<PAGE>
As filed with the Securities and Exchange Commission on June 23, 1995
-------
Registration No. 33-15489
- ---------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
----
POST-EFFECTIVE AMENDMENT NO. 33 [X]
--
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 36
--
QUEST FOR VALUE FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
ONE WORLD FINANCIAL CENTER, NEW YORK, NY 10281
(Address of Principal Executive Offices)
(212) 374-1600
--------
(Registrant's Telephone Number)
Thomas E. Duggan, Esq.
One World Financial Center
New York, NY 10281
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] On June 28, 1995 pursuant to paragraph (b)
-------------
[ ] 60 days after filing pursuant to paragraph (a)
[ ] pursuant to paragraph (a) of Rule 485 or 486
1
<PAGE>
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940 and has filed its report pursuant to that Rule for the
fiscal year ended October 31, 1994 (with respect to those series with an October
31 fiscal year) on December 14, 1994. A Rule 24f-2 Notice for the fiscal year
ended July 31, 1994 (with respect to those series with a July 31 fiscal year)
was filed on September 12, 1994.
2
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A
Item
Part A Caption Prospectus
------ ------- ----------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives of the
Fund; Investment Restrictions
and Techniques; Additional
Information
5. Management of the Fund Investment Management
Agreement; Distribution Plan;
Portfolio Transactions and
Turnover; Additional
Information
6. Capital Stock and Other Securities Dividends and Distributions;
Tax Status; Additional
Information
7. Purchase of Securities How to Buy Shares; Additional
Information
8. Redemption or Repurchase How to Redeem Shares;
Exchanging Shares; Additional
Information
9. Legal Proceedings N/A
<CAPTION>
Part B Caption Statement of Additional Information
- ------ ------- -----------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History N/A
13. Investment Objectives and Policies Investment of the Trust's
Assets; Investment Restrictions
14. Management of the Fund Trustees and Officers
<PAGE>
15. Control Persons and Principal Principal Holders of
Holders of Securities Securities; Trustees and
Officers
16. Investment Advisory and Other Investment Management and Other
Services Services; Distribution Expense
Plan; Additional Information
17. Brokerage Allocation Investment Management and Other
Services
18. Capital Stock and Other Additional Information
Securities
19. Purchase, Redemption and Determination of Net Asset Value
Pricing of Securities
20. Tax Status Additional Information
21. Underwriters Additional Information
22. Calculations of Performance Portfolio Yield and Total Return
Data Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
SUPPLEMENT DATED
APRIL 28, 1995
TO THE
PROSPECTUS DATED
MARCH 1, 1995
FOR THE
QUEST FOR VALUE FUNDS
The following is added to the section "How to Buy Shares -- Buying Class B
Shares" on page 20:
Dealers who sell Class B shares are paid a commission by Quest Distributors
equal to 4.00% of the purchase price of the shares.
The following is added to the section "How to Buy Shares -- Buying Class C
Shares" on page 21:
Dealers who sell Class C shares are paid a commission by Quest Distributors
equal to .85% of the purchase price of the shares.
<PAGE>
QUEST FOR VALUE -SM-
FUNDS
Quest for Value Funds is a family of mutual funds (the "Funds") managed by
Quest for Value Advisors ("Quest Advisors"). The Global Income Fund is a
non-diversified fund. The other Funds covered by this Prospectus are diversified
funds. Total assets under the management of Quest Advisors and its parent,
Oppenheimer Capital, amounted to approximately $29 billion on December 31, 1994.
The Funds covered by this prospectus are:
Equity: QUEST FOR VALUE FUND, INC.
SMALL CAPITALIZATION FUND
GROWTH AND INCOME FUND
Fixed
Income: U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
Flexible: OPPORTUNITY FUND
Global:
Equity: QUEST FOR VALUE GLOBAL EQUITY FUND, INC.
Income: GLOBAL INCOME FUND
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.
Statements of Additional Information dated March 1, 1995 for each of the
Quest for Value Global Equity Fund, Inc., Global Income Fund, Quest
for Value Family of Funds, and Quest for Value Fund, Inc. (the "SAIs"),
have been filed with the Securities and Exchange Commission and are
incorporated by reference in this Prospectus. You can obtain a copy of the
SAIs without charge by contacting Quest for Value Distributors, at the address
or telephone number listed on the back cover. SHARES IN 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 AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
The Funds offer three separate classes of shares: Class A, B and C shares.
Shares of each Class represent an identical interest in the investment portfolio
of a Fund, and generally have the same rights, but are offered under different
sales charge and distribution fee arrangements. The offering of Class A, B and C
shares presents the investor with the opportunity to choose the sales charge and
distribution fee arrangement which is most beneficial, depending on the amount
of purchase, the length of time the investor expects to hold the shares, and
other circumstances.
Shares of each Class are offered at the net asset value next determined after
receipt of your purchase order plus an initial ("front-end") sales charge for
purchases of Class A shares, or a deferred sales charge for purchases of Class B
or Class C shares. (See "How to Buy Shares," p. 17) Class B and C shares bear a
higher ongoing distribution fee than Class A shares, and investors should
understand that over time the accumulated distribution charges on Class B and C
shares may exceed the amount of the initial sales charge and ongoing
distribution fee on Class A shares. (See "Distribution Plan," p. 35)
MARCH 1, 1995
- --------------------------------------------------------------------------------
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>
QUEST FOR VALUE SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND
CLASS OF SHARES: A B C A B C A B C
- ------------------------------ -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Initial Sales Load
Imposed on Purchase (as a %
of offering price)........... 5.50% none none 5.50% none none 4.75% none none
Maximum Deferred Sales
Load(1)...................... none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
Maximum Sales Load Imposed On
Reinvested Dividends......... none none none none none none none none none
Redemption Fee................ none none none none none none none none none
Exchange Fee.................. $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES
(AS % OF AVERAGE NET ASSETS)
Management Fee (2)............ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% .60% .60% .60%
12b-1 Fee (including service
fees of .25%) (4)............ .50% 1.00% 1.00% .50% 1.00% 1.00% .30% 1.00% 1.00%
Other Expenses................ .21% .24% .28% .38% .48% .59% .33% .33% .35%
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FUND OPERATING EXPENSES
AFTER WAIVER AND/OR EXPENSE
ASSUMPTIONS(3)............... 1.71% 2.24% 2.28% 1.88% 2.48% 2.59% 1.23% 1.93% 1.95%
-------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- --------
EXAMPLE 1: You would pay the following expense over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the end of the time period.
10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 71.43 22.71 23.11 73.04 25.11 26.21 59.44 19.60 19.80
3 Years....................... 105.92 70.03 71.23 110.84 77.25 80.54 84.68 60.62 61.22
5 Years....................... 142.72 119.99 122.01 151.03 132.05 137.52 111.86 104.20 105.21
10 Years...................... 245.84 244.16 261.54 263.00 266.87 292.45 189.29 207.22 227.48
EXAMPLE 2: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of the time period. 10-year
figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 71.43 72.71 33.11 73.04 75.11 36.21 59.44 69.60 29.80
3 Years....................... 105.92 100.03 71.23 110.84 107.25 80.54 84.68 90.62 61.22
5 Years....................... 142.72 129.99 122.01 151.03 142.05 137.52 111.86 114.20 105.21
10 Years...................... 245.84 244.16 261.54 263.00 266.87 292.45 189.29 207.22 227.48
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
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 "How to Buy
Shares," "Investment Management Agreement" and "Distribution Plan".
Investors should be aware that over time, Class B and C shareholders may pay
more than the equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers Rules of Fair Practice.
(1) Certain purchases of Class A shares of $1 million or more are not subject
to front-end sales charges, but a contingent deferred sales charge ("CDSC")
is imposed on the proceeds of such shares equal to 1% if the shares are
redeemed within the first 12 months after the end of the calendar month of
their purchase, and .5 of 1% if redeemed within the next 12 months. Purchases
made on or after July 1, 1994 of the Quest for Value Fund, Inc., the Small
Capitalization Fund, the Growth and Income Fund, the Opportunity Fund and the
Global Equity Fund are subject to a CDSC of 1% if the shares are redeemed
within the first 12 months after the end of the calendar month of their
purchase. See "How to Buy Shares."
(2) Includes an administration fee of .25% of average net assets.
2
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT QUALITY INCOME OPPORTUNITY GLOBAL EQUITY
CLASS OF SHARES: A B C A B C A B C
- ------------------------------ -------- -------- -------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Initial Sales Load
Imposed on Purchase (as a %
of offering price)........... 4.75% none none 5.50% none none 5.50% none none
Maximum Deferred Sales
Load(1)...................... none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
Maximum Sales Load Imposed On
Reinvested Dividends......... none none none none none none none none none
Redemption Fee................ none none none none none none none none none
Exchange Fee.................. $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES
(AS % OF AVERAGE NET ASSETS)
Management Fee (2)............ .60% .60% .60% 1.00% 1.00% 1.00% .75% .75% .75%
12b-1 Fee (including service
fees of .25%) (4)............ .40% 1.00% 1.00% .50% 1.00% 1.00% .50% 1.00% 1.00%
Other Expenses................ .59% .63% .61% .28% .34% .35% .68%(2) .66%(2) .66%(2)
-------- -------- -------- -------- -------- -------- ----------- ----------- -----------
TOTAL FUND OPERATING EXPENSES
AFTER WAIVER AND/OR EXPENSE
ASSUMPTIONS(3)............... 1.59% 2.23% 2.21% 1.78% 2.34% 2.35% 1.93% 2.41% 2.41%
-------- -------- -------- -------- -------- -------- ----------- ----------- -----------
-------- -------- -------- -------- -------- -------- ----------- ----------- -----------
EXAMPLE 1: You would pay the following expense over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the end of the time period.
10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 62.90 22.61 22.41 72.09 23.71 23.81 73.52 24.41 24.41
3 Years....................... 95.30 69.73 69.12 107.94 73.04 73.34 112.28 75.14 75.14
5 Years....................... 129.94 119.49 118.48 146.14 125.03 125.53 153.46 128.54 128.54
10 Years...................... 227.44 240.35 254.43 252.93 253.66 268.61 267.98 262.76 274.62
EXAMPLE 2: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of the time period. 10-year
figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 62.90 72.61 32.41 72.09 73.71 33.81 73.52 74.41 34.41
3 Years....................... 95.30 99.73 69.12 107.94 103.04 73.34 112.28 105.14 75.14
5 Years....................... 129.94 129.49 118.48 146.14 135.03 125.53 153.46 138.54 128.54
10 Years...................... 227.44 240.35 254.43 252.93 253.66 268.61 267.98 262.76 274.62
<CAPTION>
GROWTH AND INCOME GLOBAL INCOME
CLASS OF SHARES: A B C A B C
- ------------------------------ -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Initial Sales Load
Imposed on Purchase (as a %
of offering price)........... 4.75% none none 3.00% none none
Maximum Deferred Sales
Load(1)...................... none 5.00% 1.00% none 5.00% 1.00%
Maximum Sales Load Imposed On
Reinvested Dividends......... none none none none none none
Redemption Fee................ none none none none none none
Exchange Fee.................. $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES
(AS % OF AVERAGE NET ASSETS)
Management Fee (2)............ .57% .57% .57% .11% .11% .11%
12b-1 Fee (including service
fees of .25%) (4)............ .40% 1.00% 1.00% .25%(4) 1.00% 1.00%
Other Expenses................ .93% .93% .93% 1.34%(2) 1.34%(2) 1.34%(2)
-------- -------- -------- ----------- ----------- -----------
TOTAL FUND OPERATING EXPENSES
AFTER WAIVER AND/OR EXPENSE
ASSUMPTIONS(3)............... 1.90% 2.50% 2.50% 1.70% 2.45% 2.45%
-------- -------- -------- ----------- ----------- -----------
-------- -------- -------- ----------- ----------- -----------
EXAMPLE 1: You would pay the following expense over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the end of the time period.
10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 65.88 25.31 25.31 46.76 24.81 24.81
3 Years....................... 104.37 77.85 77.85 81.97 76.35 76.35
5 Years....................... 145.28 133.05 133.05 119.54 130.55 130.55
10 Years...................... 259.17 268.89 283.59 224.85 260.12 278.62
EXAMPLE 2: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of the time period. 10-year
figures for Class B shares assume conversion to Class A shares after eight years.
1 Year........................ 65.88 75.31 35.31 46.76 74.81 34.81
3 Years....................... 104.37 107.85 77.85 81.97 106.35 76.35
5 Years....................... 145.28 143.05 133.05 119.54 140.55 130.55
10 Years...................... 259.17 268.89 283.59 224.85 260.12 278.62
</TABLE>
(3) The expenses for certain funds have been restated to reflect voluntary
expense limitations currently in effect. Currently, expenses of the Growth
and Income and Global Income Funds are voluntarily limited by Quest Advisors
so that annualized operating Fund Expenses (as defined on p. 33) exclusive of
Class Expenses (as defined on p. 33) do not exceed 1.50% and 1.45%,
respectively. These Fund Expense limitations may be discontinued at any time.
Without such limitations, annual operating expenses as a percentage of average
daily net assets would have been as follows: Growth and Income Fund: Class A:
2.32%, Class B: 2.93% and Class C: 3.10%; and Global Income Fund: Class A:
2.09%, Class B: 2.88% and Class C: 2.84%. Certain expenses of the Growth and
Income Fund were waived in order to comply with a state's expense limitations.
The expenses stated for the U.S. Government Income, Investment Quality Income
and Global Equity Funds reflect what the expenses of those Funds would have been
for their respective fiscal years if Quest Advisors had not waived a portion of
its fee.
(4) See "Distribution Plan." Although the Global Income Fund's Distribution
Plan and Agreement ("Plan") for Class A shares authorizes the Fund to pay a
maximum service fee of .25% of average daily net assets and a distribution
fee of .05% of average daily net assets, the Board of Directors of the Fund has
set a maximum .25% service fee under the Plan.
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial information given for the Small Capitalization, U.S. Government
Income, Investment Quality Income, Opportunity, Growth and Income, Global Equity
and Global Income Funds has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified reports thereon appear in the Statements of
Additional Information ("SAI(s)"). The financial information given for Quest for
Value Fund has been audited by KPMG Peat Marwick LLP, independent auditors,
whose unqualified report thereon appears in the SAI. All the following
information should be read in conjunction with the financial statements and
related notes thereto appearing in the SAIs. Further information regarding the
performance of each Fund is available in each Fund's Annual Report. Annual
Reports may be obtained without charge by calling the Fund at (800) 232-FUND.
<TABLE>
<CAPTION>
NET
REALIZED
NET AND DISTRIBUTION
INVEST- UNREALIZED DIVIDENDS FROM NET
NAV: MENT GAIN TOTAL FROM FROM NET REALIZED TAX
START OF INCOME (LOSS) ON INVESTMENT INVESTMENT GAIN ON RETURN OF
PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS CAPITAL
--------- ------- ---------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE - CLASS A
Year ended 10/31/94................ $12.51 $ .09 $ .50 $ .59 $(.04) $ (.47) --
...10/31/93........................ 11.71 .05 1.34 1.39 (.05) (.54) --
...10/31/92........................ 10.61 .04 1.77 1.81 (.07) (.64) --
...10/31/91........................ 7.84 .09 2.84 2.93 (.16) -- --
...10/31/90 (9).................... 9.85 .18 (1.38) (1.20) (.26) (.55) --
...10/31/89 (9).................... 8.99 .24 1.09 1.33 (.10) (.37) --
...10/31/88 (9).................... 7.94 .09 1.38 1.47 (.05) (.37) --
5/1/87-10/31/87 (9,10)............. 9.44 .03 (1.14) (1.11) (.09) (.30) --
Year ended 4/30/87 (9)............. 9.47 .09 .81 .90 (.07) (.86) --
...4/30/86 (9)..................... 7.40 .06 2.33 2.39 (.09) (.23) --
...4/30/85 (9)..................... 7.69 .10 .99 1.09 (.11) (1.27) --
...4/30/84 (9)..................... 8.90 .10 .48 .58 (.17) (1.62) --
QUEST FOR VALUE - CLASS B
Year ended 10/31/94................ 12.51 .02 .50 .52 (.03) (.47) --
9/2/93(4) - 10/31/93............... 12.66(3) (.01) (.14) (.15) -- -- --
QUEST FOR VALUE - CLASS C
Year ended 10/31/94................ 12.50 .01 .51 .52 (.03) (.47) --
9/2/93(4) - 10/31/93............... 12.66(3) (.01) (.15) (.16) -- -- --
SMALL CAPITALIZATION - CLASS A
Year ended 10/31/94................ $17.68 $ (.03) $ .01 $ (.02) -- $(1.33) --
...10/31/93........................ 14.60 (.04) 4.26 4.22 -- (1.14) --
...10/31/92........................ 13.52 .00 1.50 1.50 -- (.42) --
...10/31/91........................ 8.80 (.05) 4.85 4.80 (.08) -- --
...10/31/90........................ 10.91 .07 (2.04) (1.97) (.08) (.06) --
...1/1/89(7)-10/31/89.............. 10.00(3) .08 .83 .91 -- -- --
SMALL CAPITALIZATION - CLASS B
Year ended 10/31/94................ 17.66 (.11) .02 (.09) -- (1.33) --
9/2/93(4)-10/31/93................. 17.19(3) (.02) .49 .47 -- -- --
SMALL CAPITALIZATION - CLASS C
Year ended 10/31/94................ 17.67 (.13) .02 (.11) -- (1.33) --
...9/2/93(4) - 10/31/93............ 17.19(3) (.02) .50 .48 -- -- --
OPPORTUNITY - CLASS A
Year ended 10/31/94................ $18.71 $ .18 $ 1.35 $ 1.53 $(.33) $ (.22) --
...10/31/93........................ 16.73 .35 2.02 2.37 (.07) (.32) --
...10/31/92........................ 14.29 .09 2.93 3.02 (.03) (.55) --
...10/31/91........................ 9.74 .03 4.78 4.81 (.23) (.03) --
...10/31/90........................ 11.59 .25 (1.64) (1.39) (.22) (.24) --
1/1/89(7)-10/31/89................. 10.00(3) .17 1.42 1.59 -- -- --
OPPORTUNITY - CLASS B
Year ended 10/31/94................ 18.70 .08 1.34 1.42 (.31) (.22) --
...9/2/93(4)-10/31/93.............. 18.73(3) .02 (.05) (.03) -- -- --
OPPORTUNITY - CLASS C
Year ended 10/31/94................ 18.70 .08 1.33 1.41 (.31) (.22) --
...9/2/93(4)-10/31/93.............. 18.73(3) .02 (.05) (.03) -- -- --
U.S. GOVERNMENT INCOME - CLASS A
Year ended 10/31/94................ $12.08 $ .59 $(1.08) $ (.49) $(.59) $ (.21) --
...10/31/93........................ 11.92 .65 .35 1.00 (.68) (.16) --
...10/31/92........................ 11.80 .74 .18 .92 (.74) (.06) --
...10/31/91........................ 11.35 .85 .61 1.46 (.86) (.15) --
...10/31/90........................ 11.50 .93 (.06) .87 (.93) (.09) --
...10/31/89........................ 11.50 .94 .08 1.02 (.93) (.09) --
...5/6/88(7)-10/31/88.............. 11.46(3) .44 .10 .54 (.44) (.06) --
U.S. GOVERNMENT INCOME - CLASS B
Year ended 10/31/94................ 12.08 .51 (1.08) (.57) (.51) (.21) --
9/2/93(4)-10/31/93................. 12.13(3) .08 (.04) .04 (.08) (.01) --
U.S. GOVERNMENT INCOME - CLASS C
Year ended 10/31/94................ 12.08 .51 (1.08) (.57) (.51) (.21) --
...9/2/93(4)-10/31/93.............. 12.13(3) .08 (.04) .04 (.08) (.01) --
<CAPTION>
NET
ASSETS RATIO OF NET RATIO OF NET
TOTAL NAV: TOTAL AT END OPERATING INVESTMENT PORT-
DIVIDENDS END RETURN OF EXPENSES TO INCOME (LOSS) FOLIO
AND OF FOR PERIOD AVERAGE NET TO AVERAGE TURN-
DISTRIBUTIONS PERIOD PERIOD(1)* (000) ASSETS NET ASSETS OVER
---------- ------- --------- -------- ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE - CLASS A
Year ended 10/31/94................ $ (.51) $ 12.59 5.01% $238,085 1.71%(2) .72% 49 %
...10/31/93........................ (.59) 12.51 12.27% 245,320 1.75% .40% 27 %
...10/31/92........................ (.71) 11.71 18.45% 142,939 1.75% .53% 41 %
...10/31/91........................ (.16) 10.61 37.94% 79,914 1.83% 1.06% 48 %
...10/31/90 (9).................... (.81) 7.84 (13.43%) 49,740 1.82% 1.71% 51 %
...10/31/89 (9).................... (.47) 9.85 15.68% 77,205 1.81% 2.31% 30 %
...10/31/88 (9).................... (.42) 8.99 19.54% 83,228 2.21% .94% 15 %
5/1/87-10/31/87 (9,10)............. (.39) 7.94 (12.19%) 91,255 2.24%(2) .76%(2) 21 %
Year ended 4/30/87 (9)............. (.93) 9.44 10.25% 104,538 2.17% 1.23% 34 %
...4/30/86 (9)..................... (.32) 9.47 33.66% 64,331 2.18% 1.18% 68 %
...4/30/85 (9)..................... (1.38) 7.40 17.86% 28,055 2.34% 1.90% 42 %
...4/30/84 (9)..................... (1.79) 7.69 7.45% 13,388 2.29% 1.68% 74 %
QUEST FOR VALUE - CLASS B
Year ended 10/31/94................ (.50) 12.53 4.43% 14,373 2.24% .14% 49 %
9/2/93(4) - 10/31/93............... -- 12.51 (1.19%) 2,015 2.27%(1) (1.19%)(1) 27 %
QUEST FOR VALUE - CLASS C
Year ended 10/31/94................ (.50) 12.52 4.45% 3,581 2.28% .09% 49 %
9/2/93(4) - 10/31/93............... -- 12.50 (1.26%) 221 2.27%(1) (.90%)(1) 27 %
SMALL CAPITALIZATION - CLASS A
Year ended 10/31/94................ $(1.33) $ 16.33 .04% $120,102 1.88% (.14%) 67 %
...10/31/93........................ (1.14) 17.68 30.21% 104,898 1.89% (.36%) 74 %
...10/31/92........................ (.42) 14.60 11.60% 39,693 2.11% (.04%) 95 %
...10/31/91........................ (.08) 13.52 55.01% 20,686 2.25%(5) (.41%)(5) 103 %
...10/31/90........................ (.14) 8.80 (18.33%) 1,880 2.00%(5) .71%(5) 18 %
...1/1/89(7)-10/31/89.............. -- 10.91 9.10% 2,085 1.74%(1,5) 1.34%(1,5) 32 %
SMALL CAPITALIZATION - CLASS B
Year ended 10/31/94................ (1.33) 16.24 (.39%) 16,144 2.48% (.70%) 67 %
9/2/93(4)-10/31/93................. -- 17.66 2.73% 1,754 2.57%(1) (1.15%)(1) 74 %
SMALL CAPITALIZATION - CLASS C
Year ended 10/31/94................ (1.33) 16.23 (.51%) 3,344 2.59% (.81%) 67 %
...9/2/93(4) - 10/31/93............ -- 17.67 2.79% 235 2.57%(1) (1.20%)(1) 74 %
OPPORTUNITY - CLASS A
Year ended 10/31/94................ $ (.55) $ 19.69 8.41% $163,340 1.78% .96% 42 %
...10/31/93........................ (.39) 18.71 14.34% 127,225 1.83% 2.69% 24 %
...10/31/92........................ (.58) 16.73 21.93% 40,563 2.27% .72% 32 %
...10/31/91........................ (.26) 14.29 50.44% 8,446 2.35%(5) .30%(5) 88 %
...10/31/90........................ (.46) 9.74 (12.62%) 4,570 2.00%(5) 2.30%(5) 206 %
1/1/89(7)-10/31/89................. -- 11.59 15.90% 3,868 1.84%(1,5) 3.75%(5) 103 %
OPPORTUNITY - CLASS B
Year ended 10/31/94................ (.53) 19.59 7.84% 43,317 2.34% .43% 42 %
...9/2/93(4)-10/31/93.............. -- 18.70 (.16%) 2,115 2.52%(1) 1.32%(1) 24 %
OPPORTUNITY - CLASS C
Year ended 10/31/94................ (.53) 19.58 7.78% 7,289 2.35% .43% 42 %
...9/2/93(4)-10/31/93.............. -- 18.70 (.16%) 313 2.52%(1) 1.13%(1) 24 %
U.S. GOVERNMENT INCOME - CLASS A
Year ended 10/31/94................ $ (.80) $ 10.79 (4.15%) $123,257 1.20% 5.19%(6) 126 %
...10/31/93........................ (.84) 12.08 8.55% 189,091 1.15%(6) 5.33%(6) 315 %
...10/31/92........................ (.80) 11.92 7.98% 151,197 1.15%(6) 6.26%(6) 207 %
...10/31/91........................ (1.01) 11.80 13.40% 82,400 1.15%(6) 7.24%(6) 309 %
...10/31/90........................ (1.02) 11.35 7.98% 52,742 1.15%(6) 8.21%(6) 101 %
...10/31/89........................ (1.02) 11.50 9.42% 71,139 1.15%(6) 8.37%(6) 255 %
...5/6/88(7)-10/31/88.............. (.50) 11.50 4.78% 82,560 1.15%(6) 7.78%(1,6) 207 %
U.S. GOVERNMENT INCOME - CLASS B
Year ended 10/31/94................ (.72) 10.79 (4.84%) 6,813 1.92%(6) 4.53%(6) 126 %
9/2/93(4)-10/31/93................. (.09) 12.08 .29% 1,286 1.85%(6) 3.07%(1,6) 315 %
U.S. GOVERNMENT INCOME - CLASS C
Year ended 10/31/94................ (.72) 10.79 (4.84%) 1,224 1.94%(6) 4.57%(6) 126 %
...9/2/93(4)-10/31/93.............. (.09) 12.08 .34% 141 1.85%(1,6) 3.89%(1,6) 315 %
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NET
REALIZED
NET AND DISTRIBUTION
INVEST- UNREALIZED DIVIDENDS FROM NET
NAV: MENT GAIN TOTAL FROM FROM NET REALIZED TAX
START OF INCOME (LOSS) ON INVESTMENT INVESTMENT GAIN ON RETURN OF
PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME INVESTMENTS CAPITAL
--------- ------- ---------- ----------- ----------- ------------ ---------
INVESTMENT QUALITY INCOME - CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended 10/31/94................ $11.49 $ .68 $(1.75) $(1.07) $(.68) $ (.07) --
...10/31/93........................ 10.36 .68 1.19 1.87 (.68) (.06) --
...10/31/92........................ 10.06 .80 .30 1.10 (.80) -- --
12/18/90(7) - 10/31/91............. 10.00(3) .71 .06 .77 (.71) -- --
INVESTMENT QUALITY INCOME - CLASS B
Year ended 10/31/94................ 11.49 .61 (1.75) (1.14) (.61) (.07) --
9/2/93(4)-10/31/93................. 11.52(3) .08 (.03) .05 (.08) -- --
INVESTMENT QUALITY INCOME - CLASS C
Year ended 10/31/94................ 11.49 .61 (1.75) (1.14) (.61) (.07) --
9/2/93(4)-10/31/93................. 11.52(3) .09 (.03) .06 (.09) -- --
GLOBAL EQUITY - CLASS A
Year ended 11/30/94................ $13.54 $ .01 $ 1.10(8) $ 1.11 -- $ (.49) --
...11/30/93........................ 12.30 -- 2.26(8) 2.26 (.12) (.90) --
...11/30/92........................ 11.25 .12 .93(8) 1.05 -- -- --
...11/30/91........................ 10.57 (.04) .85(8) .81 (.05) (.08)(8) --
7/2/90(7)-11/30/90................. 12.05(3) .05 (1.53)(8) (1.48) -- -- --
GLOBAL EQUITY - CLASS B
Year ended 11/30/94................ 13.52 (.06) 1.10(8) 1.04 -- (.49) --
9/2/93(4)-11/30/93................. 13.75(3) (.02) (.21)(8) (.23) -- -- --
GLOBAL EQUITY - CLASS C
Year ended 11/30/94................ 13.52 (.08) 1.11(8) 1.03 -- (.49) --
9/2/93(4)-11/30/93................. 13.75(3) (.02) (.21)(8) (.23) -- -- --
GLOBAL INCOME - CLASS A
Year ended 11/30/94................ $ 9.36 $ 57 $ (.87)(8) $ (.30) $(.08) -- $(.49)
...11/30/93........................ 9.14 .63 .27(8) .90 (.17) -- (.51)
...12/2/91(7) - 11/30/92 10.00(3) .77 (1.00)(8) (.23) (.63) -- --
GLOBAL INCOME - CLASS B
Year ended 11/30/94................ 9.36 .50 (.87)(8) (.37) (.07) -- (.43)
9/2/92(4) - 11/30/93............... 9.42(3) .12 (.06)(8) .06 (.03) -- (.09)
GLOBAL INCOME - CLASS C
Year ended 11/30/94................ 9.36 .48 (.87)(8) (.39) (.07) -- (.41)
9/2/93(4) - 11/30/93............... 9.42(3) .13 (.06)(8) .07 (.03) -- (.10)
GROWTH AND INCOME - CLASS A
Year ended 10/31/94................ $11.24 $ .32 $ .55 $ .87 $(.32) $(1.70) --
...10/31/93........................ 10.80 .30 .73 1.03 (.26) (.33) --
11/4/91(7) - 10/31/92.............. 10.00(3) .28 .80 1.08 (.28) -- --
GROWTH AND INCOME - CLASS B
Year ended 10/31/94................ 11.23 .25 .56 .81 (.27) (1.70) --
9/2/93(4) - 10/31/93............... 11.21(3) .04 .05 .09 (.07) -- --
GROWTH AND INCOME - CLASS C
Year ended 10/31/94................ 11.23 .24 .56 .80 (.26) (1.70) --
9/2/93(4) - 10/31/93............... 11.21(3) .04 .05 .09 (.07) -- --
<CAPTION>
NET
ASSETS RATIO OF NET RATIO OF NET
TOTAL NAV: TOTAL AT END OPERATING INVESTMENT PORT-
DIVIDENDS END RETURN OF EXPENSES TO INCOME (LOSS) FOLIO
AND OF FOR PERIOD AVERAGE NET TO AVERAGE TURN-
DISTRIBUTIONS PERIOD PERIOD(1)* (000) ASSETS NET ASSETS OVER
---------- ------- --------- -------- ------------- ------------- ------
INVESTMENT QUALITY INCOME - CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended 10/31/94................ $ (.75) $ 9.67 (9.61%) $ 46,922 1.29%(5) 6.47%(5) 33 %
...10/31/93........................ (.74) 11.49 18.64% 61,288 1.20%(5) 6.07%(5) 12 %
...10/31/92........................ (.80) 10.36 11.21% 29,701 .95%(5) 7.62%(5) 18 %
12/18/90(7) - 10/31/91............. (.71) 10.06 8.11% 17,235 .82%(1,5) 8.25%(1,5) 19 %
INVESTMENT QUALITY INCOME - CLASS B
Year ended 10/31/94................ (.68) 9.67 (10.22%) 6,605 1.92%(5) 5.85%(5) 33 %
9/2/93(4)-10/31/93................. (.08) 11.49 .45% 1,468 1.84%(1,5) 3.68%(1,5) 12 %
INVESTMENT QUALITY INCOME - CLASS C
Year ended 10/31/94................ (.68) 9.67 (10.23%) 2,583 1.90%(5) 6.01%(5) 33 %
9/2/93(4)-10/31/93................. (.09) 11.49 .55% 101 1.84%(1,5) 4.83%(1,5) 12 %
GLOBAL EQUITY - CLASS A
Year ended 11/30/94................ $ (.49) $ 14.16 8.37% $148,044 1.92%(6) .05%(6) 70 %
...11/30/93........................ (1.02) 13.54 19.72% 135,616 1.76%(6) .04%(6) 46 %
...11/30/92........................ -- 12.30 9.33% 111,207 1.76%(6) .72%(6) 62 %
...11/30/91........................ (.13) 11.25 7.72% 46,937 2.09% (.27%) 41 %
7/2/90(7)-11/30/90................. -- 10.57 (12.28%) 58,087 2.11% .92% 2 %
GLOBAL EQUITY - CLASS B
Year ended 11/30/94................ $ (.49) 14.07 7.84% 10,268 2.50%(6) (.44%)(6) 70 %
9/2/93(4)-11/30/93................. -- 13.52 (1.67%) 1,676 2.26%(1,6) (.76%)(1,6) 46 %
GLOBAL EQUITY - CLASS C
Year ended 11/30/94................ $ (.49) 14.06 7.77% 2,415 2.66%(6) (.59%)(6) 70 %
9/2/93(4)-11/30/93................. -- 13.52 (1.67%) 244 2.26%(1,6) (.69%)(1,6) 46 %
GLOBAL INCOME - CLASS A
Year ended 11/30/94................ $ (.57) $ 8.49 (3.24%) $ 16,781 1.65% 6.45% 144 %
...11/30/93........................ (.68) 9.36 10.20% 22,465 1.70%(6) 6.73%(6) 114 %
...12/2/91(7) - 11/30/92 (.63) 9.14 (2.60%) 19,469 1.84%(2,6) 7.93%(1,6) 360 %
GLOBAL INCOME - CLASS B
Year ended 11/30/94................ (.50) 8.49 (3.99%) 1,176 2.41% 5.71% 144 %
9/2/92(4) - 11/30/93............... (.12) 9.36 .65% 699 2.45%(1,6) 4.38%(1,6) 114 %
GLOBAL INCOME - CLASS C
Year ended 11/30/94................ (.48) 8.49 (4.20%) 220 2.70% 5.48% 144 %
9/2/93(4) - 11/30/93............... (.13) 9.36 .71% 151 2.45%(1,6) 5.16%(1,6) 114 %
GROWTH AND INCOME - CLASS A
Year ended 10/31/94................ $(2.02) $ 10.09 8.64% $ 30,576 1.86%(6) 3.16%(6) 113 %
...10/31/93........................ (.59) 11.24 9.93% 28,466 1.90%(6) 2.66%(6) 192 %
11/4/91(7) - 10/31/92.............. (.28) 10.80 10.84% 8,057 2.23%(1,6) 2.73%(1,6) 77 %
GROWTH AND INCOME - CLASS B
Year ended 10/31/94................ (1.97) 10.07 7.96% 2,928 2.47(6) 2.53%(6) 113 %
9/2/93(4) - 10/31/93............... (.07) 11.23 .81% 319 2.49%(1,6) 1.83%(1,6) 192 %
GROWTH AND INCOME - CLASS C
Year ended 10/31/94................ (1.96) 10.07 7.91% 455 2.62%(6) 2.39%(6) 113 %
9/2/93(4) - 10/31/93............... (.07) 11.23 .81% 102 2.49%(1,6) 2.18%(1,6) 192 %
<FN>
- ----------------------------------------
(1)Total return shown 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.
(2)Annualized
(3)Offering Price
(4)Initial offering of Class B and C shares
(5)During the periods the Advisor voluntarily waived all or a portion of its
fees and assumed some operating expenses of the Funds. Without such waivers
and assumptions, the ratios of net operating expenses to average net assets
and the ratios of net investment income to average net assets would have
been, respectively: Investment Quality Income Fund: Class A shares - 1.59%
and 6.17% for the year ended October 31, 1994, 1.50% and 5.77% for the year
ended 10/31/93, 1.72% and 6.85% for the year ended 10/31/92, and 2.11% and
6.96% (annualized) for the period 12/18/90 (commencement of operations) to
10/31/91; Class B shares - 2.23% and 5.54% for the year ended October 31,
1994. 2.07% and 3.45% (annualized) for the period 9/2/93 (initial offering)
to October 31, 1993; and Class C shares - 2.21% and 5.70% for the year ended
October 31, 1994 and 2.06% and 4.61% (annualized) for the period 9/2/93
(initial offering) to 10/31/93; Small Capitalization Fund: Class A shares -
3.27% and (1.43%) for the year ended 10/31/91, 5.82% and (3.11%) for the
year ended 10/31/90, and 6.27% and (3.19%) (annualized) for the period
1/1/89 (commencement of operations) to 10/31/89; Opportunity Fund: Class A
shares - 3.33% and (.68%) for the year ended 10/31/91, 3.69% and .61% for
the year ended 10/31/90, and 5.32% and .27% (annualized) for the period
1/1/89 (commencement of operations) to 10/31/89.
(6)During the periods the Advisor voluntarily waived a portion of its fees.
Without such waiver, the ratios of operating expenses to average net assets
and the ratios of net investment income to average net assets would have
been, respectively: U.S. Government Income Fund: Class A shares - 1.23% and
5.16% for the year ended October 31, 1994, 1.20% and 5.28% for the year
ended 10/31/93, 1.17% and 6.24% for the year ended 10/31/92, 1.46% and 6.93%
for the year ended 10/31/91, 1.44% and 7.92% for the year ended 10/31/90,
1.37% and 8.15% for the year ended 10/31/89, and 1.42% and 7.51%
(annualized) for the period from 5/6/88 (commencement of operations) to
10/31/88; Class B shares - 1.93% and 4.52% for the year ended October 31,
1994 and 1.96% and 2.96% (annualized) for the period September 2, 1993
(initial offering) to October 31, 1993 and Class C shares - 1.95% and 4.56%
for the year ended October 31, 1994 and 1.96% and 3.78% (annualized) for the
period September 2, 1993 (initial offering) to October 31, 1993 ; Growth and
Income Fund: Class A shares - 2.32% and 2.70% for the year ended October 31,
1994, 2.18% and 2.38% for the year ended 10/31/93, and 2.98% and 1.98%
(annualized) for the period 11/4/91 (commencement of operations) to
10/31/92, Class B shares - 2.93% and 2.07% for the year ended October 31,
1994 and 2.88% and 1.44% (annualized) for the period September 2, 1993
(initial offering) to October 31, 1993 and Class C shares 3.10% and 1.91%
for the year ended October 31, 1994 and 2.87% and 1.80% (annualized) for the
period 9/2/93 (initial offering) to 10/31/93; Global Equity Fund: Class A
shares - 1.93% and .04% for the year ended 11/30/94, 1.91% and (.11%) for
the year ended 11/30/93 and 1.84% and .64% for the year ended 11/30/92,
Class B shares - 2.51% and (.45%) for the year ended 11/30/94 and 2.32% and
(.82%) (annualized) for the period 9/2/93 (initial offering) to 11/30/93 and
Class C shares - 2.66% and (.59%) for the year ended 11/30/94 and 2.35% and
(.78%) (annualized) for the period 9/2/93 (initial offering) to 11/30/93;
Global Income Fund - Class A shares -2.35% and 5.75% for the year ended
11/30/94, 2.09% and 6.34% for the year ended 11/30/93 and 1.88% and 7.89%
(annualized) for the period 12/2/91 (commencement of operations) to
11/30/92, Class B shares - 3.12% and 5.00% for the year ended 11/30/94 and
2.88% and 3.95% (annualized) for the period 9/2/93 (initial offering) to
11/30/93 and Class C shares - 3.39% and 4.79% for the year ended 11/30/94
and 2.84% and 4.77% (annualized) for the period 9/2/93 (initial offering) to
11/30/93.
(7)Commencement of Operations
(8)Includes net gains (losses) on foreign currency transactions
(9)Per share data has been retroactively restated to reflect a 200% stock
dividend as of July 1, 1991.
(10)Quest for Value Fund, Inc. changed its fiscal year end to October 31 in
1987.
</TABLE>
5
<PAGE>
- ----------------------------------------------------------------------------
INTRODUCTION
The Quest for Value Funds are a family of open-end mutual funds offering many
different investment objectives to select from ranging from funds that invest
primarily in bonds or other fixed income securities to funds that invest in
common stocks of large or small companies. You can select from all of these
funds in order to meet your long term investment objectives. This introduction
is designed to provide an overview of the funds. More information and greater
detail is provided in the remainder of this Prospectus.
WHAT ARE THE BENEFITS OF INVESTING IN QUEST FOR VALUE FUNDS? Quest for Value
Funds offer the individual investor or qualified retirement plans access to
professional money managers that are normally available only to investors with
several millions to invest. The Quest for Value Funds are managed by Quest for
Value Advisors ("Quest Advisors"), a subsidiary of Oppenheimer Capital, one of
the nation's largest institutional money managers, which has been in business
since 1968.
In addition to professional money management, the Funds offer the benefit of
diversification. Your investment is spread over many different securities in
many different industries. Diversification is so important in reducing risk that
the law requires all qualified retirement plans to diversify their investments.
Professional management and diversification offers you the opportunity to
improve your returns and reduce the risk that you would incur if you
concentrated your investments in just a limited number of securities.
WHAT FUNDS CAN I INVEST IN? There are many Quest for Value Funds that you can
choose from to meet your investment objectives. We have funds that invest in
stocks, bonds or a combination of stocks and bonds, as well as funds that invest
in foreign securities. See "Investment Objectives of the Funds," following this
Introduction, for a description of the specific investment objectives of each of
the Funds:
FUNDS INVESTING IN COMMON STOCKS
Quest for Value Fund
Small Capitalization Fund
FUNDS INVESTING IN STOCKS AND BONDS
Opportunity Fund
Growth and Income Fund
FUNDS INVESTING IN BONDS
U.S. Government Income Fund
Investment Quality Income Fund
FUNDS INVESTING IN FOREIGN SECURITIES
Global Equity Fund
Global Income Fund
In addition, Quest for Value manages and distributes money market funds and
tax-exempt funds. Ask your broker or dealer for a prospectus.
HOW CAN I PURCHASE SHARES? You can purchase shares through your broker or dealer
who has a sales agreement with Quest for Value Distributors ("Quest
Distributors"). The Funds offer Class A, B and C shares. Class A shares have an
initial sales charge that declines for larger orders. Purchases of $1 million or
more of Class A shares of the U.S. Government Income Fund and the Investment
Quality Income Fund have no initial sales charge but are subject to a contingent
deferred sales charge ("CDSC") if held for less than two years. Purchases of $1
million or more of Class A shares of the Quest for Value Fund, Inc., the Small
Capitalization Fund, the Growth and Income Fund, the Opportunity Fund and the
Global Equity Fund made on or after July 1, 1994 have no initial sales charge
but are subject to a CDSC if held for less than one year; if such purchases were
made before July 1, 1994 they are subject to a CDSC if held for less than two
years. Class A shares are also subject to an ongoing distribution fee pursuant
to the
6
<PAGE>
Distribution Plan and Agreement for Class A shares ("Plan") at the following
annual rates of each Fund's average daily net assets: U.S. Government Income
Fund--.05%, Investment Quality Income and Growth and Income Fund--.15%, all
other Funds except Global Income Fund--.25%. Each Fund's Class A Shares also pay
a service fee at the annual rate of .25% of average daily net assets. Although
the Global Income Fund is authorized to pay a distribution fee of .05% and a
service fee of .25% under its Plan, the Board of Directors of that Fund has set
a maximum fee under the Plan of .25%.
Class B shares incur no initial sales charge but are subject to a CDSC that
declines over time for shares held less than six years; Class B shares are only
available to investors purchasing less than $250,000. Class B shares are also
subject to an ongoing distribution fee pursuant to the Distribution Plan and
Agreement for Class B shares at the annual rate of .75% of each Fund's average
daily net assets and a service fee at the annual rate of .25% of average daily
net assets. Class B shares will automatically convert to Class A shares of the
same Fund eight years after the end of the calendar month in which the purchase
order for such Class B shares was accepted, on the basis of the relative net
asset values of the two classes, subject to the terms described under
"Conversion of Class B Shares," p. 20.
Class C shares incur no initial sales charge but are subject to a CDSC for
shares held less than one year. Class C shares of each Fund are subject to an
ongoing distribution fee pursuant to the Distribution Plan and Agreement for
Class C shares at the annual rate of .75% of each Fund's average daily net
assets and a service fee at the annual rate of .25% of average daily net assets.
In determining which class of shares to purchase, investors should consider
whether during the anticipated life of their investment in a Fund the
accumulated distribution fees and deferred sales charges on Class B or C shares
would be more or less than the amount of the initial sales charges and
distribution fees paid on Class A shares held for the same amount of time.
Investors who qualify for significantly reduced sales charges for Class A shares
or who expect to hold their investment for an extended period of time might find
the initial sales charge alternative preferable. However, because the initial
sales charge is deducted at the time of purchase, investors should consider the
extent to which any return might otherwise be realized on the additional funds
invested under the deferred sales charge alternative and weigh such
consideration against the higher per share return of Class A shares afforded by
the lower distribution fees of such shares. Other investors might determine it
more advantageous to have all their funds invested initially, although they
would be subject to higher ongoing distribution fees and, possibly, a CDSC.
ARE THERE SPECIAL SALES CHARGES FOR QUALIFIED RETIREMENT PLANS? The Funds offer
qualified retirement plans several different ways of buying shares at reduced
sales charges. Class A shares offer a special lower sales charge structure based
on the number of eligible employees in the plan, and do not have a sales charge
for sales over $1,000,000 or for retirement plans covering at least 50
employees. Class B shares currently are not being offered to non-qualified
retirement plans and qualified retirement plans under Internal Revenue Code
Sections 401(a), 401(k), 403(b) and 457 but are being offered to qualified
retirement plans under Internal Revenue Code Section 408(a). The CDSC is waived
for certain benefit payments from these plans. See "Exemptions from Class A, B
and C CDSC" p. 21. Your broker or dealer can help you establish an IRA, 401(k),
403(b) or pension and profit sharing plan using the Quest for Value Funds.
7
<PAGE>
HOW DO I GET MONEY OUT OF A FUND? You can receive periodic income dividends.
Some of our Funds distribute income monthly, some quarterly and some for which
income is not a primary goal, annually. You can establish a withdrawal plan that
will send you a set amount or percentage of your account on a regular basis.
You can redeem shares through your broker or dealer or through Quest
Distributors directly. Some of the Funds offer the ability to redeem shares by
writing a check on the shares in your account. For convenience, you can also
redeem shares by telephone. When you redeem shares you will receive the value of
the shares that are redeemed (less any applicable CDSC). This value can be more
or less than your purchase price depending on the results of the investments
that the fund holds. A check will be mailed to you for your redemption (or the
proceeds wired to your bank) on the day after a redemption request is received.
WHERE CAN I GET INFORMATION ABOUT MY INVESTMENT? The Funds send all shareholders
an annual and semi-annual report. The annual report contains information about
the Funds' investment management strategies and performance; you can receive a
copy of this report from your broker or dealer or from the Fund free of charge.
You will receive a confirmation from the Funds' transfer agent, State Street
Bank and Trust Company, after every transaction (purchase, redemption, exchange
or distribution). The confirmation will show you the number of shares that you
own. You can determine the value of your shares by looking up the price in the
mutual fund pages of most daily newspapers. You can also get current information
from your broker or dealer or by calling the Fund at 800-232-FUND
(800-232-3863).
WHAT ARE THE RISKS OF INVESTING IN MUTUAL FUNDS? The Funds are not fixed
investments and their net asset values will fluctuate because the values of the
securities that they own will fluctuate. On redemption the value of your shares
may be more or less than your investment. See "Risk Factors."
- ---------------------------------------------
INVESTMENT OBJECTIVES OF THE FUNDS
Quest Advisors manages the Funds in accordance with their investment objectives
described below. Quest Advisors' equity investment policy is overseen by
George Long, Managing Director and Chief Investment Officer for Oppenheimer
Capital, the parent of Quest Advisors. Mr. Long has been with Oppenheimer
Capital since 1982. 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 the firm since 1986.
QUEST FOR VALUE FUND seeks capital appreciation through investment in securities
(primarily equity securities) of companies believed by Quest Advisors to be
undervalued in the marketplace in relation to factors such as the companies'
assets, earnings, growth potential and cash flows. For the purposes of this
Prospectus the term equity securities is defined as common stocks and preferred
stocks; bonds, debentures and notes convertible into common stocks; and
depository receipts for such securities. Investments of the Quest for Value Fund
are managed by Eileen Rominger, Managing Director of Oppenheimer Capital. She
has been portfolio manager and Vice President of this Fund since 1989. Ms.
Rominger has been an analyst and portfolio manager at Oppenheimer Capital since
1981.
SMALL CAPITALIZATION FUND seeks capital appreciation through investments in a
diversified portfolio which under normal conditions will have at least 65% of
its assets invested in equity securities of companies with market
capitalizations under $1
8
<PAGE>
billion. The Fund's investment approach will attempt to identify securities of
companies whose prices are favorable in relation to their book values and/or
sales and securities of companies which have limited operating leverage
(relatively stable business with below average sensitivity to changes in the
general economy) and/or limited financial leverage (a ratio of debt to assets,
or cost of debt service to income, which is meaningfully below those of their
competitors). The Small Capitalization Fund is managed by Jenny Beth Jones,
Senior Vice President of Oppenheimer Capital, and Louis Goldstein, Vice
President of Oppenheimer Capital . Ms. Jones has been portfolio manager and Vice
President of this Fund since 1990. Previously Ms. Jones was a portfolio manager
and analyst with Mutual of America. Mr. Goldstein has been portfolio manager of
the Fund since January 3, 1995. He has been a security analyst with Oppenheimer
Capital since 1991. From 1988 to 1991 he was a security analyst with David J.
Greene & Co.
U.S. GOVERNMENT INCOME FUND seeks to provide shareholders with a high level of
current income together with protection of capital by investing exclusively in
debt obligations, including mortgage-backed securities, issued or guaranteed by
the United States government, its agencies or instrumentalities ("U.S.
government securities"), and in related futures, options and repurchase
agreements. The Fund will attempt to enhance its income and reduce the impact of
changing interest rates on the value of its shares by engaging in options and
financial futures transactions. Such transactions will tend to limit
opportunities for appreciation during periods of declining interest rates. The
average maturity of the Fund's investments will vary based on market conditions.
It is estimated that the average dollar weighted maturity of the Fund will be
between five and ten years. The U.S. Government Income Fund is managed by Vikki
Hanges, Vice President of Oppenheimer Capital. Ms. Hanges has been portfolio
manager and Vice President of this Fund since 1993. Ms. Hanges assisted with the
management of Quest Cash Reserves, Inc., a money market fund with five
portfolios managed by Quest Advisors, from 1987 through 1992. Ms. Hanges has
been on the fixed income trading desk at Oppenheimer Capital since 1982. Howard
Potter, President and Chief Executive of New Castle Advisers, Inc., advises the
Fund on investment strategies for options and financial futures. From 1986-1991
he was a Vice President in the Fixed Income Department at Oppenheimer & Co.,
Inc. ("Opco") and while Opco acted as subadvisor to this Fund from 1988 to 1991,
Mr. Potter was responsible for advising this Fund regarding options and
financial futures.
INVESTMENT QUALITY INCOME FUND seeks to provide shareholders with as high a
level of current income as is consistent with conservation of principal through
a portfolio consisting primarily of fixed income obligations. Under normal
conditions, at least 80% of the Fund's assets will be invested in corporate
bonds, U.S. government securities and/or mortgage backed debt securities rated A
or better by Moody's Investor Services Inc. (Moody's) or Standard & Poors
Corporation ("S&P"), or, if unrated, considered to be of comparable quality by
Quest Advisors. The Fund may invest up to 20% of its assets in the lowest
category of investment-grade corporate bonds, those which are rated Baa3 by
Moody's or BBB - by S&P or, if unrated, considered to be of comparable quality
by Quest Advisors. The term bonds includes debentures but does not include
bills, commercial paper or notes. The average maturity of the Fund's investments
will vary based on market conditions. It is anticipated, however, that the
average dollar weighted maturity of the Fund will be greater than 20 years. The
Investment Quality Income Fund is managed by George H. Tilghman, Jr., Vice
President of Oppenheimer Capital. Mr. Tilghman has been responsible for the
management of this fund's portfolio since its inception. He was named Vice
President of the
9
<PAGE>
Fund in 1993. He was previously a fixed income portfolio manager in
International Investment Management at Brown Brothers Harriman & Co.
OPPORTUNITY FUND seeks growth of capital over time through investments in a
diversified portfolio of common stocks, bonds and cash equivalents, the
proportions of which will vary based upon management's assessment of the
relative values of each investment under prevailing market conditions. The
Fund's portfolio will normally be invested primarily in common stocks and
securities convertible into common stock. During periods when common stocks
appear to be overvalued and when value differentials are such that fixed-income
obligations appear to present meaningful capital growth opportunities relative
to common stocks or pending investment in securities with capital growth
opportunities, up to 50% or more of the Fund's assets may be invested in bonds
and other fixed-income obligations. This may include cash equivalents which do
not generate capital appreciation. The bonds in which the Fund invests will be
limited to U.S. government obligations, mortgage-backed securities,
investment-grade corporate debt obligations and unrated obligations, including
those of foreign issuers, which management believes to be of comparable quality.
The investments of the Opportunity Fund are managed by Richard J. Glasebrook II,
Managing Director of Oppenheimer Capital. Mr. Glasebrook has been portfolio
manager and Vice President of this Fund since 1991. Previously, he was a Partner
with Delafield Asset Management where he served as a portfolio manager and
analyst.
GROWTH AND INCOME FUND seeks to achieve a combination of growth of capital and
investment income with growth of capital as the primary objective, by investing
in securities that are believed by Quest Advisors to be undervalued in the
marketplace and to offer the possibility of increased value. The Fund invests in
marketable securities traded on national securities exchanges and in the
over-the-counter market. Ordinarily, the Fund invests its assets in common
stocks (with emphasis on dividend paying stocks), preferred stocks, securities
convertible into common stock, and debt securities. The Fund may invest in
lower-quality, high-yielding convertible debt securities and other debt
securities and currently intends to limit its investments in these securities to
up to 25% of its assets. See "Risk Factors." By focusing its purchases of equity
securities on those issued by mature companies which it believes to be
under-valued, the Fund seeks to achieve both its objectives of obtaining capital
appreciation as well as income from dividends. The Fund's purchases of
convertible securities similarly affords it the potential of capital growth
through the conversion option and greater investment income prior to conversion.
The Fund's purchases of debt securities furthers the objective of investment
income and offers potential for capital appreciation in an economic environment
of declining interest rates or as a result of improved issuer credit quality. It
is anticipated that the Fund, as a result of its investment approach, will be
less volatile than the market in general. The Growth and Income Fund is managed
by Colin Glinsman, Vice President of Oppenheimer Capital. Mr. Glinsman has been
portfolio manager and Vice President of this Fund since 1992. Since 1991, Mr.
Glinsman has assisted with the management of the Quest for Value Dual Purpose
Fund, Inc., a closed-end mutual fund managed by Quest Advisors, and has been a
securities analyst with Oppenheimer Capital since 1989. He was previously an
investment banker with Prudential Securities and Morgan Grenfell, and qualified
as a certified public accountant while with Coopers & Lybrand.
GLOBAL EQUITY FUND seeks long-term capital appreciation through pursuit of a
global investment strategy primarily involving equity securities. The Fund may
invest anywhere in the world with no requirement that any specific percentage of
its assets be committed to any given country. Under
10
<PAGE>
normal circumstances, at least 65% of the Fund's total assets will be invested
in equity securities in at least three different countries, one of which may be
the United States. Opportunities for capital appreciation may also be presented
by debt securities. The Fund may invest up to 35% of its total assets in debt
obligations with remaining maturities of one year or more of U.S. or foreign
corporate, governmental or bank issuers. It is the present intention of the
Fund, although not a fundamental policy, not to invest more than 5% of its total
assets in debt securities rated below investment-grade. Domestic investments of
this Fund are managed by Richard J. Glasebrook II, Managing Director of
Oppenheimer Capital. Mr. Glasebrook has been portfolio manager and Vice
President and of this Fund since 1991. Effective January 1, 1994, the Fund's
investments in foreign securities are managed by Pierre Daviron, President and
Chief Investment Officer of Oppenheimer Capital International, a division of
Oppenheimer Capital created in 1993. Mr. Daviron was named portfolio manager and
Vice President of this Fund in 1993. Previously, he was Chairman and Chief
Executive Officer at Indosuez Gartmore Asset Management, a division of Banque
Indosuez, Paris, France. Prior thereto he was a Managing Director in Mergers and
Acquisitions at J.P. Morgan.
GLOBAL INCOME FUND seeks investment income as its primary objective, with
capital appreciation as a secondary objective through a non-diversified
portfolio. The Fund invests primarily in investment-grade debt securities of
foreign and domestic corporations and foreign governments, or their agencies and
instrumentalities, and in U.S. government securities. Generally, the debt
securities in which the Global Income Fund will invest will be those believed by
Quest Advisors to offer potential for capital appreciation in addition to
investment income, because of such factors as anticipated changes in the
comparative level of interest rates in different countries or anticipated
improvements in the issuer's credit rating. Under normal circumstances the Fund
will invest at least 65% of its total assets in the securities of issuers
located in not less than three different countries, one of which may be the
United States. The Fund may also invest in preferred stocks, securities
convertible into common stock and short-term money market instruments.
Investments in preferred stocks and securities convertible into common stock
will be limited to 10% of the total assets of the Fund at the time of purchase.
The Fund may invest in lower-quality high-yielding debt securities (also known
as "junk bonds") of foreign issuers which may be located in countries with
"emerging markets" (as defined under "Emerging Market Countries," below). The
Fund's current intention is to limit its investment in these securities to up to
35% of its net assets. See "Risk Factors" and "Investment Restrictions and
Techniques." The Fund also may engage in certain transactions in options and
futures. See "Risk Factors" and "Investment Restrictions and Techniques." The
Fund's limitations respecting options and futures transactions, preferred stock,
convertible securities, lower-rated debt securities and foreign currency are
non-fundamental policies and can be changed without a vote of shareholders. It
is anticipated that the average dollar weighted maturity of the Fund will be
between 5 and 10 years. The Global Income Fund is managed by Richard A. Gluck,
Vice President of Oppenheimer Capital. Mr. Gluck was named portfolio manager and
Vice President of this Fund in 1993. He was previously a global fixed income
portfolio manager with Dean Witter InterCapital and Clemente Capital.
---------------------
To provide liquidity for the purchase of new instruments and to effect
redemptions of shares, the Funds typically invest a part of their assets in
various types of U.S. government securities and
11
<PAGE>
high quality, short-term debt securities with remaining maturities of one year
or less such as government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate securities and repurchase
agreements ("money market instruments"). For temporary defensive purposes, the
Funds may invest up to 100% of their assets in such securities and, in the case
of the Growth and Income Fund, preferred stock. At any time that a Fund for
temporary defensive purposes invests in such securities, to the extent of such
investments, it is not pursuing its investment objectives. In the case of the
Global Equity Fund and Global Income Fund, such money market instruments may be
issued by entities organized in the U.S. or any foreign country, denominated in
dollars or in the currency of any foreign country.
In the future, each of the Quest for Value, U.S. Government Income, Growth and
Income, Global Equity and Global Income Funds may endeavor to achieve its
respective investment objective by investing its assets in a no-load diversified
open-end management investment company which has the same portfolio manager and
substantially the same investment objective as that Fund. This possible
investment has been approved by shareholder vote. Shareholders will receive
prior notice with respect to the commencement of any such investment.
Except as indicated, the investment objectives and policies described above
are fundamental and may not be changed without a vote of the shareholders.
- ---------------------------------------------
RISK FACTORS
The value of the Funds' shares will fluctuate and on redemption the value
of your shares may be more or less than your investment.
There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk associated
with the movement of the stock market in general. Financial risk is associated
with the financial condition and profitability of the underlying company.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, therefore, may disproportionately affect
their market price, tending to make them rise more in response to buying demand
and fall more in response to selling pressure than is the case with larger
capitalization companies.
There are two types of risk associated with owning debt securities: interest
rate risk and credit risk. Interest rate risk relates to fluctuations in market
value arising from changes in interest rates. If interest rates rise, the value
of debt securities will normally decline and if interest rates fall, the value
of debt securities will normally increase. All debt securities, including U.S.
government securities, which are generally considered to be the most
creditworthy of all debt obligations, are subject to interest rate risk.
Securities with longer maturities generally will have a more pronounced reaction
to interest rate changes than shorter term securities.
Credit risk relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. Bonds rated Baa3 by Moody's
or BBB- by S&P, which the Quest for Value, Small Capitalization, Investment
Quality Income, Opportunity, Growth and Income, Global Equity and Global Income
Funds may acquire, are described by those rating agencies as having speculative
elements. If a debt security is rated below investment grade by one rating
agency and as investment grade by a different rating agency, Quest Advisors
will make a determination as to the debt security's investment grade quality.
It is the present intention of the Quest for Value, Small
12
<PAGE>
Capitalization and Global Equity Funds to invest no more than 5% of their
respective assets in bonds rated below Baa3 by Moody's or BBB- by S&P (commonly
known as "high yield" or "junk bonds"). In the event that any of those Funds
intends in the future to invest more than 5% of its assets in such bonds,
appropriate disclosures will be made to existing and prospective shareholders.
The Growth and Income Fund may invest up to 25% of the value of net assets in
convertible debt and other debt securities rated not lower than Caa by Moody's
or CCC by S&P, Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps, Inc.
("Duff") or, if unrated, deemed to be of comparable quality by Quest Advisors.
The Global Income Fund may invest up to 35% of its net assets in lower-quality
high-yielding debt securities of government and corporate issuers including
securities of issuers located in emerging market countries. Such securities may
be rated Ca or C by Moody's or CI or D by S&P, or if unrated, deemed to be of
comparable quality in the opinion of Quest Advisors. As used in this Prospectus,
an "emerging market country" is any country considered to be an emerging market
country by the World Bank at the time of the Fund's investment. Such securities
may be subject to higher risks and greater market fluctuations than are
lower-yielding higher-rated securities. Securities rated Ba by Moody's are
judged to have speculative elements; their future cannot be considered as well
assured and often the protection of interest and principal payments may be very
moderate. Securities rated BB by S&P, Fitch or Duff are regarded as having
predominantly speculative characteristics and, while such obligations have less
near-term vulnerability to default than other speculative grade debt, they face
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely
interest and principal payment. Securities rated Caa by Moody's or CCC by S&P,
Fitch and Duff are considered to have predominantly speculative characteristics
with respect to capacity to pay interest and repay principal and to be of poor
standing. Securities rated Ca by Moody's are speculative to a high degree; such
issues are often in default or have other marked shortcomings. A security rated
C by Moody's has extremely poor prospects of ever attaining any real investment
standing. Securities rated CI by S&P are income bonds on which no interest is
being paid, and securities rated D by S&P are in payment default. Debt
obligations of issuers outside the United States and its territories are rated
on substantially the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the issuer but do not take into account
potential actions by the government controlling the currency of denomination
which might have a negative effect on exchange rates. The Growth and Income and
Global Income Funds do not intend to hold such lower-rated securities unless the
opportunities for capital appreciation and income, combined, remain attractive.
See the Appendix in the SAI for a more complete general description of Moody's,
S&P, Fitch and Duff ratings. The ratings of Moody's, S&P, Fitch and Duff
represent their opinions as to the quality of the obligations which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of such investments, Quest Advisors also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Growth and Income and Global Income Funds' ability to achieve
their investment objectives may be more dependent on Quest Advisors' credit
analysis than might be the case for a fund that invested in higher rated
securities. Once the rating of a security has been changed, the Growth and
Income and
13
<PAGE>
Global Income Funds will consider all circumstances deemed relevant in
determining whether to continue to hold the security. The market price and yield
of securities rated Ba or lower by Moody's and BB or lower by S&P, Fitch or Duff
are more volatile than those of higher rated securities. Factors adversely
affecting the market price and yield of these securities will adversely affect
the Growth and Income or Global Income Fund's net asset value. In addition, the
retail secondary market for these securities may be less liquid than that of
higher rated securities; adverse market conditions could make it difficult at
times for the Growth and Income and Global Income Funds to sell certain
securities. The market values of certain lower rated debt securities tend to
reflect individual corporate developments to a greater extent than do higher
rated securities, which react primarily to fluctuations in the general level of
interest rates, and tend to be more sensitive to economic conditions than higher
rated securities. Companies that issue such securities are often highly
leveraged and may not have available to them more traditional methods of
financing. Consequently, the risk associated with acquiring the securities of
such issuers is greater than with higher rated securities. The Funds are not
obliged to dispose of securities due to changes by the rating agencies. Although
there is no minimum rating for the investments of the Quest for Value, Small
Capitalization, Global Equity, or Growth and Income Funds, the Funds do not
intend to invest in bonds which are in default. The Global Income Fund may
invest in bonds which are in default, which could result in increased costs
associated with the sale or recovery of such bonds. To the extent the Funds
invest in mortgage-backed securities, they will be subject to prepayment risks.
Prepayments of mortgage principal reduce the stream of future payments and
generate cash which must be reinvested. Prepayments tend to increase following
declines in interest rates, resulting in reinvestment in a lower interest rate
environment. The ability of the Investment Quality Income Fund to generate
income is limited by its policy to invest at least 80% of its assets in
investment-grade securities.
The Global Income 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
generally 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. As a non-diversified investment company, the Global Income Fund
may present greater risks than diversified companies because the Fund can invest
in a smaller number of issuers.
The nature and degree of market and financial risk affecting an investment in
each of the Opportunity Fund and Growth and Income Fund will depend on the
relative amounts of the Fund's assets committed to equity, longer-term debt or
money market securities at any particular time.
Higher portfolio turnover can be expected to result in a higher incidence of
short-term capital gains upon which taxes will be payable and will also result
in correspondingly higher transaction costs. Certain of the Funds may have
turnover rates of up to 250%.
ADDITIONAL RISKS OF FOREIGN SECURITIES: All Funds (except the U.S. Government
Income Fund) may purchase foreign securities that are listed on a domestic or
foreign securities exchange, traded in domestic or foreign over-the counter
markets or represented by American Depository Receipts. There is no limit to the
amount of such foreign securities the Funds may acquire. It will be the general
practice of the Global Equity Fund to invest
14
<PAGE>
in foreign equity securities and the general practice of the Global Income Fund
to invest in foreign debt securities. Certain factors and risks are presented by
investment in foreign securities which are in addition to the usual risks
inherent in domestic securities. Foreign companies are not necessarily subject
to uniform accounting, auditing and financial reporting standards or other
regulatory requirements comparable to those applicable to U.S. companies. Thus,
there may be less available information concerning non-U.S. issuers of
securities held by a Fund than is available concerning U.S. companies. In
addition, with respect to some foreign countries, there is the possibility of
nationalization, expropriation or confiscatory taxation; income earned in the
foreign nation being subject to taxation, including withholding taxes on
interest and dividends (see "Tax Status"), or other taxes imposed with respect
to investments in the foreign nation; limitations on the removal of securities,
property or other assets of a fund; difficulties in pursuing legal remedies and
obtaining judgments in foreign courts, or political or social instability or
diplomatic developments which could affect U.S. investments in those countries.
For a description of the risks of possible losses through holding of securities
in foreign custodian banks and depositories, see "Risk Factors and Special
Considerations" in the SAI.
Securities of many non-U.S. companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. Non-U.S. stock exchanges
and brokers are generally subject to less governmental supervision and
regulation than in the U.S. and commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions. Certain countries restrict foreign investments in their
securities markets. These restrictions may limit or preclude investment in
certain countries, industries or market sectors, or may increase the cost of
investing in securities of particular companies. Purchasing the shares of
investment companies which invest in securities of a given country may be the
only or the most efficient way to invest in that country. This may require the
payment of a premium above the net asset value of such investment companies and
the return will be reduced by the operating expenses of those investment
companies.
A decline in the value of the U.S. dollar against the value of any particular
currency will cause an increase in the U.S. dollar value of a Fund's holdings
denominated in such currency. Conversely, a decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency.
Some foreign currency values may be volatile and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets which could adversely affect a Fund. The Funds do not intend to
speculate in foreign currency in connection with the purchase or sale of
securities on a foreign securities exchange but may enter into foreign currency
contracts to hedge their foreign currency exposure. While those transactions may
minimize the impact of currency appreciation and depreciation, the Funds will
bear a cost for entering into the transaction and such transactions do not
protect against a decline in the security's value relative to other securities
denominated in that currency.
The Global Equity Fund may invest its assets in American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs") or Global Depository Receipts
("GDRs") which are U.S. dollar-denominated receipts that represent and may be
converted into the underlying foreign security. ADRs, GDRs or EDRs are issued by
persons other
15
<PAGE>
than the underlying issuer, typically a domestic bank or trust company. Issuers
of the stock of ADRs, EDRs or GDRs sponsored by banks or trust companies are not
obligated to disclose material information in the United States and therefore,
there may not be a correlation between such information and the market value of
such ADRs, GDRs or EDRs.
EMERGING MARKET COUNTRIES: Certain developing countries may have relatively
unstable governments, economies based on only a few industries that are
dependent upon international trade and reduced secondary market liquidity.
Foreign investment in certain emerging market countries is restricted or
controlled in varying degrees. In the past, securities in these countries have
experienced greater price movement, both positive and negative, than securities
of companies located in developed countries. Lower-rated high-yielding emerging
market securities may be considered to have speculative elements.
SOVEREIGN DEBT OBLIGATIONS: The Global Income Fund and the Global Equity Fund
may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including those located in emerging market
countries. Sovereign debt may be in the form of conventional securities or other
types of debt instruments such as loans or loan participations. Sovereign debt
of emerging market countries may involve a high degree of risk and may be in
default or present the risk of default. Certain emerging market countries have
historically experienced, and may continue to experience, high inflation and
interest rates, large fluctuations in exchange rates, large amounts of external
debt, trade difficulties and extreme poverty and unemployment. Governmental
entities responsible for repayment of the debt may be unable or unwilling to
repay principal and interest when due. In the event of a default, the Funds may
have limited legal recourse against the issuer or guarantor. Remedies must in
some cases be pursued in the courts of the defaulting party itself and the
ability of holders of foreign government debt securities to obtain recourse may
depend on the political climate in the relevant country. No assurance can be
given that the holders of commercial bank debt will not contest payments to
holders of other sovereign debt obligations in the event of a default under
their commercial bank loan agreements.
EASTERN EUROPE: The Global Equity Fund presently intends not to invest more than
5% of its net assets in companies located in Eastern European countries, but may
invest in companies located outside of such countries which conduct business in
such countries.
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. Purchasing
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. The U.S. Government Income Fund will write
covered put and call options on U.S. Government securities to generate
additional income through the receipt of options premiums. CURRENTLY, EACH OF
THE U.S. GOVERNMENT INCOME, INVESTMENT QUALITY INCOME, GLOBAL INCOME, GLOBAL
EQUITY, GROWTH AND INCOME, SMALL CAPITALIZATION AND QUEST FOR VALUE FUNDS INTEND
TO ENGAGE ONLY IN FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS OR OPTIONS ON
STOCK INDEXES FOR BONA FIDE HEDGING OR OTHER NON-SPECULATIVE PURPOSES. The
Global Income Fund may also write covered call options and purchase
16
<PAGE>
put options. The Small Capitalization Fund may write covered call options on
individual securities. The Funds will not enter into any leveraged futures
transactions.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: All Funds may acquire
securities subject to repurchase agreements. The Global Income Fund may enter
into reverse repurchase agreements. Repurchase agreements and reverse repurchase
agreements involve certain risks.
For a further description of options and futures, repurchase agreements and
reverse repurchase agreements and other investment techniques used by the Funds,
see "Investment Restrictions and Techniques."
- ---------------------------------------------
HOW TO BUY SHARES
The Funds offer Class A, Class B and Class C shares. Class A shares are sold
with an initial sales charge that declines for larger orders. Purchases of $1
million or more of Class A shares of the U.S. Government Income Fund and the
Investment Quality Income Fund are sold without an initial sales charge but are
subject to a CDSC if held less than two years. Purchases of $1 million or more
of Class A shares of the Quest for Value Fund, Inc., the Small Capitalization
Fund, the Growth and Income Fund, the Opportunity Fund and the Global Equity
Fund made on or after July 1, 1994 are sold without an initial sales charge but
are subject to CDSC if held less than one year; if such purchases were made
prior to July 1, 1994 they are subject to a CDSC if held for less than two
years. Class B shares are sold without an initial sales charge but are subject
to a CDSC if held for less than six years. Class B shares are available only to
investors purchasing less than $250,000 in the aggregate and currently are not
being offered to non-qualified deferred compensation plans and qualified
retirement plans under Internal Revenue Code Sections 401(a), 401(k), 403(b) and
457 but are being offered to qualified retirement plans under Internal Revenue
Code Section 408(a). Class C shares are sold without an initial sales charge but
are subject to a CDSC if held less than one year. Each class is described below
in greater detail. The different classes provide you with alternative methods of
acquiring shares and you should determine which class best meets your individual
needs. Dealers may be compensated at different rates for selling Class A, Class
B or Class C shares.
Your initial purchase of either Class A, B or C shares must be made through a
broker or dealer having a sales agreement with Quest Distributors, an affiliate
of Quest Advisors. Subsequent purchases of shares may also be made through your
broker or dealer by mailing your payment to the Fund's Transfer Agent, State
Street Bank and Trust Company ("State Street"), P.O. Box 8505, Boston, MA 02266.
Your initial investment must be at least $1,000 and subsequent investments must
be at least $250. There are no minimums for shares purchased under an Automatic
Investment Plan or under employee benefit plans.
Some investors may qualify to purchase Class A shares at net asset value
without a sales charge. (See "Reduced Sales Charges--Net Asset Value Purchases,"
and "Additional Information--Purchases by Former Shareholders of AMA Family of
Funds and Unified Funds.") Class B and C shares will not be sold to investors
who qualify to purchase Class A shares at net asset value, as described on pages
20 and 38.
Sales of all classes 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 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.
17
<PAGE>
BUYING CLASS A SHARES. Purchases of Class A shares will be processed at the net
asset value next determined after receipt of your purchase order, plus the
applicable front-end sales charge, if any, as set forth in the following tables.
<TABLE>
<CAPTION>
QUEST FOR VALUE, SMALL CAPITALIZATION,
OPPORTUNITY AND GLOBAL EQUITY FUNDS
- ------------------------------------------------------------
OFFERING PRICE
AS A % OF % OF NET ASSET RE-ALLOWED TO
OFFERING PRICE VALUE PER SHARE SELLING DEALER
- ------------------ -------------------- ------------------
<S> <C> <C>
5.50% 5.82% 4.75%
4.75% 4.99% 4.25%
4.00% 4.17% 3.50%
3.00% 3.09% 2.75%
2.00% 2.04% 1.75%
** ** **
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME, INVESTMENT QUALITY INCOME, AND
GROWTH AND INCOME FUNDS
SALES CHARGE TABLES* ------------------------------------------------------------
CLASS A SHARES OFFERING PRICE
- ---------------------------------------------------- AS A % OF % OF NET ASSET RE-ALLOWED TO
AMOUNT OF PURCHASE OFFERING PRICE VALUE PER SHARE SELLING DEALER
- ---------------------------------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
Less than $50,000................................... 4.75% 4.99% 4.25%
$50,000 - 99,999.................................... 4.50% 4.71% 4.00%
$100,000 - 249,999.................................. 3.50% 3.63% 3.15%
$250,000 - 499,999.................................. 2.75% 2.85% 2.50%
$500,000 - 999,999.................................. 2.00% 2.04% 1.75%
$1 million or more**................................ ** ** **
<CAPTION>
GLOBAL INCOME FUND
------------------------------------------------------------
OFFERING PRICE
AS A % OF % OF NET ASSET VALUE RE-ALLOWED TO
AMOUNT OF PURCHASE OFFERING PRICE PER SHARE SELLING DEALER
- ---------------------------------------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
Less than $100,000.................................. 3.00% 3.09% 2.50%
$100,000 - 249,999.................................. 2.50% 2.56% 2.15%
$250,000 - 499,999.................................. 2.00% 2.04% 1.75%
$500,000 - 999,999.................................. 1.50% 1.52% 1.25%
$1 million or more.................................. .75% .76% .65%
</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."
**PURCHASES OF CLASS A SHARES OF $1 MILLION OR MORE (all funds except Global
Income Fund)
On purchases by a single purchaser aggregating $1 million or more, the investor
will not pay an initial sales charge, and Quest Distributors will pay authorized
dealers an amount equal to .9 of 1% of the first $2 million of such purchases,
plus .8 of 1% of the next $1 million, plus .50 of 1% of the next $2 million,
plus .35 of 1% on amounts over $6 million. A CDSC will be imposed on the
proceeds of the redemption of shares of the U.S. Government Income Fund and the
Investment Quality Income Fund purchased in amounts aggregating $1 million or
more or of shares of the Quest for Value Fund, Inc., the Small Capitalization
Fund, the Growth and Income Fund, the Opportunity Fund and the Global Equity
Fund purchased prior to July 1, 1994 in amounts aggregating $1 million or more
if they are redeemed within 24 months of the end of the calendar month of their
purchase, in an amount equal to 1% if the redemption occurs within the first 12
months and equal to .5 of 1% if the redemption occurs in the next 12 months, of
the lesser of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption. A CDSC will be
imposed on the proceeds of the redemption of shares of the Quest for Value Fund,
the Small Capitalization Fund, the Growth and Income Fund, the Opportunity Fund
and the Global Equity Fund purchased on or after July 1, 1994 in amounts
aggregating $1 million or more if they are redeemed within 12 months of the end
of the calendar month of their purchase in an amount equal to 1% of the lesser
of (a) the net asset value of the shares at the time of purchase or (b) the
18
<PAGE>
net asset value of the shares at the time of redemption. The CDSC will be
deducted from the redemption proceeds otherwise payable to the shareholder and
will be retained by Quest Distributors. For the period of 13 months from the
date of the sales of Class A shares of $1 million or more, the distribution fee
payable by a Fund to Quest Distributors pursuant to the Fund's Distribution Plan
in connection with such shares will be retained by Quest Distributors.
REDUCED SALES CHARGES: There are several ways you may qualify for reduced sales
charges when buying Class A Shares. 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 your name
and/or of your spouse or children under 21 years of age, 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. Qualified employee benefit trusts of an employer and its
consolidated subsidiaries will be considered a single trust.
RIGHTS OF ACCUMULATION: In determining the applicable level of sales charge, the
value of shares you purchase will be added to the greater of cost or market
value of the Class A, B or C shares you hold of any Quest Fund, provided that
any such Class A shares were purchased with a sales charge, were acquired by
exchange for shares on which a sales charge was paid, or were subject to a CDSC.
LETTER OF INTENT: If you intend to purchase shares valued at $50,000 or more
during a 13-month period, you may make the purchase under a Letter of Intent so
that the initial shares you purchase qualify for the reduced sales charge
applicable to the aggregate amount of your projected purchase. Your initial
purchase must 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 you
purchase less than the indicated amount during the 13-month period.
GROUP AND ASSOCIATION PURCHASES AND PURCHASES BY QUALIFIED RETIREMENT PLANS: The
following table sets forth the applicable sales charge for purchases of Class A
shares made through a single broker or dealer by qualified retirement plans
including 401(k), 403(b) plans, SEP/IRA and IRA plans of a single employer, and
by members of associations formed for any purpose other than the purchase of
securities:
<TABLE>
<CAPTION>
AS A % OF PERCENT OF
NUMBER OF AS A % OF NET ASSET OFFERING PRICE
ELIGIBLE EMPLOYEES OR OFFERING VALUE PER RE-ALLOWED TO
MEMBERS PRICE 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%
50 or more............ 0.00% see "Purchases of Class A shares of
$1,000,000 or more," p. 18
</TABLE>
Purchases made under the Group Purchase provision will qualify for the lower
of the sales charge computed according to the table based on the number of
eligible employees in a plan or members of an association or the sales charge
level under the Rights of Accumulation described above. Purchases by retirement
plans covering 50 or more employees or by associations or groups with 50 or more
members shall be entitled to the sales charge waiver applicable to purchases of
$1 million or more described above. In addition, purchases by 401(k) plans can
qualify for this sales charge waiver if, in the opinion of Quest Distributors,
the initial purchase plus projected contributions to be invested in the plan for
the following 12 months will exceed $1,000,000. Individuals who qualify for
reduced sales charges as members of associations,
19
<PAGE>
groups or eligible employees in plans as set forth in the above table may also
purchase shares for their individual or custodial accounts at the same sales
charge level.
NET ASSET VALUE PURCHASES: No sales charge will be applied to the following
transactions in Class A shares: purchases by persons who for the prior 90 days
have been directors, trustees, officers or full-time employees of any of the
Funds distributed by Quest Distributors, or of Quest Advisors, Quest
Distributors, or of their affiliates, their relatives or any trust, pension,
profit sharing or other benefit plan for any of them; purchases by any account
advised by 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 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 an initial 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 CDSC does not apply to
purchases of Class A shares at net asset value described herein.
BUYING CLASS B SHARES. Purchases of Class B shares will be processed at the net
asset value next determined after receipt of your purchase order for less than
$250,000. While not subject to a front-end sales charge, Class B shares may be
subject to a CDSC upon redemption. CLASS B SHARES CURRENTLY ARE NOT BEING
OFFERED TO NON-QUALIFIED DEFERRED COMPENSATION PLANS AND QUALIFIED RETIREMENT
PLANS UNDER INTERNAL REVENUE CODE SECTIONS 401(A), 401(K), 403(B) AND 457 BUT
ARE BEING OFFERED TO QUALIFIED RETIREMENT PLANS UNDER INTERNAL REVENUE CODE
SECTION 408(A).
If Class B Shares of any Fund are redeemed within six years after the end of
the calendar month in which a purchase order for Class B shares was accepted, a
CDSC will be imposed by applying the appropriate percentage indicated below to
the lesser of: (1) the net asset value of such shares at the time of purchase or
(2) the net asset value of such shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors. The CDSC to be imposed on such share
redemptions will be assessed according to the following schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE APPLICABLE CLASS B
ORDER OF LESS THAN CONTINGENT DEFERRED
$250,000 WAS ACCEPTED SALES CHARGE
- ----------------------------------- ------------------------
<S> <C>
Up to one year..................... 5.00%
One year or more but less than 2
years............................. 4.00%
Two years or more but less than 4
years............................. 3.00%
Four years or more but less than 5
years............................. 2.00%
Five years or more but less than 6
years............................. 1.00%
6 or more years.................... None
</TABLE>
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of the same Fund eight years after the end of the calendar month in
which the purchase order for Class B shares was accepted, on the basis of the
relative net asset values of the two classes and subject to the following terms:
Class B shares acquired through the reinvestment of dividends and distributions
("reinvested Class B shares") will be converted to Class A shares on a pro-rata
basis only when Class B
20
<PAGE>
shares not acquired through reinvestment of dividends or distributions
("purchased Class B shares") are converted. The portion of reinvested Class B
shares to be converted will be determined by the ratio that the purchased Class
B shares eligible for conversion bear to the total amount of purchased Class B
shares in the shareholder's account. For the purposes of calculating the holding
period, Class B shares will be deemed to have been issued on the sooner of: (a)
the date on which the issuance of Class B shares occurred, or (b) for Class B
shares obtained by an exchange or series of exchanges, the date on which the
issuance of the original Class B shares occurred. This conversion to Class A
shares will relieve Class B shares that have been outstanding for at least eight
years (a period of time sufficient for Quest Distributors to have been
compensated for distribution expenses related to such Class B shares) from the
higher ongoing distribution fee paid by Class B shares. Only Class B shares have
this conversion feature. Conversion of Class B shares to Class A shares is
contingent on the continuing availability of a private letter revenue ruling
from the Internal Revenue Service affirming that such conversion does not
constitute a taxable event for the shareholder under the Internal Revenue Code.
If such revenue ruling or an opinion of counsel is no longer available,
conversion of Class B shares to Class A shares would have to be suspended, and
Class B shares would continue to be subject to the Class B distribution fee
until redeemed.
BUYING CLASS C SHARES. Purchases of Class C shares will be processed at the net
asset value next determined after receipt of your purchase order. Class C shares
are not subject to a front-end sales charge, but may be subject to a CDSC upon
redemption.
If Class C shares are redeemed within one year after the end of the calendar
month in which a purchase order for Class C shares was accepted, a CDSC of 1.00%
would be imposed on the lesser of (1) the net asset value of such shares at the
time of purchase or (2) the net asset value of such shares at the time of
redemption. The CDSC will be deducted from the redemption proceeds otherwise
payable to the shareholder and will be retained by Quest Distributors.
EXEMPTIONS FROM CLASS A, B AND C CDSC. No CDSC will be imposed when a
shareholder redeems Class A, B or C shares in the following instances: (a)
shares or amounts representing increases in the value of an account above the
net cost of the investment due to increases in the net asset value per share;
(b) shares acquired through reinvestment of income dividends or capital gains
distributions; (c) shares acquired by exchange from any Quest Fund, other than a
money market fund, where the exchanged shares would not have been subject to a
CDSC upon redemption; and (d) Class A shares of the U.S. Government Income Fund
or the Investment Quality Income Fund purchased in the amount of $1 million or
more held for more than 24 months, Class A shares of the Quest for Value Fund,
Inc., the Small Capitalization Fund, the Growth and Income Fund, the Opportunity
Fund and Global Equity Fund purchased in the amount of $1 million or more prior
to July 1, 1994 held for more than 24 months and Class A shares purchased in the
amount of $1 million or more on or after July 1, 1994 if held for more than 12
months, Class B shares held for more than six years or Class C shares held for
more than one year from the end of the calendar month in which the purchase
order was accepted.
PURCHASES PRIOR TO MARCH 6, 1995. The CDSC does not apply to purchases of Class
A shares at net asset value described under "Net Asset Value Purchases" above
and will be waived in the case of redemptions of Class A, B or C shares
purchased prior to March 6, 1995 in connection with (i) distributions to
participants or beneficiaries of
21
<PAGE>
plans qualified under Section 401(a) of the Internal Revenue Code ("IRC") or
from custodial accounts under IRC Section 403(b)(7), individual retirement
accounts under IRC Section 408(a), deferred compensation plans under IRC section
457 and other employee benefit plans ("plans"), and returns of excess
contributions made to these plans, (ii) withdrawals under an automatic
withdrawal plan where the annual withdrawal does not exceed 10% of the opening
value of the account (only for Class B and C shares); and (iii) liquidation of a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the required minimum.
PURCHASES ON OR AFTER MARCH 6, 1995. The CDSC will be waived in the case of
redemptions of Class A, B or C shares purchased on or after March 6, 1995 in
connection with 1) distributions to participants or beneficiaries from
individual retirement accounts under Section 408(a) of the IRC, and retirement
plans under Section 401(a), 401(k), 403(b) and 457 of the IRC, which
distributions are made either (a) to an individual participant as a result of
separation from service or (b) following the death or disability (as defined in
the IRC) of the participant or beneficiary; 2) returns of excess contributions
to such retirement plans; 3) redemptions other than from retirement plans
following the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security Administration);
4) withdrawals under an automatic withdrawal plan where the annual withdrawals
do not exceed 10% of the opening value of the account (only for Class B and C
shares); and 5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum. A
shareholder will be credited with any CDSC paid in connection with the
redemption of any Class A, B or C shares if within 90 days after such
redemption, the proceeds are invested in the same Class of shares in the same
and/or another Quest Fund.
In determining whether the Class A, B or C CDSC is payable, it will be assumed
that shares not subject to a CDSC are redeemed first and that other shares are
then redeemed in the order purchased. No CDSC will be imposed on exchanges to
purchase shares of another Quest Fund although a CDSC will be imposed on shares
of the acquired Quest Fund purchased by exchange of shares subject to a CDSC if
the acquired shares are then redeemed within 24 months if the exchanged shares
were Class A Shares (12 months with respect to Class A shares of the Quest for
Value Fund, Inc., the Small Capitalization Fund, the Growth and Income Fund, the
Opportunity Fund, or the Global Equity Fund purchased on or after July 1, 1994),
six years if the exchanged shares were Class B Shares or one year if the
exchanged shares were Class C shares of the end of the calendar month in which
the exchanged shares were purchased.
SPECIAL FIDUCIARY RELATIONSHIPS. The CDSC will not apply with respect to
purchases of Class A shares for which the selling dealer is not permitted to
receive a sales load or redemption fee imposed on a shareholder with whom such
dealer has a fiduciary relationship in accordance with provisions of the
Employee Retirement Income Security Act and regulations thereunder. If such
dealer agrees to the reimbursement provision described below, no sales charge
will be imposed on sales of $1,000,000 or more and Quest Distributors will pay
to the selling dealer a commission described above in "Purchases of Class A
Shares of $1 Million or More."
For the period of 13 months from the date of the sales referred to in the
above paragraph, the distribution fee payable by a Fund to Quest Distributors
pursuant to the Fund's Distribution Plan in
22
<PAGE>
[LOGO] GENERAL APPLICATION
QUEST FOR VALUE FAMILY OF FUNDS
ATTN: SHAREHOLDER SERVICES
CHURCH STREET STATION
P.O. BOX 3567
NEW YORK, NY 10008-3567
(800) 232-FUND (3863)
- -------------------------------------------------------------------------------
- --------------------- 1. FUND SELECTION
BE SURE TO CONSULT THE FUND'S PROSPECTUS UNDER "HOW TO PURCHASE
SHARES" FOR DETAILS REGARDING SALES CHARGES, RIGHTS OF
ACCUMULATION, LETTERS OF INTENT, AND MINIMUM PURCHASE REQUIREMENTS.
CONFIRMED PURCHASE INFORMATION
TRADE DATE __________________ TRADE AMOUNT ________________
CONFIRM NO. ___________________________________________________
TYPES OF SHARES: / / Class A (Front-End Sales Charge)
(CHECK ONE ONLY) / / Class B (Contingent Deferred Sales Charge)
/ / Class C (Level Load)
See prospectus for details.
Fund Selection $1,000 minimum initial investment per fund, $250.00
subsequently.
EQUITY FUNDS FIXED INCOME FUNDS
Quest For Value $______ Global Income $______
Global Equity $______ Investment Quality Income $______
Growth & Income $______ US Government Income $______
Opportunity $______
Small Capitalization $______
Officer's Fund $______
TAX-EXEMPT FUNDS MONEY MARKET FUNDS
(QUEST CASH RESERVES)
California General Municipal
Tax-Exempt $______ Portfolio $______
New York Tax-Exempt $______ Government Portfolio $______
National Tax-Exempt $______ Primary Portfolio $______
NOTE: For additional fund purchases, please indicate the above
information on an attached separate sheet of paper.
- -------------------------------------------------------------------------------
- --------------------- 2. ACCOUNT REGISTRATION AND ADDRESS
TYPE OF ACCOUNT: / / Single Tenant / / Partnership / / Union
/ / Joint Tenant / / Corporation / / Estate
/ / Custodian / / Charity / / Broker
/ / Trust / / Association / / Qualified Plan
/ / Broker Directed IRA
REGISTRATION: ____________________________________________________________
(NAME OR TITLE) ____________________________________________________________
____________________________________________________________
____________________________________________________________
ADDRESS: ____________________________________________________________
Street Address
____________________________________________________________
City State Zip
DATE OF BIRTH / // /-/ // /-/ // /
(if applicable)
*SOCIAL SECURITY NO. / // // /-/ // /-/ // // // /
OR
TAX IDENTIFICATION NO. / // /-/ // // // // // // /
ON JT. ACCTS SOCIAL SECURITY # OF PRIMARY
ON UGMA/UTMA ACCTS SOCIAL SECURITY # OF MINOR
- --------------------------------------------------------------------------------
FOR OFFICE USE ONLY: Check $___________________ Other Acct:__________________
Soc.Cd_____Dir____Br_____Rep#____Rep.Name_____Cum#_____Div___Cap___NAV___CWR___
ExRed____Exch____Sys.Purch___Sys.Red____Addmail___Divmail___LOI___PROC:___QAP__
- -------------------------------------------------------------------------------
- --------------------- 3. DEALER INFORMATION
PLEASE HAVE YOUR BROKER AGENT COMPLETE THE FOLLOWING:
Firm Name ___________________________ Rep. Name ___________________________
Branch Addr.___________________________ Rep. No. ___________________________
Branch No. ___________________________ Phone No. ___________________________
AUTHORIZED SIGNATURE _________________________________________________________
______________________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------- 4. BANK INFORMATION
(PLEASE ATTACH A VOIDED CHECK)
Bank Name _________________________________________________________________
Account No. _________________________________________________________________
ABA No. _________________________________________________________________
Name(s) on Bank Account ______________________________________________________
Type of Account ___Checking ___Savings (Passbook Savings not eligible)
- --------------------------------------------------------------------------------
- ------------------------ 5. ADDITIONAL INFORMATION REQUEST
PLEASE CHECK BELOW IF YOU WOULD LIKE US TO SEND YOU ANY ADDITIONAL
INFORMATION ABOUT OUR PRODUCTS AND PROGRAMS.
PRODUCTS PROGRAMS
/ / ASSET ALLOCATION / / PLANVIEW
/ / MUTUAL FUND / / 401K
/ / MONEY MARKET / / LUMP SUM
/ / WRAP FEE / / EXECUTIVE BENEFITS
/ / UNIT TRUST / / RETIREMENT VIEW
/ / VARIABLE ANNUITY / / ADVISORY COUNCIL
/ / REGISTERED INVESTMENT ADVISOR
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------ 6. ACCOUNT OPTIONS
/ / A. REDUCED SALES CHARGE
/ / LOI I AM ENTITLED TO RECEIVE A REDUCED SALES CHARGE
(LETTER OF INTENT) BECAUSE I INTEND TO INVEST AT LEAST
$/ // // // // // // // // // // // // // // / WITHIN
THE REQUIRED 13 MONTH TIME PERIOD.
PLEASE SEE PROSPECTUS FOR DETAILS.
/ / NAV I AM ENTITLED TO PURCHASE SHARES AT NET ASSET VALUE,
(NET ASSET VALUE) WITHOUT ANY SALES CHARGE FOR THE FOLLOWING REASON:
/ / EMPLOYEE / / FAMILY MEMBER OF AN EMPLOYEE
/ / Current Name of employee____________
/ / Retired
/ / BROKERAGE FIRM EMPLOYEE (Firm must have a Selling Group Agreement)
/ / Broker / / Broker's Asst. / / Back Office / / Other_________
/ / Registered Investment Advisor
/ / NAV TRANSFER FROM ANOTHER LOAD FUND
Name of Fund/Firm ________________________________________________
Account # ________________________________________________________
Amount $ _________________________________________________________
/ / ROA I AM ENTITLED TO RECEIVE A REDUCED SALES CHARGE
(RIGHTS OF BECAUSE THE TOTAL DOLLAR VALUE OF EXISTING
ACCUMULATION) ACCOUNTS HELD BY ME, MY SPOUSE, AND MINOR
CHILDREN IS MORE THAN $50,000.00.
Existing Account Numbers _____________________________________
_____________________________________
/ / B. DISTRIBUTIONS (DIVIDENDS & CAPITAL)
/ / Dividends Reinvested / / Capital Gains Reinvested
/ / DIVIDENDS IN CASH / / CAPITAL GAINS IN CASH
/ / Mail to the Address of Record / / Wire to Bank (list bank info.
/ / Mail to the Dealer of Record in Section 4)
/ / Mail to Other ________________ / / Reinvest into another Fund
(list name & addr)________________ (complete the Section below)
From Fund _______ To Fund_________
_______ _________
/ / C. EXCHANGE
There will be a non-refundable fee of $5.00 for each exchange.
TELEPHONE EXCHANGE WILL AUTOMATICALLY BE ESTABLISHED UNLESS YOU
CHECK THIS BOX. (TELEPHONE EXCHANGE ENTITLES ANYONE WITH PERTINENT
ACCOUNT INFORMATION TO EXCHANGE.)
/ / D. SYSTEMATIC EXCHANGE (ADCAP: AVERAGE DOLLAR COST AVG.)
I WISH TO ESTABLISH THE SYSTEMATIC EXCHANGE OPTION AS INDICATED
BELOW.
FROM FUND TO FUND AMOUNT INDICATE MONTHS BELOW
J F M A M J J A S O N D
- ----------------- ----------------- -----------------
J F M A M J J A S O N D
- ----------------- ----------------- -----------------
J F M A M J J A S O N D
- ----------------- ----------------- -----------------
J F M A M J J A S O N D
- ----------------- ----------------- -----------------
*Systematic exchanges will be processed on the 27th day of the
month unless otherwise indicated here.
PROCESS DAY ____________________
/ / E. REDEMPTION
TELEPHONE REDEMPTION WILL AUTOMATICALLY BE ESTABLISHED UNLESS YOU
CHECK THIS BOX. (CHECK WILL BE MADE PAYABLE TO SHAREHOLDER(S) NAMED
IN SECTION 2 AND MAILED TO THE ADDRESS INDICATED IN SECTION 2
ONLY.)
/ / F. SYSTEMATIC REDEMPTION
I WISH TO ESTABLISH THE SYSTEMATIC REDEMPTION OPTION AS INDICATED
BELOW.
<TABLE>
<S> <C> <C> <C>
CHECK PAYABLE TO:
(IF OTHER THAN YOUR ADDRESS OR
FROM FUND AMOUNT INDICATE MOS. BELOW BANK LISTED IN SECTION 2 OR 4)
J F M A M J J A S O N D
- ------------------ ------------------ ------------------------------------------------------
J F M A M J J A S O N D
- ------------------ ------------------ ------------------------------------------------------
J F M A M J J A S O N D
- ------------------ ------------------ ------------------------------------------------------
J F M A M J J A S O N D
- ------------------ ------------------ ------------------------------------------------------
</TABLE>
*Option must be established 15 days prior to activation.
*Systematic redemptions will be processed on the 27th day of the
month unless otherwise indicated here.
PROCESS DAY __________________
/ / G. SYSTEMATIC INVESTMENT
I WISH TO ESTABLISH THE SYSTEMATIC INVESTMENT OPTION AS INDICATED
BELOW.
<TABLE>
<S> <C> <C>
INVESTMENT AMOUNT INDICATE MOS. BELOW PURCHASE SHARES INTO FUND NAME
J F M A M J J A S O N D
- ------------------------------------ ---------------------------------------------------------
J F M A M J J A S O N D
- ------------------------------------ ---------------------------------------------------------
J F M A M J J A S O N D
- ------------------------------------ ---------------------------------------------------------
J F M A M J J A S O N D
- ------------------------------------ ---------------------------------------------------------
</TABLE>
* PLEASE COMPLETE SECTION 4 WITH YOUR BANKING INFORMATION.
- --------------------------------------------------------------------------------
- --------------------- 7. SIGNATURES
I HAVE FULL AUTHORITY AND AM OF LEGAL AGE TO PURCHASE THESE SHARES,
HAVE READ A CURRENT PROSPECTUS AND AGREE TO ITS TERMS. UNDER
PENALTIES OF PERJURY, I CERTIFY (1) THAT THE SOCIAL SECURITY NUMBER
ABOVE IS CORRECT AND (2) THAT THE ACCOUNT OWNER IS NOT SUBJECT TO
BACK-UP WITHHOLDING BECAUSE (A) THE ACCOUNT OWNER HAS NOT BEEN
NOTIFIED OF BEING SUBJECT TO BACK-UP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (B) THE I.R.S. HAS
PROVIDED NOTIFICATION THAT THE ACCOUNT OWNER IS NO LONGER SUBJECT
TO BACK-UP WITHHOLDING. (CROSS OUT (2) IF IT IS NOT CORRECT.) IF
NO SUCH NUMBER IS SHOWN, I FURTHER CERTIFY UNDER PENALTIES OF
PERJURY, THAT EITHER (A) NO SUCH NUMBER HAS BEEN ISSUED, AND A
NUMBER HAS BEEN OR WILL SOON BE APPLIED FOR; IF A NUMBER IS NOT
PROVIDED BY ME WITHIN SIXTY DAYS, I UNDERSTAND THAT ALL PAYMENTS
(INCLUDING LIQUIDATIONS) ARE SUBJECT TO 31% WITHHOLDING UNDER
FEDERAL TAX LAW, UNTIL A NUMBER IS PROVIDED; OR (B) THAT I AM
NOT A CITIZEN OR RESIDENT OF THE U.S.; AND EITHER DO NOT EXPECT
TO BE IN THE U.S. FOR 183 DAYS DURING EACH CALENDAR YEAR AND DO NOT
CONDUCT A BUSINESS IN THE U.S. WHICH WOULD RECEIVE ANY GAIN FROM
THE FUND, OR AM EXEMPT UNDER AN INCOME TAX TREATY. 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. I UNDERSTAND THAT I AND MY ACCOUNT
REPRESENTATIVE WILL AUTOMATICALLY HAVE THE RIGHT TO MAKE
TELEPHONE REDEMPTIONS AND EXCHANGES UNLESS I INDICATE OTHERWISE AS
SET FORTH ABOVE.
SIGNATURE ______________________________ TITLE ______________________________
SIGNATURE ______________________________ TITLE ______________________________
__________________________________
DATE
<PAGE>
connection with such shares will be retained by Quest Distributors. In the event
of a redemption of any such shares within 24 months of purchase, the selling
dealer will reimburse Quest Distributors for the amount of commission paid less
the amount of the distribution fee with respect to such shares.
PURCHASES BY STRATEGIC ALLIANCES. The CDSC will not apply with respect to
purchases of Class A shares by participants in qualified retirement plans that
are part of strategic alliances. No sales charge will be imposed on such
purchases and Quest Distributors will pay to the selling dealer a commission
described above in "Purchases of Class A Shares of $1 Million or More." For the
period of 13 months from the date of such sales, the distribution fee payable by
a Fund to Quest Distributors pursuant to the Fund's Distribution Plan in
connection with such shares will be retained by Quest Distributors.
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. In some instances, these incentives may be made available only to
dealers whose representatives have sold or are expected to sell significant
amounts of shares. If a registered representative of a securities dealer sells
more than $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 1995 calendar year, the dealer firm is
eligible to send the representative and a guest to a sales conference at a
luxury resort; individual sales of Class A shares in the amount of $1 million or
more that are purchased at net asset value and sales of Class C shares will
count as one-half their amount for determining eligibility.
- ---------------------------------------------
DETERMINING NET ASSET VALUE
The value of shares is determined by adding up the value of all security
holdings and other assets of the Fund, deducting the value of the 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 the Fund. Securities listed
on a national securities exchange or designated as national market system
securities are valued at the last sale price or, if there has been no sale that
day, at the last bid price. Debt and equity securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the most recent bid price. Valuations may be provided by a pricing
service or from independent securities dealers. Short-term investments with
remaining maturities of less than 60 days are valued at amortized cost so long
as the Board determines in good faith that such method reflects fair value.
Other securities are valued by methods that the Board of a Fund believes
accurately reflect fair value. The calculation is made at the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time) each day the NYSE is open. The value that is
calculated is known as the net asset value per share, which will fluctuate
daily. Although the legal rights of Class A, B and C shares are identical, the
different expenses borne by each class may result in differing net asset values
and dividends for each Class.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the Close of the NYSE. The values of such securities
23
<PAGE>
used in computing the net asset value of a Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the Close of the NYSE. If events materially affecting the value of such
securities and exchange rates occur between the time of such determination
and/or the Close of the NYSE, then these securities will be valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the Fund's Board. See "Determination of Net Asset Value" in the
SAIs.
- ---------------------------------------------
HOW TO REDEEM SHARES
You may redeem shares on any day the Funds are open for business--normally when
the New York Stock Exchange ("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.
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 an eligible guarantor. Eligible guarantors include
member firms of a national securities exchange, banks, savings associations and
credit unions, as defined by the Federal Deposit Insurance Act. Special
requirements may exist for corporations, trusts and similar accounts. If you
hold stock certificates, you should call the Transfer Agent for instructions on
the appropriate redemption procedure.
EXPEDITED REDEMPTIONS: You and your account representative will automatically
receive the ability to redeem or exchange shares by telephone unless you
indicate otherwise on the application. You may also authorize certain other
expedited redemption procedures. BY TELEPHONE (minimum $1,000). The proceeds of
redemption will either be mailed to you or wired to the account of any bank that
is a member of the Federal Reserve wire system. This account must be designated
on your application. If you change the bank account, you must let us know 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 arrange an automatic
withdrawal plan so that the amount you specify (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 (U.S. Government Income Fund only--$250 minimum).
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.
Your redemption proceeds, from which any applicable CDSC will have been
deducted, will normally be mailed or wired the day after your redemption is
processed. Payments for redemption of shares that you purchased by check may be
delayed until the
24
<PAGE>
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 reinvest in a Quest Fund within 60 days of
redemption, you will be reinstated as a shareholder with the same privileges
regarding the non-payment of sales charges that apply to exchanges. You may
exercise this privilege only once each calendar year. The redemption may produce
a gain or loss for tax purposes.
The Funds may suspend redemption procedures and postpone redemption payments
during any period when the NYSE is closed other than for customary weekend or
holiday closing or the SEC has determined an emergency exists or has otherwise
permitted such suspension or postponement. The Funds reserve the right to redeem
your account if its value is less than $500 due to redemptions. Your Fund will
give you 30 days' notice to increase your account value to at least $500.
Redemption proceeds will be mailed.
- ---------------------------------------------
EXCHANGING SHARES
An 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.
Your exchange will be processed at the net asset value next determined after
the Transfer Agent receives your exchange request. A service fee (currently $5)
will be charged for administrative services in connection with an exchange. You
will receive a prospectus along with your confirmation if you exchange into a
Fund not offered in this Prospectus. The exchange feature may be modified or
discontinued at any time, upon notice to shareholders in accordance with
applicable rules adopted by the Securities and Exchange Commission ("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.
EXCHANGES OF CLASS A SHARES: You may exchange your Class A shares for Class A
shares of any mutual fund (except as described below with respect to exchanges
from the Global Income Fund) distributed by Quest Distributors ("Quest Fund")
and for shares of Quest Cash Reserves, Inc. ("QCR"), a single-class money market
fund with five different portfolios. You need not pay any sales charge
differential between Quest Funds on the exchange of Class A shares purchased
with a front-end 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 fund with the same or higher sales
charge.
If you exchange Class A shares of the Global Income Fund into another Quest
Fund within six months of your purchase of Class A shares of the Global Income
Fund, you will have to pay the difference between the sales charge paid on your
purchase of Class A shares of the Global Income Fund and the sales charge that
would have been charged if you had originally purchased Class A shares of the
Fund into which you are exchanging.
EXCHANGES OF CLASS B SHARES: Class B shares of all Quest Funds are exchangeable
for Class B shares of any other Quest Fund. Class B shares of any Quest Fund
cannot be exchanged for Class A or C shares of any Quest Fund.
25
<PAGE>
EXCHANGES OF CLASS C SHARES: Class C shares of all Quest Funds are
exchangeable for Class C shares of any other Quest Fund. Class C shares of
any Quest Fund cannot be exchanged for Class A or B shares of any Quest Fund.
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 AND TECHNIQUES
The Funds are subject to certain investment restrictions which are fundamental
policies changeable only by shareholder vote. The restrictions in a, b and c
below do not apply to U.S. government securities. The restrictions apply to each
Fund unless otherwise noted. A Fund may not (except that in the future the Quest
for Value, U.S. Government Income, the Growth and Income, the Global Income and
the Global Equity Funds may invest all or part of their respective assets in an
open-end management investment company with substantially the same respective
investment objective and restrictions): (a) Purchase more than 10% of the voting
securities of any one issuer (for Global Equity, Global Income and Growth and
Income only with respect to 75% of their respective total assets; except that to
comply with a state's securities laws, Global Income has adopted this
restriction with respect to 100% of its total assets, although this restriction
is not a fundamental policy of the Global Income Fund); (b) Purchase more than
10% of any class of security of any issuer, with all outstanding debt securities
and all preferred stock of an issuer each being considered as one class (all
Funds except Global Equity, Global Income and Growth and Income); (c)
Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, a Fund may invest up to 25%
of its total assets (valued at the time of investment) in any one industry
classification used by the Fund for investment purposes (for this purpose, a
foreign government is considered an industry). Concentration of investment in
securities of one issuer may tend to increase a Fund's financial risk (See "Risk
Factors," p. 12);(d) Borrow money in excess of: 10% of the value of the Fund's
total assets in the case of the Small Capitalization, U.S. Government Income,
Investment Quality Income and Opportunity Funds;
26
<PAGE>
33 1/3% of the value of the Fund's total assets in the case of the Quest for
Value, Global Equity, Global Income and Growth and Income Funds; each Fund
(except for Quest for Value Fund) may borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes and will make no
additional investments while such borrowings exceed 5% of the total assets;
Quest for Value Fund may, but has no present intention to, borrow for leveraging
purposes; (e) Invest more than 10% of the Fund's total assets in illiquid
securities (15% for Quest for Value Fund, the Growth and Income Fund, the Global
Income Fund and the Global Equity Fund), including securities for which there is
no readily available market, repurchase agreements which have a maturity of
longer than seven days, securities subject to legal or contractual restrictions
and certain over-the-counter options (it is the opinion of the Wisconsin
Securities Commission that investments in restricted securities in excess of 5%
of a Fund's total assets may be considered a speculative activity and therefore
involve greater risk and increase the Fund's expenses; to comply with
Wisconsin's securities laws, all Funds except Global Income have agreed to limit
investments in restricted securities to 5% of their respective total assets,
although the restriction is not a fundamental policy of such Funds); and (f)
Invest more than 5% (15% for Quest for Value Fund) of the Fund's total assets in
securities of issuers having a record, together with predecessors, of less than
three years of continuous operation. (This restriction is not a fundamental
policy of each of the Global Equity, Global Income or Growth and Income Funds,
but was adopted to comply with a state's securities laws). Notwithstanding
investment restriction (e) above, the Funds each may purchase securities which
are not registered under the Securities Act of 1933 ("1933 Act") but which can
be sold to "qualified institutional buyers" in accordance with Rule 144A under
the 1933 Act. Any such security will not be considered illiquid so long as it is
determined by the Board of Directors or Quest Advisors, acting under guidelines
approved and monitored by the Board, which has the ultimate responsibility for
any determination regarding liquidity, that an adequate trading market exists
for that security. This investment practice could have the effect of increasing
the level of illiquidity in each of the Funds during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities. The ability to sell to qualified institutional buyers under Rule
144A is a relatively recent development and it is not possible to predict how
this market will develop. The Board will carefully monitor any investments by
each of the Funds in these securities. Other investment restrictions are
described in the SAIs.
The investment techniques or instruments described below are used for
investment programs of the Funds.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: All Funds may acquire
securities subject to repurchase agreements. Under a typical repurchase
agreement, a Fund acquires a debt security for a relatively short period
(usually for one day and very seldom for more than one week) subject to an
obligation of the seller to repurchase (and the Fund's obligation to resell) the
security at an agreed-upon higher price, thereby establishing a fixed investment
return during the holding period. Pending such repurchase, the seller of the
instrument maintains securities as collateral equal in market value to the
repurchase price.
In the event a seller defaulted on its repurchase obligation, a Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of a seller's bankruptcy, a
Fund might be delayed in, or prevented from, selling the collateral for the
Fund's benefit. Each Fund's Board of Directors/ Trustees has established
procedures, which are
27
<PAGE>
periodically reviewed by the Board, pursuant to which Quest Advisors will
monitor the creditworthiness of the dealers and banks with which the Funds enter
into repurchase agreement transactions.
The Global Income Fund may enter into reverse repurchase agreements. Under a
reverse repurchase agreement, a Fund sells securities and agrees to repurchase
them at a mutually agreed date and price. At the time the Global Income Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing liquid high grade
securities having a value not less than the repurchase price (including accrued
interest). Reverse repurchase agreements involve the risk that the market value
of the securities retained in lieu of sale by the Fund may decline more than or
appreciate less than the securities the Fund has sold but is obligated to
repurchase. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, such buyer or its trustee
or receiver may receive an extension of time to determine whether to enforce the
Fund's obligation to repurchase the securities and the Fund's use of the
proceeds of the reverse repurchase agreements may effectively be restricted
pending such decisions. Reverse repurchase agreements create leverage, a
speculative factor, and will be considered borrowings for purposes of the Global
Income Fund's limitation on borrowing.
LOANS OF PORTFOLIO SECURITIES: All Funds may lend portfolio securities if
collateral (cash, U.S. Government or agency obligations or letters of credit)
securing such loans is maintained daily in an amount at least equal to the
market value of the securities loaned and if the Funds do not incur any fees
(except transaction fees of the custodian bank) in connection with such loans. A
Fund may call the loan at any time on five days' notice and reacquire the loaned
securities. The Fund would receive the cash equivalent of the interest or
dividends paid by the issuer on the securities loan and would have the right to
receive the interest on investment of the cash collateral in short-term debt
instruments. A portion of either or both kinds of such interest may be paid to
the borrower of such securities. The Fund would continue to retain any voting
rights with respect to the securities. The value of the securities loaned, if
any, is not expected to exceed 10% of the value of the total assets of Quest for
Value, Small Capitalization, Opportunity or Investment Quality Income Funds and
33 1/3% of the value of the total assets of U.S. Government Income, Global
Equity, Global Income or Growth and Income Funds. There is a risk that the
borrower of the securities may default and the Funds may have difficulty in
reacquiring the loaned securities.
BRADY BONDS. The Global Income Fund and the Global Equity Fund may purchase
Brady Bonds and other sovereign debt of countries that have restructured or are
in the process of restructuring their sovereign debt. Brady Bonds are debt
securities issued under the Brady Plan, a mechanism whereby debtor nations can
restructure their indebtedness by negotiating with lenders and exchanging
existing commercial bank debt for Brady Bonds. Brady Bonds may also be issued in
respect of new money being advanced by existing lenders in connection with the
debt restructuring. The Brady Plan only sets forth general guidelines for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
Brady Bonds have been issued only recently and consequently do not have a long
payment history. The principal of certain Brady Bonds has been collateralized by
Treasury zero coupon bonds with maturities equal to the final maturity of such
Brady Bonds. In addition, the first two or three interest payments on certain
Brady Bonds may be collateralized by
28
<PAGE>
cash or securities agreed upon by creditors. See "Risk Factors and Special
Considerations" in the SAI for a more complete description of Brady Bonds.
MORTGAGE-BACKED SECURITIES: The U.S. Government Income, Investment Quality
Income, Opportunity, Growth and Income and Global Income Funds may invest in a
type of mortgage-backed security known as modified pass-through certificates.
Each certificate evidences an interest in a specific pool of mortgages that have
been grouped together for sale and provides investors with payments of interest
and principal. The issuer of modified pass-through certificates guarantees the
payment of the principal and interest whether or not the issuer has collected
such amounts on the underlying mortgage.
The average life of these securities varies with the maturities of the
underlying mortgage instruments (generally up to 30 years) and with the extent
of prepayments or the mortgages themselves. Any such prepayments are passed
through to the certificate holder, reducing the stream of future payments.
Prepayments tend to rise in periods of falling interest rates, decreasing the
average life of the certificate and generating cash which must be invested in a
lower interest rate environment. This could also limit the appreciation
potential of the certificates when compared to similar debt obligations which
may not be paid down at will, and could cause losses on certificates purchased
at a premium or gains on certificates purchased at a discount. Government
National Mortgage Association ("Ginnie Mae") certificates represent pools of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veteran's Administration. The guarantee of
payments under these certificates is backed by the full faith and credit of the
United States. Federal National Mortgage Association ("Fannie Mae") is a
government-sponsored corporation owned entirely by private stockholders. The
guarantee of payments under these instruments is that of Fannie Mae only. They
are not backed by the full faith and credit of the United States but the U.S.
Treasury may extend credit to Fannie Mae through discretionary purchases of its
securities. The U.S. Government has no obligation to assume the liabilities of
Fannie Mae. Federal Home Loan Mortgage Corp. ("Freddie Mac") is a corporate
instrumentality of the United States government whose stock is owned by the
Federal Home Loan Banks. Certificates issued by Freddie Mac represent interest
in mortgages from its portfolio. Freddie Mac guarantees payments under its
certificates but this guarantee is not backed by the full faith and credit of
the United States and Freddie Mac does not have authority to borrow from the
U.S. Treasury.
The coupon rate of these instruments is lower than the interest rate on the
underlying mortgages by the amount of fees paid to the issuing agencies, usually
approximately 1/2 of 1%. It is not anticipated that the Funds' investments will
have any particular maturity. Mortgage-backed securities, due to the scheduled
periodic repayment of principal, and the possibility of accelerated repayment of
underlying mortgage obligations, fluctuate in value in a different manner than
other, non-redeemable debt securities. The U.S. Government Income, Investment
Quality Income, Opportunity, Growth and Income and Global Income Funds also may
invest in "collateralized mortgage obligations" ("CMO's") which are debt
obligations secured by mortgage-backed securities where the investor looks only
to the issuer of the security for payment of principal and interest.
OPTIONS AND FUTURES: The U.S. Government Income Fund may buy and sell futures
contracts and options, write covered put and call options on U.S. government
securities to generate additional income, purchase put and call options to
close-out or off-set options it has written and to hedge its investments against
changes in value or as a temporary substitute for purchases or sales of actual
29
<PAGE>
securities. The U.S. Government Income Fund also may purchase put and call
options on financial futures and write put and call options on such contracts.
The Global Income Fund may write covered call options and the Global Equity and
Global Income Funds may purchase and sell financial futures contracts (including
bond futures contracts and index futures contracts), foreign currency forward
contracts, foreign currency futures contracts, options on futures contracts and
options on currencies. In addition, the Global Income Fund is authorized to
write covered put options but does not presently intend to do so. The Quest for
Value, Small Capitalization and Growth and Income Funds may buy and sell options
on stock indexes, futures contracts and options on futures to hedge their
investments against changes in value or as a temporary substitute for purchases
or sales of actual securities. The Small Capitalization Fund may write covered
call options on individual securities. The Investment Quality Income Fund may
purchase or sell financial futures contracts and options on such contracts for
similar purposes. When each such 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
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 in 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. or
foreign commodities exchange or will result from separate, privately negotiated
transactions with a primary government securities dealer recognized by the Board
of Governors of the Federal Reserve System or with other broker-dealers approved
by the Fund's Board. Options on securities, futures contracts and options on
futures contracts that are traded on foreign exchanges are subject to the risk
of governmental action affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(i) other complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions (iii) delays in a Fund's ability to act upon economic events occurring
in foreign markets during nonbusiness hours in the United States, (iv) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, (v) lesser trading volume and (vi) in
certain circumstances, currency fluctuations. In addition, the Small
Capitalization Fund may write covered call options on individual securities.
So long as Commodities Futures Trading Commission rules so require, a Fund
will not enter into any financial 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. A call option written by a Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or
30
<PAGE>
for additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also covered if the Fund holds a call on the same security and in the
same principal amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call written or (b)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities or other liquid
high-grade debt securities in a segregated account with its custodian. A put
option written by a Fund is "covered" if the Fund maintains cash, U.S.
Government securities or other liquid high-grade debt securities with a value
equal to the exercise price in a segregated account with its custodian, or else
holds a put on the same security and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written. 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS: All Funds may
purchase securities on a "when-issued" or "delayed delivery" basis or may either
purchase or sell securities on a "firm commitment basis", whereby the price is
fixed at the time of commitment but delivery and payment may be as much as a
month or more later. The underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the securities.
RIGHTS AND WARRANTS (GLOBAL EQUITY, GLOBAL INCOME AND GROWTH AND INCOME
FUNDS): Each of these Funds may invest up to 5% of its total assets in rights or
warrants which entitle the holder to buy equity securities at a specific price
for a specific period of time. The 5% limitation is not a fundamental policy for
the Global Equity and Global Income Funds.
- ---------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The U.S. Government Income, Investment Quality Income and Global Income Funds
declare dividends of their net investment income, consisting of interest earned
less estimated expenses, on a daily basis. These dividends are paid monthly. You
are entitled to receive the dividend declared on the day after the Transfer
Agent receives payment for your shares of these funds. Dividends from net
investment income are declared and paid quarterly for the Growth and Income
Fund. The Quest for Value, Small Capitalization, Opportunity and Global Equity
Funds declare and pay dividends from net investment income on an annual basis
following the end of their fiscal years (October 31, except for the Global
Equity and Global Income Funds, which is November 30). The Funds may at times
make payments from sources other than income or net capital gains. Payments from
such sources would, in effect, represent a return of each shareholder's
investment. All or a portion of such payments would not be taxable to
shareholders.
Distributions from net long-term capital gains, if any, for all Funds normally
are declared and paid annually, subsequent to the end of their respective
31
<PAGE>
fiscal years. Distributions from net short-term capital gains, if any, for
the U.S. Government Income Fund will be made quarterly and for all other
Funds will be made annually. Short-term capital gains include the gains from
the disposition of securities held less than one year, a portion of the
premiums from expired put and call options written by a Fund and net gains
from closing transactions with respect to such options. If required by tax
laws to avoid excise or other taxes, dividends and/or capital gains
distributions may be made more frequently.
Dividends paid by any Fund with respect to Class A, B and C shares, to the
extent any dividends are paid, will be calculated in the same manner at
the same time on the same day, with each class bearing its own distribution and
other class-related expenses. Accordingly, the higher distribution fees paid by
Class B and C shares and the higher resulting expense ratio will cause such
shares to be paid lower per share dividends than those paid on Class A shares.
However, a Class B or C shareholder will receive more shares at the time of
purchase than a Class A shareholder investing the same dollar amount since no
sales charge is deducted from the amount invested in Class B or C shares.
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 on such distributions. See the SAI for a
description of how to change your election.
- ---------------------------------------------
TAX STATUS
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 net investment income or net realized capital gains,
if any, to the extent they have been distributed to their shareholders.
Distributions from the Funds' income and short-term capital gains are taxed as
ordinary income while long-term capital gains distributions by the Fund are
taxed to you as long-term capital gains, regardless of how long you have held
your shares. While tax treatment varies from state to state, some portion of the
dividends of the U.S. Government Income Fund should be exempt from income taxes
in most states depending, in part, on the percentage of income that is derived
from direct U.S. Government obligations. The U.S. Government Income Fund will
send you its best information on the tax status of dividends under the laws of
each state and will provide information regarding the source (including the
percentage of income derived from direct U.S. Government obligations) of all its
dividends and distributions. For purposes of Federal income tax, futures
contracts and certain options, if any, held by the Funds at the end of their
respective fiscal years generally will be treated as having been sold at market
value. As a general rule any gain or loss on such contracts will be treated as
60% long-term and 40% short-term. See the SAI for more detail on the tax aspects
of Hedging Instruments. Dividends will qualify for the dividends received
deduction for corporations only to the extent of a Fund's qualifying dividend
income. Since the income received by the U.S. Government Income, Investment
Quality Income and Global Income Funds will be derived from interest income
rather than dividend income, their dividends normally will not qualify for this
deduction. Shortly after the end of each calendar year, the Funds will send you
a statement of the amount and nature of net income and capital gains. Dividends,
interest and gains on foreign securities may give rise to withholding and other
taxes imposed by foreign countries, reducing the amount distributable to you.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes. The Global Equity and Global Income Funds may each qualify
to make an election
32
<PAGE>
to allow you either to claim United States foreign tax credits with respect
to such foreign taxes withheld or paid, or to deduct such amounts as an
itemized deduction on your tax return. This would increase your taxable
income (in addition to income you actually received) by the amount of such
taxes and these Funds would not be able to deduct such taxes in computing
their taxable income.
The above information is a summary of the tax treatment that will be applied
to a Fund and its distributions. You should contact your tax adviser,
particularly in connection with state and local taxes.
- ---------------------------------------------
INVESTMENT MANAGEMENT AGREEMENT
The day-to-day management of the Funds is the responsibility of Quest Advisors,
operating under the supervision of the Board of Directors or Trustees of each
Fund. Quest Advisors is a majority-owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment advisory
services provided to the Funds by Quest Advisors. For its services each Fund is
authorized to pay Quest Advisors a monthly fee at the following annual rates,
based on each Fund's daily net assets: Quest for Value, Small Capitalization and
Opportunity--1.00%; Growth and Income--.85%; Global Equity--.75%; U.S.
Government Income and Investment Quality Income--.60%; and Global Income--.50%.
The fees paid by the Quest for Value, Small Capitalization, Opportunity and
Growth and Income Funds are higher than that paid by most other investment
companies. The fee of the Global Equity Fund combined with the administration
fee described below, is also higher than that paid by most other investment
companies. Each of the Funds except Quest for Value, Global Income and Global
Equity also reimburses Quest Advisors on a cost basis for bookkeeping and
accounting services performed on behalf of each Fund. The Quest for Value Fund,
the U.S. Government Income Fund, the Small Capitalization Fund, the Opportunity
Fund, the Investment Quality Income Fund and the Growth and Income Fund have
retained State Street Bank and Trust Company ("State Street"), the custodian of
each of the Funds, to calculate the net asset value of each class of the Fund's
shares and prepare the Fund's books and records. State Street also performs such
services for the Global Income Fund and the Global Equity Fund but the fees for
such services are paid by Quest Advisors.
Pursuant to Administration Agreements with the Global Equity and Global Income
Funds, Quest Advisors provides administrative services and manages the business
affairs of each Fund. Such services include maintenance of the Fund's books and
records, monitoring the activities of entities providing services to the Fund,
furnishing office space, facilities, equipment, clerical help and bookkeeping
and legal services required in the conduct of the Fund's business, including the
preparation of proxy statements and reports filed with federal and state
securities commissions (except to the extent that the participation of
independent accountants and attorneys is, in the opinion of Quest Advisors,
necessary or desirable). Quest Advisors bears the cost of telephone service,
heat, light, power and other utilities provided to the Fund. For these services,
the Fund pays Quest Advisors a fee at the annual rate of .25% of average daily
net assets of the respective Fund.
Each Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses;
33
<PAGE>
custodian fees; insurance premiums; and trade association dues. Fund Expenses
will be allocated based on the total net assets of each class.
Each class of shares of each Fund will also be responsible for certain
expenses attributable only to that class ("Class Expenses"). These Class
Expenses may include distribution and service fees, transfer and shareholder
servicing agent fees, professional fees, printing and postage expenses for
materials distributed to current shareholders, state registration fees and
shareholder meeting expenses. Such items are considered Class Expenses provided
such fees and expenses relate solely to such Class.
A portion of printing expenses, such as typesetting costs, will be divided
equally among the Funds, while other printing expenses, such as the number of
copies printed, will be considered Class Expenses.
Quest Advisors will assume expenses of each class of the Funds in the event
that aggregate ordinary operating expenses incurred in any fiscal year exceed
the most restrictive expense limitations imposed upon the Funds in states in
which shares are then eligible for sale. Currently the most restrictive expense
limitation, which excludes certain distribution fees from operating expenses, is
2 1/2% of the first $30 million of average net assets, 2% of the next $70
million of average net assets and 1 1/2% of the remaining average net assets.
Quest Advisors has agreed to limit Fund Expenses (as defined above) of the
Growth and Income and Global Income Funds so that annualized operating Fund
Expenses, exclusive of Class Expenses (as defined above), do not exceed 1.50%
and 1.45%, respectively, of each Fund's average daily net assets; this expense
limitations are voluntary and may be discontinued at any time. Quest Advisors
may make additional waivers of its management fee and/or assume Fund expenses on
a voluntary basis.
Quest Advisors has retained New Castle Advisers Inc. ("New Castle") as the
Subadvisor for the U.S. Government Income Fund pursuant to an agreement with
Quest Advisors whereby New Castle provides advice and assistance in connection
with the options and financial futures investments of the U.S. Government Income
Fund. New Castle, a registered investment advisor, maintains an office at 1
Barker Avenue, White Plains, New York, and has been in business since 1991.
Howard Potter is the President and Chief Executive Officer of New Castle and is
the sole stockholder. Prior to establishing New Castle, Mr. Potter was the
individual responsible for developing investment strategies for options and
financial futures for Oppenheimer & Co., Inc, subadvisor to the U.S. Government
Income Fund from April 29, 1988 to November 1, 1991. Quest Advisors will pay New
Castle 20% of the advisory fee paid by the U.S. Government Income Fund to the
Advisor, subject to certain reimbursements. There is no additional cost to the
U.S. Government Income Fund from this agreement.
Prior to January 1, 1994, Quest Advisors had retained Clay Finlay Inc.
(formerly Globe Finlay Inc.) as the Subadvisor for the Global Equity Fund
pursuant to an agreement with Quest Advisors whereby Clay Finlay had the primary
responsibility for selecting non-U.S. securities, subject to the overall review
of Quest Advisors. This agreement was terminated effective December 31, 1993 and
management of the non-U.S. portion of the Fund's portfolio was assumed by Quest
Advisors.
Oppenheimer Financial Corp., a holding company holds a 33% interest in
Oppenheimer Capital, a registered investment advisor, and Oppenheimer Capital,
L.P., a Delaware limited partnership whose units are traded on the New York
Stock Exchange 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.
34
<PAGE>
- ---------------------------------------------
DISTRIBUTION PLAN
Each Class of shares of each Fund has adopted a Distribution Plan and Agreement
(the "Plan(s)") pursuant to Rule 12b-1 adopted under the Investment Company Act
of 1940. Under the Plans, Class A, B and C shares of each of the Funds are
authorized to pay Quest Distributors a distribution fee for expenses incurred in
connection with the distribution of shares of the Fund and for shareholder
servicing.
CLASS A SHARES. Class A shares of each Fund pay Quest Distributors a
distribution fee at the following annual rates of each Fund's average daily net
assets: U.S. Government Income Fund--.05%, Investment Quality Income and Growth
and Income Fund--.15%, all other Funds except Global Income Fund --.25%. Each
Fund's Class A Shares also pay a service fee at the annual rate of .25% of
average daily net assets. Although the Global Income Fund is authorized under
its Plan to pay a distribution fee of .05% and a service fee of .25%, the Board
of Directors of the Global Income Fund has set a maximum fee under the Plan of
.25%.
CLASS B AND C SHARES. Class B and C shares of each Fund pay Quest Distributors a
distribution fee at the annual rate of .75% of each Fund's average daily net
assets. Class B and C shares of each Fund will also pay a service fee at the
annual rate of .25% of each Fund's average daily net assets. The Class B Plans
were amended and restated in December 1994, without changing the fees each Fund
pays to Quest Distributors under such Plans, to reflect the intention of Quest
Distributors to assign its right to payments under the Plans in order to finance
Quest Distributors' costs in distributing Plan B Shares.
USE OF DISTRIBUTION AND SERVICE FEES. All or a portion of the distribution fees
paid by either Class A, B or C shares may be used by Quest Distributors to pay
costs of printing reports and prospectuses for potential investors and all or a
portion of the distribution and/or service fees may be paid 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 address. Payments under the Plan are not limited to amounts actually
paid or expenses actually incurred by Quest Distributors but cannot exceed the
maximum rate set by the Plan or by the Board. It is, therefore, possible that
Quest Distributors may realize a profit in a particular year as a result of
these payments. The Plans have the effect of increasing the Funds' expenses from
what they otherwise would be. The Board of each Fund reviews that Fund's
distribution payments and may reduce or eliminate the fee at any time without
further obligation of the Fund. Investors should understand that the purpose and
function of the distribution fee and CDSC applicable to Class B and C shares are
the same as the sales charge and distribution fee applicable to Class A shares,
i.e., to compensate Quest Distributors for expenses incurred in distributing
shares of the Funds. The SAIs contain more information about the Investment
Management Agreement and the Plans.
- ---------------------------------------------
PORTFOLIO TRANSACTIONS AND TURNOVER
Quest Advisors may select its affiliate Oppenheimer & Co., Inc. ("Opco"), a
registered broker-dealer 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,
35
<PAGE>
Quest Advisors may consider their record of sales of shares of the Funds. (For a
further discussion of portfolio trading, see the SAIs, "Investment Objectives,
Policies and Restrictions"). Although Quest Advisors cannot accurately predict a
Fund's annual turnover rate, it is anticipated that the Small Capitalization,
Global Equity and Growth and Income Funds each will have an annual turnover rate
(excluding turnover of securities having a maturity of one year or less) of 100%
or less and that the U.S. Government Income, Opportunity, Investment Quality
Income and Global Income Funds each will have an annual turnover rate of 250% or
less. For the year ended October 31, 1994, the annual turnover rate of the
Growth and Income Fund was 113%, which was higher than anticipated, as a result
of asset allocation shifts made in reaction to interest rate changes and the
overall market outlook. To the extent that higher portfolio turnover increases
capital gains, more taxes will be payable. See "Tax Status".
- ---------------------------------------------
ADDITIONAL INFORMATION
Organization of the Funds. The Small Capitalization, U.S. Government Income,
Investment Quality Income, Opportunity and Growth and Income Funds are
portfolios of Quest for Value Family of Funds (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust on
April 17, 1987. The Trust's other portfolios are National Tax-Exempt, California
Tax-Exempt and New York Tax-Exempt Funds and the Officers Fund. The Trust may
establish additional portfolios which may have different investment objectives
from those stated in this prospectus. Quest for Value Fund, Inc. and Quest for
Value Global Equity Fund, Inc. are each open-end diversified management
investment companies organized as Maryland corporations. Global Income Fund, an
open-end non-diversified management investment company, is a portfolio of Quest
for Value Global Funds, Inc., a company organized as a Maryland corporation.
None of the Funds is 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 the purpose of voting upon the
question of removal of a director or trustee. Each Fund will assist shareholders
in communicating with one another in connection with such a meeting. For matters
affecting only one portfolio of Quest for Value Family of Funds or Quest for
Value Global Funds, Inc., 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. No stock certificates
will be issued unless specifically requested in writing.
Under Massachusetts law shareholders of the Trust 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 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. There is a remote possibility that one Fund
might become liable for a misstatement in this Prospectus about another Fund.
36
<PAGE>
Each class of shares represents identical interests in the applicable Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class, (b)
effect of the respective sales charges, if any, for each class, (c) distribution
fees borne by each class, (d) expenses allocable exclusively to each class, (e)
voting rights on matters exclusively affecting a single class and (f) exchange
privilege of each class.
PERFORMANCE INFORMATION: From time to time the Funds may advertise 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 (exclusive of gains, if any, from
options and financial futures transactions) 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.
"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. Performance data will be computed separately for each Class of
shares in accordance with formulas specified by the SEC.
POSSIBLE CONFLICTS OF INTEREST BETWEEN CLASSES. The Boards of the Funds have
determined that currently no conflict of interest exists between Class A, B
and/or C shares of any Fund. On an ongoing basis, the Boards shall monitor the
Funds for the existence of any material conflicts between the interests of the
classes of outstanding shares. The Boards shall take such action as is
reasonably necessary to eliminate any such conflicts that may develop, up to and
including establishing a new Fund.
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, whose principal business address is P.O. Box
8505, Boston, MA 02266. 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, 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 Quest for Value Shareholder Services, P.O. Box 3567, Church Street
Station, New York, NY, 10277-1296. 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.
SHAREHOLDER REPORTS. To reduce expenses, only one copy of financial reports will
be mailed to your household, even if you have more than one account in the
particular fund. If you wish to receive additional copies of financial reports,
please call 1-800-232-FUND.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent
37
<PAGE>
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 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 Manager
brokerage account, and other accounts for which Unified Management Corporation
is the dealer of record.
SPECIAL ARRANGEMENTS FOR FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS:
PURCHASES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS. All shareholders of the
AMA Family of Funds who acquired shares of any Quest Funds 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 FORMER SHAREHOLDERS OF THE UNIFIED FUNDS. Shareholders who acquired
shares of any Quest Fund pursuant to the combination of several Quest Funds
(including the Growth and Income and Quest for Value Funds) with portfolios of
the Unified Funds are able to make future 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 AND UNIFIED
FUNDS. While they have no present intention to do so, in the event that Quest
Distributors imposes a redemption fee in the future, no redemption fees will be
imposed upon redemption of shares of any Quest Fund by former shareholders of
the Unified Funds who are entitled to purchase shares of Quest Funds at net
asset value (see Purchases by Former Shareholders of the Unified Funds, above).
EXCHANGES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED FUNDS. 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 former shareholders of the Unified Funds who qualify to purchase shares
of Quest Funds at net asset value (see Purchases by Former Shareholders of the
Unified Funds), 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) for administrative services in connection with
an exchange into a non-money market fund.
38
<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 31% of each taxable dividend or capital gain distribution paid to you
in cash or reinvested in your account and will require us to withhold 31% 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
REGISTRATION TAXPAYER NUMBER TO BE 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
39
<PAGE>
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 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.
40
<PAGE>
APPENDIX
The average distribution of investments in bonds by ratings as a percentage of
average net assets for the Growth and Income Fund and the Global Income Fund for
the fiscal year ended October 31, 1994 and November 30, 1994, respectively,
calculated monthly on a dollar-weighted basis was as follows:
RATED BONDS
<TABLE>
<CAPTION>
MOODY'S INVESTORS SERVICE, INC. STANDARD & POOR'S CORPORATION PERCENTAGE
- ------------------------------- ------------------------------ ----------------------------------
GROWTH AND GLOBAL
INCOME FUND INCOME FUND
--------------- -----------------
<S> <C> <C> <C>
Aaa AAA -- 10.2%
Aa AA -- 6.5 %
A A -- --
Baa BBB 6.2 % 2.6 %
Ba BB -- 17.7 %
B B 6.8 % 5.2 %
Caa CCC 4.4 % --
</TABLE>
UNRATED BONDS DEEMED COMPARABLE TO THE INDICATED RATING
<TABLE>
<CAPTION>
MOODY'S INVESTORS SERVICE, INC. STANDARD & POOR'S CORPORATION PERCENTAGE
- ------------------------------- ------------------------------ ----------------------------------
GROWTH AND GLOBAL
INCOME FUND INCOME FUND
--------------- -----------------
<S> <C> <C> <C>
Aaa AAA 0% 15.2 %
Aa AA 0 % 32.2 %
A A 0 % 0 %
Baa BBB 0 % 0 %
Ba BB 0 % 5.6 %
B B 0 % 2.2 %
Caa CCC 0 % 0 %
</TABLE>
The actual distribution of a Fund's corporate bond investments by rating will
vary on any given date. The distribution of a Fund's investments by rating as
set forth above should not be considered representative of the future
composition of the Fund's portfolio.
41
<PAGE>
QUEST FOR VALUE-SM- FUNDS
TWO WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10080
QUEST FOR VALUE-SM-
FUNDS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses................. 2
Financial Highlights..................... 4
Introduction............................. 6
Investment Objectives of the Funds....... 8
Risk Factors............................. 12
How to Buy Shares........................ 17
Determining Net Asset Value.............. 23
How to Redeem Shares..................... 24
Exchanging Shares........................ 25
Investment Restrictions and Techniques... 26
Dividends and Distributions.............. 31
Tax Status............................... 32
Investment Management Agreement.......... 33
Distribution Plan........................ 35
Portfolio Transactions and Turnover...... 35
Additional Information................... 36
Application Terms and Conditions......... 39
</TABLE>
INVESTMENT ADVISOR:
QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
(800) 232-FUND
TRANSFER AGENT:
STATE STREET BANK AND TRUST COMPANY
BOSTON, MA 02266-8505
GENERAL DISTRIBUTOR:
QUEST FOR VALUE DISTRIBUTORS
P.O. BOX 3567
CHURCH STREET STATION
NEW YORK, NY 10277-1296
(800) 232-FUND
QUEST FOR
VALUE FUNDS
/ / GROWTH AND INCOME FUND
/ / INVESTMENT QUALITY INCOME FUND
/ / OPPORTUNITY FUND
/ / SMALL CAPITALIZATION FUND
/ / U.S. GOVERNMENT INCOME FUND
(THE ABOVE FUNDS ARE SERIES OF QUEST FOR VALUE FAMILY OF FUNDS)
/ / QUEST FOR VALUE FUND, INC.
/ / QUEST FOR VALUE GLOBAL EQUITY FUND, INC.
/ / GLOBAL INCOME FUND
(A SERIES OF QUEST FOR VALUE GLOBAL FUNDS, INC.)
MARCH 1, 1995
PROSPECTUS
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
U.S. GOVERNMENT INCOME FUND
INVESTMENT QUALITY INCOME FUND
OPPORTUNITY FUND
SMALL CAPITALIZATION FUND
GROWTH AND INCOME 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 dated March 1, 1995 (the "Prospectus"),
of the U.S. Government Income Fund, Investment Quality Income Fund, Opportunity
Fund, Small Capitalization Fund and Growth and Income Fund (the "Fund(s)") which
may be obtained by written request to State Street Bank and Trust Company
("State Street"), P.O. Box 8505, Boston, MA 02266-8505 or by calling State
Street at (800) 232-FUND.
The date of this Additional Statement is March 1, 1995.
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
TABLE OF CONTENTS
Page
----
INVESTMENT OF THE TRUST'S ASSETS . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
TRUSTEES AND OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . .16
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .21
PORTFOLIO YIELD AND TOTAL RETURN INFORMATION . . . . . . . . . . . . . . . . .22
DISTRIBUTION EXPENSE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . .29
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
APPENDIX A - RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
2
<PAGE>
INVESTMENT OF THE TRUST'S ASSETS
The investment objective and policies of each Fund are described in the
Prospectus. A further description of each Fund's investments and investment
methods appears below.
COLLATERALIZED MORTGAGE OBLIGATIONS. In addition to securities issued by
Ginnie Mae, Fannie Mae and Freddie Mac, another type of mortgage-backed security
is the "collateralized mortgage obligation", which is secured by groups of
individual mortgages but is similar to a conventional bond where the investor
looks only to the issuer for payment of principal and interest. Although the
obligations are recourse obligations to the issuer, the issuer typically has no
significant assets, other than assets pledged as collateral for the obligations,
and the market value of the collateral, which is sensitive to interest rate
movements, may affect the market value of the obligations. A public market for a
particular collateralized mortgage obligation may or may not develop and thus,
there can be no guarantee of liquidity of an investment in such obligations.
Investments will only be made in collateralized mortgage obligations which are
of high quality, as determined by the Board of Trustees.
INFORMATION ON TIME DEPOSITS AND VARIABLE RATE NOTES. The Funds may invest
in fixed time deposits, whether or not subject to withdrawal penalties; however,
investment in such deposits which are subject to withdrawal penalties, other
than overnight deposits, are subject to the 10% limit on illiquid investments
set forth in the Prospectus for each Fund.
The commercial paper obligations which the Funds may buy are unsecured and
may include variable rate notes. The nature and terms of a variable rate note
(i.e., a "Master Note") permit a Fund to invest fluctuating amounts at varying
rates of interest pursuant to a direct arrangement between a Fund as lender, and
the issuer, as borrower. It permits daily changes in the amounts borrowed. The
Fund has the right at any time to increase, up to the full amount stated in the
note agreement, or to decrease the amount outstanding under the note. The issuer
may prepay at any time and without penalty any part of or the full amount of the
note. The note may or may not be backed by one or more bank letters of credit.
Because these notes are direct lending arrangements between the Fund and the
issuer, it is not generally contemplated that they will be traded; moreover,
there is currently no secondary market for them. Except as specifically provided
in the Prospectus for each Fund, there is no limitation on the type of issuer
from whom these notes will be purchased; however, in connection with such
purchase and on an ongoing basis, Quest for Value Advisors (the "Advisor") will
consider the earning power, cash flow and other liquidity ratios of the issuer,
and its ability to pay principal and interest on demand, including a situation
in which all holders of such notes made demand simultaneously. A Fund will not
invest more than 5% of its total assets in variable rate notes. Variable rate
notes are subject to the Funds' investment restriction on illiquid securities
unless such notes can be put back to the issuer on demand within seven days.
3
<PAGE>
FOREIGN SECURITIES. Although the Opportunity, Investment Quality Income,
Small Capitalization and Growth and Income Funds may purchase securities issued
by companies in any country, developed or underdeveloped, such Funds do not
presently intend to purchase securities issued by companies in underdeveloped
countries.
CONVERTIBLE SECURITIES. As specified in the Prospectus, certain of the
Funds may invest in fixed-income securities which are convertible into common
stock. Convertible securities rank senior to common stocks in a corporation's
capital structure and, therefore, entail less risk than the corporation's common
stock. The value of a convertible security is a function of its "investment
value" (its value as if it did not have a conversion privilege), and its
"conversion value" (the security's worth if it were to be exchanged for the
underlying security, at market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, the convertible security will sell at some premium over
its conversion value. (This premium represents the price investors are willing
to pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.) At such
times the price of the convertible security will tend to fluctuate directly with
the price of the underlying equity security. Convertible securities may be
purchased by the Funds at varying price levels above their investment values
and/or their conversion values in keeping with the Funds' objectives.
INSURED BANK OBLIGATIONS. The Federal Deposit Insurance Corporation
("FDIC") insures the deposits of federally insured banks and savings and loan
associations (collectively referred to as "banks") up to $100,000. A Fund may,
within the limits set forth in the Prospectus, purchase bank obligations which
are fully insured as to principal by the FDIC. Currently, to remain fully
insured as to principal, these investments must be limited to $100,000 per bank;
if the principal amount and accrued interest together exceed $100,000, the
excess principal and accrued interest will not be insured. Insured bank
obligations may have limited marketability. Unless the Board of Trustees
determines that a readily available market exists for such obligations, a Fund
will treat such obligations as subject to the 10% limit for illiquid investments
set forth in the Prospectus for each Fund unless such obligations are payable at
principal amount plus accrued interest on demand or within seven days after
demand.
WHEN-ISSUED SECURITIES. All Funds may take advantage of offerings of
eligible portfolio securities on a "when-issued" basis, i.e., delivery of and
payment for such securities take place sometime after the transaction date on
terms established on such date. Normally, settlement on U.S. Government
securities takes place within ten days. A Fund only will make when-issued
commitments on eligible securities with the intention of actually acquiring the
securities. If a Fund chooses to dispose of the right to acquire a when-issued
security (prior to its acquisition), it could, as with the disposition of any
other portfolio obligation, incur a gain or loss due to market fluctuation. No
when-issued commitments will be made if, as a result, more than 15% of the net
assets of a Fund would be so committed.
4
<PAGE>
DOLLAR ROLLS. The U.S. Government Income Fund may enter into dollar rolls
in which the Fund sells securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll period, the Fund
forgoes principal and interest paid on the securities. The Fund is compensated
by the difference between the current sale price and the lower forward price for
the future purchase (often referred to as the "drop") as well as interest earned
on the cash proceeds of the initial sale.
The Fund will establish a segregated account with its custodian bank in
which it will maintain cash, U.S. Government securities or other liquid high
grade debt obligations equal in value to its obligations in respect of dollar
rolls. Dollar rolls involve the risk that the market value of the securities the
Fund is obligated to repurchase may decline below the repurchase price. In the
event the buyer of securities under a dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the transaction may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Dollar rolls are considered borrowings by the Fund. Under the requirements
of the Investment Company Act of 1940, as amended (the "Act"), the Fund is
required to maintain an asset coverage (including the proceeds of borrowings) of
at least 300% of all borrowings.
HEDGING. The U.S. Government Income, Opportunity, Small Capitalization,
Growth and Income, and Investment Quality Income Funds may use certain Hedging
Instruments as described, and subject to the restrictions stated, in the
Prospectus. To engage in short hedging, a Fund would: (i) sell financial
futures, (ii) purchase puts on such futures or on individual securities held by
it ("portfolio securities") or securities indexes; or (iii) write calls on
portfolio securities or on financial futures or securities indexes. To engage in
long hedging, a fund would: (i) purchase financial futures, or (ii) purchase
calls or write puts on such futures or on portfolio securities or securities
indexes. Additional information about the Hedging Instruments a Fund may use is
provided below.
FINANCIAL FUTURES. No price is paid or received upon the purchase of a
financial future. Upon entering into a futures transaction, a fund will be
required to deposit an initial margin payment equal to a specified percentage of
the contract value. Initial margin payments will be deposited with a fund's
custodian bank in an account registered in the futures commission merchant's
name; however the futures commission merchant 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 payments, called variation margin, will
be made to or from the futures commission merchant on a daily basis. Prior to
expiration of the future, if the fund elects to close out its position by taking
an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the fund, and any loss
or gain is realized for tax purposes. Although financial futures by their terms
call for the actual delivery or acquisition of the specified debt security, in
most cases the obligation is fulfilled by closing out the position. All futures
transactions are effected through a clearing house associated with the exchange
on which the contracts are traded. At present, no Fund intends to enter into
financial futures and options on such futures if after any such purchase, the
sum of initial margin deposits on futures and premiums paid on futures options
would exceed 5% of a Fund's total assets. This limitation is not a fundamental
policy.
5
<PAGE>
ADDITIONAL INFORMATION ON PUTS AND CALLS. When a fund writes a call, it
receives a premium and agrees to sell the callable securities to a purchaser of
a corresponding call during the call period (usually not more than 9 months) at
a fixed exercise price (which may differ from the market price of the underlying
securities) regardless of market price changes during the call period. If the
call is exercised, the fund forgoes any possible profit from an increase in
market price over the exercise price. A fund may, in the case of listed options,
purchase calls in "closing purchase transactions" to terminate a call
obligation. A profit or loss will be realized, depending upon whether the net of
the amount of option transaction costs and the premium received on the call
written is more or less than the price of the call subsequently purchased. A
profit may be realized if the call lapses unexercised, because the fund retains
the underlying security and the premium received. If, due to a lack of a market,
a fund could not effect a closing purchase transaction, it would have to hold
the callable securities until the call lapsed or was exercised. A 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") in connection with listed calls, as to the securities on which the fund
has written calls, 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.
When a fund purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period (or on a certain date for OTC options) at a fixed exercise
price. A 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 call
price plus the transaction costs and the premium paid for the call and the call
is exercised. If a 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.
With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the fund and the transacting dealer, without
the intermediation of a third party such as the OCC. If a transacting dealer
fails to make delivery on the U.S. Government securities underlying an option it
has written, in accordance with the terms of that option as written, a fund
could lose the premium paid for the option as well as any anticipated benefit of
the transaction. The Funds will engage in OTC option transactions only with
primary U.S. Government securities dealers recognized by the Federal Reserve
Bank of New York. In the event that any OTC option transaction is not subject to
a forward price at which the fund has the absolute right to repurchase the OTC
option which it has sold, the value of the OTC option purchased and of the fund
assets used to "cover" the OTC option will be considered "illiquid securities"
and will be subject to the 10% limit on illiquid securities. The "formula" on
which the forward price will be based may vary among contracts with different
primary dealers, but it will be based on a multiple of the premium received by
the fund for writing the option plus the amount, if any, of the option's
intrinsic value, i.e., current market value of the underlying securities minus
the option's strike price.
A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period (or on a certain date for OTC
6
<PAGE>
options). The investment characteristics of writing a put covered by segregated
liquid assets equal to the exercise price of the put are similar to those of
writing a covered call. The premium paid on a put written by a fund represents a
profit, as long as the price of the underlying investment remains above the
exercise price. However, a fund has also assumed the obligation during the
option period to buy the underlying investment from the buyer of the put at the
exercise price, even though the value of the investment may fall below the
exercise price. If the put expires unexercised, the fund (as writer) realizes a
gain in the amount of the premium. If the put is exercised, the fund must
fulfill its obligation to purchase the underlying investment at the exercise
price, which will usually exceed the market value of the investment at that
time. In that case, the fund may incur a loss upon disposition, equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options, to secure its obligation to pay for the
underlying security, 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. As a result, the fund forgoes the opportunity of trading the segregated
assets or writing calls against those assets. As long as the fund's obligation
as a put writer continues, the fund may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the fund to purchase
the underlying security at the exercise price. A fund has no control over when
it may be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation as the
writer of the put. This obligation terminates upon the earlier of the expiration
of the put, or the consummation by the fund of a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once a fund has
been assigned an exercise notice, it is thereafter not allowed to effect a
closing purchase transaction.
A fund may effect a closing purchase transaction to realize a profit on an
outstanding put option it has written or to prevent an underlying security from
being put to it. Furthermore, effecting such a closing purchase transaction will
permit the fund to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the fund. The fund will
realize a profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from writing the option.
When a fund purchases a put, it pays a premium and has the right to sell
the underlying investment at a fixed exercise price to a seller of a
corresponding put on the same investment during the put period if it is a listed
option (or on a certain date if it is an OTC option). Buying a put on securities
or futures held by it permits a fund to attempt to protect itself during the put
period against a decline in the value of the underlying investment below the
exercise price. In the event of a decline in the market, the fund could
exercise, or sell the put option at a profit that would offset some or all of
its loss on the portfolio securities. If the market price of the underlying
investment is above the exercise price and as a result, the put is not
exercised, the put will become worthless at its expiration date and the
purchasing fund will lose the premium paid and the right to sell the underlying
securities; the put may, however, be sold prior to expiration (whether or not at
a profit). Purchasing a put on futures or securities not held by it permits a
fund to protect its portfolio securities against a decline in the market to the
extent that the prices of the future or securities underlying the put move in a
similar pattern to the prices of the securities in the fund's portfolio.
7
<PAGE>
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. A fund's option
activities may affect its turnover rate and brokerage commissions. The exercise
of calls written by a fund may cause the fund to sell from its portfolio
securities to cover the call, thus increasing its turnover rate. The exercise of
puts on securities or futures will increase portfolio turnover. Although such
exercise is within the fund's control, holding a put might cause a fund to sell
the underlying investment for reasons which would not exist in the absence of
the put. A fund will pay a brokerage commission every time it purchases or sells
a put or a call or purchases or sells a related investment in connection with
the exercise of a put or a call.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS. Transactions in options by a
fund are subject to limitations established (and changed from time to time) 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 a fund may write or hold may be affected by options written or held by
other investment companies and discretionary accounts of the Advisor, including
other investment companies having the same or an affiliated investment adviser.
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 of 1940 (the "1940
Act"), when a fund sells a future, it will maintain in a segregated account or
accounts with its custodian bank, cash or readily marketable short-term
(maturing in one year or less) debt instruments in an amount equal to the market
value of such future, less the margin deposit applicable to it.
The Trust and each Fund must operate within certain restrictions as to its
positions in futures and options thereon under a rule ("CFTC Rule") adopted by
the Commodity Futures Trading Commission ("CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Trust and 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 financial 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.
TAX ASPECTS OF HEDGING INSTRUMENTS. Each Fund in the Trust intends to
qualify as a "regulated investment company" under the Internal Revenue Code. One
of the tests for such qualification is that at least 90% of its gross income
must be derived from dividends, interest and gains from the sale or other
disposition of securities. Another test is that less than 30% of its gross
income must be derived from gains realized on the sale of securities held for
less than three months. In connection with the 90% test, the Internal Revenue
Code specifies that income from options, futures and other gains derived from
investments in securities is qualifying income under the 90% test. Due to the
30% limitation, each Fund will limit the extent to which it engages in the
following activities,
8
<PAGE>
but will not be precluded from them: (i) selling investments, including 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 or purchasing 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 a Fund for less than three months.
Regulated futures contracts, options on broad-based stock indices, options
on stock index futures, certain other futures contracts and options thereon
(collectively, "Section 1256 contracts") held by a fund at the end of each
taxable year may be required to be "marked to market" for federal income tax
purposes (that is, treated as having been sold at that time at market value).
Any unrealized gain or loss taxed pursuant to this rule will be added to
realized gains or losses recognized on Section 1256 contracts sold by a fund
during the year, and the resulting gain or loss will be deemed to consist of 60%
long-term capital gain or loss and 40% short-term capital gain or loss. A fund
may elect to exclude certain transactions from the mark-to-market rule although
doing so may have the effect of increasing the relative proportion of short-term
capital gain (taxable as ordinary income) and/or increasing the amount of
dividends that must be distributed annually to meet income distribution
requirements, currently at 98%, to avoid payment of federal excise taxes..
It should also be noted that under certain circumstances, the acquisition
of positions in hedging instruments may result in the elimination or suspension
of the holding period for tax purposes of other assets held by a fund with the
result that the relative proportion of short-term capital gains (taxable as
ordinary income) could increase and the amount of dividends qualifying for the
dividends received deduction could decrease.
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
selling futures that the prices of futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of a 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.
When a fund uses appropriate Hedging Instruments to establish a position in
the market as a temporary substitute for the purchase of individual securities
(long hedging) by buying futures and/or calls on such futures or on a particular
security, 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, it will realize a loss on the
Hedging Instruments that is not offset by a reduction in the price of the
securities purchased.
9
<PAGE>
LOWER RATED BONDS. The Small Capitalization Fund may invest up to 5% of its
assets in bonds rated below Baa by Moody's Investors Service Inc. ("Moody's") or
BBB by Standard & Poor's Corporation ("S&P") (commonly known as "junk bonds")
and the Growth and Income may invest up to 25% of its assets in convertible debt
securities and other debt securities rated not lower than Caa by Moody's or CCC
by S&P, Fitch Investors Service, Inc., Duff & Phelps, Inc., or if unrated,
deemed to be of comparable quality by the Advisor. Securities rated less than
Baa by Moody's or BBB by S&P are classified as non-investment grade securities
and are considered speculative by those rating agencies. Junk bonds may be
issued as a consequence of corporate restructurings, such as leveraged buyouts,
mergers, acquisitions, debt recapitalizations, or similar events or by smaller
or highly leveraged companies. Although the growth of the high yield securities
market in the 1980s had paralleled a long economic expansion, recently many
issuers have been affected by adverse economic and market conditions. It should
be recognized that an economic downturn or increase in interest rates is likely
to have a negative effect on (i) the high yield bond market, (ii) the value of
high yield securities and (iii) the ability of the securities' issuers to
service their principal and interest payment obligations, to meet their
projected business goals or to obtain additional financing. The market for junk
bonds may be less liquid than the market for investment grade bonds. In periods
of reduced market liquidity, junk bond prices may become more volatile and may
experience sudden and substantial price declines. Also, there may be significant
disparities in the prices quoted for junk bonds by various dealers. Under such
conditions, a Fund may have to use subjective rather than objective criteria to
value its junk bond investments accurately and rely more heavily on the judgment
of the Trust's Board of Trustees. Prices for junk bonds also may be affected by
legislative and regulatory developments. For example, federal rules require that
savings and loans gradually reduce their holdings of high-yield securities.
Also, from time to time, Congress has considered legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructurings such as takeovers, mergers or leveraged buyouts. Such
legislation, if enacted, may depress the prices of outstanding junk bonds.
ADDITIONAL RISKS. Securities in which the Funds may invest are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors and shareholders, such as the federal Bankruptcy Code, and
laws, if any, which may be enacted by Congress or the state legislatures
extending the time for payment of principal or interest, or both or imposing
other constraints upon enforcement of such obligations.
INVESTMENT RESTRICTIONS
The Trust's significant investment restrictions applicable to each Fund are
described in the Prospectus for that Fund. The following are also fundamental
policies and, together with the restrictions and other fundamental policies
described in each Prospectus, cannot be changed without the vote of a majority
of the outstanding voting securities of that Fund, as defined in the 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
10
<PAGE>
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 all Funds are authorized to purchase and sell financial
futures contracts and options on such futures contracts exclusively for hedging
and other non-speculative purposes to the extent specified in the Prospectus;
(b) Invest in real estate or real estate limited partnerships (direct
participation programs); however, each Fund may purchase securities of issuers
which engage in real estate operations and securities which are 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"
(collateral arrangements in connection with transactions in futures and options
are not deemed to be margin transactions); (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 (except that the U.S.
Government Income Fund and the Growth and Income Fund may in the future invest
all of its investable assets in an open-end management investment company with
substantially the same investment objective and restrictions as the respective
Fund); (e) Invest in securities of other investment companies except in
connection with a merger, consolidation, reorganization or acquisition of assets
(except that the U.S. Government Income Fund and the Growth and Income Fund may
in the future invest all of its respective investable assets in an open-end
management investment company with substantially the same investment objective
and restrictions as the respective Fund); (f) Invest in interests in oil, gas or
other mineral exploration or development programs or leases; (g) Purchase
warrants if as a result the Fund would then have either more than 5% of its
total assets (determined at the time of investment) invested in warrants or more
than 2% of its total assets invested in warrants not listed on the New York or
American Stock Exchange; (h) 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 Advisor 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 l% own in the aggregate more than 5% of the outstanding securities of such
issuer; (i) 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; (j) Invest for the purpose of exercising control or management
of another company (except that the U.S. Government Income Fund and the Growth
and Income Fund may in the future invest all of its investable assets in an
open-end management investment company with substantially the same investment
objective and restrictions as the respective Fund); (k) Issue senior securities
as defined in the 1940 Act except insofar as the Fund may be deemed to have
issued a senior security by reason of: (a) entering into any repurchase
agreement; (b) borrowing money in accordance with restrictions described above;
or (c) lending portfolio securities; and (l) make loans to any person or
individual except that portfolio securities may be loaned by all Funds within
the limitations set forth in the Prospectus.
In addition each Fund may not with respect to 75% of its assets, invest
more than 5% of the value of its total assets in the securities of any one
issuer (except that the U.S. Government Income Fund and the Growth and Income
Fund may in the future invest all of its respective investable assets in
11
<PAGE>
an open-end management investment company with substantially the same investment
objective and restrictions as the respective Fund).
TRUSTEES AND OFFICERS
The trustees and officers of the Trust (except officers/portfolio managers
of other portfolios 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
January 31, 1995, the trustees and officers of the Trust as a group owned less
than 1% of the outstanding shares of each of the Funds covered by this
Additional Statement.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*
President of Oppenheimer Capital and Chairman of Quest for Value Advisors,
registered investment advisers; Chairman of the Board and President of Quest
Cash Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value Fund,
Inc., Quest for Value Global Equity Fund, Inc. and Quest for Value Global Funds,
Inc., and Chairman of the Board of The Saratoga Advantage Trust, open-end
investment companies, and Chairman of the Board and President of 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 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 Cash Reserves, Inc., Quest
for Value Fund, Inc., Quest for Value Global Equity Fund, Inc. and Quest for
Value Global Funds, Inc., Trustee of Quest for Value Accumulation Trust, all of
which are open-end investment
12
<PAGE>
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), and
Hawaiian Tax-Free Trust (since 1984), 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 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
Quest Cash Reserves, Inc., Quest for Value Fund, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of 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 Cash Reserves, Inc., Quest for Value Fund,
Inc., Quest for Value Global Equity Fund, Inc. and Quest for Value Global Funds,
Inc., Trustee of Quest for Value Accumulation Trust and The Saratoga Advantage
Trust, all of which are open-end investment companies, and Director of the Quest
for Value Dual Purpose Fund, Inc., a closed-end investment company.
ROBERT J. BLUESTONE, VICE PRESIDENT
Managing Director, Oppenheimer Capital; Vice President, 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.
13
<PAGE>
MARIA CAMACHO, ASSISTANT SECRETARY
Assistant Vice President of Oppenheimer Capital since 1994 and Registrations
Department Administrator with Oppenheimer Capital since 1989; Assistant
Secretary of Quest For Value Fund, Inc., 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.
THOMAS E. DUGGAN, ASSISTANT SECRETARY
General Counsel and Secretary, Oppenheimer Capital and Quest for Value Advisors,
Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company; Assistant Secretary of Quest Cash Reserves, Inc., Quest for Value Fund,
Inc., Quest for Value Global Equity Fund, Inc., The Saratoga Advantage Trust and
Quest for Value Global Funds, Inc., open-end investment companies; formerly
Senior Vice President and Associate General Counsel of Oppenheimer & Co., Inc.
BERNARD H. GARIL, VICE PRESIDENT
President and Chief Operating Officer of Quest for Value Advisors; Vice
President of Quest Cash Reserves, Inc., Quest for Value Accumulation Trust,
Quest for Value Fund, Inc., Quest for Value Global Equity Fund, 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.
RICHARD GLASEBROOK, VICE PRESIDENT & PORTFOLIO MANAGER
Managing Director, Oppenheimer Capital; Vice President & Portfolio Manager,
Quest for Value Accumulation Trust and Quest for Value Global Equity Fund, Inc.,
open-end investment companies; formerly Partner and Portfolio Manager of
Delafield Asset Management.
COLIN GLINSMAN, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital, since 1989; Vice President and Portfolio
Manager, Quest Cash Reserves, Inc., since 1993.
LOUIS GOLDSTEIN, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital and a security analyst with Oppenheimer
Capital since 1991; prior thereto, he was a security analyst with David J.
Greene & Co.; Vice President and Portfolio Manager of Quest for Value
Accumulation Trust.
VIKKI HANGES, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital; Vice President and Portfolio Manager, Quest
Cash Reserves, Inc.; Assistant Vice President, Oppenheimer Capital, 1987-1992.
14
<PAGE>
JENNY B. JONES, VICE PRESIDENT & PORTFOLIO MANAGER
Senior Vice President, Oppenheimer Capital; Vice President & Portfolio Manager,
Quest for Value Accumulation Trust and Vice President, Endeavor Series Trust,
open-end investment companies; formerly Portfolio Manager and Second Vice
President, Mutual of America Life Insurance Company.
GEORGE H. TILGHMAN, JR., VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital; previously a fixed income portfolio manager
at Brown Brothers Harriman & Co.
DEBORAH KABACK, SECRETARY
Senior Vice President, Oppenheimer Capital; Secretary of Quest Cash Reserves,
Inc., Quest for Value Accumulation Trust, 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 Assistant Secretary
of Quest for Value Dual Purpose Fund, Inc., a closed-end investment company.
LESLIE KLEIN, ASSISTANT TREASURER
Vice President, Oppenheimer Capital; Assistant Treasurer of Quest Cash Reserves,
Inc., Quest for Value Accumulation Trust, Quest for Value Fund, Inc., Quest for
Value Global Equity Fund, Inc. and 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 and Treasurer, Oppenheimer Capital; Treasurer of Quest for
Value Advisors; Treasurer of Quest Cash Reserves, Inc., Quest for Value
Accumulation Trust, 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 DIRECTORS. All officers of the Fund are officers or
directors of Oppenheimer Capital and receive no salary or fee from the Fund. The
Directors, other than Mr. La Motta, are paid an annual fee of $3000 plus $250
for each directors' meeting attended and $100 for each committee meeting
attended. During the fiscal year ended October 31, 1994 the Fund accrued or paid
a directors' fee of $4,200 to each independent Director. The independent
directors also serve as directors/trustees for other funds in the Advisor's Fund
Complex. During the last fiscal year of such funds, Mr. Clinton earned aggregate
directors fees of $68,100 with respect to 18 investment companies in the
Advisor's Fund Complex; Mr. Courtney earned aggregate directors fees of $66,600
with respect to 18 investment companies in the Advisor's Fund Complex; Mr.
Herrmann earned aggregate directors fees of $67,350 with respect to 18
investment companies in the Advisor's Fund Complex; and Mr. Loft earned
aggregate directors fees of $74,800 with respect to 19 investment
15
<PAGE>
companies in the Advisor's Fund Complex. During such periods the independent
Directors received fees from three investment companies for which they no longer
serve as directors and which are no longer part of the Advisor's Fund Complex
but for which the Advisor currently serves as subadviser. In addition during
such periods, Mr. Clinton and Mr. Courtney each served as directors with respect
to three investment companies in the Advisor's Fund Complex for which they
received no fees; Mr. Loft and Mr. Herrmann each served as directors with
respect to 10 investment companies for which they received no fees. For the
purpose of this paragraph, a portfolio of an investment company organized in
series form is considered to be an investment company.
AMA FAMILY OF FUNDS INDEMNIFICATION. In connection with the combination of
each of the U.S. Government Income Fund and the Growth and Income Fund with a
portfolio of AMA Family of Funds, Inc., each Fund has agreed to assume the
obligation of such portfolio of the AMA Family of Funds to indemnify the
directors of the AMA Family of Funds, Inc. to the fullest extent permitted by
law and the By-Laws of the AMA Family of Funds, Inc.
UNIFIED FUNDS INDEMNIFICATION. In connection with the combination of Growth
and Income Fund with Unified Income Fund and Unified Mutual Shares, Growth and
Income Fund has agreed to assume the obligation of Unified Income Fund and
Unified Mutual Shares to indemnify the directors of such Unified Funds to the
fullest extent permitted by law and the By-Laws of such Unified Funds.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Quest for Value Advisors (the "Advisor") is a majority-owed subsidiary of
Oppenheimer Capital, a registered investment adviser.
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 that the Advisor may enter into subadvisory
agreements with other affiliated or unaffiliated investment advisers in order to
obtain specialized services for the Trust provided that the Trust is not
required to pay any additional fees for such services. As of August 18, 1993,
the Advisor has retained the services of New Castle Advisers, Inc. (the
"Subadvisor") to provide advice and assistance in connection with the options
and financial futures investments of the U.S. Government Income Fund. In the
event that the Advisor refunds to the U.S. Government Income Fund any amounts in
connection with state expense limitations, the Subadvisor will refund to the
Advisor 20% of such amount.
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
16
<PAGE>
services incurred by the Advisor will be reimbursed by each Fund for which they
are provided. For the fiscal years ended October 31, 1994, 1993 and 1992, the
respective total accounting services fees accrued or paid by the Funds to Quest
for Value Advisors are as follows: Opportunity Fund -- $53,245, $14,798 and
$37,715; Small Capitalization Fund -- $67,578, $23,448 and $46,365; Growth and
Income Fund - $68,117, $14,723 and $37,640; U.S. Government Income Fund -
$70,876, $22,145 and $57,145; Investment Quality Income Fund - $64,080, $25,645
and $50,645.
Commencing in 1993, the Trust retained the services of State Street Bank, and
Trust Company ("State Street") to calculate the net asset value of each class of
shares and to prepare the books and records. For such services, the Funds
accrued or paid the following fees for the fiscal years ended October 31, 1994
and 1993: Opportunity Fund - $55,000 and $27,917; Small Capitalization Fund -
$55,000 and $27,917; Growth and Income Fund - $55,000 and $27,918; U.S.
Government Income Fund - $65,000 and $27,918; and Investment Quality Income Fund
- - $55,000 and $30,000.
Expenses not expressly assumed by the Advisor under the Advisory Agreement
or by Quest for Value Distributors (the "Distributor") are paid by the Funds.
Each Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses; custodian fees; insurance premiums; and
trade association dues. Fund Expenses will be allocated based on the total net
assets of each class. Each class of shares of each Fund will also be responsible
for certain expenses attributable only to that class ("Class Expenses"). These
Class Expenses may include distribution and service fees, transfer and
shareholder servicing agent fees, professional fees, printing and postage
expenses for materials distributed to current shareholders, state registration
fees and shareholder meeting expenses. Such items are considered Class Expenses
provided such fees and expenses relate solely to such Class. A portion of
printing expenses, such as typesetting costs, will be divided equally among the
Funds, while other printing expenses, such as the number of copies printed, will
be considered Class Expenses. Under the Advisory Agreement, the Advisor
guarantees that it will assume expenses of each class of each Fund in the event
that aggregate ordinary operating expenses incurred in any fiscal year 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. During
the fiscal years ended October 31, 1992, 1993 and 1994, respectively, the total
investment advisory fees accrued or paid by the U.S. Government Income Fund were
$900,782, $1,062,481 and $962,940; of which the total advisory fees waived were
$33,328, $88,840 and $38,486. The total advisory fees accrued or paid by the
Opportunity and Small Capitalization Funds were $220,806 and $325,510,
respectively, for the fiscal year ended October 31, 1992, $880,856 and $756,765
for the fiscal year ended October 31, 1993 and $1,555,447 and $1,260,578 for the
fiscal year ended October 31, 1994. For the fiscal year ended October 31, 1992,
the Advisor waived its fee of $141,355 accrued by the Investment Quality Income
Fund and reimbursed other operating expenses of $39,797. For the fiscal year
ended October 31, 1993, the total advisory fee accrued or paid by the Investment
Quality Income Fund was $285,582, of which $138,415 was waived by the Advisor.
For the fiscal year ended October 31, 1994, the total advisory fee accrued or
paid by the Investment Quality Income Fund was $359,792, of which $180,934 was
waived by the Advisor. For the period November 4, 1991 (commencement of
operations) to October 31, 1992, the total advisory fee accrued by the Growth
and Income Fund was
17
<PAGE>
$58,505; of which the total advisory fee waived was $51,738; for the fiscal year
ended October 31, 1993, the total advisory fee accrued or paid by the Growth and
Income Fund was $202,511, of which $66,413 was waived by the Advisor. For the
fiscal year ended October 31, 1994, the total advisory fee accrued or paid by
the Growth and Income Fund was $263,469, of which 142,772 was waived by the
Advisor. The Advisor has agreed to reduce its management fee and assume other
expenses so that annualized operating Fund Expenses (as defined above),
exclusive of Class Expenses (as defined above), of the Growth and Income Fund do
not exceed 1.50% of the Fund's average daily net assets. This expense limitation
may be terminated at any time.
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 or omission in the course of,
or in connection with, the rendition of services thereunder. The Agreement
permits the Advisor to act as investment advisor 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.
The Advisory Agreement provides that the Advisor may enter into subadvisory
agreements with other affiliated or unaffiliated investment advisers in order to
obtain specialized services for the Trust provided that the Trust is not
required to pay any additional fees for such services. Pursuant to a Subadvisory
Agreement, New Castle Advisers, Inc. has been retained by the Advisor to provide
advice and assistance in connection with the options and financial futures
investments of the U.S. Government Income Fund. The Advisor informed the U.S.
Government Income Fund that the total subadvisory fees paid by the Advisor to
New Castle Advisers, Inc. with respect to the U.S. Government Income Fund were
$168,271 and $178,573 respectively for the fiscal years ended November 30, 1994
and November 30, 1993.
The Advisory Agreement with respect to U.S. Government Income Fund was
approved by the Board of Trustees, 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, and by Oppenheimer
Capital as sole shareholder of that Fund on April 11, 1988. The Advisory
Agreement was amended effective December 30, 1988 to refer to the Opportunity
and Small Capitalization Funds of the Trust. Such amendment was approved by the
Trust's Board of Trustees on October 31, 1988 and by the Trust's sole
shareholder on December 30, 1988. The Board of Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in such Agreement, approved amendments to
the Advisory Agreement to include the Investment Quality Income Fund and the
Growth and Income Fund on April 16, 1990 and July 29, 1991, respectively.
Shareholders of the Funds each approved the Advisory Agreement at meetings held
for that purpose on the indicated dates: U.S. Government Income Fund - July 10,
1989; Opportunity and Small Capitalization Funds - July 23, 1990; Investment
Quality Income Fund - December 9, 1991; and Growth and Income Fund - July 27,
1992.
PORTFOLIO TRANSACTIONS. Portfolio decisions are based upon recommendations
of the portfolio manager and the judgment of the portfolio managers. As most, if
not all, purchases made by the U.S. Government Income and Investment Quality
Income Funds are principal transactions at net prices,
18
<PAGE>
those Portfolios pay no brokerage commissions; however, prices of debt
obligations reflect mark-ups and mark-downs which constitute compensation to the
executing dealer. Each Fund will pay brokerage commissions on transactions in
listed options and equity 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 debt 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
brokerage 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 useful to 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
useful to one or more of the Funds. Such information may be in written or oral
form and includes information on particular companies 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. ("Opco") 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 advisor
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 portfolios of each Fund and other client accounts.
When orders to purchase or sell the same security on identical terms are placed
by more than one of the funds and/or other advisory accounts managed by the
Advisor or its affiliates, the transactions are generally executed as received,
although a fund or advisory account that does not direct trades to a specific
broker ("free trades") usually will have its order executed first. Purchases are
combined where possible for the purpose of negotiating brokerage commissions,
which in some cases might have a detrimental effect on the price or volume of
the security in a particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will generally be
executed after the free trades. All orders placed on behalf of the Fund are
considered free trades. However, having an order placed first in the market does
not necessarily guarantee the most favorable price.
19
<PAGE>
The following table presents information as to the allocation of brokerage
commissions paid by the Small Capitalization Fund for the fiscal years ended
October 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
Total Amount of
For the Total Brokerage Commissions Transactions Where
Fiscal Year Brokerage Paid to Opco Brokerage Commissions Paid
Ended Commissions to Opco
October 31, Paid --------------------- --------------------------
Dollar % Dollar Amounts %
Amounts
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
...1992 173,979 140,518 80.8 29,105,245 80.2
- --------------------------------------------------------------------------------
...1993 314,604 234,334 74.5 56,166,571 71.0
- --------------------------------------------------------------------------------
...1994 300,037 143,991 48.0 44,408,800 48.5
- --------------------------------------------------------------------------------
</TABLE>
The following table presents information as to the allocation of brokerage
commissions paid by the Opportunity Fund for the fiscal years ended October 31,
1992, 1993 and 1994:
<TABLE>
<CAPTION>
Total Amount of
For the Total Brokerage Commissions Transactions Where
Fiscal Brokerage Paid to Opco Brokerage Commissions Paid
Year Ended Commissions to Opco
October Paid ---------------------- --------------------------
31,
Dollar Amounts % Dollar Amounts %
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
...1992 42,412 34,863 82.2 20,814,502 82.1
- -------------------------------------------------------------------------------
...1993 174,608 104,705 60.0 68,765,141 61.7
- -------------------------------------------------------------------------------
...1994 189,680 94,589 49.9 78,351,168 17.6
- -------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
The following table presents information as to the allocation of brokerage
commissions paid by of the Growth and Income Fund for the period November 4,
1991 (commencement of operations) to October 31, 1992, the fiscal year ended
October 31, 1993 and the fiscal year ended October 31, 1994:
<TABLE>
<CAPTION>
For the Period Total Brokerage Brokerage Commissions Paid to Total Amount of Transactions Where
Commissions Paid Opco Brokerage Commission Paid to Opco
----------------------------- ----------------------------------
$ Amounts % $ Amounts %
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/4/91 (commencement of $ 12,567 $10,782 85.8 $ 5,612,031 90.4
operations) to 10/31/92
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 10/31/93 $108,617 $91,522 84.3 $54,968,280 86.0
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal year ended 10/31/94 $ 74,334 $55,911 75.2 38,409,929 77.5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds do not effect principal transactions with Opco. When the Funds
effect principal transactions with other broker-dealers, commissions are
imputed.
During the fiscal year ended October 31,1994, certain of the Funds directed
brokerage transactions because of research services provided. The amount of such
transactions and related commissions were as follows: Opportunity Fund -
$5,197,355 and $5,638; and the Small Capitalization Fund - $3,116,281 and
$10,632.
During the fiscal year ended October 31, 1994, the Opportunity Fund
acquired common stock of Morgan Stanley Group Incorporated, and Lehman Brothers
Holdings Incorporated, each of which is a parent of one of the Fund's regular
broker dealers. The market values of such aggregate holdings are $5,883,750 for
Morgan Stanley Group Incorporated and $1,705,000 for Lehman Brothers Holdings
Incorporated at October 31, 1994.
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 that day (currently 4:00 p.m. Eastern Time), by
dividing the value of a Fund's net assets by the number of its shares
outstanding. Although the legal rights of Class A, B and C shares are identical,
the different expenses borne by each class may result in differing net asset
values and dividends for each class.
The Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, President's Day, Good Friday,
Memorial Day, July 4, Labor Day, Thanksgiving and Christmas Day. It may also
close on other days.
Securities listed on a national securities exchange or designated national
market system securities are valued at the last reported sale price on that day,
or, if there has been no sale on such day or on the previous day on which the
Exchange was open (if a week has not elapsed between such days), then the value
of such security is taken to be the reported bid price at the time as of which
the
21
<PAGE>
value is being ascertained. Securities actively traded in the over-the-counter
market but not designated as national market system securities are valued at the
last quoted bid price. Any securities or other assets for which current market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of the Trust's Board of Trustees.
The Trust's Board of Trustees has approved the use of nationally recognized
bond pricing services for the valuation of each Fund's debt securities. The
service selected by the Advisor creates and maintains price matrices of U.S.
Government and other securities from which individual holdings are valued
shortly after the close of business each trading day. Debt securities not
covered by the pricing service are valued based upon bid prices obtained from
dealers who maintain an active market therein or, if no readily available market
quotations are available from dealers, such securities (including restricted
securities and OTC options) are valued at fair value under the Board's
procedures. Short-term (having a maturity of 60 days or less) debt securities
are valued at amortized cost.
Puts and calls are valued at the last sales price therefor, or, if there
are no transactions, at the last reported sales price that is within the spread
between the closing bid and asked prices on the valuation date. Futures are
valued based on their daily settlement value. When a Fund writes a call, an
amount equal to the premium received is included in the Fund's Statement of
Assets and Liabilities as an asset, and an equivalent credit is included in the
liability section. The credit is adjusted ("marked-to-market") to reflect the
current market value of the call. If a call written by a Fund is exercised, the
proceeds on the sale of the underlying securities are increased by the premium
received. If a call or put written by a Fund expires on its stipulated
expiration date, the Fund will realize a gain equal to the amount of the premium
received.. If a Fund enters into a closing transaction, it will realize a gain
or loss depending on whether the premium was more or less than the transaction
costs, without regard to unrealized appreciation or depreciation on the
underlying securities. If a put held by a Fund is exercised by it, the amount
the Fund receives on its sale of the underlying investment is reduced by the
amount of the premium paid by the Fund.
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.
22
<PAGE>
YIELD FOR 30-DAY PERIOD
<TABLE>
<CAPTION>
Yield for 30-Day
Period Ended
Fund October 31, 1994
---- ----------------
<S> <C>
U.S. Government Income
Class A 6.00%
Class B 5.69%
Class C 5.46%
Investment Quality Income
Class A 7.06%(1)
Class B 6.78%(1)
Class C 6.96%(1)
<FN>
(1) Reflects the waiver of certain advisory fees and the assumption of certain
operating expenses by the Advisor during the period. Had the waiver and
assumption not been in effect during the period, the yield for Class A, B
and C shares of the Investment Quality Income Fund would have been 6.79%,
6.49% and 6.67%, respectively.
</TABLE>
Current yield is calculated according to the following formula:
YIELD = 2((x DIVIDED BY cd) +1)(6) -1
Where:
x = daily net investment income, based upon the subtraction of daily accrued
expenses from daily accrued income of the portfolio. Income is accrued
daily for each day of the indicated period based upon yield-to-maturity of
each obligation held in the portfolio as of the day before the beginning of
any thirty-day period or as of contractual settlement date for securities
acquired during the period. Mortgage and other receivables-backed
securities calculate income using coupon rate and outstanding principal
amount.
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.
23
<PAGE>
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 gains or losses, non-recurring or irregular
income. Gain or loss attributable to actual monthly paydowns on mortgage or
other receivables-backed obligations purchased at a discount or premium is
reflected as an increase or decrease in interest income during the period.
Total return information may be useful to investors in reviewing a Fund's
performance. However, certain factors should be considered before using this
information as a basis for comparison with alternate investments. No adjustment
is made for taxes payable on distributions. The total return for any given past
period is not an indication or representation by the Fund of future rates of
return on its shares.
Average annual total return is calculated according to the following
formula:
P (1+t)(n) = ERV
Where: P = a hypothetical initial investment of $1,000
t = average annual total return
n = number of years
ERV = ending redeemable value of P at the end of each period
24
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
From commencement of
operations* to For the five year period ended For the Fiscal Year Ended
October 31, 1994 October 31, 1994 October 31, 1994
----------------------------- ------------------------------- ------------------------------
Reflecting Without Reflecting Without Reflecting Without
Deduction of Deduction of Deduction of Deduction of Deduction of Deduction of
Maximum Maximum Maximum Maximum Maximum Maximum
Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge Sales Charge
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income(1)
Class A 8.05% 9.82% N/A N/A 3.48% 8.64%
Class B 4.49 7.54 N/A N/A 3.48 7.96
Class C 7.50 7.50 N/A N/A 7.01 7.91
Investment Quality Income(2)
Class A 5.45 6.78 N/A N/A -13.90 -9.61
Class B -11.43 -8.49 N/A N/A -14.43 -10.22
Class C -8.43 -8.43 N/A N/A -11.07 -10.23
Opportunity(3)
Class A 14.25 15.37 13.42 14.71 2.44 8.41
Class B 3.14 6.55 N/A N/A 2.84 7.84
Class C 6.49 6.49 N/A N/A 6.78 7.78
Small Capitalization(3)
Class A 11.60 12.69 11.70 12.97 -5.46 .04
Class B -1.24 2.00 N/A N/A -4.99 -.39
Class C 1.95 1.95 N/A N/A -1.43 -.51
U.S. Government Income(4)
Class A 6.47 7.27 5.55 6.58 -8.70 -4.15
Class B -7.02 -3.93 N/A N/A -9.30 -4.84
Class C -3.89 -3.89 N/A N/A -5.74 -4.84
<FN>
* The funds commenced operations on the following dates: Growth and Income -
11/4/91; Investment Quality Income - 12/18/90; Opportunity - 1/1/89; Small
Capitalization - 1/1/89; and U.S. Government Income - 5/6/88. Class B and C
shares of the Funds were initially offered on 9/2/93.
(1) Return shown reflects the waiver of advisory fees; without such waiver, the
average annual total return would have been lower.
(2) Reflects the waiver of advisory fees and the assumption of other operating
expenses by the Advisor during the periods from commencement of operations
through 10/31/92. Had the waivers and assumptions not been in effect, the
average annual total return would have been lower.
(3) Reflects the waiver of advisory fees and assumption of other operating
expenses by the Advisor during the period from commencement of operations
(1/1/89) through 10/31/91. Had the waivers and assumptions not been in
effect, the average annual total return would have been lower.
(4) Reflects the waiver of advisory fees during the periods. Had the waiver not
been in effect, the average annual total return of would have been lower.
</TABLE>
25
<PAGE>
The preceding table assumes that a $l,000 payment was made at the beginning
of the period shown, that no further payments were made, 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.
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 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.
26
<PAGE>
The cumulative total return on an investment made in shares of the Funds
for the period from commencement of public sale through October 31, 1994 is as
follows:
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN (1)
From commencement of operations* to October 31, 1994 For the five year period ended
---------------------------------------------------- October 31, 1994
Reflecting Without Reflecting Without
Deduction of Deduction of Deduction of Deduction of
Maximum Maximum Maximum Maximum
Sales Charge Sales Charge Sales Charge Sales Charge
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Growth and Income
Class A 26.08% 32.37% N/A N/A
Class B 5.24 8.84 N/A N/A
Class C 8.79 8.79 N/A N/A
Investment Quality Income
Class A 22.82 28.94 N/A N/A
Class B -13.18 -9.82 N/A N/A
Class C -9.74 -.9.74 N/A N/A
Opportunity
Class A 117.61 130.28 87.76 98.68
Class B 3.66 7.66 N/A N/A
Class C 7.60 7.60 N/A N/A
Small Capitalization
Class A 89.75 100.79 73.92 84.04
Class B -1.45 2.33 N/A N/A
Class C 2.27 2.27 N/A N/A
U.S. Government Income
Class A 50.23 57.72 31.04 37.57
Class B -8.12 -4.57 N/A N/A
Class C -4.52 -4.52 N/A N/A
<FN>
* The funds commenced operations on the following dates: Growth and Income -
11/4/91; Investment Quality Income - 12/18/90; Opportunity - 1/1/89; Small
Capitalization - 1/1/89; and U.S. Government Income - 5/6/88. Class B and C
shares of the funds were initially offered on 9/2/93.
(1) Total return shown in the table above reflects the waiver of advisory fees
and/or assumption of expenses by the Advisor. Without such waivers and/or
assumptions, cumulative total return for the Growth and Income, Investment
Quality Income, Opportunity, Small Capitalization and U.S. Government
Income Funds would have been lower.
</TABLE>
27
<PAGE>
From time to time the Funds may refer in advertisements to rankings and
performance statistics published by (1) recognized mutual fund performance
rating services including but not limited to Lipper Analytical Services, Inc.
and Morningstar, Inc., (2) recognized indexes including but not limited to the
Standard & Poors Composite Stock Price Indexes, Russell 2000 Index, Dow Jones
Industrial Average, Consumer Price Index, Salomon Brothers High Grade Corporate
Bond Index, J.P. Morgan Government Bond Index, Lehman Brothers
Government/Corporate Bond Index, Lehman Brothers Treasury Intermediate Bond
Index, Lehman Brothers Intermediate Government Bond Index, Lehman Brothers
Corporate Bond Index, and Salomon Brothers Benchmark-on-the-Run 5 Year Index,
and (3) Money Magazine and other financial publications including but not
limited to 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, 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") and Morningstar, Inc.
("Morningstar"), independent services located in Summit, New Jersey and Chicago,
Illinois, respectively, that monitor the performance of mutual funds. Lipper and
Morningstar generally rank funds on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges or redemption fees
into consideration, and 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, a Fund's performance also may be compared to other
mutual funds tracked by financial or business publications and periodicals, For
example, the Fund may quote Morningstar ratings in its advertising materials.
Morningstar rates mutual funds on a one star to five star scale on the basis of
risk-adjusted performance.
Quest For Value Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies such as general principles of investing, such as 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. The
performance of these capital markets is based on the returns of different
indices.
Quest for Value Distributors 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
28
<PAGE>
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, Quest For Value Distributors 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 risk of marketing timing. In
addition, Quest for Value Distributors may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to fund management, investment philosophy, and investment techniques.
Quest for Value Distributors 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 symbol, 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.
Momentum Indicators indicate the Funds' price movements over specific
periods to time. Each point on the momentum indicator represents the Fund's
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 period of low price levels.
The Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $1,000 investment earning a
taxable return of 10% annually would have an after-tax value of $1,949 after ten
years, assuming tax was deducted from the return each year at a 28% rate. An
equivalent tax-deferred investment would have an after-tax value of $2,100 after
ten years, assuming tax was deducted at a 31% rate from the tax-deferred
earnings at the end of the ten-year plan.
DISTRIBUTION EXPENSE PLAN
Each class of shares of the Trust has a Plan and Agreement of Distribution
(the "Plan(s)") pursuant to which it is permitted to compensate the Distributor
in connection with the distribution of each Portfolio's shares. Each Plan was
adopted in accordance with the requirements of Rule 12b-1
29
<PAGE>
under the 1940 Act and was approved 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").
Under the Plans, each class of shares of each of the Growth and Income,
Investment Quality Income, Small Capitalization, Opportunity and U.S. Government
Income Funds pays the Distributor a monthly fee for services and expenses in
connection with the distribution of that Fund's shares at the following annual
rates of each Fund's average daily net assets on an annual basis: Class A
shares: U.S. Government Income Fund - .05%, Investment Quality Income Fund and
Growth and Income Fund - .15%, Small Capitalization and Opportunity Funds -
.25%. Such distribution fee for Class B and C shares of each Fund is .75%. Each
class of shares also pays a service fee of .25% of average daily net assets. The
total distribution fees accrued or paid by Class A shares for the fiscal year
ended October 31, 1994 of the Growth and Income, Investment Quality Income,
Opportunity, Small Capitalization and U.S. Government Income Funds were
$116,449, $215,221, $683,116, $576,382 and $465,840, respectively. For the
fiscal year ended October 31, 1994, the total distribution fees accrued or paid
by Class B and C shares of the Funds were as follows:
<TABLE>
<CAPTION>
Growth Investment U.S.
and Quality Small Government
Income Income Opportunity Capitalization Income
------ ------ ----------- -------------- ------
<S> <C> <C> <C> <C> <C>
Class B $15,858 $41,770 $162,157 $94,008 $43,485
Class C $ 2,983 $19,831 $ 27,089 $13,806 $ 8,616
</TABLE>
The Plan states that the Treasurer of the Trust shall provide, and that the
Disinterested Trustees 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 Plans can be terminated at any time with regard to each 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
the respective class of that Fund. Finally, the Plans 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. A
rule of the National Association of Securities Dealers, Inc. ("NASD"), limits
the total aggregate asset based, front end and deferred sales charges (excluding
service fees) to 6.25% of a fund's new gross sales.
30
<PAGE>
It is estimated that the Distributor spent approximately the following
amounts with respect to Class A, B and C shares of the Growth and Income,
Investment Quality Income, Opportunity, Small Capitalization and U.S. Government
Income Funds for the fiscal year ended October 31, 1994:
<TABLE>
<CAPTION>
Printing and
mailing of
Prospectuses to
Sales other than Compensation
Material and current Compensation to Sales
Advertising shareholders to Dealers Personnel Other (1)
----------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Growth and Income
Class A 55,994 32,579 69,870 128,048 71,899
Class B 29,750 18,428 106,494 70,120 39,559
Class C 25,171 15,482 2,743 59,158 33,396
Investment Quality Income
Class A 75,779 45,345 150,685 175,524 99,070
Class B 36,147 22,493 258,479 85,513 48,227
Class C 30,437 18,054 25,493 70,491 39,533
Opportunity
Class A 215,216 134,388 478,181 521,804 288,719
Class B 94,246 66,618 1,568,469 239,105 134,245
Class C 36,620 23,856 54,228 88,890 49,933
Small Capitalization
Class A 229,352 140,138 432,263 533,336 305,408
Class B 51,009 32,833 598,280 121,008 69,322
Class C 30,312 19,491 27,164 72,542 41,120
U.S. Government Income
Class A 150,757 88,807 395,964 344,232 195,305
Class B 36,436 22,858 267,086 85,950 48,875
Class C 26,953 16,650 -11,781 63,206 35,847
<FN>
(1) Includes cost of telephone and overhead.
</TABLE>
31
<PAGE>
During the fiscal year ended October 31, 1994, the Distributor received the
following compensation with respect to the Funds:
<TABLE>
<CAPTION>
Fund Portion of Sales Compensation on Redemptions
Charge on Class A Shares (CDSC's)
<S> <C> <C>
Opportunity $158,717 $21,000
Small Capitalization $107,379 $10,000
Growth and Income $8,014 $1,000
U.S. Government Income $20,540 $10,000
Investment Quality Income $13,631 $18,000
</TABLE>
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 of each class are fully paid and have no preemptive,
conversion or other subscription rights. Each class of shares represents
identical interests in the applicable Fund's investment portfolio. As such, they
have the same rights, privileges and preferences, except with respect to: (a)
the designation of each class, (b) the effect of the respective sales charges,
if any, for each class, (c) the distribution fees borne by each class, (d) the
expenses allocable exclusively to each class, (e) voting rights on matters
exclusively affecting a single class and (f) the exchange privilege of each
class. Upon liquidation of the Trust or any Fund, shareholders of each class of
shares of a Fund are entitled to share pro rata in the net assets of that class
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. Expenses not otherwise identified with a particular Fund will be
allocated fairly among two or more Funds by the Board of Trustees. 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
32
<PAGE>
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.
The Trust may in the future seek to achieve the investment objective of the
U.S. Government Income Fund and the Growth and Income Fund by investing all of
each Fund's respective assets in a no-load diversified open-end management
investment company with the same portfolio manager, investment objective and
investment restrictions. The shareholders of the U.S. Government Income Fund and
the Growth and Income Fund authorized such investment by approving changes to
the investment restrictions of the respective Fund at a Special Meeting of
Shareholders held in, 1993 and in 1994, respectively. Such investment would
only be made if the Trustees feel that the aggregate per share expenses of the
U.S. Government Income Fund and the Growth and Income Fund and such other
investment companies would be less than or approximately equal to the expenses
which the U.S. Government Income Fund and the Growth and Income Fund would incur
if such Fund were to continue its present investment policies. It is expected
that such an investment in another investment company will have no preference,
preemptive, conversion or similar rights, and will be fully-paid and non-
assessable. It is expected that the investment company will not be required to
hold annual meetings, but will hold special meetings of shareholders when, in
the judgment of the Trustees, it is necessary or desirable to submit matters for
shareholder vote.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Funds are created by
the Board of Trustees, shares of each such Fund will be entitled to vote as a
group only to the extent permitted by the 1940 Act (see below) or as permitted
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 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 General Distributor's Agreement between
the Trust and the Distributor, the Distributor acts as the Trust's agent in the
continuous public offering of each class 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 each Fund; their services
include examining the annual financial statements of each Fund as well as other
related services. Price Waterhouse LLP also serves as independent accountants
for the Advisor and its affiliates.
33
<PAGE>
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. State Street
Bank and Trust Company acts as transfer agent, shareholder servicing agent and
custodian of the assets of the Trust.
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, Inc. (which had been the investment advisor of AMA Family of Funds)
who acquire shares of any Quest Funds, and 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 Manager
brokerage account, and other 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.
TAX INFORMATION. The Federal tax treatment of the Funds' dividends and
distributions is explained in the Prospectus under the heading "Tax Status." A
Fund will be subject to a nondeductible 4% excise tax to the extent that it
fails to distribute by the end of any calendar year substantially all its
ordinary income for that year and capital gains for the one year period ending
on October 31 of that year.
CAPITAL LOSS CARRYOVERS. For the fiscal year ended October 31, 1994, the
Growth and Income Fund will utilize $188,067 of net capital loss carryovers. At
October 31, 1994, the Growth and Income Fund had net capital loss carryovers of
$791,899 of which $558,150, $117,811 and $55,938 will be available through the
fiscal years ending 1995, 1996 and 2000, respectively, to offset future net
capital gains, to the extent provided by regulations. However, these loss
carryovers are further limited by IRC Section 382 to $188,067 annually. To the
extent that these capital loss carryovers are used to offset future net capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
In addition, the Investment Quality Income Fund had a capital loss
carryover at October 31, 1994 of $952,880 available as a reduction against
future net capital gains realized before the end of fiscal year 2002 to the
extent provided by regulations.
OTHER. Oppenheimer Capital, the parent of Quest for Value Advisors and a
leading institutional investment manager with approximately $29 billion in
assets under management, has been an investment advisor to the American Medical
Association's pension fund since the 1960's.
RETIREMENT PLANS. Quest for Value Distributors may print advertisements and
brochures concerning retirement plans, lump sum distributions and 401-k plans.
These materials may include descriptions of tax rules, strategies for reducing
risk and descriptions of the 401-k program offered by Quest for Value
Distributors. From time to time hypothetical investment programs illustrating
various tax-deferred investment strategies will be used in brochures, sales
literature, and omitting prospectuses. The following examples illustrate the
general approaches that will be followed. These hypotheticals
34
<PAGE>
will be modified with different investment amounts, reflecting the amounts that
can be invested in different types of retirement programs, different assumed tax
rates, and assumed rates of return. They should not be viewed as indicative of
past or future performance of any Quest for Value products.
35
<PAGE>
EXAMPLES
<TABLE>
<CAPTION>
Benefits of Long Term Tax-Free Compounding - Benefits of Long Term Tax-Free Compounding -
Single Sum Periodic Investment
- ------------------------------------------------------------- -------------------------------------------------------------
Amount of Contribution: $100,000 Amount Invested Annually: $2000
- ------------------------------------------------------------- -------------------------------------------------------------
Rates of Return Rates of Return
Years -------------------------------------------- Years ------------------------------------------
8.00% 10.00% 12.00% 8.00% 10.00% 12.00%
-------------------------------------------- ------------------------------------------
Value at end Value at End
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $ 146,933 $ 161,051 $ 176,234 5 $ 12,672 $ 13,431 $ 14,230
10 $ 215,892 $ 259,374 $ 310,585 10 $ 31,291 $ 35,062 $ 39,309
15 $ 317,217 $ 417,725 $ 547,357 15 $ 58,649 $ 69,899 $ 83,507
20 $ 466,096 $ 672,750 $ 964,629 20 $ 98,846 $126,005 $161,397
25 $ 684,848 $1,083,471 $1,700,006 25 $157,909 $216,364 $298,668
30 $1,006,266 $1,744,940 $2,995,992 30 $244,692 $361,887 $540,585
<CAPTION>
Comparison of Taxable and Tax-Free Investing -- Periodic Investments
(Assumed Tax Rate : 28%)
- -------------------------------------------------------------------------------------------------------------------------------
Amount of Annual Contribution (Pre-Tax):$2,000 Annual Contribution (After Tax): $1,440
- ------------------------------------------------------------- ---------------------------------------------------------
Tax Deferred Rates of Return Fully Taxed Rates of Return
Years ------------------------------------------- Years ------------------------------------------
8.00% 10.00% 12.00% 5.76% 7.20% 8.64%
------------------------------------------- ------------------------------------------
Value at end Value at End
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $ 12,672 $ 13,431 $ 14,230 5 $ 8,544 $ 8,913 $ 9,296
10 $ 31,291 $ 35,062 $ 39,309 10 $ 19,849 $ 21,531 $ 23,364
15 $ 58,649 $ 69,899 $ 83,507 15 $ 34,807 $ 39,394 $ 44,654
20 $ 98,846 $126,005 $161,397 20 $ 54,598 $ 64,683 $ 76,874
25 $157,909 $216,364 $298,668 25 $ 80,785 $100,485 $125,635
30 $244,692 $361,887 $540,585 30 $115,435 $151,171 $199,429
<CAPTION>
Comparison of Tax Deferred Investing
-- Deducting Taxes at End
(Assumed Tax Rate at End: 28%)
- ------------------------------------------------------------------------
Amount of Annual Contribution: $2,000
- ------------------------------------------------------------------------
Tax Deferred Rates of Return
Years ----------------------------------------------------
8.00% 10.00% 12.00%
----------------------------------------------------
Value at End
- ------------------------------------------------------------------------
<S> <C> <C> <C>
5 $ 11,924 $ 12,470 $ 13,046
10 $ 28,130 $ 30,485 $ 33,903
15 $ 50,627 $ 58,728 $ 68,525
20 $ 82,369 $101,924 $127,406
25 $127,694 $169,782 $229,041
30 $192,978 $277,359 $406,021
</TABLE>
36
<PAGE>
APPENDIX A -- RATINGS
DESCRIPTION OF MOODY'S CORPORATE RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." 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. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best 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 possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to 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.
Ba. Bonds which are rated Ba are judges to have speculative elements and
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack the characteristics of a
desirable investment. Assurance of interest and principal payments or of other
terms of the contract over long periods may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be elements of danger present with respect to principal or
interest.
Ca. 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.
A-1
<PAGE>
C. 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.
DESCRIPTION OF S&P'S CORPORATE 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.
A. Debt rated A has a strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
BBB. Debt rated BBB is regarded as having adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category.
BB. Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B. Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest and principal payments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating
CCC. Debt rated CCC has a current identifiable vulnerability to default and
is dependent upon favorable business, financial and economic conditions to meet
timely payments 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. The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
CC. The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
A-2
<PAGE>
C. The rating C is typically applied to debt subordinated to senior debt
that 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.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is 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 such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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
A-3
<PAGE>
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.
A-4
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS -- 0.1%
$ 350,000 5.06%, 4/06/95
(cost -- $342,326) $ 342,031
------------
<CAPTION>
SHORT-TERM CORPORATE NOTES -- 10.7%
BANKING -- 3.3%
$ 8,632,000 Norwest Financial, Inc.
4.95%, 12/05/94 $ 8,591,645
------------
ENERGY -- 0.8%
2,000,000 Chevron Oil Finance Co.
4.91%, 11/28/94 1,992,635
------------
INSURANCE -- 0.9%
2,300,000 Prudential Funding Corp.
4.85%, 11/14/94 2,295,972
------------
MACHINERY & ENGINEERING -- 3.1%
7,900,000 Deere (John) Capital Corp.
4.92%, 11/07/94 7,893,522
------------
MISCELLANEOUS FINANCIAL SERVICES -- 2.6%
1,470,000 Beneficial Corp.
4.88%, 11/21/94 1,466,015
1,300,000 Commercial Credit Co.
4.85%, 11/21/94 1,296,497
4,000,000 Household Finance Corp.
4.97%, 12/01/94 3,983,433
------------
6,745,945
------------
Total Short-Term Corporate Notes
(cost -- $27,519,719) $ 27,519,719
------------
CONVERTIBLE CORPORATE BONDS -- 0.8%
REAL ESTATE
$ 2,310,156 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $2,177,494) (A) $ 1,997,340
------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
60,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,654,325) $ 2,880,000
------------
COMMON STOCKS -- 88.0%
AEROSPACE -- 10.1%
215,000 AlliedSignal, Inc. $ 7,444,375
129,000 Martin Marietta Corp. 5,917,875
59,000 McDonnell Douglas Corp. 8,319,000
90,000 Sundstrand Corp. 4,095,000
------------
25,776,250
------------
BANKING -- 6.1%
75,000 Citicorp 3,581,250
68,000 First Interstate Bancorp 5,440,000
120,810 Mellon Bank Corp. 6,720,056
------------
15,741,306
------------
CHEMICALS -- 3.1%
27,000 Hercules, Inc. 3,152,250
64,000 Monsanto Co. 4,872,000
------------
8,024,250
------------
CONGLOMERATES -- 1.7%
90,200 General Electric Co. 4,408,525
------------
CONSUMER PRODUCTS -- 7.5%
80,000 Avon Products, Inc. 5,060,000
252,000 Hasbro, Inc. 8,316,000
50,000 Unilever N.V. 5,937,500
------------
19,313,500
------------
DRUGS & MEDICAL PRODUCTS -- 5.4%
213,000 Becton, Dickinson & Co. 10,064,250
48,000 Warner-Lambert Co. 3,660,000
------------
13,724,250
------------
ELECTRONICS -- 2.6%
177,000 Arrow Electronics, Inc.* 6,681,750
INSURANCE -- 20.5%
82,000 American International Group, Inc. 7,677,250
411,000 EXEL Ltd. 16,183,125
38,500 General Reinsurance Corp. 4,312,000
205,000 John Alden Financial Corp. 6,150,000
202,500 Progressive Corp., Ohio 7,695,000
101,000 Transamerica Corp. 4,961,625
121,000 UNUM Corp. 5,550,875
------------
52,529,875
------------
MANUFACTURING -- 4.2%
260,000 Case Corp. 5,460,000
290,000 Pall Corp. 5,256,250
------------
10,716,250
------------
<FN>
* Non-income producing security.
</TABLE>
B-1
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
QUEST FOR VALUE FUND, INC. (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------
<C> <S> <C>
METALS/MINING -- 1.7%
2,844 Freeport McMoRan, Copper & Gold (Class A) $ 64,701
227,000 Freeport McMoRan, Inc. 4,171,125
------------
4,235,826
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.9%
200,000 American Express Co. 6,150,000
340,000 Countrywide Credit Industries, Inc. 5,015,000
152,000 Federal Home Loan Mortgage Corp. 8,284,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
25,332,750
------------
REAL ESTATE -- 1.1%
3,050 Security Capital Realty, Inc. (A) 2,758,036
------------
RETAIL -- 3.5%
213,000 May Department Stores Co. 8,014,125
21,000 Mercantile Stores Co., Inc. 955,500
------------
8,969,625
------------
TECHNOLOGY -- 3.1%
127,000 Intel Corp. 7,889,875
------------
TELECOMMUNICATIONS -- 1.9%
344 Bell Atlantic Corp. 18,017
145,200 Sprint Corp. 4,737,150
------------
4,755,167
------------
TEXTILES/APPAREL -- 2.1%
280,600 Warnaco Group, Inc. (Class A)* 5,296,325
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.5%
116,000 Dole Food Co. $ 3,117,500
240,000 Sara Lee Corp. 5,910,000
------------
9,027,500
------------
Total Common Stocks
(cost -- $192,374,371) $225,181,060
------------
Total Investments
(cost -- $225,068,235) 100.7% $257,920,150
Other Liabilities in Excess of
Other Assets (0.7) (1,881,015)
----- ------------
TOTAL NET ASSETS 100.0% $256,039,135
----- ------------
----- ------------
OPPORTUNITY FUND
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES -- 20.6%
AUTOMOTIVE -- 0.7%
$ 1,450,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,444,660
------------
BANKING -- 4.9%
10,600,000 Norwest Financial, Inc.
4.95%, 12/05/94 10,550,445
------------
CONGLOMERATES -- 0.5%
950,000 General Electric Capital Corp.
4.90%, 11/14/94 948,319
------------
ENERGY -- 3.5%
Chevron Oil Finance Co.
6,100,000 4.82%, 11/28/94 6,077,949
1,450,000 4.91%, 11/28/94 1,444,661
------------
7,522,610
------------
INSURANCE -- 0.6%
1,300,000 Prudential Funding Corp.
5.00%, 11/14/94 1,297,653
------------
<FN>
* Non-income producing security.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):
VALUATION
DESCRIPTION DATE OF PAR SHARES UNIT AS OF
ACQUISITION AMOUNT COST OCTOBER 31,
1994
- --------------------------------------------------------------------------------
Security Capital Realty, Inc.
12.00%, 6/30/14 9/15/94 $2,310,156 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 9/15/94 -- 3,050 926 904
</TABLE>
B-2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------
<S> <C> <C>
MACHINERY & ENGINEERING -- 1.8%
Deere (John) Capital Corp.
$ 800,000 4.83%, 11/21/94 $ 797,853
3,100,000 4.92%, 11/07/94 3,097,458
------------
3,895,311
------------
MISCELLANEOUS FINANCIAL SERVICES -- 8.6%
Beneficial Corp.
4,950,000 4.88%, 11/21/94 4,936,580
1,100,000 5.00%, 11/07/94 1,099,083
1,800,000 CIT Group Holdings, Inc.
5.05%, 11/07/94 1,798,485
1,200,000 Commercial Credit Co.
4.85%, 11/21/94 1,196,767
Household Finance Corp.
2,500,000 4.52%, 11/02/94 2,499,686
6,100,000 4.85%, 11/28/94 6,077,811
800,000 4.88%, 11/14/94 798,590
------------
18,407,002
------------
Total Short-Term Corporate Notes
(cost -- $44,066,000) $ 44,066,000
------------
U.S. TREASURY NOTES -- 1.5%
$ 1,000,000 7.50%, 11/15/01 $ 992,030
1,000,000 7.50%, 5/15/02 990,470
550,000 7.875%, 4/15/98 560,054
550,000 7.875%, 8/15/01 557,304
------------
Total U.S. Treasury Notes
(cost -- $3,149,370) $ 3,099,858
------------
CONVERTIBLE PREFERRED STOCKS -- 1.1%
METALS/MINING
50,000 Freeport McMoRan, Inc.
$4.375 Conv. Pfd.
(cost -- $2,211,938) $ 2,400,000
------------
COMMON STOCKS -- 76.5%
AEROSPACE -- 8.9%
115,000 McDonnell Douglas Corp. $ 16,215,000
60,000 Sundstrand Corp. 2,730,000
------------
18,945,000
------------
BANKING -- 15.2%
120,000 Citicorp $ 5,730,000
34,000 First Empire State Corp. 5,108,500
226,000 Mellon Bank Corp. 12,571,250
10,000 U.S. Bancorp 240,000
60,000 Wells Fargo & Co. 8,917,500
------------
32,567,250
------------
CHEMICALS -- 4.7%
75,000 Hercules, Inc. 8,756,250
18,000 Monsanto Co. 1,370,250
------------
10,126,500
------------
CONSUMER PRODUCTS -- 3.8%
60,000 Avon Products, Inc. 3,795,000
50,000 Hasbro, Inc. 1,650,000
92,500 Mattel, Inc. 2,705,625
------------
8,150,625
------------
DRUGS & MEDICAL PRODUCTS -- 5.9%
120,000 Becton, Dickinson & Co. 5,670,000
90,000 Warner-Lambert Co. 6,862,500
------------
12,532,500
------------
ENERGY -- 5.4%
139,200 Tenneco, Inc. 6,159,600
149,300 Triton Energy Corp.* 5,300,150
------------
11,459,750
------------
HEALTHCARE SERVICES -- 2.9%
435,000 National Health
Laboratories, Inc. 6,253,125
------------
INSURANCE -- 5.3%
160,000 EXEL Ltd. 6,300,000
60,000 Transamerica Corp. 2,947,500
60,000 Travelers, Inc. 2,085,000
------------
11,332,500
------------
MANUFACTURING -- 1.3%
160,000 Collins & Aikman Corp.* 1,420,000
100,100 Shaw Industries, Inc. 1,463,962
------------
2,883,962
------------
<FN>
* Non-income producing security.
</TABLE>
B-3
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
OPPORTUNITY FUND (cont'd)
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS FINANCIAL SERVICES -- 16.5%
240,000 American Express Co. $ 7,380,000
321,700 Countrywide Credit
Industries, Inc. 4,745,075
210,000 Federal Home Loan Mortgage
Corp. 11,445,000
55,000 Federal National Mortgage
Assoc. 4,180,000
110,000 Lehman Brothers Holdings,
Inc. 1,705,000
90,000 Morgan Stanley Group, Inc. 5,883,750
------------
35,338,825
------------
TECHNOLOGY -- 4.8%
70,000 Alliant Techsystems, Inc.* 2,406,250
110,000 Intel Corp. 6,833,750
50,500 Unitrode Corp.* 972,125
------------
10,212,125
------------
TELECOMMUNICATIONS -- 1.8%
120,100 Sprint Corp. 3,918,263
------------
Total Common Stocks
(cost -- $149,478,552) $163,720,425
------------
Total Investments
(cost -- $198,905,860) 99.7% $213,286,283
Other Assets in Excess of
Other Liabilities 0.3 659,462
----- ------------
TOTAL NET ASSETS 100.0% $213,945,745
----- ------------
----- ------------
SMALL CAPITALIZATION FUND
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 8.5%
AUTOMOTIVE -- 0.7%
$1,038,000 Ford Motor Credit Co.
4.91%, 11/28/94 $ 1,034,178
------------
BANKING -- 5.0%
7,041,000 Norwest Financial, Inc.
4.95%, 12/05/94 7,008,083
------------
CONGLOMERATES -- 0.7%
930,000 General Electric Capital
Corp.
4.82%, 11/21/94 927,510
------------
INSURANCE -- 1.1%
$1,468,000 Prudential Funding Corp.
4.85%, 11/28/94 $ 1,462,660
------------
MISCELLANEOUS FINANCIAL SERVICES -- 1.0%
925,000 Beneficial Corp.
4.88%, 11/21/94 922,492
475,000 Federal National Mortgage
Assoc.
4.75%, 11/01/94 475,000
------------
1,397,492
------------
Total Short-Term Corporate Notes
(cost -- $11,829,923) $ 11,829,923
------------
CORPORATE NOTES & BONDS -- 0.7%
ENERGY -- 0.3%
$ 375,000 Global Marine, Inc.
12.75%, 12/15/99 $ 405,000
------------
PRINTING & PUBLISHING -- 0.4%
700,000 U.S. Banknote Corp.
10.375%, 6/01/02 602,000
------------
Total Corporate Notes & Bonds
(cost -- $1,104,862) $ 1,007,000
------------
CONVERTIBLE CORPORATE BONDS -- 0.9%
REAL ESTATE
$1,363,500 Security Capital Realty, Inc.
12.00%, 6/30/14
(cost -- $1,285,200) (A) $ 1,178,870
------------
SHARES VALUE
- ------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
RETAIL
36,000 Family Bargain Corp.
$0.95 Conv. Pfd.
(cost -- $360,000) $ 346,500
------------
COMMON STOCKS -- 86.3%
ADVERTISING -- 4.7%
100,000 Foote, Cone & Belding
Communications, Inc. 4,475,000
39,000 Omnicom Group, Inc. 2,076,750
------------
6,551,750
------------
AEROSPACE -- 1.2%
200,000 BE Aerospace, Inc.* 1,737,500
------------
AUTOMOTIVE -- 0.2%
126,000 Collins Industries, Inc.* 283,500
------------
BUILDING & CONSTRUCTION -- 3.9%
146,000 CRSS, Inc. 1,642,500
102,600 D.R. Horton, Inc. 1,346,625
120,000 Martin Marietta Materials,
Inc. 2,475,000
------------
5,464,125
------------
CHEMICALS -- 2.0%
141,400 OM Group, Inc. 2,828,000
------------
<FN>
* Non-income producing security.
</TABLE>
B-4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMPUTER SERVICES -- 4.1%
147,700 BancTec, Inc.* $ 2,954,000
34,600 Globalink, Inc.* 484,400
90,000 National Data Corp. 1,867,500
70,000 Sudbury, Inc.* 481,250
------------
5,787,150
------------
DRUGS & MEDICAL PRODUCTS -- 3.6%
40,000 Beckman Instruments, Inc. 1,175,000
108,900 Sybron International Corp.* 3,770,662
------------
4,945,662
------------
ELECTRICAL EQUIPMENT -- 0.7%
80,000 Instrument Systems Corp.* 600,000
16,000 Marshall Industries* 418,000
------------
1,018,000
------------
ENERGY -- 9.5%
136,800 Aquila Gas Pipeline Corp. 1,043,100
195,500 BWIP Holdings, Inc. (Class
A) 3,519,000
330,155 Global Natural Resources,
Inc.* 2,476,162
125,000 Nahama & Weagant
Energy Co.* 54,687
137,500 Noble Drilling Corp.* 1,014,063
72,000 St. Mary Land &
Exploration Co. 967,500
65,000 Triton Energy Corp.* 2,307,500
92,530 UGI Corp. 1,862,166
------------
13,244,178
------------
HEALTHCARE SERVICES -- 1.7%
90,000 Community Health Systems,
Inc.* 2,362,500
------------
INSURANCE -- 3.3%
123,300 Financial Security Assurance
Holdings, Ltd. 2,758,838
112,500 Guaranty National Corp. 1,884,375
------------
4,643,213
------------
LEISURE -- 0.7%
43,700 Club Med, Inc. 977,787
------------
MANUFACTURING -- 6.8%
89,000 Collins & Aikman Corp.* 789,875
97,000 Exabyte Corp.* 2,134,000
50,000 Giddings & Lewis, Inc. 775,000
181,300 Interlake Corp.* 430,587
65,100 Masland Corp. 1,049,738
170,000 North American Watch Co. 2,210,000
85,600 Welbilt Corp.* 2,118,600
------------
9,507,800
------------
MEDIA/BROADCASTING -- 0.6%
25,000 Pulitzer Publishing Co. 893,750
------------
METALS/MINING -- 0.5%
50,000 Olympic Steel, Inc.* 737,500
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.6%
221,400 SafeCard Services, Inc. 3,542,400
100,800 Union Corp.* 1,499,400
------------
5,041,800
------------
PAPER PRODUCTS -- 0.7%
61,500 CSS Industries, Inc.* $ 1,022,438
------------
PRINTING & PUBLISHING -- 3.8%
72,000 Commerce Clearing House,
Inc. (Class B) 1,206,000
216,300 Nu-Kote Holdings, Inc.
(Class A)* 4,028,588
------------
5,234,588
------------
REAL ESTATE -- 10.6%
151,800 Cousins Properties, Inc. 2,352,900
44,000 Post Properties, Inc. 1,292,500
219,750 Property Trust of America 3,543,469
230,000 Security Capital Industrial
Trust, Inc. 3,507,500
1,800 Security Capital Realty,
Inc. (A) 1,627,848
239,000 Taubman Centers, Inc. 2,479,625
------------
14,803,842
------------
RETAIL -- 4.3%
190,000 AmeriCredit Corp.* 1,258,750
72,700 Brookstone, Inc.* 1,090,500
350,700 Cash America International,
Inc. 2,893,275
15,600 Finish Line, Inc. 113,100
52,500 Fred's, Inc. 603,750
------------
5,959,375
------------
SECURITY/INVESTIGATION SERVICES -- 0.5%
202,910 Automated Security Holdings
PLC ADS 532,639
498,184 Holmes Protection Group,
Inc. 187,409
------------
720,048
------------
TECHNOLOGY -- 8.1%
100,400 Dionex Corp.* 3,714,800
202,000 Rational Software Corp.* 505,000
130,000 Stratus Computer, Inc.* 4,842,500
113,100 Unitrode Corp.* 2,177,175
------------
11,239,475
------------
TEXTILES/APPAREL -- 3.5%
18,000 Blair Corp. 756,000
70,000 Dyersburg Corp. 437,500
42,700 Fab Industries, Inc. 1,318,363
128,000 Warnaco Group, Inc. (Class
A)* 2,416,000
------------
4,927,863
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 2.1%
70,900 Morningstar Group, Inc. 514,025
220,118 Sylvan Food Holdings, Inc.* 2,366,268
------------
2,880,293
------------
TRANSPORTATION -- 2.0%
183,700 Interpool, Inc.* 2,525,875
18,000 MTL, Inc. 279,000
------------
2,804,875
------------
UTILITIES -- 1.7%
221,200 Sithe Energies, Inc.* 2,322,600
------------
<FN>
* Non-income producing security.
</TABLE>
B-5
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
SMALL CAPITALIZATION FUND (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
OTHER -- 1.9%
142,000 McGrath RentCorp. $ 2,165,500
89,200 National Education Corp.* 434,850
------------
2,600,350
------------
Total Common Stocks
(cost -- $114,775,894) $120,539,962
------------
Total Investments
(cost -- $129,355,879) 96.6% $134,902,255
Other Assets in Excess of
Other Liabilities 3.4 4,687,545
----- ------------
TOTAL NET ASSETS 100.0% $139,589,800
----- ------------
----- ------------
GROWTH AND INCOME FUND
- ------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 13.5%
AUTOMOTIVE -- 3.4%
$ 1,150,000 Ford Motor Credit Co.
4.76%, 11/07/94 $ 1,149,088
------------
CONGLOMERATES -- 2.6%
885,000 General Electric Capital Corp.
4.72%, 11/04/94 884,652
------------
ENERGY -- 4.1%
1,415,000 Chevron Oil Finance Co.
4.70%, 11/01/94 1,415,000
------------
MISCELLANEOUS FINANCIAL SERVICES -- 3.4%
1,150,000 Household Finance Corp.
4.77%, 11/08/94 1,148,933
------------
Total Short-Term Corporate Notes
(cost -- $4,597,673) $ 4,597,673
------------
CORPORATE NOTES & BONDS -- 11.2%
CONTAINERS -- 3.0%
$ 1,000,000 Stone Container Corp.
11.875%, 12/01/98 $ 1,030,000
------------
ENERGY -- 3.8%
1,750,000 Triton Energy Corp.
Zero Coupon, 11/01/97 1,279,687
------------
TELECOMMUNICATIONS -- 4.4%
3,000,000 Nextel Communications, Inc.
0.00%/11.50%, 9/01/03** 1,515,000
------------
Total Corporate Notes & Bonds
(cost -- $4,187,052) $ 3,824,687
------------
CONVERTIBLE CORPORATE BONDS -- 6.2%
DRUGS & MEDICAL PRODUCTS -- 1.7%
$ 1,692,000 Alza Corp.
Zero Coupon, 7/14/14 $ 568,935
------------
MEDIA/BROADCASTING -- 4.5%
5,000,000 Time Warner, Inc.
Zero Coupon, 12/17/12 1,525,000
Total Convertible Corporate Bonds
(cost -- $2,173,746) $ 2,093,935
------------
- -------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 12.3%
ENERGY -- 5.4%
130,000 Gerrity Oil & Gas Corp.
$1.50 Conv. Pfd. $ 1,820,000
------------
RETAIL -- 2.2%
20,000 Venture Stores, Inc.
$3.25 Conv. Pfd. 760,000
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 4.7%
80,000 Flagstar Companies, Inc.
$2.25 Conv. Pfd. 1,590,000
------------
Total Convertible Preferred Stocks
(cost -- $4,878,620) $ 4,170,000
------------
COMMON STOCKS -- 52.6%
AEROSPACE -- 6.2%
15,000 McDonnell Douglas Corp. $ 2,115,000
------------
<FN>
* Non-income producing security.
** Represents a step-up floater which will receive 0.00% interest until
9/01/98, then will "step-up"to 11.50% until maturity.
(A) Restricted Securities (the Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in connection
with the disposition of these securities.):
AS OF
DATE OF PAR UNIT OCTOBER 31,
DESCRIPTION ACQUISITION AMOUNT SHARES COST 1994
- --------------------------------------------------------------------------------
Security Capital Realty, Inc.
12.00%, 6/30/14 6/16/94 $1,363,500 -- $ .94 $ .86
Security Capital Realty, Inc.
Common Stock 8/02/93 -- 1,800 684 904
</TABLE>
B-6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE -- 3.2%
27,000 General Motors Corp. $ 1,066,500
------------
BANKING -- 2.7%
7,000 Citicorp 334,250
4,000 Wells Fargo & Co. 594,500
------------
928,750
------------
CONGLOMERATES -- 1.0%
20,000 Canadian Pacific Ltd. 320,000
------------
CONSUMER PRODUCTS -- 0.9%
5,000 Avon Products, Inc. 316,250
------------
ENERGY -- 3.1%
5,000 McMoRan Oil & Gas Corp. 18,750
20,000 Triton Energy Corp.* 710,000
15,000 Union Texas Petroleum
Holdings, Inc. 313,125
------------
1,041,875
------------
INSURANCE -- 7.0%
16,000 Equitable Co. 312,000
10,000 Progressive Corp., Ohio 380,000
35,000 TIG Holdings, Inc. 673,750
20,000 Travelers, Inc. 695,000
7,000 UNUM Corp. 321,125
------------
2,381,875
------------
METALS/MINING -- 4.4%
1,562 Freeport McMoRan, Copper &
Gold (Class A) 35,536
80,000 Freeport McMoRan, Inc. 1,470,000
------------
1,505,536
------------
MISCELLANEOUS FINANCIAL SERVICES -- 9.7%
26,000 American Express Co. 799,500
100,000 Countrywide Credit
Industries, Inc. 1,475,000
17,000 Federal Home Loan Mortgage
Corp. 926,500
5,200 Lehman Brothers Holdings,
Inc. 80,600
------------
3,281,600
------------
RETAIL -- 1.1%
10,000 May Department Stores Co. 376,250
------------
TECHNOLOGY -- 3.7%
20,000 Intel Corp. 1,242,500
------------
TELECOMMUNICATIONS -- 1.9%
20,000 Sprint Corp. 652,500
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 7.7%
45,000 PepsiCo, Inc. $ 1,575,000
17,000 Philip Morris Companies,
Inc. 1,041,250
------------
2,616,250
------------
Total Common Stocks
(cost -- $16,287,790) $ 17,844,886
------------
Total Investments
(cost -- $32,124,881) 95.8% $ 32,531,181
Other Assets in Excess of
Other Liabilities 4.2 1,428,001
----- ------------
TOTAL NET ASSETS 100.0% $ 33,959,182
----- ------------
----- ------------
U.S. GOVERNMENT INCOME FUND
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
$ 100,000 Prudential Bache, 4.70%,
11/01/94 (proceeds at
maturity: $100,013,
collateralized by $105,000
par, $103,373 value, U.S.
Treasury Notes 4.625%,
2/29/96)
(cost -- $100,000) $ 100,000
------------
FEDERAL HOME LOAN MORTGAGE
CORPORATION -- 0.6%
$ 817,404 9.50%, 12/01/02 - 11/01/03
(cost -- $823,662) $ 846,773
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I -- 51.6%
$40,573,258 7.00%, 2/15/22 - 11/15/23
(A) $ 36,363,783
16,903,209 7.50%, 2/15/22 - 2/15/24 15,693,446
3,819,011 8.00%, 4/15/02 - 2/15/23 3,711,053
11,354,828 8.50%, 6/15/01 - 9/15/24 (A) 11,222,631
690,831 10.50%, 1/15/98 - 12/15/00 740,481
------------
Total Government National Mortgage
Association I (cost -- $75,692,773) $ 67,731,394
------------
U.S. TREASURY BONDS -- 2.9%
$ 4,000,000 7.625%, 11/15/22
(cost -- $4,740,548) $ 3,804,360
------------
<FN>
* Non-income producing security.
(A) Securities segregated (full or partial) as collateral for written options
outstanding. The aggregate market value of such segregated securities is
$20,087,482.
</TABLE>
B-7
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
SCHEDULES OF INVESTMENTS
U.S. GOVERNMENT INCOME FUND (cont'd)
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<C> <C> <C>
U.S. Treasury Notes -- 44.6%
$60,000,000 6.875%, 8/31/99
(cost -- $58,889,522) $ 58,565,400
------------
Total Investments
(cost -- $140,246,505) 99.8% $131,047,927
----- ------------
- -------------------------------------------------------
PRINCIPAL
AMOUNT
SUBJECT
TO CALL VALUE
- ------------------------------------------------------
WRITTEN CALL OPTIONS OUTSTANDING -- (0.1%)
$10,000,000 Government National
Mortgage Association I,
7.00%, expiring Dec. '94,
strike @ 89.22 $ (115,625)
10,000,000 Government National
Mortgage Association I,
8.50%, expiring Dec. '94,
strike @ 98.78 (75,000)
------------
Total Written Call Options
Outstanding (premiums
received: $142,188) $ (190,625)
------------
Other Assets in Excess of
Other Liabilities 0.3 436,494
----- ------------
Total Net Assets 100.0% $131,293,796
----- ------------
----- ------------
INVESTMENT QUALITY INCOME FUND
- -----------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------
SHORT-TERM CORPORATE NOTES -- 9.4%
CONGLOMERATES -- 3.7%
$ 2,075,000 General Electric Capital Corp.
4.72%, 11/14/94 $ 2,071,463
------------
MISCELLANEOUS FINANCIAL SERVICES -- 5.7%
2,075,000 Amercian Express Credit Corp.
4.75%, 11/07/94 2,073,357
1,150,000 Household Finance Corp.
4.68%, 11/02/94 1,149,851
------------
3,223,208
------------
Total Short-Term Corporate Notes
(cost -- $5,294,671) $ 5,294,671
------------
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
CORPORATE NOTES & BONDS -- 88.2%
AEROSPACE -- 3.6%
$ 2,000,000 United Technologies Corp.
8.875%, 11/15/19 $ 2,007,420
------------
AIRLINES -- 2.6%
1,000,000 American Airlines
9.73%, 9/29/14 916,910
550,000 Delta Air Lines, Inc.
10.375%, 2/01/11 538,351
------------
1,455,261
------------
BANKING -- 6.4%
70,000 NatWest Bancorp, Inc.
9.375%, 11/15/03 74,378
1,300,000 NCNB Corp.
10.20%, 7/15/15 1,439,139
500,000 RBSG Capital Corp.
10.125%, 3/01/04 547,640
1,500,000 Westpac Banking Corp.
9.125%, 8/15/01 1,555,020
------------
3,616,177
------------
CHEMICALS -- 0.9%
500,000 Rohm & Haas Co.
9.50%, 4/01/21 521,470
------------
CONGLOMERATES -- 5.1%
2,000,000 Canadian Pacific Ltd.
9.45%, 8/01/21 2,082,160
1,000,000 ITT Financial Corp.
6.50%, 5/01/11 786,860
------------
2,869,020
------------
ENERGY -- 5.9%
3,000,000 Occidental Petroleum Corp.
11.125%, 6/01/19 3,312,990
------------
ENTERTAINMENT -- 4.8%
3,000,000 Time Warner, Inc.
9.15%, 2/01/23 2,670,390
------------
EQUIPMENT LEASING -- 2.7%
1,600,000 Ryder Systems, Inc.
8.75%, 3/15/17 1,522,832
------------
INSURANCE -- 11.1%
1,000,000 Aetna Life & Casualty Co.
8.00%, 1/15/17 879,780
1,200,000 Capital Holding Corp.
8.75%, 1/15/17 1,172,700
2,000,000 CNA Financial Corp.
7.25%, 11/15/23 1,595,120
3,000,000 Torchmark, Inc.
7.875%, 5/15/23 2,606,610
------------
6,254,210
------------
</TABLE>
B-8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------
<C> <S> <C>
MACHINERY & ENGINEERING -- 3.3%
$ 1,750,000 Caterpillar, Inc.
9.75%, 6/01/19 $ 1,825,810
------------
MISCELLANEOUS FINANCIAL SERVICES -- 12.6%
20,000 Beneficial Corp.
12.875%, 8/01/13 23,754
1,500,000 BHP Finance USA Ltd.
8.50%, 12/01/12 1,467,105
Lehman Brothers, Inc.
865,000 9.875%, 10/15/00 910,732
115,000 10.00%, 5/15/99 121,464
205,000 Midland American
Capital Corp.
12.75%, 11/15/03 237,845
800,000 Paine Webber Group, Inc.
9.25%, 12/15/01 816,216
3,000,000 Prudential Funding Corp.
6.75%, 9/15/23 2,274,780
1,250,000 Source One Mortgage Services
Corp.
9.00%, 6/01/12 1,233,887
------------
7,085,783
------------
PAPER PRODUCTS -- 0.2%
100,000 Union Camp Corp.
10.00%, 5/01/19 109,261
------------
RETAIL -- 1.3%
May Department Stores Co.
250,000 9.875%, 6/01/17 246,032
405,000 10.625%, 11/01/10 465,957
------------
711,989
------------
TELECOMMUNICATIONS -- 12.2%
$ 420,000 GTE Corp.
10.25%, 11/01/20 $ 464,386
2,500,000 New York Telephone Co.
9.375%, 7/15/31 2,532,600
2,000,000 Pacific Bell
8.50%, 8/15/31 1,894,220
2,000,000 Southern New England
Telephone Co.
8.70%, 8/15/31 1,978,300
------------
6,869,506
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS -- 3.2%
2,000,000 American Brands, Inc.
7.875%, 1/15/23 1,779,260
------------
UTILITIES -- 9.7%
2,000,000 Hydro-Quebec
8.50%, 12/01/29 1,862,400
2,000,000 Southern California Edison
Co.
8.875%, 6/01/24 1,915,060
1,500,000 TransCanada Pipelines Ltd.
9.875%, 1/01/21 1,642,635
------------
5,420,095
------------
OTHER -- 2.6%
1,500,000 Nova Scotia (Province of)
8.875%, 7/01/19 1,431,825
------------
Total Corporate Notes & Bonds
(cost -- $53,153,893) $ 49,463,299
------------
Total Investments
(cost -- $58,448,564) 97.6% $ 54,757,970
Other Assets in Excess of
Other Liabilities 2.4 1,352,181
----- ------------
Total Net Assets 100.0% $ 56,110,151
----- ------------
----- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-9
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE FUND, OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost --
$225,068,235, $198,905,860,
$129,355,879, $32,124,881,
$140,246,505 and $58,448,564,
respectively)........................ $257,920,150 $213,286,283 $134,902,255 $32,531,181 $131,047,927 $54,757,970
Cash.................................. 490,615 495,564 347,062 8,772 14,763 25,873
Receivable for investments sold....... 3,452,070 -- 1,212,440 1,339,806 168,384 --
Receivable for investments sold to
affiliates........................... -- -- 3,506,625 -- -- --
Receivable for fund shares sold....... 482,019 2,000,491 516,512 637,310 163,696 113,417
Dividends receivable.................. 387,321 470,950 90,453 65,264 -- --
Interest receivable................... 7,084 80,497 103,317 49,276 1,314,298 1,455,316
Deferred organization expenses........ -- -- -- 38,509 -- 13,971
Other assets.......................... 42,588 18,959 16,622 24,165 34,935 19,197
------------ ------------ ------------ ------------ ------------ ------------
Total Assets........................ 262,781,847 216,352,744 140,695,286 34,694,283 132,744,003 56,385,744
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Written options outstanding, at value
(premiums received: $142,188)........ -- -- -- -- 190,625 --
Payable for investments purchased..... 6,159,929 2,049,446 676,409 648,600 6,250 --
Payable for fund shares redeemed...... 414,843 207,962 298,489 25,979 1,007,182 108,561
Investment advisory fee payable....... 41,691 34,437 22,858 4,563 12,963 632
Distribution fee payable.............. 22,304 21,278 13,023 2,509 7,401 4,568
Dividends payable..................... -- 7,778 -- -- 117,133 108,198
Other payables and accrued expenses... 103,945 86,098 94,707 53,450 108,653 53,634
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities................... 6,742,712 2,406,999 1,105,486 735,101 1,450,207 275,593
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS
Par value............................. 20,348,156 108,790 85,536 33,650 121,636 58,013
Paid-in-surplus....................... 184,710,613 191,026,174 130,829,389 31,830,359 145,717,507 60,695,612
Accumulated undistributed net
investment income (loss)............. 1,464,120 1,291,867 (238,336) 127,460 -- --
Accumulated undistributed net realized
gain (loss) on investments........... 16,664,331 7,139,720 3,366,835 1,768,686 (5,000,871) (952,880)
Distributions in excess of net
realized gains....................... -- (1,229) -- (207,273) (297,461) --
Net unrealized appreciation
(depreciation) on investments........ 32,851,915 14,380,423 5,546,376 406,300 (9,247,015) (3,690,594)
------------ ------------ ------------ ------------ ------------ ------------
Total Net Assets.................... $256,039,135 $213,945,745 $139,589,800 $33,959,182 $131,293,796 $56,110,151
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS A:
Fund shares outstanding............... 18,914,850 8,295,463 7,353,210 3,029,071 11,418,654 4,851,201
------------ ------------ ------------ ------------ ------------ ------------
Net asset value per share............. $ 12.59 $ 19.69 $ 16.33 $ 10.09 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
Maximum offering price per share*..... $ 13.32 $ 20.84 $ 17.28 $ 10.59 $ 11.33 $ 10.15
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS B:
Fund shares outstanding............... 1,147,382 2,211,377 994,342 290,685 631,471 682,943
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering price per
share................................ $ 12.53 $ 19.59 $ 16.24 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
CLASS C:
Fund shares outstanding............... 285,924 372,202 206,006 45,206 113,464 267,089
------------ ------------ ------------ ------------ ------------ ------------
Net asset value and offering price per
share................................ $ 12.52 $ 19.58 $ 16.23 $ 10.07 $ 10.79 $ 9.67
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<FN>
*Sales charges decrease on purchases of $50,000 or higher.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
B-10
<PAGE>
YEAR ENDED OCTOBER 31, 1994
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION AND GOVERNMENT QUALITY
FUND, INC. FUND FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................. $4,621,105 $3,199,658 $ 1,319,209 $ 845,665 $ -- $ --
Interest................................... 1,393,271 1,078,724 874,396 709,375 10,262,496 4,659,644
----------- ----------- -------------- ----------- ----------- -----------
Total investment income.................. 6,014,376 4,278,382 2,193,605 1,555,040 10,262,496 4,659,644
----------- ----------- -------------- ----------- ----------- -----------
OPERATING EXPENSES
Investment advisory fee (note 2a).......... 2,479,887 1,555,477 1,260,578 263,469 962,940 359,792
Distribution fee -- Class A (note 2c)...... 1,189,613 683,116 576,382 116,449 465,840 215,221
Distribution fee -- Class B (note 2c)...... 83,411 162,157 94,008 15,858 43,485 41,770
Distribution fee -- Class C (note 2c)...... 17,249 27,089 13,806 2,983 8,616 19,831
Transfer and dividend disbursing agent fees
-- Class A................................ 247,831 117,250 133,738 41,065 130,793 50,526
Transfer and dividend disbursing agent fees
-- Class B................................ 12,766 23,295 20,668 2,659 4,321 4,992
Transfer and dividend disbursing agent fees
-- Class C................................ 3,313 4,335 4,637 1,253 1,658 2,288
Accounting services fee (note 2b).......... -- 108,245 122,578 123,117 135,876 119,080
Registration fees.......................... 84,876 79,103 75,433 66,221 67,461 65,474
Reports and notices to shareholders........ 60,447 37,637 45,104 27,802 39,689 31,342
Custodian fees............................. 42,485 31,578 32,790 17,672 74,885 27,532
Auditing, consulting and tax return
preparation fees.......................... 23,051 18,100 18,101 14,600 38,501 17,100
Directors' (Trustees') fees and expenses... 17,200 17,200 17,200 8,810 17,200 17,200
Legal fees................................. 11,120 6,829 7,410 5,355 7,021 5,752
Amortization of deferred organization
expenses (note 1c)........................ -- 2,461 2,394 19,148 -- 12,374
Miscellaneous.............................. 14,902 7,146 7,114 5,243 10,727 3,951
----------- ----------- -------------- ----------- ----------- -----------
Total operating expenses................. 4,288,151 2,881,018 2,431,941 731,704 2,009,013 994,225
Less: Investment advisory fees waived
(note 2a)............................... -- -- -- (142,772) (38,486) (180,934)
----------- ----------- -------------- ----------- ----------- -----------
Net operating expenses................. 4,288,151 2,881,018 2,431,941 588,932 1,970,527 813,291
----------- ----------- -------------- ----------- ----------- -----------
Net investment income (loss)........... 1,726,225 1,397,364 (238,336) 966,108 8,291,969 3,846,353
----------- ----------- -------------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS -- NET
Net realized gain (loss) on security
transactions.............................. 16,722,091 7,139,720 3,506,967 1,768,686 (6,439,027) (1,053,662)
Net realized gain on option transactions
(note 1f)................................. -- -- 38,999 -- 2,072,188 264,063
Net realized loss on futures transactions
(note 1g)................................. (57,760) -- (179,131) -- -- (163,281)
----------- ----------- -------------- ----------- ----------- -----------
Net realized gain (loss) on
investments............................. 16,664,331 7,139,720 3,366,835 1,768,686 (4,366,839) (952,880)
Net change in unrealized appreciation
(depreciation) on investments............. (6,250,090) 4,721,481 (3,118,979) (189,442) (11,007,688) (9,068,979)
----------- ----------- -------------- ----------- ----------- -----------
Net realized gain (loss) and change in
unrealized appreciation (depreciation)
on investments.......................... 10,414,241 11,861,201 247,856 1,579,244 (15,374,527) (10,021,859)
----------- ----------- -------------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................. $12,140,466 $13,258,565 $ 9,520 $2,545,352 $(7,082,558) $(6,175,506)
----------- ----------- -------------- ----------- ----------- -----------
----------- ----------- -------------- ----------- ----------- -----------
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
B-11
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
QUEST FOR VALUE FUND,
INC. OPPORTUNITY FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
-------------------------- --------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............... $ 1,726,225 $ 815,957 $ 1,397,364 $ 2,369,084
Net realized gain (loss) on investments.... 16,664,331 9,419,025 7,139,720 1,539,178
Net change in unrealized appreciation
(depreciation) on investments............. (6,250,090) 11,586,419 4,721,481 6,462,200
------------ ------------ ------------ ------------
Net increase (decrease) in net assets.... 12,140,466 21,821,401 13,258,565 10,370,462
------------ ------------ ------------ ------------
Dividends and Distributions to Shareholders
Net investment income -- Class A........... (819,873) (608,320) (2,269,483) (220,172)
Net investment income -- Class B........... (11,801) -- (98,258) --
Net investment income -- Class C........... (2,040) -- (21,098) --
Net realized gains -- Class A.............. (9,227,704) (6,984,843) (1,497,052) (945,122)
Net realized gains -- Class B.............. (115,604) -- (30,460) --
Net realized gains -- Class C.............. (11,081) -- (11,467) --
Distributions in excess of net realized
gains -- Class A.......................... -- -- (1,196) --
Distributions in excess of net realized
gains -- Class B.......................... -- -- (24) --
Distributions in excess of net realized
gains -- Class C.......................... -- -- (9) --
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders............................ (10,188,103) (7,593,163) (3,929,047) (1,165,294)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS
CLASS A
Net proceeds from sales.................... 61,908,256 115,189,954 90,332,759 92,938,735
Net proceeds from Fund acquisitions (note
9)........................................ -- 8,793,860 -- --
Reinvestment of dividends and
distributions............................. 9,385,655 7,044,627 3,405,284 1,050,792
Cost of shares redeemed.................... (80,014,950) (42,885,888) (65,200,453) (16,545,512)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A....... (8,721,039) 88,142,553 28,537,590 77,444,015
------------ ------------ ------------ ------------
CLASS B
Net proceeds from sales.................... 12,409,864 2,121,588 40,604,196 2,225,538
Reinvestment of dividends and
distributions............................. 123,599 -- 124,021 --
Cost of shares redeemed.................... (544,061) (97,971) (1,026,439) (99,998)
------------ ------------ ------------ ------------
Net increase -- Class B.................. 11,989,402 2,023,617 39,701,778 2,125,540
------------ ------------ ------------ ------------
CLASS C
Net proceeds from sales.................... 3,521,667 222,635 6,945,412 315,179
Reinvestment of dividends and
distributions............................. 13,020 -- 32,567 --
Cost of shares redeemed.................... (271,901) -- (254,081) --
------------ ------------ ------------ ------------
Net increase -- Class C.................. 3,262,786 222,635 6,723,898 315,179
------------ ------------ ------------ ------------
Total net increase (decrease) in net assets
from fund share transactions.............. 6,531,149 90,388,805 74,963,266 79,884,734
------------ ------------ ------------ ------------
Total increase (decrease) in net
assets.................................. 8,483,512 104,617,043 84,292,784 89,089,902
NET ASSETS
Beginning of year.......................... 247,555,623 142,938,580 129,652,961 40,563,059
------------ ------------ ------------ ------------
End of year (including undistributed net
investment income (loss) of $1,464,120,
$549,014; $1,291,867, $2,283,342;
($238,336); ($315,524); $127,460, $99,804;
$0, ($242,693) and $0, $0; respectively... $256,039,135 $247,555,623 $213,945,745 $129,652,961
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
B-12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT INCOME
FUND GROWTH AND INCOME FUND FUND INVESTMENT QUALITY INCOME
FUND
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
-------------------------- -------------------------- -------------------------- --------------------------
1994 1993 1994 1993 1994 1993 1994 1993
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (238,336) $ (271,130) $ 966,108 $ 633,084 $ 8,291,969 $ 9,429,304 $ 3,846,353 $ 2,883,555
3,366,835 8,302,299 1,768,686 4,437,702 (4,366,839) 4,231,587 (952,880) 376,772
(3,118,979) 8,854,657 (189,442) (2,998,170) (11,007,688) 520,464 (9,068,979) 4,549,804
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
9,520 16,885,826 2,545,352 2,072,616 (7,082,558) 14,181,355 (6,175,506) 7,810,131
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- (936,128) (536,051) (8,071,564) (9,762,803) (3,482,793) (2,877,023)
-- -- (41,545) (1,573) (196,735) (3,601) (244,424) (5,737)
-- -- (7,305) (631) (39,362) (769) (119,136) (795)
(8,036,736) (3,584,330) (4,079,198) (245,866) (2,925,946) (2,276,286) (367,910) (163,898)
(160,831) -- (145,217) -- (38,935) (956) (10,112) --
(19,543) -- (18,475) -- (6,494) (105) (637) --
-- -- (199,276) -- (292,913) -- -- --
-- -- (7,094) -- (3,898) -- -- --
-- -- (903) -- (650) -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(8,217,110) (3,584,330) (5,435,141) (784,121) (11,576,497) (12,044,520) (4,225,012) (3,047,453)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
127,081,752 71,051,819 5,937,491 9,582,299 17,007,814 95,566,875 12,621,718 36,729,933
-- -- -- 16,543,558 -- -- -- --
7,215,556 3,294,382 5,008,623 741,804 9,588,703 10,124,750 2,758,350 2,116,388
(111,134,238) (22,419,670) (6,040,040) (7,744,229) (74,313,512) (69,938,914) (20,364,228) (12,033,169)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
23,163,070 51,926,531 4,906,074 19,123,432 (47,716,995) 35,752,711 (4,984,160) 26,813,152
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
15,275,222 1,837,990 2,763,975 319,565 6,748,251 1,386,323 6,440,954 1,582,773
148,570 -- 188,513 1,383 187,137 3,658 185,172 3,747
(811,203) (104,955) (260,750) (4,377) (964,994) (99,835) (800,932) (107,360)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
14,612,589 1,733,035 2,691,738 316,571 5,970,394 1,290,146 5,825,194 1,479,160
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,345,761 233,009 341,819 101,192 1,424,484 140,626 3,141,700 100,200
18,810 -- 26,593 631 46,127 866 93,436 786
(229,505) -- (4,696) -- (289,465) -- (422,838) --
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,135,066 233,009 363,716 101,823 1,181,146 141,492 2,812,298 100,986
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
40,910,725 53,892,575 7,961,528 19,541,826 (40,565,455) 37,184,349 3,653,332 28,393,298
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
32,703,135 67,194,071 5,071,739 20,830,321 (59,224,510) 39,321,184 (6,747,186) 33,155,976
106,886,665 39,692,594 28,887,443 8,057,122 190,518,306 151,197,122 62,857,337 29,701,361
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$139,589,800 $106,886,665 $ 33,959,182 $ 28,887,443 $131,293,796 $190,518,306 $ 56,110,151 $ 62,857,337
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
B-13
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Quest for Value Funds are registered under the Investment Company Act of
1940, as diversified, open-end management investment companies. Quest for Value
Fund, Inc. ("Quest for Value") is a Maryland Corporation. Opportunity Fund
("Opportunity"), Small Capitalization Fund ("Small Capitalization"), Growth and
Income Fund ("Growth and Income"), U.S. Government Income Fund ("U.S.
Government") and Investment Quality Income Fund ("Investment Quality") are five
of eight funds currently offered in the Quest for Value Family of Funds, a
Massachusetts business trust. Quest for Value Advisors (the "Adviser") serves as
investment adviser and provides accounting and administrative services to each
fund. Quest for Value Distributors (the "Distributor") serves as each fund's
distributor. Both the Advisor and Distributor are majority-owned (99%)
subsidiaries of Oppenheimer Capital.
Prior to September 1, 1993, the funds only issued one class of shares which
were redesignated Class A shares. Subsequent to that date all funds were
authorized to issue Class A, Class B and Class C shares. Shares of each Class
represent an identical interest in the investment portfolio of their respective
fund and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after their
respective purchase.
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 securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued at
the last reported sale price on the valuation date; if there are no such
reported sales, the securites are valued at the last quoted bid price. Other
securities traded over-the-counter and not part of the National Market System
are valued at the last quoted bid price. Investment debt securities (other than
short-term obligations) are valued each day by an independent pricing service
approved by the Board of Directors (Trustees) using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Futures contracts are valued based upon their
daily settlement value as of the close of the exchange upon which they trade.
OTC options are valued based upon a formula which utilizes the market value of
the underlying securities, strike prices and expiration of the options.
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 securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established by each fund's Board of Directors (Trustees). The ability
of issuers of debt securities held by the funds to meet their obligations may be
affected by economic or political developments in a specific state, industry 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 income to its shareholders; accordingly, no
Federal income tax provision is required.
(C) DEFERRED ORGANIZATION EXPENSES
In connection with each fund's organization, the following approximate costs
were incurred: Opportunity -- $74,000, Small Capitalization -- $72,000, Growth
and Income -- $96,000 and Investment Quality -- $62,000. These costs have been
deferred and are being amortized to expense on a straight-line basis over sixty
months from commencements 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. Dividend income is recorded on the
ex-dividend date and interest income is accrued as earned. Discounts or premiums
on debt securities purchased are accreted or
B-14
<PAGE>
- --------------------------------------------------------------------------------
amortized to interest income over the lives of the respective securities. Net
investment income, other than class specific expenses and unrealized gains and
losses are allocated daily to each class of shares based upon the relative
proportion of net assets, as defined, of each class.
(E) DIVIDENDS AND DISTRIBUTIONS
The following table summarizes each fund's dividend and capital gain
declaration policy:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM
INCOME CAPITAL CAPITAL
DIVIDENDS GAINS GAINS
--------- ------------ ------------
<S> <C> <C> <C>
Quest for Value annually annually annually
Opportunity annually annually annually
Small Capitalization annually annually annually
Growth and Income quarterly annually annually
U.S. Government daily * quarterly annually
Investment Quality daily * annually annually
* paid monthly.
</TABLE>
Each fund records dividends and distributions to its shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book-tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains, respectively. To the extent distributions
exceed current and accumulated earnings and profits for federal income tax
purposes, they are reported as distributions of paid-in-surplus or tax return of
capital. Accordingly, permanent book-tax differences relating to shareholder
distributions have been reclassified to paid-in-surplus. Net investment
income(loss), net realized gain(loss) and net assets were not affected by this
change.
During the fiscal year ended October 31, 1994, the Funds adopted Statement
of Position 93-2 Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The following table discloses the cumulative effect of such
differences reclassified from undistributed accumulated net investment
income(loss) and accumulated undistributed capital gain(loss) on investments to
paid-in-surplus:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET INVESTMENT NET REALIZED IN
INCOME (LOSS) GAIN (LOSS) SURPLUS
-------------- ------------ ---------
<S> <C> <C> <C>
Quest for Value $ 22,595 $ (50,380) $ 27,785
Opportunity -- 4,061 (4,061)
Small Capitalization 315,524 7,934 (323,458)
Growth and Income 46,526 (198,668) 152,142
U.S. Government 258,385 102,016 (360,401)
Investment Quality -- 3,929 (3,929)
</TABLE>
(F) OPTIONS ACCOUNTING POLICIES
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is included in the fund's Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. If the option expires on its
B-15
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
stipulated expiration date or if a fund enters into a closing purchase
transaction, the fund will realize a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option will be extinguished. If a call option
which a fund has written is exercised, the fund realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased by
the premium originally received. If a put option which a fund has written is
exercised, the amount of the premium originally received will reduce the cost of
the security which the fund purchases upon exercise of the option.
(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 the broker an amount of cash or U.S.
Government securities equal to the minimum "initial margin" requirements of the
exchange. 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.
(H) REPURCHASE AGREEMENTS
U.S. Government enters into repurchase agreements as part of its investment
program. The fund's custodian takes possession of collateral pledged by the
counterparty. The collateral is marked-to-market daily to ensure that the value,
plus accrued interest, is at least equal to the repurchase price. In the event
of default by the obligor to repurchase, the fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral or proceeds may
be subject to legal proceedings.
(I) EXPENSES
Expenses specifically identifiable to a particular fund or class are borne
by that fund or class. Other expenses are allocated to each fund or class based
on its net assets in relation to the total net assets of all applicable funds or
classes 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 following annual rates: 1.00% for Quest for Value, Opportunity
and Small Capitalization, respectively; .85% for Growth and Income and .60% for
U.S. Government and Investment Quality, respectively. For the year ended October
31, 1994, the Adviser voluntarily waived $142,772, $38,486 and $180,934 in
investment advisory fees for Growth and Income, U.S. Government and Investment
Quality, respectively.
(b) A portion of the accounting services fee for Opportunity, Small
Capitalization, Growth and Income, U.S. Government and Investment Quality is
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 October 31, 1994, the Adviser received $53,245, $67,578, $68,117,
$70,876 and $64,080, 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
B-16
<PAGE>
- --------------------------------------------------------------------------------
Distributor has entered into agreements with securities 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 under the Plan provide and for the expenses
they bear under the Plan, the funds pay the Distributor compensation, accrued
daily and payable monthly on each fund's average daily net assets for Class A
shares at the following annual rates: .25% for Quest for Value, Opportunity and
Small Capitalization, respectively; .05% for U.S. Government and .15% for
Investment Quality and Growth and Income, respectively. Each fund's Class A
shares also pay a service fee at the annual rate of .25%. Compensation for Class
B and Class C shares of each fund is at an annual rate of .75% of average daily
net assets. Each fund's Class B and Class C shares also pay a service fee at the
annual rate of .25%. Distribution and service fees 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 incurred by the
Distributor.
(d) Total brokerage commissions paid by Quest for Value, Opportunity, Small
Capitalization and Growth and Income were $318,014, $189,860, $300,037 and
$74,334, respectively, of which Oppenheimer & Co., Inc., an affiliate of the
Adviser, received $162,914, $94,589, $143,991 and $55,911, respectively, for the
year ended October 31, 1994.
(e) Oppenheimer & Co., Inc. has informed the funds that it received
approximately $344,000, $441,000, $353,000, $43,000, $237,000 and $114,000 in
connection with the sale of Class A shares for Quest for Value, Opportunity,
Small Capitalization, Growth and Income, U.S. Government and Investment Quality,
respectively, for the year ended October 31, 1994.
The Distributor has informed the funds that it received contingent deferred
sales charges on the redemption of Class B and Class C shares of approximately
$10,000, $21,000, $10,000, $1,000, $10,000, and $18,000 for Quest for Value,
Opportunity, Small Capitalization, Growth and Income, U.S. Government and
Investment Quality, respectively, for the year ended October 31, 1994.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1994, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
QUEST FOR SMALL GROWTH AND U.S. INVESTMENT
VALUE OPPORTUNITY CAPITALIZATION INCOME GOVERNMENT QUALITY
----------- ----------- -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases $124,679,001 $96,908,415 $ 101,529,934 $32,706,665 $197,990,061 $26,304,890
Sales 104,609,292 57,124,087 72,829,845 35,060,309 213,763,796 17,448,246
</TABLE>
The following table summarizes activity in written option transactions for
Small Capitalization and U.S. Government for the year ended October 31, 1994:
<TABLE>
<CAPTION>
SMALL CAPITALIZATION U.S. GOVERNMENT
-------------------- -----------------------
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Option contracts written: Outstanding beginning of year 400 $ 38,999 5 $ 263,438
Options written 450 113,460 51 3,941,836
Options terminated in closing purchase transactions -- -- (22) (1,991,406)
Options exercised (450) (113,460) (6) (245,000)
Options expired (400) (38,999) (26) (1,826,680)
--
--------- --------- ------------
Options contracts written: Outstanding end of year 0 $ 0 2 $ 142,188
--
--
--------- --------- ------------
--------- --------- ------------
</TABLE>
B-17
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
4. FUND SHARE TRANSACTIONS
The following tables summarize the fund share activity for the two years
ended October 31, 1994.
<TABLE>
<CAPTION>
QUEST FOR VALUE OPPORTUNITY SMALL CAPITALIZATION
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Issued..................................... 5,077,999 9,558,313 4,781,210 5,232,397 7,804,081 4,355,629
Fund acquisitions*......................... -- 754,190 -- -- -- --
Dividends and distributions reinvested..... 797,941 605,158 186,714 60,873 450,409 218,171
Redeemed................................... (6,566,112) (3,516,427) (3,470,990) (919,793) (6,835,042) (1,357,953)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease).................. (690,172) 7,401,234 1,496,934 4,373,477 1,419,448 3,215,847
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued..................................... 1,020,362 168,973 2,145,988 118,495 936,328 105,179
Dividends and distributions reinvested..... 10,514 -- 6,821 -- 9,286 --
Redeemed................................... (44,566) (7,901) (54,500) (5,427) (50,575) (5,876)
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 986,310 161,072 2,098,309 113,068 895,039 99,303
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued..................................... 289,679 17,648 367,367 16,726 205,454 13,299
Dividends and distributions reinvested..... 1,106 -- 1,789 -- 1,176 --
Redeemed................................... (22,509) -- (13,680) -- (13,923) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 268,276 17,648 355,476 16,726 192,707 13,299
----------- ----------- ----------- ----------- ----------- -----------
Total net increase..................... 564,414 7,579,954 3,950,719 4,503,271 2,507,194 3,328,449
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND INCOME U.S. GOVERNMENT INVESTMENT QUALITY
------------------------- ------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A
Issued..................................... 591,037 877,614 1,484,549 7,920,117 1,194,443 3,363,019
Fund acquisitions*......................... -- 1,549,022 -- -- -- --
Dividends and distributions reinvested..... 506,743 68,314 839,276 840,464 263,168 192,408
Redeemed................................... (600,435) (709,066) (6,552,668) (5,796,668) (1,940,417) (1,087,300)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease).................. 497,345 1,785,884 (4,228,843) 2,963,913 (482,806) 2,468,127
----------- ----------- ----------- ----------- ----------- -----------
CLASS B**
Issued..................................... 269,571 28,678 594,901 114,413 614,495 136,798
Dividends and distributions reinvested..... 19,104 125 16,698 302 18,150 327
Redeemed................................... (26,407) (386) (86,599) (8,244) (77,488) (9,339)
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 262,268 28,417 525,000 106,471 555,157 127,786
----------- ----------- ----------- ----------- ----------- -----------
CLASS C**
Issued..................................... 33,894 9,027 123,553 11,593 290,357 8,698
Dividends and distributions reinvested..... 2,697 57 4,123 72 9,047 68
Redeemed................................... (469) -- (25,877) -- (41,081) --
----------- ----------- ----------- ----------- ----------- -----------
Net increase............................. 36,122 9,084 101,799 11,665 258,323 8,766
----------- ----------- ----------- ----------- ----------- -----------
Total net increase (decrease).......... 795,735 1,823,385 (3,602,044) 3,082,049 330,674 2,604,679
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<FN>
*See note 9
**Initial offering September 2, 1993.
</TABLE>
B-18
<PAGE>
- --------------------------------------------------------------------------------
5. UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At October 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>
Quest for Value $34,762,698 $(2,034,414) $32,728,284 $225,191,866
Opportunity 16,932,676 (2,553,482) 14,379,194 198,907,089
Small Capitalization 11,588,568 (6,208,644) 5,379,924 129,522,331
Growth and Income 1,808,807 (1,464,506) 344,301 32,186,880
U.S. Government 72,722 (14,977,671) (14,904,949) 145,952,876
Investment Quality 330,434 (4,021,028) (3,690,594) 58,448,564
</TABLE>
6. AUTHORIZED FUND SHARES AND PAR VALUE PER SHARE
<TABLE>
<CAPTION>
QUEST SMALL GROWTH U.S. INVESTMENT
FOR VALUE OPPORTUNITY CAPITALIZATION AND INCOME GOVERNMENT QUALITY
---------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Authorized fund shares 35,000,000 unlimited unlimited unlimited unlimited unlimited
Par value per share $1.00 $.01 $.01 $.01 $.01 $.01
</TABLE>
7. DIVIDENDS AND DISTRIBUTIONS
The following tables summarize the per share dividends and distributions
made for the two years ended October 31, 1994:
<TABLE>
<CAPTION>
QUEST FOR SMALL
VALUE OPPORTUNITY CAPITALIZATION
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Class A $ 0.040 $ 0.047 $ 0.326 $ 0.069 -- --
Class B* 0.031 -- 0.313 -- -- --
Class C* 0.033 -- 0.312 -- -- --
Net realized gains:
Class A $ 0.469 $ 0.545 $ 0.219 $ 0.317 $ 1.331 $ 1.137
Class B* 0.469 -- 0.219 -- 1.331 --
Class C* 0.469 -- 0.219 -- 1.331 --
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND U.S. INVESTMENT
INCOME GOVERNMENT QUALITY
-------------- -------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
-------------- -------------- --------------
1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net investment income:
Class A $ 0.319 $ 0.264 $ 0.593 $ 0.676 $ 0.680 $ 0.683
Class B* 0.265 0.070 0.510 0.076 0.609 0.081
Class C* 0.261 0.070 0.509 0.082 0.608 0.092
Net realized gains:
Class A $ 1.669 $ 0.333 $ 0.213 $ 0.155 $ 0.069 $ 0.056
Class B* 1.669 -- 0.213 0.009 0.069 --
Class C* 1.669 -- 0.213 0.009 0.069 --
<FN>
*Initial offering September 2, 1993.
</TABLE>
B-19
<PAGE>
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
8. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
At October 31, 1994, U.S. Government had written options outstanding.
Written options have elements of risk in excess of the amounts reflected in the
Statement of Assets and Liabilities. The fund, as a writer of an option, has no
control over whether the option is exercised. The underlying security may be
sold and, as a result, the fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.
9. FUND ACQUISITIONS
On December 21, 1992, Growth and Income acquired, in a tax free
reorganization, the net assets of the Unified Income Fund and Unified Mutual
Shares Fund in exchange for 289,151 and 1,259,871 shares, respectively. At that
date, net assets for the Unified Income Fund and Unified Mutual Shares Fund
amounted to $3,088,136 and $13,455,422, respectively, which included $211,357
and $2,822,919, respectively, in unrealized appreciation. These assets were
combined with the net assets of Growth and Income which were $7,881,811,
immediately prior to reorganization. Expenses incurred in connection with this
acquisition approximated $34,000 which include legal costs and independent
accountants' fees. Growth and Income also received $1,168,033 in capital loss
carryovers which can be used as a reduction against future net capital gains.
These carryovers are limited by Section 382 of the Internal Revenue Code to
$188,067 annually as a result of the reorganization.
On December 28, 1992, Quest for Value acquired the net assets of the Unified
Growth Fund in exchange for 754,190 shares. At that date, net assets for Unified
Growth Fund amounted to $8,793,860, which included $486,279 in unrealized
appreciation. These assets were combined with the assets of Quest for Value
which were $157,183,979, immediately prior to reorganization. Expenses incurred
in connection with the acquisition approximated $17,000 which include legal
costs and independent auditors' fees. Quest for Value also received and used
$82,350 in capital loss carryovers to be used as a reduction against future net
capital gains realized before the fiscal year ended 2000.
10. NET CAPITAL LOSS CARRYOVER
For the fiscal year ended October 31, 1994, Growth and Income will utilize
$188,067 of net capital loss carryovers. Growth and Income has net capital loss
carryovers of $791,899 of which $558,150, $177,811 and $55,938 will be available
through the fiscal years ending 1995, 1996 and 2000, respectively, to offset net
capital gains, to the extent provided by regulations. However, due to the
reorganization described in Note 9, the loss carryovers are further limited by
IRC Section 382 to $188,067 annually. To the extent that the capital loss
carryovers are used to offset net capital gains, it is probable that the gains
so offset will not be distributed to shareholders. Also, at October 31, 1994,
Investment Quality had a net capital loss carryover of $952,880 available as a
reduction against future net capital gains realized before the end of fiscal
2002 to the extent provided by regulations.
11. SUBSEQUENT EVENTS
On December 5, 1994, the following funds declared net realized short-term
and long-term capital gain distributions, payable December 5, 1994 to
shareholders of record on the opening of business December 5, 1994 at the
following rates per share, per class:
<TABLE>
<CAPTION>
SHORT-TERM GAIN LONG-TERM GAIN
--------------- ---------------
<S> <C> <C>
Quest for Value $ 0.0924 $ 0.7355
Opportunity 0.2077 0.4058
Small Capitalization 0.3195 0.0959
Growth and Income 0.2351 0.1864
U.S. Government -- 0.0126
</TABLE>
B-20
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on Dividends and
of Period (Loss) Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.51 $ 0.09 $ 0.50 $ 0.59 $ (0.04) $ (0.47) $ (0.51)
1993 11.71 0.05 1.34 1.39 (0.05) (0.54) (0.59)
1992 10.61 0.04 1.77 1.81 (0.07) (0.64) (0.71)
1991 7.84 0.09 2.84 2.93 (0.16) -- (0.16)
1990(2) 9.85 0.18 (1.38) (1.20) (0.26) (0.55) (0.81)
Class B,
YEAR ENDED OCTOBER 31, 1994 12.51 0.02 0.50 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.14) (0.15) -- -- --
Class C,
YEAR ENDED OCTOBER 31, 1994 12.50 0.01 0.51 0.52 (0.03) (0.47) (0.50)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.66(3) (0.01) (0.15) (0.16) -- -- --
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
QUEST FOR VALUE FUND, INC.
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.59 5.01% $ 238,085 1.71%(1) 0.72%(1) 49%
1993 12.51 12.27% 245,320 1.75% 0.40% 27%
1992 11.71 18.45% 142,939 1.75% 0.53% 41%
1991 10.61 37.94% 79,914 1.83% 1.06% 48%
1990(2) 7.84 (13.43%) 49,740 1.82% 1.71% 51%
Class B,
YEAR ENDED OCTOBER 31, 1994 12.53 4.43% 14,373 2.24%(1) 0.14%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.51 (1.19%) 2,015 2.27%(5) (1.19%)(5) 27%
Class C,
YEAR ENDED OCTOBER 31, 1994 12.52 4.45% 3,581 2.28%(1) 0.09%(1) 49%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.50 (1.26%) 221 2.27%(5) (0.90%)(5) 27%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $237,922,657, $8,341,111, AND $1,724,870, RESPECTIVELY.
(2) SHARE AND PER SHARE DATA HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A 200%
STOCK DIVIDEND AS OF JULY 1, 1991.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
OPPORTUNITY FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 18.71 $ 0.18 $ 1.35 $ 1.53 $ (0.33) $ (0.22) $ (0.55)
1993 16.73 0.35 2.02 2.37 (0.07) (0.32) (0.39)
1992 14.29 0.09 2.93 3.02 (0.03) (0.55) (0.58)
1991 9.74 0.03 4.78 4.81 (0.23) (0.03) (0.26)
1990 11.59 0.25 (1.64) (1.39) (0.22) (0.24) (0.46)
Class B,
YEAR ENDED OCTOBER 31, 1994 18.70 0.08 1.34 1.42 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
Class C,
YEAR ENDED OCTOBER 31, 1994 18.70 0.08 1.33 1.41 (0.31) (0.22) (0.53)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.73(3) 0.02 (0.05) (0.03) -- -- --
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 19.69 8.41% $ 163,340 1.78%(1) 0.96%(1) 42%
1993 18.71 14.34% 127,225 1.83% 2.69% 24%
1992 16.73 21.93% 40,563 2.27% 0.72% 32%
1991 14.29 50.44% 8,446 2.35%(2) 0.30%(2) 88%
1990 9.74 (12.62%) 4,570 2.00%(2) 2.30%(2) 206%
Class B,
YEAR ENDED OCTOBER 31, 1994 19.59 7.84% 43,317 2.34%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 2,115 2.52%(5) 1.32%(5) 24%
Class C,
YEAR ENDED OCTOBER 31, 1994 19.58 7.78% 7,289 2.35%(1) 0.43%(1) 42%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 18.70 (0.16%) 313 2.52%(5) 1.13%(5) 24%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $136,623,124, $16,215,716, AND $2,708,865, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.33% AND (0.68%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 3.69% AND 0.61%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(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-21
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD--CONTINUED)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on Dividends and
of Period (Loss) Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
SMALL CAPITALIZATION FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 17.68 $ (0.03) $ 0.01 $ (0.02) $ -- $ (1.33) $ (1.33)
1993 14.60 (0.04) 4.26 4.22 -- (1.14) (1.14)
1992 13.52 0.00 1.50 1.50 -- (0.42) (0.42)
1991 8.80 (0.05) 4.85 4.80 (0.08) -- (0.08)
1990 10.91 0.07 (2.04) (1.97) (0.08) (0.06) (0.14)
Class B,
YEAR ENDED OCTOBER 31, 1994 17.66 (0.11) 0.02 (0.09) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.49 0.47 -- -- --
Class C,
YEAR ENDED OCTOBER 31, 1994 17.67 (0.13) 0.02 (0.11) -- (1.33) (1.33)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.19(3) (0.02) 0.50 0.48 -- -- --
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
SMALL CAPITALIZATION FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 16.33 0.04% $ 120,102 1.88%(1) (0.14%)(1) 67%
1993 17.68 30.21% 104,898 1.89% (0.36%) 74%
1992 14.60 11.60% 39,693 2.11% (0.04%) 95%
1991 13.52 55.01% 20,686 2.25%(2) (0.41%)(2) 103%
1990 8.80 (18.33%) 1,880 2.00%(2) 0.71% (2) 18%
Class B,
YEAR ENDED OCTOBER 31, 1994 16.24 (0.39%) 16,144 2.48%(1) (0.70%)(1) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.66 2.73% 1,754 2.57%(5) (1.15%)(5) 74%
Class C,
YEAR ENDED OCTOBER 31, 1994 16.23 (0.51%) 3,344 2.59%(1) (0.81%)(1) 67%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 17.67 2.79% 235 2.57%(5) (1.20%)(5) 74%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $115,276,454, $9,400,776, AND $1,380,547, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ITS FEES
AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING EXPENSES. IF SUCH
WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN 3.27% AND (1.43%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 5.82% AND (3.11%),
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.24 $ 0.32 $ 0.55 $ 0.87 $ (0.32) $ (1.70) $ (2.02)
1993 10.80 0.30 0.73 1.03 (0.26) (0.33) (0.59)
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.00(4) 0.28 0.80 1.08 (0.28) -- (0.28)
Class B,
YEAR ENDED OCTOBER 31, 1994 11.23 0.25 0.56 0.81 (0.27) (1.70) (1.97)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) -- (0.07)
Class C,
YEAR ENDED OCTOBER 31, 1994 11.23 0.24 0.56 0.80 (0.26) (1.70) (1.96)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.21(4) 0.04 0.05 0.09 (0.07) -- (0.07)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 10.09 8.64% $ 30,576 1.86%(1,2) 3.16%(1,2) 113%
1993 11.24 9.93% 28,466 1.90%(2) 2.66%(2) 192%
NOVEMBER 4, 1991 (3)
TO OCTOBER 31, 1992 10.80 10.84% 8,057 2.23%(2,6) 2.73%(2,6) 77%
Class B,
YEAR ENDED OCTOBER 31, 1994 10.07 7.96% 2,928 2.47%(1,2) 2.53%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 319 2.49%(2,6) 1.83%(2,6) 192%
Class C,
YEAR ENDED OCTOBER 31, 1994 10.07 7.91% 455 2.62%(1,2) 2.39%(1,2) 113%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.23 0.81% 102 2.49%(2,6) 2.18%(2,6) 192%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $29,112,348, $1,585,755, AND $298,294, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEE. IF SUCH WAIVER HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 2.32% AND 2.70%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 2.18% AND 2.38%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993 AND 2.98% AND 1.98%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD NOVEMBER 4, 1991 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1992. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.93% AND 2.07%, RESPECTIVELY, FOR CLASS B AND 3.10%
AND 1.91%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.88% AND 1.44%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.87% AND
1.80%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE PERIOD SEPTEMBER 2,
1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) 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-22
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
---------------------------------------- ---------------------------
Dividends to Distributions to
Net Asset Net Net Realized Shareholders Shareholders
Value, Investment and Unrealized Total from from Net from Net Total
Beginning Income Gain (Loss) on Investment Investment Realized Gain on Dividends and
of Period (Loss) Investments Operations Income Investments Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 12.08 $ 0.59 $ (1.08) $ (0.49) $ (0.59) $ (0.21) $ (0.80)
1993 11.92 0.65 0.35 1.00 (0.68) (0.16) (0.84)
1992 11.80 0.74 0.18 0.92 (0.74) (0.06) (0.80)
1991 11.35 0.85 0.61 1.46 (0.86) (0.15) (1.01)
1990 11.50 0.93 (0.06) 0.87 (0.93) (0.09) (1.02)
Class B,
YEAR ENDED OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09)
Class C,
YEAR ENDED OCTOBER 31, 1994 12.08 0.51 (1.08) (0.57) (0.51) (0.21) (0.72)
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.13(3) 0.08 (0.04) 0.04 (0.08) (0.01) (0.09)
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income (Loss) Portfolio
End of Total Period to Average to Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 10.79 (4.15%) $123,257 1.20%(1,2) 5.19%(1,2) 126%
1993 12.08 8.55% 189,091 1.15%(2) 5.33%(2) 315%
1992 11.92 7.98% 151,197 1.15%(2) 6.26%(2) 207%
1991 11.80 13.40% 82,400 1.15%(2) 7.24%(2) 309%
1990 11.35 7.98% 52,742 1.15%(2) 8.21%(2) 101%
Class B,
YEAR ENDED OCTOBER 31, 1994 10.79 (4.84%) 6,813 1.92%(1,2) 4.53%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.29% 1,286 1.85%(2,5) 3.07%(2,5) 315%
Class C,
YEAR ENDED OCTOBER 31, 1994 10.79 (4.84%) 1,224 1.94%(1,2) 4.57%(1,2) 126%
SEPTEMBER 2, 1993 (4)
TO OCTOBER 31, 1993 12.08 0.34% 141 1.85%(2,5) 3.89%(2,5) 315%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $155,279,927, $4,348,538, AND $861,570, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED A PORTION
OF ITS FEES. IF SUCH WAIVERS HAD NOT BEEN IN EFFECT, THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.23% AND 5.16%,
RESEPCTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.20% AND 5.28%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.17% AND 6.24%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, 1.46% AND 6.93%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1991 AND 1.44% AND 7.92%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1990. THE RATIOS OF NET
OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 1.93% AND 4.52%, RESPECTIVELY,
FOR CLASS B AND 1.95% AND 4.56%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR
ENDED OCTOBER 31, 1994 AND 1.96% AND 2.96%, ANNUALIZED, RESPECTIVELY, FOR
CLASS B AND 1.96% AND 3.78%, ANNUALIZED, RESPECTIVELY, FOR CLASS C, FOR THE
PERIOD SEPTEMBER 2, 1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) OFFERING PRICE.
(4) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(5) ANNUALIZED.
</TABLE>
INVESTMENT QUALITY INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A,
YEAR ENDED OCTOBER 31,
1994 $ 11.49 $ 0.68 $ (1.75) $ (1.07) $ (0.68) $ (0.07) $ (0.75)
1993 10.36 0.68 1.19 1.87 (0.68) (0.06) (0.74)
1992 10.06 0.80 0.30 1.10 (0.80) -- (0.80)
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.00(4) 0.71 0.06 0.77 (0.71) -- (0.71)
Class B,
YEAR ENDED OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.08 (0.03) 0.05 (0.08) -- (0.08)
Class C,
YEAR ENDED OCTOBER 31, 1994 11.49 0.61 (1.75) (1.14) (0.61) (0.07) (0.68)
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.52(4) 0.09 (0.03) 0.06 (0.09) -- (0.09)
<CAPTION>
Class A,
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1994 $ 9.67 (9.61%) $ 46,922 1.29%(1,2) 6.47%(1,2) 33%
1993 11.49 18.64% 61,288 1.20%(2) 6.07%(2) 12%
1992 10.36 11.21% 29,701 0.95%(2) 7.62%(2) 18%
DECEMBER 18, 1990 (3)
TO OCTOBER 31, 1991 10.06 8.11% 17,235 0.82%(2,6) 8.25%(2,6) 19%
Class B,
YEAR ENDED OCTOBER 31, 1994 9.67 (10.22%) 6,605 1.92%(1,2) 5.85%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.45% 1,468 1.84%(2,6) 3.68%(2,6) 12%
Class C,
YEAR ENDED OCTOBER 31, 1994 9.67 (10.23%) 2,583 1.90%(1,2) 6.01%(1,2) 33%
SEPTEMBER 2, 1993 (5)
TO OCTOBER 31, 1993 11.49 0.55% 101 1.84%(2,6) 4.83%(2,6) 12%
<FN>
(1) AVERAGE NET ASSETS FOR THE YEAR ENDED OCTOBER 31, 1994, FOR CLASSES A, B,
AND C WERE $53,805,286, $4,176,936, AND $1,983,143, RESPECTIVELY.
(2) DURING THE PERIODS PRESENTED ABOVE, THE ADVISER VOLUNTARILY WAIVED ALL OR A
PORTION OF ITS FEES AND REIMBURSED THE FUND FOR A PORTION OF ITS OPERATING
EXPENSES. IF SUCH WAIVERS AND REIMBURSEMENTS HAD NOT BEEN IN EFFECT, THE
RATIOS OF NET OPERATING EXPENSES TO AVERAGE NET ASSETS AND THE RATIOS OF NET
INVESTMENT INCOME TO AVERAGE NET ASSETS FOR CLASS A WOULD HAVE BEEN 1.59%
AND 6.17%, RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1994, 1.50% AND
5.77%, RESEPCTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1993, 1.72% AND 6.85%,
RESPECTIVELY, FOR THE YEAR ENDED OCTOBER 31, 1992, AND 2.11% AND 6.96%,
ANNUALIZED, RESPECTIVELY, FOR THE PERIOD DECEMBER 18, 1990 (COMMENCEMENT OF
OPERATIONS) TO OCTOBER 31, 1991. THE RATIOS OF NET OPERATING EXPENSES TO
AVERAGE NET ASSETS AND THE RATIOS OF NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN 2.23% AND 5.54%, RESPECTIVELY, FOR CLASS B AND 2.21%
AND 5.70%, RESPECTIVELY, FOR CLASS C, FOR THE YEAR ENDED OCTOBER 31, 1994
AND 2.07% AND 3.45%, ANNUALIZED, RESPECTIVELY, FOR CLASS B AND 2.06% AND
4.61%, ANNUALIZED, RESPECTIVELY, FOR CLASS C FOR THE PERIOD SEPTEMBER 2,
1993 (INITIAL OFFERING) TO OCTOBER 31, 1993.
(3) COMMENCEMENT OF OPERATIONS.
(4) OFFERING PRICE.
(5) INITIAL OFFERING OF CLASS B AND CLASS C SHARES.
(6) 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-23
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and 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 Opportunity Fund, the Small
Capitalization Fund, the Growth and Income Fund, the U.S. Government Income
Fund, and the Investment Quality Income Fund (constituting part of Quest for
Value Family of Funds, hereafter referred to as the "Fund") at October 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 periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; 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 October 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 10036
December 16, 1994
B-24
<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>
Supplement
dated June 28, 1995
to the
Prospectus dated November 1, 1994
of the Quest for Value Officers Fund
as supplemented February 1, 1995
The following table is added to page 3:
Quest for Value Family of Funds
OFFICERS FUND
Financial Highlights (unaudited)
November 8, 1994 (commencement of operations) to April 30, 1995
- -------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value, beginning of period . . . . . . . . . . . . . . . . . . . $10.00(1)
----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10
Net realized and unrealized gain on investments. . . . . . . . . . . . . . 1.00
----------
Total from investment operations . . . . . . . . . . . . . . . . . . . . 1.10
Dividends to shareholders from net investment income . . . . . . . . . . . (0.04)
----------
Net Asset Value, end of period . . . . . . . . . . . . . . . . . . . . . . $11.06
----------
----------
Total investment return* . . . . . . . . . . . . . . . . . . . . . . . . . 11.00%
----------
Net assets, end of period. . . . . . . . . . . . . . . . . . . . . . . . . $2,988.509
----------
Ratio of net operating expenses to average net assets. . . . . . . . . . . 0.00%(2,3,4)
----------
Ratio of net investment income to average net assets . . . . . . . . . . . 2.10%(2,3,4)
----------
Portfolio turnover rate. . . . . . . . . . . . . . . . . . . . . . . . . . 60%
----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<FN>
(1) Offering price.
(2) During the period presented above, the Advisor has voluntarily waived all
of its fees and reimbursed the Fund for all of its operating expenses. If
such waivers and reimbursements had not been in effect, the annualized
ratio of net operating expenses to average daily net assets and the
annualized ratio of net investment income to average daily net assets would
have been 2.15% and (.05%), respectively.
(3) Average net assets for the period November 8, 1994 (commencement of
operations) to April 30, 1995 were $2,295,379.
(4) Annualized.
* Assumes reinvestment of all dividends. Aggregate (not annualized) total
return is shown.
</TABLE>
<PAGE>
February 1, 1995
QUEST FOR VALUE OFFICERS FUND
SUPPLEMENT TO THE PROSPECTUS
DATED NOVEMBER 1, 1994
The Fund may invest up to 25% of its net assets in bonds rated below Baa 3
by Moody's Investors Service, Inc. or BBB- by Standard & Poor's Corporation
(commonly known as "high yield" or "junk bonds"). Such securities may be subject
to higher risks and greater market fluctuations than are lower-yielding higher-
rated securities. Securities rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered well assured and often the
protection of interest and principal payments may be very moderate. Securities
rated BB by S&P are regarded as having predominantly speculative characteristics
and, while such obligations have less near-term vulnerability to default than
other speculative grade debt, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payment. Securities
rated Caa by Moody's or CCC by S&P are considered to have predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal and to be of poor standing. Securities rated Ca by Moody's are
speculative to a high degree; such issues are often in default or have other
marked shortcomings. A security rated C by Moody's has extremely poor prospects
of ever attaining real investment standing. Securities rated CI by S&P are
income bonds on which no interest is being paid, and securities rated D by S&P
are in payment default. The Fund does not intend to hold such lower-rated
securities unless the opportunities for capital appreciation and income,
combined, remain attractive. See the Appendix in the SAI for a more complete
general description of Moody's and S&P ratings. The ratings of Moody's and S&P
represent their opinions as to the quality of the obligations which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of such investments, Quest Advisors also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Fund's ability to achieve its investment objectives may be more
dependent on Quest Advisors' credit analysis than might be the case for a fund
that invested in higher rated securities. The market price and yield of
securities rated Ba or lower by Moody's and BB or lower by S&P are more volatile
than those of higher rated securities. Factors adversely affecting the market
price and yield of these securities will adversely affect the Fund's net asset
value. In addition, the retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse market conditions could
make it difficult at times for the Fund to sell certain securities. The market
values of certain lower rated debt securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates,
and tend to be more sensitive to economic conditions than higher rated
securities. Companies that issue such securities are often highly leveraged and
may not have available to them more traditional methods of financing.
Consequently, the risk associated with acquiring the securities of such issuers
is greater than with higher rated securities. The Fund is not obliged to dispose
of securities due to changes by the rating agencies. The Fund may invest in
bonds which are in default, which could result in increased costs associated
with the sale or recovery of such bonds.
______________________________
<PAGE>
QUEST FOR VALUE -SM-
OFFICERS FUND
Quest for Value Officers Fund (the "Fund") is an open-end diversified
management investment company managed by Quest for Value Advisors ("Quest
Advisors"). The Fund is a portfolio of Quest for Value Family of Funds. Total
assets under the management of Quest Advisors and its parent, Oppenheimer
Capital, amounted to approximately $29.8 billion on July 30, 1994.
This Prospectus sets forth basic information about the Fund, 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 November 1, 1994 for the Fund (the
"SAI"), has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. You can obtain a copy of the SAI
without charge by contacting Quest for Value Distributors, at the address or
telephone number listed on the back cover.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND THE SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
The Fund offers three separate classes of shares: Class A, B and C shares.
Initially, only shares of Class A will be offered to officers, directors and
employees of Oppenheimer Capital and its affiliates, their relatives or any
trust, pension, profit sharing or other benefit plan for any of them. Shares of
each Class represent an identical interest in the investment portfolio of the
Fund, and generally have the same rights, but are offered under different sales
charge and distribution fee arrangements. The offering of Class A, B and C
shares presents the investor with the opportunity to choose the sales charge and
distribution fee arrangement which is most beneficial, depending on the amount
of purchase, the length of time the investor expects to hold the shares, and
other circumstances.
Shares of each Class are offered at the net asset value next determined after
receipt of your purchase order plus an initial ("front-end") sales charge for
purchases of Class A shares, or a deferred sales charge for purchases of Class B
or Class C shares. (See "How to Buy Shares," p. 5) Class B and C shares bear a
higher ongoing distribution fee than Class A shares, and investors should
understand that over time the accumulated distribution charges on Class B and C
shares may exceed the amount of the initial sales charge and ongoing
distribution fee on Class A shares. (See "Distribution Plan," p. 16)
November 1, 1994
- --------------------------------------------------------------------------------
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>
QUEST FOR VALUE OFFICERS FUND
CLASS OF SHARES: A B C
- ------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSE
Maximum Initial Sales Load Imposed on Purchase (as a % of offering
price).................................................................. 5.50% none none
Maximum Deferred Sales Load(1)........................................... none 5.00% 1.00%
Maximum Sales Load Imposed On Reinvested Dividends....................... none none none
Redemption Fee........................................................... none none none
Exchange Fee............................................................. $ 5.00 $ 5.00 $ 5.00
ANNUAL FUND OPERATING EXPENSES (AS % OF AVERAGE NET ASSETS) (ESTIMATED)
Management Fee(2) (after waiver)......................................... 0 % 0 % 0 %
12b-1 Fee (including service fees of.25%) (3) (after waiver) 0 % 0 % 0 %
Other Expenses(4)........................................................ 2.50% 2.50% 2.50%
---------- ---------- ----------
TOTAL FUND OPERATING EXPENSES AFTER WAIVER AND/OR EXPENSE
ASSUMPTIONS(3).......................................................... 2.50% 2.50% 2.50%
---------- ---------- ----------
---------- ---------- ----------
EXAMPLE 1: You would pay the following expenses over the indicated periods in the Fund on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the
end of the time period. 10-year figures for Class B shares assume conversion to Class A shares after eight
years.
1 Year................................................................... $ 78.92 $ 25.31 $ 25.31
3 Years.................................................................. 128.57 77.85 77.85
5 Years.................................................................. 180.73 133.25 133.25
10 Years................................................................. 322.97 283.59 283.59
EXAMPLE 2: You would pay the following expenses over the indicated periods in the Fund on a $1,000 investment
assuming (a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of
the time period. 10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year................................................................... $ 78.92 $ 75.31 $ 35.31
3 Years.................................................................. 128.57 107.85 77.85
5 Years.................................................................. 180.73 143.05 133.05
10 Years................................................................. 322.97 283.59 283.59
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
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 "How to Buy
Shares," "Investment Management Agreement" and "Distribution Plan".
Investors should be aware that over time, Class B and C shareholders may pay
more than the equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers Rules of Fair Practice.
(1) Purchases of Class A shares of $1 million or more are not subject to
front-end sales charges, but a contingent deferred sales charge ("CDSC")
is imposed on the proceeds of such shares equal to 1% if the shares are redeemed
within the first 12 months after the end of the calendar month of their
purchase. See "How to Buy Shares."
(2) Although the Fund's Investment Advisory Agreement authorizes the Fund to
pay a management fee of 1.00% of average daily net assets, the entire fee
is being waived during the initial offering period.
(3) See "Distribution Plan." Although the Fund's Distribution Plan and
Agreement ("Plan") authorizes the Fund to pay a maximum service fee of
.25% of average daily net assets and a distribution fee of .25% of average daily
net assets for Class A shares and a maximum service fee of .25% of average daily
net assets and a distribution fee of .75% of average daily net assets for Class
B and Class C shares, the fee is being waived during the initial offering
period.
(4) The expenses of the Fund are currently limited by Quest Advisors so that
Total Fund Operating Expenses as a percentage of average net assets do
not exceed .2.50%.
2
<PAGE>
- ----------------------------------------
INVESTMENT OBJECTIVES OF THE FUND
Quest Advisors manages the Fund in accordance with its investment
objectives described below. Quest Advisors' equity investment policy is
overseen by George Long, Managing Director and Chief Investment Officer for
Oppenheimer Capital, the parent of Quest Advisors. Mr. Long has been with
Oppenheimer Capital since 1982.
QUEST FOR VALUE OFFICERS FUND seeks capital appreciation through investment in
securities (primarily equity securities) of companies believed by Quest Advisors
to be undervalued in the marketplace in relation to factors such as the
companies' assets, earnings, growth potential and cash flows. Under normal
conditions, the Fund will invest at least 65% of its assets in equity securities
of companies with market capitalizations between $500 million and $5 billion.
The Fund may invest up to 35% of its assets in equity securities of companies
with no limit as to market capitalization. For the purposes of this Prospectus
the term equity securities is defined as common stocks and preferred stocks;
bonds, debentures and notes convertible into common stocks; and depository
receipts for such securities. Investments of the Fund are managed by Jeffrey C.
Whittington, Senior Vice President of Oppenheimer Capital. He has been Portfolio
Manager of the Fund since its inception. Mr. Whittington has been a portfolio
manager at Oppenheimer Capital since August, 1994, and from June, 1986 to May,
1991. From August, 1993 to July, 1994 he was a portfolio manager with Neuberger
& Berman. From October, 1991 to July, 1993 he was a portfolio manager with
Oppenheimer & Co., Inc.
---------------------
To provide liquidity for the purchase of new instruments and to effect
redemptions of shares, the Fund typically invests a part of its assets in
various types of U.S. government securities and high quality, short-term debt
securities with remaining maturities of one year or less such as government
obligations, certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate securities and repurchase agreements ("money market
instruments"). For temporary defensive purposes, the Fund may invest up to 100%
of its assets in such securities. At any time that the Fund for temporary
defensive purposes invests in such securities, to the extent of such
investments, it is not pursuing its investment objectives.
In the future, the Fund may endeavor to achieve its investment objective by
investing its assets in a no-load diversified open-end management investment
company which has the same portfolio manager and substantially the same
investment objective as the Fund. Shareholders will receive prior notice with
respect to the commencement of any such investment.
Except as indicated, the investment objectives and policies described above
are fundamental and may not be changed without a vote of the shareholders.
- ----------------------------------------
RISK FACTORS
The value of the Fund's shares will fluctuate and on redemption the value
of your shares may be more or less than your investment.
There are two types of risk generally associated with owning equity
securities: market risk and financial risk. Market risk is the risk associated
with the movement of the stock market in general. Financial risk is associated
with the financial condition and profitability of the underlying company.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies. The trading volume of
securities of smaller capitalization companies is normally less than that of
larger capitalization companies and, therefore, may disproportionately affect
their market price, tending to make them rise more in response to buying demand
and fall more in response to selling pressure than is the case with larger
capitalization companies. The Fund may invest up to 15% of its net assets in the
securities of companies that have operated less than three years, including the
operation of predecessors. Securities of unseasoned companies may have a limited
trading market, which may adversely
3
<PAGE>
affect their disposition by the Fund and can result in their shares being priced
at a lower level than might otherwise be the case.
There are two types of risk associated with owning debt securities: interest
rate risk and credit risk. Interest rate risk relates to fluctuations in market
value arising from changes in interest rates. If interest rates rise, the value
of debt securities will normally decline and if interest rates fall, the value
of debt securities will normally increase. All debt securities, including U.S.
government securities, which are generally considered to be the most
creditworthy of all debt obligations, are subject to interest rate risk.
Securities with longer maturities generally will have a more pronounced reaction
to interest rate changes than shorter term securities.
Credit risk relates to the ability of the issuer to make periodic interest
payments and ultimately repay principal at maturity. Bonds rated Baa3 by Moody's
or BBB- by S&P, which the Fund may acquire, are described by those rating
agencies as having speculative elements. If a debt security is rated below
investment grade by one rating agency and as investment grade by a different
rating agency, Quest Advisors will make a determination as to the debt
security's investment grade quality. It is the present intention of the Fund to
invest no more than 5% of its assets in bonds rated below Baa3 by Moody's or
BBB- by S&P (commonly known as "high yield" or "junk bonds"). In the event that
the Fund intends in the future to invest more than 5% of its assets in such
bonds, appropriate disclosures will be made to existing and prospective
shareholders.
ADDITIONAL RISKS OF FOREIGN SECURITIES: The Fund may purchase foreign securities
that are listed on a domestic or foreign securities exchange, traded in domestic
or foreign over-the counter markets or represented by American Depositary
Receipts. There is no limit to the amount of such foreign securities the Fund
may acquire. Certain factors and risks are presented by investment in foreign
securities which are in addition to the usual risks inherent in domestic
securities. Foreign companies are not necessarily subject to uniform accounting,
auditing and financial reporting standards or other regulatory requirements
comparable to those applicable to U.S. companies. Thus, there may be less
available information concerning non-U.S. issuers of securities held by the Fund
than is available concerning U.S. companies. In addition, with respect to some
foreign countries, there is the possibility of nationalization, expropriation or
confiscatory taxation; income earned in the foreign nation being subject to
taxation, including withholding taxes on interest and dividends (see "Tax
Status"), or other taxes imposed with respect to investments in the foreign
nation; limitations on the removal of securities, property or other assets of a
fund; difficulties in pursuing legal remedies and obtaining judgments in foreign
courts, or political or social instability or diplomatic developments which
could affect U.S. investments in those countries. For a description of the risks
of possible losses through holding of securities in foreign custodian banks and
depositories, see "Risk Factors and Special Considerations" in the SAI.
Securities of many non-U.S. companies may be less liquid and their prices more
volatile than securities of comparable U.S. companies. Non-U.S. stock exchanges
and brokers are generally subject to less governmental supervision and
regulation than in the U.S. and commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions. Certain countries restrict foreign investments in their
securities markets. These restrictions may limit or preclude investment in
certain countries, industries or market sectors, or may increase the cost of
investing in securities of particular companies. Purchasing the shares of
investment companies which invest in securities of a given country may be the
only or the most efficient way to invest in that country. This may require the
payment of a premium above the net asset value of such investment companies and
the return will be reduced by the operating expenses of those investment
companies.
A decline in the value of the U.S. dollar against the value of any particular
currency will cause an increase in the U.S. dollar value of a Fund's holdings
denominated in such
4
<PAGE>
currency. Conversely, a decline in the value of any particular currency against
the U.S. dollar will cause a decline in the U.S. dollar value of the Fund's
holdings of securities denominated in such currency. Some foreign currency
values may be volatile and there is the possibility of governmental controls on
currency exchange or governmental intervention in currency markets which could
adversely affect the Fund. The Fund does not intend to speculate in foreign
currency in connection with the purchase or sale of securities on a foreign
securities exchange but may enter into foreign currency contracts to hedge their
foreign currency exposure. While those transactions may minimize the impact of
currency appreciation and depreciation, the Fund will bear a cost for entering
into the transaction and such transactions do not protect against a decline in
the security's value relative to other securities denominated in that currency.
The Fund may invest its assets in American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or Global Depository Receipts ("GDRs")
which are U.S. dollar-denominated receipts that represent and may be converted
into the underlying foreign security. ADRs, GDRs or EDRs are issued by persons
other than the underlying issuer, typically a domestic bank or trust company.
Issuers of the stock of ADRs, EDRs or GDRs sponsored by banks or trust companies
are not obligated to disclose material information in the United States and
therefore, there may not be a correlation between such information and the
market value of such ADRs, GDRs or EDRs.
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. Purchasing
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. The Fund intends to engage in futures
contracts, options on futures contracts or options on stock indexes for bona
fide hedging or other non-speculative purposes, may write covered call options
and purchase put options, and may write covered call options on individual
securities. The Fund will not enter into any leveraged futures transactions.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: The Fund may acquire
securities subject to repurchase agreements and reverse repurchase agreements.
Repurchase agreements and reverse repurchase agreements involve certain risks.
For a further description of options and futures, repurchase agreements and
reverse repurchase agreements and other investment techniques used by the Fund,
see "Investment Restrictions and Techniques."
- ----------------------------------------
HOW TO BUY SHARES
The Fund offers Class A, Class B and Class C shares for all investors.
Initially, only Class A shares will be sold to officers, directors and
employees of Oppenheimer Capital and its affiliates, their relatives or any
trust, pension, profit sharing or other benefit plan for any of them. Class A
shares are sold with an initial sales charge that declines for larger orders.
Purchases of $1 million or more of Class A shares of the Fund are sold
without an initial sales charge but are subject to a CDSC if held less than
one year. Class B shares are sold without an initial sales charge but are
subject to a CDSC if held for less than six years. Class B shares are
available only to investors purchasing less than $250,000 in the aggregate.
Class C shares are sold without an initial sales charge but are subject to a
CDSC if held less than one year. Each class is described below in greater
detail. The different classes provide you with alternative methods of
acquiring shares and you should determine which class best meets your
individual needs. Dealers may be compensated at different rates for selling
Class A, Class B or Class C shares.
Your initial purchase of either Class A, B or C shares must be made through a
broker or dealer having a sales agreement with Quest
5
<PAGE>
Distributors, an affiliate of Quest Advisors. Subsequent purchases of shares may
also be made through your broker or dealer by mailing your payment to the Fund's
Transfer Agent, State Street Bank and Trust Company ("State Street"), P.O. Box
8505, Boston, MA 02266. During the initial offering period the initial
investment must be at least $10,000. Thereafter, your initial investment must be
at least $1,000 and subsequent investments must be at least $250. There are no
minimums for shares purchased under an Automatic Investment Plan or under
employee benefit plans.
Some investors may qualify to purchase Class A shares at net asset value
without a sales charge. (See "Reduced Sales Charges-- Net Asset Value
Purchases," and "Additional Information--Purchases by Former Shareholders of AMA
Family of Funds and Unified Funds.") Class B and C shares will not be sold to
investors who qualify to purchase Class A shares at net asset value, as
described on pages 7 and 19.
Sales of all classes 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 the 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.
BUYING CLASS A SHARES. Purchases of Class A shares will be processed at the net
asset value next determined after receipt of your purchase order, plus the
applicable front-end sales charge, if any, as set forth in the following table
SALES CHARGE TABLE*--CLASS A SHARES
<TABLE>
<CAPTION>
QUEST FOR VALUE OFFICERS FUND
- ----------------------------------------------------------------------------------
OFFERING PRICE
AS A % OF % OF NET ASSET RE-ALLOWED TO
OFFERING PRICE VALUE PER SHARE SELLING DEALER AMOUNT OF PURCHASE
- ----------------- ------------------- ----------------- -----------------------
<S> <C> <C> <C>
5.50% 5.82% 4.75% Less than $50,000
4.75% 4.99% 4.25% $50,000 - 99,999
4.00% 4.17% 3.50% $100,000 - 249,999
3.00% 3.09% 2.75% $250,000 - 499,999
2.00% 2.04% 1.75% $500,000 - 499,999
** ** ** $1 million or more**
<FN>
- -------------
* 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."
**Purchases of Class A Shares of $1 Million or More
</TABLE>
On purchases by a single purchaser aggregating $1 million or more, the investor
will not pay an initial sales charge, and Quest Distributors will pay authorized
dealers an amount equal to .9 of 1% of the first $2 million of such purchases,
plus .8 of 1% of the next $1 million, plus .35 of 1% on amounts over $3 million.
A CDSC will be imposed on the proceeds of the redemption of shares of the Fund
in amounts aggregating $1 million or more if they are redeemed within 12 months
of the end of the calendar month of their purchase in an amount equal to 1% of
the lesser of (a) the net asset value of the shares at the time of purchase or
(b) the net asset value of the shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors.
REDUCED SALES CHARGES: There are several ways you may qualify for reduced sales
charges when buying Class A Shares. 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 your name
and/or of your spouse or children under 21 years of age, all accounts of a
fiduciary purchasing for a single
6
<PAGE>
trust, and all accounts for which a single person (e.g., investment advisor,
trust department, etc.) exercises investment discretion. Qualified employee
benefit trusts of an employer and its consolidated subsidiaries will be
considered a single trust.
RIGHTS OF ACCUMULATION: In determining the applicable level of sales charge, the
value of shares you purchase will be added to the greater of cost or market
value of the Class A, B or C shares you hold of any Quest Fund, provided that
any such Class A shares were purchased with a sales charge, were acquired by
exchange for shares on which a sales charge was paid, or were subject to a CDSC.
LETTER OF INTENT: If you intend to purchase shares valued at $50,000 or more
during a 13-month period, you may make the purchase under a Letter of Intent so
that the initial shares you purchase qualify for the reduced sales charge
applicable to the aggregate amount of your projected purchase. Your initial
purchase must 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 you
purchase less than the indicated amount during the 13-month period.
GROUP AND ASSOCIATION PURCHASES AND PURCHASES BY QUALIFIED RETIREMENT PLANS: The
following table sets forth the applicable sales charge for purchases of Class A
shares made through a single broker or dealer by qualified retirement plans
including 401(k), 403(b) plans, SEP/IRA and IRA plans of a single employer, and
by members of associations formed for any purpose other than the purchase of
securities:
<TABLE>
<CAPTION>
NUMBER OF
ELIGIBLE AS A % OF AS A % OF NET PERCENT OF OFFERING
EMPLOYEES OR OFFERING ASSET VALUE PRICE RE-ALLOWED TO
MEMBERS PRICE PER SHARE SELLING DEALERS
- ---------------- ------------- ------------- -------------------
<S> <C> <C> <C>
9 or less....... 3.00% 3.09% 2.60%
Between 10 & 2.00% 2.04% 1.65%
49.............
Between 50 &
149............ 1.25% 1.27% 1.00%
150 or more..... 0.00%
see "Purchases of Class A shares
of $1,000,000 or more," p. 6
</TABLE>
Purchases made under the Group Purchase provision will qualify for the lower
of the sales charge computed according to the table based on the number of
eligible employees in a plan or members of an association or the sales charge
level under the Rights of Accumulation described above. Purchases by retirement
plans covering 150 or more employees or by associations or groups with 150 or
more members shall be entitled to the sales charge waiver applicable to
purchases of $1 million or more described above. In addition, purchases by
401(k) plans can qualify for this sales charge waiver if, in the opinion of
Quest Distributors, the initial purchase plus projected contributions to be
invested in Quest Funds for the following 12 months will exceed $1,000,000. In
determining the appropriate sales charge level for a 401(k) plan, money invested
in a Quest money market fund (which does not impose a sales charge) shall be
taken into account. Individuals who qualify for reduced sales charges as members
of associations, groups or eligible employees in plans as set forth in the above
table may also purchase shares for their individual or custodial accounts at the
same sales charge level.
NET ASSET VALUE PURCHASES: No sales charge will be applied to the following
transactions in Class A shares: purchases by persons who for at least 60 days
have been directors, trustees, officers or full-time employees of any of the
Funds distributed by Quest Distributors, or of Quest Advisors, Quest
Distributors, or of their affiliates, their relatives or any trust, pension,
profit sharing or other benefit plan for any of them; purchases by any account
advised by 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 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
7
<PAGE>
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 an initial sales charge
on the redeemed account or was subject to a contingent deferred sales charge.
Shares sold at net asset value will be included in the asset base upon which
payments under the Fund's Distribution Plan and Agreement are determined. The
CDSC does not apply to purchases of Class A shares at net asset value described
herein.
BUYING CLASS B SHARES. Purchases of Class B shares will be processed at the net
asset value next determined after receipt of your purchase order for less than
$250,000. While not subject to a front-end sales charge, Class B shares may be
subject to a CDSC upon redemption.
If Class B Shares of the Fund are redeemed within six years after the end of
the calendar month in which a purchase order for Class B shares was accepted, a
CDSC will be imposed by applying the appropriate percentage indicated below to
the lesser of: (1) the net asset value of such shares at the time of purchase or
(2) the net asset value of such shares at the time of redemption. The CDSC will
be deducted from the redemption proceeds otherwise payable to the shareholder
and will be retained by Quest Distributors. The CDSC to be imposed on such share
redemptions will be assessed according to the following schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE APPLICABLE CLASS B
ORDER OF LESS THAN CONTINGENT DEFERRED
$250,000 WAS ACCEPTED SALES CHARGE
- ------------------------------ ------------------------
<S> <C>
Up to one year................ 5.00%
One year or more but less than
2 years...................... 4.00%
Two years or more but less
than 4 years................. 3.00%
Four years or more but less
than 5 years................. 2.00%
Five years or more but less
than 6 years................. 1.00%
6 or more years............... None
</TABLE>
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to Class
A shares of the Fund eight years after the end of the calendar month in which
the purchase order for Class B shares was accepted, on the basis of the relative
net asset values of the two classes and subject to the following terms: Class B
shares acquired through the reinvestment of dividends and distributions
("reinvested Class B shares") will be converted to Class A shares on a pro-rata
basis only when Class B shares not acquired through reinvestment of dividends or
distributions ("purchased Class B shares") are converted. The portion of
reinvested Class B shares to be converted will be determined by the ratio that
the purchased Class B shares eligible for conversion bear to the total amount of
purchased Class B shares in the shareholder's account. For the purposes of
calculating the holding period, Class B shares will be deemed to have been
issued on the sooner of: (a) the date on which the issuance of Class B shares
occurred, or (b) for Class B shares obtained by an exchange or series of
exchanges, the date on which the issuance of the original Class B shares
occurred. This conversion to Class A shares will relieve Class B shares that
have been outstanding for at least eight years (a period of time sufficient for
Quest Distributors to have been compensated for distribution expenses related to
such Class B shares) from the higher ongoing distribution fee paid by Class B
shares. Only Class B shares have this conversion feature. Conversion of Class B
shares to Class A shares is contingent on the continuing availability of a
private letter revenue ruling from the Internal Revenue Service affirming that
such conversion does not constitute a taxable event for the shareholder under
the Internal Revenue Code. If such revenue ruling or an opinion of counsel is no
longer available, conversion of Class B shares to Class A shares would have to
be suspended, and Class B shares would continue to be subject to the Class B
distribution fee until redeemed.
BUYING CLASS C SHARES. Purchases of Class C shares will be processed at the net
asset value next determined after receipt of your purchase order. Class C shares
are not subject to a front-end sales charge, but may be subject to a CDSC upon
redemption.
If Class C shares are redeemed within one year after the end of the calendar
month in which a purchase order for Class C shares was accepted, a CDSC of 1.00%
would be imposed
8
<PAGE>
on the lesser of (1) the net asset value of such shares at the time of purchase
or (2) the net asset value of such shares at the time of redemption. The CDSC
will be deducted from the redemption proceeds otherwise payable to the
shareholder and will be retained by Quest Distributors.
EXEMPTIONS FROM CLASS A, B AND C CDSC. No CDSC will be imposed when a
shareholder redeems Class A, B or C shares in the following instances: (a)
shares or amounts representing increases in the value of an account above the
net cost of the investment due to increases in the net asset value per share;
(b) shares acquired through reinvestment of income dividends or capital gains
distributions; (c) shares acquired by exchange from any Quest Fund, other than a
money market fund, where the exchanged shares would not have been subject to a
CDSC upon redemption; and (d) Class A shares of the Fund purchased in the amount
of $1 million or more if held for more than 12 months, Class B shares held for
more than six years or Class C shares held for more than one year from the end
of the calendar month in which the purchase order was accepted.
The CDSC does not apply to purchases of Class A shares at net asset value
described under "Net Asset Value Purchases" above and will be waived in the case
of redemptions of Class A, B or C shares in connection with (i) distributions to
participants or beneficiaries of plans qualified under Section 401(a) of the
Internal Revenue Code ("IRC") or from custodial accounts under IRC Section
403(b)(7), individual retirement accounts under IRC Section 408(a), deferred
compensation plans under IRC section 457 and other employee benefit plans
("plans"), and returns of excess contributions made to these plans, (ii)
withdrawals under an automatic withdrawal plan where the annual withdrawal does
not exceed 10% of the opening value of the account (only for Class B and C
shares); and (iii) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required minimum. A
shareholder will be credited with any CDSC paid in connection with the
redemption of any Class A, B or C shares if within 90 days after such
redemption, the proceeds are invested in the same Class of shares in the same
and/ or another Quest Fund.
In determining whether the Class A, B or C CDSC is payable, it will be assumed
that shares not subject to a CDSC are redeemed first and that other shares are
then redeemed in the order purchased. No CDSC will be imposed on exchanges to
purchase shares of another Quest Fund although a CDSC will be imposed on shares
of the acquired Quest Fund purchased by exchange of shares subject to a CDSC if
the acquired shares are then redeemed within 24 months if the exchanged shares
were Class A Shares of the Fund, six years if the exchanged shares were Class B
Shares or one year if the exchanged shares were Class C shares after the end of
the calendar month in which the exchanged shares were purchased.
SPECIAL FIDUCIARY RELATIONSHIPS. The CDSC will not apply with respect to
purchases of Class A shares for which the selling dealer is not permitted to
receive a sales load or redemption fee imposed on a shareholder with whom such
dealer has a fiduciary relationship in accordance with provisions of the
Employee Retirement Income Security Act and regulations thereunder. If such
dealer agrees to the reimbursement provision described below, no sales charge
will be imposed on sales of $1,000,000 or more and Quest Distributors will pay
to the selling dealer a commission described above in "Purchases of Class A
Shares of $1 Million or More."
For the period of 13 months from the date of the sales referred to in the
above paragraph, the distribution fee payable by the Fund to Quest Distributors
pursuant to the Fund's Distribution Plan in connection with such shares will be
retained by Quest Distributors. In the event of a redemption of any such shares
within 24 months of purchase, the selling dealer will reimburse Quest
Distributors for the amount of commission paid less the amount of the
distribution fee with respect to such shares.
OTHER DEALER COMPENSATION. After the initial offering, Quest Distributors will
provide additional compensation to dealers in connection with sales of shares of
the Fund and other
9
<PAGE>
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. In some instances, these incentives may be made available only to
dealers whose representatives have sold or are expected to sell significant
amounts of shares.
- ----------------------------------------
DETERMINING NET ASSET VALUE
The value of shares is determined by adding up the value of all security
holdings and other assets of the Fund, deducting the value of the
liabilities, and dividing the result by the number of shares outstanding. The
value of the Fund's portfolio securities and other assets is based on market
values determined by procedures established by the Board of the Fund. Securities
listed on a national securities exchange or designated as national market system
securities are valued at the last sale price or, if there has been no sale that
day, at the last bid price. Debt and equity securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the most recent bid price. Valuations may be provided by a pricing
service or from independent securities dealers. Short-term investments with
remaining maturities of less than 60 days are valued at amortized cost so long
as the Board determines in good faith that such method reflects fair value.
Other securities are valued by methods that the Board of the Fund believes
accurately reflect fair value. The calculation is made at the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time) each day the NYSE is open. The value that is
calculated is known as the net asset value per share, which will fluctuate
daily. Although the legal rights of Class A, B and C shares are identical, the
different expenses borne by each class may result in differing net asset values
and dividends for each Class.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the Close of the NYSE. The values of such securities
used in computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the Close of the NYSE. If events materially affecting the value of such
securities and exchange rates occur between the time of such determination
and/or the Close of the NYSE, then these securities will be valued at their fair
value as determined in good faith under procedures established by and under the
supervision of the Fund's Board. See "Determination of Net Asset Value" in the
SAI.
- ----------------------------------------
HOW TO REDEEM SHARES
You may redeem shares on any day the Fund is open for business--normally
when the New York Stock Exchange ("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.
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 an eligible guarantor. Eligible guarantors include
member firms of a national securities exchange, banks, savings associations and
credit unions, as defined by the Federal Deposit Insurance Act. Special
requirements may exist for corporations, trusts and similar accounts. If you
hold stock certificates,
10
<PAGE>
you should call the Transfer Agent for instructions on the appropriate
redemption procedure.
EXPEDITED REDEMPTIONS: You and your account representative will automatically
receive the ability to redeem or exchange shares by telephone unless you
indicate otherwise on the application. You may also authorize certain other
expedited redemption procedures. BY TELEPHONE (minimum $1,000). The proceeds of
redemption will either be mailed to you or wired to the account of any bank that
is a member of the Federal Reserve wire system. This account must be designated
on your application. If you change the bank account, you must let us know 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 arrange an automatic
withdrawal plan so that the amount you specify (minimum $50) will be sent to you
on a monthly or quarterly basis. Dividends and distributions on your shares must
be reinvested.
Your redemption proceeds, from which any applicable CDSC will have been
deducted, will normally be mailed or wired the day after your redemption is
processed. Payments for redemption of shares that you 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 reinvest in a Quest Fund within 60 days of
redemption, you will be reinstated as a shareholder with the same privileges
regarding the non-payment of sales charges that apply to exchanges. You may
exercise this privilege only once each calendar year. The redemption may produce
a gain or loss for tax purposes.
The Fund may suspend redemption procedures and postpone redemption payments
during any period when the NYSE is closed other than for customary weekend or
holiday closing or the SEC has determined an emergency exists or has otherwise
permitted such suspension or postponement. The Fund reserves the right to redeem
your account if its value is less than $500 due to redemptions. Your Fund will
give you 30 days' notice to increase your account value to at least $500.
Redemption proceeds will be mailed.
- ----------------------------------------
EXCHANGING SHARES
An 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.
Your exchange will be processed at the net asset value next determined after
the Transfer Agent receives your exchange request. A service fee (currently $5)
will be charged for administrative services in connection with an exchange. You
will receive a prospectus along with your confirmation if you exchange into a
Fund not offered in this Prospectus. The exchange feature may be modified or
discontinued at any time, upon notice to shareholders in accordance with
applicable rules adopted by the Securities and Exchange Commission ("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.
EXCHANGES OF CLASS A SHARES: You may exchange your Class A shares for Class A
shares of any mutual fund (except as described below with respect to exchanges
from the Global Income Fund) distributed by Quest Distributors ("Quest Fund")
and for shares of Quest Cash Reserves, Inc. ("QCR"), a single-class money market
fund with five different portfolios. You need not pay any sales charge
differential between Quest Funds on the exchange of Class A shares purchased
with a front-end 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 fund with the same or higher
sales charge.
11
<PAGE>
If you exchange Class A shares of the Global Income Fund into another Quest
Fund within six months of your purchase of Class A shares of the Global Income
Fund, you will have to pay the difference between the sales charge paid on your
purchase of Class A shares of the Global Income Fund and the sales charge that
would have been charged if you had originally purchased Class A shares of the
Fund into which you are exchanging.
EXCHANGES OF CLASS B SHARES: Class B shares of all Quest Funds are exchangeable
for Class B shares of any other Quest Fund. Class B shares of any Quest Fund
cannot be exchanged for Class A or C shares of any Quest Fund.
EXCHANGES OF CLASS C SHARES: Class C shares of all Quest Funds are exchangeable
for Class C shares of any other Quest Fund. Class C shares of any Quest Fund
cannot be exchanged for Class A or B shares of any Quest Fund.
Because excessive trading (including short-term "market timing" trading) can
hurt a Fund's performance, the 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 AND TECHNIQUES
The Fund is subject to certain investment restrictions which are
fundamental policies changeable only by shareholder vote. The restrictions
in a, b and c below do not apply to U.S. government securities. The Fund may not
(except that in the future the Fund may invest all or part of its assets in an
open-end management investment company with substantially the same respective
investment objective and restrictions): (a) Purchase more than 10% of the voting
securities of any one issuer (with respect to 75% of its respective total
assets); (b) Purchase more than 10% of any class of security of any issuer, with
all outstanding debt securities and all preferred stock of an issuer each being
considered as one class; (c) Concentrate its investments in any particular
industry, but if deemed appropriate for attaining its investment objective, the
Fund may invest up to 25% of its total assets (valued at the time of investment)
in any one industry classification used by the Fund for investment purposes (for
this purpose, a foreign government is considered an industry). Concentration of
investment in securities of one issuer may tend to increase a Fund's financial
risk (See "Risk Factors," p.3); (d) Borrow money in excess of 33 1/3% of the
value of the Fund's total assets; the Fund may borrow only from banks and only
as a temporary measure for extraordinary or emergency purposes and will make no
additional investments while such borrowings exceed 5% of the total assets; and
(e) Invest more than 15% of the Fund's total assets in illiquid securities,
including securities for which there is no readily available market, repurchase
agreements which have a maturity
12
<PAGE>
of longer than seven days, securities subject to legal or contractual
restrictions and certain over-the-counter options. Notwithstanding investment
restriction (e) above, the Fund may purchase securities which are not registered
under the Securities Act of 1933 ("1933 Act") but which can be sold to
"qualified institutional buyers" in accordance with Rule 144A under the 1933
Act. Any such security will not be considered illiquid so long as it is
determined by the Board of Trustees or Quest Advisors, acting under guidelines
approved and monitored by the Board, which has the ultimate responsibility for
any determination regarding liquidity, that an adequate trading market exists
for that security. This investment practice could have the effect of increasing
the level of illiquidity in the Fund during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities. The ability to sell to qualified institutional buyers under Rule
144A is a recent development and it is not possible to predict how this market
will develop. The Board will carefully monitor any investments by the Fund in
these securities. Other investment restrictions are described in the SAI.
The investment techniques or instruments described below are used for the
investment program of the Fund.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS: The Fund may acquire
securities subject to repurchase agreements. Under a typical repurchase
agreement, the Fund acquires a debt security for a relatively short period
(usually for one day and very seldom for more than one week) subject to an
obligation of the seller to repurchase (and the Fund's obligation to resell) the
security at an agreed-upon higher price, thereby establishing a fixed investment
return during the holding period. Pending such repurchase, the seller of the
instrument maintains securities as collateral equal in market value to the
repurchase price. Repurchase agreements may be characterized as loans
collateralized by the underlying securities.
In the event a seller defaulted on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. In the event of a seller's bankruptcy, a
Fund might be delayed in, or prevented from, selling the collateral for the
Fund's benefit.
The Fund may enter into reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund sells securities and agrees to repurchase them at
a mutually agreed date and price. At the time the Fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated account with
an approved custodian containing liquid high grade securities having a value not
less than the repurchase price (including accrued interest). Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale by the Fund may decline more than or appreciate less than the
securities the Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Fund's obligation to
repurchase the securities and the Fund's use of the proceeds of the reverse
repurchase agreements may effectively be restricted pending such decisions.
Reverse repurchase agreements create leverage, a speculative factor, and will be
considered borrowings for purposes of the Fund's limitation on borrowing.
LOANS OF PORTFOLIO SECURITIES: The Fund may lend portfolio securities if
collateral (cash, U.S. Government or agency obligations or letters of credit)
securing such loans is maintained daily in an amount at least equal to the
market value of the securities loaned and if the Fund does not incur any fees
(except transaction fees of the custodian bank) in connection with such loans.
The value of the securities loaned, if any, is not expected to exceed 33 1/3% of
the value of the total assets of the Fund. There is a risk that the borrower of
the securities may default and the Fund may have difficulty in reacquiring the
loaned securities.
OPTIONS AND FUTURES: The Fund may buy and sell options on stock indexes, futures
13
<PAGE>
contracts and options on futures to hedge its investments against changes in
value or as a temporary substitute for purchases or sales of actual securities.
The Fund may write covered call options on individual securities. When the 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 securities are purchased, an equivalent
amount of futures contracts could be terminated by offsetting sales. The Fund
may sell futures contracts in anticipation of or in 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 the 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 the Fund will be traded on a U.S. or foreign commodities exchange or
will result from separate, privately negotiated transactions with a primary
government securities dealer recognized by the Board of Governors of the Federal
Reserve System or with other broker-dealers approved by the Fund's Board.
Options on securities, futures contracts and options on futures contracts that
are traded on foreign exchanges are subject to the risk of governmental action
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, (v) lesser trading volume and (vi) in certain circumstances,
currency fluctuations. In addition, the Fund may write covered call options on
individual securities.
So long as Commodities Futures Trading Commission rules so require, the Fund
will not enter into any financial 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. A call option written or sold by the Fund is "covered" if the Fund
owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash, U.S. Government Securities or
other liquid high-grade debt securities in a segregated account with its
custodian. A put option written or sold by the Fund is "covered" if the Fund
maintains cash, U.S. Government securities or other liquid high-grade debt
securities with a value equal to the exercise price in a segregated account with
its custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. 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
14
<PAGE>
purchase transaction with respect to an OTC option, it would have to hold the
callable securities until the call lapsed or was exercised.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS: The Fund may
purchase securities on a "when-issued" or "delayed delivery" basis or may either
purchase or sell securities on a "firm commitment basis", whereby the price is
fixed at the time of commitment but delivery and payment may be as much as a
month or more later. The underlying securities are subject to market
fluctuations and no interest accrues prior to delivery of the securities. The
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 obligations to purchase such securities.
RIGHTS AND WARRANTS: The Fund may invest up to 5% of its total assets in rights
or warrants which entitle the holder to buy equity securities at a specific
price for a specific period of time. The 5% limitation is not a fundamental
policy.
- ----------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pay dividends from net investment income on an
annual basis following the end of its fiscal year (October 31). The Fund
may at times make payments from sources other than income or net capital gains.
Payments from such sources would, in effect, represent a return of each
shareholders's investment. All or a portion of such payments would not be
taxable to shareholders.
Distributions from net long-term capital gains, if any, for the Fund normally
are declared and paid annually, subsequent to the end of its fiscal year.
Distributions from net short-term capital gains, if any, will be made annually.
Short-term capital gains include the gains from the disposition of securities
held less than one year, a portion of the premiums from expired put and call
options written by the Fund and net gains from closing transactions with respect
to such options. If required by tax laws to avoid excise or other taxes,
dividends and/or capital gains distributions may be made more frequently.
Dividends paid by the Fund with respect to Class A, B and C shares, to the
extent any dividends are paid, will be calculated in the same manner at the same
time on the same day, with each class bearing its own distribution and other
class-related expenses. Accordingly, the higher distribution fees paid by Class
B and C shares and the higher resulting expense ratio will cause such shares to
be paid lower per share dividends than those paid on Class A shares. However, a
Class B or C shareholder will receive more shares at the time of purchase than a
Class A shareholder investing the same dollar amount since no sales charge is
deducted from the amount invested in Class B or C shares.
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 on such distributions. See the SAI for a
description of how to change your election.
- ----------------------------------------
TAX STATUS
The Fund intends to qualify for taxation as regulated investment companies
under the provisions of Subchapter M of the Internal Revenue Code. As
such, the Fund will not be taxed on its net investment income or net realized
capital gains, if any, to the extent they have been distributed to their
shareholders. Distributions from the Fund's income and short-term capital gains
are taxed as ordinary income while long-term capital gains distributions by the
Fund are taxed to you as long-term capital gains, regardless of how long you
have held your shares. For purposes of Federal income tax, futures contracts and
certain options, if any, held by the Fund at the end of its fiscal year
generally will be treated as having been sold at market value. As a general rule
any gain or loss on such contracts will be treated as 60% long-term and 40%
short-term. See the SAI for more detail on the tax aspects of Hedging
Instruments. Dividends will qualify for the dividends received deduction for
corporations only to the extent of the Fund's qualifying
15
<PAGE>
dividend income. Shortly after the end of each calendar year, the Fund will send
you a statement of the amount and nature of net income and capital gains.
Dividends, interest and gains on foreign securities may give rise to withholding
and other taxes imposed by foreign countries, reducing the amount distributable
to you. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes.
The above information is a summary of the tax treatment that will be applied
to the Fund and its distributions. If you have any questions, you should contact
your tax adviser, particularly in connection with state and local taxes.
- ----------------------------------------
INVESTMENT MANAGEMENT AGREEMENT
The day-to-day management of the Fund is the responsibility of Quest
Advisors, operating under the supervision of the Board of Trustees of the
Fund. Quest Advisors is a majority-owned subsidiary of Oppenheimer Capital, a
registered investment advisor, whose employees perform all investment
advisory services provided to the Fund by Quest Advisors. For its services
the Fund is authorized to pay Quest Advisors a monthly fee at the annual rate
of 1.00% of the Fund's daily net assets. This fee is higher than that paid by
most other investment companies. The Fund also is authorized to reimburse
Quest Advisors on a cost basis for bookkeeping and accounting services
performed on behalf of the Fund.
The Fund is responsible for bearing certain expenses attributable to the Fund
but not to a particular class ("Fund Expenses"), including deferred organization
expenses; taxes; registration fees; typesetting of prospectuses and financial
reports required for distribution to shareholders; brokerage commissions; fees
and related expenses of trustees or directors who are not interested persons;
legal, accounting and audit expenses; custodian fees; insurance premiums; and
trade association dues. Fund Expenses will be allocated based on the total net
assets of each class.
Each class of shares of the Fund will also be responsible for certain expenses
attributable only to that class ("Class Expenses"). These Class Expenses may
include distribution and service fees, transfer and shareholder servicing agent
fees, professional fees, printing and postage expenses for materials distributed
to current shareholders, state registration fees and shareholder meeting
expenses. Such items are considered Class Expenses provided such fees and
expenses relate solely to such Class.
A portion of printing expenses, such as typesetting costs, will be a Fund
Expense, while other printing expenses, such as the number of copies printed,
will be considered Class Expenses.
Quest Advisors will assume expenses of each class of the Fund in the event
that aggregate ordinary operating expenses incurred in any fiscal year exceed
the most restrictive expense limitations imposed upon the Fund in states in
which shares are then eligible for sale. Currently the most restrictive expense
limitation, which excludes certain distribution fees from operating expenses, is
2 1/2% of the first $30 million of average net assets, 2% of the next $70
million of average net assets and 1 1/2% of the remaining average net assets.
Quest Advisors has agreed to waive its entire management fee during the initial
offering period of the Fund's shares; this waiver is voluntary and may be
discontinued at any time.
Oppenheimer Financial Corp., a holding company holds a 33% interest in
Oppenheimer Capital, a registered investment advisor, and Oppenheimer Capital,
L.P., a Delaware limited partnership whose units are traded on the New York
Stock Exchange 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 Class of shares of the Fund has adopted a Distribution Plan and
Agreement (the "Plan(s)") pursuant to Rule 12b-1 under the he Investment
Company
16
<PAGE>
Act of 1940. Under the Plans, Class A, B and C shares of the Fund are authorized
to pay Quest Distributors a distribution fee for expenses incurred in connection
with the distribution of shares of the Fund and for shareholder servicing. Quest
Distributors has agreed to waive its distribution fee during the initial
offering period of the Fund's shares; the waiver is voluntary and may be
discontinued at any time.
CLASS A SHARES. Class A shares of each Fund are authorized to pay Quest
Distributors a distribution fee at the annual rate of .25% of the Fund's average
daily net assets. The Fund's Class A Shares also are authorized to pay a service
fee at the annual rate of .25% of average daily net assets.
CLASS B AND C SHARES. Class B and C shares of the Fund are authorized to pay
Quest Distributors a distribution fee at the annual rate of .75% of the Fund's
average daily net assets. Class B and C shares of the Fund are also authorized
to pay a service fee at the annual rate of .25% of each Fund's average daily net
assets.
USE OF DISTRIBUTION AND SERVICE FEES. All or a portion of the distribution fees
paid by either Class A, B or C shares may be used by Quest Distributors to pay
costs of printing reports and prospectuses for potential investors and all or a
portion of the distribution and/or service fees may be paid 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 address. Payments under the Plan are not limited to amounts actually
paid or expenses actually incurred by Quest Distributors but cannot exceed the
maximum rate set by the Plan or by the Board. It is, therefore, possible that
Quest Distributors may realize a profit in a particular year as a result of
these payments. The Plans have the effect of increasing the Fund's expenses from
what they otherwise would be. The Board of the Fund reviews the Fund's
distribution payments and may reduce or eliminate the fee at any time without
further obligation of the Fund. Investors should understand that the purpose and
function of the distribution fee and CDSC applicable to Class B and C shares are
the same as the sales charge and distribution fee applicable to Class A shares,
i.e., to compensate Quest Distributors for expenses incurred in distributing
shares of the Fund. The SAI contains more information about the Investment
Management Agreement and the Plans.
- ----------------------------------------
PORTFOLIO TRANSACTIONS AND TURNOVER
Quest Advisors may select its affiliate Oppenheimer & Co., Inc. ("Opco"),
a registered broker-dealer to execute transactions for the Fund, 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 Fund. (For a further discussion
of portfolio trading, see the SAI, "Investment Objectives, Policies and
Restrictions"). Although Quest Advisors cannot accurately predict the Fund's
annual turnover rate, it is anticipated that the Fund will have an annual
turnover rate (excluding turnover of securities having a maturity of one year or
less) of 100% or less. Brokerage costs are not incurred in connection with debt
obligations or U.S. government securities transactions; however, mark-ups to
dealers are paid. These may be considered transaction costs which will be
increased by any increase in turnover rate. Options and futures may increase the
turnover rate. To the extent that higher portfolio turnover increases capital
gains, more taxes will be payable. See "Tax Status".
- ----------------------------------------
ADDITIONAL INFORMATION
ORGANIZATION OF THE FUNDS. The Fund is a portfolio of Quest for Value Family
of Funds (the "Trust"), an open-end management investment company organized
as a Massachusetts business trust on April 17, 1987. The Trust's other
portfolios are the Small Capitalization, U.S. Government Income,
17
<PAGE>
Investment Quality Income, Opportunity, Growth and Income, National Tax-Exempt,
California Tax-Exempt and New York Tax-Exempt Funds. The Trust may establish
additional portfolios which may have different investment objectives from those
stated in this prospectus.
The Fund is not required to hold annual shareholder meetings, although special
meetings may be called as required by applicable law or as requested in writing
by holders of 10% or more of the outstanding shares of the Fund for the purpose
of voting upon the question of removal of a director or trustee. The Fund will
assist shareholders in communicating with one another in connection with such a
meeting. For matters affecting only one portfolio of Quest for Value Family of
Funds, 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. No stock certificates will be issued unless specifically
requested in writing.
Under Massachusetts law shareholders of the Trust 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 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.
Each class of shares represents identical interests in the applicable Fund's
investment portfolio. As such, they have the same rights, privileges and
preferences, except with respect to the: (a) designation of each class, (b)
effect of the respective sales charges, if any, for each class, (c) distribution
fees borne by each class, (d) expenses allocable exclusively to each class, (e)
voting rights on matters exclusively affecting a single class and (f) exchange
privilege of each class.
PERFORMANCE INFORMATION: From time to time the Fund may advertise 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 (exclusive of gains, if any, from
options and financial futures transactions) 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.
"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. The 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 Fund may be compared to recognized indices of market
performance. Performance data will be computed separately for each Class of
shares in accordance with formulas specified by the SEC.
POSSIBLE CONFLICTS OF INTEREST BETWEEN CLASSES. The Board of the Fund has
determined that currently no conflict of interest exists between Class A, B
and/or C shares of the Fund. On an ongoing basis, the Board shall monitor the
Fund for the existence of any material conflicts between the interests of the
classes of outstanding shares. The Board shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop, up to and including
establishing a new Fund.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENT. The custodian of the
assets,
18
<PAGE>
transfer agent and shareholder servicing agent for the Fund is State Street Bank
and Trust Company, whose principal business address is P.O. Box 8505, Boston, MA
02266. Cash balances of the Fund 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 Fund, including purchase and sale of shares of the Fund, as well as
inquiries concerning dividends and account statements. If you prefer, you may
write to Quest for Value Shareholder Services, P.O. Box 3567, Church Street
Station, New York, NY, 10277-1296. Written inquiries concerning management and
investment policies of the Fund may be directed to Quest for Value Advisors, One
World Financial Center, New York, New York 10281.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800-346-4601) is the shareholder servicing agent 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 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 Manager
brokerage account, and other accounts for which Unified Management Corporation
is the dealer of record.
SPECIAL ARRANGEMENTS FOR FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED
FUNDS:
PURCHASES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS. All shareholders of the
AMA Family of Funds who acquired shares of any Quest Funds 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, will be able to
make future purchases of Class A shares of the Funds at net asset value without
a sales charge, provided they continuously have owned shares of a Quest Fund.
PURCHASES BY FORMER SHAREHOLDERS OF THE UNIFIED FUNDS. Shareholders who acquired
shares of any Quest Fund pursuant to the combination of several Quest Funds
(including the Growth and Income and Quest for Value Funds) with portfolios of
the Unified Funds will be able to make future purchases of Class A shares of any
Quest Fund at net asset value without a sales charge, provided that such
shareholders continuously have owned 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 AND UNIFIED
FUNDS. While they have no present intention to do so, in the event that Quest
Distributors imposes a redemption fee in the future, no redemption fees will be
imposed upon redemption of shares of any Quest Fund by former shareholders of
the Unified Funds who are entitled to purchase Class A shares of shares of Quest
Funds at net asset value (see Purchases by Former Shareholders of the Unified
Funds, above).
EXCHANGES BY FORMER SHAREHOLDERS OF AMA FAMILY OF FUNDS AND UNIFIED FUNDS. 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 former shareholders of the Unified Funds who qualify to purchase shares
of Quest Funds at net asset value (see Purchases by Former Shareholders of the
Unified Funds), 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) for administrative services in connection with
an exchange into a non-money market fund.
19
<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 31% of each taxable dividend or capital gain distribution paid to you
in cash or reinvested in your account and will require us to withhold 31% 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 Social Security Number
Minor of a Minor
Corporation, Taxpayer Identification
Partnership, Trust, Number
Estate, Pension, 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 mailed on the first business day of the next
month. Redemption of shares
20
<PAGE>
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.
21
<PAGE>
QUEST FOR VALUE -SM- OFFICERS FUND
TWO WORLD FINANCIAL CENTER QUEST FOR VALUE -SM-
NEW YORK, NEW YORK 10080 OFFICERS FUND
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses................. 2 QUEST FOR
Investment Objectives of the Fund........ 3 VALUE -SM- OFFICERS FUND
Risk Factors............................. 3
How to Buy Shares........................ 5
Determining Net Asset Value.............. 10
How to Redeem Shares..................... 10
Exchanging Shares........................ 11
Investment Restrictions and Techniques... 12
Dividends and Distributions.............. 15
Tax Status............................... 15
Investment Management Agreement.......... 16
Distribution Plan........................ 16
Portfolio Transactions and Turnover...... 17
Additional Information................... 17
Application Terms and Conditions......... 20
</TABLE>
INVESTMENT ADVISOR:
QUEST FOR VALUE ADVISORS
ONE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10281
(800) 232-FUND
TRANSFER AGENT:
STATE STREET BANK AND TRUST COMPANY
BOSTON, MA 02266-8505
GENERAL DISTRIBUTOR: NOVEMBER 1, 1994
QUEST FOR VALUE DISTRIBUTORS PROSPECTUS
P.O. BOX 3567
CHURCH STREET STATION
NEW YORK, NY 10277-1296
(800) 232-FUND
<PAGE>
Statement of Additional Information
QUEST FOR VALUE- OFFICERS FUND
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 dated November 1, 1994, as supplemented
February 1, 1995 and June 28, 1995 (the "Prospectus") of Quest for Value
Officers Fund(the "Fund"), which may be obtained by written request to State
Street Bank and Trust Company ("State Street"), P.O. Box 8505, Boston, MA
02266-8505 or by calling State Street at (800) 232-FUND.
The date of this Additional Statement is June 28, 1995.
QUEST FOR VALUE is a registered service mark of Oppenheimer Capital
<PAGE>
TABLE OF CONTENTS
Investment Policies and Special Investment Methods.............................2
Risks of Stock Index Futures and Related Options...............................6
Investment Restrictions........................................................8
Principal Holders of Securities................................................9
Trustees and Officers.........................................................10
Investment Management Services................................................13
Distribution Expense Plan.....................................................14
Brokerage.....................................................................15
Description of Brokerage Practices............................................16
Execution of Transactions.....................................................16
Determination of Net Asset Value..............................................17
Total Return and Tax Information..............................................18
Additional Information........................................................21
Appendix-Ratings.............................................................A-1
Appendix-Financial Statements................................................B-1
INVESTMENT POLICIES AND SPECIAL INVESTMENT METHODS
The investment objectives and policies of the Fund are described in the
Prospectus. In seeking to achieve its objectives, the Fund may use the following
investment methods.
BORROWING. The Fund may from time to time increase its ownership of
securities above the amounts otherwise possible by borrowing from banks on an
unsecured basis at fixed rates of interest and investing the borrowed funds. Any
such borrowing will be made only from banks, and will only be made to the extent
that the value of the Fund's assets, less its liabilities (other than such
borrowings) is
2
<PAGE>
equal to at least 300% of all borrowings including the proposed borrowing. If
the value of the Fund's assets computed as above should fail to meet the 300%
coverage described above, the Fund, within three days, is required to reduce its
bank debt to the extent necessary to meet such asset coverage and may have to
sell a portion of its investments at a time when independent investment
judgement would not dictate such action.
Interest paid on money borrowed is an expense of the Fund which it
would not otherwise incur so that it may have little or no net investment income
when its borrowings are substantial.
Borrowing for investment increases both investment opportunity and
investment risk. Since substantially all of the Fund's assets fluctuate in
value, and the obligation resulting from borrowing is fixed, the net asset value
per share of the Fund will tend to increase more when the portfolio assets
increase in value, and decrease more when the portfolio assets decrease in
value, than would otherwise be the case if no borrowing had been done. This is
the speculative factor known as leverage; such borrowings will be used only for
the purchase of securities.
INVESTMENT IN WARRANTS. The Fund may not invest more than 5% of its
total assets at the time of purchase in warrants (other than those that have
been acquired in units or attached to other securities). Of such 5%, not more
than 2% of the total assets at the time of purchase may be invested in warrants
that are not listed on the New York or American Stock Exchanges. Warrants are
pure speculation in that they have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. Warrants
are basically an option to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.
RESTRICTED SECURITIES. From time to time, the Fund may invest in
securities the disposition of which would be subject to legal restrictions. It
may be difficult to sell such securities at a price representing, in the opinion
of the Advisor, their fair value until such time as such securities may be sold
publicly. Whether the Fund or the issuer or seller of the restricted securities
will pay the expenses of their registration under the Securities Act of 1933
will in each case be the subject of negotiation at the time the securities are
purchased. The Fund will ordinarily acquire the right to have such securities
registered within some specified period of time.
When registration is required, a considerable period may elapse between
a decision to sell the securities and the time when the Fund would be permitted
to sell. Thus, the Fund may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell. The Fund may also acquire
securities through private placements under which it may agree to contractual
restrictions on the resale of such securities. Such restrictions might prevent
the sale of such securities at a time when such sale would otherwise be
desirable.
No restricted securities for which there is no readily available market
("illiquid securities") will be acquired which at the time of acquisition will
cause the aggregate current value of restricted securities (including private
placements and repurchase transactions maturing beyond seven days) to exceed 15%
of the value of the Fund's net assets. When as a result of either the increase
in the value of some or all of the restricted and illiquid securities held, or
the diminution in the value of unrestricted marketable securities in the
portfolio, the restricted and illiquid securities come to represent a larger
3
<PAGE>
percentage of the value of the Fund's net assets, the Fund's Advisor will
consider appropriate steps to protect the Fund's flexibility.
INVESTMENT IN SMALL UNSEASONED COMPANIES. Assets of the Fund may be
invested in securities of small, unseasoned companies as well as those of large
and well-known companies. The former may have a limited trading market, which
may adversely affect their disposition by the Fund and can result in their
shares being priced at a lower level than might otherwise be the case. In
addition, there are other investment companies (including those advised by the
Advisor's affiliates) and other investment media engaged in trading this type of
security and, to the extent that these organizations trade in the same
securities, the Fund may be forced to dispose of its holdings at prices lower
than might otherwise be obtained. The Fund will not make investments that will
result in more than 15% of the Fund's net assets (at the time of purchase) being
invested in securities of companies that have operated less than three years,
including the operation of predecessors.
INVESTMENT IN FOREIGN SECURITIES. The Fund may purchase foreign
securities provided that they are listed on a domestic or foreign securities
exchange or represented by American depository receipts listed on a domestic
securities exchange or traded in the United States' over-the-counter market.
There is no limit on the amount of such foreign securities that the Fund might
acquire. The Fund does not intend to speculate in foreign currency nor invest in
foreign currency contracts. The Fund will only hold foreign currency in
connection with the purchase or sale of securities on a foreign securities
exchange. To the extent that foreign currency is so held, there may be a risk
due to foreign currency exchange rate fluctuations. Such foreign currency and
foreign securities will be held by the Fund's custodian bank, or by a foreign
branch of a U.S. bank, acting as subcustodian. The custodian bank will hold such
foreign securities pursuant to such arrangements as are permitted by applicable
foreign and domestic law and custom. In connection with purchases on foreign
securities exchanges, although the Fund may purchase securities issued by
companies in any country, developed or underdeveloped, the Fund does not
presently intend to purchase securities issued by companies in underdeveloped
countries.
Investments in foreign companies involve certain considerations which
are not typically associated with investing in domestic companies. An investment
may be affected by changes in currency rates and in exchange control regulations
(e.g. currency blockage). The Fund may bear a transaction charge in connection
with the exchange of currency. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies are
generally not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. Most foreign
stock markets have substantially less volume than the New York Stock Exchange
and securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. There is generally less government
regulation of foreign stock exchanges, brokers, and listed companies than there
is in the United States. In addition, with respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could adversely affect
investment in securities of issuers located in those countries. Individual
foreign economies may differ favorably or unfavorably from the United States
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. If it should become necessary, the Fund would normally encounter
greater difficulties in commencing a lawsuit against the issuer of a foreign
security that it would against a United States issuer.
4
<PAGE>
RISKS OF OPTIONS ON INDICES. The Fund's purchase and sale of options on
indices will be subject to certain risks, notwithstanding the use of such
options solely to hedge the value of the Fund's equity portfolio. The index
option hedging strategy to be employed by the Advisor will involve primarily the
purchase of put options against indices which, in the Advisor's opinion, will be
affected by market conditions in a substantially similar fashion to the Fund's
equity portfolio. Put options will be sold only to close out long positions.
Price movements in the Fund's portfolio probably will not correlate exactly to
movements in the level of the index and, therefore, the Fund bears the risk that
the price of the securities held by the Fund may decrease more than the
corresponding value of the long index put option position may increase. It is
also possible that the price of the index may rise while the value of the Fund
portfolio may fall. If this happened the Fund would experience a loss on the
value of its portfolio which is not offset by an increase in the value of its
hedging option position. However, the Advisor believes that the value of a
diversified Fund portfolio, will, over time, tend to move in the same direction
as the market and that movements in the value of the Fund in the opposite
direction as the market will be likely to occur only for a short period or to a
small degree.
Index prices may be distorted if trading or certain stocks included in
the indices is interrupted. Trading in index options also may be interrupted in
certain circumstances such as if trading is halted in a substantial number of
stocks included in the index. If this occurred the Fund would not be able to
close out options which it had purchased, which could result in losses to the
Fund if the underlying index moved adversely before trading resumed. However, it
is the Fund's policy to purchase options only on indices which include a
sufficient number of stocks so that the likelihood of a trading halt in the
index is minimized.
The purchase of an index option may also be subject to a timing risk.
If an option is exercised before final determination of the closing index value
for that day, the risk exists that the level of the underlying index may
subsequently change. If such a change caused the exercised option to fall out of
the money (i.e. the exercising of the option would result in a loss not a gain)
the holder would be required to pay the difference between the closing index
value and the exercise price of the option (times the applicable multiple) to
the assigned writer. Although the Fund may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time, it
may not be possible to eliminate the risk entirely because the exercise cutoff
time for index options may be different than those fixed for other types of
options and may occur before definitive closing index values are announced.
Alternatively, when the index level is close to the exercise price, the Fund may
sell rather than exercise its option.
Although the markets for certain option contracts have developed
rapidly, the markets for other index options are still relatively illiquid. The
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid secondary market. It is not certain
that this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in the opinion of
the Advisor, the market for such option has developed sufficiently that the risk
in connection with such transactions is no greater than the risk in connection
with options on stocks.
LOWER RATED BONDS. The Fund may invest up to 25% of its assets in bonds
rated below Baa3 by Moody's Investors Service Inc. ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P") (commonly known as "junk bonds").
Securities rated less than Baa by Moody's or BBB by S&P are classified as
non-investment grade securities and are considered speculative by those rating
agencies. Junk bonds may be issued as a consequence of corporate restructurings,
such as leveraged buyouts, mergers, acquisitions, debt recapitalizations, or
similar events or by smaller or highly
5
<PAGE>
leveraged companies. Although the growth of the high yield securities market in
the 1980s had paralleled a long economic expansion, recently many issuers have
been affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. The market for junk bonds may be less
liquid than the market for investment grade bonds. In periods of reduced market
liquidity, junk bond prices may become more volatile and may experience sudden
and substantial price declines. Also, there may be significant disparities in
the prices quoted for junk bonds by various dealers. Under such conditions, the
Fund may have to use subjective rather than objective criteria to value its junk
bond investments accurately and rely more heavily on the judgment of the Fund's
Board of Trustees. Prices for junk bonds also may be affected by legislative and
regulatory developments. For example, new federal rules require that savings and
loans gradually reduce their holdings of high-yield securities. Also, from time
to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers, mergers or leveraged buyouts. Such
legislation, if enacted, may depress the prices of outstanding junk bonds.
ADDITIONAL RISKS. Securities in which the Fund may invest are subject
to the provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors and shareholders, such as the federal Bankruptcy Code,
and laws, if any, which may be enacted by Congress or the state legislatures
extending the time for payment of principal or interest, or both or imposing
other constraints upon enforcement of such obligations.
INVESTMENT IN OTHER INVESTMENT COMPANIES. The Fund has no present
intention of investing in the securities of other investment companies.
SECURITIES LOANS. The Fund may loan its portfolio securities. The Fund
may call the loans at any time on three days notice and reacquire the underlying
securities. The Fund would receive the cash equivalent of the interest or
dividends paid by the issuer on the securities loan and would have the right
to receive the interest on investment of the cash collateral in short-term debt
instruments. A portion of either or both kinds of such interest may be paid to
the borrower of such securities. The Fund would continue to retain any voting
rights with respect to the securities.
REPURCHASE AGREEMENTS. The Fund's Board of Trustees has established
procedures pursuant to which Quest Advisors will monitor the creditworthiness of
dealers and banks with which the Fund enters into repurchase agreement
transactions.
RISKS OF STOCK INDEX FUTURES AND RELATED OPTIONS
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Instead,
the Fund will be required to deposit with its broker an amount of cash or U.S.
Treasury bills equal to approximately 5% of the contract amount. This is known
as initial margin. Such initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. In addition, because under current futures industry practice
daily variations in gains and losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of the contract to its
broker. Such payments would be required where during the term of a stock index
futures contract purchased by the Fund, the price of the underlying stock index
6
<PAGE>
declined, thereby making the Fund's position less valuable. In all instances
involving the purchase of stock index futures contracts by the Fund resulting in
a net long position, an amount of cash and cash equivalents equal to the market
value of the futures contracts will be deposited in a segregated account with
the Fund's custodian to collateralize the position and thereby insure that the
use of such futures is unleveraged. At any time prior to the expiration of the
futures contract, the Fund may elect to close the position by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract.
There are several risks in connection with the use of stock index
futures in the Fund as a hedging device. One risk arises because of the
imperfect correlation between the price of the stock index future and the price
of the securities which are the subject of the hedge. This risk of imperfect
correlation increases as the composition of the Fund portfolio diverges from the
securities included in the applicable stock index. The price of the stock index
future may move more than or less than the price of the securities being hedged.
If the price of the stock index future moves less than the price of the
securities which 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, the 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 will be partially offset by the future. If
the price of the futures moves more than the price of the stock the Fund will
experience a loss or a gain on the future which will be completely offset by
movement in the price of the securities which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index futures, the Fund may
buy or sell stock index futures in a greater dollar amount than the dollar
amount of the securities being hedged if the historical volatility of the prices
of such securities has been greater than the historical volatility of the index.
Conversely, the Fund may buy or sell fewer stock index futures contracts if the
historical volatility of the price of the securities being hedged is less than
the historical volatility of the stock index. It is possible that where the Fund
has sold futures to hedge its portfolio against a decline in the market, the
market may advance and the Fund's portfolio may decline. If this occurred, the
Fund would lose money on the futures and also experience a decline in the value
of its portfolio securities. While this should occur, if at all, for a very
brief period or to a very small degree, the Advisor believes that over time the
value of a diversified portfolio will tend to move in the same direction as the
market indices upon which the futures are based. It is also possible that if the
Fund has hedged against the possibility of a decline in the market adversely
affecting stocks held in its portfolio and stock prices increase instead, the
Fund will lose part or all of the benefit of the increased value of its stock
which it had hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements. Such
sales of securities may be but will not necessarily be, at increased prices
which reflect the rising market. The Fund may also have to sell securities at a
time when it may be disadvantageous to do so.
Where futures are purchased to hedge against a possible increase in the
price of stocks before the Fund is able to invest its cash (or cash equivalents)
in stock (or options) in an orderly fashion, it is possible the market may
decline instead. If the Fund then concluded to not invest in stock or options at
the time because of concern as to possible further market decline or for other
reasons, the Fund will realize a loss on the futures contract that is not offset
by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation or no correlation at all between movements in the stock index future
and the portion of the portfolio being hedged, the price of stock index futures
may not correlate perfectly with movements in the stock index due to certain
7
<PAGE>
market distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Moreover, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market and may therefore
cause increased participation by speculators in the market. Such increased
participation may also cause temporary price distortions. Due to the possibility
of price distortion in the futures market and because of the imperfect
correlation between movements in the stock index and movements in the price of
stock index futures, the value of stock index futures contracts as a hedging
device may be reduced.
Currently, stock index futures contracts can be purchased or sold with
respect to several different stock indices, each based on a different measure of
market performance. Positions in stock index futures may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, as with
stock options, there is no assurance that a liquid secondary market or an
exchange or board of trade will exist for any particular contract or 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 Fund would continue to
be required to make daily cash payments of variation margin. However, in the
event futures contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract 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, as
described above, there is no guarantee that the price of securities will, in
fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
In addition, if the Fund has insufficient cash it may at times have to
sell securities to meet variation margin requirements. Such sales may have to be
effected at a time when it is disadvantageous to do so.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions are described in the
Prospectus. The following are also fundamental policies and cannot be changed
without shareholder approval. Under these additional restrictions, the Fund
cannot:
(a) Invest in real estate or interests in real estate (including
limited partnership interests), but may purchase readily
marketable securities of companies holding real estate or
interests therein;
(b) Purchase securities on margin;
(c) Underwrite securities of other companies, except insofar as it
might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held in
its own portfolio (except that the Fund may in the future
invest all of its investable assets in an open-end management
investment company with substantially the same investment
objective and restrictions as the Fund);
(d) Mortgage, hypothecate or pledge any of its assets;
8
<PAGE>
(e) Invest or hold securities of any issuer if those Officers and
Trustees of the Fund or its Advisor owning individually more
then 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer; or
(f) Invest in companies for the primary purpose of acquiring
control or management thereof (except that the Fund may in the
future invest all of its investable assets in an open-end
management investment company with substantially the same
investment objective and restrictions as the Fund);
(g) Invest in physical commodities or physical commodity
contracts, or speculate in financial commodity contracts, but
may purchase and sell stock futures contracts and options on
such futures contracts exclusively for hedging purposes;
(h) Write, purchase or sell puts, calls, or combinations thereof
on individual stocks, but may purchase or sell exchange traded
put and call options on stock indices to protect the Fund's
assets.
In addition, the Fund may not, with respect to 75% of its assets,
invest more than 5% of the value of its total assets in the securities of any
one issuer (except that the Fund may in the future invest all of its investable
assets in an open-end management investment company with substantially the same
investment objective and restrictions as the Fund). Although not a fundamental
policy, in order to comply with a state's securities laws, the Fund has agreed
not to make loans to any person or individual (except that portfolio securities
may be loaned within the limitations set forth in the Prospectus), not to make
short sales of securities except "against-the-box" and not to invest in
interests in oil, gas or other mineral exploration or development programs or
leases.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address and percentage of
ownership of each person that to the knowledge of the Fund owns of record or
beneficially 5 percent or more of the shares of the Fund as of June 1, 1995:
<TABLE>
<CAPTION>
Name and Address of 5% Owner Percentage of Ownership
<S> <C>
Joseph M. La Motta 7.52%
RR2 Box 51
Pound Ridge, NY
Thomas O'Donnell 7.19%
311 S. Wacker Drive
Chicago, IL 60606
Jeffrey C. Whittington 7.16%
P.O. Box 1367
Wainscott, NY 11975
George Tilghman 5.32%
33 Valentine's Lane
Old Brookville, NY 11545
</TABLE>
9
<PAGE>
TRUSTEES AND OFFICERS
The Fund is a series portfolio of Quest for Value Family of Funds (the
"Trust"). The Trustees and Officers of the Trust (except other
officers/portfolio managers of other portfolios 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 business address of each is One World Financial Center, New York,
New York 10281, except as noted. As of June 1, 1995, Mr. La Motta owned 7.52% of
the outstanding shares of the Fund, Mr. Whittington owned 7.16% of the
outstanding shares of the Fund, Mr. George Tilghman, Vice President and
Portfolio Manager of the Trust, owned 5.32% of the outstanding shares of the
Fund and Ms. Kaback owned less than 1% of the outstanding shares of the Fund.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF TRUSTEES AND PRESIDENT*
Chairman and President of Oppenheimer Capital and Chairman of Quest for Value
Advisors, registered investment advisers; Chairman of the Board and President of
Quest Cash Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value
Family of Funds, Quest for Value Global Equity Fund, Inc. and Quest for Value
Global Funds, Inc., open-end investment companies, and Quest For Value Dual
Purpose Fund, Inc., a closed-end investment company and Chairman of The Saratoga
Advantage Trust, an open-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 Cash Reserves, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of Quest for
Value Accumulation Trust and Quest for Value Family of Funds, 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 Cash Reserves, Inc., Quest
for Value Global Equity Fund, Inc. and Quest for Value Global Funds, Inc.,
Trustee of Quest for Value Accumulation Trust and Quest for Value Family of
Funds, all of which are open-end investment companies; former President of
Boston Company Institutional Investors; Trustee of
10
<PAGE>
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 money market fund (since 1981) and an STCM
Management Company, Inc., sponsor and Sub- Advisor to CCMT; Director of Quest
Cash Reserves, Inc., Quest for Value Global Equity Fund, Inc., and Quest for
Value Global Funds, Inc., Trustee of Quest for Value Accumulation Trust, The
Saratoga Advantage Trust, and Quest for Value Family of Funds, each of which is
an open-end investment company.
GEORGE LOFT, TRUSTEE
51 Herrick Road
Sharon, Connecticut 06069
Private Investor; Director of Quest Cash Reserves, Inc., Quest for Value Global
Equity Fund, Inc. and Quest for Value Global Funds, Inc., Trustee of Quest for
Value Accumulation Trust, The Saratoga Advantage Trust and Quest for Value
Family of Funds, all of which are open-end investment companies, and Director of
Quest for Value Dual Purpose Fund, Inc., a closed-end investment company.
MARIA CAMACHO, ASSISTANT SECRETARY
Assistant Vice President of Oppenheimer Capital since 1994 and Registrations
Department Administrator with Oppenheimer Capital since 1989; Assistant
Secretary of Quest For Value Fund, Inc., The Saratoga Advantage Trust, Quest for
Value Global Equity Fund, Inc., Quest for Value Global Funds, Inc. and Quest
Cash Reserves, Inc., open-end investment companies.
THOMAS E. DUGGAN, ASSISTANT SECRETARY
General Counsel and Secretary, Oppenheimer Capital and Quest for Value Advisors,
Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end investment
company; Assistant Secretary of Quest Cash Reserves, Inc., Quest for Value
Accumulation Trust, Quest for Value Family of Funds, Quest for Value Global
Equity Fund, Inc., The Saratoga Advantage Trust and Quest for Value Global
11
<PAGE>
Funds, Inc., open-end investment companies; formerly Senior Vice President and
Associate General Counsel of Oppenheimer & Co., Inc.
BERNARD H. GARIL, VICE PRESIDENT
President and Chief Operating Officer of Quest for Value Advisors; Senior Vice
President, Oppenheimer Capital; Vice President of Quest for Value Accumulation
Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds, Quest for
Value Global Equity Fund, 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.
DEBORAH KABACK, SECRETARY
Senior Vice President, Oppenheimer Capital; Secretary of Quest for Value
Accumulation Trust, Quest Cash Reserves, Inc., Quest for Value Family of Funds,
Quest for Value Global Equity Fund, Inc., The Saratoga Advantage Trust and Quest
for Value Global Funds, Inc., 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 Cash
Reserves, Inc., Quest for Value Accumulation Trust, Quest for Value Family of
Funds, Quest for Value Global Equity Fund, Inc., The Saratoga Advantage Trust
and Quest for Value Global Funds, Inc., 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 Family of Funds, Quest for Value Global Equity Fund Inc., The
Saratoga Advantage Trust and Quest for Value Global Funds, Inc., open-end
investment companies, and Quest for Value Dual Purpose Fund, Inc., a closed-end
investment company.
JEFFREY C. WHITTINGTON, VICE PRESIDENT AND PORTFOLIO MANAGER
Senior Vice President of Oppenheimer Capital since August 1994 and from June
1986-May 1991; Portfolio Manager with Neuberger & Berman from August 1993-July
1994; Portfolio Manager with Oppenheimer & Co., Inc. from October 1991-July
1993.
REMUNERATION OF OFFICERS AND TRUSTEES. All officers of the Trust are officers or
directors of Oppenheimer Capital and receive no salary or fee from the Trust.
Until the Fund has net assets of $25 million, no trustees fees will be paid.
When the Fund has net assets of at least $25 million but not more than $50
million the noninterested Trustees will be paid an annual fee of $1,500 plus
$125 for each trustees' meeting attended and $50 for each committee meeting
attended. When the Fund has net
12
<PAGE>
assets in excess of $50 million, the noninterested Trustees will be paid an
annual fee of $3000 plus $250 for each trustees' meeting attended and $100 for
each committee meeting attended. The following table sets forth the aggregate
compensation paid by the Fund to each of the Trustees during the period November
8, 1994 (commencement of operations) to April 30, 1995 and the aggregate
compensation paid to each of the Trustees by all of the funds in the Advisor's
Fund Complex during each such fund's 1994 fiscal year
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from the Fund and
Name of Trustee of Compensation from Accrued as Part of Benefits upon the Quest Fund
the Fund the Fund Fund Expenses Retirement Complex
<S> <C> <C> <C>
Paul Clinton 0 0 0 68,100
Thomas Courtney 0 0 0 66,600
Lacy Herrmann 0 0 0 67,350
Joseph La Motta 0 0 0 0
George Loft 0 0 0 74,800
</TABLE>
Messrs. Clinton, Courtney and Herrmann earned directors fees with
respect to 18 investment companies in the Advisor's Fund Complex and the fees
earned by Mr. Loft were with respect to 19 investment companies in the Advisor's
Fund Complex. During such periods the independent Trustees received fees from
three investment companies for which they no longer serve as directors and which
are no longer part of the Advisor's Fund Complex but for which the Advisor
currently serves as subadviser. In additon, during such periods, Mr. Clinton and
Mr. Courtney each served as director with respect to three investment companies
in the Advisor's Fund Complex for which they received no fees and Mr. Loft and
Mr. Herrmann each served as director with respect to 10 investment companies in
the Advisor's Fund Complex for which they received no fees. For the purpose of
this paragraph, a portfolio of an investment company organized in series form is
considered to be an investment company.
INVESTMENT MANAGEMENT SERVICES
Quest for Value Advisors (the "Advisor") supervises the investment
operations of the Fund and the composition of its portfolio and furnishes the
Fund advice and recommendations with respect to investments, investment
policies, and the purchase and sale of securities pursuant to an investment
advisory agreement (the "Agreement") with the Fund. The monthly management fee
payable to the Advisor under the terms of the Agreement is computed on the
average daily net assets of the Fund as of the close of business each day at an
annual rate of 1%. The management fee is higher than that paid by other
investment companies with similar investment objectives. During the initial
offering of the Fund's shares, the Advisor is waiving the entire management fee.
The Agreement requires the Advisor, at its expense, to provide the
Fund with adequate office space, facilities, and equipment as well as to provide
and supervise the activities of all administrative and clerical personnel as
shall be required to provide effective corporate administration for the Fund
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, composition of
proxy materials and registration statements for continuous public sale of shares
of the Fund and the determination of the net asset value of the Fund's shares.
The Agreement also provides that the cost of certain clerical and accounting
services incurred by the Advisor will be reimbursed by the Fund. Expenses not
expressly assumed by the Advisor under the Agreement or by the Distributor of
shares of the Fund are paid by the Fund. At present, only Class A shares of the
Fund have been issued. In the event that shares of Class B and Class C are
issued in the
13
<PAGE>
future, the Fund will be responsible for bearing certain expenses attributable
to the Fund but not to a particular class ("Fund Expenses"), including deferred
organization expenses; taxes; registration fees; typesetting of prospectuses and
financial reports required for distribution to shareholders; brokerage
commissions; fees and related expenses of directors who are not interested
persons; legal, accounting and audit expenses; custodian fees; insurance
premiums; and trade association dues. Fund Expenses will be allocated based on
the total net assets of each class. Each class of shares of each Fund will also
be responsible for certain expenses attributable only to that class ("Class
Expenses"). These Class Expenses may include distribution and service fees,
transfer and shareholder servicing agent fees, professional fees, printing and
postage expenses for materials distributed to current shareholders, state
registration fees and shareholder meeting expenses. Such items are considered
Class Expenses provided such fees and expenses relate solely to such Class. A
portion of printing expenses, such as typesetting costs, will be divided equally
among the Funds, while other printing expenses, such as the number of copies
printed, will be considered Class Expenses.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard for its obligation thereunder, the
Advisor is not liable for any act or omission in the course of or in connection
with the rendition of services thereunder. The Agreement permits the Advisor to
act as investment advisor for any person, firm or corporation.
The Agreement was adopted by the Trust's Board of Trustees, including
a majority of the Trustees who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or indirect financial interest in
the operation of the Agreement on October 25, 1994, and by the initial
shareholder of the Fund on November 1, 1994. During the period November 8, 1994
(commencement of operations) to April 30, 1995, the Advisor voluntarily waived
its advisory fee of $10,942 and rembursed the Fund for all other operating
expenses of $12,607.
DISTRIBUTION EXPENSE PLAN
Each Class of shares of the Fund has a Plan and Agreement of
Distribution (the "Plan(s)") pursuant to which it is permitted to compensate the
Distributor in connection with the distribution of Fund shares. Each Plan was
adopted in accordance with the requirements of Rule 12b-1 under the 1940 Act,
and was initially approved by the Trust's Board of Trustees (who found that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders), including a majority of the trustees who are not "interested
persons" of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of the Plan ("Disinterested
Trustees") on October 25, 1994 and by the initial shareholder of the Fund on
November 8, 1994.
Under each Plan, each Class of shares of the Fund pays the Distributor
a monthly fee based on the average daily net assets of the Fund on an annual
basis, or at such lesser rate as the Directors may from time to time determine,
for services and expenses in connection with the distribution of Fund shares.
Such distribution fee for Class A shares is .25%; for Class B and C shares, such
fee is .75%. Each class of shares also pays a service fee of .25% of average
daily net assets. During the initial offering of the Fund's shares, the
Distributor is waiving the entire distribution fee.
Each Plan states that the Treasurer of the Fund shall provide, and
that the Disinterested Trustees shall review, quarterly reports setting forth
the amounts expended pursuant to the Plan 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 Fund who are not "interested
persons" of the
14
<PAGE>
Fund shall be committed to the discretion of the Trustees then in office who are
not "interested persons" of the Fund. The Plans can be terminated at any time,
without penalty, by vote of the holders of a majority of the outstanding voting
securities of the Fund. The Plans cannot be amended to increase materially the
amount to be spent by the 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 sales charge rule of the
National Association of Securities Dealers, Inc. ("NASD")is applicable to 12b-1
fees as well as front end and deferred sales charges (but excludes service fees)
and limits the total aggregate asset based, front end and deferred sales charges
to 6.25% of a fund's new gross sales.
BROKERAGE
The Agreement contains provisions relating to the selection of
broker-dealers ("brokers") for the Fund's portfolio transactions. Briefly, the
Advisor may use such brokers as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to achieve "best execution" (as
defined) at reasonable expense. While the Advisor need not seek competitive
commission bidding or base its selection on posted rates, it is expected to be
aware of the current rates of most eligible brokers and to minimize the
commissions paid to the extent consistent with the interests and policies of the
Fund as established by its Board and the provisions of the Agreement. The
Agreement also provides that, consistent with obtaining "best execution" of the
Fund's portfolio transactions, the Advisor may, in the interests of the Fund,
select brokers other than Oppenheimer & Co., Inc. ("Opco") because they provide
brokerage and/or research services to the Fund and other accounts of the
Advisor. 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
Advisor that the commission is reasonable in relation to the services provided,
viewed either in terms of that transaction or the Advisor's overall
responsibilities to all its accounts. No specific dollar value need be put on
these services. To show that the determinations were made in good faith, the
Advisor must be prepared to show that the amount of such commissions paid over a
representative period selected by the Board were reasonable in relation to the
benefits to the Fund. Sales of shares of the Fund, subject to applicable rules
governing the Distributor's activities in this area, will also be considered as
a factor in the direction of portfolio transactions to brokers, but only in
conformity with the price, execution, and other considerations and practices
discussed above. The Agreement expressly anticipates that Opco will act as the
Fund's regular broker and may be a major recipient of its brokerage commissions,
but only if the commissions paid to Opco are calculated in accordance with
procedures adopted by the Fund's Board under any applicable SEC Rule
("Procedures"). The Procedures incorporate the standard contained in Rule 17e- 1
adopted by the SEC under the 1940 Act that the commissions paid must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
Pursuant to the Procedures, the brokerage rate paid by the Fund to Opco,
determined on a quarterly basis, is the lesser of the median of the average
commission rates paid to Opco by unaffiliated mutual fund complexes, and the
average commission rate paid by Oppenheimer Capital to brokers other than Opco.
Rule 17e-1 and the Procedures also contain review requirements and require the
Advisor to furnish reports and to maintain records in connection with reviews.
Under a separate SEC Rule, Opco may be paid for effecting and executing the
Fund's portfolio transactions on an exchange of which it is a member.
15
<PAGE>
The following table presents information as to the allocation of brokerage
commissions paid by the Fund for the period from November 8, 1994 (commencement
of operations) to April 30, 1995:
<TABLE>
<CAPTION>
Total Amount of Transactions Where
Brokerage Commissions Paid to Opco Brokerage Commissions Paid to Opco
Total Brokerage
Commissions Paid Dollar Amount % Dollar Amount %
<S> <C> <C> <C> <C>
$8,197 $3,388 41% $1,664,388 44%
</TABLE>
During the period November 8, 1994 (commencement of operations) to
April 30, 1994 the Fund directed brokerage transactions because of research
services provided. The amount of such transactions was $57,195 and the related
commissions were $194.
DESCRIPTION OF BROKERAGE PRACTICES
Subject to the provisions of the Agreement, Procedures, and Rules
described above, allocation of brokerage is made by the portfolio manager of the
Fund. Allocation of brokerage business or principal business is not made to
provide any reciprocal benefits to either Opco or the Advisor. Principal
transactions are generally done with principals or market makers. The Fund will
not purchase any securities from or sell any securities to Opco acting as
principal for its own account. Brokerage commissions are paid primarily for
effecting transactions in listed securities and otherwise only if it appears
likely that a better price or execution can be obtained. Brokers other than Opco
are chosen, except as stated above, for their execution and research services on
which no dollar value can be placed. There is no formula under which any of them
are entitled to the allocation of a particular amount of commissions. The
research information received for the Fund's commissions from particular brokers
may be useful only to one or more of the other accounts of the Advisor and
research information received for the commissions of these other accounts may be
useful both to the Fund and one or more of such other accounts. Such information
may be received in written form or through direct contact with individuals and
includes information on particular companies 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 the Fund's portfolio.
The Trust's Board, including the Disinterested Trustees, reviews the commissions
paid to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonable related to the value or benefit of
such services.
EXECUTION OF TRANSACTIONS
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 advisor 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
16
<PAGE>
responsible for managing the portfolios of each Fund and other clients accounts.
When orders to purchase or sell the same security on identical terms are placed
by more than one of the funds and/or other advisory accounts managed by the
Advisor or its affiliates, the transactions are generally executed as received,
although a fund or advisory account that does not direct trades to a specific
broker ("free trades") usually will have its order executed first. Purchases are
combined where possible for the purpose of negotiating brokerage commissions,
which in some cases might have a detrimental effect on the price or volume of
the security in a particular transaction as far as the Fund is concerned. Orders
placed by accounts that direct trades to a specific broker will generally be
executed after the free trades. All orders placed on behalf of the Fund are
considered free trades. However, having an order placed first in the market does
not necessarily guarantee the most favorable price.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the 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 the Fund's net assets by the total 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. Although the legal rights of Class A, B and C shares
are identical, the different expenses borne by each class may result in
differing net asset values and dividends for each class.
Securities listed on a national securities exchange or designated as
national market system securities are valued at the last reported sale price on
that day or, if there has been no sale on such day or on the previous day on
which the Exchange was open (if a week has not elapsed between such days), then
the value of such security is taken to be the reported bid price at the time of
which the value is being ascertained. Securities actively traded in the
over-the-counter market but not designated as national market system securities
are valued at the last quoted bid price. Any securities or other assets for
which current market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
general supervision and responsibility of the Fund's Board of Trustees. Debt
securities having remaining maturities in excess of sixty days when purchased
and debt securities originally purchased with maturities in excess of sixty days
but which currently have maturities of sixty days or less are valued at cost
adjusted for amortization of premiums and accretion of discounts. Accumulated
unrealized appreciation or depreciation on the sixty-first day, if any, is
amortized to maturity.
Concerning the valuation of an open short sale against-the-box, the
Fund would value securities covering such a sale at the market price thereof and
offset such value by the short position.
Investors should be aware that because of the difference between the
bid and asked prices of the over-the-counter securities which the Fund may
invest in, there may be an immediate reduction in the net asset value of the
shares of the Fund after the Fund has completed a purchase of such securities.
17
<PAGE>
TOTAL RETURN AND TAX INFORMATION
TOTAL RETURN CALCULATION. Total returns quoted in advertising reflect all
aspects of the Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in the 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 the 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 result in 100% growth on a compounded basis in ten
years.
Total return information may be useful to investors in reviewing the
Fund's performance. However, certain factors should be considered before using
this information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. The total return for any
given past period is not an indication or representation by the Fund of future
rates of return on its shares. When comparing the Fund's total return with that
of other alternatives, investors should understand that as the Fund is an equity
fund seeking capital appreciation, its shares are subject to greater market
risks than shares of funds having other investment objectives and that the Fund
is designed for investors who are willing to accept greater risk of loss in the
hope of realizing greater gains.
Average annual total return is calculated according to the following formula:
n
P (1+t) = ERV
Where: P = a hypothetical initial investment of $1,000
t = average annual total return
n = number of years
ERV = ending redeemable value of P at the end of each period.
In addition to average annual returns, each class of shares of the
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 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 the Fund's
sales charge into account. Excluding the Fund's sales charge from a total return
calculation produces a higher total return figure.
The aggregate total return on an investment made in shares of the Fund
for the period November 8, 1994 (commencement of operations) to April 30, 1995
was 11:00%. The annualization of interim performance may have a tendency to
distort performance as it imputs a level of continuous performance which may
have a positive or negative effect. Accordingly, only inception to date
aggregate total return for the Fund is being shown. The total return for the
period November 8, 1994 (commencement of operations) to April 30, 1995 reflects
the waiver of management fees and the assumption of all expenses by the Advisor.
Without such waivers and expense assumptions, the total return for the Fund
would have been lower.
18
<PAGE>
From time to time the Fund may refer in advertisements to rankings and
performance statistics published by (1) recognized mutual fund performance
rating services including but not limited to Lipper Analytical Services, Inc.
and Morningstar, Inc.; (2) recognized indexes including but not limited to the
Standard & Poor's Composite Stock Price Index, Standard & Poor's 400 Mid-Cap
Index, Consumer Price Index and Dow Jones Industrial Average; and (3) Money
Magazine and other financial publications including magazines, newspapers and
newsletters. Performance statistics may include total returns, measures of
volatility, standard deviation or other methods of performance based on the
method used by the publishers of the information. Advertising materials for the
Fund may also compare the Fund's total return to money market fund yields and
rates on certificates of deposit, 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 Fund 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.
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 Fund's performance also may be compared to
other mutual funds tracked by financial or business publications and
periodicals. For example, the Fund 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.
Quest for Value Distributors 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.
Quest for Value Distributors 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 Fund. The
Fund may also compare performance to that of other compilations or indices that
may be developed and made available in the future.
In advertising materials, Quest for Value Distributors 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, Quest for Value Distributors may quote financial or business
publications and periodicals, including
19
<PAGE>
model portfolios or allocations, as they relate to fund management, investment
philosophy, and investment techniques. Quest for Value Distributors may also
reprint, and use as advertising and sales literature, articles from re:Quest, a
quarterly newsletter provided free of charge to Quest fund shareholders.
The Fund may present its fund number, Quotron number, CUSIP number,
and discuss or quote their current portfolio manager.
Volatility. The Fund may quote various measures of volatility and
benchmark correlation in advertising. In addition, the Fund 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.
Momentum Indicators indicate the Fund's price movements over specific
periods of time. Each point on the momentum indicator represents the Fund's
percentage change in price movements over that period.
The Fund 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.
The Fund may be available for purchase through retirement plans or
other programs offering deferral of or exemption from income taxes, which may
produce superior after-tax returns over time. For example, a $1,000 investment
earning a taxable return of 10% annually would have an after-tax value of $1,949
after ten years, assuming tax was deducted from the return each year at a 28%
rate. An equivalent tax-deferred investment would have an after-tax value of
$2,100 after ten years, assuming tax was deducted at a 31% rate from the
tax-deferred earnings at the end of the ten-year period.
TAX STATUS OF THE FUND'S DIVIDENDS AND DISBURSEMENTS. The Federal tax treatment
of the Fund's dividends and distributions is explained in the Prospectus under
the caption "Tax Status." The Code provides for a 70% dividends-received
deduction (the "deduction") by corporations. Special provisions are contained in
the Code as to the eligibility of payments to shareholders made by mutual funds
for the deduction. Long-term capital gains distributions are not eligible for
the deduction. In addition, the amount of dividends paid by the Fund which may
qualify for the deduction is limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments which the Fund
has held for a minimum period, usually 46 days. It should also be noted that a
shareholder will not be eligible for the deduction on dividends received with
respect to shares which are held by the shareholder for 45 days or less. The
Fund will be subject to a nondeductible 4% excise tax to the extent that it
fails to distribute by the end of any calendar year substantially all its
ordinary income for that year and capital gain net income for the one year
period ending on October 31 of that year.
20
<PAGE>
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 the 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 the 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 of each class are fully paid and have no
preemptive, conversion or other subscription rights. Each class of shares
represents identical interests in the Fund's investment portfolio. As such, they
have the same rights, privileges and preferences, except with respect to: (a)
the designation of each class, (b) the effect of the respective sales charges,
if any, for each class, (c) the distribution fees borne by each class, (d) the
expenses allocable exclusively to each class, (e) voting rights on matters
exclusively affecting a single class and (f) the exchange privilege of each
class. Upon liquidation of the Trust or the Fund, shareholders of each class of
shares of the Fund are entitled to share pro rata in the net assets of that
class 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 the Fund and
all income, earnings, profits and proceeds thereof, subject only to the rights
of creditors, are allocated to the Fund, and constitute the assets of the Fund.
The assets of the Fund are required to be segregated on the Trust's books of
account. Expenses not otherwise identified with a particular Fund will be
allocated fairly among two or more Funds by the Board of Trustees. 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.
The Fund may in the future seek to achieve its investment objective by
investing all of its investable assets in a no-load diversified open-end
management investment company with the same portfolio manager, investment
objective and investment restrictions. Such investment would only be made if the
Trustees feel that the aggregate per share expenses of the Fund and such other
investment company would be less than or approximately equal to the expenses
which the Fund would incur if the Fund were to continue its present investment
policies. It is expected that such an investment in another investment company
will have no preference, preemptive, conversion or similar rights, and will be
fully-paid and non-assessable. It is expected that the investment company will
not be required to hold
21
<PAGE>
annual meetings, but will hold special meetings of shareholders when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
shareholder vote.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Funds are created
by the Board of Trustees, shares of each such Fund will be entitled to vote as a
group only to the extent permitted by the 1940 Act (see below) or as permitted
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 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.
INDEPENDENT AUDITORS. KPMG Peat Marwick LLP, 345 Park Avenue, New York, New
York, are the independent auditors of the Fund. Their services include auditing
the financial statements of the Fund as well as other related services.
CUSTODIAN. State Street Bank and Trust Company acts as custodian of the assets,
transfer agent, and shareholder servicing agent for the Fund.
DISTRIBUTION OPTIONS. Shareholders may change their distribution options by
giving the Transfer Agent three days prior notice in writing.
SHAREHOLDER SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (1-800- 346-4601) is the shareholder servicing agent for former
shareholders of the AMA Family of Funds and clients of AMA Investment Advisers,
Inc. (which acted as the investment advisor to the AMA Family of Funds) who
acquire shares of any Quest Fund, and 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 Manager brokerage account,
and other accounts for which Unified Management Corporation is the dealer of
record.
OTHER. Oppenheimer Capital, the parent of Quest for Value Advisors and a leading
institutional investment manager with over $33 billion in assets under
management, has been an investment advisor to the American Medical Association's
pension fund since the 1960's.
RETIREMENT PLANS. Quest for Value Distributors may print advertisements and
brochures concerning retirement plans, lump sum distributions, and 401-k plans.
These materials may include descriptions of tax rules, strategies for reducing
risk, and descriptions of the 401-k program offered by Quest for Value
Distributors. From time to time, hypothetical investment programs illustrating
various tax-deferred investment strategies will be used in brochures, sales
literature, and omitting prospectuses. The following example illustrates the
general approaches that will be followed. These hypotheticals will be modified
with different investment amounts, reflecting the amounts that can be invested
in
22
<PAGE>
different types of retirement programs, different assumed tax rates, and assumed
rates of return. They should not be viewed as indicative of past or future
performance of any Quest for Value product.
23
<PAGE>
EXAMPLES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Benefits of Long Term Tax-Free Compounding - Benefits of Long Term Tax-Free Compounding -
Single Sum Periodic Investment
- -------------------------------------------------------------------------------------------------------------------
Amount of Contribution: $100,000 Amount Invested Annually: $2000
- -------------------------------------------------------------------------------------------------------------------
Rates of Return Rates of Return
-------------------------------------------- -------------------------------------
Years Years
-------------------------------------------- -------------------------------------
8.00% 10.00% 12.00% 8.00% 10.00% 12.00%
-------------------------------------------- -------------------------------------
Value at end Value at End
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
5 $146,933 $161,051 $176,234 5 $ 12,672 $ 13,431 $ 14,230
- --------------------------------------------------------------------------------------------------------------------
10 $215,892 $259,374 $310,585 10 $ 31,291 $ 35,062 $ 39,309
- --------------------------------------------------------------------------------------------------------------------
15 $317,217 $417,725 $547,357 15 $ 58,649 $ 69,899 $ 83,507
- --------------------------------------------------------------------------------------------------------------------
20 $466,096 $672,750 $964,629 20 $ 98,846 $126,005 $161,397
- --------------------------------------------------------------------------------------------------------------------
25 $684,848 $1,083,471 $1,700,006 25 $157,909 $216,364 $298,668
- --------------------------------------------------------------------------------------------------------------------
30 $1,006,266 $1,744,940 $2,995,992 30 $244,692 $361,887 $540,585
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Comparison of Taxable and Tax-Free Investing -- Periodic Investments
(Assumed Tax Rate : 28%)
- ----------------------------------------------------------------------------------------------------------
Amount of Annual Contribution (Pre-Tax): $2,000 Annual Contribution (After Tax): $1,440
- ----------------------------------------------------------------------------------------------------------
Tax Deferred Rates of Return Fully Taxed Rates of Return
------------------------------------ ------------------------------------
Years Years
8.00% 10.00% 12.00% 5.76% 7.20% 8.64%
------------------------------------ ------------------------------------
Value at end Value at End
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
5 $ 12,672 $ 13,431 $ 14,230 5 $ 8,544 $ 8,913 $ 9,296
- ----------------------------------------------------------------------------------------------------------
10 $ 31,291 $ 35,062 $ 39,309 10 $ 19,849 $ 21,531 $ 23,364
- ----------------------------------------------------------------------------------------------------------
15 $ 58,649 $ 69,899 $ 83,507 15 $ 34,807 $ 39,394 $ 44,654
- ----------------------------------------------------------------------------------------------------------
20 $ 98,846 $126,005 $161,397 20 $ 54,598 $ 64,683 $ 76,874
- ----------------------------------------------------------------------------------------------------------
25 $157,909 $216,364 $298,668 25 $ 80,785 $100,485 $125,635
- ----------------------------------------------------------------------------------------------------------
30 $244,692 $361,887 $540,585 30 $115,435 $151,171 $199,429
- ----------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
Comparison of Tax Deferred Investing
-- Deducting Taxes at End
(Assumed Tax Rate at End: 28%)
------------------------------------------------------
Amount of Annual Contribution: $2,000
------------------------------------------------------
Tax Deferred Rates of Return
------------------------------------------
Years
8.00% 10.00% 12.00%
------------------------------------------
Value at End
<S> <C> <C> <C>
------------------------------------------------------
5 $ 11,924 $ 12,470 $ 13,046
------------------------------------------------------
10 $ 28,130 $ 30,485 $ 33,903
------------------------------------------------------
15 $ 50,627 $ 58,728 $ 68,525
------------------------------------------------------
20 $ 82,369 $101,924 $127,406
------------------------------------------------------
25 $127,694 $169,782 $229,041
------------------------------------------------------
30 $192,978 $277,359 $406,021
------------------------------------------------------
</TABLE>
25
<PAGE>
APPENDIX A -- RATINGS
DESCRIPTION OF MOODY'S CORPORATE RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." 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. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best 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 possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to 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.
Ba. Bonds which are rated Ba are judges to have speculative elements and
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack the characteristics of a
desirable investment. Assurance of interest and principal payments or of other
terms of the contract over long periods may be small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be elements of danger present with respect to principal or
interest.
Ca. 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.
C. 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.
A-1
<PAGE>
DESCRIPTION OF S&P'S CORPORATE 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.
A. Debt rated A has a strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
BBB. Debt rated BBB is regarded as having adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category.
BB. Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B. Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest and principal payments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating
CCC. Debt rated CCC has a current identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payments 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. The CCC rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied CCC rating.
CC. The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C. The rating C is typically applied to debt subordinated to senior debt
that 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.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is 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 such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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.
A-3
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
SEMI-ANNUAL REPORT (UNAUDITED)
APRIL 30, 1995
B-1
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)
APRIL 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY-11.4%
$340,000 Federal Farm Credit Bank
5.86%, 5/03/95
(cost--$339,890)............................................ $339,890
------------
SHORT-TERM CORPORATE NOTE-11.3%
MISCELLANEOUS FINANCIAL SERVICES
$340,000 Federal National Mortgage Association
5.86%, 5/09/95
(cost--$339,557)............................................ $339,557
------------
SHARES COMMON STOCKS-75.8%
------------
AEROSPACE-5.1%
8,300 Coltec Industries, Inc.* ....................................... $151,475
------------
CASINOS/GAMING-5.0%
3,900 Promus Companies, Inc.* ........................................ 150,150
------------
CONTAINERS-4.6%
3,200 Sealed Air Corp.* .............................................. 136,800
------------
DRUGS & MEDICAL PRODUCTS-3.3%
5,000 Alza Corp.* .................................................... 97,500
------------
ENTERTAINMENT-5.0%
3,700 King World Productions, Inc.* .................................. 148,925
------------
HEALTHCARE SERVICES-4.5%
3,200 Columbia/HCA Healthcare Corp. .................................. 134,400
------------
INSURANCE-22.9%
6,000 EXEL Ltd. ...................................................... 273,000
5,000 Mid Ocean Ltd.* ................................................ 143,125
7,100 Progressive Corp., Ohio ........................................ 268,025
------------
684,150
------------
MISCELLANEOUS FINANCIAL SERVICES-11.2%
9,000 Countrywide Credit Industries, Inc. ............................ 165,375
9,500 North American Mortgage Co. .................................... 171,000
------------
336,375
------------
OIL/GAS-5.3%
4,100 Triton Energy Corp.* ........................................... 157,850
------------
TOBACCO/BEVERAGES/FOOD PRODUCTS-4.2%
4,500 UST, Inc. ...................................................... 126,562
------------
TOYS/GAMES/HOBBY-4.7%
4,400 Hasbro, Inc. ................................................... 139,700
------------
Total Common Stocks
(cost--$2,044,358).......................................... $2,263,887
------------
Total Investments
(cost--$2,723,805)........................................ 98.5% $2,943,334
Other Assets in Excess of
Other Liabilities.......................................... 1.5 45,175
--------- ------------
TOTAL NET ASSETS.............................................. 100.0% $2,988,509
--------- ------------
--------- ------------
<FN>
*Non-income producing security.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
B-2
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 1995
ASSETS
<TABLE>
<S> <C> <C>
Investments, at value (cost--$2,723,805).................... $2,943,334
Cash........................................................ 20,727
Receivable for shares of beneficial interest sold........... 37,520
Receivable from adviser..................................... 12,606
Deferred organization expenses.............................. 6,850
Dividends receivable........................................ 2,241
Prepaid expenses............................................ 684
----------
Total Assets.............................................. $3,023,962
LIABILITIES
Payable for shares of beneficial interest redeemed.......... 16,869
Deferred organization expenses payable...................... 7,572
Other payables and accrued expenses......................... 11,012
----------
Total Liabilities......................................... 35,453
----------
NET ASSETS
Shares of beneficial interest at par........................ 2,703
Paid-in-surplus............................................. 2,718,398
Accumulated undistributed net investment income............. 15,542
Accumulated undistributed net realized gain on investments.. 32,337
Net unrealized appreciation on investments.................. 219,529
----------
Total Net Assets.......................................... $2,988,509
----------
----------
Shares of beneficial interest outstanding (unlimited
authorized, $.01 par value per share)................. 270,289
----------
Net asset value per share............................... $11.06
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-3
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................ $ 12,086
Dividends............................................... 10,922
--------
Total investment income............................... $23,008
EXPENSES:
Investment advisory fee (note 2a)....................... $ 10,942
Auditing, consulting and tax return preparation fees.... 4,131
Custodian fees.......................................... 3,000
Transfer and dividend disbursing agent fees............. 1,378
Reports and notices to shareholders..................... 972
Registration fees....................................... 952
Legal fees.............................................. 729
Amortization of deferred organization expenses (note 1c) 722
Miscellaneous........................................... 723
--------
Total operating expenses.............................. 23,549
Less: Investment advisory fees waived and
expense reimbursements (note 2a)..................... (23,549)
--------
Net operating expenses.............................. 0
--------
Net investment income............................... 23,008
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS - NET:
Net realized gain on investments......................... $ 32,337
Net unrealized appreciation on investments............... 219,529
--------
Net realized gain and net unrealized appreciation
on investments.......................................... 251,866
--------
Net increase in net assets resulting from operations..... $274,874
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-4
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C>
OPERATIONS
Net investment income............................................. $23,008
Net realized gain on investments.................................. 32,337
Net unrealized appreciation on investments........................ 219,529
----------
Net increase in net assets resulting from operations............ 274,874
----------
DIVIDENDS TO SHAREHOLDERS OF BENEFICIAL INTEREST
Net investment income ($.037 per share)........................... (7,466)
----------
SHARE TRANSACTIONS OF BENEFICIAL INTEREST
Net proceeds from sales........................................... 2,928,833
Reinvestment of dividends......................................... 7,226
Cost of shares redeemed........................................... (214,958)
----------
Net increase in net assets from share transactions of
beneficial interest.......................................... 2,721,101
----------
Total increase in net assets................................... 2,988,509
NET ASSETS:
Beginning of period.............................................. 0
----------
End of period (including undistributed net investment income
of $15,542).................................................. $2,988,509
----------
----------
SHARES OF BENEFICIAL INTEREST ISSUED AND REDEEMED
Issued............................................................ 289,659
Issued from reinvestment of dividends............................. 713
Redeemed.......................................................... (20,083)
----------
Net increase.................................................... 270,289
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
B-5
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Quest for Value Officers Fund (the "Fund") is one of nine portfolios
currently in the Quest for Value Family of Funds, a Massachusetts business
trust. The Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended, and commenced
operations on November 8, 1994. Quest for Value Advisors (the "Adviser")
serves as the Fund's investment adviser and provides accounting and
administrative services to the Fund. Quest for Value Distributors (the
"Distributor") serves as the Fund's distributor. Both the Advisor and
Distributor are majority-owned (99%) subsidiaries of Oppenheimer Capital.
The Fund is authorized to issue three separate classes of shares; Class
A, Class B and Class C shares. Initially, only shares of Class A will be
offered to officers, directors (trustees) and employees of Oppenheimer
Capital and its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan for any of them. Shares of each Class
represent an identical interest in the investment portfolio of the Fund, and
generally have the same rights, but are offered under different sales charge
and distribution fee arrangements. Furthermore, Class B shares will
automatically convert to Class A shares of the same fund eight years after
their respective purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements:
(a) VALUATION OF INVESTMENTS
Investment securities listed on a national securities exchange and
securities traded in the over-the-counter National Market System are valued
at the last reported sale price on the valuation date; if there are no such
reported sales, the securities are valued at their last quoted bid price.
Other securities traded over-the-counter and not part of the National Market
System are valued at the last quoted bid price. 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 securities or
other assets for which market quotations are not readily available are valued
at their fair value as determined in good faith under procedures established
by the Board of Trustees.
(b) FEDERAL INCOME TAXES
It is the 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 income to its shareholders; accordingly,
no Federal income tax provision is required.
(c) DEFERRED ORGANIZATION EXPENSES
Costs incurred by the Fund in connection with its organization
approximated $7,600. These costs have been deferred and are being
amortized to expense on a straight line basis over sixty months from
commencement of operations.
(d) SECURITIES 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 has
been determined on the basis of identified cost. Dividend income is
recorded on the ex-dividend date and interest income is accrued as earned.
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
It is the Fund's policy to declare and pay dividends from net investment
income and to make distributions from net realized capital gains annually.
The Fund records dividends and distributions to its shareholders on the
ex-dividend date.
(2) INVESTMENT ADVISORY FEE, DISTRIBUTION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
(a) The investment advisory fee is payable monthly to the Adviser and is
computed as percentage of the Fund's net assets as of the close of business
each day at an annual rate of 1.00%.
For the period November 8, 1994 (commencements of operations) to April 30,
1995, the Adviser has voluntarily waived its investment advisory fee of
$10,942 and reimbursed the Fund for all other operating expenses of $12,607.
B-6
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
APRIL 30, 1995
(b) The Fund has adopted a Plan and Agreement of Distribution (the "Plan")
pursuant to which the Fund is permitted to compensate the Distributor in
connection with the distribution of shares of beneficial interest. Under
the Plan, the Distributor may enter into agreements with securities 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 under the Plan
provide and for the expenses they bear under the Plan, the Fund pays the
Distributor compensation accrued daily and payable monthly at an annual rate
of .25% of average daily net assets for Class A. Class A also pays a
service fee at an annual rate of .25%. Compensation for Class B and Class
C shares of the Fund is at an annual rate of .75% of average daily net
assets. The Fund's Class B and Class C shares also pay a service fee at an
annual rate of .25%. Distribution and service fees 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 incurred by the Distributor.
For the period November 8, 1994 (commencement of operations) to April 30,
1995, the Distributor has waived any and all distribution-related expenses
without compensation from the Fund.
(c) Total brokerage commissions paid by the Fund amounted to $8,197 of
which $3,388 was paid to Oppenheimer & Co., Inc., an affiliate of the
Adviser.
(3) PURCHASES AND SALES OF SECURITIES
For the period November 8, 1994 (commencement of operations) to April 30,
1995, purchases and sales of investment securities, other than short-term
securities, aggregated $3,128,430 and $1,116,416, respectively.
(4) UNREALIZED APPRECIATION (DEPRECIATION) AND COST OF INVESTMENTS FOR FEDERAL
INCOME TAX PURPOSES
At April 30, 1995, the cost of investments for Federal income tax purposes
was the same as the cost of investments for financial statement purposes.
Aggregate gross unrealized appreciation (all investments in which there is
an excess of value over tax cost) amounted to $250,264 and aggegrate gross
unrealized depreciation (all investments in which there is an excess of tax
cost over value) amounted to $30,735, resulting in net unrealized
appreciation of $219,529.
B-7
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
NOVEMBER 8, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net Asset Value, beginning of period....................................... $10.00 (1)
-----------
Net investment income...................................................... 0.10
Net realized and unrealized gain on investments............................ 1.00
-----------
Total from investment operations........................................ 1.10
Dividends to shareholders from net investment income....................... (0.04)
-----------
Net Asset Value, end of period............................................. $11.06
-----------
-----------
Total investment return*................................................... 11.00%
-----------
Net assets, end of period.................................................. $2,988,509
-----------
Ratio of net operating expenses to average net assets...................... 0.00%(2,3,4)
-----------
Ratio of net investment income to average net assets....................... 2.10%(2,3,4)
-----------
Portfolio turnover rate.................................................... 60%
-----------
<FN>
- -------------------------------------------------------------------------------
(1) Offering price.
(2) During the period presented above, the Adviser has voluntarily waived
all of its fees and reimbursed the Fund for all of its operating
expenses. If such waivers and reimbursements had not been in effect, the
annualized ratio of net operating expenses to average daily net
assets and the annualized ratio of net investment income to average
daily net assets would have been 2.15% and (.05%), respectively.
(3) Average net assets for the period November 8, 1994 (commencement of
operations) to April 30, 1995 were $2,295,379.
(4) Annualized.
* Assumes reinvestment of all dividends. Aggregate (not annualized) total
return is shown.
</TABLE>
B-8
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS:
Included in the Prospectus:
Financial Highlights
Included in Part B:
GROWTH AND INCOME, INVESTMENT QUALITY INCOME, U.S. GOVERNMENT
INCOME, SMALL CAPITALIZATION AND OPPORTUNITY FUNDS:
AUDITED FINANCIALS: Schedule of Investments, Statement of Assets
and Liabilities, Statement of Operations, Statement of Changes in
Net Assets for the two fiscal years ended October 31, 1994, Notes
to Financial Statements, Financial Highlights, and Report of
Independent Accountants for the fiscal year ended October 31,
1994.
NATIONAL TAX-EXEMPT, CALIFORNIA TAX-EXEMPT AND NEW YORK TAX-
EXEMPT FUNDS:
AUDITED FINANCIALS: Schedule of Investments, Statement of Assets
and Liabilities, Statement of Operations, Statement of Changes in
Net Assets for the two fiscal years ended July 31, 1994, Notes
to Financial Statements, Financial Highlights and Report of
Independent Accountants for the fiscal year ended July 31, 1994.
OFFICERS FUND:
UNAUDITED FINANCIALS: Schedule of Investments, Statement of
Assets and Liabilities, Statement of Changes in Net Assets, Notes
to Financial Statements and Financial Highlights for the period
November 8, 1994 (commencement of operations) to April 30, 1995.
Included in Part C:
None
EXHIBITS:
(1) Declaration of Trust, Amendment No. 3.
(2) By-laws of Registrant.
C-1
<PAGE>
(3) Not Applicable.
(4) Not Applicable.
(5) Investment Advisory Agreement; incorporated by reference to the
Registration Statement on Form N-14 filed on July 19, 1991 (File
No. 33-41818).
(6) (a) Distribution Agreement; previously filed with Post-Effective
Amendment No. 24.
(b) Dealer Agreement; previously filed as Exhibit 6(b) to Post-
Effective Amendment No. 10.
(c) Underwriting Agreement; previously filed as Exhibit 6(a)(c)
to Pre-Effective Amendment No. 3.
(7) Not Applicable.
(8) Custody Agreement; previously filed as Exhibit 8 to
Post-Effective Amendment No. 6.
(9) Not Applicable.
(10) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid and non-assessable.
(11) Consent of Independent Accountants.
(12) Not Applicable.
(13) Agreement relating to initial capital.
(14) Model Retirement Plans; previously filed as Exhibit 14 to Post-
Effective Amendment No. 10.
(15) (a) Plan and Agreement of Distribution Pursuant to Rule 12b-1
with respect to Class A shares - previously filed with Post-
effective Amendment No. 24.
(b)(1) Amended and Restated Distribution Agreement in respect of
Class B shares dated as of December 23, 1994 - previously filed
with Post-effective Amendment No. 32.
(b)(2) Amended and Restated Distribution Plan in respect of
Class B shares dated as of December 23, 1995 - previously filed
with Post-effective Amendment No. 32.
(c) Plan and Agreement of Distribution Pursuant to Rule 12b-1
with respect to Class C shares - previously filed with Post-
effective Amendment No. 32.
C-2
<PAGE>
(16) Performance Calculations.
C-3
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is presently controlled by or under common control with
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class June 1, 1995
-------------- ----
<S> <C>
SHARES OF BENEFICIAL INTEREST
Growth and Income Fund . . . . . . . . . . 1,363
Investment Quality Income Fund . . . . . . 2,393
Opportunity Fund . . . . . . . . . . . . .21,905
Small Capitalization Fund. . . . . . . . .10,761
U.S. Government Income Fund. . . . . . . . 4,074
National Tax-Exempt Fund . . . . . . . . . 1,683
California Tax-Exempt Fund . . . . . . . . . 466
New York Tax-Exempt Fund . . . . . . . . . . 906
Officers Fund. . . . . . . . . . . . . . . . 128
</TABLE>
Item 27. INDEMNIFICATION
See Registration Statement, Form N-1A, File No.
33-15489, July 1, 1987, Item No. 27, which is
incorporated herein by reference.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF
INVESTMENT ADVISER
See "Investment Management Agreement" in the
Prospectus and "Investment Management and
Other Services" in the Additional Statement
regarding the business of the investment
advisor. For information as to the business,
profession, vocation or employment of a
substantial nature of each of the officers and
directors of the investment adviser, reference
is made to "Trustees and Officers" in the
Additional Statement and investment adviser's
Form ADV filed under the Investment Advisers
Act of 1940, File No. 801-27180, Schedule D
and F, incorporated herein by reference.
C-4
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Quest for Value Distributors acts as
principal underwriter for the Registrant,
Quest for Value Dual Purpose Fund, Inc.,
Quest for Value Fund, Inc., Quest for
Value Global Equity Fund, Inc., Quest for
Value Global Funds, Inc., Quest Cash
Reserves, Inc., The Saratoga Advantage
Trust and Quest for Value Accumulation
Trust.
(b) Set forth below is certain information
pertaining to the partners and officers
of Quest for Value Distributors,
Registrant's Principal Underwriter; THE
PRINCIPAL BUSINESS ADDRESS OF EACH IS ONE
WORLD FINANCIAL CENTER, NEW YORK, NY,
10281:
<TABLE>
<CAPTION>
Positions and Positions and
Offices WITH Offices with
Name Underwriter Registrant
- --------------------------- ------------ -------------
<S> <C> <C>
Oppenheimer Capital General Partner None
Oppenheimer Financial Corp. General Partner None
Peter Muratore President None
Sheldon Siegel Treasurer Treasurer
Thomas E. Duggan Secretary Assistant Secretary
Arthur G. Carine Senior Vice President, None
Chief Operating Officer
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND REQUIRED
RECORDS -- RULE 31A-1
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Mass 01271
Will maintain records required by Rule
31a-1(b)(1), (b)(2), (b)(3), (b)(5),
(b)(6), (b)(7) and (b)(8).
Quest for Value Advisors
One World Financial Center
C-5
<PAGE>
New York, NY 10281
Will maintain records required by Rule
31a-1(b)(4), (b)(9), (b)(10) and
(b)(11).
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to
assist shareholder communication in
accordance with the provisions of
Section 16 of the Investment
Company Act of 1940 and to call a
meeting of shareholders for the
purpose of voting upon the question
of removal of a Trustee or Trustees
when requested in writing to do so
by the holders of at least 10% of
the Registrant's outstanding shares
of beneficial interest.
(b) Not applicable.
(c) Registrant hereby undertakes to
file a post-effective amendment
containing financial statements for
any series portfolio of Registrant,
which need not be certified, within
four to six months from the
effective date of the registration
statement with respect to such
portfolio under the Securities Act
of 1933.
(d) Registrant hereby undertakes to
furnish each person to whom a
prospectus is delivered a copy of
the Registrant's latest annual
report to shareholders upon request
and without charge, if the
information called for by Item 5A
of Form N-1A is contained in the
latest annual report to
shareholders.
C-6
<PAGE>
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 this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned thereto
duly authorized in the City of New York, and State of New York on the 23 day of
June, 1995.
QUEST FOR VALUE FAMILY OF FUNDS
Joseph M. La Motta
-----------------------------
Joseph M. La Motta, President
Attest:
Deborah Kaback
- -------------------------
Deborah Kaback, Secretary
Pursuant to the requirements of the Securities Act of 1933 this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
QUEST FOR VALUE FAMILY OF FUNDS
Date
Joseph M. La Motta June 23, 1995
- --------------------------------------------- -------------------------
Joseph M. La Motta, President, Trustee
Paul Y. Clinton June 23, 1995
- --------------------------------------------- -------------------------
Paul Y. Clinton, Trustee
Thomas W. Courtney June 23, 1995
- --------------------------------------------- -------------------------
Thomas W. Courtney, Trustee
Lacy B. Herrmann June 23, 1995
- --------------------------------------------- -------------------------
Lacy B. Herrmann, Trustee
George Loft June 23, 1995
- --------------------------------------------- -------------------------
George Loft, Trustee
Deborah Kaback June 23, 1995
- --------------------------------------------- -------------------------
Deborah Kaback, Secretary
Sheldon Siegel June 23, 1995
- --------------------------------------------- -------------------------
Sheldon Siegel, Treasurer
C-7
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
INDEX TO EXHIBITS
Exhibit No.
- -----------
(1) Declaration of Trust, Amendment No. 3.
(2) By-laws of Registrant.
(10) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will
when sold be legally issued, fully paid and non-assessable.
(11) Consent of Independent Accountants.
(13) Agreement Relating to initial capital
(16) Performance Calculations.
<PAGE>
AMENDMENT TO
DECLARATION OF TRUST
OF
QUEST FOR VALUE INVESTMENT TRUST
Thomas E. Duggan, Secretary of Quest For Value Investment Trust, hereby
certifies that the following Amendment was duly adopted by a majority vote of
Trustees at a Special Meeting of the Board of Trustees on October 19, 1988.
THE DECLARATION OF TRUST of QUEST FOR VALUE INVESTMENT TRUST (the "Trust"),
made on the 13th day of March, 1987 and finally executed on the 17th day of
April, 1987, as amended as of the 11th day of April, 1988 is hereby amended to
change the name of the Trust.
Section 1.1 of Article I of the Declaration of Trust is hereby amended by
deleting the words "Quest For Value Investment Trust" in the second line thereof
and substituting therefor the words "Quest For Value Family of Funds."
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the ___ day of October 1988.
------------------------------
Thomas E. Duggan, as Secretary
Address:
Oppenheimer Capital
200 Liberty Street
New York, NY 10281
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 19th day of October, 1988, before me personally appeared Thomas
E. Duggan, to me known to be the person described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
-----------------------------
Notary Public
(SEAL)
<PAGE>
DECLARATION OF TRUST
OF
QUEST FOR VALUE U.S. GOVERNMENT INCOME TRUST
THE DECLARATION OF TRUST of QUEST FOR VALUE U.S. GOVERNMENT INCOME TRUST is
made the 13th day of March, 1987 by the parties signatory hereto, as trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
1.1. NAME. The name of the trust created hereby (the "Trust") shall be
"Quest For Value U.S. Government Income Trust," and so far as may be practicable
the Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as trustees, and not individually,
and shall not refer to the officers, agents, employees or shareholders of the
Trust. However, should the Trustees determine that the use of such name is not
advisable, they may select such other name for the Trust as they deem proper and
the Trust may hold its property and conduct its activities under such other
name. Any name change shall become effective upon the execution by a majority
of the then Trustees of an instrument setting forth the new name. Any such
instrument shall have the status of an amendment to this Declaration.
1.2 DEFINITIONS. As used in this Declaration, the following terms shall
have the following meanings:
The terms "AFFILIATED PERSON," "ASSIGNMENT," "COMMISSION," "INTERESTED
PERSON" and "PRINCIPAL UNDERWRITER" shall have the meanings given them in the
1940 Act, as amended from time to time.
"DECLARATION" shall mean this Declaration of Trust as amended from time to
time. References in this Declaration to "DECLARATION," "HEREOF," "HEREIN" and
"HEREUNDER" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"FUNDAMENTAL POLICIES" shall mean the investment objectives, policies and
restrictions set forth in the Prospectus or Statement of Additional Information
of the Trust and designated therein as policies or restrictions which may be
changed only upon a vote of Shareholders of the Trust.
"MAJORITY SHAREHOLDER VOTE" means the vote of the holders of: (i) a
majority of Shares represented in person or by proxy and entitled to vote at a
meeting of Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present and (ii) a majority of Shares issued and outstanding and
entitled to vote when action is taken by written consent of Shareholders. For
these purposes, however, the term "majority" shall mean a "majority of the
outstanding voting securities," as the phrase is defined in the 1940 Act, when
any action is required by the 1940 Act by such majority as so defined.
"PERSON" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"PROSPECTUS" and "STATEMENT OF ADDITIONAL INFORMATION" shall mean the
currently effective Prospectus and Statement of Additional Information of the
Trust under the Securities Act of 1993, as amended.
"SERIES" means one of the separately managed components of the Trust as set
forth in Section 6.1 hereof or as may be established and designated from time to
time by the Trustees pursuant to that section.
"SHARES" shall mean the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole shares.
<PAGE>
"SHAREHOLDERS" shall mean as of any particular time all holders of record
of outstanding Shares at such time.
"TRUSTEES" shall mean the signatories to this Declaration of Trust, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or appointed
and have qualified as trustees in accordance with the provisions hereof and are
then in office, and reference in this Declaration of Trust to a Trustee or
Trustees shall refer to such person or persons in their capacity as trustees
hereunder.
"TRUST PROPERTY" shall mean as of any particular time any and all property,
real or personal, tangible or intangible, which at such time is owned or held by
or for the account of the Trust or the Trustees.
The "1940 ACT" refers to the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder, as amended from time to time.
<PAGE>
ARTICLE II
TRUSTEES
2.1 NUMBER OF TRUSTEES. The number of Trustees shall be such number as
shall be fixed from time to time by a written instrument signed by a majority of
the Trustees, provided, however, that the number of Trustees shall in no event
be less than three nor more than seven.
2.2 ELECTION, TERM. Each Trustee named herein, or elected or appointed
hereafter, shall (except in the event of resignation, removal or vacancy) hold
office until a successor has been elected or appointed and has qualified to
serve as Trustee. Trustees shall have terms of unlimited duration, subject to
the resignation and removal provisions of Section 2.3 hereof. Except as herein
provided and subject to Section 16(a) of the 1940 Act, Trustees need not be
elected by Shareholders, and the Trustees may elect and appoint their own
successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees may adopt By-Laws not inconsistent with this
Declaration or any provision of law to provide for election of Trustees by
Shareholders at such time or times as the Trustees shall determine to be
necessary or advisable. Except for the Trustees named herein, an individual may
not commence to serve as Trustee except if appointed pursuant to a written
instrument signed by a majority of the Trustees then in office or unless elected
by Shareholders, and any such election or appointment shall not become effective
until the individual appointed or elected shall have accepted such election or
appointment and agreed in writing to be bound by the terms of this Declaration
of Trust. A Trustee shall be an individual at least 21 years of age who is not
under a legal disability.
2.3 RESIGNATION AND REMOVAL. Any Trustee may resign his trust (without
need for prior or subsequent accounting) by an instrument in writing signed by
him and delivered to the other Trustees and such resignation shall be effective
upon such delivery, or at a later date according to the terms of the instrument.
Any of the Trustees may be removed (provided the aggregate number of Trustees
after such removal shall not be less than the number required by Section 2.1
hereof) with cause, by action of two-thirds of the remaining Trustees or by the
action of the Shareholders of record of not less than two-thirds of the Shares
outstanding. For purposes of determining the circumstances and procedures under
which such removal by the Shareholders may take place, the provisions of Section
16(c) of the 1940 Act shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
2.4 VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of a vacancy caused by reason
of an increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by the
appointment of such other person as they, in their discretion, shall see fit. An
appointment of a Trustee may be made in anticipation of a vacancy to occur
<PAGE>
at a later date by reason of retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of such
vacancy.
2.5 MEETINGS. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary or any two
Trustees of the Trust. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be mailed or otherwise given not
less than 48 hours before the meeting but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. The Trustees may act with or without a meeting. A quorum
for all meetings of the Trustees shall be a majority of the Trustees. Unless
provided otherwise in this Declaration of Trust or by applicable law, any action
of the Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consents of all
of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof or otherwise interested in any action to be taken may be counted for
quorum purposes under this Section and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications systems shall constitute presence in person at such meeting.
2.6. OFFICERS. The Trustees shall annually elect a President, a Secretary
and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or
authorize the Chairman, if any, or President to appoint such other officers or
agents with such power as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may, but need not, be a
Trustee.
2.7. BY-LAWS. The Trustees may adopt and from time to time amend or
repeal the By-Laws for the conduct of the business of the Trust.
2.8. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees; provided that in no case shall less
<PAGE>
than two Trustees personally exercise the powers granted to the Trustees under
the Declaration except as herein otherwise expressly provided.
<PAGE>
ARTICLE III
POWERS OF TRUSTEES
3.1. GENERAL. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid power.
Such powers of the Trustees may be exercised without order of or resort to any
court.
3.2. INVESTMENTS. The Trustees shall have power, subject to the
Fundamental Policies, to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of securities and other investments and
assets of whatever kind, or retain Trust assets in cash and from time
to time change the investments of the assets of the Trust, and
exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all such investments and assets of
every kind and description, including, without limitation, the right
to consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in respect of any
of said investments and assets.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be vested in
the Trustees as joint tenants, except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any
<PAGE>
funds or property of the Trust whether capital or surplus or otherwise, to the
full extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
3.5. BORROW MONEY; LEND ASSETS. Subject to the Fundamental Policies, the
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust, including the lending of portfolio securities, and to
endorse, guarantee or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
3.6. DELEGATION; COMMITTEES. The Trustees shall have power, consistent
with their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or names of the
Trustees or otherwise as the Trustees may deem expedient, to the same extent as
such delegation is permitted to directors of a Massachusetts business
corporation and is permitted by the 1940 Act.
3.7. COLLECTION AND PAYMENT. The Trustees shall have power to collect all
property due to the Trust; and to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. EXPENSES. The Trustees shall have power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration of Trust, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal, underwriting, syndicating and brokerage services, as they in
good faith may deem reasonable and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust.
3.9. MISCELLANEOUS POWERS. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combination or associations; (c) remove
Trustees or fill vacancies in or add to their number, elect and remove such
officers and appoint and terminate such agents or employees as they consider
appropriate, and appoint from their own number, and power and authority of the
Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reasons of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, share purchase and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or similar
purposes; (g) to the extent permitted by law, indemnify any Pension with whom
the Trust has dealings, including the investment adviser, distributor, transfer
agent and selected dealers, to such extent as the Trustees shall determine; (h)
guarantee indebtedness or contractual
<PAGE>
obligations of others; (i) determine and change the fiscal year of the Trust and
the method in which its accounts shall be kept; (j) adopt a seal for the Trust,
but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust; and (k) call for meetings of Shareholders as
may be necessary or appropriate.
3.10. FURTHER POWERS. The Trustees shall have power to conduct the
business of the trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made
by the Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration, the presumption shall be in favor of a grant of power to
the Trustees. The Trustees will not be required to obtain any court order to
deal with the Trust Property.
3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by the
1940 Act or any rule or regulation thereunder, or any order or exemption issued
by the Commission, or effected to implement the provisions of any agreement to
which the Trust is a party, the Trustees shall not knowingly, on behalf of the
Trust, buy any securities (other than Shares) from or sell any securities (other
than Shares) to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, distributor or
transfer agent or with any Affiliated Person of such Person; but the Trust may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
3.12. LITIGATION. The Trustees shall have the power to engage in and to
prosecute, defend, compromise, abandon, or adjust, by arbitration or otherwise,
any actions, suits, proceedings, disputes, claims and demands relating to the
Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims
or expenses incurred in connection therewith, including those of litigation, and
such power shall include without limitation the power of the Trustees or any
appropriate committee thereof, in the exercise of their or its good faith
business judgment, to dismiss any action, suit, proceeding, dispute, claim or
demand, derivative or otherwise, brought by any person, including a Shareholder
in its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
<PAGE>
ARTICLE IV
MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
4.1. MANAGEMENT ARRANGEMENTS. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into advisory, administration or management contracts whereby the other party to
such contract shall undertake to furnish such advisory, administrative,
management, accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services, if
any, as the Trustees shall from time to time consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees may
authorize any adviser, administrator or manager (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities of the Trust on
behalf of the Trustees or may authorize any office, employee or Trustee to
effect such purchases, sales, loans or exchanges pursuant to recommendations of
any such adviser, administrator or manager (all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval or continuance of any such investment
advisory, management or other contract. If the Shareholders of any one or more
of the Series of the Trust should fail to approve any such investment advisory
or management contract, the Investment Adviser may nonetheless serve as
Investment Adviser with respect to any Series whose Shareholders approved such
contract.
4.2. ADMINISTRATIVE SERVICES. The Trustees may in their discretion from
time to time contract for administrative personnel and services whereby the
other party shall agree to provide to the Trustees or the Trust administrative
personnel and services to operate the Trust on a daily or other basis on such
terms and conditions as the Trustees may in their discretion determine. Such
services may be provided by one or more persons or entities.
4.3. DISTRIBUTION ARRANGEMENTS. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of the Shares of the
Trust to net the Trust not less than the par value per share, whereby the Trust
may either agree to sell the Shares to the other party to the contact or appoint
such other party its sales agent for such Shares. Such contract may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust and may provide that such other party may enter into
selected dealer agreements with registered securities dealers to further the
purpose of the distribution or repurchase of the Shares. The contract shall be
on such terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article IV or the By-Laws.
4.4. PARTIES TO CONTRACT. Any contract of the character described in
Sections 4.1, 4.2 or 4.3 of this Article IV, or in Article VI or in Article VII
hereof, may be entered into with any corporation, firm, trust or association,
although one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder, employee or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly
<PAGE>
therefrom, provided that the contract when entered into was reasonable and fair
and not inconsistent with the provisions of this Article IV or the By-Laws. The
same person (including a firm, corporation, trust or association) may be the
other party to contracts entered into pursuant to Sections 4.1, 4.2 or 4.3 above
or Article VI or VII, and any individual may be financially interested or
otherwise affiliated with Persons who are parties to any or all of the contracts
mentioned in this Section 4.4.
4.5. PROVISIONS AND AMENDMENTS. Any contract entered into pursuant to
Sections 4.1, 4.2 or 4.3 of this Article IV shall be consistent with and subject
to all applicable requirements of the 1940 Act with respect to its adoption,
continuance, termination and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract entered into
pursuant to such sections shall be effective unless entered into in accordance
with applicable provisions of the 1940 Act.
<PAGE>
ARTICLE V
LIMITATION OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder, as such, shall be subject to any personal liability whatsoever to
any Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the Trust
or its Shareholders, in connection with Trust Property or the affairs of the
Trust, and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee or agent, as such, of
the Trust, is made a party to any suit or proceeding to enforce any such
liability, he shall not on account thereof be held to any personal liability.
The Trust shall indemnify and hold each Shareholder harmless from and against
all claims and liabilities to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that Shareholders of a
particular Series who are subject to claims or liabilities solely by reason of
their status as Shareholders of that Series shall be limited to the assets of
that Series for recovery of any loss and related expenses. The rights accruing
to a Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee or
agent of the Trust shall be liable to the Trust, its Shareholders or to any
Shareholder, Trustee, officer, employee or agent thereof for any action or
failure to act (including wihtout limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
5.3. INDEMNIFICATION. The Trustees shall provide for indemnification by
the Trust of any person who is, or has been a Trustee, officer, employee or
agent of the Trust against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved as a party or otherwise by virtue of his being or
having been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement hereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
The word "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee, as such, shall be
obligated to give any bond or surety or other security for the performance of
any of his duties hereunder.
<PAGE>
5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST, INSTRUMENTS, ETC. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees under this Declaration of Trust or in their
capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officers,
employees or agents of the Trust, in their capacity as such, shall contain an
appropriate recital to the effect that the writing is executed or made by them
not individually, but as Trustees under the Declaration that the Shareholders,
Trustees, officers, employees and agents of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
for the satisfaction of any obligation or claim thereunder but only to the Trust
Estate or, in the case of any such obligation which relates only to a specific
Series, only to the property of such Series, and appropriate references shall be
made therein to the Declaration of Trust, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, Shareholders,
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, officers, employees
and agents in such amount as the Trustees shall deem adequate to cover possible
tort liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or employee of
the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by any investment adviser, distributor, transfer
agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
<PAGE>
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
6.1 BENEFICIAL INTEREST. The interest of the beneficiaries hereunder
shall be divided into transferable shares of beneficial interest, with par value
$.01 per share. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees may initially issue whole and fractional
shares of a single class, each of which shall represent an equal proportionate
share in the Trust with each other Share. As provided by the provisions of
Section 6.9 hereof, the Trustees may authorize the creation of series of shares
(the proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection with
a dividend in Shares or a split of Shares, shall be fully paid and
nonassessable.
6.2 RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer any assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in this Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights (except for rights of appraisal specified in Section 11.4 and as the
Trustees may determine with respect to any series or class of Shares).
6.3 TRUST ONLY. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
6.4 ISSUANCE OF SHARES. The Trustees, in their discretion, may from time
to time without a vote of the Shareholders issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount not less than par value and type of consideration,
including cash or property, at such time or times, and on such terms as the
Trustees may deem best, any may in such manner acquire other assets (including
the acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares. The Trustees may from time to time divide
or combine the Shares into a greater or lesser number without thereby changing
the proportionate beneficial interests in the Trust.
6.5 REGISTER OF SHARES. A register shall be kept at the Trust or a
transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions or
<PAGE>
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not required that certificates be issued
for the Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate rules and regulations
as to their use.
6.6 TRANSFER AGENT AND REGISTRAR. The Trustee shall have power to employe
a transfer agent or transfer agents, and a registrar or registrars. The
transfer agent or transfer agents may keep the said register and record therein
the original issues and transfers, if any, of the said Shares. Any such
transfer agent and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation, except
as modified by the Trustees.
6.7 TRANSFER OF SHARES. Shares shall be transferable on the records of
the Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
6.8 TREASURY SHARES. Shares held in the treasury shall, until reissued,
not confer any voting rights on the Trustees, nor shall such Shares be entitled
to any dividends or other distributions declared with respect to the Shares.
6.9 SERIES DESIGNATION. The Trustees, in their discretion, may authorize
the division of Shares into two or more series or two or more classes, and the
different series or classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
series or classes shall be fixed and determined, by the Trustees; provided, that
all Shares shall be identical except that there may be variations so fixed and
determined between different series or classes as to investment objective,
purchase price, right of redemption, special and relative rights as to dividends
and on liquidation and conversion rights, and the several series or classes
shall have separate voting rights, as set forth in Section 10.1 of this
Declaration. All references to Shares in this Declaration shall be deemed to be
shares of any or all series and classes as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
series or two or more classes, the following provisions shall be applicable:
<PAGE>
(a) The number of authorized Shares and the number of Shares of each
series or of each class that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued Shares or any Shares
previously issued and reacquired of any series or class into one or
more series or one or more classes that may be established and
designated from time to time. The Trustees may hold as treasury
shares (of the same or some other series or class), reissue for such
consideration and on such terms as they may determine, or cancel any
Shares of any series or any class reacquired by the Trust at their
discretion from time to time.
(b) The power of the Trustee to invest and reinvest the Trust Property
shall be governed by Section 3.2 of this Declaration with respect to
any one or more series which represents the interests in the assets of
the Trust immediately prior to the establishment of two or more series
and the power of the Trustees to invest and reinvest assets applicable
to any other series shall be the same, except as otherwise set forth
in the instrument of the Trustees establishing such series which is
hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series or class, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that series or class
for all purposes, subject only to the rights of creditors and except
as may otherwise be required by applicable tax laws, and shall be so
recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to
any particular series or Class, the Trustees shall allocate them among
any one or more of the series or classes established and designated
from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
series or classes for all purposes.
(d) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series.
All expenses and liabilities incurred or arising in connection with a
particular Series, or in connection with the management thereof, shall
be payable solely out of the assets of that Series and creditors of a
particular Series shall be entitled to look solely to the property of
such Series for satisfaction of their claims. Any general
liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among any one or
more of the series established and designated and designated from time
to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which
<PAGE>
items are capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 9.2 of this Declaration with respect to
any one or more series or classes which represents the interests in
the assets of the Trust immediately prior to the establishment of two
or more series or classes. With respect to any other series or class,
dividends and distributions on Shares of a particular series or class
may be paid with such frequency as the Trustees may determine, which
may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that series or class, from
such of the income and capital gains, accrued or realized, from the
assets belonging to that series or class, as the Trustees may
determine, after providing for actual and accrued liabilities
belonging to that series or class. All dividends and distributions on
Shares of a particular series or class shall be distributed pro rata
to the holders of that series or class in proportion to the number of
Shares of that series or class held by such holders at the date and
time of record established for the payment of such dividends or
distributions.
(f) Subject to the requirements of the 1940 Act, particularly Section
18(f) and Rule 18f-2 thereunder, the Trustees shall have the power to
determine the designations, preferences, privileges, limitations and
rights of each class and series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of
Shares of any series or class shall have the right to convert or
exchange said Shares into Shares of one or more series of Shares in
accordance with such requirements and procedures as may be established
by the Trustees.
(h) The establishment and designation of any series or class of Shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series or
class, or as otherwise provided in such instrument. At any time that
there are no Shares outstanding of any particular series or class
previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that series
or class and the establishment and designation thereof. Each
instrument referred to in this paragraph shall have the status of an
amendment to this Declaration.
(i) In the event of the liquidation of a particular series, the
Shareholders of that series which has been established and designated
and which is being liquidated shall be entitled to receive, when and
as declared by the Trustees, the excess of the assets belonging to
that series over the liabilities belonging to that series. The
holders of Shares of any series shall not be entitled hereby to any
distribution upon liquidation of any other series. The assets so
distributable to the Shareholders of any series shall be distributed
among such Shareholders in proportion to the number of Shares of that
series held by them and recorded on the books of the Trust. The
liquidation of any particular
<PAGE>
series in which there are Shares then outstanding may be authorized by
an instrument in writing, without a meeting, signed by a majority of
the Trustees then in office, subject to the approval of a majority of
the outstanding voting securities of that series, as that phase is
defined in the 1940 Act.
6.10 NOTICES. Any and all notices to which any Shareholder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
<PAGE>
ARTICLE VII
CUSTODIAN
7.1 APPOINTMENT AND DUTIES. The Trustees shall at all times employ a
custodian or custodians, meeting the qualifications for custodians contained in
the 1940 Act, as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-Laws of the Trust and the 1940 Act, for purposes of maintaining custody
of the Trust's securities and similar investments.
7.2 CENTRAL DEPOSITARY SYSTEM. Subject to applicable rules, regulations
and orders, the Trustees may direct the custodian to acquire and hold securities
in the book-entry system for United States government securities or to deposit
all or any part of the securities and similar investments owned by the Trust in
a system for the central handling of securities pursuant to which call
securities of any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities.
<PAGE>
ARTICLE VIII
REDEMPTION
8.1 REDEMPTIONS. All outstanding Shares may be redeemed at the option of
the holders thereof, upon and subject to the terms and conditions provided in
this Article VIII. The Trust shall, upon application of any Shareholder or
pursuant to authorization from any Shareholder, redeem or repurchase from such
Shareholder for cash or in kind outstanding Shares for an amount per share
determined by the application of a formula adopted for such purpose by
resolution of the Trustees (which formula shall be consistent with applicable
provisions of the 1940 Act); provided that (a) such amount per Share shall not
exceed the cash equivalent of the proportionate interest of each Share in the
assets of the Trust at the time of the purchase or redemption and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting such redemption, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act, and may, at any
time and from time to time, pursuant to such Act or an order thereunder, suspend
such right of redemption. The procedures for effecting redemption shall be as
set forth in the Prospectus and the Statement of Additional Information, as
amended from time to time.
8.2 REDEMPTION OF SHARES; DISCLOSURE OF HOLDING. If the Trustees shall,
at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any person to an extent which would disqualify the Trust as a
regulated investment company under the internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption a number, or principal amount, of Shares or other securities of
the Trust sufficient, in the opinion of the Trustees, to maintain or bring the
direct or indirect ownership of Shares or other securities of the Trust into
conformity with the requirements of such qualification and (ii) to refuse to
transfer or issue Shares or other securities of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust in question would in
the opinion of the Trustees result in such disqualification. The redemption
shall be effected at a redemption price determined in accordance with Section
8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
8.3 REDEMPTIONS OF ACCOUNT OF LESS THAN $500. The Trustees shall have the
power to redeem shares at a redemption price determined in accordance with
Section 8.1 if at any time the total investment in a Shareholder account does
not have a value of at least $500 (or such lesser amount as the Trustees may
determine); provided, however, that the Trustees may not exercise such power
with respect to Shares if the Prospectus does not describe such power (and
applicable amount). In the event the Trustees determine to exercise their power
to redeem Shares provided in this Section 8.3., shareholders shall be notified
that the value of their account is less than $500 (or such lesser amount as
determined above) and allowed a reasonable period of time to make an additional
investment before the redemption is effected.
<PAGE>
ARTICLE IX
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
9.1 NET ASSET VALUE. The net asset value of each outstanding Share of the
Trust shall be determined in such manner and at such time or times on such days
as the Trustees may determine, in accordance with applicable provisions of the
1940 Act, as described from time to time in the Trust's currently effective
Prospectus and Statement of Additional Information. The power and duty to make
the daily calculations may be delegated by the Trustees to the adviser,
administrator, manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the daily determination of net
asset value to the extent permitted by the 1940 Act.
9.2 DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time to time
distribute ratably among the Shareholders such proportion of the net profits,
including net income, surplus (including paid-in surplus), capital or assets
held by the Trustees as they may deem proper. Such distribution shall be made
in cash or Shares, and the Trustees may distribute ratably among the
Shareholders additional Shares issuable hereunder in such manner, at such times,
and on such terms as the Trustees may deem proper. Such distributions may be
among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they may deem desirable to use in the conduct of
its affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plan, cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
Inasmuch as the computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of the Trust, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
<PAGE>
ARTICLE X
SHAREHOLDERS VOTING AND REPORTS
10.1 VOTING. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article II hereof, (ii) for the removal of
Trustees as provided in Section 2.3 hereof; (iii) with respect to any investment
advisory, management or other contract as provided in Section 4.1 hereof, (iv)
with respect to termination of the Trust as provided in Section 11.2 hereof, (v)
with respect to any amendment of the Declaration to the extent and as provided
in Section 11.3 hereof, (vi) with respect to any merger, consolidation or sale
of assets as provided in Section 11.4 hereof, (vii) with respect to
incorporation of the Trust to the extent and as provided in Section 11.5 hereof,
(viii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or Shareholders, provided that Shareholders of a Series are not
entitled to vote with respect to a matter which does not affect that Series, and
(ix) with respect to such additional matters relating to the Trust as may be
required by law, the Declaration, the By-Laws or any registration statement of
the Trust filed with any federal or state regulatory authority, or as and when
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote, except
that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. A Majority
Shareholder Vote shall be sufficient to take or authorize action upon any matter
except as otherwise provided herein. There shall be no cumulative voting in the
election of Trustees. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, the Declaration
or the By-Laws to be taken by Shareholders.
In the event of the establishment of series or classes as contemplated by
Section 6.9, Shareholders of each such series or class shall, with respect to
those matters upon which Shareholders are entitled to vote, be entitled to vote
only on matters affecting such series or class, and voting shall be by series or
class and require a Majority Shareholder Vote of each series or class that would
be affected by such matter, except that all Shares (regardless of series or
class) shall be voted as a single voting class, or a Majority Shareholder Vote
of each series or class shall be necessary, where required by applicable law.
Except as otherwise required by law, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if
Shareholders constituting a Majority Shareholder Vote consent to the action in
writing and such consents are filed with the records of the Trust. Such consent
shall be treated for all purposes as votes taken at a meeting of Shareholders.
The By-Laws may include further provisions for Shareholders' votes and meetings
and related matters not inconsistent with the Declaration.
10.2 REPORTS. The Trustees shall transmit to Shareholders such written
financial reports of the operations of the Trust, including financial statements
certified by independent public accountants, as may be required uneder
applicable law.
<PAGE>
ARTICLE XI
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
11.1 DURATION. Subject to possible termination in accordance with the
provisions of Section 11.2 hereof, the Trust created hereby shall continue
without limitation of time.
11.2 TERMINATION OF TRUST.
(a) The Trust may be terminated (i) by a Majority Shareholder Vote at any
meeting of Shareholders, (ii) by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by
holders constituting a Majority Shareholder Vote or (iii) by the
Trustees by written notice to the Shareholders. Upon the termination
of the Trust,
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all of the powers of the Trustees under this Declaration shall continue
until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Property to one or more persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property shall require approval as set forth in Section 11.4.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among Shareholders according to their respective rights.
(b) After termination of the Trust and distribution to Shareholders as
herein provided, a majority of the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the
rights and interests of all Shareholders shall thereupon cease.
11.3 AMENDMENT PROCEDURE.
(a) This Declaration may be amended by vote of the Shareholders. The
Trustees may also amend this Declaration without the vote or consent
of Shareholders to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary or
desirable to conform this Declaration to the requirements of
applicable federal or state laws or regulations or the requirements of
the regulated investment company provisions of
<PAGE>
the Internal Revenue Code, but the Trustees shall not be liable for
failing so to do.
(b) No amendment may be made, under Section 11.3(a) above, which would
change any rights with respect to any Shares of the Trust by reducing
the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto,
except with the vote or consent of affected Shareholders. Nothing
contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or
to permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the
Trustees or by the Secretary or any Assistant Secretary of the Trust,
setting forth an amendment and reciting that it was duly adopted by
the Shareholders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, in recordable form, and executed by a
majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.
11.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by a Majority Shareholder Vote, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. In respect of any such merger, consolidation,
sale or exchange of assets, and Shareholder shall be entitled to rights of
appraisal of his Shares to the same extent as a shareholder of a Massachusetts
business corporation in respect of a merger, consolidation, sale or exchange of
assets of a Massachusetts business corporation, and such rights shall be his
exclusive remedy in respect of his dissent from any such action.
11.5 INCORPORATION. Upon a Majority Shareholder Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for shares or securities thereof or
otherwise, and to lend money to, subscribe for shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire shares or any
other interest. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.1 FILING. This Declaration and all amendments hereto shall be filed in
the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration and all
amendments theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
12.2 RESIDENT AGENT. The Trust hereby appoints CT Corporation System as
its resident agent in the Commonwealth of Massachusetts, whose post office
address is 2 Oliver Street, Boston, Massachusetts 02109.
12.3 GOVERNING LAW. This Declaration is executed by the Trustees and
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.4 COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5 RELIANCE BY THIRD PARTIES. Any certificate executed by an individual
who, according to the records of the Trust, or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their successors.
12.6 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such
provisions is in conflict with 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other
applicable laws and regulation, the conflicting provision shall be
deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not
<PAGE>
affect any of the remaining provisions of this Declaration or render
invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not
in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
____________________________________
Jospeh M. LaMotta , as Trustee
Address:
RR#2 Box 177
Pound Ridge, New York 10576
____________________________________
Paul Y. Clinton , as Trustee
Address:
946 Morris Avenue
Bryn Mawr, Pennsylvania 19010
____________________________________
Thomas W. Courtney , as Trustee
Address:
P.O. Box 580
Sweickly, Pennsylvania 15143
____________________________________
Lacy B. Herrmann
Address:
Suite 4515
200 Park Avenue
New York, New York 10017
___________________________________
George Loft
Address:
Herrick Road
Sharon, Connecticut 06069
<PAGE>
BY-LAWS
OF
QUEST FOR VALUE U.S. GOVERNMENT INCOME TRUST
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Majority Shareholder Vote,"
"1940 Act," "Shareholders," "Shares," "Trust Property" and "Trustees" have the
respective meanings given them in the Declaration of Trust of Quest For Value
U.S. Government Income Trust (the "Trust") dated March 13, 1987, as amended from
time to time.
ARTICLE II
OFFICES
2.1 PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
2.2 OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
State of New York, and at such other places within and without the Commonwealth
as the Trustees may from time to time designate or the business of the Trust may
require.
ARTICLE III
SHAREHOLDERS' MEETINGS
3.1 PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
3.2 MEETINGS. Meetings of Shareholders of the Trust, as a whole or
by series or class, shall be held whenever called by a majority of the Trustees
or the President of the Trust and as a whole whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of Section 16 of the 1940
Act for that purpose. Meetings of Shareholders, as a whole or by series or
class, as the case may be, shall also be called by the Secretary upon the
written request, which request shall state the purpose or purposes of such
meeting and the matters proposed to be acted on thereat, of the holders of
Shares entitled to vote not less than twenty five percent (25%) of all the votes
entitled to be cast at such meeting, provided, however, that pursuant to Section
16(c) of the 1940 Act, that a meeting requested exclusively for the stated
purpose of removing a Trustee shall be called by the Secretary upon the written
request of the holders of Shares entitled to vote not less than ten percent
(10%) of all the votes entitled to be cast at such meeting as to the matter be
acted on thereat. The Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Trust of such costs, the Secretary shall give notice
stating the purpose or purposes of the meeting to all entitled to vote at such
meeting. Except as otherwise required by law, no meeting need be called upon
the request of the holders of Shares entitled to cast less than a majority of
all votes entitled to be cast at such meeting, to consider any
<PAGE>
matter which is substantially the same as a matter voted upon at any meeting of
the same Shareholders held during the preceding twelve months.
3.3 NOTICE OF MEETINGS; WAIVER. Written or printed notice of every
Shareholders' meeting stating the place, date and purpose or purposes thereof,
shall be given by the Secretary not less than seven (7) nor more than sixty (60)
days before such meeting to each Shareholder entitled to vote at such meeting,
either by mail or by presenting it to him personally, or by leaving it at his
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Shareholder at his address as it appears on the records of the Trust. Any
such notice may be waived by any person or persons entitled to such notice, by a
notice signed by such person or persons and filed with the records of the
meeting, whether before or after the holding thereof, or by actual attendance at
the meeting, in person or by proxy, except where the Shareholder attends a
meeting for the express purpose of objecting to the transaction of business on
the grounds that the meeting has not been lawfully called or convened.
3.4 QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise provided
by law, by the Declaration or by these By-Laws, at all meetings of Shareholders
the holders of a majority of the Shares issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall be requisite and
shall constitute a quorum for the transaction of business. In the absence of a
quorum, the Shareholders present or represented by proxy and entitled to vote
thereat shall have power to adjourn the meeting from time to time. Any
adjourned meeting may be held as adjourned without further notice. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted as if the meeting had been held as originally called.
3.5 VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after six months from its date, unless
otherwise provided in the proxy, and no proxy shall be valid as to such a
meeting, if executed after the final adjournment of such a meeting. At all
meetings of Shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or Officers of the Trust.
3.6 VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration or by these By-Laws, at each meeting of Shareholders at which a
quorum is present, all matters shall be decided by Majority Shareholder Vote.
3.7 INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails
<PAGE>
or refuses to act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the person
acting as chairman. The Inspectors of Election shall determine the number of
Shares outstanding, the Shares represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, shall receive votes,
ballots or consents, shall hear and determine all challenges and questions in
any way arising in connection with the right to vote, shall count and tabulate
all votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Shareholders. On
request of the chairman of the meeting or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
3.8 INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under the Massachusetts Business Corporation Law.
3.9 ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders. No such consent shall be valid for longer than six months from
this date of execution.
ARTICLE IV
TRUSTEES
4.1 MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or special meetings of the Trustees to be held at such time
and place as shall be determined from time to time by the Trustees without
further notice.
4.2 NOTICE OF SPECIAL MEETINGS. Written notice of special meetings
of the Trustees, stating the place, date and time thereof, shall be given to
each Trustee personally, by telegram, by mail or by leaving such notice at his
place of residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust.
4.3 QUORUM AND ADJOURNMENT OF MEETINGS. If at any meeting of the
Trustees there be less than a quorum present, the Trustees present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall have been obtained.
4.4 ACTION BY TRUSTEES WITHOUT MEETING. All written consents of
Trustees evidencing action taken by the Trustees without a meeting shall set
forth such action, shall be signed by all of the Trustees entitled to vote upon
such action and shall be filed with the minutes of proceedings of the Trustees.
4.5 EXPENSES AND FEES. Each Trustee may be allowed expenses, if any,
for attendance at each regular or special meeting of the Trustees, and
<PAGE>
each Trustee shall receive for services rendered as a Trustee of the Trust such
compensation as may be fixed by the Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Trust in any other capacity
and receiving compensation therefor.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
(a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust or any of its
shareholders) by reason of the fact that he is or was a Trustee, officer,
employee or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with the action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceedings, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust or any of its shareholders to obtain a
judgment or decree in its favor by reason of the fact that he is or was a
Trustee, officer, employee or agent of the Trust. The indemnification shall be
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust; except that such indemnification
shall preclude payment upon any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties as described in Sections 17(h)
and (i) of the 1940 act.
(c) To the extent that a Trustee, officer, employee or agent of the
Trust has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d)(1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
<PAGE>
(i) by the Trustees, by a majority vote of a quorum which
consists of Trustees who were not parties to the action, suit or
proceeding; or
(ii) if the required quorum is not obtainable, or if a quorum
of disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) by the Shareholders.
(3) Notwithstanding the provisions of this Section 5.1, no person
shall be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties as described in Sections
17(h) and (i) of the 1940 Act ("Disabling Conduct"). A person shall be deemed
not liable by reason of Disabling Conduct if, either:
(i) a final decision on the merits is made by a court or
other body before whom the proceeding was brought that the person to
indemnified ("Indemnitee") was not liable by reason of Disabling Conduct;
or
(ii) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Indemnitee was
not liable by reason of Disabling Conduct, is made by either-
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the 1940 Act, nor parties to the action, suit or proceeding; or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee,
officer, employee or agent of the Trust in defending a civil or criminal action,
suit or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if it is
not ultimately determined that such person is entitled to be indemnified by the
Trust; and
(3) either,
(i) such person provides a security for his undertaking; or
(ii) the Trust is insured against losses by reason of any
lawful advances; or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either
<PAGE>
(A) A majority of a quorum which consists of Trustees who
are neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding; or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any by-
law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding office, and shall continue as to a person who has ceased to be a
Trustee, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of such person; provided that no person may satisfy
any right of indemnity or reimbursement granted herein or to which he may be
otherwise entitled except out of the property of the Trust, and no Shareholder,
as such, shall be personally liable with respect to any claim for indemnity or
reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any
person who is or was a Trustee, officer, employee or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust pay that
portion of insurance premiums, if any, attributable to coverage which would
indemnify any officer or Trustee against liability for Disabling Conduct.
(h) Nothing contained in this Section shall be construed to protect
any Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE VI
COMMITTEES
6.1 EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or other committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust, except those powers
which by law, the Declaration or these By-Laws they are prohibited from
delegating. In the absence of any member of any such committee, the members
thereof present at any meeting, whether or not they constitute a quorum, may
appoint a Trustee to act in place of such absent member. The Executive
Committee and any such committee shall fix its own rules or procedures. Each
such committee shall keep a record of its proceedings. All actions of the
Executive Committee shall be reported to the Trustees at the meeting thereof
next succeeding to the taking of such action.
6.2 ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any
<PAGE>
such advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
6.3 COMMITTEE ACTION WITHOUT MEETING. All written consents of the
committee members evidencing action taken by such committee without a meeting
shall set forth such action, shall be signed by the required number of committee
members and shall be filed with the records of the proceedings of such
committee.
ARTICLE VII
OFFICERS
7.1 EXECUTIVE OFFICERS. In addition to the officers required or
permitted by the Declaration, the Trustees may also elect one or more Vice
Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to appoint,
such other officers and agents as the Trustees shall at any time or from time to
time deem advisable. Two or more offices, except those of President and Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity. The executive
officers of the Trust shall be elected annually by the Trustees and each
executive officer so elected shall hold office until his successor is elected
and is qualified.
7.2 EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS AND
OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfers of securities standing in the name of the Trust shall
be executed, by the President, any Vice President or the Treasurer, or by any
one or more officers or agents of the Trust as may be designated by vote of the
Trustees.
7.3 TERM AND REMOVAL AND VACANCIES. Each Officer of the Trust shall
hold office until his successor is elected and is qualified. Any officer or
agent of the Trust may be removed by the Trustees whenever, in their judgment,
the best interests of the Trust will be served thereby, but such removal shall
be without prejudice to the contractual rights, if any, of the person so
removed.
7.4 COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to the
extent provided by the Trustees with respect to officers appointed by the
President.
7.5 POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
provided, that no rights of any third party shall be affected or impaired by any
such By-Laws or resolution of the Trustees unless he has knowledge thereof.
7.6 THE CHAIRMAN. The Chairman, if any, or in his absence the
President, shall preside at all meetings of the Shareholders and of the
Trustees, shall be a signatory on all Annual and Semi-Annual Reports as may be
<PAGE>
sent to Shareholders, and he shall perform such other duties as the Trustees may
from time to time prescribe.
7.7 THE PRESIDENT. The President shall be the chief executive
officer of the Trust, he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Trustees
are carried into effect, and, in connection therewith, shall be authorized to
delegate to one or more Vice Presidents such of his powers and duties at such
times and in such manner as he may deem advisable. Subject to the control of
the Trustees and to the control of any committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust. He shall
have the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers, agents, clerks and employees as he may find necessary to
transact the business of the Trust. He shall also have the power to grant,
issue, execute or sign such powers of attorney, proxies or other documents as
may be deemed advisable or necessary in furtherance of the interests of the
Trust. The President shall have such other powers and duties, as from time to
time may be conferred upon or assigned to him by the Trustees.
7.8 THE VICE PRESIDENTS. The Vice Presidents shall be of such number
and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President; and
he or they shall perform such other duties as the Trustees or the President may
from time to time prescribe.
7.9 THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President, or,
if there be more than one, the Assistant Vice Presidents, shall perform such
duties and have such powers as may be assigned them from time to time by the
Trustees or the President.
7.10 THE SECRETARY. The Secretary shall attend all meetings of the
Trustees and all meetings of the Shareholders and record all the proceedings of
the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the President, may from time to
time prescribe. He shall keep in safe custody the seal of the Trust and affix
or cause the same to be affixed to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
7.11 THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there shall be more than one, the Assistant Secretaries, in the order determined
by the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Trustees, or the
President, may from time to time prescribe.
7.12 THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts or receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the President whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition
<PAGE>
of the Trust; and he shall perform such other duties as the Trustee, or the
President, may from time to time prescribe.
7.13 THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if there
shall be more than one, the Assistant Treasurers in the order determined by the
Trustees or the President, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Trustee, or the President,
may from time to time prescribe.
ARTICLE VIII
CUSTODIAN
The custodian of the Trust shall be appointed, among other things:
(1) to receive and hold the securities owned by the Trust and
deliver the same upon written order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. In addition the custodian may be authorized to keep the
books and accounts of the Trust and furnish clerical and accounting services and
to compute the net income of the Trust and the net asset value of the Trust and
its shares. If so directed by a Majority Shareholder Vote, the custodian shall
deliver and pay over all property of the Trust held by it as specified in such
vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
ARTICLE IX
MISCELLANEOUS
9.1 LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
9.2 RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice of,
or to vote at, any meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date, in any
case shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than ten (10) days prior to the date on which particular
action requiring such determination of Shareholders is to be taken. In lieu of
fixing a record date, the Trustees may provide that the transfer books shall be
closed for a stated period but not to exceed, in any case, twenty (20 )days. If
the transfer books are closed for the purpose of
<PAGE>
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meetings.
9.3 SEAL. The Trustees shall adopt a seal, which shall be in such
form and shall have such inscription thereon as the Trustees may from time to
time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
9.4 FISCAL YEAR. The fiscal year of the Trust shall end on such date
as the Trustees may by resolution specify, and the Trustees may by resolution
change such date for future fiscal years at any time and from time to time.
9.5 ORDERS FOR PAYMENT OF MONEY. All orders or instructions for the
payment of money of the Trust, and all notes or other evidences of indebtedness
issued in the name of the Trust, shall be signed by such officer or officers or
such other person or persons as the Trustees may from time to time designate, or
as may be specified in or pursuant to the agreement between the Trust and the
bank or trust company appointed as Custodian of the securities and funds of the
Trust.
ARTICLE X
COMPLIANCE WITH FEDERAL AND STATE REGULATIONS
The Trustees are hereby empowered to take such action as they may deem
to be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XI
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may
be adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no such amendment, adoption or repeal requires, pursuant
to law, the Declaration or these By-Laws, a vote of the Shareholders. The
Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, and any apparent inconsistency shall be construed in favor of the
related provision in the Declaration.
ARTICLE XII
DECLARATION OF TRUST
The Declaration establishing Quest For Value U.S. Government Income
Trust, a copy of which, together with all amendments hereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name Quest For Value U.S. Government Income Trust refers to the Trustees under
the Declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, Shareholder, officer, employee or agent of Quest For Value U.S.
Government Income Trust shall be held to any
<PAGE>
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Quest For Value U.S. Government Income Trust, but the Trust
Property only shall be liable.
<PAGE>
GORDON HURWITZ BUTOWSKY WEITZEN SHALOV & WEIN
101 PARK AVENUE, NEW YORK, N.Y. 10178
Phone (212) 557-8000
July 12, 1991
Quest for Value Family of Funds
One World Financial Center
New York, New York 10281
AMA Family of Funds, Inc..
5 Sentry Parkway West
Suite 120
Blue Bell, Pennsylvania 19422
Gentlemen:
You have requested our opinion as to the Federal income tax
consequences of the transaction (the "Reorganization") described below pursuant
to which (i) Quest For Value Family of Funds, a Massachusetts business trust
("QFV Family of Funds"), on behalf of Quest For Value Growth and Income Fund
("Growth and Income"), will acquire substantially all the assets of Balanced
Fund, one of a series of funds of AMA Family of Funds, Inc., a Maryland
corporation (the "Corporation"), in exchange for shares of beneficial interest,
par value $.01 per share, of QFV Family of Funds representing interests in
Growth and Income (the "Growth and Income Shares"), and the assumption by QFV
Family of Funds on behalf of Growth and Income of certain identified liabilities
of Balanced Fund (the "Liabilities"), (ii) Balanced Fund will be liquidated, and
(iii) the Growth and Income Shares will be distributed to the shareholders of
Balanced Fund (the "Balanced Fund Shareholders") pursuant to such liquidation.
We have examined and are familiar with such documents, records and
other instruments as we have deemed appropriate for purposes of this opinion
letter, including the Registration Statement under the Securities Act of 1933
being filed with the Securities and Exchange Commission on Form N-14 relating to
the Growth and Income Shares (the "Registration Statement") which includes, as a
part thereof, the Proxy Statement of the Corporation to be used to solicit
proxies of Balanced Fund Shareholders in connection with a Special Meeting of
Shareholders (the "Balanced Fund Proxy") and the proposed form of Agreement and
Plan between the Corporation on behalf of Balanced Fund and QFV Family of Fund
on behalf of Growth and Income (the "Plan"). In rendering this opinion, we have
assumed that such documents as yet unexecuted, will, when executed, conform to
the proposed forms of such documents that we have examined. We have further
assumed that the Reorganization will be carried out pursuant to the terms of the
Plan, that factual statements and information contained in the Registration
Statement, the
<PAGE>
Balanced Fund Proxy and other documents, records, and instruments supplied to us
are correct and that there will be no material change with respect to such facts
or information prior to the time of the Reorganization. In rendering our opinion
we have also relied on the representations and facts discussed below which have
been provided to us by the Corporation and QFV Family of Funds and we have
assumed that such representations and facts will remain correct at the time of
the Reorganization.
FACTS
-----
Balanced Fund was organized as a series of an open-end diversified
management investment company engaged in the continuous offering of its shares
to the public. Balanced Fund is a series of the Corporation which is a "series
company" within the meaning of Rule 18f-2 of the Investment Company Act of 1940.
Since its inception, Balanced Fund has conducted its affairs so as to qualify,
and has elected to be taxed, as a regulated investment company within the
meaning of Section 851 of the Internal Revenue Code of 1986, as amended (the
"Code").
Growth and Income was organized as a series of an open-end diversified
management investment company engaged in the continuous offering of its shares
to the public. Growth and Income is a series of QFV Family of Funds which is a
"series company" within the meaning of Rule 18f-2 of the Investment Company Act
of 1940. Growth and Income intends to elect to be, and qualify as, a regulated
investment company within the meaning of Section 851 of the code.
The Board of Directors of the Corporation and the Board of Trustees of
QFV Family of funds have each determined, for valid business reasons, that it is
advisable to combine the assets of Growth and Income and Balanced Fund into one
fund.
In view of the above, the Board of Directors of the Corporation and
the Board of Trustees of QFV Family of Funds each have adopted the Plan, subject
to, among other things, approval by the Balanced Fund Shareholders.
Pursuant to the Plan, Balanced Fund will transfer substantially all of
its assets to QFV Family of Funds on behalf of Growth and Income in exchange for
the Growth and Income Shares (including fractional Growth and Income Shares),
and the assumption by QFV Family of Funds on behalf of Growth and Income of the
Liabilities. Immediately thereafter, Balanced Fund will distribute the Growth
and Income Shares to the Balanced Fund Shareholders in cancellation of the
shares of common stock of the Corporation representing interests in Balanced
Fund (the "Balanced Fund Shares") in complete liquidation of Balanced Fund.
Each of the following representations has been made to us in
connection with the Reorganization by the Corporation, QFV Family of Funds, or
both the Corporation and QFV Family of Funds.
<PAGE>
(1) To the best of the knowledge of the management of the Corporation
and QFV Family of Funds, there is no plan or intention on the part of the
Balanced Fund Shareholders, to sell, exchange or otherwise dispose of a number
of Growth and Income Shares that would reduce the Balanced Fund Shareholders'
ownership of Growth and Income Shares to a number of Growth and Income Shares
having a value, as of the date of the Reorganization, of less than 50 percent of
the value of all of the formerly outstanding Balanced Fund Shares as of such
date;
(2) Except to the extent necessary to comply with the legal obligation
to redeem its own shares, QFV Family of Funds has no plan or intention to
reacquire any of the Growth and Income Shares to be issued pursuant to the
Reorganization;
(3) The Liabilities to be assumed by, or transferred to, QFV Family of
Funds on behalf of Growth and Income in the Reorganization were incurred by
Balanced Fund in the ordinary course of business and are associated with the
assets being transferred to QFV Family of Funds on behalf of Growth and Income;
(4) The amount of the Liabilities will not exceed the aggregate
adjusted basis of Balanced Fund for its assets transferred to QFV Family of
Funds on behalf of Growth and Income pursuant to the Reorganization;
(5) QFV Family of Funds has no plan or intention to sell or otherwise
dispose of the assets of Balanced Fund acquired in the Reorganization, except
for dispositions made in the ordinary course of business;
(6) There is no indebtedness between Balanced Fund and Growth and
Income that was issued, acquired or will be settled at a discount;
(7) Balanced Fund has been a regulated investment company within the
meaning of Section 851 of the Code since the date of its organization through
the end of its last taxable year and will qualify as a regulated investment
company for its current taxable year;
(8) Growth and Income intends to elect to be, and qualify as, a
regulated investment company within the meaning of Section 851 of the Code; and
(9) Balanced Fund had no accumulated earnings and profits in taxable
years prior to its current taxable year.
OPINION
-------
Based on the Code, Treasury Regulations issued thereunder, Internal
Revenue Service Rulings and the relevant case law, as of the date hereof, and on
the facts, representations and assumptions set forth above, and the documents,
records and to the instruments we have reviewed, it is our opinion that the
Federal income tax consequences
<PAGE>
of the Reorganization to Balanced Fund, QFV Family of Funds, the Balanced Fund
Shareholders, Growth and Income and the Corporation will be as follows:
(1) The transfer of substantially all of the Balanced Fund's assets in
exchange for Growth and Income Shares and the assumption by QFV Family of Funds
on behalf of Growth and Income of the Liabilities followed by the distribution
by Balanced Fund of the Growth and Income Shares to the Balanced Fund
Shareholders in exchange for their Balanced Fund Shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and
Balanced Fund and Growth and Income will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by QFV Family of Funds or
Growth and Income upon the receipt of the assets of Balanced Fund solely in
exchange for Growth and Income Shares and the assumption by QFV Family of Funds
on behalf of Growth and Income of the Liabilities;
(3) No gain or loss will be recognized by Balanced Fund or the
Corporation upon the transfer of the assets of Balanced Fund to QFV Family of
Funds on behalf of Growth and Income in exchange for Growth and Income Shares
and the assumption by QFV Family of Funds on behalf of Growth and Income of the
Liabilities or upon the distribution of the Growth and Income Shares to the
Balanced Fund Shareholders in exchange for their Balanced Fund shares;
(4) No gain or loss will be recognized by the Balanced Fund
Shareholders upon the exchange of the Balanced Fund Shares for the Growth and
Income Shares;
(5) The aggregate tax basis for the Growth and Income Shares received
by each Balanced Fund Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Balanced Fund Shares held by each such
Balanced Fund Shareholder immediately prior to the Reorganization;
(6) The holding period of the Growth and Income Shares to be received
by each Balanced Fund Shareholder will include the period during which the
Balanced Fund Shares surrendered in exchange therefor were held (provided such
Balanced Fund Shares were held as capital assets on the date of the
Reorganization);
(7) The tax basis of the assets of Balanced Fund acquired by QFV
Family of Funds on behalf of Growth and Income will be the same as the tax basis
of such assets to Balanced Fund immediately prior to the Reorganization; and
(8) The holding period of the assets of Balanced Fund in the hands of
Growth and Income will include the period during which those assets were held by
Balanced Fund.
<PAGE>
We are not expressing an opinion as to any aspect of the
Reorganization other than those opinions expressly stated above.
As noted above, this opinion is based upon our analysis of the Code,
Treasury Regulations issued thereunder, Internal Revenue Service Rulings and
case law which we deem relevant as of the date hereof. No assurances can be
given that there will not be a change in the existing law or that the Internal
Revenue Service will not alter its present views, either prospectively or
retroactively, or adopt new views with regard to any of the matters upon which
we are rendering this opinion, nor can any assurance be given that the Internal
Revenue Service will not audit or question the treatment accorded to the
Reorganization on the Federal income tax returns of the Corporation, QFV Family
of Funds, Balanced Fund, Growth and Income or the Balanced Fund Shareholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our firm
in the Registration Statement and the Balanced Fund Proxy constituting a party
thereof.
Very truly yours,
Gordon Hurwitz Butowksy Weitzen
Shalov & Wein
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information,
pertaining to the funds referred to herein, constituting part of this
Post-Effective Amendment No. 33 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated December 16, 1994, relating to the
financial statements and financial highlights of the U.S. Government Income
Fund, the Opportunity Fund, the Small Capitalization Fund, the Growth and Income
Fund and the Investment Quality Income Fund, each a series of Quest for Value
Family of Funds, which appears in such Statement of Additional Information, and
to the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
references to us under the headings "Financial Highlights" in the Prospectus
pertaining to the funds referred to herein, and "Independent Accountants" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
June 16, 1995
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information,
pertaining to the funds referred to herein, constituting part of this
Post-Effective Amendment No. 33 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated September 20, 1994, relating to
the financial statements and financial highlights of National Tax-Exempt Fund,
New York Tax-Exempt Fund and California Tax-Exempt Fund, each a series of Quest
for Value Family of Funds, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" in the
Prospectus pertaining to the funds referred to herein, and "Independent
Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
June 16, 1995
<PAGE>
INDEPENDENT AUDITORS' CONSENT
To the Shareholders and Trustees of the
Quest For Value Officers Fund:
We consent to the reference to our Firm under the heading "Independent Auditors"
in the Statement of Additional Information.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
New York, New York
June 16, 1995
<PAGE>
QUEST FOR VALUE U.S. GOVERNMENT INCOME TRUST
Oppenheimer Tower
World Financial Center
New York, New York 10281
October 13, 1987
QUEST FOR VALUE DISTRIBUTORS
Oppenheimer Tower
World Financial Center
New York, New York 10281
Dear Sirs:
In connection with your purchase today of an aggregate of 10,000 shares of
beneficial interest for $100,000, you hereby represent and confirm that you have
acquired such securities for investment for your own account, with no present
intention of redeeming, reselling or otherwise distributing the same.
It is mutually agreed that the aforementioned shares purchased by you
cannot be sold, assigned, or transferred, except upon redemption by QUEST FOR
VALUE Distributors.
Furthermore, you hereby confirm that you are party to no arrangement,
agreement or understanding regarding QUEST FOR VALUE U.S. Government Income
Trust or its securities, with the Trust, QUEST FOR VALUE Advisors or any other
person made in consideration of your purchase of the aforementioned shares.
If the foregoing correctly expresses your understanding and our agreement,
please so indicate by signing the accompanying copy of this letter and return
the same to us.
A copy of the Declaration of Trust of QUEST FOR VALUE U.S. Government
Income Trust is on file with the Secretary of the Commonwealth of Massachusetts
and this Agreement is executed on behalf of the Trustees as Trustees and no
individually, and the obligations hereunder are not binding upon any of the
Trustees or shareholders of the Trust individually but are binding only upon the
assets and the property of the Trust.
Very truly yours,
QUEST FOR VALUE U.S.
GOVERNMENT INCOME TRUST
CONFIRMED AND AGREED: By: __________________________
Name:
QUEST FOR VALUE DISTRIBUTORS Title
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT 16
QUEST FOR VALUE FAMILY OF FUNDS
OPPORTUNITY FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
28-Dec-89 0.4650 11.69 103.978
28-Dec-90 0.2600 10.23 106.621
17-Dec-91 0.5450 13.94 110.789
30-Dec-91 0.0340 14.9 111.042
18-Dec-92 0.3170 17.26 113.081
31-Dec-92 0.0690 17.27 113.533
15-Nov-93 0.2190 18.39 114.885
31-Dec-93 0.3260 18.14 116.950
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (1/01/89) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.69) * SHARES (116.950) $2,302.75
TOTAL RETURN AT N.A.V. ($2,302.75/$1,000)-1 130.28%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 15.37%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($2,302.75/($1,000/.945))-1 117.61%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 14.25%
---------
---------
RETURNS FOR THE FIVE YEARS ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.69) * SHARES (116.950)/
N.A.V. ON 10/31/89 ($11.59) * SHARES (100.000) *1000 $1,986.84
TOTAL RETURN AT N.A.V. ($1,986.84/$1,000)-1 98.68%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 14.71%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,986.84/($1,000/.945))-1 87.76%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 13.42%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.69) * SHARES (116.950)/
N.A.V. ON 10/31/93 ($18.71) * SHARES (113.533) *1000 $1,084.05
TOTAL RETURN AT N.A.V. ($1,084.05/$1,000)-1 8.41%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 8.41%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,084.05/($1,000/.945))-1 2.44%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 2.44%
---------
---------
</TABLE>
<PAGE>
OPPORTUNITY FUND
TOTAL RETURN CALCULATIONS (CLASS B) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 53.390 $1,000.00
15-Nov-93 0.2190 18.38 54.026
31-Dec-93 0.3127 18.12 54.958
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.59) * SHARES (54.958) $1,076.63
TOTAL RETURN AT N.A.V. ($1,076.63/$1,000)-1 7.66%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 6.55%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,076.63-($1,000*.04))/$1,000-1 3.66%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 3.14%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.59) * SHARES (54.958)/
N.A.V. ON 10/31/93 ($18.70) * SHARES (53.390) *1000 $1,078.36
TOTAL RETURN AT N.A.V. ($1,084.05/$1,000)-1 7.84%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.84%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,078.36-($1,000*.05)/($1,000)-1 2.84%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 2.84%
---------
---------
</TABLE>
<PAGE>
OPPORTUNITY FUND
TOTAL RETURN CALCULATIONS (CLASS C) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 53.390 $1,000.00
15-Nov-93 0.2190 18.37 54.026
31-Dec-93 0.3116 18.12 54.955
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.58) * SHARES (54.955) $1,076.02
TOTAL RETURN AT N.A.V. ($1,076.02/$1,000)-1 7.60%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 6.49%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,076.02/$1,000)-1 7.60%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 6.49%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($19.58) * SHARES (54.955)/
N.A.V. ON 10/31/93 ($18.70) * SHARES (53.390) *1000 $1,077.75
TOTAL RETURN AT N.A.V. ($1,077.75/$1,000)-1 7.78%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.78%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
(($1,077.75-(1000*.01))/$1,000)-1 6.78%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 6.78%
---------
---------
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
SMALL CAPITALIZATION FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
28-Dec-89 0.1380 10.97 101.258
28-Dec-90 0.0840 9.41 102.162
17-Dec-91 0.4230 12.66 105.575
18-Dec-92 1.1370 15.10 113.525
15-Nov-93 1.3310 16.02 122.957
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (1/01/89) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.33) * SHARES (122.957) $2,007.89
TOTAL RETURN AT N.A.V. ($2,007.89/$1,000)-1 100.79%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 12.69%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($2,007.89/($1,000/.945))-1 89.75%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 11.60%
---------
---------
RETURNS FOR THE FIVE YEARS ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.33) * SHARES (122.957)/
N.A.V. ON 10/31/89 ($10.91) * SHARES (100.000) *1000 $1,840.41
TOTAL RETURN AT N.A.V. ($1,840.41/$1,000)-1 84.04%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 12.97%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,840.41/($1,000/.945))-1 73.92%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 11.70%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.33) * SHARES (122.957)/
N.A.V. ON 10/31/93 ($17.68) * SHARES (113.525) *1000 $1,000.38
TOTAL RETURN AT N.A.V. ($1,000.38/$1,000)-1 0.04%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 0.04%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,000.38/($1,000/.945))-1 -5.46%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -5.46%
---------
---------
</TABLE>
<PAGE>
SMALL CAPITALIZATION FUND
TOTAL RETURN CALCULATIONS (CLASS B) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 58.173 $1,000.00
15-Nov-93 1.3310 16.00 63.012
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.24) * SHARES (63.012) $1,023.31
TOTAL RETURN AT N.A.V. ($1,023.31/$1,000)-1 2.33%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 2.00%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,023.31-((58.173*16.24)*.04))/$1,000-1 -1.45%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -1.24%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.24) * SHARES (63.012)/
N.A.V. ON 10/31/93 ($17.66) * SHARES (58.173) *1000 $996.09
TOTAL RETURN AT N.A.V. ($996.09/$1,000)-1 -0.39%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -0.39%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($996.09-((16.24*58.173)*.05)/($1,000)-1 -4.99%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -4.99%
---------
---------
</TABLE>
<PAGE>
SMALL CAPITALIZATION FUND
TOTAL RETURN CALCULATIONS (CLASS C) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 58.173 $1,000.00
15-Nov-93 1.3310 16.00 63.012
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.23) * SHARES (63.012) $1,022.68
TOTAL RETURN AT N.A.V. ($1,022.68/$1,000)-1 2.27%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 1.95%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,022.68)/$1,000)-1 2.27%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 1.95%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($16.23) * SHARES (63.012)/
N.A.V. ON 10/31/93 ($17.67) * SHARES (58.173) *1000 $994.91
TOTAL RETURN AT N.A.V. ($1,022.69/$1,000)-1 -0.51%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -0.51%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
(($1,022.69-((56.561*16.33)*.01))/$1,000)-1 -1.43%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -1.43%
---------
---------
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
GROWTH AND INCOME FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
30-Dec-91 0.0400 10.34 100.387
31-Mar-92 0.0600 10.28 100.973
30-Jun-92 0.0850 10.59 101.783
30-Sep-92 0.0900 10.80 102.631
18-Dec-92 0.3930 10.68 106.408
31-Dec-92 0.0090 10.65 106.498
31-Mar-93 0.0600 10.86 107.086
30-Jun-93 0.0650 11.01 107.718
30-Sep-93 0.0700 11.05 108.400
13-Dec-93 1.6991 9.90 127.004
31-Dec-93 0.1113 9.87 128.436
31-Mar-94 0.0591 9.59 129.228
30-Jun-94 0.0788 9.75 130.272
30-Sep-94 0.0701 9.98 131.187
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (11/04/91) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.10) * SHARES (131.187) $1,323.68
TOTAL RETURN AT N.A.V. ($1,323.68/$1,000)-1 32.37%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 9.82%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,323.68/($1,000/.9525))-1 26.08%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 8.05%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.09) * SHARES (131.187)/
N.A.V. ON 10/31/93 ($11.24) * SHARES (108.400) *1000 $1,086.39
TOTAL RETURN AT N.A.V. ($1,086.39/$1,000)-1 8.64%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 8.64%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,086.39/($1,000/.9525))-1 3.48%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 3.48%
---------
---------
</TABLE>
<PAGE>
GROWTH AND INCOME FUND
TOTAL RETURN CALCULATIONS (CLASS B) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 89.206 $1,000.00
30-Sep-93 0.0700 11.05 89.771
13-Dec-93 1.6991 9.88 105.209
31-Dec-93 0.1011 9.85 106.289
31-Mar-94 0.0397 9.58 106.729
30-Jun-94 0.0657 9.74 107.449
30-Sep-94 0.0586 9.96 108.081
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.07) * SHARES (108.081) $1,088.38
TOTAL RETURN AT N.A.V. ($1,088.38/$1,000)-1 8.84%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.54%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,088.38-((10.07*89.206)*.04)$1,000*.04))/$1,000-1 5.24%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 4.49%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.07) * SHARES (108.081)/
N.A.V. ON 10/31/93 ($11.23) * SHARES (89.771) *1000 $1,079.60
TOTAL RETURN AT N.A.V. ($1,079.60/$1,000)-1 7.96%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.96%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,079.60-((89.047*10.07)*.05)/($1,000)-1 3.48%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 3.48%
---------
---------
</TABLE>
<PAGE>
GROWTH AND INCOME FUND
TOTAL RETURN CALCULATIONS (CLASS C) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 89.206 $1,000.00
30-Sep-93 0.0700 11.05 89.771
13-Dec-93 1.6991 9.88 105.209
31-Dec-93 0.0952 9.86 106.225
31-Mar-94 0.0429 9.59 106.700
30-Jun-94 0.0653 9.75 107.415
30-Sep-94 0.0571 9.98 108.030
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.07) * SHARES (108.030) $1,087.86
TOTAL RETURN AT N.A.V. ($1,087.86/$1,000)-1 8.79%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.50%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,087.02/$1,000)-1 8.79%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 7.50%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = N.A.V. ON 10/31/94 ($10.07) * SHARES (108.030)/
N.A.V. ON 10/31/93 ($11.23) * SHARES (89.771) *1000 $1,079.09
TOTAL RETURN AT N.A.V. ($1,077.75/$1,000)-1 7.91%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.91%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
(($1,079.09-((89.047*10.07)*.01))/$1,000)-1 7.01%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 7.01%
---------
---------
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
INVESTMENT QUAILTY FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
31-Dec-90 0.0233108 10 100.233 $1,002.33
18-Jan-91 0.0340388 10.02 100.574 $1,007.75
28-Feb-91 0.0869417 9.94 101.454 $1,008.45
28-Mar-91 0.0730756 9.73 102.216 $994.56
30-Apr-91 0.0738727 9.77 102.989 $1,006.20
31-May-91 0.0714013 9.8 103.739 $1,016.64
30-Jun-91 0.0708055 9.71 104.495 $1,014.65
31-Jul-91 0.0708340 9.77 105.253 $1,028.32
31-Aug-91 0.0700620 9.94 105.995 $1,053.59
30-Sep-91 0.0698767 10.07 106.731 $1,074.78
31-Oct-91 0.0689960 10.06 107.463 $1,081.08
29-Nov-91 0.0682744 10.04 108.194 $1,086.27
31-Dec-91 0.0675971 10.4 108.897 $1,132.53
31-Jan-92 0.0670521 10.2 109.613 $1,118.05
28-Feb-92 0.0672150 10.25 110.332 $1,130.90
31-Mar-92 0.0661741 10.13 111.053 $1,124.97
30-Apr-92 0.0655011 10.11 111.772 $1,130.01
31-May-92 0.0648634 10.32 112.475 $1,160.74
30-Jun-92 0.0656709 10.40 113.185 $1,177.12
31-Jul-92 0.0674507 10.67 113.901 $1,215.32
31-Aug-92 0.0664295 10.66 114.611 $1,221.75
30-Sep-92 0.0662263 10.68 115.322 $1,231.64
31-Oct-92 0.0657517 10.36 116.054 $1,202.32
30-Nov-92 0.0624711 10.39 116.752 $1,213.05
18-Dec-92 0.0560000 10.45 117.378 $1,226.60
31-Dec-92 0.0625717 10.49 118.078 $1,238.64
31-Jan-93 0.0596269 10.66 118.738 $1,265.75
28-Feb-93 0.0593046 10.92 119.383 $1,303.66
31-Mar-93 0.0558049 10.89 119.995 $1,306.75
30-Apr-93 0.0546519 10.88 120.598 $1,312.11
28-May-93 0.0568929 10.89 121.228 $1,320.17
30-Jun-93 0.0565254 11.13 121.844 $1,356.12
31-Jul-93 0.0553595 11.20 122.446 $1,371.40
31-Aug-93 0.0541883 11.51 123.022 $1,415.98
30-Sep-93 0.0530874 11.44 123.593 $1,413.90
29-Oct-93 0.0522710 11.49 124.155 $1,426.54
15-Nov-93 0.0690000 11.26 124.916 $1,406.55
30-Nov-93 0.0517087 11.19 125.493 $1,404.27
31-Dec-93 0.0548092 11.16 126.109 $1,407.38
31-Jan-94 0.0557617 11.34 126.729 $1,437.11
28-Feb-94 0.0552482 10.89 127.372 $1,387.08
31-Mar-94 0.0562101 10.52 128.053 $1,347.12
29-Apr-94 0.0580023 10.28 128.776 $1,323.82
31-May-94 0.0583310 10.13 129.518 $1,312.02
30-Jun-94 0.0585350 9.98 130.278 $1,300.17
31-Jul-94 0.0583872 10.18 131.025 $1,333.83
31-Aug-94 0.0575916 10.09 131.773 $1,329.59
30-Sep-94 0.0572095 9.79 132.543 $1,297.60
31-Oct-94 0.0581133 9.67 133.340 $1,289.40
<PAGE>
INVESTMENT QUAILTY FUND
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (12/18/90) THROUGH 10/31/94
VALUE AT 10/31/94 = $1,289.40
TOTAL RETURN AT N.A.V. ($1,289.40/$1,000)-1 28.94%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 6.78%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,289.40/($1,000/.9525))-1 22.82%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 5.45%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = $1,289.40/
VALUE ON 10/31/93 =$1,426.54 *1000 $903.87
TOTAL RETURN AT N.A.V. ($903.87/$1,000)-1 -9.61%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -9.61%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($903.87/($1,000/.9525))-1 -13.90%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -13.90%
---------
---------
</TABLE>
<PAGE>
INVESTMENT QUAILTY FUND
TOTAL RETURN CALCULATIONS (CLASS B) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 86.806 $1,000.00
30-Sep-93 0.0357304 11.44 87.077 $996.16
29-Oct-93 0.0452691 11.49 87.420 $1,004.46
15-Nov-93 0.0690000 11.26 87.956 $990.38
30-Nov-93 0.0453907 11.19 88.313 $988.22
31-Dec-93 0.0474903 11.16 88.689 $989.77
31-Jan-94 0.0490653 11.33 89.073 $1,009.20
28-Feb-94 0.0496832 10.89 89.479 $974.43
31-Mar-94 0.0505626 10.52 89.909 $945.84
29-Apr-94 0.0522641 10.28 90.366 $928.96
31-May-94 0.0528240 10.13 90.837 $920.18
30-Jun-94 0.0531958 9.98 91.321 $911.38
31-Jul-94 0.0527719 10.17 91.795 $933.56
31-Aug-94 0.0520130 10.09 92.268 $930.98
30-Sep-94 0.0520540 9.79 92.759 $908.11
31-Oct-94 0.0521171 9.67 93.259 $901.81
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = $901.81
TOTAL RETURN AT N.A.V. ($901.81/$1,000)-1 -9.82%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -8.49%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($901.81-((86.806*9.67)*.04))/$1,000-1 -13.18%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -11.43%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = 901.81/
VALUE ON 10/31/93 = 1,004.46*1000 $897.81
TOTAL RETURN AT N.A.V. ($897.81/$1,000)-1 -10.22%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -10.22%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($897.81-((87.032*9.67)*.05)/($1,000)-1 -14.43%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -14.43%
---------
---------
</TABLE>
<PAGE>
INVESTMENT QUAILTY FUND
TOTAL RETURN CALCULATIONS (CLASS C) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 86.806 $1,000.00
30-Sep-93 0.0457680 11.44 87.153 $997.03
29-Oct-93 0.0464050 11.49 87.505 $1,005.43
15-Nov-93 0.0690000 11.26 88.041 $991.34
30-Nov-93 0.0459893 11.19 88.403 $989.23
31-Dec-93 0.0433137 11.16 88.746 $990.41
31-Jan-94 0.0474377 11.34 89.117 $1,010.59
28-Feb-94 0.0499848 10.89 89.526 $974.94
31-Mar-94 0.0507236 10.52 89.958 $946.36
29-Apr-94 0.0528436 10.28 90.420 $929.52
31-May-94 0.0531770 10.13 90.895 $920.77
30-Jun-94 0.0533870 9.98 91.381 $911.98
31-Jul-94 0.0531389 10.18 91.858 $935.11
31-Aug-94 0.0523013 10.09 92.334 $931.65
30-Sep-94 0.0521222 9.80 92.825 $909.69
31-Oct-94 0.0535897 9.67 93.339 $902.59
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = $902.59
TOTAL RETURN AT N.A.V. ($902.59/$1,000)-1 -9.74%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -8.43%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($902.59/$1,000)-1 -9.74%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -8.43%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 =902.59/
VALUE ON 10/31/93= 1005.43 *1000 $897.72
TOTAL RETURN AT N.A.V. ($897.72/$1,000)-1 -10.23%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -10.23%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
(($897.72-((87.032*9.67)*.01)))/$1,000)-1 -11.07%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -11.07%
---------
---------
</TABLE>
<PAGE>
INVESTMENT QUALITY INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
S.E.C. 30 DAY YIELD CALCULATION (CLASS A)
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the max. off. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / price on 7/31/94 + 1 and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ---------------------- ------------- -------------- ----------------
2 * ( $290,227.88 / 4930646.659 * $10.15 + 1) (6) -1 = 7.06% 6.79%
S.E.C. 30 DAY YIELD CALCULATION (CLASS B)
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the N.A.V. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / on 7/31/94 + 1) and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ------------------- ------------- -------------- ----------------
2 * ( $34,741.17 / 644627.824 * $9.67 + 1) (6) -1 = 6.78% 6.49%
S.E.C. 30 DAY YIELD CALCULATION (CLASS C)
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the N.A.V. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / on 7/31/94 + 1) and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ------------------- ------------- -------------- ----------------
2 * ( $14,592.86 / 263982.736 * $9.67 + 1) (6) -1 = 6.96% 6.67%
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 87.260 $1,000.00
16-Jun-88 0.0924561 11.5 87.962 $1,011.56
21-Jul-88 0.0825247 11.45 88.596 $1,014.42
18-Aug-88 0.1295059 11.29 89.612 $1,011.72
15-Sep-88 0.0722555 11.43 90.178 $1,030.73
20-Oct-88 0.0908535 11.44 90.894 $1,039.83
17-Nov-88 0.1158984 11.33 91.824 $1,040.37
15-Dec-88 0.0701244 11.19 92.399 $1,033.94
30-Dec-88 0.0372820 11.22 92.706 $1,040.16
19-Jan-89 0.0494058 11.28 93.112 $1,050.30
16-Feb-89 0.0732909 11.2 93.721 $1,049.68
22-Feb-89 0.0565275 11.14 94.197 $1,049.35
16-Mar-89 0.0587777 11.07 94.697 $1,048.30
20-Apr-89 0.0924154 11.1 95.485 $1,059.88
18-May-89 0.0733680 11.27 96.107 $1,083.13
15-Jun-89 0.0723649 11.37 96.719 $1,099.70
20-Jul-89 0.0909410 11.43 97.489 $1,114.30
20-Aug-89 0.0792968 11.34 98.171 $1,113.26
20-Sep-89 0.0750014 11.42 98.816 $1,128.48
20-Oct-89 0.0750000 11.46 99.463 $1,139.85
13-Nov-89 0.1310000 11.48 100.598 $1,154.87
20-Dec-89 0.0750000 11.52 101.253 $1,166.43
29-Dec-89 0.0266134 11.48 101.488 $1,165.08
20-Jan-90 0.0483866 11.42 101.918 $1,163.90
20-Feb-90 0.1150000 11.19 102.965 $1,152.18
20-Mar-90 0.0750007 11.25 103.651 $1,166.07
20-Apr-90 0.0750000 11.09 104.352 $1,157.26
20-May-90 0.0920000 11.19 105.210 $1,177.30
20-Jun-90 0.0750000 11.28 105.910 $1,194.66
20-Jul-90 0.0750000 11.37 106.609 $1,212.14
20-Aug-90 0.0820000 11.26 107.385 $1,209.16
20-Sep-90 0.0750000 11.24 108.102 $1,215.07
19-Oct-90 0.0750000 11.36 108.816 $1,236.15
20-Nov-90 0.1241000 11.46 109.994 $1,260.53
20-Dec-90 0.0750000 11.55 110.708 $1,278.68
31-Dec-90 0.0287131 11.56 110.983 $1,282.96
18-Jan-91 0.0483869 11.6 111.446 $1,292.77
20-Feb-91 0.0750000 11.72 112.159 $1,314.50
20-Mar-91 0.0750000 11.52 112.889 $1,300.48
20-Apr-91 0.0750000 11.56 113.621 $1,313.46
20-May-91 0.0950000 11.57 114.554 $1,325.39
20-Jun-91 0.0700000 11.5 115.251 $1,325.39
20-Jul-91 0.0700000 11.56 115.949 $1,340.37
20-Aug-91 0.0950000 11.64 116.895 $1,360.66
20-Sep-91 0.0700000 11.77 117.590 $1,384.03
20-Oct-91 0.1150000 11.74 118.742 $1,394.03
20-Nov-91 0.0620000 11.83 119.364 $1,412.08
20-Dec-91 0.0620000 11.97 119.982 $1,436.18
31-Dec-91 0.0749000 11.98 120.732 $1,446.37
20-Jan-92 0.0400000 11.8 121.141 $1,429.46
20-Feb-92 0.0620000 11.66 121.785 $1,420.01
20-Mar-92 0.0620000 11.53 122.440 $1,411.73
20-Apr-92 0.0620000 11.62 123.093 $1,430.34
20-May-92 0.0620000 11.78 123.741 $1,457.67
20-Jun-92 0.0620000 11.82 124.390 $1,470.29
20-Jul-92 0.0620000 11.96 125.035 $1,495.42
20-Aug-92 0.0620000 12.08 125.677 $1,518.18
<PAGE>
20-Sep-92 0.0620000 12.07 126.323 $1,524.72
20-Oct-92 0.0620000 11.89 126.982 $1,509.82
20-Nov-92 0.0620000 11.89 127.644 $1,517.69
18-Dec-92 0.0360000 11.90 128.030 $1,523.56
20-Dec-92 0.0620000 11.90 128.697 $1,531.49
31-Dec-92 0.0220000 11.93 128.934 $1,538.18
31-Jan-93 0.0620000 12.04 129.598 $1,560.36
28-Feb-93 0.0820000 12.09 130.477 $1,577.47
31-Mar-93 0.0580000 12.08 131.103 $1,583.72
30-Apr-93 0.0580000 12.10 131.731 $1,593.95
28-May-93 0.1180000 12.00 133.026 $1,596.31
30-Jun-93 0.0520000 12.11 133.597 $1,617.86
31-Jul-93 0.0520000 12.09 134.172 $1,622.14
31-Aug-93 0.0520000 12.16 134.746 $1,638.51
01-Sep-93 0.0300000 12.13 135.079 $1,638.51
30-Sep-93 0.0520000 12.11 135.659 $1,642.83
31-Oct-93 0.0494998 12.08 136.215 $1,645.48
30-Nov-93 0.1050000 11.87 137.420 $1,631.18
13-Dec-93 0.1084000 11.79 138.683 $1,635.07
31-Dec-93 0.0465000 11.79 139.230 $1,641.52
31-Jan-94 0.0450000 11.88 139.757 $1,660.31
28-Feb-94 0.0654904 11.65 140.543 $1,637.33
31-Mar-94 0.0450000 11.31 141.102 $1,595.86
29-Apr-94 0.0525241 11.17 141.765 $1,583.52
31-May-94 0.0783565 11.13 142.763 $1,588.95
30-Jun-94 0.0493693 10.98 143.405 $1,574.59
31-Jul-94 0.0513040 11.13 144.066 $1,603.45
31-Aug-94 0.0521870 11.09 144.744 $1,605.21
30-Sep-94 0.0518999 10.87 145.435 $1,580.88
31-Oct-94 0.0549877 10.79 146.176 $1,577.24
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (5/06/88) THROUGH 10/31/94
VALUE AT 10/31/94 = $1,577.24
TOTAL RETURN AT N.A.V. ($1,577.24/$1,000)-1 57.72%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 7.27%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,577.24/($1,000/.9525))-1 50.23%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 6.47%
---------
---------
RETURNS FOR THE FIVE YEARS ENDED 10/31/94
VALUE AT 10/31/94 =$1,577.24)/
VALUE ON 10/31/89 =$1,146.46 *1000 $1,375.75
TOTAL RETURN AT N.A.V. ($1,375.75/$1,000)-1 37.57%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 6.58%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,375.75/($1,000/.9525))-1 31.04%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 5.55%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = $1,577.24/
VALUE ON 10/31/93 =$1,645.45 *1000 $958.55
TOTAL RETURN AT N.A.V. ($958.55/$1,000)-1 -4.15%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -4.15%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($958.55/($1,000/.9525))-1 -8.70%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -8.70%
---------
---------
</TABLE>
<PAGE>
TOTAL RETURN CALCULATIONS (CLASS B) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 82.440 $1,000.00
30-Sep-93 0.0363947 12.11 82.688 $1,001.35
31-Oct-93 0.0483705 12.08 83.019 $1,002.87
30-Nov-93 0.1004463 11.87 83.722 $993.78
13-Dec-93 0.1084000 11.78 84.492 $995.32
31-Dec-93 0.0401874 11.78 84.780 $998.71
31-Jan-94 0.0408895 11.87 85.072 $1,009.80
28-Feb-94 0.0550721 11.64 85.474 $994.92
31-Mar-94 0.0416902 11.29 85.790 $968.57
29-Apr-94 0.0415863 11.16 86.110 $960.99
31-May-94 0.0714031 11.12 86.663 $963.69
30-Jun-94 0.0427513 10.97 87.001 $954.40
31-Jul-94 0.0440860 11.12 87.346 $971.29
31-Aug-94 0.0452747 11.08 87.703 $971.75
30-Sep-94 0.0453797 10.86 88.069 $956.43
31-Oct-94 0.0464093 10.79 88.448 $954.35
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = $954.35
TOTAL RETURN AT N.A.V. ($954.35/$1,000)-1 -4.57%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -3.93%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($954.35-((82.440*10.79)*.04))/$1,000-1 -8.12%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -7.02%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 = 954.35/
VALUE ON 10/31/93 = 1,002.87*1000 $951.62
TOTAL RETURN AT N.A.V. ($951.62/$1,000)-1 -4.84%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -4.84%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($951.62-((82.781*10.79)*.05)/($1,000)-1 -9.30%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -9.30%
---------
---------
</TABLE>
<PAGE>
TOTAL RETURN CALCULATIONS (CLASS C) THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 82.440 $1,000.00
30-Sep-93 0.0417115 12.11 82.724 $1,001.79
31-Oct-93 0.0494870 12.08 83.063 $1,003.40
30-Nov-93 0.1009740 11.87 83.770 $994.35
13-Dec-93 0.1084000 11.77 84.542 $995.06
31-Dec-93 0.0402247 11.78 84.831 $999.31
31-Jan-94 0.0398122 11.87 85.116 $1,010.33
28-Feb-94 0.0545079 11.65 85.514 $996.24
31-Mar-94 0.0422752 11.30 85.834 $969.92
29-Apr-94 0.0426573 11.16 86.162 $961.57
31-May-94 0.0715029 11.12 86.716 $964.28
30-Jun-94 0.0428367 10.97 87.055 $954.99
31-Jul-94 0.0447065 11.13 87.405 $972.82
31-Aug-94 0.0455444 11.08 87.764 $972.43
30-Sep-94 0.0454269 10.86 88.131 $957.10
31-Oct-94 0.0438922 10.79 88.490 $954.81
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (9/02/93) THROUGH 10/31/94
VALUE AT 10/31/94 = $954.81
TOTAL RETURN AT N.A.V. ($954.81/$1,000)-1 -4.52%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -3.89%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($954.81/$1,000)-1 -4.52%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -3.89%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 10/31/94 =954.81/
VALUE ON 10/31/93= 1003.40 *1000 $951.57
TOTAL RETURN AT N.A.V. ($951.57/$1,000)-1 -4.84%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. -4.84%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
(($951.57-((82.781*10.79)*.01))/$1,000)-1 -5.74%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -5.74%
---------
---------
</TABLE>
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<S> <C> <C> <C> <C> <C>
S.E.C. 30 DAY YIELD CALCULATION (CLASS A)
Net Income for the Average shares out. Raised to S.E.C 30 Day
30 days ended mult. by the max. off. the 6th power Dividend Yield
2 * ( 07/31/94 / price on 7/31/94 + 1 and minus 1 = (with waiver)
- -------------- ------------------ ---------------------- ------------- --------------
2 * ( $655,097.12 / 11714458.914 * $11.33 + 1) (6) -1 = 6.00%
S.E.C. 30 DAY YIELD CALCULATION (CLASS B)
Net Income for the Average shares out. Raised to S.E.C 30 Day
30 days ended mult. by the N.A.V. the 6th power Dividend Yield
2 * ( 07/31/94 / on 7/31/94 + 1) and minus 1 = (with waiver)
- -------------- ------------------ ------------------- ------------- --------------
2 * ( $31,060.14 / 614051.667 * $10.79 + 1) (6) -1 = 5.69%
S.E.C. 30 DAY YIELD CALCULATION (CLASS C)
Net Income for the Average shares out. Raised to S.E.C 30 Day
30 days ended mult. by the N.A.V. the 6th power Dividend Yield
2 * ( 07/31/94 / on 7/31/94 + 1) and minus 1 = (with waiver)
- -------------- ------------------ ------------------- ------------- --------------
2 * ( $5,442.15 / 1121847.148 * $10.79 + 1) (6) -1 = 5.46%
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
NATIONAL TAX-EXEMPT FUND
TOTAL RETURN CALCULATIONS THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
20-Sep-90 0.0250674 9.9 100.253
19-Oct-90 0.0491296 9.91 100.750
20-Nov-90 0.06125 10.03 101.365
20-Dec-90 0.0602789 10.04 101.974
31-Dec-90 0.0225704 10.04 102.203 $1,026.12
18-Jan-91 0.0394722 10.05 102.604 $1,031.17
28-Feb-91 0.0828524 10.12 103.444 $1,046.85
28-Mar-91 0.0611140 10.1 104.070 $1,051.11
30-Apr-91 0.0608213 10.18 104.692 $1,065.76
31-May-91 0.0615354 10.22 105.322 $1,076.39
30-Jun-91 0.0611272 10.14 105.957 $1,074.40
31-Jul-91 0.0624808 10.22 106.605 $1,089.50
31-Aug-91 0.0624200 10.28 107.252 $1,102.55
30-Sep-91 0.0627601 10.35 107.902 $1,116.79
31-Oct-91 0.0616436 10.41 108.541 $1,129.91
29-Nov-91 0.0668306 10.37 109.241 $1,132.83
31-Dec-91 0.0587542 10.54 109.850 $1,157.82
31-Jan-92 0.0605730 10.46 110.486 $1,155.68
28-Feb-92 0.0604627 10.44 111.126 $1,160.16
31-Mar-92 0.0602420 10.4 111.770 $1,162.41
30-Apr-92 0.0595536 10.46 112.406 $1,175.77
31-May-92 0.0600870 10.58 113.044 $1,196.01
30-Jun-92 0.0583288 10.74 113.658 $1,220.69
31-Jul-92 0.0602234 11.08 114.276 $1,266.18
31-Aug-92 0.0592677 10.84 114.901 $1,245.53
30-Sep-92 0.0594646 10.84 115.531 $1,252.36
31-Oct-92 0.0585710 10.59 116.170 $1,230.24
30-Nov-92 0.0562934 10.82 116.774 $1,263.49
18-Dec-92 0.0170000 10.83 116.957 $1,266.64
31-Dec-92 0.0560643 10.87 117.560 $1,277.88
31-Jan-93 0.0570270 10.95 118.172 $1,293.98
28-Feb-93 0.0576717 11.34 118.773 $1,346.89
31-Mar-93 0.0557123 11.12 119.368 $1,327.37
30-Apr-93 0.0549780 11.19 119.954 $1,342.29
28-May-93 0.0544821 11.21 120.537 $1,351.22
30-Jun-93 0.0547022 11.36 121.117 $1,375.89
31-Jul-93 0.0536045 11.29 121.692 $1,373.90
31-Aug-93 0.0541918 11.54 122.263 $1,410.92
30-Sep-93 0.0538712 11.63 122.829 $1,428.50
29-Oct-93 0.0524521 11.61 123.384 $1,432.49
22-Nov-93 0.2392000 11.15 126.031 $1,405.25
30-Nov-93 0.0502686 11.19 126.597 $1,416.62
31-Dec-93 0.0501021 11.36 127.155 $1,444.48
31-Jan-94 0.0510018 11.46 127.721 $1,463.68
28-Feb-94 0.0514273 11.11 128.312 $1,425.55
31-Mar-94 0.0502094 10.58 128.921 $1,363.98
29-Apr-94 0.0504564 10.57 129.536 $1,369.20
31-May-94 0.0500931 10.64 130.146 $1,384.75
30-Jun-94 0.0494959 10.52 130.758 $1,375.57
31-Jul-94 0.0486475 10.67 131.354 $1,401.55
<PAGE>
NATIONAL TAX-EXEMPT FUND
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (8/14/90) THROUGH 10/31/94
VALUE AT 7/31/94 = $1,401.55
TOTAL RETURN AT N.A.V. ($1,401.55/$1,000)-1 40.16%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 8.88%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,401.55/($1,000/.9525))-1 33.50%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 7.55%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 7/31/94 = $1,401.55/
VALUE ON 7/31/93 =$1,373.95 *1000 $1,020.09
TOTAL RETURN AT N.A.V. ($1,020.09/$1,000)-1 2.01%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 2.01%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1020.09/($1,000/.9525))-1 -2.84%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -2.84%
---------
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S.E.C. 30 DAY YIELD CALCULATION AND TAX EQUIVALENT YIELDS
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the max. off. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / price on 7/31/94 + 1 and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ---------------------- ------------- -------------- ----------------
2 * ( $427,844.91 / 8,738,860.834 * $11.20 + 1) (6) -1 = 5.3% 5.27%
<CAPTION>
<S> <C> <C> <C> <C>
Federal
Tax Rate 28% 31% 36% 39.6%
- -------- --------- ---------- ---------- ----------
7.4% 7.7% 8.3% 8.8%
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
CALIFORNIA TAX-EXEMPT FUND
TOTAL RETURN CALCULATIONS THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
20-Sep-90 0.039476 9.89 100.399
19-Oct-90 0.0532755 9.93 100.938
20-Nov-90 0.0581975 10.12 101.518
20-Dec-90 0.0537029 10.1 102.058
31-Dec-90 0.0204633 10.1 102.265 $1,032.88
18-Jan-91 0.0367033 10.11 102.636 $1,037.65
28-Feb-91 0.0780258 10.13 103.427 $1,047.72
28-Mar-91 0.0586903 10.08 104.029 $1,048.61
30-Apr-91 0.0579870 10.19 104.621 $1,066.09
31-May-91 0.0592298 10.23 105.227 $1,076.47
30-Jun-91 0.0583608 10.15 105.832 $1,074.19
31-Jul-91 0.0593070 10.23 106.446 $1,088.94
31-Aug-91 0.0586399 10.3 107.052 $1,102.64
30-Sep-91 0.0601479 10.39 107.672 $1,118.71
31-Oct-91 0.0582460 10.4 108.275 $1,126.06
29-Nov-91 0.0579361 10.35 108.881 $1,126.92
31-Dec-91 0.0586129 10.49 109.489 $1,148.54
31-Jan-92 0.056575 10.43 110.083 $1,148.17
28-Feb-92 0.0537850 10.41 110.652 $1,151.89
31-Mar-92 0.0571200 10.38 111.261 $1,154.89
30-Apr-92 0.0573300 10.4 111.874 $1,163.49
31-May-92 0.0575925 10.45 112.491 $1,175.53
30-Jun-92 0.0560309 10.58 113.087 $1,196.46
31-Jul-92 0.0567983 10.86 113.678 $1,234.54
31-Aug-92 0.0556766 10.64 114.273 $1,215.86
30-Sep-92 0.0562846 10.64 114.877 $1,222.29
31-Oct-92 0.0555284 10.34 115.494 $1,194.21
30-Nov-92 0.0550263 10.60 116.094 $1,230.60
18-Dec-92 0.0120000 10.64 116.225 $1,236.63
31-Dec-92 0.0552317 10.68 116.826 $1,247.70
31-Jan-93 0.0544269 10.72 117.419 $1,258.73
28-Feb-93 0.0549269 11.13 117.998 $1,313.32
31-Mar-93 0.0520085 10.94 118.559 $1,297.04
30-Apr-93 0.0507352 11.04 119.104 $1,314.91
28-May-93 0.0512010 11.05 119.656 $1,322.20
30-Jun-93 0.0507791 11.20 120.199 $1,346.23
31-Jul-93 0.0503529 11.15 120.742 $1,346.27
31-Aug-93 0.0497843 11.40 121.269 $1,382.47
30-Sep-93 0.0497761 11.51 121.793 $1,401.84
29-Oct-93 0.0488246 11.49 122.311 $1,405.35
10-Nov-93 0.1560000 11.15 124.022 $1,382.85
30-Nov-93 0.0463194 11.11 124.539 $1,383.63
31-Dec-93 0.0464019 11.27 125.052 $1,409.34
31-Jan-94 0.0467233 11.38 125.565 $1,428.93
28-Feb-94 0.0475142 11.06 126.104 $1,394.71
31-Mar-94 0.0467029 10.55 126.662 $1,336.28
29-Apr-94 0.0471709 10.48 127.232 $1,333.39
31-May-94 0.0474112 10.55 127.804 $1,348.33
30-Jun-94 0.0472145 10.42 128.383 $1,337.75
31-Jul-94 0.0468602 10.60 128.951 $1,366.88
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (8/14/90) THROUGH 10/31/94
VALUE AT 7/31/94 = $1,366.88
TOTAL RETURN AT N.A.V. ($1,366.88/$1,000)-1 36.69%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 8.20%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,366.88/($1,000/.9525))-1 30.20%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 6.88%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 7/31/94 = $1,366.88/
VALUE ON 7/31/93 =$1,346.34 *1000 $1,015.26
TOTAL RETURN AT N.A.V. ($1,015.26/$1,000)-1 1.53%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 1.53%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1015.26/($1,000/.9525))-1 -3.30%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -3.30%
---------
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S.E.C. 30 DAY YIELD CALCULATION AND TAX EQUIVALENT YIELDS *
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the max. off. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / price on 7/31/94 + 1 and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ---------------------- ------------- -------------- ----------------
2 * ( $132,152.78 / 2767180.27 * $11.13 + 1) (6) -1 = 5.2% 5.13%
<CAPTION>
<S> <C> <C> <C> <C>
Federal
Tax Rate 28% 31% 36% 39.6%
- -------- --------- ---------- ---------- ----------
8.0% 8.3% 9.0% 9.5%
<FN>
* Tax equivalent yield assumes a state tax rate of 9.3%.
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
NEW YORK TAX-EXEMPT FUND
TOTAL RETURN CALCULATIONS THROUGH 10/31/94
DIVIDENDS & INVESTMENT
DISTRIBUTIONS REINVESTMENT SHARES VALUE
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
20-Sep-90 0.0428646 9.79 100.438
19-Oct-90 0.0397111 9.69 100.850
20-Nov-90 0.0505618 9.84 101.368
20-Dec-90 0.0590007 9.81 101.978
31-Dec-90 0.0220567 9.81 102.207 $1,002.65
18-Jan-91 0.0400978 9.84 102.623 $1,009.81
28-Feb-91 0.0818809 9.88 103.473 $1,022.31
28-Mar-91 0.0584113 9.9 104.084 $1,030.43
30-Apr-91 0.0604425 9.99 104.714 $1,046.09
31-May-91 0.0609914 9.99 105.353 $1,052.48
30-Jun-91 0.0595976 9.93 105.985 $1,052.43
31-Jul-91 0.0604585 10.05 106.623 $1,071.56
31-Aug-91 0.0606408 10.13 107.261 $1,086.55
30-Sep-91 0.0602190 10.24 107.892 $1,104.81
31-Oct-91 0.0596951 10.26 108.520 $1,113.42
29-Nov-91 0.0597279 10.21 109.155 $1,114.47
31-Dec-91 0.0598176 10.36 109.785 $1,137.37
31-Jan-92 0.057414 10.22 110.402 $1,128.31
28-Feb-92 0.0574055 10.22 111.022 $1,134.64
31-Mar-92 0.0573520 10.23 111.644 $1,142.12
30-Apr-92 0.0578335 10.3 112.271 $1,156.39
31-May-92 0.0584220 10.4 112.902 $1,174.18
30-Jun-92 0.0565501 10.60 113.504 $1,203.14
31-Jul-92 0.0589697 10.98 114.114 $1,252.97
31-Aug-92 0.0589550 10.72 114.742 $1,230.03
30-Sep-92 0.0578543 10.66 115.365 $1,229.79
31-Oct-92 0.0570083 10.45 115.994 $1,212.14
30-Nov-92 0.0544250 10.67 116.586 $1,243.97
18-Dec-92 0.0340000 10.69 116.957 $1,250.27
31-Dec-92 0.0540409 10.73 117.546 $1,261.27
31-Jan-93 0.0548173 10.81 118.142 $1,277.12
28-Feb-93 0.0546103 11.20 118.718 $1,329.64
31-Mar-93 0.0531409 11.04 119.289 $1,316.95
30-Apr-93 0.0525318 11.13 119.852 $1,333.95
28-May-93 0.0513163 11.17 120.403 $1,344.90
30-Jun-93 0.0518141 11.32 120.954 $1,369.20
31-Jul-93 0.0517381 11.26 121.510 $1,368.20
31-Aug-93 0.0508939 11.48 122.049 $1,401.12
30-Sep-93 0.0508733 11.57 122.586 $1,418.32
29-Oct-93 0.0499892 11.55 123.117 $1,422.00
10-Nov-93 0.0110000 11.39 123.236 $1,403.66
30-Nov-93 0.0483016 11.34 123.761 $1,403.45
31-Dec-93 0.0477687 11.54 124.273 $1,434.11
31-Jan-94 0.0484430 11.63 124.791 $1,451.32
28-Feb-94 0.0487411 11.30 125.329 $1,416.22
31-Mar-94 0.0487849 10.73 125.899 $1,350.90
29-Apr-94 0.0472232 10.70 126.455 $1,353.07
31-May-94 0.0471240 10.79 127.007 $1,370.41
30-Jun-94 0.0481099 10.67 127.580 $1,361.28
31-Jul-94 0.0476978 10.82 128.142 $1,386.50
<PAGE>
NEW YORK TAX-EXEMPT FUND
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (8/14/90) THROUGH 10/31/94
VALUE AT 7/31/94 = $1,386.50
TOTAL RETURN AT N.A.V. ($1,386.50/$1,000)-1 38.65%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 8.59%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1,386.50/($1,000/.9525))-1 32.06%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE 7.26%
---------
---------
RETURNS FOR THE FISCAL YEAR ENDED 10/31/94
VALUE AT 7/31/94 = $1,386.50/
VALUE ON 7/31/93 =$1,367.92 *1000 $1,013.58
TOTAL RETURN AT N.A.V. ($1,013.58/$1,000)-1 1.36%
---------
---------
AVERAGE ANNUAL RETURN AT N.A.V. 1.36%
---------
---------
TOTAL RETURN ASSUMING MAXIMUM SALES CHARGE
($1013.58/($1,000/.9525))-1 -3.46%
---------
---------
AVERAGE ANNUAL RETURN ASSUMING MAXIMUM SALES CHARGE -3.46%
---------
---------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S.E.C. 30 DAY YIELD CALCULATION AND TAX EQUIVALENT YIELDS *
Net Income for the Average shares out. Raised to S.E.C 30 Day S.E.C 30 Day
30 days ended mult. by the max. off. the 6th power Dividend Yield Dividend Yield
2 * ( 07/31/94 / price on 7/31/94 + 1 and minus 1 = (with waiver) (without waiver)
- -------------- ------------------ ---------------------- ------------- -------------- ----------------
2 * ( $141,968.50 / 2916405.226 * $11.36 + 1) (6) -1 = 5.2% 4.96%
<CAPTION>
<S> <C> <C> <C> <C>
Federal
Tax Rate 28% 31% 36% 39.6%
- -------- --------- ---------- ---------- ----------
8.1% 8.5% 9.2% 9.7%
<FN>
* Tax equivalent yield assumes a state tax rate of 7.875% and a New York City tax rate of 3.4%.
</TABLE>
<PAGE>
QUEST FOR VALUE FAMILY OF FUNDS
OFFICERS FUND
TOTAL RETURN CALCULATIONS (CLASS A) THROUGH 10/31/94
DIVIDENDS &
DISTRIBUTIONS REINVESTMENT SHARES INVESTMENT
DATE PER SHARE N.A.V. PER SHARE -------- ----------
- --------- ------------- ---------------- 100.000 $1,000.00
30-Dec-94 0.0366 10.13 100.361
<TABLE>
<S> <C>
RETURNS FROM COMMENCEMENT OF OPERATIONS (11/08/94) THROUGH 4/30/95
VALUE AT 4/30/95 = N.A.V. ON 4/30/95 ($11.06) * SHARES (100.361) $1,109.99
TOTAL RETURN AT N.A.V. ($1,109.99/$1,000)-1 11.00%
---------
---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 021
<NAME> SMALL CAPITALIZATION FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 129,355,879
<INVESTMENTS-AT-VALUE> 134,902,255
<RECEIVABLES> 5,429,347
<ASSETS-OTHER> 363,684
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,695,286
<PAYABLE-FOR-SECURITIES> 676,409
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 429,077
<TOTAL-LIABILITIES> 1,105,486
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,914,925
<SHARES-COMMON-STOCK> 7,353,210
<SHARES-COMMON-PRIOR> 5,933,762
<ACCUMULATED-NII-CURRENT> (238,336)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,366,835
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,546,376
<NET-ASSETS> 139,589,800
<DIVIDEND-INCOME> 1,319,209
<INTEREST-INCOME> 874,396
<OTHER-INCOME> 0
<EXPENSES-NET> (2,431,941)
<NET-INVESTMENT-INCOME> (238,336)
<REALIZED-GAINS-CURRENT> 3,366,835
<APPREC-INCREASE-CURRENT> (3,118,979)
<NET-CHANGE-FROM-OPS> 9,520
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,036,736)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,804,081
<NUMBER-OF-SHARES-REDEEMED> (6,835,042)
<SHARES-REINVESTED> 450,409
<NET-CHANGE-IN-ASSETS> 32,703,135
<ACCUMULATED-NII-PRIOR> (315,524)
<ACCUMULATED-GAINS-PRIOR> 8,209,176
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,260,578
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,431,941
<AVERAGE-NET-ASSETS> 126,057,777
<PER-SHARE-NAV-BEGIN> 17.68
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.33
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994.
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 022
<NAME> SMALL CAPITALIZATION FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 129,355,879
<INVESTMENTS-AT-VALUE> 134,902,255
<RECEIVABLES> 5,429,347
<ASSETS-OTHER> 363,684
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,695,286
<PAYABLE-FOR-SECURITIES> 676,409
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 429,077
<TOTAL-LIABILITIES> 1,105,486
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,914,925
<SHARES-COMMON-STOCK> 994,342
<SHARES-COMMON-PRIOR> 99,303
<ACCUMULATED-NII-CURRENT> (238,336)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,366,835
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,546,376
<NET-ASSETS> 139,589,800
<DIVIDEND-INCOME> 1,319,209
<INTEREST-INCOME> 874,396
<OTHER-INCOME> 0
<EXPENSES-NET> (2,431,941)
<NET-INVESTMENT-INCOME> (238,336)
<REALIZED-GAINS-CURRENT> 3,366,835
<APPREC-INCREASE-CURRENT> (3,118,979)
<NET-CHANGE-FROM-OPS> 9,520
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (160,831)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 936,328
<NUMBER-OF-SHARES-REDEEMED> (50,575)
<SHARES-REINVESTED> 9,286
<NET-CHANGE-IN-ASSETS> 32,703,135
<ACCUMULATED-NII-PRIOR> (315,524)
<ACCUMULATED-GAINS-PRIOR> 8,209,176
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,260,578
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,431,941
<AVERAGE-NET-ASSETS> 126,057,777
<PER-SHARE-NAV-BEGIN> 17.66
<PER-SHARE-NII> (.11)
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.24
<EXPENSE-RATIO> 2.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 023
<NAME> SMALL CAPITALIZATION FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 129,355,879
<INVESTMENTS-AT-VALUE> 134,902,255
<RECEIVABLES> 5,429,347
<ASSETS-OTHER> 363,684
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140,695,286
<PAYABLE-FOR-SECURITIES> 676,409
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 429,077
<TOTAL-LIABILITIES> 1,105,486
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,914,925
<SHARES-COMMON-STOCK> 206,006
<SHARES-COMMON-PRIOR> 13,299
<ACCUMULATED-NII-CURRENT> (238,336)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,366,835
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,546,376
<NET-ASSETS> 139,589,800
<DIVIDEND-INCOME> 1,319,209
<INTEREST-INCOME> 874,396
<OTHER-INCOME> 0
<EXPENSES-NET> (2,431,941)
<NET-INVESTMENT-INCOME> (238,336)
<REALIZED-GAINS-CURRENT> 3,366,835
<APPREC-INCREASE-CURRENT> (3,118,979)
<NET-CHANGE-FROM-OPS> 9,520
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (19,543)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 205,454
<NUMBER-OF-SHARES-REDEEMED> (13,923)
<SHARES-REINVESTED> 1,176
<NET-CHANGE-IN-ASSETS> 32,703,135
<ACCUMULATED-NII-PRIOR> (315,524)
<ACCUMULATED-GAINS-PRIOR> 8,209,176
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,260,578
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,431,941
<AVERAGE-NET-ASSETS> 126,057,777
<PER-SHARE-NAV-BEGIN> 17.67
<PER-SHARE-NII> (.13)
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.23
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 031
<NAME> OPPORTUNITY FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 198,905,860
<INVESTMENTS-AT-VALUE> 213,286,283
<RECEIVABLES> 2,551,938
<ASSETS-OTHER> 514,523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216,352,744
<PAYABLE-FOR-SECURITIES> 2,049,446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 357,553
<TOTAL-LIABILITIES> 2,406,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 191,134,964
<SHARES-COMMON-STOCK> 8,295,463
<SHARES-COMMON-PRIOR> 6,798,529
<ACCUMULATED-NII-CURRENT> 1,291,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,139,720
<OVERDISTRIBUTION-GAINS> (1,229)
<ACCUM-APPREC-OR-DEPREC> 14,380,423
<NET-ASSETS> 213,945,745
<DIVIDEND-INCOME> 3,199,658
<INTEREST-INCOME> 1,078,724
<OTHER-INCOME> 0
<EXPENSES-NET> 2,881,018
<NET-INVESTMENT-INCOME> 1,397,364
<REALIZED-GAINS-CURRENT> 7,139,720
<APPREC-INCREASE-CURRENT> 4,721,481
<NET-CHANGE-FROM-OPS> 13,258,565
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,269,483)
<DISTRIBUTIONS-OF-GAINS> (1,497,052)
<DISTRIBUTIONS-OTHER> (1,196)
<NUMBER-OF-SHARES-SOLD> 4,781,210
<NUMBER-OF-SHARES-REDEEMED> (3,470,990)
<SHARES-REINVESTED> 186,714
<NET-CHANGE-IN-ASSETS> 84,292,784
<ACCUMULATED-NII-PRIOR> 2,283,342
<ACCUMULATED-GAINS-PRIOR> 1,534,918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,555,477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,881,018
<AVERAGE-NET-ASSETS> 155,547,705
<PER-SHARE-NAV-BEGIN> 18.71
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 1.35
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> (.22)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.69
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY FOR FUNDS
<SERIES>
<NUMBER> 032
<NAME> OPPORTUNITY FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 198,905,860
<INVESTMENTS-AT-VALUE> 213,286,283
<RECEIVABLES> 2,551,938
<ASSETS-OTHER> 514,523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216,352,744
<PAYABLE-FOR-SECURITIES> 2,049,446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 357,553
<TOTAL-LIABILITIES> 2,406,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 191,134,964
<SHARES-COMMON-STOCK> 2,211,377
<SHARES-COMMON-PRIOR> 113,068
<ACCUMULATED-NII-CURRENT> 1,291,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,139,720
<OVERDISTRIBUTION-GAINS> (1,229)
<ACCUM-APPREC-OR-DEPREC> 14,380,423
<NET-ASSETS> 213,945,745
<DIVIDEND-INCOME> 3,199,658
<INTEREST-INCOME> 1,078,724
<OTHER-INCOME> 0
<EXPENSES-NET> 2,881,018
<NET-INVESTMENT-INCOME> 1,397,364
<REALIZED-GAINS-CURRENT> 7,139,720
<APPREC-INCREASE-CURRENT> 4,721,481
<NET-CHANGE-FROM-OPS> 13,258,565
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (98,258)
<DISTRIBUTIONS-OF-GAINS> (30,460)
<DISTRIBUTIONS-OTHER> (24)
<NUMBER-OF-SHARES-SOLD> 2,145,988
<NUMBER-OF-SHARES-REDEEMED> (54,500)
<SHARES-REINVESTED> 6,821
<NET-CHANGE-IN-ASSETS> 84,292,784
<ACCUMULATED-NII-PRIOR> 2,283,342
<ACCUMULATED-GAINS-PRIOR> 1,534,918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,555,477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,881,018
<AVERAGE-NET-ASSETS> 155,547,705
<PER-SHARE-NAV-BEGIN> 18.70
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.34
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> (.22)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.59
<EXPENSE-RATIO> 2.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 033
<NAME> OPPORTUNITY FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 198,905,860
<INVESTMENTS-AT-VALUE> 213,286,283
<RECEIVABLES> 2,551,938
<ASSETS-OTHER> 514,523
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216,352,744
<PAYABLE-FOR-SECURITIES> 2,049,446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 357,553
<TOTAL-LIABILITIES> 2,406,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 191,134,964
<SHARES-COMMON-STOCK> 372,202
<SHARES-COMMON-PRIOR> 16,726
<ACCUMULATED-NII-CURRENT> 1,291,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,139,720
<OVERDISTRIBUTION-GAINS> (1,229)
<ACCUM-APPREC-OR-DEPREC> 14,380,423
<NET-ASSETS> 213,945,745
<DIVIDEND-INCOME> 3,199,658
<INTEREST-INCOME> 1,078,724
<OTHER-INCOME> 0
<EXPENSES-NET> 2,881,018
<NET-INVESTMENT-INCOME> 1,397,364
<REALIZED-GAINS-CURRENT> 7,139,720
<APPREC-INCREASE-CURRENT> 4,721,481
<NET-CHANGE-FROM-OPS> 13,258,565
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,098)
<DISTRIBUTIONS-OF-GAINS> (11,467)
<DISTRIBUTIONS-OTHER> (9)
<NUMBER-OF-SHARES-SOLD> 367,367
<NUMBER-OF-SHARES-REDEEMED> (13,680)
<SHARES-REINVESTED> 1,789
<NET-CHANGE-IN-ASSETS> 84,292,784
<ACCUMULATED-NII-PRIOR> 2,283,342
<ACCUMULATED-GAINS-PRIOR> 1,534,918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,555,477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,881,018
<AVERAGE-NET-ASSETS> 155,547,705
<PER-SHARE-NAV-BEGIN> 18.70
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.33
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> (.22)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.58
<EXPENSE-RATIO> 2.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 011
<NAME> U.S. GOVERNMENT INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 140,104,317<F1>
<INVESTMENTS-AT-VALUE> 130,857,302<F2>
<RECEIVABLES> 1,646,378
<ASSETS-OTHER> 49,698
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 132,553,378
<PAYABLE-FOR-SECURITIES> 6,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,253,332
<TOTAL-LIABILITIES> 1,259,582
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,839,143
<SHARES-COMMON-STOCK> 11,418,654
<SHARES-COMMON-PRIOR> 15,647,497
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,000,871)
<OVERDISTRIBUTION-GAINS> (297,461)
<ACCUM-APPREC-OR-DEPREC> (9,247,015)
<NET-ASSETS> 131,293,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,262,496
<OTHER-INCOME> 0
<EXPENSES-NET> (1,970,527)
<NET-INVESTMENT-INCOME> 8,291,969
<REALIZED-GAINS-CURRENT> (4,366,839)
<APPREC-INCREASE-CURRENT> (11,007,688)
<NET-CHANGE-FROM-OPS> (7,082,558)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,071,564)
<DISTRIBUTIONS-OF-GAINS> (2,925,946)
<DISTRIBUTIONS-OTHER> (292,913)
<NUMBER-OF-SHARES-SOLD> 1,484,549
<NUMBER-OF-SHARES-REDEEMED> (6,552,668)
<SHARES-REINVESTED> 839,276
<NET-CHANGE-IN-ASSETS> (59,224,510)
<ACCUMULATED-NII-PRIOR> (242,693)
<ACCUMULATED-GAINS-PRIOR> 2,235,327
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 962,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,013
<AVERAGE-NET-ASSETS> 160,490,035
<PER-SHARE-NAV-BEGIN> 12.08
<PER-SHARE-NII> .59
<PER-SHARE-GAIN-APPREC> (1.08)
<PER-SHARE-DIVIDEND> (.59)
<PER-SHARE-DISTRIBUTIONS> (.21)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Includes premium on written options outstanding
<F2>Includes written options outstanding
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 012
<NAME> U.S. GOVERNMENT INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 140,104,317<F1>
<INVESTMENTS-AT-VALUE> 130,857,302<F2>
<RECEIVABLES> 1,646,378
<ASSETS-OTHER> 49,698
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 132,553,378
<PAYABLE-FOR-SECURITIES> 6,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,253,332
<TOTAL-LIABILITIES> 1,259,582
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,839,143
<SHARES-COMMON-STOCK> 631,471
<SHARES-COMMON-PRIOR> 106,471
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,000,871)
<OVERDISTRIBUTION-GAINS> (297,461)
<ACCUM-APPREC-OR-DEPREC> (9,247,015)
<NET-ASSETS> 131,293,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,262,496
<OTHER-INCOME> 0
<EXPENSES-NET> (1,970,527)
<NET-INVESTMENT-INCOME> 8,291,969
<REALIZED-GAINS-CURRENT> (4,366,839)
<APPREC-INCREASE-CURRENT> (11,007,688)
<NET-CHANGE-FROM-OPS> (7,082,558)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (196,735)
<DISTRIBUTIONS-OF-GAINS> (38,935)
<DISTRIBUTIONS-OTHER> (3,898)
<NUMBER-OF-SHARES-SOLD> 594,901
<NUMBER-OF-SHARES-REDEEMED> (86,599)
<SHARES-REINVESTED> 16,698
<NET-CHANGE-IN-ASSETS> (59,224,510)
<ACCUMULATED-NII-PRIOR> (242,693)
<ACCUMULATED-GAINS-PRIOR> 2,235,327
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 962,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,013
<AVERAGE-NET-ASSETS> 460,490,035
<PER-SHARE-NAV-BEGIN> 12.08
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> (1.08)
<PER-SHARE-DIVIDEND> (.51)
<PER-SHARE-DISTRIBUTIONS> (.21)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Includes premium on written options outstanding
<F2>Includes written options outstanding
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 013
<NAME> U.S. GOVERNMENT INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 140,104,317<F1>
<INVESTMENTS-AT-VALUE> 130,857,302<F2>
<RECEIVABLES> 1,646,378
<ASSETS-OTHER> 49,698
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 132,553,378
<PAYABLE-FOR-SECURITIES> 6,250
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,253,332
<TOTAL-LIABILITIES> 1,259,582
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 145,839,143
<SHARES-COMMON-STOCK> 113,464
<SHARES-COMMON-PRIOR> 11,665
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,000,871)
<OVERDISTRIBUTION-GAINS> (297,461)
<ACCUM-APPREC-OR-DEPREC> (9,247,015)
<NET-ASSETS> 131,293,796
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,262,496
<OTHER-INCOME> 0
<EXPENSES-NET> (1,970,527)
<NET-INVESTMENT-INCOME> 8,291,969
<REALIZED-GAINS-CURRENT> (4,366,839)
<APPREC-INCREASE-CURRENT> (11,007,688)
<NET-CHANGE-FROM-OPS> (7,082,558)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (39,362)
<DISTRIBUTIONS-OF-GAINS> (6,494)
<DISTRIBUTIONS-OTHER> (650)
<NUMBER-OF-SHARES-SOLD> 123,558
<NUMBER-OF-SHARES-REDEEMED> (25,877)
<SHARES-REINVESTED> 4,123
<NET-CHANGE-IN-ASSETS> (59,224,510)
<ACCUMULATED-NII-PRIOR> (242,693)
<ACCUMULATED-GAINS-PRIOR> 2,235,327
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 962,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,009,013
<AVERAGE-NET-ASSETS> 160,490,035
<PER-SHARE-NAV-BEGIN> 12.08
<PER-SHARE-NII> .51
<PER-SHARE-GAIN-APPREC> (1.08)
<PER-SHARE-DIVIDEND> (.51)
<PER-SHARE-DISTRIBUTIONS> (.21)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Includes premium on written options outstanding
<F2>Includes written options outstanding
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 081
<NAME> INVESTMENT QUALITY INCOME CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 58,448,564
<INVESTMENTS-AT-VALUE> 54,757,970
<RECEIVABLES> 1,568,733
<ASSETS-OTHER> 59,041
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,385,744
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275,593
<TOTAL-LIABILITIES> 275,593
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,753,625
<SHARES-COMMON-STOCK> 4,851,201
<SHARES-COMMON-PRIOR> 5,334,007
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (952,880)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,690,594)
<NET-ASSETS> 56,110,151
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,659,644
<OTHER-INCOME> 0
<EXPENSES-NET> (813,291)
<NET-INVESTMENT-INCOME> 3,846,353
<REALIZED-GAINS-CURRENT> (952,880)
<APPREC-INCREASE-CURRENT> (9,068,979)
<NET-CHANGE-FROM-OPS> (6,175,506)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,482,793)
<DISTRIBUTIONS-OF-GAINS> (367,910)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,194,443
<NUMBER-OF-SHARES-REDEEMED> (1,940,417)
<SHARES-REINVESTED> 263,168
<NET-CHANGE-IN-ASSETS> (6,747,186)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 374,730
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,792
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 994,225
<AVERAGE-NET-ASSETS> 59,965,365
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> .68
<PER-SHARE-GAIN-APPREC> (1.75)
<PER-SHARE-DIVIDEND> (.68)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.67
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 082
<NAME> INVESTMENT QUALITY INCOME CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 58,448,564
<INVESTMENTS-AT-VALUE> 54,757,970
<RECEIVABLES> 1,568,733
<ASSETS-OTHER> 59,041
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,385,744
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275,593
<TOTAL-LIABILITIES> 275,593
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,753,625
<SHARES-COMMON-STOCK> 682,943
<SHARES-COMMON-PRIOR> 127,786
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (952,880)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,690,594)
<NET-ASSETS> 56,110,151
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,659,644
<OTHER-INCOME> 0
<EXPENSES-NET> (813,291)
<NET-INVESTMENT-INCOME> 3,846,353
<REALIZED-GAINS-CURRENT> (952,880)
<APPREC-INCREASE-CURRENT> (9,068,979)
<NET-CHANGE-FROM-OPS> (6,175,506)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (244,424)
<DISTRIBUTIONS-OF-GAINS> (10,112)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 614,495
<NUMBER-OF-SHARES-REDEEMED> (77,488)
<SHARES-REINVESTED> 18,150
<NET-CHANGE-IN-ASSETS> (6,747,186)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 374,730
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,792
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 994,225
<AVERAGE-NET-ASSETS> 59,965,365
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (1.75)
<PER-SHARE-DIVIDEND> (.61)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.67
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 083
<NAME> INVESTMENT QUALITY INCOME CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 58,448,564
<INVESTMENTS-AT-VALUE> 54,757,970
<RECEIVABLES> 1,568,733
<ASSETS-OTHER> 59,041
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,385,744
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275,593
<TOTAL-LIABILITIES> 275,593
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,753,625
<SHARES-COMMON-STOCK> 267,089
<SHARES-COMMON-PRIOR> 8,766
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (952,880)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,690,594)
<NET-ASSETS> 56,110,151
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,659,644
<OTHER-INCOME> 0
<EXPENSES-NET> (813,291)
<NET-INVESTMENT-INCOME> 3,846,353
<REALIZED-GAINS-CURRENT> (952,880)
<APPREC-INCREASE-CURRENT> (9,068,979)
<NET-CHANGE-FROM-OPS> (6,175,506)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (119,136)
<DISTRIBUTIONS-OF-GAINS> (637)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 290,357
<NUMBER-OF-SHARES-REDEEMED> (41,081)
<SHARES-REINVESTED> 9,047
<NET-CHANGE-IN-ASSETS> (6,747,186)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 374,730
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,792
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 994,225
<AVERAGE-NET-ASSETS> 59,965,365
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (1.75)
<PER-SHARE-DIVIDEND> (.61)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.67
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 091
<NAME> GROWTH & INCOME CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 32,124,881
<INVESTMENTS-AT-VALUE> 32,531,181
<RECEIVABLES> 2,091,656
<ASSETS-OTHER> 71,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,694,283
<PAYABLE-FOR-SECURITIES> 648,600
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,501
<TOTAL-LIABILITIES> 735,101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,864,009
<SHARES-COMMON-STOCK> 3,029,071
<SHARES-COMMON-PRIOR> 2,531,726
<ACCUMULATED-NII-CURRENT> 127,460
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,768,686
<OVERDISTRIBUTION-GAINS> (207,273)
<ACCUM-APPREC-OR-DEPREC> 406,300
<NET-ASSETS> 33,959,182
<DIVIDEND-INCOME> 845,665
<INTEREST-INCOME> 709,375
<OTHER-INCOME> 0
<EXPENSES-NET> (588,932)
<NET-INVESTMENT-INCOME> 966,108
<REALIZED-GAINS-CURRENT> 1,768,686
<APPREC-INCREASE-CURRENT> (189,442)
<NET-CHANGE-FROM-OPS> 2,545,352
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (936,128)
<DISTRIBUTIONS-OF-GAINS> (4,079,198)
<DISTRIBUTIONS-OTHER> (199,276)
<NUMBER-OF-SHARES-SOLD> 591,037
<NUMBER-OF-SHARES-REDEEMED> (600,435)
<SHARES-REINVESTED> 506,743
<NET-CHANGE-IN-ASSETS> 5,071,739
<ACCUMULATED-NII-PRIOR> 99,804
<ACCUMULATED-GAINS-PRIOR> 4,441,558
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 263,469
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 731,704
<AVERAGE-NET-ASSETS> 30,996,397
<PER-SHARE-NAV-BEGIN> 11.24
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .55
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> (1.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 092
<NAME> GROWTH & INCOME CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 32,124,881
<INVESTMENTS-AT-VALUE> 32,531,181
<RECEIVABLES> 2,091,656
<ASSETS-OTHER> 71,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,694,283
<PAYABLE-FOR-SECURITIES> 648,600
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,501
<TOTAL-LIABILITIES> 735,101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,864,009
<SHARES-COMMON-STOCK> 290,685
<SHARES-COMMON-PRIOR> 28,417
<ACCUMULATED-NII-CURRENT> 127,460
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,768,686
<OVERDISTRIBUTION-GAINS> (207,273)
<ACCUM-APPREC-OR-DEPREC> 406,300
<NET-ASSETS> 33,959,182
<DIVIDEND-INCOME> 845,665
<INTEREST-INCOME> 709,375
<OTHER-INCOME> 0
<EXPENSES-NET> (588,932)
<NET-INVESTMENT-INCOME> 966,108
<REALIZED-GAINS-CURRENT> 1,768,686
<APPREC-INCREASE-CURRENT> (189,442)
<NET-CHANGE-FROM-OPS> 2,545,352
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (41,545)
<DISTRIBUTIONS-OF-GAINS> (145,217)
<DISTRIBUTIONS-OTHER> (7,094)
<NUMBER-OF-SHARES-SOLD> 269,571
<NUMBER-OF-SHARES-REDEEMED> (26,407)
<SHARES-REINVESTED> 19,104
<NET-CHANGE-IN-ASSETS> 5,071,739
<ACCUMULATED-NII-PRIOR> 99,804
<ACCUMULATED-GAINS-PRIOR> 4,441,558
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 263,469
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 731,704
<AVERAGE-NET-ASSETS> 30,996,397
<PER-SHARE-NAV-BEGIN> 11.23
<PER-SHARE-NII> .25
<PER-SHARE-GAIN-APPREC> .56
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> (1.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 2.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR YEAR ENDED OCTOBER 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 093
<NAME> GROWTH & INCOME CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-1-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 32,124,881
<INVESTMENTS-AT-VALUE> 32,531,181
<RECEIVABLES> 2,091,656
<ASSETS-OTHER> 71,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,694,283
<PAYABLE-FOR-SECURITIES> 648,600
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 86,501
<TOTAL-LIABILITIES> 735,101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,864,009
<SHARES-COMMON-STOCK> 45,206
<SHARES-COMMON-PRIOR> 9,084
<ACCUMULATED-NII-CURRENT> 127,460
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,768,686
<OVERDISTRIBUTION-GAINS> (207,273)
<ACCUM-APPREC-OR-DEPREC> 406,300
<NET-ASSETS> 33,959,182
<DIVIDEND-INCOME> 845,665
<INTEREST-INCOME> 709,375
<OTHER-INCOME> 0
<EXPENSES-NET> (588,932)
<NET-INVESTMENT-INCOME> 966,108
<REALIZED-GAINS-CURRENT> 1,768,686
<APPREC-INCREASE-CURRENT> (189,442)
<NET-CHANGE-FROM-OPS> 2,545,352
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,305)
<DISTRIBUTIONS-OF-GAINS> (18,475)
<DISTRIBUTIONS-OTHER> (903)
<NUMBER-OF-SHARES-SOLD> 33,894
<NUMBER-OF-SHARES-REDEEMED> (469)
<SHARES-REINVESTED> 2,697
<NET-CHANGE-IN-ASSETS> 5,071,739
<ACCUMULATED-NII-PRIOR> 99,804
<ACCUMULATED-GAINS-PRIOR> 4,441,558
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 263,469
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 731,704
<AVERAGE-NET-ASSETS> 30,996,397
<PER-SHARE-NAV-BEGIN> 11.23
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> .56
<PER-SHARE-DIVIDEND> (.26)
<PER-SHARE-DISTRIBUTIONS> (1.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> 2.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR THE FISCAL YEAR ENDED JULY 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 05
<NAME> NATIONAL TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-START> AUG-01-1993
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 92,135,153
<INVESTMENTS-AT-VALUE> 92,510,130
<RECEIVABLES> 4,154,131
<ASSETS-OTHER> 71,639
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96,735,900
<PAYABLE-FOR-SECURITIES> 2,885,909
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 319,522
<TOTAL-LIABILITIES> 3,205,431
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,272,275
<SHARES-COMMON-STOCK> 8,762,939
<SHARES-COMMON-PRIOR> 9,776,550
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (116,783)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 374,977
<NET-ASSETS> 93,530,469
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,311,090
<OTHER-INCOME> 0
<EXPENSES-NET> (455,531)
<NET-INVESTMENT-INCOME> 5,855,559
<REALIZED-GAINS-CURRENT> 1,700,031
<APPREC-INCREASE-CURRENT> (5,263,348)
<NET-CHANGE-FROM-OPS> 2,292,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,855,559)
<DISTRIBUTIONS-OF-GAINS> (2,395,083)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,496,488
<NUMBER-OF-SHARES-REDEEMED> 2,965,354
<SHARES-REINVESTED> 455,255
<NET-CHANGE-IN-ASSETS> (16,866,240)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 578,269
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 531,371
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 824,071
<AVERAGE-NET-ASSETS> 106,274,260
<PER-SHARE-NAV-BEGIN> 11.29
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> (.38)
<PER-SHARE-DIVIDEND> (.61)
<PER-SHARE-DISTRIBUTIONS> (.24)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ANNUAL REPORT FOR FISCAL YEAR ENDED JULY 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 06
<NAME> CALIFORNIA TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-START> AUG-1-1993
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 29,503,029
<INVESTMENTS-AT-VALUE> 29,529,445
<RECEIVABLES> 1,708,073
<ASSETS-OTHER> 144,948
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,382,466
<PAYABLE-FOR-SECURITIES> 2,015,322
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 343,344
<TOTAL-LIABILITIES> 2,358,666
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,053,477
<SHARES-COMMON-STOCK> 2,739,090
<SHARES-COMMON-PRIOR> 3,354,988
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (56,093)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,416
<NET-ASSETS> 29,023,800
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,012,746
<OTHER-INCOME> 0
<EXPENSES-NET> (210,692)
<NET-INVESTMENT-INCOME> 1,802,054
<REALIZED-GAINS-CURRENT> 266,364
<APPREC-INCREASE-CURRENT> (1,560,035)
<NET-CHANGE-FROM-OPS> 508,383
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,802,054)
<DISTRIBUTIONS-OF-GAINS> (497,507)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 620,408
<NUMBER-OF-SHARES-REDEEMED> (1,346,383)
<SHARES-REINVESTED> 110,077
<NET-CHANGE-IN-ASSETS> (8,390,620)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 175,050
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,954
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 330,872
<AVERAGE-NET-ASSETS> 34,790,898
<PER-SHARE-NAV-BEGIN> 11.15
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> (.39)
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> (.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ANNUAL REPORT FOR FISCAL YEAR ENDED JULY 31, 1994
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 07
<NAME> NEW YORK TAX-EXEMPT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-START> AUG-01-1993
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 31,376,321
<INVESTMENTS-AT-VALUE> 31,820,170
<RECEIVABLES> 971,460
<ASSETS-OTHER> 28,388
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,820,018
<PAYABLE-FOR-SECURITIES> 498,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 111,483
<TOTAL-LIABILITIES> 610,233
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,322,409
<SHARES-COMMON-STOCK> 2,977,289
<SHARES-COMMON-PRIOR> 3,317,154
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 443,527
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 443,849
<NET-ASSETS> 32,209,785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,186,290
<OTHER-INCOME> 0
<EXPENSES-NET> (242,594)
<NET-INVESTMENT-INCOME> 1,943,696
<REALIZED-GAINS-CURRENT> 505,040
<APPREC-INCREASE-CURRENT> (1,963,681)
<NET-CHANGE-FROM-OPS> 485,055
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,943,696)
<DISTRIBUTIONS-OF-GAINS> (39,426)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 829,382
<NUMBER-OF-SHARES-REDEEMED> (1,286,252)
<SHARES-REINVESTED> 117,005
<NET-CHANGE-IN-ASSETS> (5,132,489)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (22,087)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186,813
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 352,223
<AVERAGE-NET-ASSETS> 37,362,620
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> .58
<PER-SHARE-GAIN-APPREC> (.43)
<PER-SHARE-DIVIDEND> (.58)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SEMI ANNUAL REPORT (UNAUDITED) FOR THE PERIOD NOVEMBER 8, 1994 TO
APRIL 30, 1995
</LEGEND>
<CIK> 0000817982
<NAME> QUEST FOR VALUE FAMILY OF FUNDS
<SERIES>
<NUMBER> 10
<NAME> OFFICERS FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-8-1994
<PERIOD-END> APR-30-1995
<INVESTMENTS-AT-COST> 2,723,805
<INVESTMENTS-AT-VALUE> 2,943,334
<RECEIVABLES> 59,217
<ASSETS-OTHER> 21,411
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,023,962
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,453
<TOTAL-LIABILITIES> 35,453
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,721,101
<SHARES-COMMON-STOCK> 270,289
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,542
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 32,337
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 219,529
<NET-ASSETS> 2,988,509
<DIVIDEND-INCOME> 10,922
<INTEREST-INCOME> 12,086
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 23,008
<REALIZED-GAINS-CURRENT> 32,337
<APPREC-INCREASE-CURRENT> 219,529
<NET-CHANGE-FROM-OPS> 274,874
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,466)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 289,659
<NUMBER-OF-SHARES-REDEEMED> (20,083)
<SHARES-REINVESTED> 713
<NET-CHANGE-IN-ASSETS> 2,988,509
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,942
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,549
<AVERAGE-NET-ASSETS> 2,295,379
<PER-SHARE-NAV-BEGIN> 10.00<F2>
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.06
<EXPENSE-RATIO> 0<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Adviser has voluntarily waived all of its fees & reimbursed the fund
for all of its operating expenses.
<F2>Initial offering price
</FN>
</TABLE>