<PAGE>
- --------------------------------------------------------------------------------
Quest for Value Funds
One World Financial
Center
New York, NY 10281
Equity Funds
- ------------
Quest for Value Fund
Global Equity Fund
Opportunity Fund
Small Capitalization Fund
Growth and Income Fund
Fixed Income Funds
- ------------------
Taxable
U.S. Government
Income Fund
Investment Quality
Income Fund
Global Income Fund
Tax-Exempt
National Tax-Exempt Fund
California Tax-Exempt Fund
New York Tax-Exempt Fund
Money Market Funds
- ------------------
Quest Cash Reserves:
Taxable
Primary Portfolio
Government Portfolio
Tax-Exempt
General Municipal Portfolio
California Municipal Portfolio
New York Municipal Portfolio
For more information or
assistance with your account
please call:
1-800-232-3863
- --------------------------------------------------------------------------------
QUEST FOR VALUE/SM/
TAX-EXEMPT FUNDS
September 22, 1995
Dear Shareholder:
As you may have read in the press, Quest for Value Advisors and Oppenheimer
Management Corporation have agreed to a transaction that involves the Quest for
Value Funds. Oppenheimer Management Corporation and its affiliates manage funds
with assets of more than $35 billion, held in more than 2.4 million shareholder
accounts. Although at one time Oppenheimer Management Corporation was affiliated
with Oppenheimer Capital, the parent of Quest for Value Advisors, that is not
currently the case.
As part of the proposed transaction, the Quest for Value National Tax-Exempt
Fund, California Tax-Exempt Fund and New York Tax-Exempt Fund would be merged
into the Oppenheimer Tax-Free Bond Fund, Oppenheimer California Tax-Exempt Fund
and Oppenheimer New York Tax-Exempt Fund, respectively. The transaction is
subject to approval by the Funds' shareholders. You will be receiving additional
materials, including a proxy, shortly.
Investment Markets in Fiscal 1995
In this report, we want to bring you up to date on the results of your
investment in the fiscal year ended July 31, 1995. Detailed information on the
performance and holdings of each Fund is presented in the Investment Review and
financial statements that follow.
For investors in tax-exempt municipal securities, the fiscal year was a tale of
two markets: bond prices fell from August 1994 through mid-November 1994, then
reversed course and rose over the remainder of the fiscal year. When all was
said and done, in the fiscal year municipal bonds delivered a total return of
6.1%, as measured by the Bond Buyer Index, even after taking into account a
negative total return of 0.3% in the fiscal first half.
The swift change in market conditions was driven by a slowing of the economy,
the downturn of interest rates and an easing of investor concerns that inflation
might increase. All types of fixed income securities participated in the rally
that began in November 1994, one of the most explosive bond market advances in
history. However, tax-exempt municipals were relative laggards, generating more
modest total returns than other sectors. Because many investors fear that
radical tax proposals, such as a flat tax, would not bode well for municipal
securities, demand for municipals has diminished somewhat, causing their yields
to increase relative to taxable investments. Tax-exempt 30-year AAA municipals
are currently trading at an historically high 90% of the yield of taxable
30-year Treasuries. While no one can predict future investment prices with
certainty, we believe that investor concerns about the impact of tax proposals
have been overdone. Today's municipal yields, in our view, account for the risk
that these proposals might be adopted at some future date.
Yields on 20-year municipals currently exceed 6%, the taxable equivalent of
nearly 8.7% for an investor in the 31% federal income tax bracket and 9.9% in
the top federal bracket of 39.6%. Taxable equivalent yields are even greater for
investors in high-tax states such as California and New York. These yields not
only exceed the inflation rate, currently less than 3% a year, but are extremely
competitive in relation to returns on other long-term, conservative investments.
In managing the Funds, we look for sector, maturity and quality groups of the
municipal bond market that provide the highest yield at the lowest price with
the least amount of risk. Because lower-rated municipals offer very little yield
advantage over higher-rated issues at this time, all three Funds are invested
almost entirely in issues rated A or better. We have also increased our
/SM/ Quest for Value is a registered service mark of Oppenheimer Capital.
<PAGE>
investments in health care and housing issues, where we find good value. In
addition, we have been selectively buying AAA-rated insured municipal bonds,
which are inexpensive due to oversupply.
Summary
We manage the Funds prudently, emphasizing investments in quality securities.
We recognize that protection of capital is more important than taking added risk
to squeeze out a few extra basis points of return. We have been able to manage
the Funds in this conservative manner and still deliver competitive returns over
time.
Since this may be the last report you will be receiving from us, we want to take
this opportunity to thank you for investing with Quest for Value. It has been
our privilege to serve your investment needs.
Sincerely,
/s/ Joseph M. La Motta
Joseph M. La Motta
President
<PAGE>
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Investment Review
- --------------------------------------------------------------------------------
Quest for Value National
Tax-Exempt Fund
Objective
Seeks to provide a high level of current income exempt from federal income tax,
consistent with preservation of capital. Designed to protect principal through
investment-grade municipals.
Investment Results
The Fund provided a total return of 6.7% in the fiscal year ended July 31, 1995.
This return ranked 136th among the 424 national municipal bond funds monitored
by Morningstar, Inc., a leading reporter of mutual fund performance. All of the
Fund's return came in the second fiscal half, when the bond market rallied and
the Fund generated a total return of 6.8%. Since its inception on August 14,
1990, the Fund's average annual total return is 8.4% based on net asset value
(NAV).
The Fund paid cash dividends of $.578 per share in the fiscal year. On an
annualized basis, the monthly distribution yield of the Fund was 5.2% at July
31, 1995, based on NAV per share. This yield was equivalent to a taxable return
of 8.6% for an individual, not subject to the alternative minimum tax, in the
39.6% federal tax bracket. In addition, long-term capital gains of $.007 per
share were distributed by the Fund during the year.
Portfolio Analysis
We continue to emphasize investment quality. As of July 31, 1995, the Fund's
broadly diversified portfolio consisted of 88 issues, with 92% of the assets
rated A or higher by Standard & Poor's or Moody's. The average maturity of
the portfolio was 17.8 years.
In the first fiscal half, we increased the Fund's cash reserves when bond prices
were falling and were able to put this cash back into the market in the second
half at favorable rates. In our purchases, we emphasized health care and housing
bonds. We also focused on noncallable and discounted bonds, which tend to
benefit most in a rally.
The five largest sectors represented in the Fund as of July 31, 1995 were:
general obligation, 22.4%; health/hospital, 13.6%; housing, 11.6%;
power/utility, 10.7%; and water/sewer, 9.6%. The five largest portfolio
positions by state were: Texas, 8.5%; California, 8.5%; New York, 8.2%; Ohio,
6.2%; and Virginia, 6.2%.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Quest for Value Bond Buyer
National Tax-Exempt Fund Municipal Bond Index
------------------------ --------------------
<S> <C> <C>
Aug 1990 9,525 10,000
July 1991 10,454 11,005
July 1992 12,149 12,676
July 1993 13,183 13,655
July 1994 13,448 13,342
July 1995 14,351 14,153
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
Investment Review (continued)
- --------------------------------------------------------------------------------
Quest for Value California
Tax-Exempt Fund
Objective
Seeks to provide a high level of "double tax-exempt" income (exempt from federal
and California income tax), consistent with preservation of capital. Designed to
protect principal through investment-grade municipals.
Investment Results
The Fund's total return was 5.6% in the fiscal year ended July 31, 1995 --
83rd among the 136 California municipal bond funds monitored by Morningstar,
Inc. The Fund's below-average performance reflected our extreme caution in
selecting investments, given California's ongoing economic problems. The
Fund's total return was 5.9% in the second fiscal half. Since its inception
on August 14, 1990, the Fund has provided an average annual total return of
7.7% based on net asset value (NAV).
The Fund paid cash dividends of $.539 per share in the fiscal year. On an
annualized basis, the monthly distribution yield of the Fund was 4.9% as of
July 31, 1995, based on NAV per share. This yield was equivalent to a taxable
return of 9.1% for an investor, not subject to the alternative minimum tax, in
the top federal and California income tax brackets of 39.6% and 11%,
respectively. In addition, the Fund distributed long-term capital gains of $.068
per share during the year.
Portfolio Analysis
We continued to upgrade the quality of the Fund's investments, emphasizing
protection of principal as well as high returns. The Fund's portfolio consisted
of 40 issues as of July 31, 1995, with 100% of the assets rated A or higher by
Standard & Poor's or Moody's. The average maturity of the portfolio was 19.4
years.
Investments are focused on essential service revenue bonds, including
power/utility and water/sewer issues. We have selectively begun to purchase
state-backed obligations. The Fund does not have any direct exposure to Orange
County securities.
The five largest sectors represented in the Fund as of July 31, 1995 were:
water/sewer, 18.0%; tax allocation, 14.9%; housing, 10.9%; general obligation,
9.4%; and health/ hospital, 8.3%.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Quest for Value Bond Buyer
California Tax-Exempt Fund Municipal Bond Index
-------------------------- --------------------
<S> <C> <C>
Aug 1990 9,525 10,000
July 1991 10,424 11,005
July 1992 11,818 12,676
July 1993 12,888 13,655
July 1994 13,085 13,342
July 1995 13,812 14,153
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Quest for Value New York
Tax-Exempt Fund
Objective
Seeks to provide a high level of "triple tax-exempt" income (exempt from
federal, New York State and New York City income tax), consistent with
preservation of capital. Designed to protect principal through investment-grade
municipals.
Investment Results
The Fund generated a total return of 6.4% in the fiscal year ended July 31,
1995 -- 32nd among the 107 New York municipal bond funds monitored by
Morningstar. The total return of the Fund was 7.4% in the second fiscal half.
The Fund has provided an average annual total return of 8.1% based on net asset
value (NAV) since its inception on August 14, 1990.
The Fund paid cash dividends of $.553 per share in the fiscal year. On an
annualized basis, the monthly distribution yield of the Fund was 5.0% at
July 31, 1995, based on NAV per share. This yield was equivalent to a taxable
return of 9.4% for an investor, not subject to the alternative minimum tax, in
the top federal, New York State and New York City tax brackets of 39.6%, 7.875%
and 3.91%, respectively. Additionally, the Fund distributed long-term capital
gains of $.176 per share in the fiscal year.
Portfolio Analysis
As with our other funds, we continued to upgrade investment quality in light
of the narrow yield spread between higher-rated and lower-rated bonds. At the
end of July, the Fund's portfolio consisted of 64 issues, with 86% of the
assets rated A or higher by Standard & Poor's or Moody's. The average
maturity of the portfolio was 17.0 years.
The Fund owns a diversified portfolio of New York bonds, including general
obligation issues of improving credits. In the second fiscal half, we
continued to reduce the Fund's holdings of New York City securities because
of the city's ongoing budget deficit problems. New York City securities
accounted for approximately 14% of the Fund's net assets as of July 31, 1995.
The five largest sectors represented in the Fund were: education, 17.8%;
general obligation, 14.8%; power/utility, 11.5%; health/hospital, 10.9%; and
sales tax, 8.1%.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Quest for Value Bond Buyer
New York Tax-Exempt Fund Municipal Bond Index
------------------------ --------------------
<S> <C> <C>
Aug 1990 9,525 10,000
July 1991 10,338 11,005
July 1992 12,088 12,676
July 1993 13,197 13,655
July 1994 13,376 13,342
July 1995 14,229 14,153
</TABLE>
5
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Schedules of Investments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
National Tax-Exempt Fund
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
MUNICIPAL NOTES & BONDS--99.0%
ALABAMA--1.1%
Health/Hospital
$ 1,000,000 University of Alabama
Birmingham Hospital
5.00%, 10/01/14
(MBIA insured)...................................... $ 894,250
------------
ARIZONA--0.4%
Health/Hospital
300,000 Arizona Health Facilities Authority
Phoenix Memorial Hospital
8.20%, 6/01/21...................................... 317,781
------------
CALIFORNIA--8.5%
Correctional Facilities--3.5%
California Statewide Communities
Development Authority
Certificates of Participation
750,000 Salk Institute
6.10%, 7/01/14...................................... 740,017
1,400,000 Sutter Health Obligation Group (2)
3.75%, 7/01/15...................................... 1,400,000
740,000 Los Angeles County Certificates
of Participation
Correctional Facilities Project
6.50%, 9/01/13
(MBIA insured)...................................... 767,942
------------
2,907,959
------------
General Obligation--1.0%
725,000 California State
General Obligation Bonds
7.00%, 11/01/12..................................... 810,021
------------
Health/Hospital--1.7%
1,315,000 California Health Facilities Financing
Good Samaritan Hospital
7.00%, 9/01/21...................................... 1,375,884
------------
Tax Allocation--0.6%
500,000 Industry, California Urban
Development Agency
6.90%, 11/01/07..................................... 531,740
------------
Transportation--0.6%
500,000 San Francisco,
California Bay Area
Rapid Transportation
District Sales Tax Revenue
5.50%, 7/01/20
(FGIC insured)...................................... 461,790
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Water/Sewer--1.1%
$ 1,000,000 Sacramento County,
California Sanitation District
Financing Authority
5.125%, 12/01/13.................................... $ 890,650
------------
6,978,044
------------
COLORADO--1.9%
Education--1.3%
1,000,000 Colorado Student
Obligation Bond Authority
Student Loan Revenue (1)
7.15%, 9/01/06...................................... 1,043,280
------------
General Obligation--0.6%
500,000 Jefferson County School District
6.25%, 12/15/12
(AMBAC insured)..................................... 520,845
------------
1,564,125
------------
CONNECTICUT--1.3%
Sales Tax
1,000,000 Connecticut State
Special Tax Obligation Revenue
6.25%, 10/01/14..................................... 1,031,520
------------
FLORIDA--2.4%
General Obligation--1.2%
1,000,000 Dade County School District
6.125%, 8/01/11..................................... 1,019,810
------------
Housing--1.2%
970,000 Florida Housing Finance Agency
Refunding Single Family
Mortgage (Series A)
6.35%, 7/01/14...................................... 991,369
------------
2,011,179
------------
GEORGIA--2.1%
Pollution Control--0.1%
100,000 Burke County, Georgia
Development Authority Pollution
Control Revenue Power
Company Plant Voltage (2)
4.25%, 7/01/24...................................... 100,000
------------
Power/Utility--2.0%
Municipal Electric Authority
of Georgia, Special Obligation
1,000,000 Fifth Crossover Series
6.50%, 1/01/17
(MBIA insured)...................................... 1,074,880
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 500,000 Fourth Crossover Series
6.50%, 1/01/12
(MBIA insured)...................................... $ 537,255
------------
1,612,135
------------
1,712,135
------------
HAWAII--1.7%
General Obligation
Honolulu, Hawaii City & County
1,000,000 5.00%, 10/01/13..................................... 912,900
500,000 6.10%, 6/01/11 (Series B)........................... 514,320
------------
1,427,220
------------
ILLINOIS--3.6%
Airline/Airport--1.1%
1,000,000 Chicago, Illinois
O'Hare Int'l. Airport (1)
5.60%, 1/01/18...................................... 919,850
------------
Health/Hospital--1.4%
1,000,000 Illinois Health Facilities Authority
Revenue Hindsdale Health
System
9.50%, 11/15/19..................................... 1,165,630
------------
Tax Allocation--1.1%
825,000 Hoffman Estates Tax Increment
Revenue
7.625%, 11/15/09.................................... 876,851
------------
2,962,331
------------
LOUISIANA--1.3%
Education
1,000,000 Louisiana Public Facilities
Authority Student Loan
Revenue (1)
6.75%, 9/01/06...................................... 1,045,520
------------
MAINE--0.7%
Education
500,000 Maine Educational Loan
Marketing Corp.
Student Loan Revenue (1)
6.90%, 11/01/03..................................... 541,730
------------
MARYLAND--0.7%
Education
500,000 University of Maryland Auxiliary
Facilities & Tuition Revenue
5.90%, 2/01/03...................................... 533,760
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
MASSACHUSETTS--4.6%
General Obligation--2.3%
Massachusetts State General
Obligation Bonds
Consolidated Loan
$ 1,000,000 6.50%, 8/01/11 (Series B)........................... $ 1,056,730
300,000 7.00%, 7/01/07 (Series D)........................... 331,773
400,000 7.00%, 8/01/12 (Series C)........................... 455,248
------------
1,843,751
------------
Housing--1.2%
1,000,000 Massachusetts State Housing
Finance Authority
Housing Projects
6.30%, 10/01/13..................................... 998,800
------------
Water/Sewer--1.1%
1,000,000 Massachusetts State Water
Resource Authority (Series A)
5.50%, 7/15/22
(MBIA insured)...................................... 932,300
------------
3,774,851
------------
MICHIGAN--4.4%
Finance--1.2%
1,000,000 Michigan Municipal Bond
Authority Revenue
Local Government Loan
Program (Series A)
6.00%, 12/01/13
(FGIC insured)...................................... 1,003,970
------------
Health/Hospital--1.9%
750,000 Jackson County Hospital
Finance Authority W. A.
Foote Memorial Hospital (Series A)
4.75%, 6/01/15..................................... 635,888
Michigan State Hospital
Finance Authority
455,000 Bay Medical Center
8.25%, 7/01/12...................................... 484,370
400,000 Sisters of Mercy Health Corp.
7.50%, 2/15/18
(Pre-refunded with U.S.
Government Securities).............................. 457,912
------------
1,578,170
------------
Resource Recovery--1.3%
1,000,000 Michigan State Strategic Fund
Limited Obligation Revenue
Waste Management, Inc. (1)
6.625%, 12/01/12.................................... 1,025,390
------------
3,607,530
------------
</TABLE>
7
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Schedules of Investments (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
National Tax-Exempt Fund (cont'd)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
MINNESOTA--1.6%
Housing--0.4%
$ 290,000 Minnesota State Housing
Finance Agency Single Family
Mortgage Revenue (1)
7.45%, 7/01/22...................................... $ 307,209
------------
Power/Utility--1.2%
1,000,000 Western Minnesota
Municipal Power Agency
7.00%, 1/01/13...................................... 1,045,740
------------
1,352,949
------------
NEVADA--2.2%
Airline/Airport--0.6%
500,000 Clark County,
Nevada Passenger Facilities (1)
6.25%, 7/01/11...................................... 507,125
General Obligation--1.6%
750,000 Clark County, Nevada
Refunding & Improvement
Transportation (Series A)
6.00%, 6/01/13
(MBIA insured)...................................... 759,360
490,000 Nevada State
General Obligation Bonds
Municipal Bond Bank
6.80%, 7/01/12
(Pre-refunded with U.S.
Government Securities).............................. 553,073
------------
1,312,433
------------
1,819,558
------------
NEW HAMPSHIRE--1.3%
Housing
1,000,000 New Hampshire State Housing
Finance Authority Single Family
Mortgage (Series C) (1)
6.90%, 7/01/19...................................... 1,032,420
------------
NEW JERSEY--3.9%
Health/Hospital--1.1%
New Jersey Health Care Facilities
500,000 Atlantic City Medical Center
6.80%, 7/01/11...................................... 520,270
400,000 St. Elizabeth Hospital
8.25%, 7/01/20...................................... 430,140
------------
950,410
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Turnpike/Toll--2.8%
$ 2,100,000 New Jersey State
Turnpike Authority (Series C)
6.50%, 1/01/16...................................... $ 2,274,780
------------
3,225,190
------------
NEW YORK--8.2%
Education--1.2%
1,000,000 New York State
Dormitory Authority
State University System
5.50%, 5/15/07...................................... 972,870
------------
General Obligation--4.8%
New York City
General Obligation Bonds
1,000,000 5.625%, 8/01/12 (Series E).......................... 907,890
1,000,000 6.00%, 5/15/10 (Series E)........................... 960,140
945,000 7.625%, 2/01/15 (Series G).......................... 1,024,087
1,000,000 New York State
General Obligation Bonds
6.875%, 3/01/12..................................... 1,090,740
------------
3,982,857
------------
Sales Tax--2.2%
New York State Local
Government Assistance Corp.
900,000 7.00%, 4/01/11 (Series D)........................... 988,515
745,000 7.125%, 4/01/11 (Series A).......................... 824,886
------------
1,813,401
------------
6,769,128
------------
OHIO--6.2%
Correctional Facilities--0.6%
500,000 Ohio State Building Authority
State Juvenile Correctional
Facilities
6.60%, 10/01/14
(AMBAC insured)..................................... 530,800
------------
General Obligation--1.5%
1,200,000 Summit County, Ohio
6.625%, 12/01/12
(AMBAC insured)..................................... 1,276,788
------------
Power/Utility--2.8%
2,000,000 Cleveland, Ohio
Public Power Systems Revenue
First Mortgage (Series A)
7.00%, 11/15/16
(MBIA insured)...................................... 2,288,760
------------
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Water/Sewer--1.3%
$ 1,000,000 Northeast Ohio Regional
Sewer District
Wastewater Revenue
6.50%, 11/15/16
(AMBAC insured)..................................... $ 1,038,500
------------
5,134,848
------------
OKLAHOMA--6.1%
Health/Hospital--2.9%
Oklahoma State
Industry Authority Revenue
1,400,000 Baptist Medical Center Oklahoma
7.00%, 8/15/14
(AMBAC insured)..................................... 1,502,956
1,000,000 Sisters Mercy Health Project
5.00%, 6/01/18...................................... 843,610
------------
2,346,566
------------
Power/Utility--2.0%
1,575,000 Muskogee, Oklahoma
Industrial Trust
Pollution Control Revenue
Oklahoma Gas & Electric Co.
Project (Series A)
7.00%, 3/01/17...................................... 1,644,521
------------
Water/Sewer--1.2%
1,000,000 McGee Creek, Oklahoma
Water Authority Revenue
6.00%, 1/01/23
(MBIA insured)...................................... 1,023,050
------------
5,014,137
------------
PENNSYLVANIA--6.1%
Education--0.6%
500,000 Pennsylvania Higher Education
Assistance Agency
Student Loan Revenue (1)
7.15%, 9/01/21
(AMBAC Insured)..................................... 525,910
------------
General Obligation--1.1%
810,000 Pennsylvania State
General Unlimited Tax
6.60%, 11/01/11..................................... 861,168
------------
Health/Hospital--0.4%
350,000 Monroeville Hospital
Authority Revenue Bond
Forbes Health System Refunding
7.00%, 10/01/13..................................... 350,885
------------
Transportation--1.0%
750,000 Pennsylvania State Turnpike
Community Revenue Bonds
6.50%, 12/01/13..................................... 779,700
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Water/Sewer--3.0%
$ 2,230,000 Philadelphia Water & Sewer
Revenue
7.35%, 9/01/04...................................... $ 2,469,792
------------
4,987,455
------------
RHODE ISLAND--1.2%
Housing
1,000,000 Rhode Island Housing & Mortgage
Finance Corp. Homeownership
Opportunity (1)
6.60%, 10/01/25..................................... 1,001,490
------------
SOUTH CAROLINA--3.9%
Housing--1.2%
1,000,000 South Carolina State Housing
Finance & Development Authority
Mortgage Revenue (Series A)
6.45%, 7/01/17...................................... 1,012,420
------------
Power/Utility--2.7%
2,000,000 Piedmont, South Carolina
Municipal Power Agency
Electric Revenue (Series A)
6.50%, 1/01/16
(FGIC insured)...................................... 2,166,100
------------
3,178,520
------------
SOUTH DAKOTA--1.2%
Health/Hospital
1,000,000 South Dakota Housing
Development Authority
Homeownership Mortgage (1)
6.15%, 5/01/26...................................... 949,750
------------
TEXAS--8.5%
Airline/Airport--1.3%
1,000,000 Houston, Texas
Airport System Revenue
Subordinated Lien (Series B)
6.625%, 7/01/22..................................... 1,045,260
------------
General Obligation--2.6%
1,000,000 Dallas, Texas
General Obligation Bonds
6.125%, 2/15/05
(Pre-refunded with U.S.
Government Securities).............................. 1,084,930
1,000,000 Texas State Veterans Housing
Assistance Fund (Series A) (1)
6.80%, 12/01/10..................................... 1,059,730
------------
2,144,660
------------
</TABLE>
9
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Schedules of Investments (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
National Tax-Exempt Fund (cont'd)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
TEXAS (cont'd)
Health/Hospital--0.1%
$ 100,000 North Central Texas Health
Facilities Development Corp.
Presbyterian Medical
Center (Series C) (2)
3.90%, 12/01/15..................................... $ 100,000
------------
Turnpike/Toll--2.6%
Harris County, Texas
Refunding Toll Road
1,000,000 6.50%, 8/15/15...................................... 1,048,670
1,000,000 6.75%, 8/01/14...................................... 1,064,720
------------
2,113,390
------------
Water/Sewer--1.9%
Houston, Texas
Water & Sewer System
Revenue Refunding Bonds
1,000,000 6.40%, 12/01/09..................................... 1,071,710
500,000 6.75%, 12/01/08..................................... 542,320
------------
1,614,030
------------
7,017,340
------------
VERMONT--2.0%
Housing
1,570,000 Vermont State Housing
Finance Authority (1)
7.85%, 12/01/29..................................... 1,663,603
------------
VIRGINIA--6.2%
General Obligation--2.8%
2,250,000 Richmond, Virginia
Refunding (Series B)
6.25%, 1/15/18...................................... 2,269,890
------------
Housing--1.2%
1,000,000 Virginia State Housing
Development Authority (1)
6.55%, 1/01/27...................................... 1,001,190
------------
Resource Recovery--1.2%
1,000,000 Southeastern Public Service
Authority of Virginia
Regional Solid Waste System (1)
6.00%, 7/01/13...................................... 951,510
------------
Transportation--1.0%
1,000,000 Virginia State Transportation
Board Revenue (Series C)
5.25%, 5/15/19...................................... 898,540
------------
5,121,130
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WASHINGTON--1.7%
General Obligation--1.2%
$ 1,000,000 Washington State
General Obligation Bonds
5.75%, 5/01/16 (Series B)........................... $ 972,750
------------
Health/Hospital--0.5%
400,000 Washington State Health Care
Facilities Group Health
Co-Op Puget Sound
6.75%, 12/01/19
(AMBAC insured)..................................... 419,208
------------
1,391,958
------------
WEST VIRGINIA--1.2%
Resource Recovery
1,000,000 Braxton County, West Virginia
Solid Waste Disposal Revenue
Weyerhaeuser Co. Project (1)
6.50%, 4/01/25
(AMBAC insured)..................................... 1,000,690
------------
WISCONSIN--1.8%
Health/Hospital--0.9%
750,000 Wisconsin State
Health & Educational Facilities
Hospital Sisters Services, Inc.
5.25%, 6/01/10
(MBIA insured)...................................... 703,590
------------
Housing--0.9%
740,000 Wisconsin Housing &
Economic Development
Authority Homeownership
Revenue
7.10%, 3/01/23...................................... 774,980
------------
1,478,570
------------
WYOMING--1.0%
Housing
750,000 Wyoming Community
Development Authority
Single Family
Mortgage Revenue (1)
7.15%, 6/01/22...................................... 786,548
------------
Total Investments
(cost--$78,774,958)...................................................... 99.0% $ 81,327,260
Other Assets in Excess of
Other Liabilities........................................................ 1.0 845,844
----- ------------
Total Net Assets............................................................ 100.0% $ 82,173,104
===== ============
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
MUNICIPAL NOTES & BONDS--98.4%
Airline/Airport--6.8%
$ 1,500,000 San Francisco City and
County Airports Commission
International Airport
Revenue (1)
6.20%, 5/01/20
(MBIA insured)...................................... $ 1,494,165
------------
Education--8.1%
California Educational Facilities
Authority Revenue
100,000 7.00%, 3/01/16
(MBIA insured)...................................... 109,003
1,000,000 Stanford University
6.00%, 11/01/16..................................... 993,950
150,000 California State University and
Colleges Student Union Revenue
Dominguez Hills
6.80%, 5/01/16...................................... 151,684
250,000 Fresno, California Unified School
District Certificates of
Participation
7.00%, 5/01/12...................................... 257,087
250,000 Los Angeles Unified School District
Certificates of Participation
6.60%, 6/01/06...................................... 264,650
------------
1,776,374
------------
General Obligation--9.4%
1,000,000 California State General
Obligation Bonds
5.15%, 10/01/19
(AMBAC insured)..................................... 881,770
500,000 East Bay Regional Park District
6.375%, 9/01/10..................................... 521,970
San Francisco, California City
and County (Series A)
250,000 6.70%, 12/15/08..................................... 261,407
400,000 Library Facility Project
6.25%, 6/15/11...................................... 409,592
------------
2,074,739
------------
Health/Hospital--8.3%
California Health Facilities
Financing Authority Revenue
315,000 Adventist Health Systems
6.50%, 3/01/07
(MBIA insured)...................................... 336,562
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 1,000,000 Good Samaritan Hospital
7.00%, 9/01/21...................................... $ 1,046,300
500,000 Kaiser Permanente
5.60%, 5/01/33...................................... 441,320
------------
1,824,182
------------
Housing--10.9%
California Housing Finance Agency
Revenue Home Mortgage
1,000,000 6.45%, 2/01/12, (Series E) (1)...................... 1,014,580
80,000 7.35%, 8/01/11 (Series A)........................... 85,666
350,000 Multi-Unit Rental Housing
6.875%, 2/01/22..................................... 350,924
500,000 Pomona, California Single Family
Mortgage Revenue
7.50%, 8/01/23...................................... 578,470
300,000 Riverside County, California Single
Family Revenue (Series A) (1)
7.80%, 5/01/21...................................... 368,040
------------
2,397,680
Leasing--2.4%
400,000 San Francisco, California City
and County Certificates of
Participation San Francisco
Courthouse Project
5.60%, 4/01/16
(CGIC insured)...................................... 378,440
150,000 Sonoma County, California
Certificates of Participation
6.75%, 10/01/07..................................... 161,076
------------
539,516
------------
Pollution Control--4.4%
500,000 California Pollution Control
Financing Authority
Solid Waste Disposal Revenue
North County Recycling Center
6.75%, 7/01/11...................................... 517,545
500,000 Puerto Rico Industrial, Medical &
Environmental Pollution
Control Facilities Financing
Authority Revenue
5.10%, 12/01/18..................................... 445,555
------------
963,100
------------
Ports--1.4%
300,000 Port of Oakland, California Special
Facilities Revenue (1)
6.75%, 1/01/12...................................... 309,699
------------
</TABLE>
11
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Schedules of Investments (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund (cont'd)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Power/Utility--5.9%
$ 500,000 Kings River Conservation District
Pine Flat Power Revenue
6.375%, 1/01/12..................................... $ 508,065
760,000 Modesto Public Power Agency
San Juan Project
6.875%, 7/01/19..................................... 792,422
------------
1,300,487
------------
Sales Tax--2.1%
500,000 Los Angeles, California Community
Redevelopment Agency Financing
Authority Revenue (1)
5.90%, 12/01/13..................................... 470,110
------------
Tax Allocation--14.9%
200,000 Avalon, California Improvement
Agency
7.25%, 8/01/21...................................... 210,260
1,000,000 Fairfield, California Public
Financing Authority Revenue
6.25%, 7/01/14
(FGIC insured)...................................... 1,009,450
Industry, California Urban
Development Agency
260,000 6.50%, 11/01/07
(MBIA insured)...................................... 279,178
500,000 6.90%, 11/01/07..................................... 531,740
500,000 Merced, California Public
Finance Authority
5.50%, 12/01/10..................................... 464,235
680,000 Santa Margarita/Dana Point
Authority California Revenue
Improvement District
7.25%, 8/01/14
(MBIA insured)...................................... 792,628
------------
3,287,491
------------
Transportation--5.8%
750,000 Contra Costa, California
Transportation Authority
Sales Tax Revenue
6.50%, 3/01/09
(FGIC insured)...................................... 834,008
500,000 Puerto Rico Commonwealth
Highway Authority
5.25%, 7/01/21...................................... 439,100
------------
1,273,108
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Water/Sewer--18.0%
$ 400,000 Big Bear Lake, California Water
Revenue
6.25%, 4/01/12
(FGIC insured)...................................... $ 407,716
750,000 Calleguas-Las Virgines, California
Public Financing Authority
Calleguas Municipal Water District
5.125%, 7/01/14
(FGIC insured)...................................... 671,640
1,000,000 East Bay, California Municipal
Utility District
Water System Revenue
6.375%, 6/01/12
(AMBAC insured)..................................... 1,117,930
Los Angeles, California Wastewater
System Revenue
500,000 3.65%, 8/08/95...................................... 500,000
250,000 6.25%, 6/01/12
(AMBAC insured)..................................... 254,550
1,000,000 Stockton East Water District
Certificates of Participation
6.40%, 4/01/22
(AMBAC insured)..................................... 1,024,730
------------
3,976,566
------------
Total Investments
(cost--$21,422,462)................................................. 98.4% $ 21,687,217
Other Assets in Excess of
Other Liabilities................................................... 1.6 359,214
----- ------------
Total Net Assets....................................................... 100.0% $ 22,046,431
===== ============
<CAPTION>
- -------------------------------------------------------------------------------------------------------
New York Tax-Exempt Fund
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
MUNICIPAL NOTES & BONDS--98.0%
Airline/Airport--3.2%
$ 1,000,000 New York City Industrial
Special Facilities Authority
American Airlines (1)
6.00%, 1/01/15...................................... $ 952,610
------------
Correctional Facilities--1.5
500,000 New York State Urban
Development Corp.
Correctional Facilities
5.50%, 1/01/16...................................... 448,560
------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Education--17.8%
New York State Dormitory
Authority Revenue
City University System
$ 500,000 6.875%, 7/01/14
(MBIA insured)...................................... $ 543,345
500,000 7.40%, 7/01/05...................................... 540,640
750,000 Columbia University
5.75%, 7/01/15...................................... 731,722
500,000 Episcopal Health Services
5.85%, 8/01/13...................................... 492,890
195,000 Menorah Campus
7.30%, 8/01/16...................................... 215,124
330,000 Rochester Hospital
5.55%, 8/01/12...................................... 323,245
150,000 Saint Vincent's Hospital
7.375%, 8/01/11..................................... 167,271
State University Educational
Facilities
1,000,000 5.25%, 5/15/13...................................... 895,410
720,000 5.50%, 5/15/10
(FGIC insured)...................................... 712,044
750,000 5.50%, 5/15/13...................................... 692,303
------------
5,313,994
------------
General Obligation--14.8%
500,000 Buffalo, New York
General Obligation Bonds
6.65%, 12/01/13
(AMBAC insured)..................................... 542,470
500,000 Nassau County, New York
General Obligation Bonds
6.25%, 10/15/09
(AMBAC insured)..................................... 529,075
New York City General Obligation Bonds
100,000 3.95%, 8/01/20 (2).................................. 100,000
450,000 5.75%, 8/01/05
(MBIA insured)...................................... 472,689
200,000 7.50%, 8/01/20...................................... 214,186
350,000 7.625%, 2/01/14..................................... 379,291
300,000 7.75%, 3/15/03...................................... 328,119
100,000 8.25%, 6/01/02...................................... 113,572
150,000 8.25%, 11/15/13..................................... 180,217
100,000 8.40%, 11/15/09..................................... 114,003
New York State General
Obligation Bonds
500,000 6.875%, 3/01/12..................................... 545,370
300,000 7.00%, 2/01/09...................................... 326,640
500,000 7.50%, 11/15/00..................................... 564,085
------------
4,409,717
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Health/Hospital--10.9%
New York State Medical Care
Facilities Finance Agency
Revenue
$ 500,000 5.25%, 8/15/14...................................... $ 455,120
500,000 6.75%, 8/15/14
(AMBAC insured)..................................... 534,755
Hospital & Nursing Home
365,000 6.45%, 2/15/09...................................... 393,550
590,000 7.70%, 2/15/22
(Pre-refunded with U.S.
Government Securities).............................. 661,242
Mental Health Services
500,000 5.375%, 2/15/14..................................... 443,820
500,000 5.70%, 8/15/14
(AMBAC insured)..................................... 482,545
250,000 North Shore University Hospital
7.20%, 11/01/20
(MBIA insured)...................................... 276,380
------------
3,247,412
------------
Housing--5.0%
New York State Housing Finance Agency
Multi-Family Housing (1)
240,000 6.95%, 8/15/24...................................... 249,612
350,000 7.05%, 8/15/24...................................... 365,663
New York State Mortgage Agency
Revenue Bonds (1)
500,000 6.40%, 10/01/12..................................... 510,885
345,000 7.375%, 10/01/11.................................... 368,736
------------
1,494,896
------------
Pollution Control--5.4%
New York State Environmental
Facilities Pollution Control
Revenue
500,000 6.50%, 6/15/14...................................... 526,660
250,000 6.60%, 9/15/12...................................... 265,993
350,000 7.20%, 3/15/11...................................... 375,988
500,000 Puerto Rico Industrial, Medical &
Environmental Pollution
Control Facilities Financing
Authority Revenue
5.10%, 12/01/18..................................... 445,555
------------
1,614,196
------------
</TABLE>
13
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Schedules of Investments (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
New York Tax-Exempt Fund (cont'd)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
Power/Utility--11.5%
New York State Energy Research &
Development
Consolidated Edison, Inc. (1)
$ 200,000 7.375%, 7/01/24..................................... $ 212,558
280,000 7.50%, 1/01/26...................................... 301,146
620,000 7.75%, 1/01/24...................................... 663,927
New York State Power Authority
315,000 6.625%, 1/01/12..................................... 334,892
100,000 8.00%, 1/01/17...................................... 110,571
1,000,000 Puerto Rico Electric Power
Authority
5.00%, 7/01/12...................................... 885,820
1,000,000 Puerto Rico Telephone Authority
5.50%, 1/01/22...................................... 934,080
------------
3,442,994
------------
Resource Recovery--2.4%
700,000 Babylon, New York Industrial
Development Agency
Resource Recovery Revenue (2)
2.10%, 12/01/24..................................... 700,000
------------
Sales Tax--8.1%
220,000 Municipal Assistance Corp. for
the City of New York
7.25%, 7/01/08...................................... 230,175
New York State Local Government
Assistance Corp.
500,000 5.00%, 4/01/21...................................... 431,385
1,000,000 6.00%, 4/01/24...................................... 985,090
700,000 7.00%, 4/01/12...................................... 764,736
------------
2,411,386
------------
Transportation--7.6%
350,000 Metropolitan Transit Authority
6.25%, 7/01/17
(MBIA insured)...................................... 356,429
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 500,000 6.375%, 7/01/10
(FGIC insured)...................................... $ 523,655
250,000 7.375%, 7/01/08..................................... 279,140
Port Authority of New York &
New Jersey
500,000 5.00%, 10/01/13..................................... 447,125
400,000 6.125%, 7/15/10 (1)................................. 410,728
250,000 6.50%, 4/15/11...................................... 262,845
------------
2,279,922
------------
Turnpike/Toll--6.2%
New York State Thruway Authority
500,000 5.125%, 4/01/07..................................... 462,830
400,000 7.25%, 1/01/10...................................... 423,664
Triborough Bridge & Tunnel
Authority
500,000 5.00%, 1/01/20...................................... 439,215
500,000 6.625%, 1/01/17
(MBIA insured)...................................... 532,975
------------
1,858,684
------------
Water/Sewer--3.6%
New York City Municipal Water
Finance Authority
Water & Sewer Systems
Revenue
750,000 6.375%, 6/15/22
(Pre-refunded with U.S.
Government Securities).............................. 782,058
275,000 7.10%, 6/15/12...................................... 298,370
------------
1,080,428
------------
Total Investments
(cost--$28,522,233).................................................... 98.0% $ 29,254,799
Other Assets in Excess of
Other Liabilities...................................................... 2.0 590,779
----- ------------
Total Net Assets.......................................................... 100.0% $ 29,845,578
===== ============
</TABLE>
- --------------------------------------------------------------------------------
(1) Subject to alternative minimum tax.
(2) Represents a variable rate demand note, payable on demand. Interest rates
are subject to change daily and reflects rate in effect on 7/31/95.
See accompanying notes to financial statements.
14
<PAGE>
This Page Intentionally Left Blank.
15
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
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--$78,774,958, $21,422,462 and
$28,522,233, respectively)........................................ $81,327,260 $21,687,217 $29,254,799
Cash................................................................. -- 25,280 165,728
Interest receivable.................................................. 1,235,706 354,096 454,204
Receivable for investments sold...................................... 1,115,476 130,412 75,000
Receivable for shares of beneficial interest sold.................... 106,529 37,893 --
Deferred organization expenses and other assets...................... 13,650 2,499 3,200
----------- ----------- -----------
Total Assets...................................................... 83,798,621 22,237,397 29,952,931
----------- ----------- -----------
Liabilities
Due to custodian..................................................... 122,326 -- --
Payable for investments purchased.................................... 924,520 -- --
Payable for shares of beneficial interest redeemed................... 353,736 106,936 24,077
Dividends payable.................................................... 157,548 45,017 45,735
Investment advisory fee payable...................................... 10,537 2,626 2,354
Distribution fee payable............................................. 1,350 365 490
Other payables and accrued expenses.................................. 55,500 36,022 34,697
----------- ----------- -----------
Total Liabilities................................................. 1,625,517 190,966 107,353
----------- ----------- -----------
Net Assets
Shares of beneficial interest at par value........................... 76,298 20,888 27,827
Paid-in-surplus...................................................... 81,534,879 22,087,933 29,210,150
Accumulated net realized loss on investments......................... (1,990,375) (327,145) (124,965)
Net unrealized appreciation on investments........................... 2,552,302 264,755 732,566
----------- ----------- -----------
Total Net Assets.................................................. $82,173,104 $22,046,431 $29,845,578
----------- ----------- -----------
Shares of beneficial interest outstanding............................... 7,629,799 2,088,853 2,782,747
----------- ----------- -----------
Net asset value per share............................................... $10.77 $10.55 $10.73
=========== =========== ===========
Maximum offering price per share*....................................... $11.31 $11.08 $11.27
=========== =========== ===========
</TABLE>
* Sales charges decrease on purchases of $50,000 or higher.
See accompanying notes to financial statements.
16
<PAGE>
Year Ended July 31, 1995
- --------------------------------------------------------------------------------
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............................................................ $ 5,367,250 $ 1,581,134 $ 1,883,954
------------ ------------ ------------
Operating Expenses
Investment advisory fees (note 2a).................................. 428,119 129,604 152,144
Distribution fees (note 2c)......................................... 77,750 23,487 27,747
Accounting services fees (note 2b).................................. 75,450 73,028 72,221
Transfer and dividend disbursing agent fees......................... 69,592 15,457 22,697
Custodian fees...................................................... 47,088 30,061 32,402
Registration fees................................................... 25,439 2,011 3,152
Trustees' fees and expenses......................................... 17,255 8,855 8,855
Auditing, consulting and tax return preparation fees................ 13,952 13,952 13,952
Reports and notices to shareholders................................. 13,290 6,964 7,903
Amortization of deferred organization expenses (note 1c)............ 10,147 518 712
Legal fees.......................................................... 2,968 2,586 3,243
Miscellaneous....................................................... 9,686 3,547 3,194
------------ ------------ ------------
Total operating expenses......................................... 790,736 310,070 348,222
Less: Investment advisory fees waived (note 2a).................. (154,440) (80,730) (69,418)
------------ ------------ ------------
Net operating expenses........................................ 636,296 229,340 278,804
------------ ------------ ------------
Net investment income......................................... 4,730,954 1,351,794 1,605,150
------------ ------------ ------------
Realized and Unrealized Gain (Loss) on Investments--Net
Net realized loss on security transactions.......................... (1,965,769) (297,266) (100,494)
Net realized gain on futures transactions (note 1f)................. 100,832 32,621 37,685
------------ ------------ ------------
Net realized loss on investments................................. (1,864,937) (264,645) (62,809)
Net change in unrealized appreciation (depreciation) on investments.... 2,177,325 238,339 288,717
------------ ------------ ------------
Net realized loss and change in unrealized appreciation
(depreciation) on investments.................................... 312,388 (26,306) 225,908
------------ ------------ ------------
Net increase in net assets resulting from operations................... $ 5,043,342 $ 1,325,488 $ 1,831,058
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------
National Tax-Exempt Fund
---------------------------------
Year Ended July 31,
--------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment income......................................................... $ 4,730,954 $ 5,855,559
Net realized gain (loss) on investments....................................... (1,864,937) 1,700,031
Net change in unrealized appreciation (depreciation) on investments........... 2,177,325 (5,263,348)
------------ ------------
Net increase in net assets resulting from operations....................... 5,043,342 2,292,242
------------ ------------
Dividends and Distributions to Shareholders
Net investment income......................................................... (4,730,954) (5,855,559)
Net realized gains............................................................ -- (2,395,083)
Distributions in excess of net realized gains................................. (56,482) --
------------ ------------
Total dividends and distributions to shareholders.......................... (4,787,436) (8,250,642)
------------ ------------
Share Transactions of Beneficial Interest
Net proceeds from sales....................................................... 9,167,458 16,877,343
Reinvestment of dividends and distributions................................... 2,981,310 5,055,760
Cost of shares redeemed....................................................... (23,762,039) (32,840,943)
------------ ------------
Net decrease............................................................... (11,613,271) (10,907,840)
------------ ------------
Total decrease in net assets............................................... (11,357,365) (16,866,240)
Net Assets
Beginning of year............................................................. 93,530,469 110,396,709
------------ ------------
End of year................................................................... $ 82,173,104 $ 93,530,469
============ ============
Shares of Beneficial Interest Issued and Redeemed
Issued........................................................................ 872,813 1,496,488
Issued in reinvestment of dividends and distributions......................... 284,803 455,255
Redeemed...................................................................... (2,290,756) (2,965,354)
------------ ------------
Net decrease............................................................... (1,133,140) (1,013,611)
============ ============
Dividends and Distributions Per Share
Net investment income......................................................... $ 0.578 $ 0.612
------------ ------------
Net realized gains............................................................ $ 0.007 $ 0.239
------------ ------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------- --------------------------------
California Tax-Exempt Fund New York Tax-Exempt Fund
- -------------------------------- --------------------------------
Year Ended July 31, Year Ended July 31,
- -------------------------------- --------------------------------
1995 1994 1995 1994
- ------------ ------------ ------------ ------------
<S> <C> <C> <C>
$ 1,351,794 $ 1,802,054 $ 1,605,150 $ 1,943,696
(264,645) 266,364 (62,809) 505,040
238,339 (1,560,035) 288,717 (1,963,681)
- ------------ ------------ ------------ ------------
1,325,488 508,383 1,831,058 485,055
- ------------ ------------ ------------ ------------
(1,351,794) (1,802,054) (1,605,150) (1,943,696)
-- (497,507) -- (39,426)
(168,496) -- (510,362) --
- ------------ ------------ ------------ ------------
(1,520,290) (2,299,561) (2,115,512) (1,983,122)
- ------------ ------------ ------------ ------------
2,154,564 6,916,432 3,162,033 9,337,899
897,509 1,213,893 1,301,919 1,311,333
(9,834,640) (14,729,767) (6,543,705) (14,283,654)
- ------------ ------------ ------------ ------------
(6,782,567) (6,599,442) (2,079,753) (3,634,422)
- ------------ ------------ ------------ ------------
(6,977,369) (8,390,620) (2,364,207) (5,132,489)
29,023,800 37,414,420 32,209,785 37,342,274
- ------------ ------------ ------------ ------------
$ 22,046,431 $ 29,023,800 $ 29,845,578 $ 32,209,785
============ ============ ============ ============
208,962 620,408 304,753 829,382
87,450 110,077 125,900 117,005
(946,649) (1,346,383) (625,195) (1,286,252)
- ------------ ------------ ------------ ------------
(650,237) (615,898) (194,542) (339,865)
============ ============ ============ ============
$ 0.539 $ 0.571 $ 0.553 $ 0.584
- ------------ ------------ ------------ ------------
$ 0.068 $ 0.156 $ 0.176 $ 0.011
- ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
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 Advisor 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. The amount of dividends and distributions
from net investment income and net realized gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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,
net realized gain(loss) and net assets were not affected.
As required by 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
reclassifications from accumulated undistributed net investment income 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 Gain(Loss) Surplus
-------------- ------------- ---------
<S> <C> <C> <C>
National -- $ 47,827 $ (47,827)
California -- 162,089 (162,089)
New York -- 4,679 (4,679)
</TABLE>
(f) 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. There were no futures contracts outstanding at July 31,
1995 for National, California and New York, respectively.
(g) Allocation of Expenses
Expenses specifically identifiable to a particular fund are borne by the
fund. Other expenses are allocated to each fund based on its net assets in
relation to the total net assets of all the applicable funds or on another
reasonable basis.
2. Investment Advisory Fee, Accounting Services Fee, Distribution Fee and
Other Transactions with Affiliates.
(a) The investment advisory fee is payable monthly to the Adviser, and is
computed as a percentage of each fund's net assets as of the close of business
each day at the annual rate of .50%. For the year ended July 31, 1995, the
Adviser voluntarily waived $154,440, $80,730 and $69,418 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, 1995, the Adviser received $45,450, $43,028 and $42,221 for
National, California and New York, respectively.
21
<PAGE>
July 31, 1995
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(c) Each fund has adopted a Plan and Agreement of Distribution (the "Plan")
pursuant to which each fund is permitted to compensate the Distributor in
connection with the distribution of shares of beneficial interest. Under the
Plan, the Distributor has entered into agreements with dealers and other
financial institutions and organizations to obtain various sales-related
services in rendering distribution assistance. To compensate the Distributor for
the services it and other dealers provide and for the expense they bear under
the Plan, each fund pays the Distributor compensation, accrued daily and payable
monthly at an annual rate of up to .25% of average daily net assets or such
lesser rate as the Board of Trustees may from time to time determine. The total
fee may be paid by the Distributor to broker-dealers or others for providing
personal service, maintenance of accounts and ongoing sales or shareholder
support functions in connection with the distribution of shares of beneficial
interest. While payments under the Plan may not exceed the stated percentage of
average daily net assets on an annual basis, the payments are not limited to the
amounts actually paid or expenses actually incurred by the Distributor. For the
period September 1, 1994 to July 31, 1995, a service fee at the annual rate of
.10% of average daily net assets of each fund was accrued under the plan.
(d) Oppenheimer & Co., Inc., an affiliate of Oppenheimer Capital, has
informed the funds that it received approximately $77,000, $40,000, and $55,000
in connection with the sale of shares of beneficial interest for National,
California and New York, respectively, for the year ended July 31, 1995.
3. Purchases and Sales of Securities
For the year ended July 31, 1995, purchases and sales of investment
securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
National California New York
----------- ----------- -----------
<S> <C> <C> <C>
Purchases $33,039,473 $ 6,955,239 $ 8,716,041
Sales 42,292,804 14,411,969 11,742,025
</TABLE>
4. Unrealized Appreciation (Depreciation) and Cost of Investments for Federal
Income Tax Purposes
At July 31, 1995, the composition of unrealized appreciation (depreciation)
of investment securities and the cost of investments for Federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Appreciation (Depreciation) Net Tax Cost
------------ -------------- ---------- ----------
<S> <C> <C> <C> <C>
National $2,888,196 ($585,506) $2,302,690 $79,024,570
California 509,111 (244,356) 264,755 21,422,462
New York 1,148,492 (415,926) 732,566 28,522,233
</TABLE>
5. Authorized Shares of Beneficial Interest and Par Value Per Share
<TABLE>
<CAPTION>
National California New York
--------- ---------- ---------
<S> <C> <C> <C>
Authorized shares of beneficial interest unlimited unlimited unlimited
Par value per share $.01 $.01 $.01
</TABLE>
6. Financial Instruments and Associated Risks
During the year ended July 31, 1995, the funds invested in futures
contracts in order to hedge their existing portfolio securities against
fluctuations in value caused by changes in interest rates. The use of futures
contracts involves the risk of imperfect correlation in movements in the price
of futures contracts, interest rates and the underlying hedged securities.
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. Capital Loss Carryforwards
For the year ended July 31, 1995, National and California had net capital
loss carryforwards of $543,230 and $32,560, respectively, which will be
available, to the extent provided by regulations, to offset future net capital
gains realized through the fiscal year ending 2003 and reduce amounts
distributable to shareholders. Capital losses incurred after October 31, 1994
are deemed to arise on the first business day of the following tax year.
Accordingly, for the fiscal year ended July 31, 1995, National, California and
New York incurred and elected to defer $981,794, $205,633 and $52,905 in net
capital losses, respectively.
8. Proposed Mergers
On June 22, 1995, the Board of Trustees approved the proposed mergers of
National, California and New York, each a series of Quest for Value Family of
Funds, and Oppenheimer Tax-Free Bond Fund, Oppenheimer California Tax-Exempt
Fund and Oppenheimer New York Tax-Exempt Fund, respectively. The proposed
mergers, each of which would be a tax-free reorganization, provide for each
acquiring Oppenheimer fund to acquire all the assets of the respective Quest for
Value fund, subject to the assumption of liabilities, in exchange for the shares
of the respective acquiring Oppenheimer fund. Consummation of each merger is
dependent upon shareholder approval.
23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
--------------------------------------- ----------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
National Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $10.67 $0.58 $0.11 $0.69 ($0.58) ($0.01) ($0.59)
1994 11.29 0.61 (0.38) 0.23 (0.61) (0.24) (0.85)
1993 11.08 0.68 0.23 0.91 (0.68) (0.02) (0.70)
1992 10.22 0.73 0.86 1.59 (0.73) -- (0.73)
August 14, 1990 (4)
to July 31, 1991 10.00(5) 0.65 0.22 0.87 (0.65) -- (0.65)
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
National Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C>
1995 $10.77 6.72% $82,173 0.74%(1,2) 5.53%(1,2) 40%
1994 10.67 2.01% 93,530 0.43%(1) 5.51%(1) 45%
1993 11.29 8.51% 110,397 0.20%(1) 6.01%(1) 19%
1992 11.08 16.22% 49,303 0.02%(1) 6.80%(1) 10%
August 14, 1990 (4)
to July 31, 1991 10.22 8.95% 13,231 0.00%(1,3) 6.97%(1,3) 8%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been .92% and 5.35%,
respectively, for the year ended July 31, 1995, .78% and 5.16%,
respectively, for the year ended July 31, 1994, .85% and 5.36%,
respectively, for the year ended July 31, 1993, 1.03% and 5.79%,
respectively, for the year ended July 31, 1992 and 1.75% and 5.22%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
--------------------------------------- ----------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
California Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $10.60 $0.54 $0.02 $0.56 ($0.54) ($0.07) ($0.61)
1994 11.15 0.57 (0.39) 0.18 (0.57) (0.16) (0.73)
1993 10.86 0.64 0.30 0.94 (0.64) (0.01) (0.65)
1992 10.23 0.69 0.63 1.32 (0.69) -- (0.69)
August 14, 1990 (4)
to July 31, 1991 10.00(5) 0.63 0.23 0.86 (0.63) -- (0.63)
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
California Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C>
1995 $10.55 5.56% $22,046 0.88%(1,2) 5.22%(1,2) 28%
1994 10.60 1.52% 29,024 0.61%(1) 5.18%(1) 32%
1993 11.15 9.06% 37,414 0.29%(1) 5.78%(1) 24%
1992 10.86 13.37% 18,643 0.09%(1) 6.45%(1) 12%
August 14, 1990 (4)
to July 31, 1991 10.23 8.89% 4,320 0.00%(1,3) 6.65%(1,3) 20%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.20% and 4.90%,
respectively, for the year ended July 31, 1995, .95% and 4.84%,
respectively, for the year ended July 31, 1994, .94% and 5.13%,
respectively, for the year ended July 31, 1993, 1.46% and 5.08%,
respectively, for the year ended July 31, 1992 and 3.90% and 2.75%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
<TABLE>
<CAPTION>
INCOME FROM DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
--------------------------------------- ----------------------------------------------
Net Realized Dividends to Distributions to
Net Asset and Shareholders Shareholders Total
Value, Net Unrealized Total from from Net from Net Dividends
Beginning Investment Gain (Loss) Investment Investment Realized Gain and
of Period Income on Investments Operations Income on Investments Distributions
New York Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $10.82 $0.55 $0.09 $0.64 ($0.55) ($0.18) ($0.73)
1994 11.26 0.58 (0.43) 0.15 (0.58) (0.01) (0.59)
1993 10.98 0.65 0.31 0.96 (0.65) (0.03) (0.68)
1992 10.05 0.70 0.93 1.63 (0.70) -- (0.70)
August 14, 1990 (4)
to July 31, 1991 10.00(5) 0.64 0.05 0.69 (0.64) -- (0.64)
<CAPTION>
RATIOS
---------------------------------------
Ratio of Net Ratio of Net
Net Asset Net Assets Operating Investment
Value, End of Expenses Income to Portfolio
End of Total Period to Average Average Turnover
Period Return* (000's) Net Assets Net Assets Rate
New York Tax-Exempt Fund
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C>
1995 $10.73 6.37% $29,846 0.92%(1,2) 5.28%(1,2) 30%
1994 10.82 1.36% 32,210 0.65%(1) 5.20%(1) 49%
1993 11.26 9.17% 37,342 0.37%(1) 5.84%(1) 7%
1992 10.98 16.93% 18,754 0.13%(1) 6.70%(1) 31%
August 14, 1990 (4)
to July 31, 1991 10.05 7.16% 7,828 0.00%(1,3) 6.90%(1,3) 6%
</TABLE>
(1) During the periods presented above, the Adviser waived all or a portion of
its fees and reimbursed the fund for all or a portion of its other operating
expenses. If such waivers and reimbursements had not been in effect, the
ratio of net operating expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.15% and 5.05%,
respectively, for the year ended July 31, 1995, .94% and 4.91%,
respectively, for the year ended July 31, 1994, .99% and 5.22%,
respectively, for the year ended July 31, 1993, 1.19% and 5.64%,
respectively, for the year ended July 31, 1992 and 2.54% and 4.36%,
annualized, respectively, for the period August 14, 1990 (commencement of
operations) to July 31, 1991.
- -------------------------
(2) Average net assets for the year ended July 31, 1995 were $85,623,719,
$25,920,712 and $30,428,752 for National, California and New York,
respectively.
(3) Annualized.
(4) Commencement of operations.
(5) Offering price.
* Assumes reinvestment of all dividends and distributions, but does not
reflect deductions for sales charges. Aggregate (not annualized) total
return is shown for any period shorter than one year.
24
<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 National Tax-Exempt Fund, the
California Tax-Exempt Fund, and the New York Tax-Exempt Fund (constituting part
of Quest for Value Family of Funds, hereafter referred to as the "Funds") at
July 31, 1995, 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 four 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' 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 July
31, 1995 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 22, 1995
25
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the funds' fiscal year end (July 31,
1995) as to the Federal tax status of dividends and distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that
substantially all dividends paid from net investment income during the fiscal
year ended July 31, 1995 were Federally exempt interest dividends, although,
each fund did invest in securities which paid interest subject to the Federal
alternative minimum tax during its fiscal year. Dividends paid from net
investment income subject to such tax amount to 19.2%, 15.0% and 9.3%,
respectively, for the National, California and New York Tax-Exempt Funds. Per
share dividends and distributions paid to shareholders for the fiscal year ended
July 31, 1995 were as follows:
<TABLE>
<CAPTION>
Net Investment Short-Term Long-Term
Income Capital Gains Capital Gains
-------------- ------------- -------------
<S> <C> <C> <C>
National Tax-Exempt Fund $0.5782 $0.0067 -
California Tax-Exempt Fund 0.5386 0.0652 0.0026
New York Tax-Exempt Fund 0.5532 - 0.1758
</TABLE>
Since the funds' fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1995. In January 1996, you will be
advised on IRS Form 1099 DIV as to the Federal tax status of the dividends
received by you in calendar 1995. The amounts that will be reported, will be the
amounts to use on your 1995 Federal income tax return and will probably differ
from the amounts which we must report for the funds' fiscal year ended July 31,
1995. Shareholders are advised to consult with their own tax advisers as to the
Federal, state and local tax status of each funds' income received. A breakdown
of interest by state for the National Tax-Exempt Fund will also be provided in
January 1996, which may be of value in reducing a shareholder's state or local
tax liability, if any.
26
<PAGE>
[LOGO OF QUEST FOR VALUE APPEARS HERE]
27
<PAGE>
- --------------------------------------------------------------------------------
QUEST
QUEST FOR VALUE
TAX-EXEMPT FUNDS
- --------------------------------------------------------------------------------
Trustees and Officers
Joseph M. La Motta Trustee, President
Paul Y. Clinton Trustee
Thomas W. Courtney Trustee
Lacy B. Herrmann Trustee
George Loft Trustee
Bernard H. Garil Vice President
Robert J. Bluestone Vice President
Matthew Greenwald Vice President
Sheldon Siegel Treasurer
Deborah Kaback Secretary
Leslie Klein Assistant Treasurer
Thomas E. Duggan Assistant Secretary
Maria Camacho Assistant Secretary
Investment Adviser
Quest for Value Advisors
One World Financial Center
New York, NY 10281
Distributor
Quest for Value Distributors
Two World Financial Center
New York, NY 10080
Transfer and Shareholder Servicing Agent
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Table of Contents
<S> <C>
President's Letter......................................................... 1
Investment Review.......................................................... 3
Schedules of Investments................................................... 6
Statements of Assets and Liabilities....................................... 16
Statements of Operations................................................... 17
Statements of Changes in Net Assets........................................ 18
Notes to Financial Statements.............................................. 20
Financial Highlights....................................................... 24
Report of Independent Accountants.......................................... 25
Tax Information............................................................ 26
</TABLE>
- --------------------------------------------------------------------------------
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus.
- --------------------------------------------------------------------------------
QUEST FOR VALUE
TAX-EXEMPT FUNDS
- --------------------------------------------------------------------------------
NATIONAL TAX-EXEMPT FUND
CALIFORNIA TAX-EXEMPT FUND
NEW YORK TAX-EXEMPT FUND
Annual Report
July 31, 1995
[LOGO OF QUEST FOR VALUE APPEARS HERE]
Managed by
Quest for Value Advisors
