfectly with movements in the prices of the hedged
securities due to price distortions in the futures markets. There may be several
reasons unrelated to the value of the underlying securities that cause this
situation to occur. First, as noted above, all participants in the futures
market are subject to initial and variation margin requirements. If, to avoid
meeting additional margin deposit requirements or for other reasons, investors
choose to close a significant number of futures contracts through offsetting
transactions, distortions in the normal price relationship between the
securities and the futures markets may occur. Second, because the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market; such speculative activity in the futures market also may
cause temporary price distortions. As a result, a correct forecast of general
market trends may not result in successful hedging through the use of futures
contracts over the short term. In addition, activities of large traders in both
the futures and securities markets involving arbitrage and other investment
strategies may result in temporary price distortions.
10
<PAGE>
(3) Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures contracts.
Although the Funds intend to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract at any particular time. In such event, it
may not be possible to close a futures position, and in the event of adverse
price movements, the Funds would continue to be required to make variation
margin payments.
(4) Like options on securities, options on futures contracts have a limited
life. The ability to establish and close out options on futures will be subject
to the development and maintenance of liquid secondary markets on the relevant
exchanges or boards of trade. There can be no certainty that liquid secondary
markets for all options on futures contracts will develop. However, the Funds
will not trade options on futures contracts on any exchange or board of trade
unless and until, in the Advisor's opinion, the market for such options has
developed sufficiently that the risks in connection with options on futures
transactions are not greater than the risks in connection with futures
transactions.
(5) Purchasers of options on futures contracts pay a premium in cash at the
time of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on futures contracts, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when a
Fund purchases an option is the premium paid for the option and the transaction
costs, there may be circumstances when the purchase of an option on a futures
contract would result in a loss to the Fund when the use of a futures contract
could not, such as when there is no movement in the level of the underlying
index or the value of the securities being hedged.
(6) As is the case with options, the Funds' activities in the futures
markets may result in a higher portfolio turnover rate and additional
transaction costs in the form of brokerage commissions; however, the Funds also
may save on commissions by using such contracts as a hedge rather than buying or
selling individual securities in anticipation or as a result of market
movements.
PARTICIPATION INTERESTS. For purposes of the diversification restriction and the
industry concentration restriction, the Funds will consider the underlying
corporate borrower to be an issuer of a participation interest.
RISK FACTORS AND SPECIAL CONSIDERATIONS REGARDING NEW YORK MUNICIPAL
OBLIGATIONS. The financial condition of the State of New York (the "State") may
be affected by various financial, social, economic and political factors. Those
factors can be very complex, may vary from fiscal year to fiscal year, and are
frequently the result of actions taken not only by the State and its agencies
and instrumentalities but also by entities that are not under the control of the
State.
The financial condition of the State, its authorities and public benefit
corporations (the "Authorities") and its municipalities, particularly The City
of New York (the "City"), could affect the market values and marketability of,
and therefore the net asset value per share and the interest income
11
<PAGE>
of, the New York Tax-Exempt Portfolio, or result in the default of existing
obligations, including obligations which may be held by the New York Tax-Exempt
Fund.
The following section provides only a brief summary of the complex factors
affecting the financial situation in New York and is based on information drawn
from certain official statements relating to securities offerings of the State,
its Authorities and the City and certain other localities, as available on the
date of this Statement of Additional Information. THE INFORMATION CONTAINED IN
SUCH OFFICIAL STATEMENTS AND OTHER PUBLICLY AVAILABLE DOCUMENTS HAS NOT BEEN
INDEPENDENTLY VERIFIED.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, resulting in the gradual erosion of its relative economic
affluence. The causes of this relative decline are varied and complex, in many
cases involving national and international developments beyond the State's
control. Part of the reason for the long-term relative decline in the State
economy has been attributed to the combined State and local tax burden, which is
one of the highest in the nation. The existence of this tax burden limits the
State's ability to impose higher taxes in the event of future financial
difficulties. Recently, the State has been relatively successful in bringing the
rate of growth in the public sector in the State in line with changes in the
private economy.
As a result of the national and regional economic recession, the State's
tax receipts for its 1991 and 1992 fiscal years were substantially lower than
projected, which resulted in reductions in State aid to localities for the
State's 1992 and 1993 fiscal years from amounts previously projected. The State
completed its 1993 fiscal year with a positive margin of $671 million in the
General Fund. The State's economy, as measured by employment, started to recover
near the start of the 1993 calendar year and the State completed its 1994 fiscal
year with a cash-basis positive balance of $1,026 billion in the State's General
Fund (the major operating fund of the State).
The State updates its Financial Plans quarterly to adjust for changing
economic conditions. The State's 1994-95 Financial Plan, which is based upon the
enacted State budget, projects a balanced General Fund. The State's 1994-95
Financial Plan provided the City with savings through various actions, which
include increased State education aid and State assumption of certain costs
previously paid by the City and restoration of certain prior year revenue
sharing reductions. However, the State legislature failed to enact a substantial
portion of the proposed state assumption of local Medical costs, other
significant mandate relief items, and certain Medicaid costs containment items
proposed by the Governor, which would have provided the City with additional
savings. The Division of the Budget has cautioned that its projections are
subject to various risks and that actual economic growth may be weaker than
projected due to such factors as consumer attitudes towards spending, Federal
financial and monetary policies, the availability of credit and the condition of
the world economy.
Owing to these and other factors the State may face substantial potential
budget gaps in future years resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at required levels. Any such recurring
imbalance would be exacerbated by the use by the State of nonrecurring resources
to achieve
12
<PAGE>
budgetary balance in a particular fiscal year. To correct any recurring
budgetary imbalance, the State would need to take significant actions to align
recurring receipts and disbursements in future fiscal years. There can be no
assurance, however, that the State's action will be sufficient to preserve
budget balances in the then current or future fiscal years.
The State Financial Plan contains actions that provide nonrecurring
resources or savings, as well as actions that impose nonrecurring losses of
receipts or costs. The Division of the Budget believes that the amount of such
actions do not materially affect the underlying financial condition of the
State, and represent less than one-half of one percent of the State's General
Fund. This amount is significantly lower than the amount included in the State
Financial Plans in recent years.
In addition to these nonrecurring actions, the 1994-95 State Financial Plan
reflects the use of $1.026 billion in the positive cash margin carried over from
the prior fiscal year, resources that are not expected to be available in 1995-
96.
On January 13, 1992, S&P reduced its ratings on the State's general
obligation bonds from A to A- and in addition reduced its ratings on the State's
moral obligation, lease purchase, guaranteed and contractual obligation debt.
S&P also continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, S&P revised its rating outlook assessment to
stable. On June 8, 1993, S&P affirmed the State's A- rating and continued its
outlook as stable. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease-purchase and contractual obligations
from A to Baa1. On June 8, 1993 Moody's reconfirmed its A rating on the State's
general long-term indebtedness.
NEW YORK CITY. The fiscal health of the State is closely related to the fiscal
health of its localities, particularly the City, which has required and
continues to require significant financial assistance from the State. For each
of the 1981 through 1993 fiscal years, the City achieved balanced operating
results as reported in accordance with generally accepted accounting principles
("GAAP"), and the City's 1994 fiscal year results are projected to be balanced
in accordance with GAAP. For fiscal year 1995, the City has adopted a budget
which has halted the trend in recent years of substantial increases in City
spending from one year to the next. The City was required to close substantial
budget gaps in recent years in order to maintain balanced operating results.
There can be no assurance that the City will continue to maintain a balanced
budget as required by State law without additional tax or other revenue
increases or reductions in City services, which could adversely affect the
City's economic base.
In response to the City's fiscal crisis in 1975, the State took a number of
steps to assist the City in returning to fiscal stability. Among these actions,
the State created the Municipal Assistance Corporation for the City of New York
("MAC") to provide financing assistance to the City. The State also enacted the
New York State Financial Emergency Act for the City of New York (the "Financial
Emergency Act") which, among other things, established the New York State
Financial Control Board (the "Control Board") to oversee the City's financial
affairs. The State also established the Office of the State Deputy Comptroller
("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the Control Board's powers of approval over
the City's Financial Plan were suspended pursuant to the Financial Emergency
Act. However, the Control Board, MAC and OSDC continue to exercise various
monitoring functions relating to the City's financial position.
13
<PAGE>
The City operates under a four-year financial plan which is prepared annually
and is periodically updated. The City submits its financial plans as well as the
periodic updates to the Control Board for its review.
Estimates of the City's revenues and expenditures are based on numerous
assumptions and are subject to various uncertainties. If expected Federal or
State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City should
negotiate wage increases for its employees greater than the amounts provided for
in the City's Financial Plan, or if other uncertainties materialize that reduce
expected revenues or increase projected expenditures, then to avoid operating
deficits the City may be required to implement additional actions, including
increases in taxes and reductions in essential City services. The City might
also seek additional assistance from the State.
On July 8, 1994, the City submitted to the Control Board a fourth quarter
modification to the City's financial plan for the 1994 fiscal year (the "1994
Modification") which projects a balanced budget in accordance with GAAP for the
1994 fiscal year, after taking into account a discretionary transfer of $171
million in resources to the 1995 fiscal year.
On July 25, 1994, the Mayor announced the City would implement additional
spending reductions, over and above those included in the Financial Plan,
totaling $250 million during the 1995 fiscal year to compensate for a shortfall
in projected tax revenues and additional expenditures over projection for the
1994 fiscal year and failure by the State Legislature to approve City proposals
for tort reform and State mandate relief. The Mayor stated that the City would
also prepare contingency plans for an additional $200 million in spending
reductions during the 1995 fiscal year, such plans to be implemented in the
event other assumptions included in the Financial Plan do not materialize.
The City's financial plans have been the subject of extensive public
comment and criticism. On August 12, 1994, the City Comptroller issued a report
on the Financial Plan citing budget risks of up to $968 million for the 1995
fiscal year and budget risks of up to $1.2 billion, $1.3 billion and $1.6
billion for the 1996 through 1998 fiscal years, respectively. On July 28, 1994,
the staff of the New York State Financial Control Board (the "Control Board")
issued a report on the 1995-1998 Financial Plan concluding that the City faces
budget risks of more than $1 billion in the 1995 fiscal year, $2 billion in the
1996 fiscal year and $3 billion in each of the 1997 and 1998 fiscal years. On
July 27, 1994, the Office of the State Deputy Comptroller of New York issued a
report reviewing the 1995-1998 Financial Plan. The report concluded that a
potential budget gap of $616 million exists for the 1995 fiscal year and that
budget gaps for fiscal years 1996-1998 could exceed the gaps projected by the
Financial Plan by a total of $1.2 billion annually. On July 11, 1994, the three
private members of the Control Board issued a statement which concluded the
City's 1995 fiscal year budget is not reasonably balanced and that further
budget cuts are unavoidable in the next six months. It is reasonable to expect
that such reports and statements will continue to be issued and to engender
public comment.
As of July 28, 1994, Moody's Investors Service, Inc. ("Moody's") rated the
City's general obligation bonds Baal and Standard & Poor's Ratings Group
("Standard & Poor's") and Fitch Investors Service, Inc. ("Fitch") each rated
such bonds A-. Such ratings reflect only the views of
14
<PAGE>
Moody's, Standard & Poor's and Fitch, from which an explanation of the
significance of such ratings may be obtained. There is no assurance that such
ratings will continue for any given period of time or that they will be revised
downward or withdrawn entirely. Any such downward revision or withdrawal could
have an adverse effect on the market prices of bonds.
RISK FACTORS AND SPECIAL CONSIDERATIONS REGARDING CALIFORNIA MUNICIPAL
OBLIGATIONS. Since the California Tax-Exempt Fund concentrates its investments
in California tax-exempt securities, it is affected by any political, economic
or regulatory developments affecting the ability of California issuers to pay
interest or repay principal.
The following information constitutes only a brief summary, does not
purport to be a complete description and is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State of California and various local agencies in California, available as of
the date of this Statement of Additional Information. THE INFORMATION CONTAINED
IN SUCH OFFICIAL STATEMENTS AND OTHER PUBLICLY AVAILABLE DOCUMENTS HAS NOT BEEN
INDEPENDENTLY VERIFIED.
Periodic reports on revenues and expenditures during each fiscal year are
issued by the Administration, the state Controller's Office, the Commission on
State Finance and the Legislative Analyst's Office. The Department of Finance
also issues a monthly bulletin which reports the most recent revenue receipts,
comparing them to budget projections, and reports on other current developments
affecting the budget. The Administration also formally updates its budget
projections twice during each fiscal year, generally in January and May.
Recent developments regarding the California constitution and state
statutes which limit the taxing and spending authority of California
governmental entities may impair the ability of California issuers to maintain
debt service on their obligations.
In 1978, Proposition 13, an amendment to the California constitution, was
approved, limiting real property valuation for property tax purposes and the
power of local governments to increase real property tax revenues and revenues
from other sources. Legislation adopted after Proposition 13 provided for
assistance to local governments, including the redistribution of the then-
existing surplus in the General Fund. However, more recent legislation reduced
such state assistance.
In June 1982, the voters of California passed two initiative measures to
repeal the California gift and inheritance tax laws and to enact, in lieu
thereof, a California death tax. California voters also passed an initiative
measure to increase, for taxable years commencing on or after January 1, 1982,
the amount by which personal income tax brackets will be adjusted annually in an
effort to index such tax brackets to account for the effects of inflation.
Decreases in State and local revenues in future fiscal years as a consequence of
these initiatives may result in reductions in allocations of state revenues to
California issuers or in the ability of California issuers to pay their
obligations.
In November 1984, California voters rejected a proposed amendment to the
California constitution that was intended to reverse the results of court
decisions narrowing the scope of Proposition 13 and was further intended to
broaden the tax relief granted by Proposition 13. If passed
15
<PAGE>
by the voters, this constitutional amendment would have had a substantial effect
both on the current revenue of California state and local governments and on the
future revenue-raising capability of such governments. This proposed amendment
resulted in S&P and Moody's review of their California tax-exempt obligations.
Proposals similar to the November 1984 proposal could be made in the future,
and, if enacted, could impair the ability of California issuers to pay interest
and principal on their obligations. In November 1986, California voters approved
Proposition 62, which by statute (rather than Constitutional amendment) imposes
additional requirements on the ability of certain California issuers to impose
newer higher "general taxes". Under Proposition 62, all "general taxes" (taxes
the revenues from which are not designated for a specific purpose) must be
approved by a majority vote of the electorate of the local government or
district imposing the tax, and any taxes imposed by any California local
government or district after July 31, 1985 and before November 4, 1986 must be
approved by a majority of voters voting in an election on the tax by November 4,
1988. The Legislative Analyst's ballot analysis of this measure, however,
indicates that general taxes paid by charter cities do not need to be approved
by voters by November 4, 1988. If the tax fails to comply with Proposition 62,
the taxing agency's share of property tax revenue allocated to it by the State
of California must be reduced by one dollar for each dollar of revenue
attributable to such tax for each year that the tax was collected. Two
California Courts of Appeals, however, recently ruled that the voter approval
requirement of Proposition 62 violates the California Constitution. Moreover,
one of the California Courts of Appeal also ruled that the requirements that
general taxes adopted on or after November 4, 1986 be approved by local voters
also violated the California Constitution. One of these two California Courts of
Appeal has also recently ruled that the requirement in Proposition 62 that
"special taxes" (taxes the revenues from which are designated for a specific
purpose) be approved by a two-thirds vote of the electorate of the local
government or district imposing the tax is unconstitutional. The California
Supreme Court has accepted an appeal of this decision.
The State is subject to an annual appropriations limit imposed by Article
XIII B of the State Constitution (the "Appropriations Limit"). Article XIII B
prohibits the State from spending "appropriations subject to limitation" in
excess of the Appropriations Limit. Article XIII B, originally adopted in 1979,
was modified substantially by Propositions 98 and 111 in 1988 and 1990,
respectively. "Appropriations subject to limitation," with respect to the State,
are authorizations to spend "proceeds of taxes," which consist of tax revenues,
and certain other funds, including proceeds from regulatory licenses, user
charges or other fees to the extent that such proceeds exceed "the cost
reasonably borne by that entity in providing the regulation, product or
service," but "proceeds of taxes" exclude most state subventions to local
governments, tax refunds and some benefit payments such as unemployment
insurance. No limit is imposed on appropriations of funds which are not
"proceeds of taxes," such as reasonable user charges or fees and certain other
non-tax funds.
Not included in the Appropriations Limit are appropriations for the debt
service costs of bonds existing or authorized by January 1, 1979 or subsequently
authorized by the voters, appropriations required to comply with mandates of
courts or the federal government and, pursuant to Proposition 111,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle weight
fees above January 1, 1990 levels. In addition, a number of recent and proposed
initiatives are structured to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article XIII B
limits (e.g. increased cigarette and tobacco taxes enacted by Proposition 99 in
1988). The Appropriations Limit
16
<PAGE>
may also be exceeded in cases of emergency. However, unless the emergency
results from civil disturbance or natural disaster declared by the Governor, and
the appropriations are approved by two-thirds of the Legislature, the
Appropriations Limit for the next three years must be reduced by the amount of
the excess.
The State's Appropriations Limit in each year is based on the limit for the
prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended average
of overall state population growth and change in attendance at local school and
community college ("K-14") districts. As amended by Proposition 111, the
Appropriations Limit is tested over consecutive two-year periods. Any excess of
the aggregate "proceeds of taxes" received over such two year period above the
combined Appropriations Limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the Appropriations Limit was based on 1978-
79 fiscal year authorizations to expend proceeds of taxes and was adjusted
annually to reflect changes in cost of living and population (using different
definitions, which were modified by Proposition 111). Starting in the 1991-92
fiscal year, the Appropriations Limit was recalculated by taking the actual
1986-87 limit and applying the annual adjustments as if Proposition 111 had been
in effect. The Legislature has enacted methods for determining the
Appropriations Limit. Government Code Section 7912 requires an estimate of the
Appropriations Limit to be included in the annual budget proposed by the
Governor in January of each year for the next fiscal year (the "Governor's
Budget"), and thereafter to be subject to the budget process and established in
the Budget Act.
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level, and the operation of the
Appropriations Limit, primarily by guaranteeing K-14 schools a minimum share of
General Fund revenues. Proposition 98 permits the Legislature by two-thirds vote
of both houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one year period.
In the November 1990 general election, California voters rejected two
measures that would have made it more difficult for California and its local
governments to increase taxes. In addition, a California Court of Appeal
recently ruled that California's "unitary" system of taxation was
unconstitutional as applied to the worldwide income from the operations of a
foreign corporation and its subsidiaries. The state has requested that the Court
of Appeal rehear this matter. Should the Court of Appeal's decision ultimately
be affirmed, California might have to make significant tax refund payments to
corporate taxpayers. In addition, based upon a 1989 U.S. Supreme Court decision
challenges to the constitutionality of California's Proposition 13 system of
real property taxation are also pending in the California courts. Two California
Courts of Appeal have recently held that Proposition 13 is constitutional,
however. If Proposition 13 is ultimately ruled to be unconstitutional,
California counties might have to make substantial refunds of real property tax
revenue.
17
<PAGE>
In the years following enactment of the Federal Tax Reform Act of 1986, and
conforming changes to the state's tax laws, taxpayer behavior became much more
difficult to predict, and the state experienced a series of fiscal years in
which revenue came in significantly higher or lower than the original estimates.
Since the start of the 1990-91 Fiscal Year, the State has faced the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), exports and financial services, among
others, have all been severely affected. Job losses have been the worst of any
post-war recession and have continued through the end of 1993. The Department of
Finance now projects that non-farm employment levels will be stable in 1994 and
show modest growth in 1995, but pre-recession job levels are not expected to be
reached for several more years. Unemployment is expected to remain well above
the national average through 1994. The Department of Finance foresees slow
recovery from the recession in California beginning in 1994. Both the California
and national economic recoveries are much weaker than in previous business
cycles, and could be harmed by several factors, including rising interest rates.
The recession has seriously affected State tax revenues, which basically
mirror economic conditions. It has also caused increased expenditures for health
and welfare programs. The State has also been facing a structural imbalance in
its budget with the largest programs supported by the General Fund-K-12 schools
and community colleges, health and welfare, and corrections-growing at rates
higher than the growth rates for the principal revenue sources of the General
Fund. As a result, the State has experienced recurring budget deficits. The
State Controller reports that expenditures exceeded revenues for four of the
five fiscal years ending with 1991-92, and were essentially equal in 1992-93. By
June 30, 1993, according to the Department of Finance, the State's Special Fund
for Economic Uncertainties had a deficit, on a budget basis, of approximately
$2.8 billion. The 1993-94 Budget Act incorporated a Deficit Retirement Plan to
repay this deficit over two fiscal years. The original budget for 1993-94
reflected revenues which exceeded expenditures by approximately $2.0 billion. As
a result of the continuing recession, the excess of revenues over expenditures
for the fiscal year is now expected to be only about $500 million. Thus the
accumulated budget deficit at June 30, 1994 is now estimated by the Department
of Finance to be approximately $2.0 billion, and the deficit will not be retired
by June 30, 1995 as planned.
The accumulated budget deficits over the past several years, together with
expenditures for school funding which have not been reflected in the budget, and
reduction of available internal borrowable funds, have combined to significantly
deplete the State's cash resources to pay its ongoing expenses. In order to meet
its cash needs in the 1994-95 Fiscal Year, the State has issued, in July and
August, 1994, $4.0 billion of revenue anticipation warrants which mature on
April 25, 1996, and $3.0 billion of revenue anticipation notes maturing on June
28, 1995.
The 1994-95 Budget Act is projected to have $41.9 billion of General Fund
revenues and transfers and $40.0 billion of budgeted expenditures. In addition,
the 1994-95 Budget Act anticipates deferring retirement of about $1 billion of
the accumulated budget deficit to the 1995-96 Fiscal Year when it is intended to
be fully retired by June 30, 1996.
18
<PAGE>
On July 15, 1994, all three of the rating agencies rating the State's long-
term debt lowered their ratings of the State's general obligation bonds. Moody's
Investors Service lowered its rating from "Aa" to "A1," Standard & Poor's
Ratings Group lowered its rating from "A+" to "A" and termed its outlook as
"stable," and Fitch Investors Service lowered its rating from "AA" to "A".
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8 on
the Richter Scale struck Los Angeles causing significant damage to public and
private structures and facilities. Although some individuals and businesses
suffered losses totaling in the billions of dollars, the overall effect of the
earthquake on the regional and State economy is not expected to be serious.
ADDITIONAL CONSIDERATIONS. With respect to municipal obligations issued by the
State of California and its political sub-divisions, the Fund cannot predict
what legislation, if any, may be proposed in the California State Legislature as
regards the California State personal income tax status of interest on such
obligations, or which proposals, if any, might be enacted. Such proposals, if
enacted, might materially adversely affect the availability of California
municipal obligations for investment by the California Tax-Exempt Fund and the
value of the California Tax-Exempt Fund. In such an event, the Directors would
reevaluate the California Tax-Exempt Fund's investment objective and policies
and consider changes in its structure or possible dissolution.
INVESTMENT RESTRICTIONS
The Trust's significant investment restrictions applicable to each Fund are
described in the Prospectus. The following are also fundamental policies and,
together with the restrictions and other fundamental policies described in the
Prospectus, cannot be changed without the vote of a majority of the outstanding
voting securities of that Fund, as defined in the 1940 Act. Such a majority is
defined as the lesser of (a) 67% or more of the shares of the Fund present at a
meeting of shareholders of the Trust, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by Proxy or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions and those contained in the Prospectus: (i) all percentage
limitations apply immediately after a purchase or initial investment; and (ii)
any subsequent change in any applicable percentage resulting from market
fluctuations or other changes in the amount of total assets does not require
elimination of any security from a Fund. Under these additional restrictions,
each Fund cannot:
(a) Invest in physical commodities or physical commodity contracts or speculate
in financial commodity contracts, but may purchase and sell futures contracts
and options on such futures contracts exclusively for hedging and other non-
speculative purposes;
(b) Invest in real estate; however, each Fund may purchase municipal securities
secured by real estate or interests therein;
(c) Purchase securities on margin (except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities) or make short
sales of securities except "against the box", except that the Funds may make
margin deposits, make short sales and maintain short positions in connection
with the use of options, futures contracts and options on futures contracts;
19
<PAGE>
(d) Underwrite securities of other companies except in so far as the Fund may
be deemed to be an underwriter under the Securities Act of 1933 in disposing of
a security;
(e) Invest in interests in oil, gas or other mineral exploration or development
programs or leases;
(f) Invest in securities of any issuer if, to the knowledge of the Trust, any
officer or trustee of the Trust or any officer or director of the Manager owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer;
(g) Pledge its assets or assign or otherwise encumber its assets in excess of
10% of its net assets (taken at market value at the time of pledging) and then
only to secure borrowings effected within the limitations set forth in the
Prospectus;
(h) Invest for the purpose of exercising control or management of another
company;
(i) Issue senior securities as defined in the Act except insofar as the Fund
may be deemed to have issued a senior security by reason of: (1) entering into
any repurchase agreement; (2) borrowing money in accordance with restrictions
described above; or (3) lending portfolio securities; and
(j) Make loans to any person or individual except that portfolio securities may
be loaned within the limitations set forth in the prospectus.
In addition, the National Tax-Exempt Fund and the California Tax-Exempt
Fund, with respect to 75% of their respective assets, may not invest more than
5% of the value of their total assets in the securities of any one issuer and,
to comply with a state's securities laws, the Funds have agreed not to purchase
warrants, if as a result a Fund would then have either more than 5% of its
assets invested in warrants or more than 2% of its assets invested in warrants
not listed on the New York or American Stock Exchange.
TRUSTEES AND OFFICERS
The trustees and officers (except officers/portfolio managers of other
portfolios of the Trust) of the Trust, and their principal occupations during
the past five years, are set forth below. Trustees who are "interested persons",
as defined in the 1940 Act, are denoted by an asterisk. The address of each is
One World Financial Center, New York, New York 10281, except as noted. As of
October 28, 1994 all of the trustees and officers of the Trust as a group owned
less than 1% of the outstanding shares of the National, and the California Tax-
Exempt Funds and owned approimately 2% of the outstanding shares of the New York
Tax Exempt Fund.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*
President of Oppenheimer Capital and Quest for Value Advisors, registered
investment advisers; Chairman of the Board and President of Quest for Value
Accumulation Trust, Quest for Value Fund, Inc., Quest for Value Global Equity
Fund, Inc., Quest for Value Global Funds, Inc. and Quest Cash
20
<PAGE>
Reserves, Inc., and Chairman of the Board of The Saratoga Advantage Trust, open-
end investment companies, and Quest for Value Dual Purpose Fund, Inc., a closed-
end investment company.
PAUL Y. CLINTON, TRUSTEE
946 Morris Avenue, Bryn Mawr, Pennsylvania 19010
Director, External Affairs, Kravco Corporation, a national real estate owner and
property management corporation; formerly President of Essex Management
Corporation, a management consulting company; Trustee of Capital Cash Management
Trust, Prime Cash Fund and Short Term Asset Reserves, each of which is a money-
market fund; Director of Quest for Value Fund, Inc., Quest for Value Global
Equity Fund, Inc., Quest for Value Global Funds, Inc. and Quest Cash Reserves,
Inc., Trustee of Quest for Quest for Value Accumulation Trust, all of which are
open-end investment companies. Formerly a general partner of Capital Growth
Fund, a venture capital partnership; formerly a general partner of Essex Limited
Partnership, an investment partnership; formerly President of Geneve Corp., a
venture capital fund; formerly Chairman of Woodland Capital Corp., a small
business investment company; formerly Vice President of W.R. Grace & Co.
THOMAS W, COURTNEY, C.F.A., TRUSTEE
P.O. Box 580, Sewickley, Pennsylvania 15143
Principal of Courtney Associates, Inc., a venture capital firm; former General
Partner of Trivest Venture Fund, a private venture capital fund; former
President of Investment Counseling Federated Investors, Inc.; Trustee of Cash
Assets Trust, a money market fund; Director of Quest for Value Fund, Inc., Quest
for Value Global Equity Fund, Inc., Quest for Value Global Funds, Inc. and Quest
Cash Reserves, Inc., Trustee of Quest for Value Accumulation Trust, all of which
are open-end investment companies; former President of Boston Company
Institutional Investors; Trustee of Hawaiian Tax-Free Trust and Tax Free Trust
of Arizona, tax-exempt bond funds; Director of several privately owned
corporations; former Director of Financial Analysts Federation.
LACY B. HERRMANN, TRUSTEE
380 Madison Avenue, Suite 2300, New York, New York 10017
President and Chairman of the Board of Aquila Management Corporation (since
1984) and of Incap Management Corporation (since 1982), the sponsoring
organizations and Administrator and/or Sub-Advisor to the following open-end
investment companies, and Chairman of the Board of Trustees and President of
each; Churchill Cash Reserves Trust (since 1985), Short Term Asset Reserves
(since 1984), Cash Assets Trust (since 1984), U.S. Treasuries Cash Assets Trust
(since 1988), Tax-Free Cash Assets Trust (since 1988), Prime Cash Fund (since
1982), Oxford Cash Management Fund (1982-1988) and Trinity Liquid Assets Trust
(1982-1985), each of which is a money market fund, and of Churchill Tax-Free
Fund of Kentucky (since 1986), Tax-Free Fund of Colorado (since 1986), Tax-Free
Trust of Oregon (since 1985), Tax-Free Trust of Arizona (since 1985), Hawaiian
Tax-Free Trust (since 1984), Narrangansett Insured Tax Free Income Fund (since
1992), and Tax Free Fund for Utah (since 1992), each of which is a tax-free
municipal bond fund; Vice President, Director, Secretary, and formerly Treasurer
of Aquila Distributors, Inc. (since 1981), distributor of most of the above
funds; President and Chairman of the Board of Trustees of Capital Cash
Management Trust ("CCMT") a
21
<PAGE>
money market fund (since 1981) and an Officer and Trustee/Director of its
predecessors (since 1974); President and Director of STCM Management Company,
Inc., sponsor and Sub-Advisor to CCMT; General Partner of Tamarack Associates
(1966-1984), a private investment partnership and Chairman of the Board and
President of various of its subsidiaries through 1986. Director of the Quest for
Value Fund, Inc., Quest for Value Global Equity Fund, Inc. and Quest Cash
Reserves, Inc. and Trustee of the Quest for Value Accumulation Trust and The
Saratoga Advantage Trust, each of which is an open-end investment company.
GEORGE LOFT, TRUSTEE
51 Herrick Road, Sharon, Connecticut 06069
Private Investor; Director of Quest for Value Fund, Inc., Quest for Value Global
Equity Fund, Inc., Quest for Value Global Funds, Inc. and Quest Cash Reserves,
Inc., Trustee of Quest for Value Accumulation Trust and The Saratoga Advantage
Trust, all of which are open-end investment companies.
ROBERT J. BLUESTONE, VICE PRESIDENT
Managing Director, Oppenheimer Capital; Vice President and Portfolio Manager,
Quest for Value Accumulation Trust, Quest Cash Reserves, Inc., and Quest for
Value Global Funds, Inc., open-end investment companies; formerly Vice
President, Bankers Trust Co.
THOMAS E. DUGGAN, ASSISTANT SECRETARY
General Counsel and Secretary of Oppenheimer Capital and Quest for Value
Advisors; Assistant Secretary of Quest for Value Accumulation Trust, Quest for
Value Fund, Inc., Quest for Value Global Equity Fund, Inc., Quest for Value
Global Funds, Inc. Quest Cash Reserves, Inc. and The Saratoga Advantage Trust,
open-end investment companies, and Secretary of Quest for Value Dual Purpose
Fund, Inc., a closed-end investment company.
BERNARD H. GARIL, VICE PRESIDENT
President and Chief Operating Officer, Quest for Value Advisors; Senior Vice
President, Oppenheimer Capital; Vice President, Quest for Value Accumulation
Trust, Quest Cash Reserves, Inc., Quest for Value Global Equity Fund, Inc.,
Quest for Value Global Funds, Inc. and Quest for Value Global Funds, Inc., open-
end investment companies and Vice President of Quest for Value Dual Purpose
Fund, Inc., a closed-end investment company; formerly Senior Vice President of
Oppenheimer & Co., Inc., 1981-1990.
MATTHEW GREENWALD, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital; Vice President, Quest Cash Reserves, Inc.;
Assistant Vice President, Oppenheimer Capital, 1989-1992; Fixed income portfolio
manager and analyst, Paine Webber's Mitchell Hutchins Asset Management, 1984-
1989.
22
<PAGE>
DEBORAH KABACK, SECRETARY
Senior Vice President of Oppenheimer Capital; Secretary of Quest for Value Fund,
Inc., Quest for Value Accumulation Trust, Quest Cash Reserves, Inc., Quest for
Value Global Equity Fund, Inc., Quest for Value Global Funds, Inc. and The
Saratoga Advantage Trust, open-end investment companies and Assistant Secretary
of Quest for Value Dual Purpose Fund, Inc., a closed-end investment company.
LESLIE KLEIN, ASSISTANT TREASURER
Vice President of Oppenheimer Capital; Assistant Treasurer of Quest for Value
Fund, Inc., Quest for Value Accumulation Trust, Quest Cash Reserves, Inc., Quest
for Value Global Equity Fund, Inc., Quest for Value Global Funds, Inc., and The
Saratoga Advantage Trust, open-end investment companies and Quest for Value Dual
Purpose Fund, Inc., a closed-end investment company.
SHELDON M. SIEGEL, TREASURER
Managing Director of Oppenheimer Capital; Treasurer of Quest for Value Advisors;
Treasurer of Quest for Value Accumulation Trust, Quest Cash Reserves, Inc.,
Quest for Value Fund, Inc., Quest for Value Global Equity Fund Inc., Quest for
Value Global Funds, Inc., and The Saratoga Advantage Trust, open-end investment
companies, and Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company.
REMUNERATION OF OFFICERS AND TRUSTEES. All officers of the Trust are officers of
Oppenheimer Capital and receive no salary or fee from the Trust. Until a Fund
has net assets of $25 million, no trustees' fees will be paid by that Fund. When
a Fund has net assets of at least $25 million but not more than $50 million, the
Trustees, other than Mr. La Motta, will be paid an annual fee of $1,500 plus
$125 for each trustees' meeting attended and $50 for each committee meeting
attended. When a Fund has net assets in excess of $50 million, the Trustees,
other than Mr. La Motta, will be paid an annual fee of $3,000 plus $250 for each
trustee's meeting attended and $100 for each committee meeting attended. For the
fiscal year ended July 31, 1994, the Trustees were paid an aggregate of $,17,201
$8,801 and $8,801 in fees and expenses by the National, California and New York
Tax-Exempt Funds, respectively.
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE ADVISORY AGREEMENT. Under the Advisory Agreement, the Advisor is required
to: (i) regularly provide investment advice and recommendations to each Fund
with respect to its investments, investment policies and the purchase and sale
of securities; (ii) supervise continuously and determine the securities to be
purchased or sold by each Fund and the portion, if any, of each Fund's assets to
be held uninvested; and (iii) arrange for the purchase of securities and other
investments by each Fund and the sale of securities and other investments held
in each Fund's assets. The Advisory Agreement provides for an advisory fee at
the annual rate of .50 of 1% of the daily net assets of each Fund.
23
<PAGE>
The Advisory Agreement also requires the Advisor to provide administrative
services for the Funds, including (1) coordination of the functions of
accountants, counsel and other parties performing services for the Funds and (2)
preparation and filing of reports required by federal securities and "blue sky"
laws, shareholder reports and proxy materials. The costs of certain clerical and
accounting services incurred by the Advisor will be reimbursed by each Fund for
which they are provided. During the fiscal year ended July 31, 1992, the Advisor
waived the following accounting services fees: National Tax-Exempt Fund --
$52,595, California Tax-Exempt Fund -- $45,295, and New York Tax-Exempt Fund --
$41,345. For the fiscal year ended July 31, 1993, the Advisor was paid $30,095,
$22,795 and $18,845 in accounting services fees by the National, California and
New York Tax-Exempt Funds, respectively. For the fiscal year ended July 31,
1994, the Advisor was paid $52,193, $40,850 and $40,850 in accounting services
fees by the National, California and New York Tax-Exempt Funds, respectively.
Expenses not expressly assumed by the Advisor under the Advisory Agreement
or by Quest for Value Distributors (the "Distributor") are paid by the Funds.
The Advisory Agreement lists examples of expenses paid by the Funds, of which
the major categories relate to interest, taxes, fees to non-interested trustees,
legal and audit expenses, custodian and transfer agent expenses, stock issuance
costs, certain printing and registration costs and non-recurring expenses,
including litigation. Under the Advisory Agreement, the Advisor guarantees that
the total expenses of each Fund in any fiscal year, exclusive of taxes,
interest, brokerage fees and distribution expense assumptions, shall not exceed,
and the Advisor undertakes to pay or refund to the Fund any amount by which such
expenses do exceed, the most restrictive state law provisions in effect in
states where shares of the Fund are qualified to be sold and under such
circumstances the payment of the management fee at the end of any month will be
reduced or postponed. Currently, expenses are limited so that annualized
operating expenses do not exceed % of the average daily net assets of the
National, California and New York Tax-Exempt Funds, respectively; these
limitations are voluntary and may be discontinued at any time. During the fiscal
year ended July 31, 1992, the Advisor waived fees of $147,314, $54,602, and
$74,862 and assumed other operating expenses of $151,553, $94,684, and $84,430
with respect to the National, California and New York Tax-Exempt Funds,
respectively. For the year ended July 31, 1993, the Advisor waived fees of
$397,454, $137,982 and $128,236 and assumed other operating expenses of
$122,640, $41,059 and $31,905 for the National, California and New York Tax-
Exempt Funds, respectively. For the year ended July 31, 1994, advisory fees of
$531,371, $173,954 and $186,813 were accrued for the National, California and
New York Tax Exempt Funds; the Advisor voluntarily waived $368,540, $120,180 and
$109,629 of such fees for the National, California and New York Tax-Exempt
Funds, respectively.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, the Advisor is not liable for any act of omission in the course of,
or in connection with, the rendition of services thereunder. The Agreement
permits the Advisor to act as investment adviser for any other person, firm or
corporation and to use the name "Quest for Value" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Advisor shall no longer act as investment adviser to the
Trust, the right of the Trust to use the name "Quest for Value" as part of its
name may be withdrawn.
24
<PAGE>
The Advisory Agreement was last approved by the Board of Trustees with
respect to the Funds, including a majority of the Trustees who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in such Agreement on October 28, 1992.
Shareholders of the Funds approved the Advisory Agreement on December 9, 1991.
FUND TRANSACTIONS. Fund decisions are based upon recommendations of the Advisor
and the judgment of the portfolio managers. Municipal obligations normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. Prices of portfolio securities purchased from underwriters of
new issues include a commission or concession paid by the issuer to the
underwriter, and prices of municipal securities purchased from dealers include a
spread between the bid and asked prices. The Advisor seeks to obtain prompt
execution of orders at the most favorable net price. Transactions may be
directed to dealers during the course of an underwriting in return for their
execution and research services, which are intangible and on which no dollar
value can be placed. There is no formula for such allocation. The research
information may or may not be used by one or more of the Funds and/or other
accounts of the Advisor; information received in connection with directed orders
of other accounts managed by the Advisor or its affiliates may or may not be
used by one or more of the Funds. Such information may be in written or oral
form and includes information on particular issuers and industries as well as
market, economic or institutional activity areas. It serves to broaden the scope
and supplement the research activities of the Advisor, to make available
additional views for consideration and comparison, and to enable the Advisor to
obtain market information for the valuation of securities held in a Fund's
assets.
Sales of shares of each Fund, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of portfolio transactions to dealers, but only in conformity with
the price, execution and other considerations and practices discussed above. A
Fund will not purchase any securities from or sell any securities to Oppenheimer
& Co., Inc. acting as principal for its own account. The Advisor currently
serves as investment manager to a number of clients, including other investment
companies, and may in the future act as investment manager or adviser to others.
It is the practice of the Advisor to cause purchase or sale transactions to be
allocated among the Funds and others whose assets it manages in such manner as
it deems equitable. In making such allocations among the Funds and other client
accounts, the main factors considered are the respective investment objectives,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
assets of each Fund and other client accounts. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts managed
by the Advisor or its parent Oppenheimer Capital are combined, which in some
cases could have a detrimental effect on the price or volume of the security in
a particular transaction as far as a Fund is concerned. Transactions effected
pursuant to such combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for such account.
25
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is determined each day the New
York Stock Exchange (the "Exchange") is open, as of the close of the regular
trading session of the Exchange (currently 4:00 p.m., Eastern Time) that day, by
dividing the value of a Fund's net assets by the number of its shares
outstanding. The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, July 4, Labor Day, Thanksgiving and Christmas Day. It may
also close on other days.
Fund securities for which market quotations are readily available are
valued at their bid prices, based on prices provided by a pricing service using
a computerized matrix system. Where such market quotations are not readily
available, securities are valued by the pricing service based upon appraisals
derived from recognized dealers in those securities. The amortized cost method
of valuation will be used with respect to debt obligations with 60 days or less
remaining to maturity if the Trust's Board of Trustees determines that this
represents fair value. All other assets will be valued at fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
PORTFOLIO YIELD AND TOTAL RETURN INFORMATION
YIELDS. Yield information may be useful to investors in reviewing a Fund's
performance. However, a number of factors should be considered before using
yield information as a basis for comparison with other investments. An
investment in any of the Funds of the Trust is not insured; yield is not
guaranteed and normally will fluctuate on a daily basis. The yield for any given
past period is not an indication or representation of future yields or rates of
return. Yield is affected by portfolio quality, portfolio maturity, type of
instruments held and operating expenses. When comparing a Fund's yield with that
of other investments, investors should understand that certain other investment
alternatives such as money-market instruments or bank accounts provide fixed
yields and also that bank accounts may be insured.
CURRENT YIELD is calculated according to the following formula:
x
Where: YIELD = 2(--- + 1) to the sixth power - 1
cd
x = daily net investment income, based upon the subtraction of daily accrued
expenses from daily accrued income of the Fund. Income is accrued daily for
each day of the indicated period based upon yield-to-maturity of each
obligation held in the Fund as of the day before the beginning of any
thirty-day period or as of contractual settlement date for securities
acquired during the period.
26
<PAGE>
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Yield may also be calculated by substituting the net asset value or lower
offering price per share for the maximum offering price per share in
representing the yield to those persons or groups who are entitled to purchase
shares at lower than offering prices or net asset value without sales charge.
Yield does not reflect capital gain or losses, non-recurring or irregular
income.
YIELD FOR 30-DAY PERIOD ENDED JULY 31,1994(1)
---------------------------------------------
National Tax-Exempt Fund . . . . 5.3%
California Tax-Exempt Fund . . . 5.2%
New York Tax-Exempt Fund . . . . 5.2%
---------------------------------------------
(1) Reflects the waiver of advisory fees and assumption of expenses. Had the
waivers and assumptions not been in effect during the period, the yield for the
National, California and New York Tax-Exempt Funds would have been 5.27%, 5.13%,
and 4.96%, respectively.
TAX EQUIVALENT YIELD is computed by dividing that portion of the current
yield (computed as described above) which is tax exempt by 1 minus a stated tax
rate and adding the quotient to that portion, if any, of the yield of the Fund
that is not tax exempt.
E
TAX EQUIVALENT YIELD = --- + t Where:E = tax exempt yield
1-P
P = stated income tax rate
t = taxable yield
The Funds may advertise tax-equivalent yields at varying assumed tax rates.
TAX EQUIVALENT YIELD FOR 30 DAY PERIOD ENDED JULY 31, 1994 (1)
ASSUMING THE FEDERAL TAX RATE INDICATED,
A CALIFORNIA TAX RATE OF 9.3%, A NEW YORK STATE TAX RATE OF 7.875%
AND A NEW YORK CITY TAX RATE OF 3.4%
----------------------------------------------------------------------------
Federal Tax Rate . . . . . . . . . . . . 28% 31% 36% 39.6%
----------------------------------------------------------------------------
National Tax-Exempt Fund . . . . . . . . 7.4% 7.7% 8.3% 8.8%
California Tax-Exempt Fund . . . . . . . 8.0% 8.3% 9.0% 9.5%
New York Tax-Exempt Fund . . . . . . . . 8.1% 8.5% 9.2% 9.7%
----------------------------------------------------------------------------
27
<PAGE>
(1) Reflects the waiver of advisory fees . Had the waivers not been in effect
during the period, the tax equivalent yield for the National, California and New
York Tax-Exempt Funds would have been 7.3%, 7.9% and 7.8%, respectively, at the
28% Federal rate; 7.6%, 8.2% and 8.1%, respectively, at the 31% Federal rate;
8.2%, 8.8% and 8.7%, respectively, at the 36% Federal rate; and 8.7%, 9.4% and
9.3%, respectively, at the 39.6% Federal rate. New York tax-equivalent yield
figures assume residency in New York City. A portion of the tax-exempt dividends
paid by each Fund is treated as a tax preference item for individuals subject to
the alternative minimum tax. For the fiscal year ended July 31, 1994,
approximately 18.4%, 9.7%, and 8.7% of the respective distributions of the
National, California and New York Tax-Exempt Funds were tax preference items;
for the calendar year ending December 31, 1994, it is estimated that
approximately 18%, 10% and 9% of the respective distributions will be tax
preference items.
Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions,
and any change in a Fund's net asset value per share over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical investment in a fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result if
the rate of growth or decline in value had been constant over the period. For
example, a cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual return that would equal 100%
growth on a compounded basis in ten years.
In addition to average annual returns, a Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments and/or a series of redemptions over a any
time period. Total returns and other performance information may be quoted
numerically or in a table graph or similar illustration. Total returns may be
quoted with or without taking a Fund's sales charge into account. Excluding a
Fund's sales charge from a total return calculation produces a higher total
return figure.
From time to time the Funds may refer in advertisements to rankings and
performance statistics published by recognized mutual fund performance rating
services such as Lipper Analytical Services, Inc. and financial publications
including magazines, newspapers and newsletters. Performance statistics may
include yields, total returns, measures of volatility or other methods of
portraying performance based on the method used by the publishers of the
information. In addition, comparisons may be made between yields on certificates
of deposit and U.S. government securities and corporate bonds, may compare
growth stocks to value stocks and may refer to current or historic financial or
economic trends or conditions.
The performance of the Funds may be compared to the performance of other
mutual funds in general, or to the performance of particular types of mutual
funds. These comparisons may be expressed as mutual fund rankings prepared by
Lipper Analytical Services, Inc. (Lipper), an independent service located in
Summit, New Jersey that monitors the performance of mutual funds.
28
<PAGE>
Lipper generally ranks funds on the basis of total return, assuming reinvestment
of distributions, but does not take sales charges or redemption fees into
consideration, and rankings are prepared without regard to tax consequences. In
addition to the mutual fund rankings, performance may be compared to mutual fund
performance indices prepared by Lipper.
From time to time, the Funds performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals. For
example, the Funds may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance.
The Distributor may provide information designed to help individuals
understand their investment goals and explore various financial strategies such
as general principles of investing, asset allocation, diversification, risk
tolerance; goal setting; and a questionnaire designed to help create a personal
financial profile.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on CPI), and combinations of various capital markets which may
be used for comparative or illustrative purposes. The performance of these
capital markets is based on the returns of different indices.
The Distributor may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Funds. The
Funds may also compare performance to that of other compilations or indices that
may be developed and made available in the future.
In advertising materials, the Distributor may reference or discuss its
products and services, which may include: other Quest funds; retirement
investing; brokerage products and services; the effects of dollar-cost averaging
and saving for college; and the risks of market timing. In addition, the
Distributor may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. The Distributor may also
reprint, and use as advertising and sales literature, articles from re:Quest, a
quarterly magazine provided free of charge to Quest fund shareholders.
The Funds may present their fund number, Quotron number, CUSIP number, and
discuss or quote their current portfolio manager.
Volatility. The Funds may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Funds may compare these
measures to those of other funds. Measures of volatility seek to compare a
fund's historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a comparative
benchmark may be. All measures of volatility and correlation are calculated
using averages of historical data.
29
<PAGE>
Momentum Indicators indicate the Funds price movements over specific
periods of time. Each point on the momentum indicator represents the Funds
percentage change in price movements over that period.
The Funds may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against a loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.
AVERAGE ANNUAL TOTAL RETURN is calculated according to the following
formula:
P (1+t)to the nth power = ERV
Where: P = a hypothetical initial payment of $1,000
t = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period.
30
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
For the Period from
August 14, 1990* For the Fiscal Year Ended
to July 31, 1994 (1,2) July 31, 1994 (2)
---------------------- -------------
Reflecting Without Reflecting Without
Deduction of Deduction of Deduction of Deduction of
Maximum Maximum Maximum Maximum
Sales Charge Sales Charge Sales Charge Sales Charge
- -------------------------------------------------------------------------------
National Tax-Exempt..... 7.6% 8.9% (2.8)% 2.0%
California Tax-Exempt... 6.9% 8.2% (3.3)% 1.5%
New York Tax-Exempt..... 7.3% 8.6% (3.5)% 1.4%
- -------------------------------------------------------------------------------
*Inception date
(1) Annualized.
(2) Reflects the waiver of advisory fees and assumption of expenses for the
period from August 14, 1990 to July 31, 1994 and the waiver of a portion of the
advisory fees for the fiscal year ended July 31, 1994. Had the waivers and
assumptions not been in effect, the average annual total return for the
National, California and New York Tax-Exempt Funds, respectively, would have
been 7.2%, 6.4% and 6.8% after deducting the maximum sales charge and 8.5%, 7.7%
and 8.1% without deduction of the maximum sales charge for the period August 14,
1990 (commencement of operations) to July 31, 1994, and would have been (3.8)%,
(4.5)% and (4.6)% after deducting the maximum sales charge and 2.0%, 1.3% and
1.2% without deduction of the maximum sales charge for the fiscal year ended
July 31, 1994.
The table assumes that a $1,000 payment was made at the beginning of the
period shown, that no further payments were made and that any distributions from
the assets of each Fund were reinvested. The table reflects the historical rates
of return and deductions for all charges, expenses and fees of each Fund, after
waivers and assumptions.
31
<PAGE>
AGGREGATE TOTAL RETURN (1)
For the Period August 14, 1990 Reflecting Without Deduction
(commencement of operations) Deduction of of Maximum
to July 31, 1994 Maximum Sales Charge
Sales Charge
- --------------------------------------------------------------------------------
National Tax-Exempt Fund . . . . . . . 33.5% 40.2%
California Tax-Exempt Fund . . . . . . 30.2% 36.7%
New York Tax-Exempt Fund . . . . . . . 32.1% 38.7%
- --------------------------------------------------------------------------------
(1) Reflects the waiver of advisory fees and assumption of expenses. Had the
waivers and assumptions not been in effect during the period, the respective
inception to date total return for the National, California and New York Tax-
Exempt Funds would have been 31.6%, 27.7% and 29.9%, respectively, after
deducting the maximum sales charge and would have been 38.2%, 34.1% and 36.3%,
respectively, without deduction of the maximum sales charge.
DISTRIBUTION EXPENSE PLAN
The Trust has a Plan and Agreement of Distribution (the "Plan") pursuant to
which it is permitted to compensate the Distributor in connection with the
distribution of each Fund's shares. The Plan was adopted in accordance with the
requirements of Rule 12b-1 under the 1940 Act, and was initially approved with
respect to the Funds by the Trust's Board of Trustees (who found that there is a
reasonable likelihood that the Plan will benefit the Funds and their
shareholders), including a majority of the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan ("Disinterested Trustees") on April 16, 1990. The Plan was
last approved with respect to the Funds by the Board of Trustees, including a
majority of the Trustees who are not "interested persons," on October 28, 1992.
Shareholders of the Funds approved the Plan at a meeting held December 9, 1991.
Under the Plan, each Fund is authorized to pay the Distributor a monthly
fee of up to .25% of average daily net assets, on an annual basis, or at such
lesser rate as the Trustees may from time to time determine, for services and
expenses in connection with the distribution of that Fund's shares. For the
period August 14, 1990 (commencement of operations) to July 31, 1993, the
Distributor has assumed all distribution-related expenses without compensation
from the Funds. For the year ended July 31, 1994, the Distributor assumed all
distribution-related expenses without compensation from the Funds. Since
September 1, 1994, a service fee at the annual rate of .10% of average net
assets has been paid to Quest Distributors under the Plan.
The Plan states that the Disinterested Trustees shall be provided with and
shall review, quarterly reports setting forth the amounts expended pursuant to
the Plan in connection with the distribution of each Fund's shares and the
purpose for which the amounts were expended. It further provides that, as long
as the Plan remains in effect, the selection and nomination of trustees of the
Trust who are not "interested persons" shall be committed to the discretion of
the trustees then in office who are not "interested persons" of the Trust. The
Plan can be terminated at any time with regard to each
32
<PAGE>
Fund, without penalty, by the vote of a majority of the Disinterested Trustees
or by the vote of the holders of a majority of the outstanding voting securities
of that Fund. Finally, the Plan cannot be amended to increase materially the
amount to be spent by a Fund thereunder without shareholder approval, and all
material amendments are required to be approved by the vote of the Board of
Trustees of the Trust, including a majority of the Disinterested Trustees, cast
in person at a meeting called for that purpose. The National Association of
Securities Dealers, Inc. ("NASD") has adopted amendments to its sales charge
rule that make the rule applicable to 12b-1 fees and service fees as well as
front end sales charges. Under the NASD's rules, if an investment company pays a
service fee but not an asset based sales charge, as do the Funds, the maximum
aggregate sales charge is limited to 7.25% of the offering price.
It is estimated that the Distributor spent approximately the following
amounts with respect to the Funds for the fiscal year ended July 31, 1994:
National Tax- California Tax- New York Tax-
Exempt Fund Exempt Fund Exempt Fund
----------- ----------- -----------
Sales Material and $129,674 $ 61,727 $67,569
Advertising
Printing and Mailing of
Prospectuses to Other 64,043 30,832 33,176
than Current Shareholders
Compensation to Dealers -0- -0- -0-
Compensation to Sales 269,599 128,954 140,968
Personnel
Other 143,494 69,209 74,567
Total Expenses $606,810 $290,722 $316,280
-------- -------- --------
TAXES
Because the Funds will distribute exempt-interest dividends, interest on
indebtedness incurred by a shareholder to purchase or carry shares of a Fund is
not deductible for Federal income and New York State and New York City personal
income tax purposes and California personal income tax purposes. If a
shareholder receives exempt-interest dividends with respect to any share and if
such share is held by the shareholder for six months or less, then any loss on
the sale or exchange of such share may, to the extent of such exempt-interest
dividends, be disallowed. In addition, the Code may require a shareholder, if he
or she receives exempt-interest dividends, to treat as taxable income a portion
of certain otherwise non-taxable social security and railroad retirement benefit
payments. Furthermore, that portion of any exempt-interest dividend paid by a
Fund which represents income derived from private activity bonds held by the
Fund may not retain its tax-exempt status in the hands of a shareholder who is a
"substantial user" of a facility financed by such bonds, or a "related person"
thereof. Moreover, as noted in the Prospectus, some of a Fund's dividends may be
a specific preference item or a component of an adjustment item, for purposes of
the Federal individual and corporate alternative minimum taxes. In addition, the
receipt of dividends and distributions from a Fund also may affect a foreign
corporate shareholder's Federal "branch profits" tax liability and a Subchapter
S corporate shareholder's Federal "excess net passive income" tax liability.
Shareholders
33
<PAGE>
should consult their own tax advisors as to whether they are (a) substantial
users with respect to a facility or related to such users within the meaning of
the Code or (b) subject to a Federal alternative minimum tax, the Federal
environmental tax, the Federal branch profits tax or the Federal excess net
passive income tax.
As described above and in the Prospectus, the Funds may invest in futures
contracts and options. Each Fund anticipates that these investment activities
will not prevent the Fund from qualifying as a regulated investment company. As
a general rule, these investment activities will increase or decrease the amount
of long-term and short-term capital gains or losses realized by a Fund and,
accordingly, will affect the amount of capital gains distributed to the Fund's
shareholders.
Any net long-term capital gains realized by a Fund will be distributed
annually as described in the Prospectus. Such distributions ("capital gain
dividends") will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held shares of the Fund, and will be
designated as capital gain dividends in a written notice mailed by the Fund to
shareholders after the close of the Fund's taxable year. If a shareholder
receives a capital gain dividend with respect to any share and if the share has
been held by the shareholder for six months or less, then any loss (to the
extent not disallowed pursuant to the other six-month rule described above
relating to exempt-interest dividends) on the sale or exchange of such share
will be treated as a long-term capital loss to the extent of the capital gain
dividend.
The Internal Revenue Code provides that when a taxpayer incurs a sales
charge in acquiring shares of a mutual fund, disposes of the shares within 90
days and acquires shares in a mutual fund for which the otherwise applicable
sales charge is reduced by reason of a reinvestment right, the original sales
charge increases the taxpayer's basis in the original shares, for the purposes
of determining the amount of gain or loss on the disposition of such shares,
only to the extent that the otherwise applicable sales charge for the second
acquisition is not reduced. The disallowed charge would be treated as incurred
with respect to the second acquisition. The purpose of this provision is to
prevent a taxpayer from shifting his or her investment in a family of mutual
funds in order to immediately deduct the sales charge.
Each shareholder will receive after the close of the calendar year an
annual statement as to the Federal income tax status of his or her dividends and
distributions from the Fund for the prior calendar year. These statements also
will designate the amount of exempt-interest dividends that is a specified
preference item for purposes of the Federal individual and corporate alternative
minimum taxes. Each shareholder of the National Tax-Exempt Fund will also
receive a report of the percentage and source on a state-by-state basis of
interest income on municipal obligations received by the Fund during the
preceding year. Each shareholder of the New York Tax-Exempt Fund will receive an
annual statement as to the New York State and New York City personal income tax
status of his or her dividends and distributions from such Fund for the prior
calendar year and each shareholder of the California Tax-Exempt Fund will
receive an annual statement as to the California State personal income tax
status of his or her dividends and distributions from each Fund for the prior
calendar year. Shareholders should consult their tax advisors as to any other
state and local taxes that may apply to these dividends and
34
<PAGE>
distributions. In the event that a Fund derives taxable net investment income,
it intends to designate as taxable dividends the same percentage of each day's
dividend as its actual taxable net investment income bears to its total taxable
net investment income earned on that day. Therefore, the percentage of each
day's dividend designated as taxable, if any, may vary from day to day.
If a shareholder fails to furnish a correct taxpayer identification number,
fails to fully report dividend or interest income or fails to certify that he or
she has provided a correct taxpayer identification number and that he or she is
not subject to backup withholding, then the shareholder may be subject to a 31%
"backup withholding tax," effective January 1, 1993, with respect to (a) taxable
dividends and distributions, and (b) the proceeds of any redemptions of shares
of a Fund. An individual's taxpayer identification number is his or her social
security number. The backup withholding tax is not an additional tax and will be
credited against a taxpayer's regular Federal income tax liability.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities. Similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Funds could be affected. In that event the
Board of Trustees of the Trust would reevaluate the investment objections and
policies of the Funds.
The foregoing is only a summary of certain tax considerations generally
affecting each Fund and its shareholders, and is not intended as a substitute
for careful tax planning. Individuals are often exempt from state and local
personal income taxes on distributions of tax-exempt interest income derived
from obligations of issuers located in the state in which they reside when these
distributions are received directly from these issuers, but are usually subject
to such taxes on income derived from obligations of issuers located in other
jurisdictions. The discussion does not purport to deal with all of the Federal,
state and local tax consequences applicable to an investment in a Fund, or to
all categories of investors, some of which may be subject to special rules.
Shareholders are urged to consult their tax advisors with specific reference to
their own tax situations.
ADDITIONAL INFORMATION
DESCRIPTION OF THE TRUST. The Trust was formed under the laws of Massachusetts
on April 17, 1987. It is not contemplated that regular annual meetings of
shareholders will be held. Shareholders of each Fund have the right, upon the
declaration in writing or vote by a majority of the outstanding shares of the
Fund, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
(for at least six months) of 10% of its outstanding shares. In addition, 10
shareholders holding the lesser of $25,000 or 1% of a Fund's outstanding shares
may advise the Trustees in writing that they wish to communicate with other
shareholders of that Fund for the purpose of requesting a meeting to remove a
Trustee. The Trustees will then either give the applicants access to the Fund's
shareholder list or mail the applicants' communication to all other shareholders
at the applicants' expense.
When issued, shares are fully paid and have no preemptive, conversion or
other subscription rights. The shares of each Fund are freely-transferable and
equal as to earnings, assets and voting
35
<PAGE>
privileges with all other shares of that Fund. Upon liquidation of the Trust or
any Fund, shareholders of a Fund are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders after all debts
and expenses have been paid. The shares do not have cumulative voting rights.
The assets received by the Trust on the sale of shares of each Fund and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, are allocated to each Fund, and constitute the assets of such Fund.
The assets of each Fund are required to be segregated on the Trust's books of
account. The Trust's Board of Trustees has agreed to monitor the portfolio
transactions and management of each of the Funds and to consider and resolve any
conflict that may arise.
The Declaration of Trust contains an express disclaimer of shareholder
liability for each Fund's obligations, and provides that each Fund shall
indemnify any shareholder who is held personally liable for the obligations of
that Fund. It also provides that each Fund shall assume, upon request, the
defense of any claim made against any shareholder for any act or obligation of
that Fund and shall satisfy any judgment thereon. Thus, while Massachusetts law
permits a shareholder of a trust (such as the Trust) to be held personally
liable as a partner under certain circumstances, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
the relatively remote circumstance in which a Fund itself would be unable to
meet the obligations described above.
POSSIBLE ADDITIONAL FUND SERIES. If additional Funds are created by the Board of
Trustees, shares of each such Fund will be entitled to vote as a class only to
the extent permitted by the 1940 Act (see below) or as permitted by the Board of
Trustees. Expenses not otherwise identified with a particular Fund will be
allocated fairly among two or more Funds by the Board of Trustees.
Under Rule 18f-2 of the 1940 Act, any matter required to be submitted to a
vote of shareholders of any investment company which has two or more series
outstanding is not deemed to have been effectively acted upon unless approved by
the holders of a "majority" (as defined in that Rule) of the voting securities
of each series affected by the matter. Such separate voting requirements do not
apply to the election of trustees or the ratification of the selection of
accountants. Approval of an investment management or distribution plan and a
change in fundamental policies would be regarded as matters requiring separate
voting by each Fund. The Rule contains special provisions for cases in which an
advisory contract is approved by one or more, but not all, series. A change in
investment policy may go into effect as to one or more series whose holders so
approve the change even though the required vote is not obtained as to the
holders of other affected series.
DISTRIBUTION AGREEMENT. Under the Distribution Agreement between the Trust and
the Distributor, the Distributor acts as the Trust's agent in the continuous
public offering of its shares. Expenses normally attributable to sales, other
than those paid under the Distribution Expense Plan, are borne by the
Distributor.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York, are the independent accountants of the Funds; their services
include examining the financial
36
<PAGE>
statements of the Funds as well as other related services. Price Waterhouse LLP
also serves as independent accountants for the Advisor and its affiliates.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. State Street Bank and
Trust Company acts as custodian of the assets of the Trust, transfer agent and
shareholder servicing agent.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent of the Funds for
former shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, L.P. who acquire shares of any Quest Fund, and will be the shareholder
servicing agent for former shareholders of the Unified Funds and Liquid Green
Trusts, accounts which participated or participate in a retirement plan for
which Unified Investment Advisers, Inc. or an affiliate acts as custodian or
trustee, accounts which have a Money Master or Money Manager brokerage account,
and accounts for which Unified Management Corporation is the dealer of record.
DISTRIBUTION OPTIONS. Shareholders may change their distribution options by
giving the Transfer Agent three days prior notice in writing.
OTHER. Oppenheimer Capital, the parent of Quest for Value Advisors and a leading
institutional investment manager with over $29 billion in assets under
management, has been the investment advisor to the American Medical
Association's pension fund since the 1960's.
37
<PAGE>
APPENDIX A -- RATINGS
DESCRIPTION OF MOODY'S FOUR HIGHEST MUNICIPAL BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. They are rated lower than the Aaa bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which made
the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A are judged to be upper medium grade obligations.
Security for principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade obligations,
i.e.; they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
DESCRIPTION OF S&P'S FOUR HIGHEST MUNICIPAL BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree. The AA
rating may be modified by the addition of a plus or minus sign to show relative
standing within the AA rating category.
A. Debt rated A is regarded as safe. This rating differs from the two
higher ratings because, with respect to general obligation bonds, there is some
weakness which, under certain adverse circumstances, might impair the ability of
the issuer to meet debt obligations at some future date. With respect to revenue
bonds, debt service coverage is good but not exceptional and stability of
pledged revenues could show some variations because of increased competition or
economic influences in revenues.
BBB. Bonds rated BBB are regarded as having adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or
A-1
<PAGE>
changing circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this capacity than for bonds in the A
category.
DESCRIPTION OF FITCH'S FOUR HIGHEST MUNICIPAL BOND RATINGS.
Debt rated "AAA", the highest rating by Fitch, is considered to be of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Debt rated "AA" is regarded as very high credit quality. The
obligor's ability to pay interest and repay principal is very strong. Debt rated
"A" is of high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than debt with higher ratings.
Debt rated "BBB" is of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is adequate, however a change in economic
conditions may adversely affect timely payment. Plus (+) and minus (-) signs are
used with a rating symbol (except AAA) to indicate the relative position within
the category.
DESCRIPTION OF MOODY'S HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER
SHORT-TERM LOANS
Moody's ratings for state and municipal notes and other short-term loans
are designated "Moody's Investment Grade" ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. A short-term
rating designated VMIG may also be assigned on an issue having a demand feature.
Factors affecting the liquidity of the borrower and short-term cyclical elements
are critical in short-term borrowing. Symbols used will be as follows:
MIG-1/VMIG-1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2. This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
DESCRIPTION OF S&P'S RATINGS OF STATE AND MUNICIPAL NOTES AND OTHER SHORT-TERM
LOANS
Standard & Poor's tax exempt note ratings are generally given to such notes
that mature in three years or less. The two higher rating categories are as
follows:
SP-1. Very strong or strong capacity to pay principal and interest. These
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2. Satisfactory capacity to pay principal and interest.
A-2
<PAGE>
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated Prime-1 by Moody's are judged by Moody's to be of
the best quality. Their short-term debt obligations carry the smallest degree of
investment risk. Margins of support for current indebtedness are large or stable
with cash flow and asset protection well assured. Current liquidity provides
ample coverage of near-term liabilities and unused alternative financing
arrangements are generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Issuers (or related supporting institutions) rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Commercial paper rated A by S&P have the following characteristics.
Liquidity ratios are better than industry average. Long-term debt rating is A or
better. The issuer has access to at least two additional channels of borrowing.
Basic earnings and cash flow are in an upward trend. Typically, the issuer is a
strong company in a well-established industry and has superior management.
Issuers rated A are further refined by use of numbers 1, 2, and 3 to denote
relative strength within this highest classification. Those issuers rated A-1
that are determined by S&P to possess overwhelming safety characteristics are
denoted with a plus (+) sign designation.
Fitch's commercial paper ratings represent Fitch's assessment of the
issuer's ability to meet its obligations in a timely manner. The assessment
places emphasis on the existence of liquidity. Ratings range from F-1+ which
represents exceptionally strong credit quality to F-4 which represents weak
credit quality.
Duff & Phelps' short-term ratings apply to all obligations with maturities
of under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit and current maturities of long-term
debt. Emphasis is placed on liquidity. Ratings range from Duff 1+ for the
highest quality to Duff 5 for the lowest, issuers in default. Issues rated Duff
1+ are regarded as having the highest certainty of timely payment. Issues rated
Duff 1 are regarded as having very high certainty of timely payment.
Thomson's BankWatch, Inc. assigns only one Issuer Rating to each company,
based upon a qualitative and quantitative analysis of the consolidated
financials of an issuer and its subsidiaries. The rating incorporates TBW's
opinion of the vulnerability of the company to adverse developments which may
impact the marketability of its securities, as well as the issuer's ability to
repay principal and interest. Ratings range from A for highest quality to E for
the lowest, companies with very serious problems.24
A-3
<PAGE>
JULY 31, 1994
SCHEDULES OF INVESTMENTS
NATIONAL TAX-EXEMPT FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL NOTES & BONDS-98.9%
ALABAMA-0.9%
Health/Hospital
$ 1,000,000 University of Alabama
Birmingham Hospital
5.00%, 10/01/14. . . . . . . . . . . . . $ 869,060
------------
ALASKA-0.3%
Housing
320,000 Alaska State Housing Finance
Corp. (1)
6.70%, 12/01/25. . . . . . . . . . . . . 321,056
------------
ARIZONA-0.4%
Health/Hospital
300,000 Arizona Health Facilities Authority
Phoenix Memorial Hospital
8.20%, 6/01/21 . . . . . . . . . . . . . 321,294
------------
CALIFORNIA-8.1%
Airline/Airport-0.8%
710,000 San Francisco, California City &
County Airport Commission
International Airport Revenue (1)
6.125%, 5/01/08. . . . . . . . . . . . . 720,316
------------
Correctional Facilities-2.7%
750,000 California Statewide Communities
Development Authority
Certificates of Participation
Salk Institute
6.10%, 7/01/14 . . . . . . . . . . . . . 742,275
Los Angeles County Certificates
of Participation
740,000 Correctional Facilities Project
6.50%, 9/01/13 (MBIA insured). . . . . . 765,774
500,000 Edelman Childrens Center
6.00%, 4/01/12 (AMBAC insured) . . . . . 500,305
500,000 Santa Ana, California Financing
Authority Lease Revenue
Police Administration & Holding
Facilities (Series A)
5.50%, 7/01/07 . . . . . . . . . . . . . 486,900
------------
2,495,254
------------
Health/Hospital-1.4%
1,315,000 California Health Facilities
Financing
Good Samaritan Hospital
7.00%, 9/01/21 . . . . . . . . . . . . . 1,364,036
------------
Tax Allocation-0.5%
500,000 Industry, California Urban
Development Agency
6.90%, 11/01/07. . . . . . . . . . . . . 531,145
------------
Transportation-1.1%
1,000,000 San Diego, California Open Space
Park Facilities
District Number 1
5.75%, 1/01/08 . . . . . . . . . . . . . 1,007,740
------------
Water/Sewer-1.6%
600,000 Orange County, California Various
Sanitation Districts
Certificates of Participation
(Series C) (2)
2.65%, 8/01/17 . . . . . . . . . . . . . 600,000
1,000,000 Sacramento County, California
Sanitation District
Financing Authority
5.125%, 12/01/13 . . . . . . . . . . . . 882,830
------------
1,482,830
------------
7,601,321
------------
COLORADO-1.7%
Education-1.1%
1,000,000 Colorado Student Obligation
Bond Authority
Student Loan Revenue (1)
7.15%, 9/01/06 . . . . . . . . . . . . . 1,042,200
------------
General Obligation-0.6%
500,000 Jefferson County School District
6.25%, 12/15/12
(AMBAC insured). . . . . . . . . . . . . 516,525
------------
1,558,725
------------
DISTRICT OF COLUMBIA-2.6%
General Obligation-1.5%
District of Columbia General
Obligation Bonds
100,000 2.70%, 10/01/07 (Series A) (2) . . . . . 100,000
1,320,000 5.75%, 12/01/05 (Series C) . . . . . . . 1,327,524
------------
1,427,524
------------
Health/Hospital-1.1%
1,000,000 District of Columbia Hospital
Revenue Washington Hospital
(Series A)
7.00%, 8/15/05 . . . . . . . . . . . . . 1,027,140
------------
2,454,664
------------
B-1
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
FLORIDA-2.2%
General Obligation-1.1%
$ 1,000,000 Dade County School District
6.125%, 8/01/11. . . . . . . . . . . . . $ 1,009,900
------------
Housing-1.1%
1,000,000 Florida Housing Finance Agency
Refunding Single Family
Mortgage (Series A)
6.35%, 7/01/14 . . . . . . . . . . . . . 1,004,080
------------
2,013,980
------------
GEORGIA-2.7%
Health/Hospital-1.0%
1,000,000 Tri-City Hospital Authority
Georgia Hospital
6.375%, 7/01/16. . . . . . . . . . . . . 922,010
------------
Power/Utility-1.7%
Municipal Electric Authority of
Georgia, Special Obligation
Fourth Crossover Series
500,000 6.50%, 1/01/12 . . . . . . . . . . . . . 519,875
1,000,000 6.50%, 1/01/17 . . . . . . . . . . . . . 1,045,330
------------
1,565,205
------------
2,487,215
------------
HAWAII-1.5%
General Obligation
Honolulu, Hawaii City & County
1,000,000 5.00%, 10/01/13. . . . . . . . . . . . . 879,650
500,000 6.10%, 6/01/11 (Series B). . . . . . . . 507,530
------------
1,387,180
------------
ILLINOIS-6.5%
Airline/Airport-0.8%
750,000 Chicago, Illinois O'Hare Int'l.
Airport (1)
6.00%, 1/01/12 . . . . . . . . . . . . . 741,968
------------
General Obligation-1.7%
1,600,000 Chicago, Illinois General
Obligation Bonds
6.25%, 1/01/12
(AMBAC insured). . . . . . . . . . . . . 1,619,184
------------
Health/Hospital-1.2%
1,000,000 Illinois Health Facilities
Authority Revenue
Hindsdale Health System
9.50%, 11/15/19. . . . . . . . . . . . . 1,163,320
------------
Housing-1.3%
1,250,000 Illinois Housing Development
Authority
Multi-Family Housing Revenue
6.10%, 9/01/13 . . . . . . . . . . . . . 1,211,588
------------
Ports-0.5%
500,000 Metropolitan Pier & Exposition
Authority
6.50%, 6/15/27 . . . . . . . . . . . . . 500,715
------------
Tax Allocation-1.0%
825,000 Hoffman Estates Tax Increment
Revenue
7.625%, 11/15/09 . . . . . . . . . . . . 887,222
------------
6,123,997
------------
INDIANA-1.2%
Other
Indiana State Bond Bank
680,000 5.70%, 2/01/06 . . . . . . . . . . . . . 672,098
445,000 5.75%, 2/01/07 . . . . . . . . . . . . . 437,221
------------
1,109,319
------------
KENTUCKY-0.5%
Education
500,000 University of Kentucky Revenue
Educational Building
Construction
6.00%, 5/01/11 . . . . . . . . . . . . . 497,850
------------
LOUISIANA-1.1%
Education
1,000,000 Louisiana Public Facilities
Authority Student Loan
Revenue (1)
6.75%, 9/01/06 . . . . . . . . . . . . . 1,031,670
------------
MAINE-0.6%
Education
500,000 Maine Educational Loan
Marketing Corp.
Student Loan Revenue (1)
6.90%, 11/01/03. . . . . . . . . . . . . 520,370
------------
MARYLAND-1.1%
Education
1,000,000 University of Maryland Auxiliary
Facilities & Tuition Revenue
5.90%, 2/01/03 . . . . . . . . . . . . . 1,049,020
------------
B-2
<PAGE>
NATIONAL TAX-EXEMPT FUND (CONT'D)
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
MASSACHUSETTS-9.0%
General Obligation-3.5%
Massachusetts State General
Obligation
Consolidated Loan
$ 500,000 5.50%, 2/01/11 (Series A). . . . . . . . $ 469,550
1,000,000 6.00%, 6/01/11 (Series A). . . . . . . . 999,900
1,000,000 6.50%, 8/01/11 (Series B). . . . . . . . 1,041,430
300,000 7.00%, 7/01/07 (Series D). . . . . . . . 324,660
400,000 7.00%, 8/01/12 (Series C). . . . . . . . 430,744
------------
3,266,284
------------
Health/Hospital-2.3%
Massachusetts State Health &
Education Facilities Authority
Revenue Board
1,500,000 Faulkner Hospital
6.00%, 7/01/23 . . . . . . . . . . . . . 1,287,030
900,000 Sisters of Providence
6.50%, 11/15/08. . . . . . . . . . . . . 904,563
------------
2,191,593
------------
Housing-1.6%
1,500,000 Massachusetts State Housing
Finance Authority
Housing Projects
6.30%, 10/01/13. . . . . . . . . . . . . 1,486,650
------------
Resource Recovery-0.5%
500,000 Massachusetts State Industrial
Finance Agency
Resource Recovery Revenue
Refusetech, Inc. Project
6.30%, 7/01/05 . . . . . . . . . . . . . 505,865
------------
Transportation-1.1%
1,000,000 Massachusetts State Port Authority
Revenue (Series A) (1)
6.00%, 7/01/13 . . . . . . . . . . . . . 978,930
------------
8,429,322
------------
MICHIGAN-2.8%
Health/Hospital-1.7%
750,000 Jackson County Hospital
Finance Authority
W.A. Foote Memorial
Hospital (Series A)
4.75%, 6/01/15 . . . . . . . . . . . . . 622,148
Michigan State Hospital Finance
Authority
455,000 Bay Medical Center
8.25%, 7/01/12 . . . . . . . . . . . . . 492,110
400,000 Sisters of Mercy Health Corp.
7.50%, 2/15/18 . . . . . . . . . . . . . 457,624
------------
1,571,882
------------
Resource Recovery-1.1%
1,000,000 Michigan State Strategic Fund
Limited Obligation
Revenue Waste Management,
Inc. (1)
6.625%, 12/01/12 . . . . . . . . . . . . 1,014,440
------------
2,586,322
------------
MINNESOTA-0.6%
Housing-0.3%
290,000 Minnesota State Housing
Finance Agency
Single Family Mortgage
Revenue (1)
7.45%, 7/01/22 . . . . . . . . . . . . . 306,089
------------
Other-0.3%
265,000 Minneapolis Community
Development Agency
Supported Development Revenue
7.35%, 12/01/08. . . . . . . . . . . . . 277,529
------------
583,618
------------
MISSISSIPPI-2.5%
Education-1.3%
1,200,000 Mississippi Higher Education
Assistance Corp.
Student Loan Revenue
(Series C) (1)
6.05%, 9/01/07 . . . . . . . . . . . . . 1,238,304
------------
Pollution Control-1.2%
1,100,000 Jackson County Mississippi
Pollution Control Revenue
Chevron USA, Inc. Project (2)
2.60%, 6/01/23 . . . . . . . . . . . . . 1,100,000
------------
2,338,304
------------
NEVADA-2.1%
Airline/Airport-0.6%
500,000 Clark County, Nevada
Passenger Facilities (1)
6.25%, 7/01/11 . . . . . . . . . . . . . 506,975
------------
General Obligation-1.5%
890,000 Clark County, Nevada
Refunding & Improvement
Transportation (Series A)
6.00%, 6/01/13 (MBIA insured). . . . . . 885,924
B-3
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
$ 500,000 Nevada State General Obligation
Municipal Bond Bank
6.80%, 7/01/12 . . . . . . . . . . . . . $ 548,225
------------
1,434,149
------------
1,941,124
------------
NEW JERSEY-2.7%
General Obligation-0.5%
465,000 Jersey City General Obligation
Bonds
6.60%, 2/15/10 . . . . . . . . . . . . . 471,212
------------
Health/Hospital-1.8%
New Jersey Health Care Facilities
500,000 Atlantic City Medical Center
6.80%, 7/01/11 . . . . . . . . . . . . . 521,190
400,000 St. Elizabeth Hospital
8.25%, 7/01/20 . . . . . . . . . . . . . 432,828
750,000 Wayne General Hospital
5.30%, 8/01/04 . . . . . . . . . . . . . 713,085
------------
1,667,103
------------
Turnpike/Toll-0.4%
380,000 New Jersey State Turnpike
Authority Economic
Development & Revenue
6.50%, 1/01/16 . . . . . . . . . . . . . 403,188
------------
2,541,503
------------
NEW YORK-12.8%
Correctional Facilities-0.5%
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.625%, 1/01/07. . . . . . . . . . . . . 479,915
------------
Education-1.0%
1,000,000 New York State Dormitory
Authority State University
System
5.50%, 5/15/07 . . . . . . . . . . . . . 966,060
------------
General Obligation-5.2%
New York City General
Obligation Bonds
1,000,000 5.625%, 8/01/12 (Series E) . . . . . . . 911,880
500,000 5.70%, 8/15/06 (Series D). . . . . . . . 484,745
1,500,000 6.00%, 5/15/10 (Series E). . . . . . . . 1,459,575
975,000 6.50%, 8/01/13 (Series A). . . . . . . . 981,396
945,000 7.625%, 2/01/15 (Series G) . . . . . . . 1,041,579
------------
4,879,175
------------
Power/Utility-1.5%
1,400,000 New York State Energy
Research & Development
Niagara Mohawk (2)
2.80%, 7/01/15 . . . . . . . . . . . . . 1,400,000
------------
Sales Tax-3.0%
New York State Local
Government Assistance Corp.
1,250,000 5.00%, 4/01/21 (Series E). . . . . . . . 1,041,250
900,000 7.00%, 4/01/11 (Series D). . . . . . . . 960,444
745,000 7.125%, 4/01/11 (Series A) . . . . . . . 803,468
------------
2,805,162
------------
Transportation-0.7%
700,000 Port Authority of New York &
New Jersey
6.00%, 12/01/16. . . . . . . . . . . . . 693,973
------------
Turnpike/Toll-0.4%
300,000 Triborough Bridge & Tunnel
Authority
6.375%, 1/01/05. . . . . . . . . . . . . 321,849
------------
Water/Sewer-0.5%
400,000 New York City Municipal
Water Finance Authority
Water & Sewer System
Revenue
7.00%, 6/15/09 . . . . . . . . . . . . . 432,640
------------
11,978,774
------------
NORTH CAROLINA-1.1%
Power/Utility
1,000,000 North Carolina Eastern
Municipal Power Agency
6.00%, 1/01/04 . . . . . . . . . . . . . 1,021,580
------------
OHIO-0.8%
Health/Hospital
850,000 Franklin County, Ohio
Hospital Revenue
Doctors Hospital Project
5.875%, 12/01/13 . . . . . . . . . . . . 774,494
------------
OKLAHOMA-1.0%
Health/Hospital
1,150,000 Oklahoma State Industry
Authority Revenue
Sisters Mercy Health Project
5.00%, 6/01/18 . . . . . . . . . . . . . 947,071
------------
B-4
<PAGE>
NATIONAL TAX-EXEMPT FUND (CONT'D)
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA-5.4%
Education-0.6%
$ 500,000 Pennsylvania Higher Education
Assistance Agency Student
Loan Revenue (1)
7.15%, 9/01/21
(AMBAC insured). . . . . . . . . . . . . $ 532,945
------------
General Obligation-0.9%
810,000 Pennsylvania State General
Unlimited Tax
6.60%, 11/01/11. . . . . . . . . . . . . 849,471
------------
Health/Hospital-0.4%
350,000 Monroeville Hospital Authority
Revenue Bond Forbes Health
System Refunding
7.00%, 10/01/13. . . . . . . . . . . . . 353,752
------------
Transportation-0.8%
750,000 Pennsylvania State Turnpike
Community Revenue Bonds
6.50%, 12/01/13. . . . . . . . . . . . . 762,503
------------
Water/Sewer-2.7%
2,240,000 Philadelphia Water &
Sewer Revenue
7.35%, 9/01/04 . . . . . . . . . . . . . 2,538,838
------------
5,037,509
------------
PUERTO RICO-0.5%
Power/Utility
500,000 Puerto Rico Electric Power
Authority Power Revenue
(Series T)
6.00%, 7/01/16 . . . . . . . . . . . . . 488,655
------------
RHODE ISLAND-1.6%
Housing
1,500,000 Rhode Island Housing &
Mortgage Finance Corp. (1)
6.30%, 10/01/12. . . . . . . . . . . . . 1,468,095
------------
SOUTH DAKOTA-1.0%
Housing
1,000,000 South Dakota Housing
Development Authority
Homeownership Mortgage (1)
6.15%, 5/01/26 . . . . . . . . . . . . . 936,600
------------
TEXAS-6.4%
Education-0.5%
400,000 Brazos, Texas Higher Education
Student Loans (1)
6.80%, 12/01/04. . . . . . . . . . . . . 411,916
------------
General Obligation-2.9%
1,000,000 Dallas, Texas General
Obligation Bonds
6.125%, 2/15/05. . . . . . . . . . . . . 1,057,470
1,500,000 San Antonio, Texas General
Obligation Bonds
5.75%, 8/01/13 . . . . . . . . . . . . . 1,433,280
200,000 Texas State Tax & Revenue
Anticipation Notes
3.25%, 8/31/94 . . . . . . . . . . . . . 200,085
------------
2,690,835
------------
Turnpike/Toll-1.1%
1,000,000 Harris County, Texas Refunding
Toll Road
6.75%, 8/01/14 . . . . . . . . . . . . . 1,048,040
------------
Water/Sewer-1.9%
Houston, Texas Water &
Sewer System Revenue
Refunding Bonds
1,250,000 6.40%, 12/01/09. . . . . . . . . . . . . 1,273,500
500,000 6.75%, 12/01/08. . . . . . . . . . . . . 527,190
------------
1,800,690
------------
5,951,481
------------
UTAH-2.1%
Housing-0.3%
250,000 Utah State Housing Finance
Agency Single Family
Mortgage Revenue (1)
6.95%, 7/01/24 . . . . . . . . . . . . . 254,635
------------
Power/Utility-1.8%
1,760,000 Intermountain Power Agency
6.00%, 7/01/12 . . . . . . . . . . . . . 1,735,202
------------
1,989,837
------------
VERMONT-1.8%
Housing
1,570,000 Vermont State Housing Finance
Authority (1)
7.85%, 12/01/29. . . . . . . . . . . . . 1,660,149
------------
B-5
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
VIRGINIA-4.1%
General Obligation-1.1%
$ 1,000,000 Richmond, Virginia Refunding
(Series B)
6.25%, 1/15/18 . . . . . . . . . . . . . $ 1,003,860
------------
Housing-1.1%
1,000,000 Virginia State Housing
Development Authority (1)
6.55%, 1/01/27 . . . . . . . . . . . . . 982,770
------------
Resource Recovery-1.0%
1,000,000 Southeastern Public Service
Authority of Virginia Regional
Solid Waste System (1)
6.00%, 7/01/13 . . . . . . . . . . . . . 970,260
------------
Transportation-0.9%
1,000,000 Virginia State Transportation
Board Revenue (Series C)
5.25%, 5/15/19 . . . . . . . . . . . . . 881,540
------------
3,838,430
------------
WASHINGTON-6.6%
Convention Center/Stadiums-0.6%
500,000 Bellevue Convention Center
Authority Meyden Bauer
Center
7.10%, 12/01/19. . . . . . . . . . . . . 531,595
------------
General Obligation-1.0%
1,000,000 Washington State (Series B)
5.75%, 5/01/16 . . . . . . . . . . . . . 959,200
------------
Health/Hospital-1.2%
Washington State Health
Care Facilities
400,000 Group Health Co-Op
Puget Sound
6.75%, 12/01/19
(AMBAC insured). . . . . . . . . . . . . 412,288
400,000 Multi-Care Medical Center
5.90%, 8/15/10 . . . . . . . . . . . . . 398,752
250,000 Yakima Valley Memorial Hospital
7.25%, 1/01/09 . . . . . . . . . . . . . 269,160
------------
1,080,200
------------
Power/Utility-3.8%
Washington State Public Power
Supply Systems
1,000,000 6.00%, 7/01/12 . . . . . . . . . . . . . 970,070
500,000 6.75%, 7/01/11 . . . . . . . . . . . . . 514,110
500,000 6.875%, 7/01/17. . . . . . . . . . . . . 513,870
1,500,000 7.00%, 7/01/12 . . . . . . . . . . . . . 1,558,905
------------
3,556,955
------------
6,127,950
------------
WISCONSIN-1.5%
Health/Hospital-0.7%
750,000 Wisconsin State Health &
Educational Facilities
Hospital Sisters Services, Inc.
5.25%, 6/01/10 . . . . . . . . . . . . . 689,340
------------
Housing-0.8%
740,000 Wisconsin Housing & Economic
Development Authority
Homeownership Revenue
7.10%, 3/01/23 . . . . . . . . . . . . . 761,149
------------
1,450,489
------------
WYOMING-1.1%
Housing-0.8%
750,000 Wyoming Community
Development Authority
Single Family Mortgage
Revenue (1)
7.15%, 6/01/22 . . . . . . . . . . . . . 772,102
------------
Pollution Control-0.3%
300,000 Green River, Wyoming Pollution
Control Revenue
Rhone Poulene, Inc. Project (2)
2.85%, 6/01/99 . . . . . . . . . . . . . 300,000
------------
1,072,102
------------
<CAPTION>
<S> <C> <C>
Total Investments
(cost-$92,135,153) . . . . . . . . . . . . 98.9% $ 92,510,130
Other Assets in Excess of
Other Liabilities. . . . . . . . . . . . . 1.1 1,020,339
----- ------------
Total Net Assets . . . . . . . . . . . . . . 100.0% $ 93,530,469
----- ------------
----- ------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA TAX-EXEMPT FUND
MUNICIPAL NOTES & BONDS-101.7%
Airline/Airport-6.1%
San Francisco City Commission
International Airport
Revenue (1)
$ 500,000 6.125%, 5/01/08. . . . . . . . . . . . . $ 507,265
1,250,000 6.20%, 5/01/20 . . . . . . . . . . . . . 1,256,662
------------
1,763,927
------------
Correctional Facilities-3.1%
500,000 California State Public Works
Department of Corrections
6.50%, 9/01/11 . . . . . . . . . . . . . 503,710
B-6
<PAGE>
CALIFORNIA TAX-EXEMPT FUND (CONT'D)
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Correctional Facilities-(cont'd)
$ 400,000 Los Angeles County Certificates
of Participation Edelman
Childrens Center
6.00%, 4/01/12
(AMBAC insured). . . . . . . . . . . . . $ 400,244
------------
903,954
------------
Education-6.1%
California State Education
Facilities Authority Revenue
1,000,000 6.00%, 11/01/16. . . . . . . . . . . . . 1,001,990
100,000 7.00%, 3/01/16
(MBIA insured) . . . . . . . . . . . . . 107,401
150,000 California State University
Dominguez Hills
6.80%, 5/01/16 . . . . . . . . . . . . . 154,054
250,000 Fresno Unified School District
Certificates of Participation
7.00%, 5/01/12 . . . . . . . . . . . . . 256,575
250,000 Los Angeles Unified School District
Certificates of Participation
6.60%, 6/01/06 . . . . . . . . . . . . . 259,867
------------
1,779,887
------------
General Obligation-6.6%
East Bay Regional Park District
750,000 5.75%, 9/01/12 . . . . . . . . . . . . . 726,210
500,000 6.375%, 9/01/10. . . . . . . . . . . . . 517,830
400,000 San Francisco City and County
Library Facility Project
6.25%, 6/15/11 . . . . . . . . . . . . . 406,672
250,000 San Francisco City and County
(Series A)
6.70%, 12/15/08. . . . . . . . . . . . . 261,290
------------
1,912,002
------------
Health/Hospital-8.7%
California Health Facilities
Financing
315,000 Adventist Hospital
6.50%, 3/01/07
(MBIA insured) . . . . . . . . . . . . . 331,465
1,000,000 Good Samaritan Hospital
7.00%, 9/01/21 . . . . . . . . . . . . . 1,037,290
Kaiser Permanente
555,000 6.25%, 3/01/21 . . . . . . . . . . . . . 548,579
250,000 6.50%, 12/01/20. . . . . . . . . . . . . 252,367
100,000 Sutter Memorial Hospital
7.00%, 1/01/09 . . . . . . . . . . . . . 105,257
250,000 Marysville Hospital Revenue
6.30%, 1/01/22
(AMBAC insured). . . . . . . . . . . . . 252,260
------------
2,527,218
------------
Housing-5.7%
California Housing Finance
Agency
80,000 Home Mortgage Revenue
7.35%, 8/01/11 . . . . . . . . . . . . . 83,382
200,000 Lancaster-Grand Terrace
7.375%, 1/01/12. . . . . . . . . . . . . 205,230
350,000 Multi-Unit Rental Housing
6.875%, 2/01/22. . . . . . . . . . . . . 352,191
250,000 Delta County Home Mortgage
Finance (1)
6.75%, 12/01/25. . . . . . . . . . . . . 251,393
500,000 Pomona, California
Single Family Mortgage
Revenue
7.50%, 8/01/23 . . . . . . . . . . . . . 604,875
150,000 Southern California Housing
Finance Authority
Single Family Mortgage
Revenue (1)
6.90%, 10/01/24. . . . . . . . . . . . . 151,908
------------
1,648,979
------------
Leasing-4.4%
450,000 Pasadena County, Certificates
of Participation
7.20%, 1/01/18 . . . . . . . . . . . . . 484,889
615,000 Santa Monica Parking Authority
Lease Revenue
6.375%, 7/01/16. . . . . . . . . . . . . 621,937
150,000 Sonoma County, Certificates of
Participation
6.75%, 10/01/07. . . . . . . . . . . . . 159,396
------------
1,266,222
------------
Pollution Control-6.2%
California Pollution Control
Finance Authority
200,000 Delano Project (1,2)
2.60%, 8/01/19 . . . . . . . . . . . . . 200,000
200,000 Honey Lake Power Project (1,2)
2.60%, 9/01/18 . . . . . . . . . . . . . 200,000
1,000,000 Pacific Gas & Electric (1)
5.85%, 12/01/23. . . . . . . . . . . . . 897,230
500,000 Solid Waste Disposal Revenue
6.75%, 7/01/11 . . . . . . . . . . . . . 514,520
------------
1,811,750
------------
B-7
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Ports-1.0%
$ 300,000 Port of Oakland, California
Special Facilities Revenue (1)
6.75%, 1/01/12 . . . . . . . . . . . . . $ 306,498
------------
Power/Utility-7.9%
500,000 Kings River Conservation
District Pine Flat
Power Revenue
6.375%, 1/01/12. . . . . . . . . . . . . 509,905
760,000 Modesto Public Power Agency
San Juan Project
6.875%, 7/01/19. . . . . . . . . . . . . 776,287
1,000,000 Southern California Public
Power Authority
Transmission Project Revenue
6.125%, 7/01/18. . . . . . . . . . . . . 998,070
------------
2,284,262
------------
Sales Tax-3.3%
500,000 Los Angeles Community
Redevelopment
Finance Authority (1)
5.90%, 12/01/13. . . . . . . . . . . . . 470,325
500,000 Los Angeles County Transport
Commission Sales Tax
Revenue
6.25%, 7/01/16 . . . . . . . . . . . . . 500,055
------------
970,380
------------
Tax Allocation-14.4%
200,000 Avalon, California Improvement
Agency
7.25%, 8/01/21 . . . . . . . . . . . . . 209,548
100,000 Chico Public Finance Authority
Redevelopment Project
7.40%, 4/01/21 . . . . . . . . . . . . . 107,216
1,000,000 Fairfield, California Public
Financing Authority
6.25%, 7/01/14 (FGIC insured). . . . . . 1,010,980
Industry, California Urban
Development Agency
260,000 6.50%, 11/01/07
(MBIA insured) . . . . . . . . . . . . . 274,885
500,000 6.90%, 11/01/07. . . . . . . . . . . . . 531,145
500,000 Merced Public Finance
Authority
5.50%, 12/01/10. . . . . . . . . . . . . 470,175
150,000 Riverside County Redevelopment
Project
7.50%, 10/01/26. . . . . . . . . . . . . 156,641
650,000 Santa Clara Redevelopment
Agency Bayshore North
Project
5.75%, 7/01/14
(AMBAC insured). . . . . . . . . . . . . 619,606
680,000 Santa Magarita/Dana Point
Authority California Revenue
Improvement District
7.25%, 8/01/14
(MBIA insured) . . . . . . . . . . . . . 787,848
------------
4,168,044
------------
Transportation-7.8%
500,000 California State Department
of Transportation
Certificates of Participation
6.50%, 3/01/16 . . . . . . . . . . . . . 500,930
750,000 Contra Costa Transportation
Authority
6.50%, 3/01/09 . . . . . . . . . . . . . 783,525
Puerto Rico Commonwealth
Highway Authority
500,000 5.25%, 7/01/21 . . . . . . . . . . . . . 431,165
500,000 6.50%, 7/01/22 . . . . . . . . . . . . . 550,845
------------
2,266,465
------------
Water/Sewer-20.4%
425,000 Beverly Hills, California
Public Financing Authority
Wastewater Revenue
5.875%, 6/01/10. . . . . . . . . . . . . 423,007
400,000 Big Bear Lake, California
Water Revenue
6.25%, 4/01/12 . . . . . . . . . . . . . 410,460
1,000,000 California State Department
of Water Resources
Central Valley Project
6.125%, 12/01/13 . . . . . . . . . . . . 998,200
1,000,000 Calleguas Public Financing
Authority
5.125%, 7/01/14. . . . . . . . . . . . . 875,850
1,000,000 East Bay, California Municipal
Utility District Water
System Revenue
6.375%, 6/01/12. . . . . . . . . . . . . 1,095,480
Los Angeles Department of
Water and Power
1,000,000 5.75%, 9/01/12 . . . . . . . . . . . . . 954,530
500,000 6.00%, 7/15/08 . . . . . . . . . . . . . 506,460
250,000 Los Angeles Wastewater
System Revenue
6.25%, 6/01/12
(AMBAC insured). . . . . . . . . . . . . 255,870
Orange County, California
Various Sanitation Districts
Certificates of Participation (2)
300,000 2.65%, 8/01/15 . . . . . . . . . . . . . 300,000
100,000 2.65%, 8/01/17 (Series C). . . . . . . . 100,000
------------
5,919,857
------------
B-8
<PAGE>
CALIFORNIA TAX-EXEMPT FUND (CONT'D)
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Total Investments
(cost-$29,503,029) . . . . . . . . . . . . 101.7% $ 29,529,445
Other Liabilities in Excess of
Other Assets . . . . . . . . . . . . . . . (1.7) (505,645)
----- ------------
Total Net Assets . . . . . . . . . . . . . . 100.0% $ 29,023,800
----- ------------
----- ------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
NEW YORK TAX-EXEMPT FUND
MUNICIPAL NOTES & BONDS-98.8%
Airline/Airport-4.5%
$ 1,000,000 New York City Industrial
Special Facilities Authority
American Airlines
6.00%, 1/01/15 . . . . . . . . . . . . . $ 963,500
500,000 Westchester County, New York
Westchester Airport
Association Series A
5.95%, 8/01/24 . . . . . . . . . . . . . 477,825
------------
1,441,325
------------
Correctional Facilities-1.4%
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.50%, 1/01/16 . . . . . . . . . . . . . 442,580
------------
Education-17.3%
New York State Dormitory
Authority Revenue
500,000 City University System
7.40%, 7/01/05 . . . . . . . . . . . . . 548,820
750,000 Columbia University
5.75%, 7/01/15 . . . . . . . . . . . . . 729,510
500,000 Episcopal Health Services
5.85%, 8/01/13 . . . . . . . . . . . . . 483,320
200,000 Menorah Campus
7.30%, 8/01/16 . . . . . . . . . . . . . 217,816
500,000 Metropolitan Museum of Art
9.20%, 7/01/15 . . . . . . . . . . . . . 536,685
445,000 Rochester Hospital
5.55%, 8/01/12 . . . . . . . . . . . . . 409,355
150,000 Saint Vincent's Hospital
7.375%, 8/01/11. . . . . . . . . . . . . 164,904
State University Educational
Facilities
1,000,000 5.50%, 5/15/07 . . . . . . . . . . . . . 966,060
750,000 5.50%, 5/15/13 . . . . . . . . . . . . . 682,050
720,000 7.70%, 5/15/12 . . . . . . . . . . . . . 828,274
------------
5,566,794
------------
General Obligation-17.6%
670,000 Grand Central, New York
General Obligation Bonds
6.50%, 1/01/10 . . . . . . . . . . . . . 731,318
500,000 Nassau County, New York
General Obligation Bonds
6.25%, 10/15/09
(AMBAC insured). . . . . . . . . . . . . 524,025
New York City General
Obligation Bonds
915,000 5.75%, 8/01/05 (MBIA insured). . . . . . 912,319
500,000 6.375%, 8/01/07. . . . . . . . . . . . . 504,595
500,000 7.20%, 2/01/15 . . . . . . . . . . . . . 533,765
200,000 7.50%, 8/01/20 . . . . . . . . . . . . . 216,600
350,000 7.625%, 2/01/14. . . . . . . . . . . . . 385,770
300,000 7.75%, 3/15/03 . . . . . . . . . . . . . 330,978
200,000 8.00%, 8/15/18 . . . . . . . . . . . . . 232,954
100,000 8.25%, 6/01/02 . . . . . . . . . . . . . 115,901
150,000 8.25%, 11/15/13. . . . . . . . . . . . . 176,106
100,000 8.40%, 11/15/09. . . . . . . . . . . . . 118,294
New York State General
Obligation Bonds
300,000 7.00%, 2/01/09 . . . . . . . . . . . . . 321,042
500,000 7.50%, 11/15/00. . . . . . . . . . . . . 565,870
------------
5,669,537
------------
Health/Hospital-10.2%
New York State Medical Care
Facilities
590,000 Buffalo General Hospital
7.70%, 2/15/22 . . . . . . . . . . . . . 664,729
375,000 Hospital & Nursing Home
6.45%, 2/15/09 . . . . . . . . . . . . . 385,080
Mental Health Services
500,000 5.375%, 2/15/14. . . . . . . . . . . . . 441,750
650,000 5.70%, 8/15/14
(AMBAC insured). . . . . . . . . . . . . 618,332
500,000 5.75%, 2/15/14 . . . . . . . . . . . . . 478,775
250,000 North Shore University
Hospital
7.20%, 11/01/20
(MBIA insured) . . . . . . . . . . . . . 272,433
500,000 Presbyterian Hospital
5.25%, 8/15/14 . . . . . . . . . . . . . 441,200
------------
3,302,299
------------
B-9
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Housing-5.3%
New York State Housing
Finance Agency
Multi-Family Housing
$ 250,000 6.45%, 8/15/14 . . . . . . . . . . . . . $ 251,272
245,000 6.95%, 8/15/24 (1) . . . . . . . . . . . 250,128
350,000 7.05%, 8/15/24 (1) . . . . . . . . . . . 359,604
New York State Mortgage
Agency Revenue Bonds (1)
500,000 6.40%, 10/01/12. . . . . . . . . . . . . 499,940
345,000 7.375%, 10/01/11 . . . . . . . . . . . . 355,478
------------
1,716,422
------------
Pollution Control-2.0%
New York State
Environmental Facilities
Pollution Control Revenue
250,000 6.60%, 9/15/12 . . . . . . . . . . . . . 259,505
350,000 7.20%, 3/15/11 . . . . . . . . . . . . . 378,630
------------
638,135
------------
Power/Utility-13.9%
New York State Energy
Research & Development
Consolidated Edison, Inc. (1)
200,000 7.375%, 7/01/24. . . . . . . . . . . . . 212,350
280,000 7.50%, 1/01/26 . . . . . . . . . . . . . 299,734
620,000 7.75%, 1/01/24 . . . . . . . . . . . . . 670,257
Niagara Mohawk
100,000 2.80%, 7/01/15 (2) . . . . . . . . . . . 100,000
400,000 2.70%, 12/01/25 (2). . . . . . . . . . . 400,000
400,000 6.625%, 10/01/13 . . . . . . . . . . . . 417,104
New York State Power Authority
315,000 6.625%, 1/01/12. . . . . . . . . . . . . 327,380
100,000 8.00%, 1/01/17 . . . . . . . . . . . . . 110,945
Puerto Rico Electric Power
Authority
1,650,000 5.00%, 7/01/12 . . . . . . . . . . . . . 1,444,278
500,000 6.00%, 7/01/16 . . . . . . . . . . . . . 488,655
------------
4,470,703
------------
Resource Recovery-1.6%
500,000 Oneida Herkimer, New York
Solid Waste Authority
6.60%, 4/01/04 . . . . . . . . . . . . . 519,855
------------
Sales Tax-5.2%
220,000 Municipal Assistance Corp. for
the City of New York
7.25%, 7/01/08 . . . . . . . . . . . . . 234,520
New York State Local
Government Assistance Corp.
700,000 7.00%, 4/01/12 . . . . . . . . . . . . . 756,973
600,000 7.00%, 4/01/16 . . . . . . . . . . . . . 674,850
------------
1,666,343
------------
Transportation-8.2%
Metropolitan Transit Authority
350,000 6.25%, 7/01/17
(MBIA insured) . . . . . . . . . . . . . 352,544
500,000 6.375%, 7/01/10. . . . . . . . . . . . . 518,560
250,000 7.375%, 7/01/08. . . . . . . . . . . . . 281,608
Port Authority of New York
& New Jersey
500,000 5.00%, 10/01/13. . . . . . . . . . . . . 438,280
385,000 6.00%, 12/01/15. . . . . . . . . . . . . 385,624
400,000 6.125%, 7/15/10 (1). . . . . . . . . . . 407,312
250,000 6.50%, 4/15/11 . . . . . . . . . . . . . 262,970
------------
2,646,898
------------
Turnpike/Toll-8.3%
New York State Thruway
Authority
500,000 5.125%, 4/01/07. . . . . . . . . . . . . 462,345
400,000 7.25%, 1/01/10 . . . . . . . . . . . . . 427,200
1,000,000 Puerto Rico Highway Authority
Revenue Bonds
5.25%, 7/01/20 . . . . . . . . . . . . . 864,380
Triborough Bridge & Tunnel
Authority
500,000 5.00%, 1/01/20 . . . . . . . . . . . . . 422,570
500,000 6.00%, 1/01/12 . . . . . . . . . . . . . 503,740
------------
2,680,235
------------
Water/Sewer-3.3%
New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue
750,000 6.375%, 6/15/22. . . . . . . . . . . . . 770,052
275,000 7.10%, 6/15/12 . . . . . . . . . . . . . 288,992
------------
1,059,044
------------
<CAPTION>
- ---------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Total Investments
(cost-$31,376,321) . . . . . . . . . . . . 98.8% $ 31,820,170
Other Assets in Excess of
Other Liabilities. . . . . . . . . . . . . 1.2 389,615
----- ------------
Total Net Assets . . . . . . . . . . . . . . 100.0% $ 32,209,785
----- ------------
----- ------------
<FN>
(1) Subject to alternative minimum tax.
(2) Represents a variable rate demand note, payable on demand.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-10
<PAGE>
JULY 31, 1994
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost-$92,135,153, $29,503,029 and
$31,376,321, respectively). . . . . . . . . . . . . . . . . . . . . . . . . . $92,510,130 $29,529,445 $31,820,170
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,317 141,510 24,805
Receivable for investments sold/called . . . . . . . . . . . . . . . . . . . . 2,653,546 1,284,411 440,635
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,453,736 420,553 514,961
Receivable for shares of beneficial interest sold. . . . . . . . . . . . . . . 46,849 3,109 15,864
Deferred organization expenses and other assets. . . . . . . . . . . . . . . . 27,322 3,438 3,583
----------- ----------- -----------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,735,900 31,382,466 32,820,018
----------- ----------- -----------
LIABILITIES
Payable for investments purchased. . . . . . . . . . . . . . . . . . . . . . . 2,885,909 2,015,322 498,750
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,675 60,760 47,989
Payable for shares of beneficial interest redeemed . . . . . . . . . . . . . . 96,267 246,096 29,985
Investment advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . 3,847 8,727 3,849
Other payables and accrued expenses. . . . . . . . . . . . . . . . . . . . . . 40,733 27,761 29,660
----------- ----------- -----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,205,431 2,358,666 610,233
----------- ----------- -----------
NET ASSETS
Shares of beneficial interest. . . . . . . . . . . . . . . . . . . . . . . . . 87,630 27,391 29,773
Paid-in-surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,184,645 29,026,086 31,292,636
Accumulated net realized gain (loss) on investments. . . . . . . . . . . . . . (116,783) (56,093) 443,527
Net unrealized appreciation on investments . . . . . . . . . . . . . . . . . . 374,977 26,416 443,849
----------- ----------- -----------
Total Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $93,530,469 $29,023,800 $32,209,785
----------- ----------- -----------
----------- ----------- -----------
Fund shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,762,939 2,739,090 2,977,289
----------- ----------- -----------
Net asset value per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.67 $10.60 $10.82
----------- ----------- -----------
----------- ----------- -----------
Maximum offering price per share*. . . . . . . . . . . . . . . . . . . . . . . . $11.20 $11.13 $11.36
----------- ----------- -----------
----------- ----------- -----------
<FN>
* Sales charges decrease on purchases of $50,000 or higher.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-11
<PAGE>
YEAR ENDED JULY 31, 1994
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA NEW YORK
TAX-EXEMPT TAX-EXEMPT TAX-EXEMPT
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,311,090 $ 2,012,746 $ 2,186,290
----------- ----------- -----------
OPERATING EXPENSES
Investment advisory fee (note 2a). . . . . . . . . . . . . . . . . . . . . . . 531,371 173,954 186,813
Accounting services fee (note 2b). . . . . . . . . . . . . . . . . . . . . . . 82,193 70,850 70,850
Transfer and dividend disbursing agent fees. . . . . . . . . . . . . . . . . . 53,526 10,371 18,713
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,806 35,371 35,057
Registration fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,056 1,706 1,830
Reports and notices to shareholders. . . . . . . . . . . . . . . . . . . . . . 17,224 9,477 9,364
Trustees' fees and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 17,201 8,801 8,801
Auditing, consulting and tax return preparation fees . . . . . . . . . . . . . 15,267 15,267 15,267
Amortization of deferred organization expenses (note 1c) . . . . . . . . . . . 10,147 518 712
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 2,900 2,900
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,280 1,657 1,916
----------- ----------- -----------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 824,071 330,872 352,223
Less: Investment advisory fees waived (note 2a) . . . . . . . . . . . . . . (368,540) (120,180) (109,629)
----------- ----------- -----------
Net operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 455,531 210,692 242,594
----------- ----------- -----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,855,559 1,802,054 1,943,696
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-NET
Net realized gain on security transactions . . . . . . . . . . . . . . . . . . 1,825,469 328,864 567,196
Net realized loss on futures transactions (note 1g). . . . . . . . . . . . . . (125,438) (62,500) (62,156)
----------- ----------- -----------
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . 1,700,031 266,364 505,040
Net change in unrealized appreciation (depreciation) on investments. . . . . . . (5,263,348) (1,560,035) (1,963,681)
----------- ----------- -----------
Net realized gain and change in unrealized appreciation
(depreciation) on investments . . . . . . . . . . . . . . . . . . . . . . . (3,563,317) (1,293,671) (1,458,641)
----------- ----------- -----------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . $ 2,292,242 $ 508,383 $ 485,055
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NATIONAL TAX-EXEMPT FUND
----------------------------------
YEAR ENDED JULY 31,
----------------------------------
1994 1993
------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,855,559 $ 4,777,616
Net realized gain (loss) on investments. . . . . . . . . . . . . . . . . . . . . . 1,700,031 602,847
Net change in unrealized appreciation (depreciation) on investments. . . . . . . . (5,263,348) 1,936,858
------------- -------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 2,292,242 7,317,321
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,855,559) (4,777,616)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,395,083) (97,494)
------------- -------------
Total dividends and distributions to shareholders. . . . . . . . . . . . . . . . (8,250,642) (4,875,110)
------------- -------------
FUND SHARE TRANSACTIONS
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,877,343 60,245,315
Net proceeds from acquisition of Unified Fund (note 6) . . . . . . . . . . . . . . -- 11,135,311
Reinvestment of dividends and distributions. . . . . . . . . . . . . . . . . . . . 5,055,760 2,902,707
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,840,943) (15,631,725)
------------- -------------
Net increase (decrease) in net assets from fund share transactions . . . . . . . (10,907,840) 58,651,608
------------- -------------
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . (16,866,240) 61,093,819
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,396,709 49,302,890
------------- -------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,530,469 $ 110,396,709
------------- -------------
------------- -------------
SHARES ISSUED AND REDEEMED
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,496,488 5,445,828
Issued in connection with acquisition of Unified Fund (note 6) . . . . . . . . . . -- 1,028,191
Issued in reinvestment of dividends and distributions. . . . . . . . . . . . . . . 455,255 261,926
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,965,354) (1,410,304)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,013,611) 5,325,641
------------- -------------
------------- -------------
DIVIDENDS AND DISTRIBUTIONS PER SHARE
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.612 $ 0.676
------------- -------------
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.239 $ 0.017
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-13
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT FUND
----------------------------------
YEAR ENDED JULY 31,
----------------------------------
1994 1993
------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,054 $ 1,594,686
Net realized gain (loss) on investments. . . . . . . . . . . . . . . . . . . . . . 266,364 175,332
Net change in unrealized appreciation (depreciation) on investments. . . . . . . . (1,560,035) 786,308
------------- -------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 508,383 2,556,326
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,802,054) (1,594,686)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (497,507) (24,171)
------------- -------------
Total dividends and distributions to shareholders. . . . . . . . . . . . . . . . (2,299,561) (1,618,857)
------------- -------------
FUND SHARE TRANSACTIONS
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,916,432 24,538,429
Net proceeds from acquisition of Unified Fund (note 6) . . . . . . . . . . . . . . -- --
Reinvestment of dividends and distributions. . . . . . . . . . . . . . . . . . . . 1,213,893 896,260
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,729,767) (7,601,046)
------------- -------------
Net increase (decrease) in net assets from fund share transactions . . . . . . . (6,599,442) 17,833,643
------------- -------------
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . (8,390,620) 18,771,112
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,414,420 18,643,308
------------- -------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,023,800 $37,414,420
------------- -------------
------------- -------------
SHARES ISSUED AND REDEEMED
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,408 2,250,221
Issued in connection with acquisition of Unified Fund (note 6) . . . . . . . . . . -- --
Issued in reinvestment of dividends and distributions. . . . . . . . . . . . . . . 110,077 82,494
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,346,383) (694,865)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (615,898) 1,637,850
------------- -------------
------------- -------------
DIVIDENDS AND DISTRIBUTIONS PER SHARE
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.571 $ 0.642
------------- -------------
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.156 $ 0.012
------------- -------------
<CAPTION>
NEW YORK TAX-EXEMPT FUND
----------------------------------
YEAR ENDED JULY 31,
----------------------------------
1994 1993
------------- --------------
<S> <C> <C>
OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,943,696 $ 1,498,850
Net realized gain (loss) on investments. . . . . . . . . . . . . . . . . . . . . . 505,040 (23,101)
Net change in unrealized appreciation (depreciation) on investments. . . . . . . . (1,963,681) 948,674
------------- -------------
Net increase in net assets resulting from operations . . . . . . . . . . . . . . 485,055 2,424,423
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,943,696) (1,498,850)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,426) (71,383)
------------- -------------
Total dividends and distributions to shareholders. . . . . . . . . . . . . . . . (1,983,122) (1,570,233)
------------- -------------
FUND SHARE TRANSACTIONS
Net proceeds from sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,337,899 21,130,966
Net proceeds from acquisition of Unified Fund (note 6) . . . . . . . . . . . . . . -- --
Reinvestment of dividends and distributions. . . . . . . . . . . . . . . . . . . . 1,311,333 981,559
Cost of shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,283,654) (4,378,709)
------------- -------------
Net increase (decrease) in net assets from fund share transactions . . . . . . . (3,634,422) 17,733,816
------------- -------------
Total increase (decrease) in net assets. . . . . . . . . . . . . . . . . . (5,132,489) 18,588,006
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,342,274 18,754,268
------------- -------------
End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,209,785 $37,342,274
------------- -------------
------------- -------------
SHARES ISSUED AND REDEEMED
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829,382 1,922,302
Issued in connection with acquisition of Unified Fund (note 6) . . . . . . . . . . -- --
Issued in reinvestment of dividends and distributions. . . . . . . . . . . . . . . 117,005 89,651
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,286,252) (402,195)
------------- -------------
Net increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (339,865) 1,609,758
------------- -------------
------------- -------------
DIVIDENDS AND DISTRIBUTIONS PER SHARE
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.584 $ 0.652
------------- -------------
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.011 $ 0.034
------------- -------------
</TABLE>
B-14
<PAGE>
JULY 31, 1994
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
National Tax-Exempt Fund ("National"), California Tax-Exempt Fund
("California") and New York Tax-Exempt Fund ("New York") are portfolios of Quest
for Value Family of Funds, a Massachusetts business trust. Each fund commenced
operations on August 14, 1990. On August 10, 1990, each fund sold 20,000 shares
to Oppenheimer Capital for $200,000 to provide the initial capital for the
funds. Quest for Value Advisors (the "Adviser") serves as investment adviser and
provides accounting services to each fund. Quest for Value Distributors (the
"Distributor") serves as each fund's distributor. Both the Adviser and
Distributor are majority-owned (99%) subsidiaries of Oppenheimer Capital. The
following is a summary of significant accounting policies consistently followed
by each fund in the preparation of its financial statements:
(a) Valuation of Investments
Investment debt securities (other than short-term obligations) are valued
each day by an independent pricing service approved by the Board of Trustees.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any security or other asset for which market quotations are not readily
available is valued at its fair value as determined in good faith by or under
procedures established by the Board of Trustees. National invests substantially
all of its assets in a diversified portfolio of debt obligations issued by
states, territories and possessions of the United States and by the District of
Columbia and their political subdivisions. California invests substantially all
of its assets in debt obligations issued by the State of California and its
various political subdivisions. New York invests substantially all of its assets
in debt obligations issued by the State of New York and its various political
subdivisions. The issuers' abilities to meet their obligations may be affected
by economic and political developments in a specific state or region.
(b) Federal Income Taxes
It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable and non-taxable income to its shareholders;
accordingly, no Federal income tax provision is required.
(c) Deferred Organization Expenses
The following costs were incurred by each fund in connection with its
organization: National - $58,000, California - $12,000 and New York - $13,000.
These costs have been deferred and are being amortized to expense on a straight
line basis over sixty months from commencement of each fund's operations.
(d) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Original issue discounts or premiums
on debt securities purchased are accreted or amortized to interest income over
the lives of the respective securities.
(e) Dividends and Distributions
Each fund declares its dividends from net investment income daily and pays
the dividend monthly. Distributions of net realized capital gains, if any, will
be paid at least annually. Each fund records dividends and distributions to its
shareholders on the ex-dividend date.
B-15
<PAGE>
(f) Allocation of Expenses
Expenses specifically identifiable to a particular fund are borne by the
fund. Other expenses are allocated to each fund based on its net assets in
relation to the total net assets of all applicable funds or on another
reasonable basis.
(g) Futures Accounting Policies
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to a broker an amount of cash, U.S.
Government securities or other liquid, high grade debt instruments equal to the
minimum "initial margin" requirements of the exchange. Pursuant to a contract, a
fund agrees to receive from or pay to a broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the fund as unrealized
appreciation or depreciation. When a contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed and reverses
any unrealized appreciation or depreciation previously recorded.
2. INVESTMENT ADVISORY FEE, ACCOUNTING SERVICES FEE, DISTRIBUTION FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the annual rate of .50%. For the year ended July 31, 1994, the
Adviser voluntarily waived $368,540, $120,180 and $109,629 in investment
advisory fees for National, California and New York, respectively.
(b) A portion of accounting services fees for National, California and New
York are payable monthly to the Adviser. Each fund reimburses the Adviser for a
portion of the salaries of officers and employees of Oppenheimer Capital based
upon the amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the
year ended July 31, 1994, the Adviser received $52,193, $40,850 and $40,850 for
National, California and New York, respectively.
(c) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of fund shares. Under the Plan, the
Distributor has entered into agreements with dealers and other financial
institutions and organizations to obtain various sales-related services in
rendering distribution assistance. To compensate the Distributor for the
services it and other dealers provide and for the expense they bear under the
Plan, each fund pays the Distributor compensation, accrued daily and payable
monthly at an annual rate of up to .25% of average daily net assets or such
lesser rate as the Board of Trustees may from time to time determine. The total
fee may be paid by the Distributor to broker-dealers or others for providing
personal service, maintenance of accounts and ongoing sales or shareholder
support functions in connection with the distribution of fund shares. While
payments under the Plan may not exceed the stated percentage of average daily
net assets on an annual basis, the payments are not limited to the amounts
actually paid or expenses actually incurred by the Distributor. For the year
ended July 31, 1994, the Distributor has assumed all distribution-related
expenses without compensation from the funds.
(d) Oppenheimer & Co., Inc., an affiliate of Oppenheimer Capital, has
informed the funds that it received approximately $110,000, $58,000 and $133,000
in connection with the sale of fund shares for National, California and New
York, respectively, for the year ended July 31, 1994.
B-16
<PAGE>
JULY 31, 1994
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the year ended July 31, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA NEW YORK
----------- ----------- -----------
<S> <C> <C> <C>
Purchases $46,099,443 $10,753,387 $17,288,469
Sales 64,510,442 15,881,790 19,233,802
</TABLE>
4. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At July 31, 1994, the composition of unrealized appreciation (depreciation)
of investment securities and the cost of investments for Federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
APPRECIATION (DEPRECIATION) NET TAX COST
------------ -------------- -------- -----------
<S> <C> <C> <C> <C>
National $1,842,470 ($1,467,493) $374,977 $92,135,153
California 527,093 (500,677) 26,416 29,503,029
New York 1,138,151 (694,302) 443,849 31,376,321
</TABLE>
5. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
NATIONAL CALIFORNIA NEW YORK
--------- ---------- ----------
<S> <C> <C> <C>
Authorized fund shares unlimited unlimited unlimited
Par value per share $.01 $.01 $.01
</TABLE>
6. ACQUISITION OF UNIFIED FUND
On December 21, 1992, National acquired the net assets of the Unified
Indiana Bond Fund in a tax free exchange for 1,028,191 shares. At that date, net
assets for Unified Indiana Bond Fund amounted to $11,135,311, which included
$568,988 in unrealized appreciation. These net assets were combined with the net
assets of National, which were $62,095,964, immediately prior to reorganization.
Expenses incurred in connection with this acquisition approximated $22,000 which
include legal costs and independent accountants' fees.
B-17
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
NATIONAL TAX-EXEMPT FUND
INCOME FROM
INVESTMENT OPERATIONS
--------------------------------------------------
NET
REALIZED
NET ASSET AND TOTAL
VALUE, NET UNREALIZED FROM
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
<S> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 $11.29 $0.61 ($0.38) $0.23
1993 11.08 0.68 0.23 0.91
1992 10.22 0.73 0.86 1.59
AUGUST 14, 1990 (3)
TO JULY 31,
1991 10.00 (4) 0.65 0.22 0.87
<CAPTION>
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------
DISTRIBUTIONS
TO
DIVIDENDS TO SHAREHOLDERS
SHAREHOLDERS FROM NET TOTAL NET ASSET NET
ASSETS
FROM NET REALIZED DIVIDENDS VALUE, END OF
INVESTMENT GAIN ON AND END OF TOTAL PERIOD
INCOME INVESTMENTS DISTRIBUTIONS PERIOD RETURN*
(000'S)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 ($0.61) ($0.24) ($0.85) $10.67 2.01% $93,530
1993 (0.68) (0.02) (0.70) 11.29 8.51% 110,397
1992 (0.73) -- (0.73) 11.08 16.22% 49,303
AUGUST 14, 1990 (3)
TO JULY 31,
1991 (0.65) -- (0.65) 10.22 8.95% 13,231
<CAPTION>
RATIOS
--------------------------------------------------
RATIO OF NET RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME (LOSS) PORTFOLIO
TO AVERAGE TO AVERAGE TURNOVER
NET ASSETS NET ASSETS RATE
<S> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 0.43% (1,2) 5.51% (1,2) 45%
1993 0.20% (2) 6.01% (2) 19%
1992 0.02% (2) 6.80% (2) 10%
AUGUST 14, 1990 (3)
TO JULY 31,
1991 0.00% (2,5) 6.97% (2,5) 8%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $106,274,260.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF ITS FEES AND
REIMBURSED THE FUND FOR A PORTION OF
ITS OTHER OPERATING EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT,
THE RATIO OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD
HAVE BEEN .78% AND 5.16%, RESPECTIVELY,
FOR THE YEAR ENDED JULY 31, 1994, .85% AND 5.36%, RESPECTIVELY, FOR THE YEAR ENDED JULY 31,
1993, 1.03% AND 5.79%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1992 AND 1.75% AND 5.22%, ANNUALIZED,
RESPECTIVELY, FOR THE PERIOD AUGUST 14, 1990
(COMMENCEMENT OF OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT FUND
INCOME FROM
INVESTMENT OPERATIONS
--------------------------------------------------
NET
REALIZED
NET ASSET AND TOTAL
VALUE, NET UNREALIZED FROM
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
<S> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 $11.15 $0.57 ($0.39) $0.18
1993 10.86 0.64 0.30 0.94
1992 10.23 0.69 0.63 1.32
AUGUST 14, 1990 (3)
TO JULY 31,
1991 10.00 (5) 0.63 0.23 0.86
<CAPTION>
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------
DISTRIBUTIONS
TO
DIVIDENDS TO SHAREHOLDERS
SHAREHOLDERS FROM NET TOTAL NET ASSET NET
ASSETS
FROM NET REALIZED DIVIDENDS VALUE, END OF
INVESTMENT GAIN ON AND END OF TOTAL PERIOD
INCOME INVESTMENTS DISTRIBUTIONS PERIOD RETURN*
(000'S)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 ($0.57) ($0.16) ($0.73) $10.60 1.52% $29,024
1993 (0.64) (0.01) (0.65) 11.15 9.06% 37,414
1992 (0.69) -- (0.69) 10.86 13.37% 18,643
AUGUST 14, 1990 (3)
TO JULY 31,
1991 (0.63) -- (0.63) 10.23 8.89% 4,320
<CAPTION>
RATIOS
--------------------------------------------------
RATIO OF NET RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME (LOSS) PORTFOLIO
TO AVERAGE TO AVERAGE TURNOVER
NET ASSETS NET ASSETS RATE
<S> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 0.61% (1,2) 5.18% (1,2) 32%
1993 0.29% (2) 5.78% (2) 24%
1992 0.09% (2) 6.45% (2) 12%
AUGUST 14, 1990 (3)
TO JULY 31,
1991 0.00% (2,5) 6.65% (2,5) 20%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $34,790,898
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF ITS FEES AND
REIMBURSED THE FUND FOR A PORTION OF
ITS OTHER OPERATING EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT,
THE RATIO OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD
HAVE BEEN .95% AND 4.84%, RESPECTIVELY,
FOR THE YEAR ENDED JULY 31, 1994, .94% AND 5.13% RESPECTIVELY, FOR THE YEAR ENDED JULY 31,
1993, 1.46% AND 5.08%, RESPECTIVELY,
FOR THE YEAR ENDED JULY 31, 1992 AND 3.90% AND 2.75%, ANNUALIZED, RESPECTIVELY, FOR THE
PERIOD AUGUST 14, 1990 (COMMENCEMENT OF
OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
NEW YORK TAX-EXEMPT FUND
INCOME FROM
INVESTMENT OPERATIONS
--------------------------------------------------
NET
REALIZED
NET ASSET AND TOTAL
VALUE, NET UNREALIZED FROM
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
<S> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 $11.26 $0.58 ($0.43) $0.15
1993 10.98 0.65 0.31 0.96
1992 10.05 0.70 0.93 1.63
AUGUST 14, 1990 (3)
TO JULY 31,
1991 10.00 (4) 0.64 0.05 0.69
<CAPTION>
DIVIDENDS AND DISTRIBUTIONS
-------------------------------------------------
DISTRIBUTIONS
TO
DIVIDENDS TO SHAREHOLDERS
SHAREHOLDERS FROM NET TOTAL NET ASSET NET
ASSETS
FROM NET REALIZED DIVIDENDS VALUE, END OF
INVESTMENT GAIN ON AND END OF TOTAL PERIOD
INCOME INVESTMENTS DISTRIBUTIONS PERIOD RETURN*
(000'S)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 ($0.58) ($0.01) ($0.59) $10.82 1.36% $32,210
1993 (0.65) (0.03) (0.68) 11.26 9.17% 37,342
1992 (0.70) -- (0.70) 10.98 16.93% 18,754
AUGUST 14, 1990 (3)
TO JULY 31,
1991 (0.64) -- (0.64) 10.05 7.16% 7,828
<CAPTION>
RATIOS
--------------------------------------------------
RATIO OF NET RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME (LOSS) PORTFOLIO
TO AVERAGE TO AVERAGE TURNOVER
NET ASSETS NET ASSETS RATE
<S> <C> <C> <C>
YEAR ENDED
JULY 31,
1994 0.65% (1,2) 5.20% (1,2) 49%
1993 0.37% (2) 5.84% (2) 7%
1992 0.13% (2) 6.70% (2) 31%
AUGUST 14, 1990 (3)
TO JULY 31,
1991 0.00% (2,5) 6.90% (2,5) 6%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED JULY 31, 1994 WERE $37,362,620.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER WAIVED A PORTION OR ALL OF ITS FEES AND
REIMBURSED THE FUND FOR A PORTION OF
ITS OTHER OPERATING EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT,
THE RATIO OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD
HAVE BEEN .94% AND 4.91%, RESPECTIVELY,
FOR THE YEAR ENDED JULY 31, 1994, .99% AND 5.22%, RESPECTIVELY, FOR THE YEAR ENDED JULY 31,
1993, 1.19% AND 5.64%,
RESPECTIVELY, FOR THE YEAR ENDED JULY 31, 1992 AND 2.54% AND 4.36%, ANNUALIZED,
RESPECTIVELY, FOR THE PERIOD AUGUST 14, 1990
(COMMENCEMENT OF OPERATIONS) TO JULY 31, 1991.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) ANNUALIZED.
- -----------------------------------------------------------
* Assumes reinvestment of all dividends and distributions, but does not reflect deductions for sales charges. Aggregate (not
annualized) total return is shown for any period shorter than one year.
</TABLE>
B-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
QUEST FOR VALUE FAMILY OF FUNDS
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the National Tax-Exempt Fund, the
California Tax-Exempt Fund, and the New York Tax-Exempt Fund (constituting part
of the Quest for Value Family of Funds, hereafter referred to as the "Funds") at
July 31, 1994, the results of each of their operations for the year then ended,
the changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period August 14, 1990 (commencement of
operations) to July 31, 1991, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
managment; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1994 by correspondence with the custodian
and brokers, and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
/S/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September 20, 1994
B-19
<PAGE>
ANNUAL REPORT
QUEST FOR VALUE/SM/
TAX-EXEMPT FUNDS
September 1, 1994
Dear Shareholder:
The Quest for Value National, California and New York Tax-Exempt Funds had
marginally positive total returns in the fiscal year ended July 31, 1994.
Reflecting very difficult market conditions, the Funds had negative total
returns in the second half of the fiscal year. However, each of the Funds has
delivered an average annual return in excess of 8%, based on net asset value,
since its inception in August 1990.
Detailed information on the performance and holdings of each Fund is presented
in the Investment Review and financial statements that follow.
Market Environment
Prices of municipal bonds peaked in October 1993 following a protracted period
of rising prices. The market turned downward in October due to investor concerns
that the Federal Reserve might raise short-term interest rates and fears that
the inflation rate might increase. Prices rallied somewhat, then began a sharp
decline in February 1994 when the Fed raised its target for short-term rates by
one-quarter percentage point -- the first in a series of rate increases by the
Fed. Long-term rates rose in response to the Fed's actions, and prices of
virtually all types of bonds, including municipal securities, fell. By the end
of the fiscal year, the municipal bond market appeared to have stabilized.
For investors, rising interest rates are a two-edged sword, offering the
opportunity to earn higher yields but also causing market prices of existing
fixed income securities to decline.
Following the recent market decline, 20-year municipal bonds now offer tax-
exempt yields exceeding 6% -- the taxable equivalent of over 8.5% for an
investor in the 31% Federal tax bracket and more than 9.25% in the 36% bracket.
Taxable equivalents are even greater for investors in high-tax states such as
California and New York. We believe these yields are very attractive relative to
the inflation rate, currently about 3% annually, as well as in comparison to the
returns on other long-term, conservative investments.
Investment Strategy
In managing the Funds, we were able to temper somewhat the impact of the severe
market downturn by adopting a cautious investment stance early in the fiscal
year. For instance, we reduced the average maturity of each Fund's portfolio and
increased each Fund's holdings of cash. Late in the fiscal year, we backed off
from our defensive posture and began to reinvest cash at today's higher interest
rates.
Because the yield differential between various credit qualities was so narrow,
offering little incentive to invest in lower-rated municipals, we increased each
Fund's holdings of higher-rated bonds. More recently, the "yield curve" has
flattened, as the sharp rise in short-term interest rates has led to a narrowing
of the yield differential between short and long maturities. We have therefore
been increasing the Funds' investments in 15 to 20 year securities, which at
this time offer about 95% of the yield of 30-year bonds with much less market
risk.
We continue to avoid all investments in "inverse floaters" and other high-risk
derivative securities. Although such securities can generate higher returns,
they also entail higher risks, a fact that was made clear when some mutual funds
suffered substantial losses on these investments. Our philosophy is to manage
the Funds conservatively, recognizing that shareholders view protection of
principal as one of their most important objectives.
/SM/Quest for Value is a registered service mark of Oppenheimer Capital.
QUEST FOR VALUE FUNDS
One World Financial
Center
New York, NY 10281
EQUITY FUNDS
------------
QUEST FOR VALUE FUND
GLOBAL EQUITY FUND
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
FIXED INCOME FUNDS
------------------
TAXABLE
U.S. GOVERNMENT
INCOME FUND
INVESTMENT QUALITY
INCOME FUND
GLOBAL INCOME FUND
TAX-EXEMPT
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
MONEY MARKET FUNDS
------------------
QUEST CASH RESERVES:
TAXABLE
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
TAX-EXEMPT
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
FOR MORE INFORMATION OR
ASSISTANCE WITH YOUR ACCOUNT
PLEASE CALL:
1-800-232-3863
<PAGE>
Outlook
We are generally optimistic about the prospects for municipal bonds at this
time. We believe that further interest rate increases, if they occur in the near
future, are likely to be modest. Additionally, the supply/demand balance of the
municipal securities market is favorable and could help bolster prices in the
near term. The supply of new municipal securities in calendar 1994 is down
nearly 50% from calendar 1993 levels. At the same time, demand is strong, as
investors seek relief from federal income taxes.
We at Quest for Value remain dedicated to serving your needs by providing high
current tax-exempt income from quality investments. We continue to monitor
interest rates and market conditions carefully to be alert to any changes that
might warrant a more cautious investment stance.
Sincerely,
/s/ Joseph M. La Motta
Joseph M. La Motta
President
<PAGE>
Investment Review
Quest for Value National Tax-Exempt Fund
Objective
Seeks to provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. Designed to protect principal through
investment-grade municipals.
Investment Results
The Fund paid cash dividends totaling $.30 in the six months ended July 31,
1994. On an annualized basis, the monthly distribution yield of the Fund was
5.5% at July 31, 1994, based on the net asset value per share. This yield was
equivalent to a taxable return of 8.6% for an individual, not subject to the
alternative minimum tax, in the 36% tax bracket.
The Fund had a negative total return of 4.2% in the six months ended July 31,
1994, reflecting a decline in its per-share net asset value due to market
conditions. For the fiscal year ended July 31, 1994, the Fund provided a 2.0%
total return, ranking 104th among the 299 national municipal bond funds
monitored by Morningstar, Inc., a leading reporter of mutual fund performance.
Since its inception on August 14, 1990, the Fund has delivered an average annual
total return of 8.9% based on net asset value.
With the major exception of California, most state economies are improving.
During the year, we increased the Fund's holdings of general obligation bonds,
which stand to benefit as economies recover. The Fund owns securities in
California, but not any state-backed obligations.
Portfolio Analysis
The Fund's broadly diversified portfolio consisted of 115 issues as of July 31,
1994, with 90% of the assets rated A or higher by Standard & Poor's or Moody's.
The average maturity of the portfolio was 18 years.
The five largest sectors represented in the Fund as of July 31, 1994 were:
general obligation, 23.0%; health/hospital, 16.9%; housing, 11.0%;
power/utility, 10.4%; and education, 7.8%.
The five largest portfolio positions by state were: New York, 12.8%;
Massachusetts, 9.0%; California, 8.1%; Washington, 6.6%; and Illinois, 6.5%.
Comparison of Change in Value of $10,000 Investment*
in Quest for Value National Tax-Exempt Fund on 8/31/90 and
Total Return on Bond Buyer Municipal Bond Index
[GRAPH]
Index Source: The Bond Buyer and Goldman Sachs Calculations.
Past performance is not predictive of future performance.
*after taking into account maximum sales charge
3
<PAGE>
Investment Review (continued)
Quest for Value California Tax-Exempt Fund
Objective
Seeks to provide a high level of "double tax-exempt" income (exempt from
federal and California income tax), consistent with preservation of capital.
Designed to protect principal through investment-grade municipals.
Investment Results
The Fund paid cash dividends totaling $.283 in the six months ended July 31,
1994. On an annualized basis, the monthly distribution yield of the Fund was
5.3% at July 31, 1994, based on the net asset value per share. This yield was
equivalent to a taxable return of 9.3% for an investor, not subject to the
alternative minimum tax, in the top federal and California income tax brackets
of 36% and 11%, respectively.
The Fund had a negative total return of 4.3% in the six months ended July 31,
1994, due to a decrease in its per-share net asset value. For the fiscal year
ended July 31, 1994, the Fund provided a total return of 1.5%, 42nd among the
103 California municipal bond funds monitored by Morningstar. The Fund has
provided an average annual total return of 8.2% based on net asset value since
inception on August 14, 1990.
We continue to manage the Fund conservatively, emphasizing protection of
principal as well as high returns, in light of the State of California's ongoing
budgetary problems. During the year, we upgraded the average credit rating of
the Fund's portfolio. Virtually the entire portfolio is now invested in
securities rated A or higher. Moreover, we have minimized our investments in
state-backed obligations. Investments are focused on essential service revenue
bonds, including power/utility and water/sewer issues, where we see high quality
and good value.
Portfolio Analysis
As of July 31, 1994, the Fund's portfolio consisted of 61 issues, with 99% of
the assets rated A or higher by Standard & Poor's or Moody's. The average
maturity of the portfolio was 20 years.
The five largest sectors represented in the Fund as of July 31, 1994 were:
water/sewer, 20.4%; tax allocation, 14.4%; health/hospital, 8.7%; power/utility,
7.9%; and transportation, 7.8%.
Comparison of Change in Value of $10,000 Investment*
in Quest for Value National Tax-Exempt Fund on 8/31/90 and
Total Return on Bond Buyer Municipal Bond Index
[GRAPH]
Index Source: The Bond Buyer and Goldman Sachs Calculations.
Past performance is not predictive of future performance.
*after taking into account maximum sales charge
4
<PAGE>
Quest for Value New York Tax-Exempt Fund
Objective
Seeks to provide a high level of "triple tax-exempt" income (exempt from
federal, New York State and New York City income tax), consistent with
preservation of capital. Designed to protect principal through investment-grade
municipals.
Investment Results
The Fund paid cash dividends totaling $.288 in the six months ended July 31,
1994. On an annualized basis, the monthly distribution yield of the Fund was
5.3% at July 31, 1994, based on the net asset value per share. This yield was
equivalent to a taxable return of 9.4% for an investor, not subject to the
alternative minimum tax, in the top federal, New York State and New York City
tax brackets of 36%, 7.875% and 3.91%, respectively.
The Fund had a negative total return of 4.5% in the six months ended July 31,
1994. For the fiscal year ended July 31, 1994, the Fund provided a 1.4% total
return, 23rd among the 79 New York municipal bond funds in the Morningstar
universe. Since its inception on August 14, 1990, the Fund has delivered an
average annual total return of 8.6% based on net asset value.
Both the New York State and New York City governments continue to show fiscal
improvement and enjoy strong demand for their securities. The Fund owns a
diversified portfolio of bonds, including general obligation issues of improving
credits. New York City securities represented approximately 17% of the Fund's
net assets as of July 31, 1994.
Portfolio Analysis
The Fund's portfolio consisted of 69 issues at the end of July, with 85% of the
assets rated A or higher by Standard & Poor's or Moody's. The average maturity
of the portfolio was 18 years.
The five largest sectors represented in the Fund were: general obligation,
17.6%; education, 17.3%; power/utility, 13.9%; health/hospital, 10.2%; and
turnpike/toll, 8.3%.
Comparison of Change in Value of $10,000 Investment*
in Quest for Value New York Tax-Exempt Fund on 8/31/90 and
Total Return on Bond Buyer Municipal Bond Index
[GRAPH]
Index Source: The Bond Buyer and Goldman Sachs Calculations.
Past performance is not predictive of future performance.
*after taking into account maximum sales charge
5
<PAGE>
July 31, 1994
Schedules of Investments
NATIONAL TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
MUNICIPAL NOTES & BONDS--98.9%
ALABAMA--0.9%
HEALTH/HOSPITAL
$ 1,000,000 University of Alabama
Birmingham Hospital
5.00%, 10/01/14.................... $ 869,060
------------
ALASKA--0.3%
HOUSING
320,000 Alaska State Housing Finance
Corp. (1)
6.70%, 12/01/25.................... 321,056
------------
ARIZONA--0.4%
HEALTH/HOSPITAL
300,000 Arizona Health Facilities Authority
Phoenix Memorial Hospital
8.20%, 6/01/21..................... 321,294
------------
CALIFORNIA--8.1%
AIRLINE/AIRPORT--0.8%
710,000 San Francisco, California City &
County Airport Commission
International Airport Revenue (1)
6.125%, 5/01/08.................... 720,316
------------
CORRECTIONAL FACILITIES--2.7%
750,000 California Statewide Communities
Development Authority
Certificates of Participation
Salk Institute
6.10%, 7/01/14..................... 742,275
Los Angeles County Certificates
of Participation
740,000 Correctional Facilities Project.......
6.50%, 9/01/13 (MBIA insured)...... 765,774
500,000 Edelman Childrens Center
6.00%, 4/01/12 (AMBAC insured)..... 500,305
500,000 Santa Ana, California Financing
Authority Lease Revenue
Police Administration & Holding
Facilities (Series A)
5.50%, 7/01/07..................... 486,900
------------
2,495,254
------------
HEALTH/HOSPITAL--1.4%
1,315,000 California Health Facilities
Financing
Good Samaritan Hospital
7.00%, 9/01/21..................... 1,364,036
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
TAX ALLOCATION--0.5%
$ 500,000 Industry, California Urban
Development Agency
6.90%, 11/01/07.................... $ 531,145
------------
TRANSPORTATION--1.1%
1,000,000 San Diego, California Open Space
Park Facilities
District Number 1
5.75%, 1/01/08..................... 1,007,740
WATER/SEWER--1.6%
600,000 Orange County, California Various
Sanitation Districts
Certificates of Participation
(Series C) (2)
2.65%, 8/01/17..................... 600,000
1,000,000 Sacramento County, California
Sanitation District
Financing Authority
5.125%, 12/01/13................... 882,830
------------
1,482,830
------------
7,601,321
------------
COLORADO--1.7%
EDUCATION--1.1%
1,000,000 Colorado Student Obligation
Bond Authority
Student Loan Revenue (1)
7.15%, 9/01/06..................... 1,042,200
------------
GENERAL OBLIGATION--0.6%
500,000 Jefferson County School District
6.25%, 12/15/12
(AMBAC insured).................... 516,525
------------
1,558,725
------------
DISTRICT OF COLUMBIA--2.6%
GENERAL OBLIGATION--1.5%
District of Columbia General
Obligation Bonds
100,000 2.70%, 10/01/07 (Series A) (2)........ 100,000
1,320,000 5.75%, 12/01/05 (Series C)............ 1,327,524
------------
1,427,524
------------
HEALTH/HOSPITAL--1.1%
1,000,000 District of Columbia Hospital
Revenue Washington Hospital
(Series A)
7.00%, 8/15/05..................... 1,027,140
------------
2,454,664
------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
FLORIDA--2.2%
GENERAL OBLIGATION--1.1%
$ 1,000,000 Dade County School District
6.125%, 8/01/11.................... $ 1,009,900
------------
HOUSING--1.1%
1,000,000 Florida Housing Finance Agency
Refunding Single Family
Mortgage (Series A)
6.35%, 7/01/14..................... 1,004,080
------------
2,013,980
------------
GEORGIA--2.7%
HEALTH/HOSPITAL--1.0%
1,000,000 Tri-City Hospital Authority
Georgia Hospital
6.375%, 7/01/16.................... 922,010
------------
POWER/UTILITY--1.7%
Municipal Electric Authority of
Georgia, Special Obligation
Fourth Crossover Series
500,000 6.50%, 1/01/12..................... 519,875
1,000,000 6.50%, 1/01/17..................... 1,045,330
------------
1,565,205
------------
2,487,215
------------
HAWAII--1.5%
GENERAL OBLIGATION
Honolulu, Hawaii City & County
1,000,000 5.00%, 10/01/13 879,650
500,000 6.10%, 6/01/11 (Series B).......... 507,530
------------
1,387,180
------------
ILLINOIS--6.5%
AIRLINE/AIRPORT--0.8%
750,000 Chicago, Illinois O'Hare Int'l.
Airport (1)
6.00%, 1/01/12..................... 741,968
------------
GENERAL OBLIGATION--1.7%
1,600,000 Chicago, Illinois General
Obligation Bonds
6.25%, 1/01/12
(AMBAC insured).................... 1,619,184
------------
HEALTH/HOSPITAL--1.2%
1,000,000 Illinois Health Facilities
Authority Revenue
Hindsdale Health System
9.50%, 11/15/19.................... 1,163,320
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
HOUSING--1.3%
$ 1,250,000 Illinois Housing Development
Authority
Multi-Family Housing Revenue
6.10%, 9/01/13..................... $ 1,211,588
------------
PORTS--0.5%
500,000 Metropolitan Pier & Exposition
Authority
6.50%, 6/15/27..................... 500,715
TAX ALLOCATION--1.0%
825,000 Hoffman Estates Tax Increment
Revenue
7.625%, 11/15/09................... 887,222
------------
6,123,997
------------
INDIANA--1.2%
OTHER
Indiana State Bond Bank
680,000 5.70%, 2/01/06..................... 672,098
445,000 5.75%, 2/01/07..................... 437,221
------------
1,109,319
------------
KENTUCKY--0.5%
EDUCATION
500,000 University of Kentucky Revenue
Educational Building
Construction
6.00%, 5/01/11..................... 497,850
------------
LOUISIANA--1.1%
EDUCATION
1,000,000 Louisiana Public Facilities
Authority Student Loan
Revenue (1)
6.75%, 9/01/06..................... 1,031,670
------------
MAINE--0.6%
EDUCATION
500,000 Maine Educational Loan
Marketing Corp.
Student Loan Revenue (1)
6.90%, 11/01/03.................... 520,370
------------
MARYLAND--1.1%
EDUCATION
1,000,000 University of Maryland Auxiliary
Facilities & Tuition Revenue
5.90%, 2/01/03..................... 1,049,020
------------
</TABLE>
7
<PAGE>
July 31, 1994
Schedule of Investments
NATIONAL TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
MASSACHUSETTS--9.0%
GENERAL OBLIGATION--3.5%
Massachusetts State General
Obligation
Consolidated Loan
$ 500,000 5.50%, 2/01/11 (Series A).......... $ 469,550
1,000,000 6.00%, 6/01/11 (Series A).......... 999,900
1,000,000 6.50%, 8/01/11 (Series B).......... 1,041,430
300,000 7.00%, 7/01/07 (Series D).......... 324,660
400,000 7.00%, 8/01/12 (Series C).......... 430,744
------------
3,266,284
------------
HEALTH/HOSPITAL--2.3%
Massachusetts State Health &
Education Facilities Authority
Revenue Board
1,500,000 Faulkner Hospital
6.00%, 7/01/23..................... 1,287,030
900,000 Sisters of Providence
6.50%, 11/15/08.................... 904,563
------------
2,191,593
------------
HOUSING--1.6%
1,500,000 Massachusetts State Housing
Finance Authority
Housing Projects
6.30%, 10/01/13.................... 1,486,650
------------
RESOURCE RECOVERY--0.5%
500,000 Massachusetts State Industrial
Finance Agency
Resource Recovery Revenue
Refusetech, Inc. Project
6.30%, 7/01/05..................... 505,865
------------
TRANSPORTATION--1.1%
1,000,000 Massachusetts State Port Authority
Revenue (Series A) (1)
6.00%, 7/01/13..................... 978,930
------------
8,429,322
------------
MICHIGAN--2.8%
HEALTH/HOSPITAL--1.7%
750,000 Jackson County Hospital
Finance Authority
W.A. Foote Memorial
Hospital (Series A)
4.75%, 6/01/15..................... 622,148
Michigan State Hospital Finance
Authority
455,000 Bay Medical Center
8.25%, 7/01/12..................... 492,110
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
$ 400,000 Sisters of Mercy Health Corp.
7.50%, 2/15/18..................... $ 457,624
------------
1,571,882
------------
RESOURCE RECOVERY--1.1%
1,000,000 Michigan State Strategic Fund
Limited Obligation
Revenue Waste Management,
Inc. (1)
6.625%, 12/01/12................... 1,014,440
------------
2,586,322
------------
MINNESOTA--0.6%
HOUSING--0.3%
290,000 Minnesota State Housing
Finance Agency
Single Family Mortgage
Revenue (1)
7.45%, 7/01/22..................... 306,089
------------
OTHER--0.3%
265,000 Minneapolis Community
Development Agency
Supported Development Revenue
7.35%, 12/01/08.................... 277,529
------------
583,618
------------
MISSISSIPPI--2.5%
EDUCATION--1.3%
1,200,000 Mississippi Higher Education
Assistance Corp.
Student Loan Revenue
(Series C) (1)
6.05%, 9/01/07..................... 1,238,304
------------
POLLUTION CONTROL--1.2%
1,100,000 Jackson County Mississippi
Pollution Control Revenue
Chevron USA, Inc. Project (2)......
2.60%, 6/01/23..................... 1,100,000
------------
2,338,304
------------
NEVADA--2.1%
AIRLINE/AIRPORT--0.6%
500,000 Clark County, Nevada
Passenger Facilities (1)
6.25%, 7/01/11..................... 506,975
------------
GENERAL OBLIGATION--1.5%
890,000 Clark County, Nevada
Refunding & Improvement
Transportation (Series A)
6.00%, 6/01/13 (MBIA insured)...... 885,924
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
$ 500,000 Nevada State General Obligation
Municipal Bond Bank
6.80%, 7/01/12..................... $ 548,225
-------------
1,434,149
-------------
1,941,124
-------------
NEW JERSEY--2.7%
GENERAL OBLIGATION--0.5%
465,000 Jersey City General Obligation Bonds
6.60%, 2/15/10..................... 471,212
-------------
HEALTH/HOSPITAL--1.8%
New Jersey Health Care Facilities
500,000 Atlantic City Medical Center
6.80%, 7/01/11..................... 521,190
400,000 St. Elizabeth Hospital
8.25%, 7/01/20..................... 432,828
750,000 Wayne General Hospital
5.30%, 8/01/04..................... 713,085
-------------
1,667,103
-------------
TURNPIKE/TOLL--0.4%
380,000 New Jersey State Turnpike
Authority Economic
Development & Revenue
6.50%, 1/01/16..................... 403,188
-------------
2,541,503
-------------
NEW YORK--12.8%
CORRECTIONAL FACILITIES--0.5%
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.625%, 1/01/07.................... 479,915
-------------
EDUCATION--1.0%
1,000,000 New York State Dormitory
Authority State University
System
5.50%, 5/15/07..................... 966,060
-------------
GENERAL OBLIGATION--5.2%
New York City General
Obligation Bonds
1,000,000 5.625%, 8/01/12 (Series E)......... 911,880
500,000 5.70%, 8/15/06 (Series D).......... 484,745
1,500,000 6.00%, 5/15/10 (Series E).......... 1,459,575
975,000 6.50%, 8/01/13 (Series A).......... 981,396
945,000 7.625%, 2/01/15 (Series G)......... 1,041,579
-------------
4,879,175
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
POWER/UTILITY--1.5%
$1,400,000 New York State Energy
Research & Development
Niagara Mohawk (2)
2.80%, 7/01/15..................... $ 1,400,000
-------------
SALES TAX--3.0%
New York State Local
Government Assistance Corp.
1,250,000 5.00%, 4/01/21 (Series E).......... 1,041,250
900,000 7.00%, 4/01/11 (Series D).......... 960,444
745,000 7.125%, 4/01/11 (Series A)......... 803,468
-------------
2,805,162
-------------
TRANSPORTATION--0.7%
700,000 Port Authority of New York &
New Jersey
6.00%, 12/01/16.................... 693,973
-------------
TURNPIKE/TOLL--0.4%
300,000 Triborough Bridge & Tunnel
Authority
6.375%, 1/01/05.................... 321,849
-------------
WATER/SEWER--0.5%
400,000 New York City Municipal
Water Finance Authority
Water & Sewer System
Revenue
7.00%, 6/15/09..................... 432,640
-------------
11,978,774
-------------
NORTH CAROLINA--1.1%
POWER/UTILITY
1,000,000 North Carolina Eastern
Municipal Power Agency
6.00%, 1/01/04..................... 1,021,580
-------------
OHIO--0.8%
HEALTH/HOSPITAL
850,000 Franklin County, Ohio
Hospital Revenue
Doctors Hospital Project
5.875%, 12/01/13................... 774,494
-------------
OKLAHOMA--1.0%
HEALTH/HOSPITAL
1,150,000 Oklahoma State Industry
Authority Revenue
Sisters Mercy Health Project
5.00%, 6/01/18..................... 947,071
-------------
</TABLE>
9
<PAGE>
July 3, 1994
Schedules of Investments
NATIONAL TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
PENNSYLVANIA--5.4%
EDUCATION--0.6%
$ 500,000 Pennsylvania Higher Education
Assistance Agency Student
Loan Revenue (1)
7.15%, 9/01/21
(AMBAC insured)............. $ 532,945
----------
GENERAL OBLIGATION--0.9%
810,000 Pennsylvania State General
Unlimited Tax
6.60%, 11/01/11............. 849,471
----------
HEALTH/HOSPITAL--0.4%
350,000 Monroeville Hospital Authority
Revenue Bond Forbes Health
System Refunding
7.00%, 10/01/13............. 353,752
----------
TRANSPORTATION--0.8%
750,000 Pennsylvania State Turnpike
Community Revenue Bonds
6.50%, 12/01/13............. 762,503
----------
WATER/SEWER--2.7%
2,240,000 Philadelphia Water &
Sewer Revenue
7.35%, 9/01/04.............. 2,538,838
----------
5,037,509
----------
PUERTO RICO--0.5%
POWER/UTILITY
500,000 Puerto Rico Electric Power
Authority Power Revenue
(Series T)
6.00%, 7/01/16.............. 488,655
----------
RHODE ISLAND--1.6%
HOUSING
1,500,000 Rhode Island Housing &
Mortgage Finance Corp. (1)
6.30%, 10/01/12............. 1,468,095
----------
SOUTH DAKOTA--1.0%
HOUSING
1,000,000 South Dakota Housing
Development Authority
Homeownership Mortgage (1)
6.15%, 5/01/26 936,600
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
TEXAS--6.4%
EDUCATION--0.5%
$ 400,000 Brazos, Texas Higher Education
Student Loans (1)
6.80%, 12/01/04 $ 411,916
----------
GENERAL OBLIGATION--2.9%
1,000,000 Dallas, Texas General
Obligation Bonds
6.125%, 2/15/05 1,057,470
----------
1,500,000 San Antonio, Texas General
Obligation Bonds
5.75%, 8/01/13 1,433,280
----------
200,000 Texas State Tax & Revenue
Anticipation Notes
3.25%, 8/31/94 200,085
----------
2,690,835
----------
TURNPIKE/TOLL--1.1%
1,000,000 Harris County, Texas Refunding
Toll Road
6.75%, 8/01/14 1,048,040
----------
WATER/SEWER--1.9%
Houston, Texas Water &
Sewer System Revenue
Refunding Bonds
1,250,000 6.40%, 12/01/09 1,273,500
500,000 6.75%, 12/01/08 527,190
----------
1,800,690
----------
5,951,481
----------
UTAH--2.1%
HOUSING--0.3%
250,000 Utah State Housing Finance
Agency Single Family
Mortgage Revenue (1)
6.95%, 7/01/24 254,635
----------
POWER/UTILITY--1.8%
1,760,000 Intermountain Power Agency
6.00%, 7/01/12 1,735,202
----------
1,989,837
----------
VERMONT--1.8%
HOUSING
1,570,000 Vermont State Housing Finance
Authority (1)
7.85%, 12/01/29 1,660,149
----------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
VIRGINIA--4.1%
GENERAL OBLIGATION--1.1%
$ 1,000,000 Richmond, Virginia Refunding
(Series B)
6.25%, 1/15/18.......................... $ 1,003,860
------------
HOUSING--1.1%
1,000,000 Virginia State Housing
Development Authority (1)
6.55%, 1/01/27.......................... 982,770
------------
RESOURCE RECOVERY--1.0%
1,000,000 Southeastern Public Service
Authority of Virginia Regional
Solid Waste System (1)
6.00%, 7/01/13.......................... 970,260
------------
TRANSPORTATION--0.9%
1,000,000 Virginia State Transportation
Board Revenue (Series C)
5.25%, 5/15/19.......................... 881,540
------------
3,838,430
------------
WASHINGTON--6.6%
CONVENTION CENTER/STADIUMS--0.6%
500,000 Bellevue Convention Center
Authority Meyden Bauer
Center
7.10%, 12/01/19......................... 531,595
------------
GENERAL OBLIGATION--1.0%
1,000,000 Washington State (Series B)
5.75%, 5/01/16.......................... 959,200
------------
HEALTH/HOSPITAL--1.2%
Washington State Health
Care Facilities
400,000 Group Health Co-Op
Puget Sound
6.75%, 12/01/19
(AMBAC insured)......................... 412,288
400,000 Multi-Care Medical Center
5.90%, 8/15/10.......................... 398,752
250,000 Yakima Valley Memorial Hospital
7.25%, 1/01/09.......................... 269,160
------------
1,080,200
------------
POWER/UTILITY--3.8%
Washington State Public Power
Supply Systems
1,000,000 6.00%, 7/01/12.......................... 970,070
500,000 6.75%, 7/01/11.......................... 514,110
500,000 6.875%, 7/01/17......................... 513,870
1,500,000 7.00%, 7/01/12.......................... 1,558,905
------------
3,556,955
------------
6,127,950
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
WISCONSIN--1.5%
HEALTH/HOSPITAL--0.7%
$ 750,000 Wisconsin State Health &
Educational Facilities
Hospital Sisters Services, Inc..........
5.25%, 6/01/10.......................... $ 689,340
------------
HOUSING--0.8%
740,000 Wisconsin Housing & Economic
Development Authority
Homeownership Revenue
7.10%, 3/01/23.......................... 761,149
------------
1,450,489
------------
WYOMING--1.1%
HOUSING--0.8%
750,000 Wyoming Community
Development Authority
Single Family Mortgage
Revenue (1)
7.15%, 6/01/22.......................... 772,102
------------
POLLUTION CONTROL--0.3%
300,000 Green River, Wyoming Pollution
Control Revenue
Rhone Poulene, Inc. Project (2).........
2.85%, 6/01/99.......................... 300,000
------------
1,072,102
------------
TOTAL INVESTMENTS
(cost--$92,135,153)........................... 98.9% $92,510,130
OTHER ASSETS IN EXCESS OF
OTHER LIABILITIES............................. 1.1 1,020,339
TOTAL NET ASSETS................................ 100.0% $93,530,469
===== ===========
CALIFORNIA TAX-EXEMPT FUND
MUNICIPAL NOTES & BONDS--101.7%
AIRLINE/AIRPORT--6.1%
San Francisco City Commission
International Airport
Revenue (1)
$ 500,000 6.125%, 5/01/08......................... $ 507,265
1,250,000 6.20%, 5/01/20.......................... 1,256,662
------------
1,763,927
------------
CORRECTIONAL FACILITIES--3.1%
500,000 California State Public Works
Department of Corrections
6.50%, 9/01/11.......................... 503,710
</TABLE>
11
<PAGE>
July 31, 1994
Schedules of Investments
CALIFORNIA TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
CORRECTIONAL FACILITIES--(CONT'D)
$ 400,000 Los Angeles County Certificates
of Participation Edelman
Childrens Center
6.00%, 4/01/12
(AMBAC insured)............. $ 400,244
----------
903,954
----------
EDUCATION--6.1%
California State Education
Facilities Authority Revenue
1,000,000 6.00%, 11/01/16............. 1,001,990
100,000 7.00%, 3/01/16
(MBIA insured).............. 107,401
150,000 California State University
Dominguez Hills
6.80%, 5/01/16.............. 154,054
250,000 Fresno Unified School District
Certificates of Participation
7.00%, 5/01/12.............. 256,575
250,000 Los Angeles Unified School District
Certificates of Participation
6.60%, 6/01/06.............. 259,867
----------
1,779,887
----------
GENERAL OBLIGATION--6.6%
East Bay Regional Park District
750,000 5.75%, 9/01/12.............. 726,210
500,000 6.375%, 9/01/10............. 517,830
400,000 San Francisco City and County
Library Facility Project
6.25%, 6/15/11.............. 406,672
250,000 San Francisco City and County
(Series A)
6.70%, 12/15/08............. 261,290
----------
1,912,002
----------
HEALTH/HOSPITAL--8.7%
California Health Facilities
Financing
315,000 Adventist Hospital
6.50%, 3/01/07..............
(MBIA insured).............. 331,465
1,000,000 Good Samaritan Hospital
7.00%, 9/01/21.............. 1,037,290
Kaiser Permanente
555,000 6.25%, 3/01/21.............. 548,579
250,000 6.50%, 12/01/20............. 252,367
100,000 Sutter Memorial Hospital
7.00%, 1/01/09.............. 105,257
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
$250,000 Marysville Hospital Revenue
6.30%, 1/01/22
(AMBAC insured)............. $ 252,260
----------
2,527,218
----------
HOUSING--5.7%
California Housing Finance
Agency
80,000 Home Mortgage Revenue
7.35%, 8/01/11.............. 83,382
200,000 Lancaster-Grand Terrace
7.375%, 1/01/12............. 205,230
350,000 Multi-Unit Rental Housing
6.875%, 2/01/22............. 352,191
250,000 Delta County Home Mortgage
Finance (1)
6.75%, 12/01/25............. 251,393
500,000 Pomona, California
Single Family Mortgage
Revenue
7.50%, 8/01/23.............. 604,875
150,000 Southern California Housing
Finance Authority
Single Family Mortgage
Revenue (1)
6.90%, 10/01/24............. 151,908
----------
1,648,979
----------
LEASING--4.4%
450,000 Pasadena County, Certificates
of Participation
7.20%, 1/01/18.............. 484,889
615,000 Santa Monica Parking Authority
Lease Revenue
6.375%, 7/01/16............. 621,937
150,000 Sonoma County, Certificates of
Participation
6.75%, 10/01/07............. 159,396
----------
1,266,222
----------
POLLUTION CONTROL--6.2%
California Pollution Control
Finance Authority
200,000 Delano Project (1,2)
2.60%, 8/01/19.............. 200,000
200,000 Honey Lake Power Project (1,2)
2.60%, 9/01/18.............. 200,000
1,000,000 Pacific Gas & Electric (1)
5.85%, 12/01/23............. 897,230
500,000 Solid Waste Disposal Revenue
6.75%, 7/01/11.............. 514,520
----------
1,811,750
----------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
PORTS--1.0%
$ 300,000 Port of Oakland, California
Special Facilities Revenue (1)
6.75%, 1/01/12..................... $ 306,498
------------
POWER/UTILITY--7.9%
500,000 Kings River Conservation
District Pine Flat
Power Revenue
6.375%, 1/01/12..................... 509,905
760,000 Modesto Public Power Agency
San Juan Project
6.875%, 7/01/19..................... 776,287
1,000,000 Southern California Public
Power Authority
Transmission Project Revenue
6.125%, 7/01/18..................... 998,070
------------
2,284,262
------------
SALES TAX--3.3%
500,000 Los Angeles Community
Redevelopment
Finance Authority (1)
5.90%, 12/01/13..................... 470,325
500,000 Los Angeles County Transport
Commission Sales Tax
Revenue
6.25%, 7/01/16...................... 500,055
------------
970,380
------------
TAX ALLOCATION--14.4%
200,000 Avalon, California Improvement
Agency
7.25%, 8/01/21...................... 209,548
100,000 Chico Public Finance Authority
Redevelopment Project
7.40%, 4/01/21...................... 107,216
1,000,000 Fairfield, California Public
Financing Authority
6.25%, 7/01/14 (FGIC insured)....... 1,010,980
Industry, California Urban
Development Agency
260,000 6.50%, 11/01/07
(MBIA insured)...................... 274,885
500,000 6.90%, 11/01/07..................... 531,145
500,000 Merced Public Finance
Authority
5.50%, 12/01/10..................... 470,175
150,000 Riverside County Redevelopment
Project
7.50%, 10/01/26..................... 156,641
650,000 Santa Clara Redevelopment
Agency Bayshore North Project
5.75%, 7/01/14
(AMBAC insured)..................... 619,606
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -------------
<S> <C>
$ 680,000 Santa Magarita/Dana Point
Authority California Revenue
Improvement District
7.25%, 8/01/14
(MBIA insured)...................... $ 787,848
------------
4,168,044
------------
TRANSPORTATION--7.8%
500,000 California State Department
of Transportation
Certificates of Participation
6.50%, 3/01/16..................... 500,930
750,000 Contra Costa Transportation
Authority
6.50%, 3/01/09..................... 783,525
Puerto Rico Commonwealth
Highway Authority
500,000 5.25%, 7/01/21..................... 431,165
500,000 6.50%, 7/01/22..................... 550,845
------------
2,266,465
------------
WATER/SEWER--20.4%
425,000 Beverly Hills, California
Public Financing Authority
Wastewater Revenue
5.875%, 6/01/10.................... 423,007
400,000 Big Bear Lake, California
Water Revenue
6.25%, 4/01/12..................... 410,460
1,000,000 California State Department
of Water Resources
Central Valley Project
6.125%, 12/01/13................... 998,200
1,000,000 Calleguas Public Financing
Authority
5.125%, 7/01/14.................... 875,850
1,000,000 East Bay, California Municipal
Utility District Water
System Revenue
6.375%, 6/01/12.................... 1,095,480
Los Angeles Department of
Water and Power
1,000,000 5.75%, 9/01/12..................... 954,530
500,000 6.00%, 7/15/08..................... 506,460
250,000 Los Angeles Wastewater
System Revenue
6.25%, 6/01/12
(AMBAC insured).................... 255,870
Orange County, California
Various Sanitation Districts
Certificates of Participation (2)
300,000 2.65%, 8/01/15..................... 300,000
100,000 2.65%, 8/01/17 (Series C).......... 100,000
------------
5,919,857
------------
</TABLE>
<PAGE>
July 31, 1994
SCHEDULE OF INVESTMENTS
CALIFORNIA TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C> <C>
Total Investments
(cost--$29,503,029)................... 101.7% $ 29,529,445
Other Liabilities in Excess of
Other Assets.......................... (1.7) (505,645)
----- ------------
TOTAL NET ASSETS........................ 100.0% $ 29,023,800
===== ============
</TABLE>
NEW YORK TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
MUNICIPAL NOTES & BONDS--98.8%
AIRLINE/AIRPORT--4.5%
$ 1,000,000 New York City Industrial
Special Facilities Authority
American Airlines
6.00%, 1/01/15........................... $ 963,500
500,000 Westchester County, New York
Westchester Airport
Association Series A
5.95%, 8/01/24........................... 477,825
------------
1,441,325
------------
CORRECTIONAL FACILITIES--1.4%
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.50%, 1/01/16........................... 442,580
------------
EDUCATION--17.3%
New York State Dormitory
Authority Revenue
500,000 City University System
7.40%, 7/01/05........................... 548,820
750,000 Columbia University
5.75%, 7/01/15........................... 729,510
500,000 Episcopal Health Services
5.85%, 8/01/13........................... 483,320
200,000 Menorah Campus
7.30%, 8/01/16........................... 217,816
500,000 Metropolitan Museum of Art
9.20%, 7/01/15........................... 536,685
445,000 Rochester Hospital
5.55%, 8/01/12........................... 409,355
150,000 Saint Vincent's Hospital
7.375%, 8/01/11.......................... 164,904
State University Educational
Facilities
1,000,000 5.50%, 5/15/07........................... 966,060
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C>
$ 750,000 5.50%, 5/15/13........................... $ 682,050
720,000 7.70%, 5/15/12........................... 828,274
------------
5,566,794
------------
GENERAL OBLIGATION--17.6%
670,000 Grand Central, New York
General Obligation Bonds
6.50%, 1/01/10........................... 731,318
500,000 Nassau County, New York
General Obligation Bonds
6.25%, 10/15/09
(AMBAC insured).......................... 524,025
New York City General
Obligation Bonds
915,000 5.75%, 8/01/05 (MBIA insured)............. 912,319
500,000 6.375%, 8/01/07........................... 504,595
500,000 7.20%, 2/01/15............................ 533,765
200,000 7.50%, 8/01/20............................ 216,600
350,000 7.625%, 2/01/14........................... 385,770
300,000 7.75%, 3/15/03............................ 330,978
200,000 8.00%, 8/15/18............................ 232,954
100,000 8.25%, 6/01/02............................ 115,901
150,000 8.25%, 11/15/13........................... 176,106
100,000 8.40%, 11/15/09........................... 118,294
New York State General
Obligation Bonds
300,000 7.00%, 2/01/09............................ 321,042
500,000 7.50%, 11/15/00........................... 565,870
------------
5,669,537
------------
HEALTH/HOSPITAL--10.2%
New York State Medical Care
Facilities
590,000 Buffalo General Hospital
7.70%, 2/15/22............................ 664,729
375,000 Hospital & Nursing Home
6.45%, 2/15/09............................ 385,080
Mental Health Services
500,000 5.375%, 2/15/14........................... 441,750
650,000 5.70%, 8/15/14
(AMBAC insured)........................... 618,332
500,000 5.75%, 2/15/14............................ 478,775
250,000 North Shore University
Hospital
7.20%, 11/01/20
(MBIA insured)............................ 272,433
500,000 Presbyterian Hospital
5.25%, 8/15/14............................ 441,200
------------
3,302,299
------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
HOUSING--5.3%
New York State Housing
Finance Agency
Multi-Family Housing
$ 250,000 6.45%, 8/15/14.................. $ 251,272
245,000 6.95%, 8/15/24 (1).............. 250,128
350,000 7.05%, 8/15/24 (1).............. 359,604
New York State Mortgage
Agency Revenue Bonds (1)
500,000 6.40%, 10/01/12................. 499,940
345,000 7.375%, 10/01/11................ 355,478
----------
1,716,422
----------
POLLUTION CONTROL--2.0%
New York State
Environmental Facilities
Pollution Control Revenue
250,000 6.60%, 9/15/12.................. 259,505
350,000 7.20%, 3/15/11.................. 378,630
----------
638,135
----------
POWER/UTILITY--13.9%
New York State Energy
Research & Development
Consolidated Edison, Inc. (1)
200,000 7.375%, 7/01/24................. 212,350
280,000 7.50%, 1/01/26.................. 299,734
620,000 7.75%, 1/01/24.................. 670,257
Niagara Mohawk
100,000 2.80%, 7/01/15 (2).............. 100,000
400,000 2.70%, 12/01/25 (2)............. 400,000
400,000 6.625%, 10/01/13................ 417,104
New York State Power Authority
315,000 6.625%, 1/01/12................. 327,380
100,000 8.00%, 1/01/17.................. 110,945
Puerto Rico Electric Power Authority
1,650,000 5.00%, 7/01/12.................. 1,444,278
500,000 6.00%, 7/01/16.................. 488,655
----------
4,470,703
----------
RESOURCE RECOVERY--1.6%
500,000 Oneida Herkimer, New York
Solid Waste Authority
6.60%, 4/01/04.................. 519,855
----------
SALES TAX--5.2%
220,000 Municipal Assistance Corp. for
the City of New York
7.25%, 7/01/08.................. 234,520
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ----------
<S> <C>
New York State Local
Government Assistance Corp.
$ 700,000 7.00%, 4/01/12.................. $ 756,973
600,000 7.00%, 4/01/16.................. 674,850
----------
1,666,343
----------
TRANSPORTATION--8.2%
Metropolitan Transit Authority
350,000 6.25%, 7/01/17
(MBIA insured).................. 352,544
500,000 6.375%, 7/01/10................. 518,560
250,000 7.375%, 7/01/08................. 281,608
Port Authority of New York
& New Jersey
500,000 5.00%, 10/01/13................. 438,280
385,000 6.00%, 12/01/15................. 385,624
400,000 6.125%, 7/15/10 (1)............. 407,312
250,000 6.50%, 4/15/11.................. 262,970
----------
2,646,898
----------
TURNPIKE/TOLL--8.3%
New York State Thruway
Authority
500,000 5.125%, 4/01/07................. 462,345
400,000 7.25%, 1/01/10.................. 427,200
1,000,000 Puerto Rico Highway Authority
Revenue Bonds
5.25%, 7/01/20.................. 864,380
Triborough Bride & Tunnel
Authority
500,000 5.00%, 1/01/20.................. 422,570
500,000 6.00%, 1/01/12.................. 503,740
----------
2,680,235
----------
WATER/SEWER--3.3%
New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue
750,000 6.375%, 6/15/22................. 770,052
275,000 7.10%, 6/15/12.................. 288,992
----------
1,059,044
----------
TOTAL INVESTMENTS
(cost--$31,376,321)............... 98.8% $31,820,170
OTHER ASSETS IN EXCESS OF
OTHER LIABILITIES................ 1.2 389,615
------ -----------
TOTAL NET ASSETS................... 100.0% $32,209,785
====== ===========
</TABLE>
(1) Subject to alternative minimum tax.
(2) Represents a variable rate demand note, payable on demand.
See accompanying notes to financial statements.
15
<PAGE>
July 31, 1994
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
National California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost--$92,135,153, $29,503,029 and
$31,376,321, respectively)................................ $92,510,130 $29,529,445 $31,820,170
Cash....................................................... 44,317 141,510 24,805
Receivable for investments sold/called..................... 2,653,546 1,284,411 440,635
Interest receivable........................................ 1,453,736 420,553 514,961
Receivable for shares of beneficial interest sold.......... 46,849 3,109 15,864
Deferred organization expenses and other assets............ 27,322 3,438 3,583
----------- ----------- -----------
Total Assets.............................................. 96,735,900 31,382,466 32,820,018
----------- ----------- -----------
LIABILITIES
Payable for investments purchased.......................... 2,885,909 2,015,322 498,750
Dividends payable.......................................... 178,675 60,760 47,989
Payable for shares of beneficial interest redeemed......... 96,267 246,096 29,985
Investment advisory fee payable............................ 3,847 8,727 3,849
Other payables and accrued expenses........................ 40,733 27,761 29,660
----------- ----------- -----------
Total Liabilities......................................... 3,205,431 2,358,666 610,233
----------- ----------- -----------
NET ASSETS
Shares of beneficial interest.............................. 87,630 27,391 29,773
Paid-in-surplus............................................ 93,184,645 29,026,086 31,292,636
Accumulated net realized gain (loss) on investments........ (116,783) (56,093) 443,527
Net unrealized appreciation on investments................. 374,977 26,416 443,849
----------- ----------- -----------
TOTAL NET ASSETS.......................................... $93,530,469 $29,023,800 $32,209,785
=========== ===========
===========
Fund shares outstanding..................................... 8,762,939 2,739,090 2,977,289
----------- ----------- -----------
Net asset value per share................................... $10.67 $10.60 $10.82
=========== ===========
===========
Maximum offering price per share*........................... $11.20 $11.13 $11.36
=========== ===========
===========
</TABLE>
* Sales charges decrease on purchases of $50,000 or higher.
See accompanying notes to financial statements.
16
<PAGE>
Year Ended July 31, 1994
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
National California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest............................................................ $ 6,311,090 $ 2,012,746 $ 2,186,290
----------- ----------- -----------
OPERATING EXPENSES
Investment advisory fee (note 2a)................................... 531,371 173,954 186,813
Accounting services fee (note 2b)................................... 82,193 70,850 70,850
Transfer and dividend disbursing agent fees......................... 53,526 10,371 18,713
Custodian fees...................................................... 52,806 35,371 35,057
Registration fees................................................... 36,056 1,706 1,830
Reports and notices to shareholders................................. 17,224 9,477 9,364
Trustees' fees and expenses......................................... 17,201 8,801 8,801
Auditing, consulting and tax return preparation fees................ 15,267 15,267 15,267
Amortization of deferred organization expenses (note 1c)............ 10,147 518 712
Legal fees.......................................................... 5,000 2,900 2,900
Miscellaneous....................................................... 3,280 1,657 1,916
----------- ----------- -----------
Total operating expenses........................................... 824,071 330,872 352,223
Less: Investment advisory fees waived (note 2a)................... (368,540) (120,180) (109,629)
----------- ----------- -----------
Net operating expenses........................................... 455,531 210,692 242,594
----------- ----------- -----------
Net investment income............................................ 5,855,559 1,802,054 1,943,696
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized gain on security transactions.......................... 1,825,469 328,864 567,196
Net realized loss on futures transactions (note 1g)................. (125,438) (62,500) (62,156)
----------- ----------- -----------
Net realized gain on investments................................... 1,700,031 266,364 505,040
Net change in unrealized appreciation (depreciation) on investments.. (5,263,348) (1,560,035) (1,963,681)
----------- ----------- -----------
Net realized gain and change in unrealized appreciation
(depreciation) on investments...................................... (3,563,317) (1,293,671) (1,458,641)
----------- ----------- -----------
Net increase in net assets resulting from operations................. $ 2,292,242 $ 508,383 $ 485,055
=========== ===========
===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
National Tax-Exempt Fund
---------------------------
Year Ended July 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income................................................ $ 5,855,559 $ 4,777,616
Net realized gain (loss) on investments.............................. 1,700,031 602,847
Net change in unrealized appreciation (depreciation) on investments.. (5,263,348) 1,936,858
------------ ------------
Net increase in net assets resulting from operations................ 2,292,242 7,317,321
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income................................................ (5,855,559) (4,777,616)
Net realized gains................................................... (2,395,083) (97,494)
------------ ------------
Total dividends and distributions to shareholders................... (8,250,642) (4,875,110)
------------ ------------
FUND SHARE TRANSACTIONS
Net proceeds from sales.............................................. 16,877,343 60,245,315
Net proceeds from acquisition of Unified Fund (note 6)............... -- 11,135,311
Reinvestment of dividends and distributions.......................... 5,055,760 2,902,707
Cost of shares redeemed.............................................. (32,840,943) (15,631,725)
------------ ------------
Net increase (decrease) in net assets from fund share transactions.. (10,907,840) 58,651,608
------------ ------------
Total increase (decrease) in net assets........................... (16,866,240) 61,093,819
NET ASSETS
Beginning of year.................................................... 110,396,709 49,302,890
------------ ------------
End of year.......................................................... $ 93,530,469 $110,396,709
============ ============
SHARES ISSUED AND REDEEMED
Issued............................................................... 1,496,488 5,445,828
Issued in connection with acquisition of Unified Fund (note 6)....... -- 1,028,191
Issued in reinvestment of dividends and distributions................ 455,255 261,926
Redeemed............................................................. (2,965,354) (1,410,304)
------------ ------------
Net increase (decrease)........................................... (1,013,611) 5,325,641
============ ============
DIVIDENDS AND DISTRIBUTIONS PER SHARE
Net investment income................................................ $ 0.612 $ 0.676
------------ ------------
Net realized gains................................................... $ 0.239 $ 0.017
------------ ------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT FUND NEW YORK TAX-EXEMPT FUND
---------------------------- -------------------------
Year Ended July 31, Year Ended July 31,
---------------------------- -------------------------
1994 1993 1994 1993
------------- ----------- ------------ -----------
<S> <C> <C> <C>
$ 1,802,054 $ 1,594,686 $ 1,943,696 $ 1,498,850
266,364 175,332 505,040 (23,101)
(1,560,035) 786,308 (1,963,681) 948,674
------------- ----------- ------------ -----------
508,383 2,556,326 485,055 2,424,423
------------- ----------- ------------ -----------
(1,802,054) (1,594,686) (1,943,696) (1,498,850)
(497,507) (24,171) (39,426) (71,383)
------------- ----------- ------------ -----------
(2,299,561) (1,618,857) (1,983,122) (1,570,233)
------------- ----------- ------------ -----------
6,916,432 24,538,429 9,337,899 21,130,966
-- -- -- --
1,213,893 896,260 1,311,333 981,559
(14,729,767) (7,601,046) (14,283,654) (4,378,709)
------------- ----------- ------------ -----------
(6,599,442) 17,833,643 (3,634,422) 17,733,816
------------- ----------- ------------ -----------
(8,390,620) 18,771,112 (5,132,489) 18,588,006
37,414,420 18,643,308 37,342,274 18,754,268
------------- ----------- ------------ -----------
$ 29,023,800 $37,414,420 $ 32,209,785 $37,342,274
------------- ----------- ------------ -----------
620,408 2,250,221 829,382 1,922,302
-- -- -- --
110,077 82,494 117,005 89,651
(1,346,383) (694,865) (1,286,252) (402,195)
------------- ----------- ------------ -----------
(615,898) 1,637,850 (339,865) 1,609,758
============= =========== ============ ===========
$ 0.571 $0.642 $0.584 $ 0.652
------------- ----------- ------------ -----------
0.156 $0.012 $0.011 $ 0.034
------------- ----------- ------------ -----------
</TABLE>
19
<PAGE>
July 31, 1994
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
National Tax-Exempt Fund ("National"), California Tax-Exempt Fund
("California") and New York Tax-Exempt Fund ("New York") are portfolios of Quest
for Value Family of Funds, a Massachusetts business trust. Each fund commenced
operations on August 14, 1990. On August 10, 1990, each fund sold 20,000 shares
to Oppenheimer Capital for $200,000 to provide the initial capital for the
funds. Quest for Value Advisors (the "Adviser") serves as investment adviser and
provides accounting services to each fund. Quest for Value Distributors (the
"Distributor") serves as each fund's distributor. Both the Adviser and
Distributor are majority-owned (99%) subsidiaries of Oppenheimer Capital. The
following is a summary of significant accounting policies consistently followed
by each fund in the preparation of its financial statements:
(a) Valuation of Investments
Investment debt securities (other than short-term obligations) are valued
each day by an independent pricing service approved by the Board of Trustees.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any security or other asset for which market quotations are not readily
available is valued at its fair value as determined in good faith by or under
procedures established by the Board of Trustees. National invests substantially
all of its assets in a diversified portfolio of debt obligations issued by
states, territories and possessions of the United States and by the District of
Columbia and their political subdivisions. California invests substantially all
of its assets in debt obligations issued by the State of California and its
various political subdivisions. New York invests substantially all of its assets
in debt obligations issued by the State of New York and its various political
subdivisions. The issuers' abilities to meet their obligations may be affected
by economic and political developments in a specific state or region.
(b) Federal Income Taxes
It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable and non-taxable income to its shareholders;
accordingly, no Federal income tax provision is required.
(c) Deferred Organization Expenses
The following costs were incurred by each fund in connection with its
organization: National--$58,000, California--$12,000 and New York--$13,000.
These costs have been deferred and are being amortized to expense on a straight
line basis over sixty months from commencement of each fund's operations.
(d) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining the
gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Original issue discounts or premiums
on debt securities purchased are accreted or amortized to interest income over
the lives of the respective securities.
(e) Dividends and Distributions
Each fund declares its dividends from net investment income daily and pays
the dividend monthly. Distributions of net realized capital gains, if any, will
be paid at least annually. Each fund records dividends and distributions to its
shareholders on the ex-dividend date.
20
<PAGE>
(f) Allocation of Expenses
Expenses specifically identifiable to a particular fund are borne by the
fund. Other expenses are allocated to each fund based on its net assets in
relation to the total net assets of all applicable funds or on another
reasonable basis.
(g) Futures Accounting Policies
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to a broker an amount of cash, U.S.
Government securities or other liquid, high grade debt instruments equal to the
minimum "initial margin" requirements of the exchange. Pursuant to a contract, a
fund agrees to receive from or pay to a broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the fund as unrealized
appreciation or depreciation. When a contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed and reverses
any unrealized appreciation or depreciation previously recorded.
2. Investment Advisory Fee, Accounting Services Fee, Distribution Fee and Other
Transactions with Affiliates
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the annual rate of .50%. For the year ended July 31, 1994, the
Adviser voluntarily waived $368,540, $120,180 and $109,629 in investment
advisory fees for National, California and New York, respectively.
(b) A portion of accounting services fees for National, California and New
York are payable monthly to the Adviser. Each fund reimburses the Adviser for a
portion of the salaries of officers and employees of Oppenheimer Capital based
upon the amount of time such persons spend in providing services to each fund
in accordance with the provisions of the Investment Advisory Agreement. For the
year ended July 31, 1994, the Adviser received $52,193, $40,850 and $40,850 for
National, California and New York, respectively.
(c) The funds have adopted a Plan and Agreement of Distribution (the "Plan")
pursuant to which each fund is permitted to compensate the Distributor in
connection with the distribution of fund shares. Under the Plan, the Distributor
has entered into agreements with dealers and other financial institutions and
organizations to obtain various sales-related services in rendering distribution
assistance. To compensate the Distributor for the services it and other dealers
provide and for the expense they bear under the Plan, each fund pays the
Distributor compensation, accrued daily and payable monthly at an annual rate of
up to .25% of average daily net assets or such lesser rate as the Board of
Trustees may from time to time determine. The total fee may be paid by the
Distributor to broker-dealers or others for providing personal service,
maintenance of accounts and ongoing sales or shareholder support functions in
connection with the distribution of fund shares. While payments under the Plan
may not exceed the stated percentage of average daily net assets on an annual
basis, the payments are not limited to the amounts actually paid or expenses
actually incurred by the Distributor. For the year ended July 31, 1994, the
Distributor has assumed all distribution-related expenses without compensation
from the funds.
(d) Oppenheimer & Co., Inc., an affiliate of Oppenheimer Capital, has
informed the funds that it received approximately $110,000, $58,000 and $133,000
in connection with the sale of fund shares for National, California and New
York, respectively, for the year ended July 31, 1994.
21
<PAGE>
July 31, 1994
NOTES TO FINANCIAL STATEMENTS (continued)
3. Purchases and Sales of Securities
For the year ended July 31, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
National California New York
-------- ---------- --------
<S> <C> <C> <C>
Purchases $46,099,443 $10,753,387 $17,288,469
Sales 64,510,442 15,881,790 19,233,802
</TABLE>
4. Unrealized Appreciation (Depreciation) and Cost of Investments
for Federal Income Tax Purposes
At July 31, 1994, the composition of unrealized appreciation (depreciation)
of investment securities and the cost of investments for Federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Appreciation (Depreciation) Net Tax Cost
------------ -------------- --- --------
<S> <C> <C> <C> <C>
National $1,842,470 ($1,467,493) $374,977 $92,135,153
California 527,093 (500,677) 26,416 29,503,029
New York 1,138,151 (694,302) 443,849 31,376,321
5. Authorized Fund Shares and Par Value Per Share
<CAPTION>
National California New York
-------- ---------- --------
<S> <C> <C> <C>
Authorized fund shares unlimited unlimited unlimited
Par value per share $ .01 $ .01 $ .01
</TABLE>
6. Acquisition of Unified Fund
On December 21, 1992, National acquired the net assets of the Unified Indiana
Bond Fund in a tax free exchange for 1,028,191 shares. At that date, net assets
for Unified Indiana Bond Fund amounted to $11,135,311, which included $568,988
in unrealized appreciation. These net assets were combined with the net assets
of National, which were $62,095,964, immediately prior to reorganization.
Expenses incurred in connection with this acquisition approximated $22,000 which
include legal costs and independent accountants' fees.
22
<PAGE>
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
-------------------------------------- -----------------------------------------
Distributions
Net to
Realized Dividends to Shareholders
Net Asset and Total Shareholders from Net Total Net Asset
Value, Net Unrealized from from Net Realized Dividends Value,
Beginning Investment Gain (Loss) on Investment Investment Gain on and End of Total
of Period Income Investments Operations Income Investments Distributions Period Return*
--------- ---------- -------------- ---------- ------------ ------------ ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
National Tax-Exempt Fund
Year Ended
July 31,
1994 $11.29 $0.61 ($0.38) $0.23 ($0.61) ($0.24) ($0.85) $10.67 2.01%
1993 11.08 0.68 0.23 0.91 (0.68) (0.02) (0.70) 11.29 8.51%
1992 10.22 0.73 0.86 1.59 (0.73) - (0.73) 11.08 16.22%
August 14, 1990
(3) to July 31,
1991 10.00(4) 0.65 0.22 0.87 (0.65) - (0.65) 10.22 8.95%
</TABLE>
<TABLE>
<CAPTION>
RATIOS
-----------------------------------------
Ratio of Net Ratio of Net
Net Assets Operating Investment
End of Expenses Income (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
---------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Year Ended
July 31,
1994 $ 93,530 0.43% (1,2) 5.51% (1,2) 45%
1993 110,397 0.20% (2) 6.01% (2) 19%
1992 49,303 0.02% (2) 6.80% (2) 10%
August 14, 1990
(3) to July 31,
1991 13,231 0.00% (2,5) 6.97% (2,5) 8%
</TABLE>
(1) Average net assets for the year ended July 31, 1994 were $106,274,260.
(2) During the periods presented above, the Adviser waived a portion or all
of its fees and reimbursed the fund for a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been .78% and 5.16%,
respectively, for the year ended July 31, 1994, .85% and 5.36%,
respectively, for the year ended July 31, 1993, 1.03% and 5.79%,
respectively, for the year ended July 31, 1992 and 1.75% and 5.22%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
(3) Commencement of operations.
(4) Offering price.
(5) Annualized.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
-------------------------------------- -----------------------------------------
Distributions
Net to
Realized Dividends to Shareholders
Net Asset and Total Shareholders from Net Total Net Asset
Value, Net Unrealized from from Net Realized Dividends Value,
Beginning Investment Gain (Loss) on Investment Investment Gain on and End of Total
of Period Income Investments Operations Income Investments Distributions Period Return*
--------- ---------- -------------- ---------- ------------ ------------ ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
California Tax-Exempt Fund
Year Ended
July 31,
1994 $11.15 $0.57 ($0.39) $0.18 ($0.57) ($0.16) ($0.73) $10.60 1.52%
1993 10.86 0.64 0.30 0.94 (0.64) (0.01) (0.65) 11.15 9.06%
1992 10.23 0.69 0.63 1.32 (0.69) - (0.69) 10.86 13.37%
August 14, 1990 (3)
to July 31,
1991 10.00(5) 0.63 0.23 0.86 (0.63) - (0.63) 10.23 8.89%
</TABLE>
<TABLE>
<CAPTION>
RATIOS
-----------------------------------------
Ratio of Net Ratio of Net
Net Assets Operating Investment
End of Expenses Income (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
---------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Year Ended
July 31,
1994 $29,024 0.61% (1,2) 5.18% (1,2) 32%
1993 37,414 0.29% (2) 5.78% (2) 24%
1992 18,643 0.09% (2) 6.45% (2) 12%
August 14, 1990
(3) to July 31,
1991 4,320 0.00% (2,5) 6.65% (2,5) 20%
</TABLE>
(1) Average net assets for the year ended July 31, 1994 were $34,790,898
(2) During the periods presented above, the Adviser waived a portion or all
of its fees and reimbursed the fund for a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been .95% and 4.84%,
respectively, for the year ended July 31, 1994, .94% and 5.13% respectively,
for the year ended July 31, 1993, 1.46% and 5.08%, respectively, for the
year ended July 31, 1992 and 3.90% and 2.75%, annualized, respectively, for
the period August 14, 1990 (commencement of operations) to July 31, 1991.
(3) Commencement of operations.
(4) Offering price.
(5) Annualized.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
-------------------------------------- -----------------------------------------
Distributions
Net to
Realized Dividends to Shareholders
Net Asset and Total Shareholders from Net Total Net Asset
Value, Net Unrealized from from Net Realized Dividends Value,
Beginning Investment Gain (Loss) on Investment Investment Gain on and End of Total
of Period Income Investments Operations Income Investments Distributions Period Return*
--------- ---------- -------------- ---------- ------------ ------------ ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
New York Tax-Exempt Fund
Year Ended
July 31,
1994 $11.26 $0.58 ($0.43) $0.15 ($0.58) ($0.01) ($0.59) $10.82 1.36%
1993 10.98 0.65 0.31 0.96 (0.65) (0.03) (0.68) 11.26 9.17%
1992 10.05 0.70 0.93 1.63 (0.70) - (0.70) 10.98 16.93%
August 14, 1990 (3)
to July 31,
1991 10.00(4) 0.64 0.05 0.69 (0.64) - (0.64) 10.05 7.16%
</TABLE>
<TABLE>
<CAPTION>
RATIOS
-----------------------------------------
Ratio of Net Ratio of Net
Net Assets Operating Investment
End of Expenses Income (Loss) Portfolio
Period to Average to Average Turnover
(000's) Net Assets Net Assets Rate
---------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Year Ended
July 31,
1994 $32,210 0.65% (1,2) 5.20% (1,2) 49%
1993 37,342 0.37% (2) 5.84% (2) 7%
1992 18,754 0.13% (2) 6.70% (2) 31%
August 14, 1990
(3) to July 31,
1991 7,828 0.00% (2,5) 6.90%(2,5) 6%
</TABLE>
(1) Average net assets for the year ended July 31, 1994 were $37,362,620.
(2) During the periods presented above, the Adviser waived a portion or all
of its fees and reimbursed the fund for a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been .94% and 4.91%,
respectively, for the year ended July 31, 1994, .99% and 5.22%,
respectively, for the year ended July 31, 1993, 1.19% and 5.64%,
respectively, for the year ended July 31, 1992 and 2.54% and 4.36%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
(3) Commencement of operations.
(4) Offering price.
(5) Annualized.
_________________________________________________
* Assumes reinvestment of all dividends and distributions, but does not reflect
deductions for sales charges. Aggregate (not annualized) total return is shown
for any period shorter than one year.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Quest for Value Family of Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the National Tax-Exempt Fund, the
California Tax-Exempt Fund, and the New York Tax-Exempt Fund (constituting part
of the Quest for Value Family of Funds, hereafter referred to as the "Funds") at
July 31, 1994, the results of each of their operations for the year then ended,
the changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period August 14, 1990 (commencement of
operations) to July 31, 1991, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
managment; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1994 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September 20, 1994
24
<PAGE>
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the funds' fiscal year end (July 31,
1994) as to the Federal tax status of dividends and distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that
substantially all dividends paid from net investment income during the fiscal
year ended July 31, 1994 were Federally exempt interest dividends, although,
each fund did invest in securities which paid interest subject to the Federal
alternative minimum tax during the fiscal year. Dividends paid from net
investment income subject to such tax amount to 18.4%, 9.7% and 8.7%,
respectively, for the National, California and New York Tax-Exempt Funds. Per
share dividends and distributions paid to shareholders for the fiscal year ended
July 31, 1994 were as follows:
<TABLE>
<CAPTION>
Net Investment Short-Term Long-Term
Income Capital Gains Capital Gains
-------------- ------------- -------------
<S> <C> <C> <C>
National Tax-Exempt Fund $0.612 $0.001 $0.238
California Tax-Exempt Fund 0.571 -- 0.156
New York State Tax-Exempt Fund 0.584 -- 0.011
</TABLE>
Since the funds' fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1994. In January 1995, you will be
advised on IRS Form 1099 DIV as to the Federal tax status of the dividends
received by you in calendar 1994. The amounts that will be reported, will be the
amounts to use on your 1994 Federal income tax return and probably will differ
from the amounts which we must report for the funds' fiscal year ended July 31,
1994. Shareholders are advised to consult with their own tax advisor as to the
Federal, state and local tax status of each funds' income received. A breakdown
of interest by state for the National Tax-Exempt Fund will also be provided in
January 1995, which may be of value in reducing a shareholder's state or local
tax liability, if any.
25
<PAGE>
[LOGO OF QUEST]
<PAGE>
QUEST FOR VALUE FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
Quest for Value Fund invests primarily in common stocks with an objective of
capital appreciation.
Quest for Value Opportunity Fund seeks capital appreciation through a mix of
stocks, fixed income and money market securities.
Quest for Value Small Capitalization Fund seeks capital appreciation by
investing primarily in undervalued stocks of companies with market
capitalization under $1 billion.
Quest for Value Global Equity Fund seeks long term growth through a global
investment strategy primarily involving equity securities.
Quest for Value Growth and Income Fund seeks total return by investing in a
combination of stocks, U.S. government securities and investment grade bonds.
FIXED-INCOME FUNDS
Quest for Value Investment Quality Income Fund seeks high monthly income
consistent with conservation of principal through a portfolio of corporate and
U.S. government bonds, at least 80% of which are rated A or better.
Quest for Value Global Income Fund invests in fixed income securities of
domestic and foreign governments and corporations with an objective of high
monthly income.
Quest for Value U.S. Government Income Fund seeks high current income together
with protection of principal by investing in U.S. government securities.
Quest for Value Tax Exempt Funds are three portfolios investing in investment
grade municipal obligations with the objective of high current income exempt
from Federal taxes and, in some cases, state and local income taxes. The three
portfolios are: the National Tax Exempt Fund, the New York Tax Exempt Fund and
the California Tax Exempt Fund.
<PAGE>
QUEST FOR VALUE
TAX-EXEMPT FUNDS
TRUSTEES AND OFFICERS
Joseph M. La Motta Trustee, President
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
George Loft Trustee
Robert J. Bluestone Vice President
Bernard H. Garil Vice President
Matthew Greenwald Vice President
Sheldon Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Thomas E. Duggan Assistant Secretary
INVESTMENT ADVISER
Quest for Value Advisors
One World Financial Center
New York, NY 10281
DISTRIBUTOR
Quest for Value Distributors
Two World Financial Center
New York, NY 10080-6116
TRANSFER AND SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Table of Contents
President's Letter.................... 1
Investment Review..................... 3
Schedules of Investments.............. 6
Statements of Assets and Liabilities.. 16
Statements of Operations.............. 17
Statements of Changes in Net Assets... 18
Notes to Financial Statements......... 20
Financial Highlights.................. 23
Independent Accountants Report........ 24
Tax Information....................... 25
This report is authorized for distribution only to shareholders
and to others who have received a copy of the prospectus.
QUEST
[LOGO OF QUEST]
QUEST FOR VALUE
TAX-EXEMPT FUNDS
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
Annual Report
JULY 31, 1994
MANAGED BY
QUEST FOR VALUE ADVISORS
<PAGE>
QUEST FOR VALUE/SM/
TAX-EXEMPT FUNDS
QUEST FOR VALUE FUNDS
One World Financial
Center
New York, NY 10281
EQUITY FUNDS
- ------------
QUEST FOR VALUE FUND
GLOBAL EQUITY FUND
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
FIXED INCOME FUNDS
- ------------------
TAXABLE
U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
GLOBAL INCOME FUND
TAX-EXEMPT
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
MONEY MARKET FUNDS
- ------------------
QUEST CASH RESERVES:
TAXABLE
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
TAX-EXEMPT
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
FOR MORE INFORMATION OR
ASSISTANCE WITH YOUR ACCOUNT PLEASE CALL:
1-800-232-3863
March 17, 1995
DEAR SHAREHOLDER:
We are pleased to provide you with this semi-annual report for the Quest for
Value National, California and New York Tax-Exempt Funds. Detailed information
on the performance and holdings of each Fund for the six months ended January
31, 1995, is presented in the Investment Review and financial statements that
follow.
Investment Environment
Following a year of declining prices, conditions in the municipal bond
market have improved markedly since mid-November. Prices of virtually all types
of fixed income securities, including municipal bonds, fell sharply through
most of calendar 1994 as a result of a series of increases in short-term rates
by the Federal Reserve. The Fed's actions were aimed at slowing the economy and
forestalling inflation.
By November 1994, when the market bottomed, municipal bonds were clearly
oversold in relation to other types of fixed income securities. For instance,
yields on 30-year triple-A tax-exempt securities had reached 90% of the yield
on 30-year Treasury securities, compared with an historical average of about
81%. At that point, insurance companies and other investors came back into the
market and their purchases helped bolster prices.
As I write this message, yields on 20-year municipals exceed 6% - the
taxable equivalent of nearly 8.7% for an investor in the 31% federal income tax
bracket and 9.9% in the top federal bracket of 39.6%. Taxable equivalent yields
are even greater for investors in high-tax states such as California and New
York. These yields not only exceed the inflation rate, currently about 3%
annually, but are highly competitive in relation to the returns on other
long-term, conservative investments.
Of course, no one can predict the future. But we feel comfortable with the
values available today to investors in quality municipal securities. Our
generally positive view is reinforced by a favorable supply/demand balance.
Demand for tax-exempt securities remains strong, even as the supply of new
issues continues to decrease. New-issue supply was down by about 50% in
calendar 1994 and is expected to decline further in 1995, as state and local
governments reduce their borrowing for major projects in today's era of more
frugal government budgets.
Investment Results and Strategy
For the six months ended January 31, 1995, municipal bonds had a negative total
return of 0.3%, as measured by the Bond Buyer Index, reflecting the impact of
price declines in the first half of the six-month period and partial price
recovery in the second half. Mirroring these conditions, each of the Quest for
Value Tax-Exempt Funds had a slightly negative total return in the six months.
Each of the Funds has delivered strong investment results over time.
We manage the Funds conservatively, recognizing that shareholders view
protection of principal as one of their most important objectives, together
with high tax-exempt income. Through most of calendar 1994, we increased the
cash reserves of each of the Funds to help protect principal. By October, cash
reserves approached or exceeded 10% of each Fund's net assets. We then began to
invest these reserves to capitalize on the high yields available on municipal
securities.
/SM/ Quest for Value is a registered service mark of Oppenheimer Capital.
<PAGE>
In addition, we continued to stress investment quality, increasing each
Fund's holdings of higher-rated bonds. Because the yield differential between
various credit qualities remains unusually narrow, there is little incentive at
this time to invest in lower-rated municipals.
The past six months highlighted the advantages of investing in municipal
bonds through a mutual fund rather than buying individual securities directly.
Investors in the securities of Orange County, California, suffered severe
losses when that county ran into financial difficulties and declared bankruptcy
in December. Mutual funds not only provide professional management, but also
portfolio diversity. Fortunately, the Orange County bankruptcy was a non-event
for the Quest for Value Tax-Exempt Funds. None of the Funds had any direct
exposure to Orange County securities, and only the California Fund had a small
position in the insured securities of a municipality in the county.
Summary
The difficult market conditions of the past year for investors in municipal
securities appear to be over. The market has stabilized and prices have
recovered somewhat since mid-November. We are alert to both the opportunities
and challenges that lie ahead and remain dedicated to serving your needs by
providing high current tax-exempt income from quality investments. Thank you
for investing with us at Quest for Value.
Sincerely,
/s/ Joseph M. La Motta
Joseph M. La Motta
President
<PAGE>
Investment Review
QUEST FOR VALUE NATIONAL
TAX-EXEMPT FUND
Objective
Seeks to provide a high level of current income exempt from federal income
tax, consistent with preservation of capital. Designed to protect principal
through investment-grade municipals.
Investment Results
The Fund paid cash dividends totaling $.29 per share in the six months ended
January 31, 1995. On an annualized basis, the monthly distribution yield of the
Fund was 5.7% at January 31, 1995, based on the net asset value per share. This
yield was equivalent to a taxable return of 9.4% for an individual, not subject
to the alternative minimum tax, in the 39.6% federal tax bracket. Long-term
capital gains distributions declared by the Fund were $.0067 per share in the
six months.
The Fund had a negative total return of 0.1% in the six-month period, as
dividend payments were offset by a decline in the Fund's per-share net asset
value. For the 12 months ended January 31, 1995, the Fund had a negative total
return of 4.3%. Since its inception on August 14, 1990, the Fund has delivered
an average annual total return of 7.8% based on net asset value.
During the six months, we increased the Fund's holdings of securities in those
states where fiscal conditions are favorable and where we expect bond demand to
exceed supply. Examples include Ohio, Michigan and Minnesota. In addition, we
continued to increase the Fund's holdings of general obligation bonds, which
stand to benefit as economies recover.
Portfolio Analysis
The Fund's broadly diversified portfolio consisted of 106 issues as of
January 31, 1995, with 93% of the assets rated A or higher by Standard &
Poor's or Moody's. The average maturity of the portfolio was 17.0 years.
The five largest sectors represented in the Fund as of January 31, 1995
were: general obligation, 25.1%; health/hospital, 15.3%; power/utility, 10.5%;
housing, 10.3%; and water/sewer, 7.6%.
The five largest portfolio positions by state were: Texas, 9.9%; New York,
9.4%; California, 8.2%; Massachusetts, 7.2%; and Pennsylvania, 5.9%.
QUEST FOR VALUE CALIFORNIA
TAX-EXEMPT FUND
Objective
Seeks to provide a high level of "double tax-exempt" income (exempt from
federal and California income tax), consistent with preservation of capital.
Designed to protect principal through investment-grade municipals.
Investment Results
The Fund paid cash dividends totaling $.273 per share in the six months
ended January 31, 1995. On an annualized basis, the monthly distribution yield
of the Fund was 5.2% at January 31, 1995, based on the net asset value per
share. This yield was equivalent to a taxable return of 9.7% for an investor,
not subject to the alternative minimum tax, in the top federal and California
income tax brackets of 39.6% and 11%, respectively. In addition, the Fund
declared long-term capital gains distributions of $.0678 per share during the
period.
Reflecting difficult market conditions, the Fund had a negative total return
of 0.3% in the six months. In the 12 months ended January 31, 1995, the Fund
had a negative total return of 4.6%. Since its inception on August 14, 1990,
the Fund has provided an average annual total return of 7.2% based on net asset
value.
We continue to manage the Fund conservatively, emphasizing protection of
principal as well as high returns, in light of the State of California's
ongoing budgetary problems. Investments are focused on high-quality essential
service revenue bonds, including power/utility and water/sewer issues, where we
see good value. We have minimized our investments in state-backed obligations.
Moreover, the Fund does not have any direct exposure to Orange County
securities.
Portfolio Analysis
As of January 31, 1995, the Fund's portfolio consisted of 56 issues, with
99% of the assets rated A or higher by Standard & Poor's or Moody's. The
average maturity of the portfolio was 17.8 years.
The five largest sectors represented in the Fund as of January 31, 1995
were: water/sewer, 16.6%; tax allocation, 15.3%; pollution control, 10.0%;
housing, 9.2%; and power/utility, 8.6%.
3
<PAGE>
Investment Review (continued)
QUEST FOR VALUE NEW YORK
TAX-EXEMPT FUND
Objective
Seeks to provide a high level of "triple tax-exempt" income (exempt from
federal, New York State and New York City income tax), consistent with
preservation of capital. Designed to protect principal through investment-grade
municipals.
Investment Results
The Fund paid cash dividends totaling $.281 per share in the six months
ended January 31, 1995. On an annualized basis, the monthly distribution yield
of the Fund was 5.4% at January 31, 1995, based on the net asset value per
share. This yield was equivalent to a taxable return of 10.1% for an investor,
not subject to the alternative minimum tax, in the top federal, New York State
and New York City tax brackets of 39.6%, 7.875% and 3.91%, respectively. In
addition, the Fund declared long-term capital gains distributions of $.1758 per
share during the six months.
The Fund had a negative total return of 0.9% in the six-month period. For
the 12 months ended January 31, 1995, the Fund had a negative total return of
5.4%. Since its inception on August 14, 1990, the Fund has delivered an average
annual total return of 7.4% based on net asset value.
The Fund owns a diversified portfolio of New York bonds, including general
obligation issues of improving credits. We reduced somewhat the Fund's holdings
of New York City securities in light of ongoing budget deficit problems. New
York City securities represented approximately 16% of the Fund's net assets as
of January 31, 1995.
Portfolio Analysis
The Fund's portfolio consisted of 69 issues at the end of January, with 84%
of the assets rated A or higher by Standard & Poor's or Moody's. The average
maturity of the portfolio was 17.5 years.
The five largest sectors represented in the Fund were: education, 20.1%;
general obligation, 16.7%; health/hospital, 11.8%; power/utility, 9.5%; and
transportation, 8.5%.
4
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
NATIONAL TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
MUNICIPAL NOTES & BONDS - 100.0%
ALABAMA - 1.2%
Health/Hospital - 1.0%
$ 1,000,000 University of Alabama
Birmingham Hospital
5.00%, 10/01/14..................... $ 842,550
-----------
Pollution Control - 0.2%
200,000 McIntosh, Alabama Industrial
Development Board
Pollution Control Revenue
Ciba - Geigy Corp. Project
(Series B) (2)
3.80%, 7/01/04...................... 200,000
-----------
1,042,550
-----------
ARIZONA - 1.6%
Health/Hospital - 0.4%
300,000 Arizona Health Facilities Authority
Phoenix Memorial Hospital
8.20%, 6/01/21...................... 305,880
Pollution Control - 1.2%
1,000,000 Maricopa County, Arizona
Pollution Control Corp.
Pollution Control Revenue
Refunding Arizona Public
Service Co. (Series F) (2)
4.10%, 5/01/29...................... 1,000,000
-----------
1,305,880
-----------
CALIFORNIA - 8.2%
Correctional Facilities - 2.9%
750,000 California Statewide Communities
Development Authority
Certificates of Participation
Salk Institute
6.10%, 7/01/14...................... 718,710
Los Angeles County
Certificates of Participation
740,000 Correctional Facilities Project
6.50%, 9/01/13 (MBIA insured)....... 750,086
500,000 Edelman Childrens Center
6.00%, 4/01/12
(AMBAC insured)..................... 486,900
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
$ 500,000 Santa Ana, California Financing
Authority Lease Revenue Police
Administration & Holding
Facilities (Series A)
5.50%, 7/01/07...................... $ 469,550
-----------
2,425,246
-----------
General Obligation - 0.9%
725,000 California State General
Obligation Bonds
7.00%, 11/01/12..................... 769,675
-----------
Health/Hospital - 1.6%
1,315,000 California Health Facilities Financing
Good Samaritan Hospital
7.00%, 9/01/21...................... 1,302,363
-----------
Tax Allocation - 0.6%
500,000 Industry, California Urban
Development Agency
6.90%, 11/01/07..................... 520,970
-----------
Transportation - 1.2%
1,000,000 San Diego, California Open
Space Park Facilities
District Number 1
5.75%, 1/01/08...................... 978,560
-----------
Water/Sewer - 1.0%
1,000,000 Sacramento County, California
Sanitation District
Financing Authority
5.125%, 12/01/13.................... 853,710
-----------
6,850,524
-----------
COLORADO - 1.9%
Education - 1.3%
1,000,000 Colorado Student Obligation Bond Authority
Student Loan Revenue (1)
7.15%, 9/01/06...................... 1,040,670
-----------
General Obligation - 0.6%
500,000 Jefferson County School District
6.25%, 12/15/12
(AMBAC insured)..................... 510,660
-----------
1,551,330
-----------
CONNECTICUT - 1.2%
Sales Tax
1,000,000 Connecticut State Special Tax
Obligation Revenue
6.25%, 10/01/14..................... 1,003,990
-----------
</TABLE>
5
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
NATIONAL TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
FLORIDA - 2.4%
General Obligation - 1.2%
$ 1,000,000 Dade County School District
6.125%, 8/01/11..................... $ 1,006,640
-----------
Housing - 1.2%
980,000 Florida Housing Finance Agency
Refunding Single Family
Mortgage (Series A)
6.35%, 7/01/14...................... 983,087
-----------
1,989,727
-----------
GEORGIA - 1.8%
Power/Utility
Municipal Electric Authority of
Georgia, Special Obligation
1,000,000 Fifth Crossover Series
6.50%, 1/01/17 (MBIA insured)....... 1,025,910
500,000 Fourth Crossover Series
6.50%, 1/01/12 (MBIA insured)....... 513,955
-----------
1,539,865
-----------
HAWAII - 1.6%
General Obligation
Honolulu, Hawaii City & County
1,000,000 5.00%, 10/01/13..................... 850,580
500,000 6.10%, 6/01/11 (Series B)........... 498,410
-----------
1,348,990
-----------
ILLINOIS - 4.5%
Airline/Airport - 0.9%
750,000 Chicago, Illinois O'Hare Int'l.
Airport (1)
6.00%, 1/01/12...................... 723,720
-----------
General Obligation - 1.2%
1,000,000 Chicago, Illinois General
Obligation Bonds
6.25%, 1/01/12
(AMBAC insured)..................... 998,890
-----------
Health/Hospital - 1.4%
1,000,000 Illinois Health Facilities
Authority Revenue
Hindsdale Health System
9.50%, 11/15/19..................... 1,138,760
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Tax Allocation - 1.0%
$ 825,000 Hoffman Estates Tax
Increment Revenue
7.625%, 11/15/09.................... $ 864,476
-----------
3,725,846
-----------
KENTUCKY - 0.6%
Education
500,000 University of Kentucky
Revenue Educational
Building Construction
6.00%, 5/01/11...................... 488,290
-----------
LOUISIANA - 1.2%
Education
1,000,000 Louisiana Public Facilities
Authority Student Loan
Revenue (1)
6.75%, 9/01/06...................... 1,014,700
-----------
MAINE - 0.6%
Education
500,000 Maine Educational Loan
Marketing Corp.
Student Loan Revenue (1)
6.90%, 11/01/03..................... 511,445
-----------
MARYLAND - 0.6%
Education
500,000 University of Maryland
Auxiliary Facilities &
Tuition Revenue
5.90%, 2/01/03...................... 512,150
-----------
MASSACHUSETTS - 7.2%
General Obligation - 3.3%
Massachusetts State General
Obligation Bonds
Consolidated Loan
1,000,000 6.00%, 6/01/11 (Series A)........... 974,530
1,000,000 6.50%, 8/01/11 (Series B)........... 1,018,930
300,000 7.00%, 7/01/07 (Series D)........... 319,167
400,000 7.00%, 8/01/12 (Series C)........... 419,544
-----------
2,732,171
-----------
Health/Hospital - 1.0%
900,000 Massachusetts State Health &
Education Facilities Authority
Revenue Board
Sisters of Providence
6.50%, 11/15/08..................... 850,986
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Housing - 1.2%
$ 1,000,000 Massachusetts State Housing
Finance Authority
Housing Projects
6.30%, 10/01/13..................... $ 968,990
-----------
Resource Recovery - 0.6%
500,000 Massachusetts State Industrial
Finance Agency
Resource Recovery Revenue
Refusetech, Inc. Project
6.30%, 7/01/05...................... 490,630
-----------
Transportation - 1.1%
1,000,000 Massachusetts State Port Authority
Revenue (Series A) (1)
6.00%, 7/01/13...................... 967,510
-----------
6,010,287
-----------
MICHIGAN - 4.2%
Finance - 1.2%
1,000,000 Michigan Municipal Bond
Authority Revenue Local
Government Loan Program
(Series A)
6.00%, 12/01/13..................... 976,770
-----------
Health/Hospital - 1.8%
750,000 Jackson County Hospital
Finance Authority
W. A. Foote Memorial
Hospital (Series A)
4.75%, 6/01/15...................... 603,008
Michigan State Hospital
Finance Authority
455,000 Bay Medical Center
8.25%, 7/01/12...................... 474,351
400,000 Sisters of Mercy Health Corp.
7.50%, 2/15/18
(Pre-refunded with U.S.
Government Securities).............. 444,204
-----------
1,521,563
-----------
Resource Recovery - 1.2%
1,000,000 Michigan State Strategic Fund
Limited Obligation Revenue
Waste Management, Inc. (1)
6.625%, 12/01/12.................... 991,100
-----------
3,489,433
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
MINNESOTA - 1.9%
Housing - 0.4%
$ 290,000 Minnesota State Housing
Finance Agency Single Family
Mortgage Revenue (1)
7.45%, 7/01/22...................... $ 301,907
-----------
Other - 0.3%
265,000 Minneapolis Community
Development Agency
Supported Development
Revenue
7.35%, 12/01/08..................... 268,042
-----------
Power/Utility - 1.2%
1,000,000 Western Minnesota Municipal
Power Agency
7.00%, 1/01/13...................... 1,023,880
-----------
1,593,829
-----------
NEVADA - 2.3%
Airline/Airport - 0.6%
500,000 Clark County, Nevada Passenger
Facilities (1)
6.25%, 7/01/11...................... 494,410
-----------
General Obligation - 1.7%
890,000 Clark County, Nevada
Refunding & Improvement
Transportation (Series A)
6.00%, 6/01/13 (MBIA insured)....... 865,819
500,000 Nevada State General Obligation
Bonds Municipal Bond Bank
6.80%, 7/01/12
(Pre-refunded with U.S.
Government Securities).............. 543,095
-----------
1,408,914
-----------
1,903,324
-----------
NEW HAMPSHIRE - 1.2%
Housing
1,000,000 New Hampshire State Housing
Finance Authority Single
Family Mortgage (Series C)(1)
6.90%, 7/01/19...................... 999,900
-----------
NEW JERSEY - 1.1%
Health/Hospital
New Jersey Health Care Facilities
500,000 Atlantic City Medical Center
6.80%, 7/01/11...................... 506,890
</TABLE>
7
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
NATIONAL TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
NEW JERSEY (cont'd)
Health/Hospital (cont'd)
$ 400,000 St. Elizabeth Hospital
8.25%, 7/01/20 $ 423,064
-----------
929,954
-----------
NEW YORK - 9.4%
Correctional Facilities - 0.5%
500,000 New York State Urban Development Corp.
Correctional Facilities
5.625%, 1/01/07 452,890
-----------
Education - 1.1%
1,000,000 New York State Dormitory
Authority State University
System
5.50%, 5/15/07 898,150
-----------
General Obligation - 4.2%
New York City General
Obligation Bonds
300,000 4.05%, 10/01/20 (Series B)(2) 300,000
1,000,000 5.625%, 8/01/12 (Series E) 843,800
1,000,000 6.00%, 5/15/10 (Series E) 903,430
500,000 6.50%, 8/01/13 (Series A) 465,485
945,000 7.625%, 2/01/15 (Series G) 980,749
-----------
3,493,464
-----------
Power/Utility - 0.1%
100,000 New York State Energy Research
& Development Authority
Pollution Control Revenue
Niagara Mohawk Power (Series A) (2)
4.10%, 7/01/15 100,000
-----------
Sales Tax - 2.0%
New York State Local
Government Assistance Corp.
900,000 7.00%, 4/01/11 (Series D) 935,622
745,000 7.125%, 4/01/11 (Series A) 777,884
-----------
1,713,506
-----------
Transportation - 0.6%
500,000 Port Authority of New York &
New Jersey
6.00%, 12/01/16 474,905
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Turnpike/Toll - 0.4%
$ 300,000 Triborough Bridge & Tunnel
Authority
6.375%, 1/01/05 $ 314,838
Water/Sewer - 0.5%
400,000 New York City Municipal Water
Finance Authority
Water & Sewer System Revenue
7.00%, 6/15/09 410,348
7,858,101
OHIO - 5.9%
Correctional Facilities - 0.6%
500,000 Ohio State Building Authority
State Juvenile Correctional
Facilities
6.60%, 10/01/14 516,790
General Obligation - 1.5%
1,200,000 Summit County, Ohio
6.625%, 12/01/12 1,242,396
Power/Utility - 2.6%
2,000,000 Cleveland, Ohio Public Power
Systems Revenue
First Mortgage (Series A)
7.00%, 11/15/16
(MBIA insured) 2,128,680
Water/Sewer - 1.2%
1,000,000 Northeast Ohio Regional
Sewer District
Wastewater Revenue
6.50%, 11/15/16
(AMBAC insured) 1,018,600
4,906,466
OKLAHOMA - 4.1%
Health/Hospital - 2.2%
Oklahoma State Industry Authority Revenue
1,000,000 Baptist Medical Center Oklahoma
7.00%, 8/15/14 (AMBAC insured) 1,033,580
1,000,000 Sisters of Mercy Health Project
5.00%, 6/01/18 788,840
1,822,420
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Power/Utility - 1.9%
$ 1,575,000 Muskogee, Oklahoma Industrial
Trust Pollution Control
Revenue Oklahoma Gas &
Electric Co. Project (Series A)
7.00%, 3/01/17 $ 1,601,586
-----------
3,424,006
-----------
OREGON - 1.7%
Health/Hospital
1,400,000 Umatilla County, Oregon Hospital
Facility Revenue
Franciscan Health Systems (2)
4.05%, 12/01/24 1,400,000
-----------
PENNSYLVANIA - 5.9%
Education - 0.6%
500,000 Pennsylvania Higher Education
Assistance Agency
Student Loan Revenue (1)
7.15%, 9/01/21
(AMBAC Insured) 522,415
-----------
General Obligation - 1.0%
810,000 Pennsylvania State General
Unlimited Tax
6.60%, 11/01/11 828,581
-----------
Health/Hospital - 0.4%
350,000 Monroeville Hospital Authority
Revenue Bond Forbes Health
System Refunding
7.00%, 10/01/13 341,072
-----------
Transportation - 0.9%
750,000 Pennsylvania State Turnpike
Community Revenue Bonds
6.50%, 12/01/13 762,495
-----------
Water/Sewer - 3.0%
2,235,000 Philadelphia Water & Sewer Revenue
7.35%, 9/01/04 2,471,239
-----------
4,925,802
-----------
PUERTO RICO - 0.6%
Power/Utility
500,000 Puerto Rico Electric Power Authority
Power Revenue (Series T)
6.00%, 7/01/16 469,625
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
SOUTH CAROLINA - 1.1%
Housing
$ 1,000,000 South Carolina State Housing
Finance & Development
Authority Mortgage Revenue
(Series A)
6.45%, 7/01/17. $ 965,500
-----------
SOUTH DAKOTA - 1.1%
Health/Hospital
1,000,000 South Dakota Housing
Development Authority
Homeownership Mortgage (1)
6.15%, 5/01/26 899,530
-----------
TEXAS - 9.9%
Airline/Airport - 1.2%
1,000,000 Houston, Texas Airport
System Revenue Subordinated
Lien (Series B)
6.625%, 7/01/22 1,009,850
-----------
General Obligation - 4.1%
1,000,000 Dallas, Texas General
Obligation Bonds
6.125%, 2/15/05 (Pre-refunded with
U.S. Government Securities). 1,034,230
1,500,000 San Antonio, Texas General
Obligation Bonds
5.75%, 8/01/13 1,416,855
1,000,000 Texas State Veterans Housing
Assistance Fund (1)
6.80%, 12/01/10. 1,008,570
-----------
3,459,655
-----------
Pollution Control - 0.2%
200,000 Gulf Coast Waste Disposal
Authority Texas Pollution
Control Revenue
Amoco Oil Co. Project (2)
4.30%, 6/01/24. 200,000
-----------
Turnpike/Toll - 2.5%
Harris County, Texas
Refunding Toll Road
1,000,000 6.50%, 8/15/15. 1,014,140
1,000,000 6.75%, 8/01/14 1,030,590
-----------
2,044,730
-----------
</TABLE>
9
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
NATIONAL TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
TEXAS (cont'd)
Water/Sewer - 1.9%
Houston, Texas Water &
Sewer System Revenue
Refunding Bonds
$ 1,000,000 6.40%, 12/01/09..................... $ 1,021,820
500,000 6.75%, 12/01/08..................... 519,120
-----------
1,540,940
-----------
8,255,175
-----------
UTAH - 0.3%
Housing
245,000 Utah State Housing Finance
Agency Single Family
Mortgage Revenue(1)
6.95%, 7/01/24...................... 244,368
-----------
VERMONT - 2.0%
Housing
1,570,000 Vermont State Housing Finance
Authority (1)
7.85%, 12/01/29..................... 1,637,416
-----------
VIRGINIA - 4.7%
General Obligation - 1.5%
1,250,000 Richmond, Virginia Refunding
(Series B)
6.25%, 1/15/18...................... 1,230,500
-----------
Housing - 1.1%
1,000,000 Virginia State Housing
Development Authority (1)
6.55%, 1/01/27...................... 950,090
-----------
Resource Recovery - 1.1%
1,000,000 Southeastern Public Service
Authority of Virginia Regional
Solid Waste System (1)
6.00%, 7/01/13...................... 924,490
-----------
Transportation - 1.0%
1,000,000 Virginia State Transportation
Board Revenue (Series C)
5.25%, 5/15/19...................... 838,650
-----------
3,943,730
-----------
WASHINGTON - 5.4%
General Obligation - 2.3%
Washington State General
Obligation Bonds
1,000,000 5.75%, 5/01/16 (Series B)........... 931,530
1,000,000 6.00%, 3/01/16 (Series A)........... 962,920
-----------
1,894,450
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Health/Hospital - 0.8%
Washington State Health Care Facilities
400,000 Group Health Co-Op
Puget Sound 6.75%, 12/01/19
(AMBAC insured)..................... $ 402,552
250,000 Yakima Valley
Memorial Hospital
7.25%, 1/01/09...................... 260,185
-----------
662,737
-----------
Power/Utility - 2.3%
Washington State Public
Power Supply Systems
1,000,000 6.00%, 7/01/12...................... 923,780
500,000 6.75%, 7/01/11...................... 505,380
500,000 6.875%, 7/01/17..................... 503,280
-----------
1,932,440
-----------
4,489,627
-----------
WISCONSIN - 1.7%
Health/Hospital - 0.8%
750,000 Wisconsin State Health &
Educational Facilities
Hospital Sisters Services, Inc.
5.25%, 6/01/10...................... 658,455
-----------
Housing - 0.9%
740,000 Wisconsin Housing & Economic
Development Authority
Homeownership Revenue
7.10%, 3/01/23...................... 757,309
-----------
1,415,764
-----------
WYOMING - 0.9%
Housing
750,000 Wyoming Community
Development Authority
Single Family Mortgage
Revenue (1)
7.15%, 6/01/22...................... 762,465
-----------
Total Investments
(cost-$83,875,625)................... 100.0% $83,409,589
Other Assets in Excess of
Other Liabilities.................... 0.0 29,659
----- -----------
Total Net Assets 100.0% $83,439,248
===== ===========
</TABLE>
10
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
CALIFORNIA TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
MUNICIPAL NOTES & BONDS - 100.9%
Airline/Airport - 6.5%
$ 200,000 Los Angeles, California Regional
Airports Improvement Corp.
Lease Revenue American Airlines
International (Series B) (2)
4.05%, 12/01/24..................... $ 200,000
San Francisco City Commission
International Airport Revenue (1)
500,000 6.125%, 5/01/08..................... 498,820
1,000,000 6.20%, 5/01/20...................... 960,500
-----------
1,659,320
-----------
Correctional Facilities - 3.5%
500,000 California State Public Works
Department of Corrections
6.50%, 9/01/11...................... 498,955
400,000 Los Angeles County Certificates
of Participation
Edelman Childrens Center
6.00%, 4/01/12
(AMBAC insured)..................... 389,520
-----------
888,475
-----------
Education - 6.7%
California Educational Facilities
Authority Revenue
100,000 7.00%, 3/01/16
(MBIA insured)...................... 103,942
1,000,000 Stanford University
6.00%, 11/01/16..................... 966,900
150,000 California State University
Dominguez Hills
6.80%, 5/01/16...................... 148,317
250,000 Fresno Unified School District
Certificates of Participation
7.00%, 5/01/12...................... 251,840
250,000 Los Angeles Unified School
District Certificates of
Participation
6.60%, 6/01/06...................... 257,205
-----------
1,728,204
-----------
General Obligation - 4.6%
500,000 East Bay Regional Park District
6.375%, 9/01/10..................... 508,925
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
$ 250,000 San Francisco City and County
(Series A)
6.70%, 12/15/08..................... $ 256,543
400,000 San Francisco City and County
Library Facility Project
6.25%, 6/15/11...................... 401,132
-----------
1,166,600
-----------
Health/Hospital - 5.5%
California Health Facilities
Financing
315,000 Adventist Hospital
6.50%, 3/01/07
(MBIA insured)...................... 324,541
1,000,000 Good Samaritan Hospital
7.00%, 9/01/21...................... 990,390
100,000 Sutter Memorial Hospital
7.00%, 1/01/09...................... 100,951
-----------
1,415,882
Housing - 9.2%
-----------
California Housing Finance
Agency Revenue
Home Mortgage
1,000,000 6.45%, 2/01/12 (Series E) (1)......... 979,810
80,000 7.35%, 8/01/11 (Series A)............. 83,683
350,000 Multi-Unit Rental Housing
6.875%, 2/01/22....................... 350,091
250,000 Delta County Home Mortgage
Finance Authority Single
Family Mortgage Revenue (1)
6.75%, 12/01/25..................... 248,045
500,000 Pomona, California
Single Family Mortgage
Revenue
7.50%, 8/01/23...................... 563,785
125,000 Southern California Housing
Finance Authority Single
Family Mortgage Revenue (1)
6.90%, 10/01/24..................... 126,280
-----------
2,351,694
-----------
Leasing - 2.9%
615,000 Santa Monica Parking
Authority Lease Revenue
6.375%, 7/01/16 599,896
</TABLE>
11
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
CALIFORNIA TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Leasing (cont'd)
$ 150,000 Sonoma County
Certificates of Participation
6.75%, 10/01/07..................... $ 157,614
-----------
757,510
-----------
Pollution Control - 10.0%
California Pollution Control
Financing Authority
100,000 Burney Forest Products
Project (Series A) (1,2)
3.80%, 9/01/20.................... 100,000
400,000 Delano Project (1,2)
3.95%, 8/01/19...................... 400,000
400,000 Honey Lake Power Project (1,2)
3.95%, 9/01/18 ..................... 400,000
1,000,000 Pacific Gas & Electric (1)
5.85%, 12/01/23..................... 872,030
500,000 Solid Waste Disposal Revenue
6.75%, 7/01/11...................... 504,810
300,000 Ultra Power Malaga Project
(Series B) (1,2)
4.00%, 4/01/17...................... 300,000
-----------
2,576,840
-----------
Ports - 1.2%
300,000 Port of Oakland, California
Special Facilities Revenue (1)
6.75%, 1/01/12...................... 302,046
Power/Utility - 8.6%
500,000 Kings River Conservation District
Pine Flat Power Revenue
6.375%, 1/01/12..................... 503,195
1,000,000 Los Angeles Department of
Water and Power
Electric Plant Revenue
5.75%, 9/01/12...................... 929,920
760,000 Modesto Public Power Agency
San Juan Project
6.875%, 7/01/19..................... 766,392
-----------
2,199,507
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Sales Tax - 3.7%
$ 500,000 Los Angeles, California Community Redevelopment
Financing Authority Revenue (1)
5.90%, 12/01/13..................... $ 457,500
500,000 Los Angeles County
Transport Commission
Sales Tax Revenue
6.25%, 7/01/16...................... 477,845
-----------
935,345
-----------
Tax Allocation - 15.3%
200,000 Avalon, California Improvement
Agency
7.25%, 8/01/21...................... 203,802
100,000 Chico Public Finance Authority
Redevelopment Project
7.40%, 4/01/21...................... 101,645
1,000,000 Fairfield, California Public
Financing Authority
6.25%, 7/01/14
(FGIC insured)...................... 997,700
Industry, California Urban
Development Agency
260,000 6.50%, 11/01/07 (MBIA insured)...... 269,448
500,000 6.90%, 11/01/07..................... 520,970
500,000 Merced Public Finance Authority
5.50%, 12/01/10..................... 451,415
150,000 Riverside County Redevelopment
Project
7.50%, 10/01/26..................... 153,567
500,000 Santa Clara Redevelopment
Agency Bayshore North Project
5.75%, 7/01/14 (AMBAC insured)...... 468,870
680,000 Santa Magarita/Dana Point
Authority California Revenue
Improvement District
7.25%, 8/01/14 (MBIA insured)....... 759,315
-----------
3,926,732
-----------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
Transportation - 6.6%
$ 500,000 California State Department of
Transportation
Certificates of Participation
6.50%, 3/01/16...................... $ 486,005
750,000 Contra Costa, California
Transportation Authority
Sales Tax Revenue
6.50%, 3/01/09...................... 780,907
500,000 Puerto Rico Commonwealth
Highway Authority
5.25%, 7/01/21...................... 411,800
-----------
1,678,712
-----------
Water/Sewer - 16.6%
425,000 Beverly Hills, California Public
Financing Authority
Wastewater Revenue
5.875%, 6/01/10..................... 408,570
400,000 Big Bear Lake, California
Water Revenue
6.25%, 4/01/12...................... 401,892
500,000 California State Department
of Water Resources
Central Valley Project
6.125%, 12/01/13.................... 489,830
750,000 Calleguas-Las Virgines, California
Public Financing Authority
Municipal Water District
5.125%, 7/01/14..................... 637,845
1,000,000 East Bay, California Municipal
Utility District
Water System Revenue
6.375%, 6/01/12..................... 1,065,950
250,000 Los Angeles Wastewater System
Revenue
6.25%, 6/01/12
(AMBAC insured)..................... 250,670
1,000,000 Stockton East Water District
Certificates of Participation
6.40%, 4/01/22
(AMBAC insured)..................... 1,000,000
-----------
4,254,757
-----------
Total Investments
(cost - $26,467,546)..................... 100.9% $25,841,624
Other Liabilities in Excess of
Other Assets............................. (0.9) (226,031)
----- -----------
Total Net Assets........................... 100.0% $25,615,593
===== ===========
</TABLE>
NEW YORK TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
MUNICIPAL NOTES & BONDS - 98.5%
Airline/Airport - 4.5%
$ 1,000,000 New York City Industrial
Special Facilities Authority
American Airlines (1)
6.00%, 1/01/15...................... $ 902,270
500,000 Westchester County, New York
Westchester Airport Association
(Series A) (1)
5.95%, 8/01/24...................... 440,465
-----------
1,342,735
-----------
Correctional Facilities - 1.4%
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.50%, 1/01/16...................... 420,155
-----------
Education - 20.1%
New York State Dormitory
Authority Revenue
City University System
500,000 6.875%, 7/01/14..................... 524,365
500,000 7.40%, 7/01/05...................... 522,375
750,000 Columbia University
5.75%, 7/01/15...................... 685,268
500,000 Episcopal Health Services
5.85%, 8/01/13...................... 458,775
200,000 Menorah Campus
7.30%, 8/01/16...................... 212,196
500,000 Metropolitan Museum of Art
9.20%, 7/01/15...................... 519,420
395,000 Rochester Hospital
5.55%, 8/01/12...................... 391,725
500,000 Saint Thomas Aquinas College
6.25%, 7/01/08...................... 484,110
150,000 Saint Vincent's Hospital
7.375%, 8/01/11..................... 160,827
State University System
1,000,000 5.50%, 5/15/07...................... 898,150
750,000 5.50%, 5/15/13...................... 647,318
500,000 7.70%, 5/15/12...................... 559,800
-----------
6,064,329
-----------
General Obligation - 16.7%
500,000 Buffalo, New York General
Obligation Bonds
6.65%, 12/01/13..................... 515,650
</TABLE>
<PAGE>
January 31, 1995
Schedules of Investments (unaudited)
NEW YORK TAX-EXEMPT FUND (cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
General Obligation (cont'd)
$ 250,000 Grand Central, New York
General Obligation Bonds
6.50%, 1/01/10.................... $ 266,450
500,000 Nassau County, New York
General Obligation Bonds
6.25%, 10/15/09
(AMBAC insured)................... 509,100
New York City General
Obligation Bonds
915,000 5.75%, 8/01/05
(MBIA insured).................... 874,992
500,000 7.20%, 2/01/15.................... 502,290
200,000 7.50%, 8/01/20.................... 205,044
350,000 7.625%, 2/01/14................... 363,240
300,000 7.75%, 3/15/03.................... 322,308
200,000 8.00%, 8/15/18.................... 229,850
100,000 8.25%, 6/01/02.................... 110,639
150,000 8.25%, 11/15/13................... 163,074
100,000 8.40%, 11/15/09................... 109,750
New York State General
Obligation Bonds
300,000 7.00%, 2/01/09.................... 316,785
500,000 7.50%, 11/15/00................... 545,070
-----------
5,034,242
-----------
Health/Hospital - 11.8%
New York State Medical Care
Facilities
590,000 Buffalo General Hospital
7.70%, 2/15/22
(Pre-refunded with U.S.
Government Securities)............ 645,153
370,000 Hospital & Nursing Home
6.45%, 2/15/09.................... 374,340
Mental Health Services
500,000 5.375%, 2/15/14................... 418,915
500,000 5.70%, 8/15/14
(AMBAC insured)................... 458,655
500,000 5.75%, 2/15/14.................... 461,920
500,000 New York Hospital
6.75%, 8/15/14
(FHA insured)..................... 514,510
250,000 North Shore University
Hospital
7.20%, 11/01/20
(MBIA insured).................... 261,570
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
$ 500,000 Presbyterian Hospital
5.25%, 8/15/14.................... $ 432,870
-----------
3,567,933
-----------
Housing - 4.8%
New York State Housing
Finance Agency
Multi-Family Housing (1)
245,000 6.95%, 8/15/24.................... 248,048
350,000 7.05%, 8/15/24.................... 354,582
New York State Mortgage
Agency Revenue Bonds (1)
500,000 6.40%, 10/01/12................... 492,150
345,000 7.375%, 10/01/11.................. 360,073
-----------
1,454,853
-----------
Pollution Control - 3.7%
New York State Environmental
Facilities Pollution Control
Revenue
500,000 6.50%, 6/15/14.................... 501,865
250,000 6.60%, 9/15/12.................... 254,785
350,000 7.20%, 3/15/11.................... 370,279
-----------
1,126,929
-----------
Power/Utility - 9.5%
New York State Energy
Research & Development
Consolidated Edison, Inc. (1)
200,000 7.375%, 7/01/24................... 202,328
280,000 7.50%, 1/01/26.................... 287,700
620,000 7.75%, 1/01/24.................... 640,045
New York State Power Authority
315,000 6.625%, 1/01/12................... 322,957
100,000 8.00%, 1/01/17.................... 108,776
Puerto Rico Electric Power
Authority
1,000,000 5.00%, 7/01/12.................... 845,830
500,000 6.00%, 7/01/16.................... 469,625
-----------
2,877,261
-----------
Resource Recovery - 1.7%
500,000 Oneida Herkimer, New York
Solid Waste Authority
6.60%, 4/01/04.................... 497,230
-----------
Sales Tax - 5.0%
220,000 Municipal Assistance Corp.
for the City of New York
7.25%, 7/01/08.................... 229,541
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- -----------
<S> <C>
New York State Local Government
Assistance Corp.
$ 700,000 7.00%, 4/01/12...................... $ 725,256
500,000 7.00%, 4/01/16...................... 547,265
-----------
1,502,062
-----------
Transportation - 8.5%
Metropolitan Transit Authority
350,000 6.25%, 7/01/17
(MBIA insured)...................... 346,230
500,000 6.375%, 7/01/10..................... 508,805
250,000 7.375%, 7/01/08..................... 267,050
Port Authority of New York
& New Jersey
500,000 5.00%, 10/01/13..................... 418,105
385,000 6.00%, 12/01/15..................... 366,947
400,000 6.125%, 7/15/10 (1)................. 400,392
250,000 6.50%, 4/15/11...................... 254,995
-----------
2,562,524
-----------
Turnpike/Toll - 7.4%
New York State Thruway Authority
500,000 5.125%, 4/01/07..................... 425,100
400,000 7.25%, 1/01/10...................... 410,840
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Principal
Amount Value
- ------------------------------------------------------------------
<S> <C>
Triborough Bridge & Tunnel Authority
$ 500,000 5.00%, 1/01/20...................... $ 403,310
500,000 6.00%, 1/01/12...................... 493,440
500,000 6.625%, 1/01/17..................... 508,720
-----------
2,241,410
-----------
Water/Sewer - 3.4%
New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue
750,000 6.375%, 6/15/22
(Pre-refunded with U.S.
Government Securities).............. 746,333
275,000 7.10%, 6/15/12...................... 285,491
-----------
1,031,824
-----------
Total Investments
(cost - $30,204,010)...................... 98.5% $29,723,487
Other Assets in Excess of
Other Liabilities......................... 1.5 456,456
----- -----------
Total Net Assets............................ 100.0% $30,179,943
----- -----------
</TABLE>
(1) Subject to alternative minimum tax.
(2) Represents a variable rate demand note, payable on demand.
See accompanying notes to financial statements.
15
<PAGE>
January 31, 1995
Statements of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
National California New York
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost--$83,875,625, $26,467,546 and
$30,204,010, respectively)....................................... $83,409,589 $25,841,624 $29,723,487
Cash................................................................ 48,558 32,710 75,479
Interest receivable................................................. 1,323,262 415,697 504,166
Receivable for investments sold..................................... 439,190 497,718 55,000
Receivable for shares of beneficial interest sold................... 26,848 -- 8,928
Deferred organization expenses and other assets..................... 22,638 2,148 3,181
----------- ----------- -----------
Total Assets..................................................... 85,270,085 26,789,897 30,370,241
----------- ----------- -----------
LIABILITIES
Payable for investments purchased................................... 1,017,083 1,019,900 --
Payable for shares of beneficial interest redeemed.................. 589,752 69,644 107,318
Dividends payable................................................... 171,658 50,874 50,238
Investment advisory fee payable..................................... 2,885 591 1,082
Distribution fee payable............................................ 1,138 349 412
Other payables and accrued expenses................................. 48,321 32,946 31,248
----------- ----------- -----------
Total Liabilities................................................ 1,830,837 1,174,304 190,298
----------- ----------- -----------
NET ASSETS
Shares of beneficial interest....................................... 80,502 25,055 29,451
Paid-in-surplus..................................................... 86,062,394 26,668,940 30,933,697
Accumulated net realized loss on investments........................ (2,237,612) (452,480) (302,682)
Net unrealized depreciation on investments.......................... (466,036) (625,922) (480,523)
----------- ----------- -----------
TOTAL NET ASSETS................................................. $83,439,248 $25,615,593 $30,179,943
=========== ===========
===========
Shares of beneficial interest outstanding.............................. 8,050,221 2,505,451 2,945,068
----------- ----------- -----------
Net asset value per share.............................................. $10.36 $10.22 $10.25
=========== ===========
===========
Maximum offering price per share*...................................... $10.88 $10.73 $10.76
=========== ===========
===========
</TABLE>
* Sales charges decrease on purchases of $50,000 or higher.
See accompanying notes to financial statements.
16
<PAGE>
Six Months Ended January 31, 1995
Statements of Operations (unaudited)
<TABLE>
<CAPTION>
California National New York
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest............................................................ $2,775,004 $ 816,976 $ 957,506
---------- --------- ---------
OPERATING EXPENSES
Investment advisory fees (note 2a).................................. 220,180 66,349 76,443
Accounting services fees (note 2b).................................. 37,725 36,514 36,111
Distribution fees (note 2c)......................................... 36,163 10,836 12,607
Transfer and dividend disbursing agent fees......................... 38,959 9,897 13,751
Custodian fees...................................................... 25,103 15,953 15,853
Registration fees................................................... 12,960 1,052 1,598
Trustees' fees and expenses......................................... 8,671 4,438 4,438
Auditing, consulting and tax return preparation fees................ 7,293 7,294 7,294
Reports and notices to shareholders................................. 7,007 3,403 3,529
Amortization of deferred organization expenses (note 1c)............ 5,115 261 359
Legal fees.......................................................... 2,521 1,461 1,462
Miscellaneous....................................................... 5,354 982 1,907
---------- --------- ---------
Total operating expenses......................................... 407,051 158,440 175,352
Less: Investment advisory fees waived (note 2a).................. (102,735) (49,764) (43,797)
---------- --------- ---------
Net operating expenses........................................ 304,316 108,676 131,555
---------- --------- ---------
Net investment income......................................... 2,470,688 708,300 825,951
---------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized loss on security transactions.......................... (2,091,252) (238,647) (246,603)
Net realized gain on futures transactions (note 1e)................. 26,905 10,756 10,756
---------- --------- ---------
Net realized loss on investments................................. (2,064,347) (227,891) (235,847)
Net change in unrealized appreciation (depreciation) on
investments...................................................... (841,013) (652,338) (924,372)
---------- --------- ---------
Net realized loss and change in unrealized appreciation
(depreciation) on investments................................. (2,905,360) (880,229) (1,160,219)
----------- --------- -----------
Net decrease in net assets resulting from operations................ $ (434,672) $(171,929) $ (334,268)
=========== =========
===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
National Tax-Exempt Fund
-----------------------------------
Six Months
Ended
January 31, Year Ended
1995 (1) July 31, 1994
------------ --------------
<S> <C> <C>
OPERATIONS
Net investment income.................................................. $ 2,470,688 $ 5,855,559
Net realized gain (loss) on investments................................ (2,064,347) 1,700,031
Net change in unrealized appreciation (depreciation) on investments.... (841,013) (5,263,348)
------------ -------------
Net increase (decrease) in net assets resulting from operations..... (434,672) 2,292,242
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.................................................. (2,470,688) (5,855,559)
Net realized gains..................................................... (56,482) (2,395,083)
------------ -------------
Total dividends and distributions to shareholders................... (2,527,170) (8,250,642)
------------ -------------
SHARE TRANSACTIONS OF BENEFICIAL INTEREST
Net proceeds from sales................................................ 4,590,599 16,877,343
Reinvestment of dividends and distributions............................ 1,574,546 5,055,760
Cost of shares redeemed................................................ (13,294,524) (32,840,943)
------------ -------------
Net decrease........................................................ (7,129,379) (10,907,840)
------------ -------------
Total decrease in net assets..................................... (10,091,221) (16,866,240)
NET ASSETS
Beginning of period.................................................... 93,530,469 110,396,709
------------ -------------
End of period.......................................................... $83,439,248 $ 93,530,469
============ =============
SHARES OF BENEFICIAL INTEREST ISSUED AND REDEEMED
Issued................................................................. 446,090 1,496,488
Issued from reinvestment of dividends and distributions................ 153,511 455,255
Redeemed............................................................... (1,312,319) (2,965,354)
------------ -------------
Net decrease........................................................ (712,718) (1,013,611)
============ =============
DIVIDENDS AND DISTRIBUTIONS PER SHARE
Net investment income.................................................. $ 0.290 $ 0.612
------------ -------------
Net realized gains..................................................... $ 0.007 $ 0.239
------------ -------------
</TABLE>
(1) Unaudited.
See accompanying notes to financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA TAX-EXEMPT FUND
- -----------------------------
Six Months
Ended
January 31, Year Ended
1995 (1) July 31, 1994
- ------------ -------------
<S> <C>
$ 708,300 $ 1,802,054
(227,891) 266,364
(652,338) (1,560,035)
- ----------- ------------
(171,929) 508,383
(708,300) (1,802,054)
(168,496) (497,507)
- ----------- ------------
(876,796) (2,299,561)
- ----------- ------------
1,216,871 6,916,432
545,990 1,213,893
(4,122,343) (14,729,767)
- ----------- ------------
(2,359,482) (6,599,442)
- ----------- ------------
(3,408,207) (8,390,620)
29,023,800 37,414,420
- ----------- ------------
$25,615,593 $ 29,023,800
=========== ============
120,175 620,408
54,138 110,077
(407,952) (1,346,383)
- ----------- ------------
(233,639) (615,898)
=========== ============
$ 0.273 $ 0.571
- ----------- ------------
$ 0.068 $ 0.156
- ----------- ------------
<CAPTION>
NEW YORK TAX-EXEMPT FUND
- -----------------------------
Six Months
Ended
January 31, Year Ended
1995 (1) July 31, 1994
- ----------- -------------
<S> <C>
$ 825,951 $ 1,943,696
(235,847) 505,040
(924,372) (1,963,681)
- ----------- ------------
(334,268) 485,055
- ----------- ------------
(825,951) (1,943,696)
(510,362) (39,426)
- ----------- ------------
(1,336,313) (1,983,122)
- ----------- ------------
2,478,752 9,337,899
838,337 1,311,333
(3,676,350) (14,283,654)
- ----------- ------------
(359,261) (3,634,422)
- ----------- ------------
(2,029,842) (5,132,489)
32,209,785 37,342,274
- ----------- ------------
$30,179,943 $ 32,209,785
=========== ============
240,458 829,382
82,424 117,005
(355,103) (1,286,252)
- ----------- ------------
(32,221) (339,865)
=========== ============
$ 0.281 $ 0.584
- ----------- ------------
$ 0.176 $ 0.011
- ----------- ------------
</TABLE>
19
<PAGE>
January 31, 1995
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
National Tax-Exempt Fund ("National"), California Tax-Exempt Fund
("California") and New York Tax-Exempt Fund ("New York") are portfolios of Quest
for Value Family of Funds, a Massachusetts business trust. Each fund commenced
operations on August 14, 1990. On August 10, 1990, each fund sold 20,000 shares
to Oppenheimer Capital for $200,000, to provide the initial capital for the
funds. Quest for Value Advisors (the "Adviser") serves as investment adviser and
provides accounting services to each fund. Quest for Value Distributors (the
"Distributor") serves as each fund's distributor. Both the Adviser and
Distributor are majority-owned (99%) subsidiaries of Oppenheimer Capital. The
following is a summary of significant accounting policies consistently followed
by each fund in the preparation of its financial statements:
(a) Valuation of Investments
Investment debt securities (other than short-term obligations) are valued
each day by an independent pricing service approved by the Board of Trustees.
Short-term debt securities having a remaining maturity of sixty days or less are
valued at amortized cost or amortized value, which approximates market value.
Any security or other asset for which market quotations are not readily
available is valued at its fair value as determined in good faith by or under
procedures established by the Board of Trustees. National invests substantially
all of its assets in a diversified portfolio of debt obligations issued by
states, territories and possessions of the United States and by the District of
Columbia and their political subdivisions. California invests substantially all
of its assets in debt obligations issued by the State of California and its
various political subdivisions. New York invests substantially all of its assets
in debt obligations issued by the State of New York and its various political
subdivisions. The issuers' abilities to meet their obligations may be affected
by economic and political developments in a specific state or region.
(b) Federal Income Taxes
It is each fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable and non-taxable income to its shareholders;
accordingly, no Federal income tax is required.
(c) Deferred Organization Expenses
The following approximate costs were incurred by each fund in connection
with its organization: National - $58,000, California - $12,000 and New York-
$13,000. These costs have been deferred and are being amortized to expense on a
straight line basis over sixty months from commencement of each fund's
operations.
(d) Security Transactions and Other Income
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Original issue discounts or premiums
on debt securities purchased are accreted or amortized to interest income over
the lives of the respective securities.
(e) Futures Accounting Policies
Futures contracts are agreements between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, a fund is required to pledge to the broker an amount of cash, U.S.
Government securities or other liquid, high grade debt instruments equal to the
minimum "initial margin" requirements of the exchange.
20
<PAGE>
Pursuant to the contract, a fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
fund as unrealized appreciation or depreciation. When a contract is closed, the
fund records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed and reverses any unrealized appreciation or depreciation previously
recorded.
(f) Dividends and Distributions
Each fund declares its dividends from net investment income daily and pays
the dividend monthly. Distributions of net realized capital gains, if any, will
be paid at least annually. Each fund records dividends and distributions to its
shareholders on the ex-dividend date.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular fund are borne by the
fund. Other expenses are allocated to each fund based on its net assets in
relation to the total net assets of all the applicable funds or on another
reasonable basis.
2. Investment Advisory Fee, Accounting Services Fee, Distribution Fee and
Other Transactions with Affiliates.
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the annual rate of .50%. For the six months ended January 31, 1995,
the Adviser voluntarily waived $102,735, $49,764 and $43,797 in investment
advisory fees for National, California and New York, respectively.
(b) A portion of accounting services fees for National, California and New
York are payable monthly to the Adviser. Each fund reimburses the Adviser for a
portion of the salaries of officers and employees of Oppenheimer Capital based
upon the amount of time such persons spend in providing services to each fund in
accordance with the provisions of the Investment Advisory Agreement. For the six
months ended January 31, 1995, the Adviser received $22,725, $21,514 and $21,111
for National, California and New York, respectively.
(c) The funds have adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to which each fund is permitted to compensate the Distributor
in connection with the distribution of shares of beneficial interest. Under the
Plan, the Distributor has entered into agreements with dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers provide and for the expense they bear under
the Plan, each fund pays the Distributor compensation, accrued daily and payable
monthly at an annual rate of up to .25% of average daily net assets or such
lesser rate as the Board of Trustees may from time to time determine. The total
fee may be paid by the Distributor to broker-dealers or others for providing
personal service, maintenance of accounts and ongoing sales or shareholder
support functions in connection with the distribution of shares of beneficial
interest. While payments under the Plan may not exceed the stated percentage of
average daily net assets on an annual basis, the payments are not limited to the
amounts actually paid or expenses actually incurred by the Distributor. For the
period September 1, 1994 to January 31, 1995, a service fee of .10% was accrued
under the Plan.
(d) Oppenheimer & Co., Inc., an affiliate of Oppenheimer Capital, has
informed the funds that it received approximately $34,000, $16,000, and $25,000
in connection with the sale of shares of beneficial interest for National,
California and New York, respectively, for the six months ended January 31,
1995.
21
<PAGE>
January 31, 1995
Notes to Financial Statements (unaudited) (continued)
3. Purchases and Sales of Securities
For the six months ended January 31, 1995, purchases and sales of
investment securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
National California New York
----------- ---------- ----------
<S> <C> <C> <C>
Purchases $19,517,613 $2,420,459 $2,983,265
Sales 25,165,258 5,803,570 3,388,185
</TABLE>
4. Unrealized Appreciation (Depreciation) and Cost of Investments for Federal
Income Tax Purposes
At January 31, 1995, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investments for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Appreciation (Depreciation) Net Tax Cost
------------ -------------- ---------- -----------
<S> <C> <C> <C> <C>
National $1,382,841 ($1,848,877) ($466,036) $83,875,625
California 182,563 (808,485) (625,922) 26,467,546
New York 621,747 (1,102,270) (480,523) 30,204,010
</TABLE>
5. Authorized Shares of Beneficial Interest and Par Value Per Share
<TABLE>
<CAPTION>
National California New York
--------- ---------- ---------
<S> <C> <C> <C>
Authorized shares of beneficial interest unlimited unlimited unlimited
Par value per share $.01 $.01 $.01
</TABLE>
6. Financial Instruments and Associated Risks
During the six months ended January 31, 1995, the funds invested in futures
contracts in order to hedge their existing portfolio securities against
fluctuations in value caused by changes in interest rates. The use of futures
contracts involves the risk of imperfect correlation in movements in the price
of futures contracts, interest rates and the underlying hedged securities.
22
<PAGE>
Financial Highlights (For a share outstanding throughout each period)
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------------ --------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
---------- ---------- -------------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONAL TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.67 $0.29 ($0.30) ($0.01) ($0.29) ($0.01) ($0.30)
Year Ended
July 31,
1994 11.29 0.61 (0.38) 0.23 (0.61) (0.24) (0.85)
1993 11.08 0.68 0.23 0.91 (0.68) (0.02) (0.70)
1992 10.22 0.73 0.86 1.59 (0.73) -- (0.73)
August 14, 1990 (5)
to July 31, 1991 10.00(6) 0.65 0.22 0.87 (0.65) -- (0.65)
<CAPTION>
RATIOS
--------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
--------- ------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
NATIONAL TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.36 (0.06%) $83,439 0.69%(1,3,4) 5.61%(1,3,4) 23%
Year Ended
July 31,
1994 10.67 2.01% 93,530 0.43%(1) 5.51%(1) 45%
1993 11.29 8.51% 110,397 0.20%(1) 6.01%(1) 19%
1992 11.08 16.22% 49,303 0.02%(1) 6.80%(1) 10%
August 14, 1990 (5)
to July 31, 1991 10.22 8.95% 13,231 0.00%(1,3) 6.97%(1,3) 8%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been .92% and 5.38%,
annualized, respectively, for the six months ended January 31, 1995, .78%
and 5.16%, respectively, for the year ended July 31, 1994, .85% and 5.36%,
respectively, for the year ended July 31, 1993, 1.03% and 5.79%,
respectively, for the year ended July 31, 1992 and 1.75% and 5.22%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------------ --------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
---------- ---------- -------------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.60 $0.27 ($0.31) ($0.04) ($0.27) ($0.07) ($0.34)
Year Ended
July 31,
1994 11.15 0.57 (0.39) 0.18 (0.57) (0.16) (0.73)
1993 10.86 0.64 0.30 0.94 (0.64) (0.01) (0.65)
1992 10.23 0.69 0.63 1.32 (0.69) -- (0.69)
August 14, 1990 (5)
to July 31, 1991 10.00(6) 0.63 0.23 0.86 (0.63) -- (0.63)
<CAPTION>
RATIOS
--------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
--------- ------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.22 (0.28%) $25,616 0.82%(1,3,4) 5.34%(1,3,4) 9%
Year Ended
July 31,
1994 10.60 1.52% 29,024 0.61%(1) 5.18%(1) 32%
1993 11.15 9.06% 37,414 0.29%(1) 5.78%(1) 24%
1992 10.86 13.37% 18,643 0.09%(1) 6.45%(1) 12%
August 14, 1990 (5)
to July 31, 1991 10.23 8.89% 4,320 0.00%(1,3) 6.65%(1,3) 20%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.19% and 4.97%,
annualized, respectively, for the six months ended January 31, 1995, .95%
and 4.84%, respectively, for the year ended July 31, 1994, .94% and 5.13%,
respectively, for the year ended July 31, 1993, 1.46% and 5.08%,
respectively, for the year ended July 31, 1992 and 3.90% and 2.75%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------------ --------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
---------- ---------- -------------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NEW YORK TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.82 $0.28 ($0.39) ($0.11) ($0.28) ($0.18) ($0.46)
Year Ended
July 31,
1994 11.26 0.58 (0.43) 0.15 (0.58) (0.01) (0.59)
1993 10.98 0.65 0.31 0.96 (0.65) (0.03) (0.68)
1992 10.05 0.70 0.93 1.63 (0.70) -- (0.70)
August 14, 1990 (5)
to July 31, 1991 10.00(6) 0.64 0.05 0.69 (0.64) -- (0.64)
<CAPTION>
RATIOS
--------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
--------- ------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK TAX-EXEMPT FUND
Six Months Ended
January 31, 1995 (2) $10.25 (0.94%) $30,180 0.86%(1,3,4) 5.40%(1,3,4) 10%
Year Ended
July 31,
1994 10.82 1.36% 32,210 0.65%(1) 5.20%(1) 49%
1993 11.26 9.17% 37,342 0.37%(1) 5.84%(1) 7%
1992 10.98 16.93% 18,754 0.13%(1) 6.70%(1) 31%
August 14,1990 (5)
to July 31, 1991 10.05 7.16% 7,828 0.00%(1,3) 6.90%(1,3) 6%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.15% and 5.11%,
annualized, respectively, for the six months ended January 31, 1995, .94%
and 4.91%, respectively, for the year ended July 31, 1994, .99% and 5.22%,
respectively, for the year ended July 31, 1993, 1.19% and 5.64%,
respectively, for the year ended July 31, 1992 and 2.54% and 4.36%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
- ----------------------
(2) Unaudited.
(3) Annualized.
(4) Average net assets for the six months ended January 31, 1995 were
$87,354,027, $26,323,131 and $30,327,952 for National, California and New
York, respectively.
(5) Commencement of operations.
(6) Offering price.
* Assumes reinvestment of all dividends and distributions, but does not reflect
deductions for sales charges. Aggregate (not annualized) total return is shown
for any period shorter than one year.
23
<PAGE>
[LOGO OF QUEST]
QUEST FOR VALUE
TAX-EXEMPT FUNDS
TRUSTEES AND OFFICERS
Joseph M. La Motta Trustee, President
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
George Loft Trustee
Bernard H. Garil Vice President
Robert J. Bluestone Vice President
Matthew Greenwald Vice President
Sheldon Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Thomas E. Duggan Assistant Secretary
INVESTMENT ADVISER
Quest for Value Advisors
One World Financial Center
New York, NY 10281
DISTRIBUTOR
Quest for Value Distributors
Two World Financial Center
New York, NY 10080
TRANSFER AND SHAREHOLDER SERVICING AGENT
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
President's Letter.............................................................1
Investment Review..............................................................3
Schedules of Investments.......................................................5
Statements of Assets and Liabilities..........................................16
Statements of Operations......................................................17
Statements of Changes in Net Assets...........................................18
Notes to Financial Statements.................................................20
Financial Highlights..........................................................23
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus.
QUEST
QUEST FOR VALUE
TAX-EMEMPT FUNDS
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
SEMI-ANNUAL
REPORT
JANUARY 31, 1995
MANAGED BY
QUEST FOR VALUE ADVISORS
<PAGE>
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to the provisions of Article SEVENTH of
Registrant's Declaration of Trust, as amended, filed as Exhibit 24(b)(1)
to Registrant's Registration Statement and incorporated herein by
reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Declaration of Trust dated 8/21/95:
Filed with Registrant's Post-Effective Amendment No. 17,
8/24/95, and incorporated herein by reference.
(2) By-Laws amended as of 8/6/87: Previously filed with Post-
Effective Amendment No. 5 to Registrant's Registration
Statement, 1/27/88, refiled with Registrant's Post
Effective Amendment No. 14, 1/27/95 pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
(3) Not applicable.
(4) Agreement and Plan of Reorganization: See Exhibit A to
Part A of this Registration Statement.
(5) (i) Class A Specimen Share Certificate: Previously filed
with Post-Effective Amendment No. 12 to Registrant's
Registration Statement, 11/26/93, and incorporated herein
by reference.
(ii) Class B Specimen Share Certificate: Previously filed
with Post-Effective Amendment No. 12 to Registrant's
Registration Statement, 11/26/93, and incorporated herein
by reference.
(iii) Class C Specimen Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 17,
8/24/95, and incorporated herein by reference.
(6) Investment Advisory Agreement dated October 22, 1990:
Filed with Post-Effective Amendment No. 8 to Registrant's
Registration Statement, 12/3/90, refiled with Registrant's
Post Effective Amendment No. 14, 1/27/95 pursuant to Item
102 of Regulation S-T, and incorporated herein by
reference.
(7) (i) General Distributor's Agreement dated 12/10/92: Filed
with Post-Effective Amendment No. 12 to Registrant's
Registration Statement, 11/26/93, and incorporated herein
by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(iii)Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 to
the Registration Statement of Oppenheimer Main Street
Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management,
Inc. and Newbridge Securities dated 11/1/86: Filed with
Post-Effective Amendment No. 25 of Oppenheimer Growth Fund
(Reg. No. 2-45272), 10/30/86, refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg. No. 2-
45272), 8/22/94, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(8) Retirement Plan for Non-Interested Trustees or Directors
dated 6/7/90: Filed with Post-Effective Amendment No. 97
of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90, refiled
with Post-Effective Amendment No. 45 of Oppenheimer Growth
Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(9) Custodian Agreement with Citibank, N.A.: Filed with
Registrant's Post Effective Amendment No. 14, 1/27/95
pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(10) (i) Class A Service Plan and Agreement dated 6/10/93:
Previously filed with Post-Effective Amendment No. 13 to
Registrant's Registration Statement, 1/24/94, and
incorporated herein by reference.
(ii) Class B Distribution and Service Plan and Agreement
dated 2/10/94: Previously filed with Registrant's Post
Effective Amendment No. 14, 1/27/95, and incorporated
herein by reference.
(iii) Class C Distribution and Service Plan and Agreement
dated August 29, 1995: Previously filed with Post-
Effective Amendment No. 16 to Registrant's Registration
Statement, 6/28/95, and incorporated herein by reference.
(11) Opinion and Consent of Counsel dated 7/3/84: Previously
filed with Pre-Effective Amendment No. 1 to Registrant's
Registration Statement, 7/12/84, refiled with Registrant's
Post Effective Amendment No. 14, 1/27/95 pursuant to Item
102 of Regulation S-T, and incorporated herein by
reference.
(12) Tax Opinion Relating to the Reorganization: Draft Form of
Opinion filed herewith.
(13) Not applicable.
(14) (i) Consent of Peat Marwick LLP: To be filed by
amendment.
(ii)Consent of Price Waterhouse LLP: To be filed by
amendment.
(15) Not applicable.
(16) Not applicable.
(17)(i) Declaration of Registrant under Rule 24f-2: Filed
herewith.
(17)(ii) Financial Data Schedules.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
360ptc.n14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 22nd day of August, 1995.
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
By: /s/ Donald W. Spiro
----------------------------------------
Donald W. Spiro, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Leon Levy Chairman of the
- -------------- Board of Trustees August 22, 1995
Leon Levy
/s/ Donald W. Spiro Chief Executive
- -------------------- Officer and
Donald W. Spiro Trustee August 22, 1995,
/s/ George Bowen Chief Financial
- ----------------- and Accounting
George Bowen Officer August 22, 1995
/s/ Leo Cherne Trustee August 22, 1995
- ---------------
Leo Cherne
/s/ Robert G. Galli Trustee August 22, 1995
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee August 22, 1995
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan Trustee August 22, 1995
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee August 22, 1995
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan Trustee August 22, 1995
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee August 22, 1995
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins Trustee August 22, 1995
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere Trustee August 22, 1995
- --------------------
Pauline Trigere
Trustee August __, 1995
- -----------------------
Clayton K. Yeutter
<PAGE>
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
EXHIBIT INDEX
Exhibit No.
Exhibit Description
- ------- -----------
16(12) Tax Opinion in Draft Form
16(17)(i) Declaration of the Registrant under Rule 24f-2
16(17)(ii) Financial Data Schedules
[Letterhead of Price Waterhouse LLP]
The parties shall have received a favorable opinion from Price Waterhouse
LLP (based on such representations as such firm shall reasonably request),
addressed to Oppenheimer Fund and Quest Portfolio, which opinion may be
relied upon by the shareholders of Oppenheimer Fund and Quest Portfolio,
substantially to the effect that, for federal income tax purposes:
(1) The transfer of substantially all of Quest Portfolio's assets in
exchange for Oppenheimer Fund Shares and the assumption by
Oppenheimer Fund of certain identified liabilities of Quest Portfolio
followed by the distribution by Quest Portfolio of Oppenheimer Fund
Shares to the Quest Portfolio Shareholders in exchange for their
Quest Portfolio Shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code and Quest Portfolio and
Oppenheimer Fund will each be a "party to the reorganization" within
the meaning of Section 368(b) of the Code;
(2) Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Oppenheimer Fund upon the receipt of the assets of
Quest Portfolio solely in exchange for Oppenheimer Fund Shares and
the assumption by Oppenheimer Fund of the identified liabilities of
Quest Portfolio;
(3) Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by Quest Portfolio upon the transfer of the assets of
Quest Portfolio to Oppenheimer Fund in exchange for Oppenheimer Fund
Shares and the assumption by Oppenheimer Fund of the identified
liabilities of Quest Portfolio, or upon the distribution of
Oppenheimer Fund Shares to the Quest Portfolio Shareholders in
exchange for the Quest Portfolio shares;
(4) Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Quest Portfolio Shareholders upon the exchange of
the Quest Portfolio Shares for the Oppenheimer Fund Shares;
(5) Pursuant to Section 358 of the Code, the aggregate tax basis for
Oppenheimer Fund Shares received by each Quest Portfolio Shareholder
pursuant to the Reorganization will be the same as the aggregate tax
basis of the Quest Portfolio Shares held by each such Quest Portfolio
Shareholder immediately prior to the Reorganization;
(6) Pursuant to Section 1223 of the Code, the holding period of
Oppenheimer Fund Shares to be received by each Quest Portfolio
Shareholder will include the period during which the Quest Portfolio
Shares surrendered in exchange therefor were held (provided such
Quest Portfolio Shares were held as capital assets on the date of the
Reorganization);
(7) Pursuant to Section 362(b) of the Code, the tax basis of the assets
of Quest Portfolio acquired by Oppenheimer Fund will be the same as
the tax basis of such assets to Quest Portfolio immediately prior to
the Reorganization;
(8) Pursuant to Section 1223 of the Code, the holding period of the
assets of Quest Portfolio in the hands of Oppenheimer Fund will
include the period during which those assets were held by Quest
Portfolio; and
(9) Oppenheimer Fund will succeed to and take into account the items of
Quest Portfolio described in Section 381(c) of the Code, including
the earnings and profits, or deficit in earnings and profits, of
Quest Portfolio as of the date of the transaction. Oppenheimer Fund
will take those items into account subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code
and applicable regulations thereunder.
merge\231opin
Rule 24f-2 Notice for Oppenheimer New York Tax-Exempt Fund
Two World Trade Center, New York, New York 10048-0203
(Registration No. 2-91683, File No. 811-4054)
NOTICE IS HEREBY GIVEN that Oppenheimer New York Tax-Exempt Fund
having previously filed in its registration statement a declaration that
an indefinite number of its shares of beneficial interest were being
registered pursuant to Rule 24f-2 of the Investment Company Act of 1940,
now elects to continue such indefinite registration.
(i) This Notice is being filed for the fiscal year ended September
30, 1994.
(ii) No shares which had been registered other than pursuant to
this Rule remained unsold at the beginning of the above fiscal
year.
(iii) No shares were registered other than pursuant to this Rule
during the above fiscal year.
(iv) The number of shares sold during the above fiscal year was as
follows(1):
Class A 8,954,607
Class B 3,489,946
(v) Shares sold during the above fiscal year in reliance upon
registration pursuant to this Rule were as follows:
Class A 8,954,607
Class B 3,489,946
Pursuant to the requirements of the Investment Company Act of 1940,
the undersigned registrant has caused this Notice to be signed on its
behalf this 28th day of November, 1994.
Oppenheimer New York Tax-Exempt Fund
By:__________________________________
Andrew J. Donohue, Secretary
_________________
(1)The calculation of the aggregate sales price is made pursuant to Rule
24f-2 of the Investment Company Act of 1940, as follows:
Value of
Value of Shares Filing
Shares Sold Redeemed Net Fee
Class A $118,003,500 $(128,710,513) $(10,707,013) $ 0
Class B $ 44,671,139 $( 6,356,229) $ 38,314,910 $13,212
Class A shares to be re-registered total 1,247,296.
SEC/3601<PAGE>
<PAGE>
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 West 47th Street New York, N.Y. 10036
Telephone: (212) 626-0800 Telecopier (212) 626-0799
November 28, 1994
Oppenheimer New York Tax-Exempt Fund
Two World Trade Center
New York, New York 10048-0203
Ladies and Gentlemen:
In connection with the public offering of shares of beneficial
interest, no par value, of Oppenheimer New York Tax-Exempt Fund (the
"Fund"), we have examined such records and documents and have made such
further investigation and examination as we deemed necessary for the
purpose of this opinion.
It is our opinion that the shares the registration of which is
made definite by the accompanying Rule 24f-2 Notice of the Fund were
legally issued, fully paid and non-assessable by the Fund to the extent
set forth in its Prospectus forming part of its Registration Statement
under the Securities Act of 1933, as amended.
We hereby consent to the filing of this opinion with said
Notice.
Very truly yours,
/s/ Gordon Altman Butowsky Weitzen Shalov & Wein
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000748009
<NAME> OPPENHEIMER NEW YORK TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 780591028
<INVESTMENTS-AT-VALUE> 752264348
<RECEIVABLES> 14906509
<ASSETS-OTHER> 22259
<OTHER-ITEMS-ASSETS> 782054
<TOTAL-ASSETS> 767975170
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6798854
<TOTAL-LIABILITIES> 6798854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 786272600
<SHARES-COMMON-STOCK> 57643750
<SHARES-COMMON-PRIOR> 56086649
<ACCUMULATED-NII-CURRENT> 1685934
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1544462
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (28326680)
<NET-ASSETS> 687233355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 52336632
<OTHER-INCOME> 0
<EXPENSES-NET> 7389268
<NET-INVESTMENT-INCOME> 44947364
<REALIZED-GAINS-CURRENT> 1578448
<APPREC-INCREASE-CURRENT> (92939878)
<NET-CHANGE-FROM-OPS> (46414066)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 41273404
<DISTRIBUTIONS-OF-GAINS> 1480818
<DISTRIBUTIONS-OTHER> 6989184
<NUMBER-OF-SHARES-SOLD> 8954607
<NUMBER-OF-SHARES-REDEEMED> 10201903
<SHARES-REINVESTED> 2804397
<NET-CHANGE-IN-ASSETS> (36715769)
<ACCUMULATED-NII-PRIOR> 1237047
<ACCUMULATED-GAINS-PRIOR> 6102675
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4074417
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7389268
<AVERAGE-NET-ASSETS> 738747000
<PER-SHARE-NAV-BEGIN> 13.50
<PER-SHARE-NII> .74
<PER-SHARE-GAIN-APPREC> (1.46)
<PER-SHARE-DIVIDEND> .71
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> .12
<PER-SHARE-NAV-END> 11.92
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000748009
<NAME> OPPENHEIMER NEW YORK TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 6199583
<SHARES-COMMON-PRIOR> 3033381
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 73942961
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2926006
<DISTRIBUTIONS-OF-GAINS> 97630
<DISTRIBUTIONS-OTHER> 463100
<NUMBER-OF-SHARES-SOLD> 3489946
<NUMBER-OF-SHARES-REDEEMED> 507286
<SHARES-REINVESTED> 183542
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 61008000
<PER-SHARE-NAV-BEGIN> 13.50
<PER-SHARE-NII> .64
<PER-SHARE-GAIN-APPREC> (1.45)
<PER-SHARE-DIVIDEND> .60
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> .13
<PER-SHARE-NAV-END> 11.93
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 746701277
<INVESTMENTS-AT-VALUE> 742316443
<RECEIVABLES> 14141831
<ASSETS-OTHER> 37032
<OTHER-ITEMS-ASSETS> 101953
<TOTAL-ASSETS> 756597259
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5100569
<TOTAL-LIABILITIES> 5100569
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 761699818
<SHARES-COMMON-STOCK> 54841749
<SHARES-COMMON-PRIOR> 57643750
<ACCUMULATED-NII-CURRENT> 1195467
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5786418)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5612177)
<NET-ASSETS> 668466673
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24891143
<OTHER-INCOME> 0
<EXPENSES-NET> 3519871
<NET-INVESTMENT-INCOME> 21371272
<REALIZED-GAINS-CURRENT> (7330880)
<APPREC-INCREASE-CURRENT> 22714503
<NET-CHANGE-FROM-OPS> 36754895
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19849704
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2747484
<NUMBER-OF-SHARES-REDEEMED> 6761301
<SHARES-REINVESTED> 1211816
<NET-CHANGE-IN-ASSETS> (9679626)
<ACCUMULATED-NII-PRIOR> 1685934
<ACCUMULATED-GAINS-PRIOR> 1544462
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1872377
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3519871
<AVERAGE-NET-ASSETS> 648096000
<PER-SHARE-NAV-BEGIN> 11.92
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> .27
<PER-SHARE-DIVIDEND> (.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 6808905
<SHARES-COMMON-PRIOR> 6199583
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 83030017
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2012035
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1048103
<NUMBER-OF-SHARES-REDEEMED> 551325
<SHARES-REINVESTED> 112544
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 75172000
<PER-SHARE-NAV-BEGIN> 11.93
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> .27
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> 1.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
