WILLIAM PENN INTEREST INCOME FUND
New York Tax-Free Income Portfolio
Supplement Dated February 1, 1996 to the
Prospectus Dated February 1, 1995 and
Amended November 15, 1995
The NEW YORK TAX-FREE INCOME PORTFOLIO seeks to provide a high
level of current income exempt from both Federal income taxes and
personal income taxes imposed by the State of New York, without assuming
any undue risk to income or principal. In pursuing this objective, the
Portfolio will invest principally in investment grade New York municipal
obligations with varying terms of maturity.
Investment Objectives and Policies
The NEW YORK TAX-FREE INCOME PORTFOLIO's investment objective is to
provide a high level of current income exempt from Federal income tax
and New York personal income taxes, consistent with liquidity and
stability of principal. This Portfolio's investment policy will be to
invest principally in investment grade municipal obligations issued
by or on behalf of the Commonwealth of New York and its political
subdivisions, agencies authorities, and instrumentalities ("New York
Bonds"). At least 75% of the Portfolio's assets will be invested in New
York Bonds rated at the time of purchase within the four highest grades
assigned by Moody's or S&P, or if not rated, determined by the advisor
to be of comparable quality. This Portfolio will not invest in
securities rated below B by S&P or Moody's.
In accordance with the Portfolio's investment policy, generally 100%,
but at least 80% of the Portfolio's total assets will be invested in New
York Bonds, and no more than 20% will be invested in taxable securities.
Under certain market conditions, however, the Portfolio
may invest in non-tax-exempt securities for temporary defensive purposes
Such temporary investments may include investments in U.S. Government
securities or other high grade investments (two highest categories of
Moody's or S&P). Because the interest on New York Bonds is exempt from
federal income taxation and New York taxes, the yield is generally lower
than that of portfolios primarily invested in taxable securities.
This Portfolio may also utilize bond ( including Treasury Bills) futures
contracts, options on futures contracts and options. However, this
Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts
in combination with its outstanding obligations with respect to
options transactions would exceed 35% of its total assets.
This Portfolio may engage in futures and/or options transactions only
for hedging purposes when it is consistent with the investment
objectives. The Portfolio will maintain assets sufficient to meet its
obligations under such contracts in a segregated account with the
custodian bank.
Risk Factors
Because the New York Tax-Free Income Portfolio concentrates its invest-
ments in New York, there are risks that would not be present if it were
diversified nationally. In addition, legislative proposals may be
introduced that would restrict or eliminate the federal and state
income tax exemption for interest on types of securities to be purchased
by this Portfolio. Any such proposals, if enacted, would reduce the
number of securities that the Portfolio could purchase consistent with
its investment objective.
In recent years, New York State, New York City and other New York public
bodies have encountered financial difficulties, and New York City is
currently encountering financial difficulties which could have an
adverse effect with respect to the performance of the Portfolio.
Currently, Moody's, Standard & Poor's and Fitch rate New York City's
general obligation bonds Baa1, A-, and A-, respectively, and Moody's and
Standard & Poor's rate New York State's general obligation bonds A and
A-, respectively.
Fund Expenses
The following tables illustrate ALL expenses and fees a shareholder of
the New York Tax-Free Portfolio will incur and is intended to assist you
in understanding the various costs and expenses that an investor in the
Portfolio will bear directly or indirectly.
Class A Class C
Shareholder Transaction Shares Shares
Maximum sales charge imposed on purchases 4.75% None
Sales charge imposed on reinvested dividends None None
Deferred sales charge None 1.0% (1)
Exchange fee None None
(1) Only if shares are redeemed within 12 months of purchase. See
"Purchase and Redemption of Shares."
New York Tax-Free Portfolio was not publicly offered during the past
fiscal year. The Annual Fund Operating Expenses shown below are
estimates based on the amounts that would have been payable assuming
that the Portfolio was outstanding during the past fiscal year.
Class A Class C
Annual Fund Operating Expenses Shares Shares
Management Fee 0.65% 0.65%
Distribution Fee (12b-1) 0.20% 1.00%
Other Expenses 0.10% 0.10%
Total Fund Operating Expenses 0.95% 1.75%
EXAMPLE:
The following example illustrates the expenses that a shareholder would
pay on a $1,000 investment after one year and over a period of three,
five and ten years utilizing the expenses from the chart above and
assuming a 5% annual rate of return and redemption at the end of each
period.
Class A Class C
Shares Shares
1 year $57 $18
3 years 76 55
5 years 98 95
10 years 159 206
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
February 1, 1996
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to this Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City
and State of New York, on the 21st day of November 1995.
WILLIAM PENN INTEREST INCOME FUND
James E. Jordan, President
(Signature)
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this registration statement has been signed below by the
following persons in the capacities and on the date indicated.
James E. Jordan, President
(Signature)
Dennis J. Westley, Vice President and Treasurer
(Signature)
/s/ Gail M. Harrity * Trustee
/s/ Paul J. Lawler * Trustee
/s/ Emmett M. Murphy * Trustee
/s/ June A. Roedel * Trustee
/s/ Ferdinand Thun * Trustee
* James E. Jordan, attorney-in-fact pursuant to power of
(Signature) attorney included on signature page of Amendment
No. 14 filed Oct. 27, 1995.
