<PAGE>
As filed with the Securities and Exchange Commission on March __, 1996
Registration No. 33-29070
- -----------------------------------------------------------------------
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. 12 [X]
--
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 15
--
OCC CASH RESERVES, INC.
(Previously called Quest Cash Reserves, Inc.)
----------------------------------------------
(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 March 29, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] pursuant to paragraph (a) of Rule 485 or 486
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. A Rule 24f-2 Notice for the fiscal year ended November 30,
1995 was filed on January 16, 1996.
<PAGE>
CROSS REFERENCE SHEET
Form N-1A
Item
Part A Caption Prospectus
- ------ ------- ----------
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; Additional Information;
of Registrant Fund Organization;
OCC Cash Reserves-Primary
Portfolio; OCC Cash Reserves-
Government Portfolio; OCC Cash
Reserves-General Municipal
Portfolio; OCC Cash Reserves-
California Municipal Portfolio; OCC
Cash Reserves-New York Municipal
Portfolio
5. Management of the Fund The Advisor; Distribution Plan;
Additional Information
6. Capital Stock and Other Additional Information; Share
Securities Price; Daily Dividends, Other
Distributions, Taxes;
7. Purchase of Securities Purchase and Redemption of Shares;
Obtaining an Application Form;
Additional Information
8. Redemption or Repurchase Purchase and Redemption of Shares;
Additional Information
9. Legal Proceedings N/A
Part B Caption Statement of Additional Information
- ------ ------- -----------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History N/A
13. Investment Objectives and Investment of the Fund's Assets;
Investment
<PAGE>
Policies Restrictions
14. Management of the Fund Investment Management and Other
Services - the Advisory Agreement
15. Control Persons and Principal Directors and Officers
Holders of Securities
16. Investment Advisory and Other Investment Management and Other
Services Services - Distribution Assistance
Plan
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Determination of Net Asset Value;
Additional Information; Possible
Additional Series
19. Purchase, Redemption and Determination of Net Asset Value
Pricing of Securities
20. Tax Status Taxes
21. Underwriters Investment Management and Other
Services - Distribution Assistance
Plan
22. Calculations of Performance Data Portfolio Yield
23. Financial Statements Financial Statements
<PAGE>
[LOGO] ................... with investment objectives of
SAFETY - LIQUIDITY - INCOME
OCC Cash Reserves (the "Fund") is a money market fund with five distinct
Portfolios-the Primary Portfolio, the Government Portfolio, the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolio (the "Portfolios").
Safety of principal is sought by investing in securities which are selected
for their high quality, liquidity and stability of principal. A security at the
time of purchase cannot have a maturity exceeding thirteen months, and the
average weighted maturity of all securities in the Portfolio cannot exceed 90
days. Such a short average maturity enhances the ability of each Portfolio to
provide both liquidity and stability of value to you and your fellow
shareholders. WHILE EACH PORTFOLIO SEEKS TO MAINTAIN (AND HAS MAINTAINED) ITS
SHARE PRICE AT $1.00, INVESTMENTS IN THE PORTFOLIOS ARE NOT GUARANTEED OR
INSURED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT A PORTFOLIO WILL
MAINTAIN A CONSTANT PRICE OF $1.00 PER SHARE.
IS OCC CASH RESERVES FOR YOU?
The Fund is designed for individuals, institutions, advisors, custodians,
charities, fiduciaries and corporations who can benefit from a fund seeking
maximum current income and who place value on an investment having safety of
principal, liquidity, stability, simplicity, and convenience. The availability
of five separate Portfolios provides you with the advantage of selecting a
combination of investment characteristics particularly suitable to your needs.
The five Portfolios described in this Prospectus compare to one another as
follows:
<TABLE>
<S> <C> <C>
Primary Portfolio -- highest money market income; conservative investments
Government Portfolio -- high money market income; very conservative investments
General Municipal -- highest money market tax-exempt income; conservative investments
Portfolio
California Municipal -- highest money market income exempt from Federal and California
Portfolio personal income taxes; conservative investments
New York Municipal -- highest money market income exempt from Federal, New York State
Portfolio and New York City income taxes; conservative investments
</TABLE>
<PAGE>
EXPENSE INFORMATION
The expense summary format below was developed for use by all mutual funds
to help investors understand the various direct costs and expenses related to a
fund investment.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (FOR EACH PORTFOLIO)
<S> <C>
Sales Load Imposed on Purchases.............................. None
Sales Load Imposed on Reinvested Dividends................... None
Redemption Fees.............................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE NET ASSETS)
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Management fees............. .41% .48% .47% .50% .50%
12b-1 (Distribution Plan)
expenses................... .25% .25% .25% .25% .25%
Other Expenses.............. .28% .27% .28% .20% .25%
-- --
--- --- ---
Total Operating Expenses.... .94% 1.00% 1.00% .95% 1.00%
</TABLE>
During the fiscal year ended November 30, 1995, OpCap Advisors (the
"Advisor") voluntarily waived part of its advisory fee with respect to the
Government Portfolio, the General Municipal Portfolio, the California Municipal
Portfolio and the New York Municipal Portfolio in order to maintain a
competitive yield. After giving effect to such waivers, the management fees for
the Government Portfolio, the General Municipal Portfolio, the California
Municipal Portfolio and the New York Municipal Portfolio were .48%, .40%, .37%
and .29%, respectively, and the total operating expenses were 1.00%, .93%, .82%
and .79% respectively. Such advisory fee waivers are voluntary and may be
discontinued at any time, except that the Advisor has agreed to assume expenses
of any Portfolio in excess of 1.00% in any fiscal year. Had such waivers not
occurred, the total operating expenses would have been 1.02%, 1.02%, .95%, and
1.00%, respectively. The expenses listed for the Government and General
Municipal Portfolio have been restated to reflect the Advisor's agreement to
assume expenses in excess of 1.00% and the expenses for the California Municipal
Portfolio and the New York Municipal Portfolio have been restated to reflect
what the expenses would have been without the voluntary waivers. In addition,
the expense information has been restated to reflect the reduction in the 12b-1
expenses for each Portfolio from .30% of average net assets to .25% of average
net assets, effective March 31, 1995, and an increase in administrative
expenses.
The following table illustrates the expenses that an investor would pay on a
hypothetical $1,000 investment in each of the Portfolios assuming a 5% annual
return (cumulatively through the end of each time period). Neither the 5% return
nor the estimated expenses should be considered an indication of actual or
expected performance or expenses, both of which may vary.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary Portfolio..................................... $ 9.59 $ 29.96 $ 52.02 $ 115.48
Government Portfolio.................................. 10.20 31.84 55.24 122.46
General Municipal Portfolio........................... 10.20 31.84 55.24 122.46
California Municipal Portfolio........................ 9.69 30.26 52.54 116.63
New York Municipal Portfolio.......................... 10.20 31.84 55.24 122.46
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial information presented below has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report thereon
appears in the Statement of Additional Information ("SAI"). Investors should
understand that all the following information should be read in conjunction with
the financial statements and related notes thereto appearing in the SAI.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS DIVIDENDS AND DISTRIBUTIONS
------------------------------------- ---------------------------------------------
NET DIVIDENDS TO DISTRIBUTIONS
NET ASSET REALIZED SHAREHOLDERS TO DISTRIBUTIONS
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET SHAREHOLDERS TO SHAREHOLDERS
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT FROM OTHER FROM NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME SOURCES REALIZED GAINS
<S> <C> <C> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995..................... $1.00 $ .051 $ 0.000(1) $0.051 $(0.051) -- $(0.000)(1)
1994..................... 1.00 .032 0.000(1) 0.032 (0.032) $ 0.000)(1) (0.000)(1)
1993..................... 1.00 .024 0.000(1) 0.024 (0.024) (0.000)(1) (0.000)(1)
1992..................... 1.00 .033 0.000(1) 0.033 (0.033) -- (0.000)(1)
1991..................... 1.00 .057 (0.000)(1) 0.057 (0.057) -- --
December 13, 1989 (3)
to November 30, 1990.... 1.00 .073(4) 0.000(1) 0.073 (0.073) -- (0.000)(1)
<CAPTION>
RATIOS TO AVERAGE NET
NET ASSETS
ASSETS, --------------------------
NET ASSET END OF NET
VALUE, END TOTAL PERIOD NET OPERATING INVESTMENT
OF PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995..................... $ 1.00 5.19% $1,671.1 0.94%(2) 5.07%(2)
1994..................... 1.00 3.26% 1,453.8 0.91% 3.21%
1993..................... 1.00 2.44% 1,413.9 0.90% 2.41%
1992..................... 1.00 3.38% 1,168.3 0.88% 3.34%
1991..................... 1.00 5.89% 1,249.0 0.86% 5.74%
December 13, 1989 (3)
to November 30, 1990.... 1.00 7.80%(5) 1,244.2 0.87%(4,5) 7.47%(4,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Average net assets for the year ended November 30, 1995 were $1,594,387,722.
(3) Commencement of operations.
(4) Reflects a voluntary waiver of $.00004 per share in advisory fees. Had such
waiver not occurred, the net operating expense and net investment income
ratios would have been 0.88% and 7.46%, respectively.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT PORTFOLIO
Year ended November 30,
1995..................... $1.00 $0.049(2) $0.000(1) $0.049 $(0.049) -- $(0.000)(1)
1994..................... 1.00 0.031(2) 0.000(1) 0.031 (0.031) $ 0.000)(1) --
1993..................... 1.00 0.022 -- 0.022 (0.022) (0.000)(1) --
1992..................... 1.00 0.032(2) 0.000(1) 0.032 (0.032) -- (0.000)(1)
1991..................... 1.00 0.055(2) -- 0.055 (0.055) -- --
February 14, 1990 (4)
to November 30, 1990.... 1.00 0.059(2) 0.000(1) 0.059 (0.059) -- (0.000)(1)
<CAPTION>
GOVERNMENT PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995..................... $ 1.00 5.02% $ 108.6 1.00%(2,3) 4.91%(2,3)
1994..................... 1.00 3.12% 113.2 0.95%(2) 3.08%(2)
1993..................... 1.00 2.26% 127.9 1.00% 2.24%
1992..................... 1.00 3.24% 131.7 0.93%(2) 3.23%(2)
1991..................... 1.00 5.69% 142.2 0.84%(2) 5.62%(2)
February 14, 1990 (4)
to November 30, 1990.... 1.00 7.67%(5) 150.1 0.67%(2,5) 7.34%(2,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Reflects a voluntary waiver of $.0002, $.0002, $.0002 and $.001 per share,
respectively, in advisory fees and $.004 per share in advisory fees and
reimbursement of other operating expenses, respectively, in effect during
each period. Had such waivers and reimbursements not occurred, the ratio of
net operating expenses would have been 1.02%, 0.97%, 0.94%, 0.92% and 1.19%,
respectively and the ratio of net investment income would have been 4.89%,
3.06%, 3.22%, 5.54% and 6.82%, respectively.
(3) Average net assets for the year ended November 30, 1995 were $111,066,046.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
3
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------- DIVIDENDS TO
NET ASSET NET REALIZED SHAREHOLDERS
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET CAPITAL
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT CONTRIBUTION
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME BY ADVISOR
<S> <C> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $0.031(1) $(0.000)(2) $0.031 $(0.031) --
1994.......................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993.......................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992.......................... 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
1991.......................... 1.00 0.042(1) 0.000(2) 0.042 (0.042) --
February 14, 1990 (4)
to November 30, 1990......... 1.00 0.042(1) (0.000)(2) 0.042 (0.042) --
<CAPTION>
RATIOS TO AVERAGE NET
NET ASSETS
ASSETS, --------------------------
NET ASSET END OF NET
VALUE, END TOTAL PERIOD NET OPERATING INVESTMENT
OF PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 3.11% $116.0 0.93%(1,3) 3.07%(1,3)
1994.......................... 1.00 2.04% 108.7 0.90%(1,3) 2.01%(1)
1993.......................... 1.00 1.74% 109.7 0.98%(1) 1.73%(1)
1992.......................... 1.00 2.66% 112.9 0.90%(1) 2.62%(1)
1991.......................... 1.00 4.24% 100.1 0.88%(1) 4.20%(1)
February 14, 1990 (4)
to November 30, 1990......... 1.00 5.45%(5) 107.9 0.71%(1,5) 5.32%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.0003, $.001, $.001 and $.002
per share, respectively, in advisory fees in effect during each period. Had
such waivers not occurred, the ratio of net operating expenses would have
been 1.02%, 1.01%, 1.01%, 1.00%, 0.98% and 1.00%, respectively and the ratio
of net investment income would have been 2.98%, 1.90%, 1.70%, 2.52%, 4.10%
and 5.03%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $126,528,413.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $0.031(1) $(0.008) $0.023 $(0.031) $ 0.008
1994.......................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993.......................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992.......................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
March 20, 1991(4) 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
to November 30, 1991......... 1.00 0.026(1)
<CAPTION>
CALIFORNIA MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995.......................... $1.00 3.10% $ 75.9 0.82%(1,2) 3.05%(1,2)
1994.......................... 1.00 1.99% 61.3 0.85%(1) 1.99%(1)
1993.......................... 1.00 1.76% 62.3 0.85%(1) 1.75%(1)
1992.......................... 1.00 2.57% 61.2 0.60%(1) 2.51%(1)
March 20, 1991(4) 1.00 4.24%(5) 45.4 0.54%(1,5) 3.75%(1,5)
to November 30, 1991.........
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.001 and $.004 per share in
advisory fees and $.004 per share in advisory fees and reimbursement of
other operating expenses, respectively, in effect during each period. Had
such waivers and reimbursements not occurred, the ratio of net operating
expenses would have been .95%, 0.97%, 0.98%, 1.02% and 1.08%, respectively
and the ratio of net investment income would have been 2.92%, 1.87%, 1.62%,
2.09% and 3.21%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $63,810,311.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $0.030(1) $(0.000)(2) $0.030 $(0.030) --
1994.......................... 1.00 0.019(1) 0.000(2) 0.019 (0.019) --
1993.......................... 1.00 0.016(1) (0.000)(2) 0.016 (0.016) --
1992.......................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
April 10, 1991 (4)
to November 30, 1991......... 1.00 0.024(1) (0.000)(2) 0.024 (0.024) --
<CAPTION>
NEW YORK MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995.......................... $1.00 3.07% $ 52.3 0.79%(1.3) 3.02%
1994.......................... 1.00 1.92% 48.0 0.82%(1) 1.90%(1)
1993.......................... 1.00 1.66% 42.2 0.79%(1) 1.64%(1)
1992.......................... 1.00 2.56% 32.9 0.74%(1) 2.43%(1)
April 10, 1991 (4)
to November 30, 1991......... 1.00 4.29%(5) 18.4 0.56%(1,5) 3.80%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.002, $.002, $.002 and $.005 per share in
advisory fees and $.006 per share in advisory fees and reimbursement of
other operating expenses, respectively, in effect during each period. Had
such waivers and reimbursements not occurred, the ratio of net operating
expenses would have been 1.00%, 1.01%, 1.03%, 1.19% and 1.43%, respectively
and the ratio of net investment income would have been 2.81%, 1.71%, 1.40%,
1.98% and 2.93%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $52,398,588.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
4
<PAGE>
OCC CASH RESERVES PRIMARY PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The Primary Portfolio's investment objectives are in the following order of
priority--safety of principal, liquidity, and maximum current income from money
market securities to the extent consistent with the first two objectives. As a
matter of fundamental policy, the Primary Portfolio pursues its objectives by
maintaining a diversified portfolio of high quality money market securities of
the types described in the succeeding section, all of which at the time of
investment have remaining maturities of thirteen months or less. While the
Portfolio may not change this policy or the other "fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Primary Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Primary Portfolio invests are (1)
marketable obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities (collectively "U.S. Government Securities"); (2)
U.S. dollar-denominated certificates of deposit and bankers' acceptances of
prime quality issued or guaranteed by, and interest-bearing time deposits
maintained at, (a) U.S. banks or savings and loan associations having total
assets of more than $1 billion and which are insured under the administration of
the Federal Deposit Insurance Corporation ("FDIC"), (b) foreign branches of such
U.S. institutions, and U.S. or foreign branches of foreign banks having total
assets of at least $1 billion; (3) domestic or foreign commercial paper of prime
quality and participation interests in loans of equivalent quality extended by
banks to such companies; and (4) repurchase agreements that are collateralized
in full each day by U.S. Government Securities. For the purposes of this
prospectus, prime quality shall mean the security (or the issuer for a
comparable security) is rated in one of the two highest rating categories for
short term debt obligations by any two of Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc
("Fitch"), Duff & Phelps, Inc. ("Duff") or Thomson BankWatch, Inc., or by one of
such rating agencies if only one rating agency has issued a rating with respect
to the security, or, if not rated, judged by the Advisor pursuant to criteria
adopted by the Fund's Board of Directors to be of comparable quality.
In further regard to items (2) and (3) above, investments by the Primary
Portfolio which do not satisfy one of the following requirements are limited in
the aggregate to 5% of the Portfolio's total assets in regard to issues and to
1% of total assets (or $1 million if greater) in regard to any one issuer of
such issues: (i) issues rated in the highest category (or the issuer is so rated
for a comparable security) by at least two of the above-listed rating agencies;
or (ii) if rated only by one agency, rated in the highest category; or (iii) if
unrated, determined by the Board of Directors to be of quality comparable to
issues which qualify under (i) or (ii).
Certificates of deposit represent the obligation of a bank to repay funds
deposited with it for a specified period of time. Bankers' acceptances are
short-term collateralized credit instruments drawn on and evidencing the
obligation of a bank to pay the value at maturity. Commercial paper consists of
unsecured promissory notes issued by corporations to finance short-term credit
needs. Participation interests are undivided beneficial interests in loans
giving the purchaser the right to receive a pro rata share of a loan's cash
flow. Repurchase agreements are contracts under which the buyer acquires a
security subject to the obligation of the seller to repurchase at a fixed price,
usually within one week. The Fund enters into such agreements only with
5
<PAGE>
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government Securities and with the Fund's Custodian. The Fund could
experience a loss in the event of its failure to realize full value upon
collateral liquidation required by a dealer's default. Though investments in
obligations of foreign issuers may be higher yielding than those of domestic
issuers, they may involve certain different risks such as exchange control
regulations; limited availability of information about the issuer; differences
in accounting, auditing and financial reporting standards and government
regulation; the possibility of expropriation, nationalization or confiscatory
taxation; political or social instability or diplomatic developments; and the
differences between the economies of the United States and the applicable
foreign country, even though the Fund's investments are limited to those in
"developed countries." Each of these factors is carefully considered when
investments are made, but the Fund does not limit the amount of its assets which
can be invested in any particular type of eligible obligation or in any
developed foreign country.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Primary Portfolio may not (1) invest more than 25% of its total assets in the
securities of issuers conducting their principal business activities in any one
industry, except that under normal circumstances at least 25% of its total
assets will be invested in bank obligations; (2) invest more than 5% of its
total assets in the securities of any issuer (loan participations are considered
obligations of both the lender and the borrower); (3) invest more than 10% of
its total assets in repurchase agreements not terminable within seven days
(whether or not illiquid) or other illiquid investments including participation
interests and other instruments described above for which no secondary markets
exist: (4) borrow money except from banks for extraordinary or emergency
purposes in aggregate amounts not exceeding 15% of its total assets (and, when
such borrowings exceed 5% of its total assets, make any further investments);
and (5) mortgage, pledge or hypothecate its assets except to secure such
borrowings. Limitations (1) and (2) do not apply to U.S. Government Securities.
OCC CASH RESERVES GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVES AND PROCEDURES
The Government Portfolio's investment objectives are in the following order
of priority-- safety of principal, liquidity, and maximum current income from
money market securities to the extent consistent with the first two objectives.
As a matter of fundamental policy, the Government Portfolio pursues its
objectives by maintaining a diversified portfolio of high quality money market
securities of types described in the succeeding paragraph, all of which at the
time of investment have remaining maturities of thirteen months or less. While
the Portfolio may not change this policy or the "other fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Government Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Government Portfolio invests are
(1) marketable obligations of, or guaranteed by, the United States Government,
its agencies or instrumentalities (collectively "U.S. Government Securities"),
including direct obligations of the United States Treasury such as Bills, Notes
and Bonds, and issues of agencies and instrumentalities established under the
authority of an act of Congress such as the Federal Home Loan Banks, which have
the right to borrow from the U.S. Treasury, and the Federal National Mortgage
Association, the securities of which are
6
<PAGE>
solely dependent on the issuing instrumentality for repayment; and (2)
repurchase agreements that are collateralized in full each day by the types of
U.S. Government Securities listed above. These agreements are entered into with
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government Securities and with the Fund's Custodian.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Government Portfolio may not (1) invest more than 5% of its total assets in
repurchase agreements with any one vendor, although with respect to 25% of its
total assets it may invest without regard to such limitation; (2) invest more
than 10% of its total assets in repurchase agreements not terminable within
seven days (whether or not illiquid) or other illiquid investments; (3) borrow
money except from banks for extraordinary or emergency purposes in aggregate
amounts not exceeding 15% of its total assets (and, when such borrowings exceed
5% of its total assets, make any further investments); and (4) mortgage, pledge
or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES GENERAL MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The General Municipal Portfolio's investment objectives are in the following
order of priority-- safety of principal, liquidity, and, to the extent
consistent with these objectives, maximum current income from money market
securities that is exempt from Federal income taxes. As a matter of fundamental
policy, the General Municipal Portfolio pursues its objectives by maintaining a
diversified portfolio of high-grade municipal securities of the types described
in the succeeding section, all of which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal income taxes. At
least 80% of the Portfolio's total assets will be invested in such securities
(not including securities treated as tax preference items) unless the Advisor
has determined that it is in the best interest of the Portfolio to assume a
temporary defensive position involving a greater commitment of assets to
obligations generating taxable income. Normally, substantially all of the
Portfolio's income will be exempt from Federal taxes, although it may be subject
to state or local income taxes. While the Portfolio may not change this policy
or the "other fundamental investment policies" described below without
shareholder approval, it may, upon notice to shareholders but without such
approval, change its other investment policies. As is true with all investment
companies, there can be no assurance that the General Municipal Portfolio's
objectives will be achieved.
Under the current Internal Revenue Code (1) interest on tax-exempt municipal
securities issued after August 7, 1986 and used to finance "private activities"
(e.g., industrial development bonds) shall be treated as an item of tax
preference for purposes of alternative minimum tax ("AMT") imposed on
individuals and corporations, though for Federal income tax purposes such
interest shall remain fully tax-exempt, and (2) interest on all tax-exempt
obligations shall be included in "adjusted net book income" of corporations for
AMT purposes. The General Municipal Portfolio may purchase "private activity"
municipal securities without limitation and therefore a substantial portion (and
potentially all) of any distribution from the Portfolio may be treated as a tax
preference item (with resulting tax) for those taxpayers subject to AMT.
Investors who are already subject to AMT should consider whether an investment
in the Portfolio is suitable for them. Investors are urged to consult their own
tax advisors with respect to their own tax situations.
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MUNICIPAL SECURITIES
The municipal securities in which the General Municipal Portfolio invests
are municipal notes, short-term municipal bonds, short-term discount notes, and
participation interests in any of the foregoing. Municipal notes are generally
used to provide for short-term capital needs and generally have maturities of
thirteen months or less. Examples include tax anticipation and revenue
anticipation notes which are generally issued in anticipation of various
seasonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Municipal notes and short-term municipal bonds may either be secured by the
issuer's pledge of its faith, credit and taxing power for payment of principal
and interest, or paid from the revenues of a particular facility or a specific
excise or other source. Included within the revenue bonds category are
participations in lease obligations or installment purchase contracts
(hereinafter collectively called "lease obligations") of municipalities. States
and local agencies or authorities issue lease obligations to acquire equipment
and facilities. Short-term discount notes are short-term obligations issued at a
discount to face value. Participation interests are undivided interests in loans
giving the purchaser the right to a pro-rata share of a loan's cash flow.
All of the General Municipal Portfolio's municipal securities at the time of
purchase must be of prime quality, as previously defined. Securities must also
meet credit standards applied by the Advisor.
The General Municipal Portfolio may invest in variable rate obligations
whose interest rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the security's interest
rate is tied. Such adjustments minimize changes in the market value of the
obligation and, accordingly, enhance the ability of the Portfolio to maintain a
stable net asset value. Variable rate securities purchased may include
participation interests in industrial development bonds backed by letters of
credit of domestic or foreign banks having total assets of more than $1 billion;
the letters of credit of any single bank in respect of all variable rate
obligations will not cover more than 10% of the Portfolio's total assets.
The General Municipal Portfolio also may purchase tender option bonds. A
tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer, or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the municipal security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities coupled
with the tender option to trade at par on the date of such determination. Thus,
after payment of the fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Advisor, on behalf of the General Municipal Portfolio, will consider on an
ongoing basis the creditworthiness of the issuer of the underlying municipal
security, of any custodian, and of the third party provider of the tender
option. In certain instances and for certain tender option bonds, the option may
be terminable in the event of a default in payment of principal or interest on
the underlying municipal securities, and for other reasons. The Fund will
consider as illiquid securities tender option bonds as to which it cannot
exercise the tender feature on not more than seven days' notice if there is no
secondary market available for these 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
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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 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 General Municipal Portfolio will consider such securities to be illiquid
(the Portfolio 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.
The General Municipal Portfolio also may invest in forward commitments,
which obligate the Portfolio to purchase securities, and stand-by commitments or
puts, which give the Portfolio the right to resell securities, from or to a
dealer at a specified price. Such commitments, which may involve certain
expenses and risks, are not expected to comprise a significant portion of the
Portfolio's investments. The Portfolio may commit up to 15% of its net assets to
the purchase of when-issued securities. The underlying securities are subject to
market fluctuations and no interest accrues prior to delivery of such
securities.
TAXABLE INVESTMENTS
The taxable investments in which the General Municipal Portfolio may invest
include obligations of the U.S. Government and its agencies or
instrumentalities; high quality certificates of deposit and bankers'
acceptances; prime commercial paper; and repurchase agreements collateralized at
all times by such instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain Portfolio diversification and reduce investment risk, the
General Municipal Portfolio may not (1) invest more than 25% of its total assets
in municipal securities whose issuers are located in the same state or more than
25% of its total assets in municipal securities whose interest is paid from
revenues of similar-type projects; (2) invest more than 5% of its total assets
in the securities of any one issuer (except the U.S. Government) although with
respect to 25% of its total assets it may invest without regard to such
limitation; (3) invest more than 10% of its total assets in repurchase
agreements not terminable within seven days (whether or not illiquid) or other
illiquid investments; (4) borrow money except from banks for extraordinary or
emergency purposes and in aggregate amounts not exceeding 15% of its total
assets (and, when such borrowings exceed 5% of its total assets, make any
further investments); and (5) mortgage, pledge or hypothecate its assets except
to secure such borrowings.
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OCC CASH RESERVES CALIFORNIA MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the California Municipal Portfolio (the
"Portfolio") are in the following order of priority-safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal and
California personal income taxes. The Portfolio pursues its objectives by
maintaining a portfolio of high-grade securities of the types described in the
succeeding section, which at the time of investment have remaining maturities of
thirteen months or less and generate, in the opinion of bond counsel to the
issuer, interest that is exempt from Federal and California personal income
taxes ("California Municipal Securities"). As a matter of fundamental policy, at
least 80% of the Portfolio's total assets will be invested in California
Municipal Securities unless the Advisor determines that it is in the best
interest of the Portfolio to assume a temporary defensive position involving a
greater commitment of assets to obligations generating taxable income. Normally,
substantially all of the Portfolio's income will be exempt from Federal and
California personal income taxes. While the Portfolio may not change the
foregoing policies or the "other fundamental investment policies" described
below without shareholder approval, it may, upon notice to shareholders but
without such approval, change its other investment policies. As is true with all
investment companies, there can be no assurance that the Portfolio's objectives
will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT (as defined on page ).
Investors already subject to AMT should consider whether an investment in the
Portfolio is suitable for them. Investors are urged to consult their own tax
advisors with respect to their own tax situations.
CALIFORNIA MUNICIPAL SECURITIES
The California Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under "Municipal
Securities" on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments, tender option bonds and lease obligations, as
described and according to the limitations set forth under "Municipal
Securities" on page .
Investors in the California Municipal Portfolio should consider the possible
greater risk arising from the geographic concentration and non-diversified
structure of the Portfolio's investments, as well as the current and past
financial condition of California municipal issuers which is discussed in the
Statement of Additional Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in California Municipal Securities, the Portfolio is
authorized, under normal circumstances, to invest up to 20% of its total assets
in taxable investments. The taxable investments are limited to obligations of
the U.S. Government and its agencies or instrumentalities; prime quality
certificates of deposit and bankers acceptances of domestic banks; prime quality
commercial paper; and repurchase agreements collateralized at all times by such
instruments.
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OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the New York Municipal Portfolio (the
"Portfolio") are in the following order of priority-safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal, New
York State and New York City income taxes. The Portfolio pursues its objectives
by maintaining a portfolio of high-grade securities of the types described in
the succeeding section, which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal, New York State and
New York City income taxes ("New York Municipal Securities"). As a matter of
fundamental policy, at least 80% of the Portfolio's total assets will be
invested in New York Municipal Securities unless the Advisor determines that it
is in the best interest of the Portfolio to assume a temporary defensive
position involving a greater commitment of assets to obligations generating
taxable income. Normally, substantially all of the Portfolio's income will be
exempt from Federal, New York State and New York City income taxes. While the
Portfolio may not change the foregoing policies or the "other fundamental
investment policies" described below without shareholder approval, it may, upon
notice to shareholders but without such approval, change its other investment
policies. As is true with all investment companies, there can be no assurance
that the Portfolio's objectives will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation, and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT as defined on page .
Investors who are already subject to AMT should consider whether an investment
in the Portfolio is suitable for them. Investors are urged to consult their own
tax advisors with respect to their own tax situations.
NEW YORK MUNICIPAL SECURITIES
The New York Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under Municipal
Securities on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments or puts, tender option bonds and lease
11
<PAGE>
obligations as described and according to the limitations set forth under
"Municipal Securities" on page .
Investors in the New York Municipal Portfolio should consider the possible
greater risk arising from the geographic concentration and non-diversified
structure of the Portfolio's investments, as well as the current and past
financial condition of New York municipal issuers which is discussed in the
Statement of Additional Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in New York Municipal Securities, the Portfolio is authorized,
under normal circumstances, to invest up to 20% of its total assets in taxable
investments. The taxable investments are limited to obligations of the U.S.
Government and its agencies or instrumentalities; prime quality certificates of
deposit and bankers acceptances of domestic banks; prime quality commercial
paper; and repurchase agreements collateralized at all times by such
instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
ADDITIONAL INFORMATION
ARRANGEMENTS FOR TELEPHONE REDEMPTIONS. If you wish to use the telephone
redemption procedure, indicate this on your New Account Application and
designate a bank and account number to receive the proceeds of your withdrawals.
You also may choose to have the proceeds mailed to you in the form of check to
the address of record on your account. If you decide later that you wish to use
this procedure, or to change instructions already given, send a written notice
to Unified with your signature guaranteed by an eligible guarantor, and
designate a bank and account number to receive redemption proceeds. Eligible
guarantors include member firms of a national securities exchange, banks,
savings associations, and credit unions, as defined by the Federal Deposit
Insurance Act. For joint accounts, all owners must sign and have their
signatures guaranteed.
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member
of the Federal Reserve System is converted to Federal Funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks which
are not members of the Federal Reserve System may take longer to be converted
and invested. All payments must be in United States dollars.
FORWARDING OF PROCEEDS FROM ANY REDEMPTION OF FUND SHARES PURCHASED BY CHECK
MAY BE DELAYED ONLY UNTIL THE CHECK HAS CLEARED WHICH MAY NORMALLY TAKE UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE.
AUTOMATED CLEARING HOUSE TRANSFERS. Fund shares can be purchased and
redeemed by ACH electronic funds transfer between Unified and a bank. There are
no charges to you for ACH transactions, either by the Fund or Unified. ACH
transfers are completed approximately two business days following the placement
of transfer orders.
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For your Fund account to be eligible for ACH transfers to and from your
bank, you must complete Unified's ACH Authorization Form which can be obtained
from our service representative by telephoning the number below. Direct deposits
into your Fund account by ACH transfer can be used for part or all of recurring
payments made to you by your employer (corporate, Federal, military, or other
type) or by the Social Security Administration. Instructions to the sending
parties are simple; call toll-free 800-UMC-FUND (800-862-3863) to obtain
complete information from our service representative.
TIMING OF INVESTMENTS AND REDEMPTIONS. The Fund has two transaction times
each day, at 12:00 noon and 4:00 p.m. (New York time). New investments
represented by Federal Funds or bank wire monies received by the Custodian prior
to 12:00 noon are paid the full dividend for that day; such investments received
after 12:00 noon do not begin to receive daily dividends until the next day.
Redemption orders received prior to 12:00 noon are effected at 12:00 noon; the
shares redeemed do not earn that day's dividend but the redemption proceeds are
available that day. Redemption orders received after 12:00 noon are effected at
4:00 p.m.; the shares redeemed earn the daily dividend for that day and the
redemption proceeds are remitted the next business day.
MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments, and $500 for account balances. These minimums do not
apply to shareholder accounts maintained through brokerage firms or other
financial institutions, as such financial intermediaries may maintain their own
minimums for their customer's investments in the Fund. The Fund may impose
service charges upon financial intermediaries to reflect the relatively higher
costs of small accounts and small transactions; these intermediaries may in turn
pass on such charges to affected accounts.
A shareholder subject to the minimum account balance requirement must
increase his or her account balance to at least $500 within sixty days after
notice of a deficient balance has been mailed by the Fund, or the Fund may close
the account and mail a check for the proceeds to the shareholder. The Fund
intends at least once each six months to review its shareholder balances in
regard to the $500 minimum and to send appropriate notices to shareholders with
deficient accounts. The Fund imposes no minimums for redemptions by mail or for
redemptions made on an account's behalf by brokerage firms or other financial
institutions. However, such firms may have internal procedures that include
minimums.
SHARE PRICE. Shares are sold and redeemed on a continuing basis without
sales or redemption charges at their net asset value which is expected to be
constant at $1.00, although this share price is not guaranteed. The net asset
value is determined each business day at 12:00 noon and 4:00 p.m. (New York
time). The net asset value per share is calculated by taking the sum of the
value of investments (amortized cost value is used for this purpose) and any
cash or other assets, subtracting liabilities, and dividing by the total number
of shares outstanding. All expenses, including the fees payable to the Advisor,
are accrued daily.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of each
Portfolio is determined each business day and is declared payable pro rata to
shareholders of record as of 12:00 noon. Declared dividends are accrued and are
automatically paid into shareholders' accounts on a monthly basis. As such
additional reinvested shares earn subsequent dividends, a compounding growth of
income occurs.
Net income of the Portfolios consists of all accrued interest income on
portfolio assets less the expenses applicable to that dividend period. All
realized gains and losses are reflected in the net asset value and are not
included in net investment income.
Distributions to your account of tax-exempt interest income are not subject
to Federal income tax (other than the alternative minimum tax described above),
but may be subject to state or local
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<PAGE>
income taxes. Distributions of income earned by the California General Municipal
Portfolio from California tax-exempt securities are not subject to Federal
income tax (other than the alternative minimum tax described above) or to
California personal income taxes. Distributions of income earned by the New York
Municipal Portfolio from New York Municipal Securities are not subject to
Federal income tax (other than the alternative minimum tax described above) or
to New York State and New York City income taxes. Distributions of taxable
interest income, other investment income, and net short-term capital gains are
taxed to you as ordinary income; state and local taxation of such distributions,
if any, may be reduced in proportion to the percentage of income that derives
from U.S. Government obligations. Distributions of net long-term capital gains
would be taxable as long-term capital gains irrespective of the length of time
you may have held your shares. Distributions of net short-term and long-term
capital gains, if any, would be made annually. Each January, each Portfolio will
send you tax information for the calendar year just ended stating the amounts
and types of all its distributions, including the percentage of income derived
from U.S. Government obligations, for the calendar year just ended.
PERIODIC WITHDRAWALS. Without affecting your right to use any of the
methods of redemption described on page 9, by checking the appropriate boxes on
the Application Form you may elect to participate additionally in the following
plans without any separate charges. Under the INCOME DISTRIBUTION PLAN you
receive monthly payments of all the income earned in your Fund account. Under
the SYSTEMATIC WITHDRAWAL PLAN, you may request checks in any specified amount
of $50 or more each month or in any intermittent pattern of months. If desired,
you can order, via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person.
THE ADVISOR. The Fund retains OpCap Advisors (the "Advisor"), One World
Financial Center, New York, New York, 10281, under an Advisory Agreement to
provide investment advice and, in general, to supervise the Fund's business
affairs and investment program, subject to the general control of the Directors
of the Fund. The Advisor is a subsidiary of Oppenheimer Capital, one of the
nation's largest independent investment managers, presently having in excess of
$30 billion in assets under its supervision. The management fee rate for each
Portfolio is at an annual rate of .50% on the first $100 million of average
daily net assets, .45% on the next $200 million of average daily net assets, and
.40% of average daily net assets in excess of $300 million, payable monthly.
DISTRIBUTION PLAN. Under a Distribution Assistance and Administrative
Services Plan (the "Plan") adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, each Portfolio pays the Advisor monthly at an
annual rate of .25 of 1% of the Portfolio's average daily net assets.
Substantially all such monies are paid by the Advisor to broker-dealers, banks
and other depository institutions, and other financial intermediaries for
distribution assistance and administrative services provided to the Portfolio,
with any remaining amounts being used to partially defray other expenses
incurred by the Advisor in distributing shares. The Plan has been approved by
the Board of Directors and by the Fund's shareholders. The Statement of
Additional Information contains additional information about the Advisory
Agreement and the Plan.
EXPENSES--EXPENSE LIMITATION. Principal operating expenses of the Fund
consist of the Advisor's fee, costs of the Plan, legal and accounting expenses,
custodian fees, and transfer agent and other shareholder servicing costs.
Shareholders pay no direct charges or fees for investment services. Each
Portfolio's expenses are paid out of its gross investment income. The Advisor
reimburses each Portfolio to the extent that the combined aggregate operating
expenses of the Portfolio exceed 1% of its average daily net assets for any
fiscal year.
FUND ORGANIZATION. The Fund, which is an open-end investment company
registered under the Investment Company Act of 1940, was organized as a Maryland
corporation in series form in
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<PAGE>
April 1989. The Fund's activities are supervised by its Board of Directors. Each
share of a Portfolio is entitled to one vote; shares vote as a single series on
matters that affect all Portfolios in substantially the same manner. The Fund
does not intend to hold regular annual shareholder meetings. Directors are
required to call a special meeting of a Portfolio's shareholders if owners of at
least 10% of the Portfolio's outstanding shares so request in writing. The Fund
may establish additional Portfolios which may have different investment
objectives from those stated in this prospectus. The Fund issues shares only for
full monetary consideration, and it does not issue share certificates.
REPORTS. You will receive semi-annual and annual reports of the Portfolio
in which you are invested. To reduce expenses, only one copy of financial
reports will be mailed to your household, even if you have more than one
account. If you wish to receive additional copies of financial reports, please
call 1-800-862-3863. You can arrange for a copy of each of your account
statements to be sent to other parties.
YIELD DEFINITIONS. From time to time we may advertise yield, effective
yield, and tax equivalent yield. Yield refers to income generated by an
investment in a Portfolio over a seven day or other stated period, expressed as
an annual percentage rate. Effective yield of a Portfolio results from the
compounding of periodically reinvested dividends. Tax-equivalent yield
represents the amount of income subject to a particular tax rate which would
have to be earned to give an investor an amount of income equal to tax-exempt
income. In addition, reference in advertisements may be made to ratings and
ratings among similar funds by independent evaluators, such as Lipper's
Analytical Services, Inc. The performance of the Portfolios may be compared to
recognized indices of market performance.
CUSTODIAN AND TRANSFER AGENT. The custodian of the assets, transfer agent
and shareholder servicing agent for the Fund is State Street Bank and Trust
Company. 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 SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (800-UMC-FUND(862-3863)) is the shareholder servicing agent for
former shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, Inc. 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 brokerage
account, and other accounts for which Unified Management Corporation is the
dealer of record.
PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS--NEW INVESTMENTS
A. WHEN FUNDS ARE SENT BY WIRE (the wire method permits immediate credit)
1) Telephone Unified toll-free at 800-UMC-
FUND (800-862-3863). A service representative will ask you for (a) the
name of the account as you wish it to be registered, (b) the address of
the account, (c) your taxpayer identification number (social security
number for an individual) and (d) the name of the Portfolio in which you
wish to invest. You will then be provided with a control number.
2) Instruct your bank to wire Federal Funds
(see minimums below) exactly as follows and precisely in the order
presented:
15
<PAGE>
RECEIVING BANK INFORMATION:
Fifth Third Bank (Cincinnati, OH)
ABA#042000314
BENEFICIARY INFORMATION:
BNF=OCC Cash Reserves
(SPECIFY PRIMARY, GOVERNMENT,GENERAL MUNICIPAL, CALIFORNIA MUNICIPAL OR NEW
YORK MUNICIPAL PORTFOLIO)
AC-71575485
OTHER BENEFICIARY INFORMATION:
OBI=OCC Cash Reserves
<TABLE>
<S> <C> <C>
Your account name as registered
Your account number with the Fund
</TABLE>
There is a $1,000 minimum to open a new account, except that there is no
minimum for opening Individual Retirement Accounts or other retirement plans.
3)Mail a completed Application Form to:
Unified Management Corp.
P.O. Box 6110
Indianapolis, IN 46206-6110
FOR OTHER THAN U.S. POSTAL SERVICE MAIL:
Unified Management Corp.
429 North Pennsylvania Street
Indianapolis, IN 46204
B. WHEN FUNDS ARE SENT BY CHECK
1) Complete the New Account Application
2) Mail the completed Application along with
your check, money order or Federal Reserve bank draft (see minimums under
A(2) above) payable to the OCC Cash Reserves Portfolio you have selected,
to the address in A(3) above.
C. BY EXCHANGE
1) BY MAIL--Send a written request to the
address in A(3) above. Sign the request exactly as your name appears on the
account registration. (For joint accounts, all owners must sign.) Be
certain your request meets the minimum for a new account and that the
amount remaining in the Fund from which you are exchanging also exceeds
its minimum. (For more information see page .)
2) BY TELEPHONE--Call Unified at 800-UMC-
FUND (800-862-3863).
<TABLE>
<S> <C>
OBTAINING AN APPLICATION FORM--ASSISTANCE If your account with the Fund is to be
If you wish to obtain an Application Form, maintained through a brokerage firm or
or if you have any questions about the other institution, do not fill out the
Form, purchasing shares, or other Fund Application Form or the Signature Card.
procedures, please telephone the Fund Instead, contact your account
toll-free at 800-UMC-FUND (800-862-3863). representative at such institution.
Institutions may charge a fee for providing
such assistance.
</TABLE>
SUBSEQUENT INVESTMENTS (PURCHASES)
A. INVESTMENTS BY WIRE (to obtain immediate credit)
Instruct your bank to wire Federal Funds (minimum $1000) as in A(2) above.
B. INVESTMENTS BY CHECK
Mail your check, money order or Federal Reserve bank draft (minimum $100),
payable to the appropriate OCC Portfolio, to the address in A(3) above, along
with the remittance portion of your last account statement or letter of
instruction. Include your account name, account number and Portfolio name on the
front of your check, money order or draft.
C. BY EXCHANGE
Follow instructions under C, above. There is no minimum for systematic
exchanges established for dollar cost averaging purposes.
16
<PAGE>
WITHDRAWALS (Redemptions)
A. WITHDRAWALS BY TELEPHONE (requires pre-arrangement; call 800-UMC-FUND
(800-862-3863) for information)
Telephone Unified toll-free at 800-UMC-FUND (800-862-3863) or at
317-634-3300 (not toll-free) and place your redemption request with the service
representative. You may request that your redemption proceeds be sent via wire
or ACH to your previously-designated bank account or that a check be mailed to
you. Wires will be sent to your bank and checks will be mailed to you on the
next Indiana business day following receipt of your request. Unified may charge
a fee for wire redemptions. Monies sent via ACH take approximately two business
days to reach your bank. You may be required to have your signature guaranteed.
(See page .)
B. WITHDRAWALS BY CHECKWRITING
Under the Fund's Regular Checkwriting Service, you may write checks made
payable to any payee in any amount of $250 or more. The checkwriting service
enables you to receive the daily dividends declared on the shares to be redeemed
until the day that your check is presented for payment.
Please do not use the checkwriting service to close out your OCC account, as
the balance of your account will continue to increase via daily dividends until
the check is presented for payment. Unified reserves the right to impose a
charge for certain check services such as checks returned unpaid for
insufficient funds or for checks on which you have placed a stop order.
C. WITHDRAWALS BY MAIL
Submit a written request for any amount to Unified at the address in A(3)
above. Include your account name as registered and your account number. Sign the
request exactly as your name appears on the registration. (For joint accounts,
all owners must sign.) You may be required to have your signature guaranteed.
(See page .)
17
<PAGE>
OCC Cash Reserves (the "Fund") is an open-end money market fund investment
company with five separate Portfolios. Though the Portfolios have the same
investment objectives of safety of principal, liquidity and maximum current
income, they may in the pursuit of these objectives invest in different types of
money market securities or in different proportions of the same types of
securities. This prospectus sets forth information about the Fund and its
Primary, Government, General Municipal, California Municipal and New York
Municipal Portfolios that a prospective investor should know before investing.
Please retain this prospectus for future reference.
A Statement of Additional Information dated March 29, 1996 provides further
discussion of certain areas in this prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. A free copy may be obtained
by writing the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS PAGE
Introduction.................................................................. 1
Expense Information.......................................................... 2
Financial Highlights......................................................... 3
Primary Portfolio............................................................ 5
Government Portfolio......................................................... 6
General Municipal Portfolio.................................................. 7
California Municipal Portfolio............................................... 10
New York Municipal Portfolio................................................. 11
Additional Information....................................................... 12
Purchase and Redemption of Shares............................................ 15
<PAGE>
MARCH 29, 1996
OCC CASH RESERVES
- PRIMARY PORTFOLIO
- GOVERNMENT PORTFOLIO
- GENERAL MUNICIPAL PORTFOLIO
- CALIFORNIA MUNICIPAL PORTFOLIO
- NEW YORK MUNICIPAL PORTFOLIO
PROSPECTUS
OFFERED THROUGH
UNIFIED MANAGEMENT CORPORATION
429 N. PENNSYLVANIA ST.
INDIANAPOLIS, IN 46204
<PAGE>
[LOGO] ................... with investment objectives of
SAFETY - LIQUIDITY - INCOME
OCC Cash Reserves (the "Fund") is a money market fund with five distinct
Portfolios-the Primary Portfolio, the Government Portfolio, the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolio (the "Portfolios").
Safety of principal is sought by investing in securities which are selected
for their high quality, liquidity and stability of principal. A security at the
time of purchase cannot have a maturity exceeding thirteen months, and the
average weighted maturity of all securities in the Portfolio cannot exceed 90
days. Such a short average maturity enhances the ability of each Portfolio to
provide both liquidity and stability of value to you and your fellow
shareholders. WHILE EACH PORTFOLIO SEEKS TO MAINTAIN (AND HAS MAINTAINED) ITS
SHARE PRICE AT $1.00, INVESTMENTS IN THE PORTFOLIOS ARE NOT GUARANTEED OR
INSURED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT A PORTFOLIO WILL
MAINTAIN A CONSTANT PRICE OF $1.00 PER SHARE.
IS OCC CASH RESERVES FOR YOU?
The Fund is designed for individuals, institutions, advisors, custodians,
charities, fiduciaries and corporations who can benefit from a fund seeking
maximum current income and who place value on an investment having safety of
principal, liquidity, stability, simplicity, and convenience. The availability
of five separate Portfolios provides you with the advantage of selecting a
combination of investment characteristics particularly suitable to your needs.
The five Portfolios described in this Prospectus compare to one another as
follows:
<TABLE>
<S> <C> <C>
Primary Portfolio -- highest money market income; conservative investments
Government -- high money market income; very conservative investments
Portfolio
General Municipal -- highest money market tax-exempt income; conservative investments
Portfolio
California -- highest money market income exempt from Federal and California
Municipal personal income taxes; conservative investments
Portfolio
New York Municipal -- highest money market income exempt from Federal, New York State
Portfolio and New York City income taxes; conservative investments
</TABLE>
<PAGE>
EXPENSE INFORMATION
The expense summary format below was developed for use by all mutual funds
to help investors understand the various direct costs and expenses related to a
fund investment. Shareholder Transaction Expenses (for each Portfolio)
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (FOR EACH PORTFOLIO)
<S> <C>
Sales Load Imposed on Purchases.............................. None
Sales Load Imposed on Reinvested Dividends................... None
Redemption Fees.............................................. None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE NET ASSETS)
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Management fees............. .41% .48% .47% .50% .50%
12b-1 (Distribution Plan)
expenses.................... .25% .25% .25% .25% .25%
Other Expenses.............. .28% .27% .28% .20% .25%
--
--- --- --- -----
Total Operating Expenses.... .94% 1.00% 1.00% .95% 1.00%
</TABLE>
During the fiscal year ended November 30, 1995, OpCap Advisors (the
"Advisor") voluntarily waived part of its advisory fee with respect to the
Government Portfolio, the General Municipal Portfolio, the California Municipal
Portfolio and the New York Municipal Portfolio in order to maintain a
competitive yield. After giving effect to such waivers, the management fees for
the Government Portfolio, the General Municipal Portfolio, the California
Municipal Portfolio and the New York Municipal Portfolio were .48%, .40%, .37%
and .29%, respectively, and the total operating expenses were 1.00%, .93%, .82%
and .79% respectively. Such advisory fee waivers are voluntary and may be
discontinued at any time, except that the Advisor has agreed to assume expenses
of any Portfolio in excess of 1.00% in any fiscal year. Had such waivers not
occurred, the total operating expenses would have been 1.02%, 1.02%, .95%, and
1.00%, respectively. The expenses listed for the Government and General
Municipal Portfolio have been restated to reflect the Advisor's agreement to
assume expenses in excess of 1.00% and the expenses for the California Municipal
Portfolio and the New York Municipal Portfolio have been restated to reflect
what the expenses would have been without the voluntary waivers. In addition,
the expense information has been restated to reflect the reduction in the 12b-1
expenses for each Portfolio from .30% of average net assets to .25% of average
net assets, effective March 31, 1995, and an increase in administrative
expenses.
The following table illustrates the expenses that an investor would pay on a
hypothetical $1,000 investment in each of the Portfolios assuming a 5% annual
return (cumulatively through the end of each time period). Neither the 5% return
nor the estimated expenses should be considered an indication of actual or
expected performance or expenses, both of which may vary.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary Portfolio..................................... $ 9.59 $ 29.96 $ 52.02 $ 115.48
Government Portfolio.................................. 10.20 31.84 55.24 122.46
General Municipal Portfolio........................... 10.20 31.84 55.24 122.46
California Municipal Portfolio........................ 9.69 30.26 52.54 116.63
New York Municipal Portfolio.......................... 10.20 31.84 55.24 122.46
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial information presented below has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report thereon
appears in the Statement of Additional Information ("SAI"). Investors should
understand that all the following information should be read in conjunction with
the financial statements and related notes thereto appearing in the SAI.
<TABLE>
<CAPTION>
DIVIDENDS AND
INCOME FROM DISTRIBUTIONS
INVESTMENT OPERATIONS ----------------------------------------------
-------------------------------------- DIVIDENDS TO DISTRIBUTIONS
NET ASSET NET REALIZED SHAREHOLDERS TO DISTRIBUTIONS TO
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET SHAREHOLDERS SHAREHOLDERS
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT FROM OTHER FROM NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME SOURCES REALIZED GAINS
<S> <C> <C> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995..................... $1.00 $ .051 $ 0.000(1) $0.051 $(0.051) -- $(0.000)(1)
1994..................... 1.00 0.032 0.000(1) 0.032 (0.032) $(0.000)(1) (0.000)(1)
1993..................... 1.00 0.024 0.000(1) 0.024 (0.024) (0.000)(1) (0.000)(1)
1992..................... 1.00 0.033 0.000(1) 0.033 (0.033) -- (0.000)(1)
1991..................... 1.00 0.057 (0.000)(1) 0.057 (0.057) -- --
December 13, 1989(3)
to November 30, 1990.... 1.00 0.073(4) 0.000(1) 0.073 (0.073) -- (0.000)(1)
<CAPTION>
RATIOS TO AVERAGE
NET NET ASSETS
ASSETS, --------------------------
NET ASSET END OF NET
VALUE, END TOTAL PERIOD NET OPERATING INVESTMENT
OF PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995..................... $ 1.00 5.19% $1,671.1 0.94%(2) 5.07%(2)
1994..................... 1.00 3.26% 1,453.8 0.91% 3.21%
1993..................... 1.00 2.44% 1,413.9 0.90% 2.41%
1992..................... 1.00 3.38% 1,168.3 0.88% 3.34%
1991..................... 1.00 5.89% 1,249.0 0.86% 5.74%
December 13, 1989(3)
to November 30, 1990.... 1.00 7.80%(5) 1,244.2 0.87%(4,5) 7.47%(4,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Average net assets for the year ended November 30, 1995 were
$1,594,387,722.
(3) Commencement of operations.
(4) Reflects a voluntary waiver of $.00004 per share in advisory fees. Had such
waiver not occurred, the net operating expense and net investment income
ratios would have been 0.88% and 7.46%, respectively.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT PORTFOLIO
Year end November 30,
1995..................... $1.00 $0.049(2) $ 0.000(1) $0.049 $(0.049) -- $(0.000)(1)
1994..................... 1.00 0.031(2) 0.000(1) 0.031 (0.031) $(0.000)(1) --
1993..................... 1.00 0.022 -- 0.022 (0.022) (0.000)(1) --
1992..................... 1.00 0.032(2) 0.000(1) 0.032 (0.032) -- $(0.000)(1)
1991..................... 1.00 0.055(2) -- 0.055 (0.055) -- --
February 14, 1990(4)
to November 30, 1990.... 1.00 0.059(2) 0.000(1) 0.059 (0.059) -- (0.000)(1)
<CAPTION>
GOVERNMENT PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year end November 30,
1995..................... $ 1.00 5.02% $ 108.6 1.00%(2,3) 4.91%(2,3)
1994..................... 1.00 3.12% 113.2 0.95%(2) 3.08%(2)
1993..................... 1.00 2.26% 127.9 1.00% 2.24%
1992..................... 1.00 3.24% 131.7 0.93%(2) 3.23%(2)
1991..................... 1.00 5.69% 142.2 0.84%(2) 5.62%(2)
February 14, 1990(4)
to November 30, 1990.... 1.00 7.67%(5) 150.1 0.67%(2,5) 7.34%(2,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Reflects a voluntary waiver of $.0002, $.002, $.0002 and $.001 per share,
respectively, in advisory fees and $.004 per share in advisory fees and
reimbursement of other operating expenses, respectively, in effect during
each period. Had such waivers and reimbursements not occurred, the ratio of
net operating expenses would have been 1.02%, 0.97%, 0.94%, 0.92% and
1.19%, respectively and the ratio of net investment income would have been
4.89%, 3.06%, 3.22%, 5.54% and 6.82%, respectively.
(3) Average net assets for the year ended November 30, 1995 were $111,066,046.
(4) Commencement of operations.
(5) Annualized.
3
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------- DIVIDENDS TO
NET ASSET NET REALIZED SHAREHOLDERS
VALUE, NET GAIN/(LOSS) TOTAL FROM FROM NET CAPITAL
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT CONTRIBUTION
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME BY ADVISER
<S> <C> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL
PORTFOLIO
Year ended November 30,
1995..................... $1.00 $0.031(1) $(0.000)(2) $0.031 $(0.031) --
1994..................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993..................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992..................... 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
1991..................... 1.00 0.042(1) 0.000(2) 0.042 (0.042) --
February 14, 1990(4)
to November 30, 1990.... 1.00 0.042(1) (0.000)(2) 0.042 (0.042) --
<CAPTION>
RATIOS TO AVERAGE
NET NET ASSETS
ASSETS, --------------------------
NET ASSET END OF NET
VALUE, END TOTAL PERIOD NET OPERATING INVESTMENT
OF PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL
PORTFOLIO
Year ended November 30,
1995..................... $ 1.00 3.11% $116.0 0.93%(1,3) 3.07%(1,3)
1994..................... 1.00 2.04% 108.7 0.90%(1,3) 2.01%(1)
1993..................... 1.00 1.74% 109.7 0.98%(1) 1.73%(1)
1992..................... 1.00 2.66% 112.9 0.90%(1) 2.62%(1)
1991..................... 1.00 4.24% 100.1 0.88%(1) 4.20%(1)
February 14, 1990(4)
to November 30, 1990.... 1.00 5.45%(5) 107.9 0.71%(1,5) 5.32%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.0003, $.001, $.001 and $.002
per share, respectively, in advisory fees in effect during each period. Had
such waivers not occurred. the ratio of net operating expenses would have
been 1.02%, 1.01%, 1.01%, 1.00%, 0.98% and 1.00%, respectively and the
ratio of net investment income would have been 1.90%, 1.70%, 2.52%, 4.10%
and 5.03%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $126,528,413.
(4) Commencement of operations.
(5) Annualized
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL
PORTFOLIO
Year ended November 30,
<S> <C> <C> <C> <C> <C> <C>
1995..................... $1.00 $0.031(1) $(0.008) $0.023 $(0.031) $ 0.008
1994..................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993..................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992..................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
March 20, 1991(4) to 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
November 30, 1991....... 1.00 0.026(1)
<CAPTION>
CALIFORNIA MUNICIPAL
PORTFOLIO
Year ended November 30,
<S> <C> <C> <C> <C> <C>
1995..................... $ 1.00 3.10% $ 75.9 0.82%(1,2) 3.05%(1,2)
1994..................... 1.00 1.99% 61.3 0.85%(1) 1.99%(1)
1993..................... 1.00 1.76% 62.3 0.85%(1) 1.75%(1)
1992..................... 1.00 2.57% 61.2 0.60%(1) 2.51%(1)
March 20, 1991(4) to 1.00 4.24%(5) 45.4 0.54%(1,5) 3.75%(1,5)
November 30, 1991.......
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.001 and $.004 per share in
advisory fees and $.004 per share in advisory fees and reimbursement of
other operating expenses, respectively, in effect during each period. Had
such waivers and reimbursements not occurred, the ratio of net operating
expenses would have been .95%, 0.97%, 0.98%, 1.02% and 1.08%, respectively
and the ratio of net investment income would have been 2.92%, 1.87%, 1.62%,
2.09% and 3.21%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $63,810,311.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<CAPTION>
NEW YORK MUNICIPAL
PORTFOLIO
Year ended November 30,
<S> <C> <C> <C> <C> <C> <C>
1995..................... $1.00 $0.030(1) $(0.000)(2) $0.030 $(0.030) --
1994..................... 1.00 0.019(1) 0.000(2) 0.019 (0.019) --
1993..................... 1.00 0.016(1) (0.000)(2) 0.016 (0.016) --
1992..................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
April 10, 1991(4)
to November 30, 1991.... 1.00 0.024(1) (0.000)(2) 0.024 (0.024) --
<CAPTION>
NEW YORK MUNICIPAL
PORTFOLIO
Year ended November 30,
<S> <C> <C> <C> <C> <C>
1995..................... $ 1.00 3.07% $ 52.3 0.79%(1.3) 3.02%
1994..................... 1.00 1.92% 48.0 0.82%(1) 1.90(1)
1993..................... 1.00 1.66% 42.2 0.79%(1) 1.64%(1)
1992..................... 1.00 2.56% 32.9 0.74%(1) 2.43%(1)
April 10, 1991(4)
to November 30, 1991.... 1.00 4.29%(5) 18.4 0.56%(1,5) 3.80%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.002, $.002, $.002, $.002 and $.005 per
share in advisory fees and $.006 per share in advisory fees and
reimbursement of other operating expenses, respectively, in effect during
each period. Had such waivers and reimbursements not occurred, the ratio of
net operating expenses would have been 1.00%, 1.01%, 1.03%, 1.19% and
1.43%, respectively and the ratio of net investment income would have been
2.81%, 1.71%, 1.40%, 1.98% and 2.93%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $52,398,588.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
4
<PAGE>
OCC CASH RESERVES PRIMARY PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The Primary Portfolio's investment objectives are in the following order of
priority--safety of principal, liquidity, and maximum current income from money
market securities to the extent consistent with the first two objectives. As a
matter of fundamental policy, the Primary Portfolio pursues its objectives by
maintaining a diversified portfolio of high quality money market securities of
the types described in the succeeding section, all of which at the time of
investment have remaining maturities of thirteen months or less. While the
Portfolio may not change this policy or the other "fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Primary Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Primary Portfolio invests are (1)
marketable obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities (collectively "U.S. Government Securities"); (2)
U.S. dollar-denominated certificates of deposit and bankers' acceptances of
prime quality issued or guaranteed by, and interest-bearing time deposits
maintained at, (a) U.S. banks or savings and loan associations having total
assets of more than $1 billion and which are insured under the administration of
the Federal Deposit Insurance Corporation ("FDIC"), (b) foreign branches of such
U.S. institutions, and U.S. or foreign branches of foreign banks having total
assets of at least $1 billion; (3) domestic or foreign commercial paper of prime
quality and participation interests in loans of equivalent quality extended by
banks to such companies; and (4) repurchase agreements that are collateralized
in full each day by U.S. Government Securities. For the purposes of this
prospectus, prime quality shall mean the security (or the issuer for a
comparable security) is rated in one of the two highest rating categories for
short term debt obligations by any two of Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc
("Fitch"), Duff & Phelps, Inc. ("Duff") or Thomson BankWatch, Inc., or by one of
such rating agencies if only one rating agency has issued a rating with respect
to the security, or, if not rated, judged by the Advisor pursuant to criteria
adopted by the Fund's Board of Directors to be of comparable quality.
In further regard to items (2) and (3) above, investments by the Primary
Portfolio which do not satisfy one of the following requirements are limited in
the aggregate to 5% of the Portfolio's total assets in regard to issues and to
1% of total assets (or $1 million if greater) in regard to any one issuer of
such issues: (i) issues rated in the highest category (or the issuer is so rated
for a comparable security) by at least two of the above-listed rating agencies;
or (ii) if rated only by one agency, rated in the highest category; or (iii) if
unrated, determined by the Board of Directors to be of quality comparable to
issues which qualify under (i) or (ii).
Certificates of deposit represent the obligation of a bank to repay funds
deposited with it for a specified period of time. Bankers' acceptances are
short-term collateralized credit instruments drawn on and evidencing the
obligation of a bank to pay the value at maturity. Commercial paper consists of
unsecured promissory notes issued by corporations to finance short-term credit
needs. Participation interests are undivided beneficial interests in loans
giving the purchaser the right to receive a pro rata share of a loan's cash
flow. Repurchase agreements are contracts under which the buyer acquires a
security subject to the obligation of the seller to repurchase at a fixed price,
usually within one week. The Fund enters into such agreements only with
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"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government Securities and with the Fund's Custodian. The Fund could
experience a loss in the event of its failure to realize full value upon
collateral liquidation required by a dealer's default. Though investments in
obligations of foreign issuers may be higher yielding than those of domestic
issuers, they may involve certain different risks such as exchange control
regulations; limited availability of information about the issuer; differences
in accounting, auditing and financial reporting standards and government
regulation; the possibility of expropriation, nationalization or confiscatory
taxation; political or social instability or diplomatic developments; and the
differences between the economies of the United States and the applicable
foreign country, even though the Fund's investments are limited to those in
"developed countries." Each of these factors is carefully considered when
investments are made, but the Fund does not limit the amount of its assets which
can be invested in any particular type of eligible obligation or in any
developed foreign country.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Primary Portfolio may not (1) invest more than 25% of its total assets in the
securities of issuers conducting their principal business activities in any one
industry, except that under normal circumstances at least 25% of its total
assets will be invested in bank obligations; (2) invest more than 5% of its
total assets in the securities of any issuer (loan participations are considered
obligations of both the lender and the borrower); (3) invest more than 10% of
its total assets in repurchase agreements not terminable within seven days
(whether or not illiquid) or other illiquid investments including participation
interests and other instruments described above for which no secondary markets
exist: (4) borrow money except from banks for extraordinary or emergency
purposes in aggregate amounts not exceeding 15% of its total assets (and, when
such borrowings exceed 5% of its total assets, make any further investments);
and (5) mortgage, pledge or hypothecate its assets except to secure such
borrowings. Limitations (1) and (2) do not apply to U.S. Government Securities.
OCC CASH RESERVES GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVES AND PROCEDURES
The Government Portfolio's investment objectives are in the following order
of priority-- safety of principal, liquidity, and maximum current income from
money market securities to the extent consistent with the first two objectives.
As a matter of fundamental policy, the Government Portfolio pursues its
objectives by maintaining a diversified portfolio of high quality money market
securities of types described in the succeeding paragraph, all of which at the
time of investment have remaining maturities of thirteen months or less. While
the Portfolio may not change this policy or the "other fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Government Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Government Portfolio invests are
(1) marketable obligations of, or guaranteed by, the United States Government,
its agencies or instrumentalities (collectively "U.S. Government Securities"),
including direct obligations of the United States Treasury such as Bills, Notes
and Bonds, and issues of agencies and instrumentalities established under the
authority of an act of Congress such as the Federal Home Loan Banks, which have
the right to borrow from the U.S. Treasury, and the Federal National
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Mortgage Association, the securities of which are solely dependent on the
issuing instrumentality for repayment; and (2) repurchase agreements that are
collateralized in full each day by the types of U.S. Government Securities
listed above. These agreements are entered into with "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S. Government
Securities and with the Fund's Custodian.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Government Portfolio may not (1) invest more than 5% of its total assets in
repurchase agreements with any one vendor, although with respect to 25% of its
total assets it may invest without regard to such limitation; (2) invest more
than 10% of its total assets in repurchase agreements not terminable within
seven days (whether or not illiquid) or other illiquid investments; (3) borrow
money except from banks for extraordinary or emergency purposes in aggregate
amounts not exceeding 15% of its total assets (and, when such borrowings exceed
5% of its total assets, make any further investments); and (4) mortgage, pledge
or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES GENERAL MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The General Municipal Portfolio's investment objectives are in the following
order of priority-- safety of principal, liquidity, and, to the extent
consistent with these objectives, maximum current income from money market
securities that is exempt from Federal income taxes. As a matter of fundamental
policy, the General Municipal Portfolio pursues its objectives by maintaining a
diversified portfolio of high-grade municipal securities of the types described
in the succeeding section, all of which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal income taxes. At
least 80% of the Portfolio's total assets will be invested in such securities
(not including securities treated as tax preference items) unless the Advisor
has determined that it is in the best interest of the Portfolio to assume a
temporary defensive position involving a greater commitment of assets to
obligations generating taxable income. Normally, substantially all of the
Portfolio's income will be exempt from Federal taxes, although it may be subject
to state or local income taxes. While the Portfolio may not change this policy
or the "other fundamental investment policies" described below without
shareholder approval, it may, upon notice to shareholders but without such
approval, change its other investment policies. As is true with all investment
companies, there can be no assurance that the General Municipal Portfolio's
objectives will be achieved.
Under the current Internal Revenue Code (1) interest on tax-exempt municipal
securities issued after August 7, 1986 and used to finance "private activities"
(e.g., industrial development bonds) shall be treated as an item of tax
preference for purposes of alternative minimum tax ("AMT") imposed on
individuals and corporations, though for Federal income tax purposes such
interest shall remain fully tax-exempt, and (2) interest on all tax-exempt
obligations shall be included in "adjusted net book income" of corporations for
AMT purposes. The General Municipal Portfolio may purchase "private activity"
municipal securities without limitation and therefore a substantial portion (and
potentially all) of any distribution from the Portfolio may be treated as a tax
preference item (with resulting tax) for those taxpayers subject to AMT.
Investors who are already subject to AMT should consider whether an investment
in the Portfolio is suitable for them. Investors are urged to consult their own
tax advisors with respect to their own tax situations.
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MUNICIPAL SECURITIES
The municipal securities in which the General Municipal Portfolio invests
are municipal notes, short-term municipal bonds, short-term discount notes, and
participation interests in any of the foregoing. Municipal notes are generally
used to provide for short-term capital needs and generally have maturities of
thirteen months or less. Examples include tax anticipation and revenue
anticipation notes which are generally issued in anticipation of various
seasonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Municipal notes and short-term municipal bonds may either be secured by the
issuer's pledge of its faith, credit and taxing power for payment of principal
and interest, or paid from the revenues of a particular facility or a specific
excise or other source. Included within the revenue bonds category are
participations in lease obligations or installment purchase contracts
(hereinafter collectively called "lease obligations") of municipalities. States
and local agencies or authorities issue lease obligations to acquire equipment
and facilities. Short-term discount notes are short-term obligations issued at a
discount to face value. Participation interests are undivided interests in loans
giving the purchaser the right to a pro-rata share of a loan's cash flow.
All of the General Municipal Portfolio's municipal securities at the time of
purchase must be of prime quality, as previously defined. Securities must also
meet credit standards applied by the Advisor.
The General Municipal Portfolio may invest in variable rate obligations
whose interest rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the security's interest
rate is tied. Such adjustments minimize changes in the market value of the
obligation and, accordingly, enhance the ability of the Portfolio to maintain a
stable net asset value. Variable rate securities purchased may include
participation interests in industrial development bonds backed by letters of
credit of domestic or foreign banks having total assets of more than $1 billion;
the letters of credit of any single bank in respect of all variable rate
obligations will not cover more than 10% of the Portfolio's total assets.
The General Municipal Portfolio also may purchase tender option bonds. A
tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer, or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the municipal security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities coupled
with the tender option to trade at par on the date of such determination. Thus,
after payment of the fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Advisor, on behalf of the General Municipal Portfolio, will consider on an
ongoing basis the creditworthiness of the issuer of the underlying municipal
security, of any custodian, and of the third party provider of the tender
option. In certain instances and for certain tender option bonds, the option may
be terminable in the event of a default in payment of principal or interest on
the underlying municipal securities, and for other reasons. The Fund will
consider as illiquid securities tender option bonds as to which it cannot
exercise the tender feature on not more than seven days' notice if there is no
secondary market available for these 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
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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 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 General Municipal Portfolio will consider such securities to be illiquid
(the Portfolio 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.
The General Municipal Portfolio also may invest in forward commitments,
which obligate the Portfolio to purchase securities, and stand-by commitments or
puts, which give the Portfolio the right to resell securities, from or to a
dealer at a specified price. Such commitments, which may involve certain
expenses and risks, are not expected to comprise a significant portion of the
Portfolio's investments. The Portfolio may commit up to 15% of its net assets to
the purchase of when-issued securities. The underlying securities are subject to
market fluctuations and no interest accrues prior to delivery of such
securities.
TAXABLE INVESTMENTS
The taxable investments in which the General Municipal Portfolio may invest
include obligations of the U.S. Government and its agencies or
instrumentalities; high quality certificates of deposit and bankers'
acceptances; prime commercial paper; and repurchase agreements collateralized at
all times by such instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain Portfolio diversification and reduce investment risk, the
General Municipal Portfolio may not (1) invest more than 25% of its total assets
in municipal securities whose issuers are located in the same state or more than
25% of its total assets in municipal securities whose interest is paid from
revenues of similar-type projects; (2) invest more than 5% of its total assets
in the securities of any one issuer (except the U.S. Government) although with
respect to 25% of its total assets it may invest without regard to such
limitation; (3) invest more than 10% of its total assets in repurchase
agreements not terminable within seven days (whether or not illiquid) or other
illiquid investments; (4) borrow money except from banks for extraordinary or
emergency purposes and in aggregate amounts not exceeding 15% of its total
assets (and, when such borrowings exceed 5% of its total assets, make any
further investments); and (5) mortgage, pledge or hypothecate its assets except
to secure such borrowings.
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OCC CASH RESERVES CALIFORNIA MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the California Municipal Portfolio (the
"Portfolio") are in the following order of priority--safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal and
California personal income taxes. The Portfolio pursues its objectives by
maintaining a portfolio of high-grade securities of the types described in the
succeeding section, which at the time of investment have remaining maturities of
thirteen months or less and generate, in the opinion of bond counsel to the
issuer, interest that is exempt from Federal and California personal income
taxes ("California Municipal Securities"). As a matter of fundamental policy, at
least 80% of the Portfolio's total assets will be invested in California
Municipal Securities unless the Advisor determines that it is in the best
interest of the Portfolio to assume a temporary defensive position involving a
greater commitment of assets to obligations generating taxable income. Normally,
substantially all of the Portfolio's income will be exempt from Federal and
California personal income taxes. While the Portfolio may not change the
foregoing policies or the "other fundamental investment policies" described
below without shareholder approval, it may, upon notice to shareholders but
without such approval, change its other investment policies. As is true with all
investment companies, there can be no assurance that the Portfolio's objectives
will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT (as defined on page ).
Investors already subject to AMT should consider whether an investment in the
Portfolio is suitable for them. Investors are urged to consult their own tax
advisors with respect to their own tax situations.
CALIFORNIA MUNICIPAL SECURITIES
The California Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under "Municipal
Securities" on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments, tender option bonds and lease obligations, as
described and according to the limitations set forth under "Municipal
Securities" on page .
Investors in the California Municipal Portfolio should consider the possible
greater risk arising from the geographic concentration and non-diversified
structure of the Portfolio's investments, as well as the current and past
financial condition of California municipal issuers which is discussed in the
Statement of Additional Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in California Municipal Securities, the Portfolio is
authorized, under normal circumstances, to invest up to 20% of its total assets
in taxable investments. The taxable investments are limited to obligations of
the U.S. Government and its agencies or instrumentalities; prime quality
certificates of deposit and bankers acceptances of domestic banks; prime quality
commercial paper; and repurchase agreements collateralized at all times by such
instruments.
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OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the New York Municipal Portfolio (the
"Portfolio") are in the following order of priority--safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal, New
York State and New York City income taxes. The Portfolio pursues its objectives
by maintaining a portfolio of high-grade securities of the types described in
the succeeding section, which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal, New York State and
New York City income taxes ("New York Municipal Securities"). As a matter of
fundamental policy, at least 80% of the Portfolio's total assets will be
invested in New York Municipal Securities unless the Advisor determines that it
is in the best interest of the Portfolio to assume a temporary defensive
position involving a greater commitment of assets to obligations generating
taxable income. Normally, substantially all of the Portfolio's income will be
exempt from Federal, New York State and New York City income taxes. While the
Portfolio may not change the foregoing policies or the "other fundamental
investment policies" described below without shareholder approval, it may, upon
notice to shareholders but without such approval, change its other investment
policies. As is true with all investment companies, there can be no assurance
that the Portfolio's objectives will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation, and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT as defined on page .
Investors who are already subject to AMT should consider whether an investment
in the Portfolio is suitable for them. Investors are urged to consult their own
tax advisors with respect to their own tax situations.
NEW YORK MUNICIPAL SECURITIES
The New York Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under Municipal
Securities on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments or puts, tender option bonds and lease obligations as
described and according to the limitations set forth under "Municipal
Securities" on page .
Investors in the New York Municipal Portfolio should consider the possible
greater risk arising
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from the geographic concentration and non-diversified structure of the
Portfolio's investments, as well as the current and past financial condition of
New York municipal issuers which is discussed in the Statement of Additional
Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in New York Municipal Securities, the Portfolio is authorized,
under normal circumstances, to invest up to 20% of its total assets in taxable
investments. The taxable investments are limited to obligations of the U.S.
Government and its agencies or instrumentalities; prime quality certificates of
deposit and bankers acceptances of domestic banks; prime quality commercial
paper; and repurchase agreements collateralized at all times by such
instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
ADDITIONAL INFORMATION
INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member
of the Federal Reserve System is converted to Federal Funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks which
are not members of the Federal Reserve System may take longer to be converted
and invested. All payments must be in United States dollars.
FORWARDING OF PROCEEDS FROM ANY REDEMPTION OF FUND SHARES PURCHASED BY CHECK
MAY BE DELAYED ONLY UNTIL THE CHECK HAS CLEARED WHICH MAY NORMALLY TAKE UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE.
AUTOMATED CLEARING HOUSE TRANSFERS. Fund shares can be purchased and
redeemed by ACH electronic funds transfer between the Fund and a bank. There are
no charges to you for ACH transactions, either by the Fund or by the bank. ACH
transfers are completed approximately two business days following the placement
of transfer orders.
For your Fund account to be eligible for ACH transfers to and from your
bank, you must complete the Fund's ACH Authorization Form which can be obtained
from our service representative by telephoning the number below. Direct deposits
into your Fund account by ACH transfer can be used for part or all of recurring
payments made to you by your employer (corporate, Federal, military, or other
type) or by the Social Security Administration. Instructions to the sending
parties are simple; call toll-free 800-401-6672 during business hours to obtain
complete information from our service representative.
TIMING OF INVESTMENTS AND REDEMPTIONS. The Fund has two transaction times
each day, at 12:00 noon and 4:00 p.m. (New York time). New investments
represented by Federal Funds or bank wire monies received by the Custodian prior
to 12:00 noon are paid the full dividend for that day; such investments received
after 12:00 noon do not begin to receive daily dividends until the next day.
Redemption orders received prior to 12:00 noon are effected at 12:00 noon; the
shares redeemed do
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not earn that day's dividend but the redemption proceeds are available that day.
Redemption orders received after 12:00 noon are effected at 4:00 p.m.; the
shares redeemed earn the daily dividend for that day and the redemption proceeds
are remitted the next business day.
MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments, and $500 for account balances. These minimums do not
apply to shareholder accounts maintained through brokerage firms or other
financial institutions, as such financial intermediaries may maintain their own
minimums for their customer's investments in the Fund. The Fund may impose
service charges upon financial intermediaries to reflect the relatively higher
costs of small accounts and small transactions; these intermediaries may in turn
pass on such charges to affected accounts.
A shareholder subject to the minimum account balance requirement must
increase his or her account balance to at least $500 within sixty days after
notice of a deficient balance has been mailed by the Fund, or the Fund may close
the account and mail a check for the proceeds to the shareholder. The Fund
intends at least once each six months to review its shareholder balances in
regard to the $500 minimum and to send appropriate notices to shareholders with
deficient accounts. The Fund imposes no minimums for redemptions by mail or for
redemptions made on an account's behalf by brokerage firms or other financial
institutions. However, such firms may have internal procedures that include
minimums.
GUARANTEED PAYMENT. A broker-dealer or other financial intermediary may
arrange for investments in shares of the Fund at the 4:00 p.m. transaction time
and guarantee that payments in Federal Funds for the shares purchased will be
made prior to 12:00 noon the next day.
SHARE PRICE. Shares are sold and redeemed on a continuing basis without
sales or redemption charges at their net asset value which is expected to be
constant at $1.00, although this share price is not guaranteed. The net asset
value is determined each business day at 12:00 noon and 4:00 p.m. (New York
time). The net asset value per share is calculated by taking the sum of the
value of investments (amortized cost value is used for this purpose) and any
cash or other assets, subtracting liabilities, and dividing by the total number
of shares outstanding. All expenses, including the fees payable to the Advisor,
are accrued daily.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of each
Portfolio is determined each business day and is declared payable pro rata to
shareholders of record as of 12:00 noon. Declared dividends are accrued and are
automatically paid into shareholders' accounts on a monthly basis. As such
additional reinvested shares earn subsequent dividends, a compounding growth of
income occurs.
Net income of the Portfolios consists of all accrued interest income on
portfolio assets less the expenses applicable to that dividend period. All
realized gains and losses are reflected in the net asset value and are not
included in net investment income.
Distributions to your account of tax-exempt interest income are not subject
to Federal income tax (other than the alternative minimum tax described above),
but may be subject to state or local income taxes. Distributions of income
earned by the California General Municipal Portfolio from California tax-exempt
securities are not subject to Federal income tax (other than the alternative
minimum tax described above) or to California personal income taxes.
Distributions of income earned by the New York Municipal Portfolio from New York
Municipal Securities are not subject to Federal income tax (other than the
alternative minimum tax described above) or to New York State and New York City
income taxes. Distributions of taxable interest income, other investment income,
and net short-term capital gains are taxed to you as ordinary income; state and
local taxation of such distributions, if any, may be reduced in proportion to
the percentage of income that derives from U.S. Government obligations.
Distributions of net long-
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term capital gains would be taxable as long-term capital gains irrespective of
the length of time you may have held your shares. Distributions of net
short-term and long-term capital gains, if any, would be made annually. Each
January, each Portfolio will send you tax information for the calendar year just
ended stating the amounts and types of all its distributions, including the
percentage of income derived from U.S. Government obligations, for the calendar
year just ended.
PERIODIC WITHDRAWALS. Without affecting your right to use any of the
methods of redemption described on page 8, by checking the appropriate boxes on
the Application Form you may elect to participate additionally in the following
plans without any separate charges. Under the INCOME DISTRIBUTION PLAN you
receive monthly payments of all the income earned in your Fund account. Under
the SYSTEMATIC WITHDRAWAL PLAN, you may request checks in any specified amount
of $50 or more each month or in any intermittent pattern of months. If desired,
you can order, via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person.
VALUED INVESTMENT PLAN. The Valued Investment Plan ("VIP") is a central
asset program that includes checkwriting with no minimum dollar amount and a VIP
cash card. The program is available only to individuals whose Fund shares are
held as part of a brokerage account. The fees for this program, which are being
waived currently, are $45 a year with fees for additional checks and a $1.00 fee
per transaction for use at automated teller machines. Shareholders should
contact their broker or the Fund for information about this program.
THE ADVISOR. The Fund retains OpCap Advisors (the "Advisor"), One World
Financial Center, New York, New York, 10281, under an Advisory Agreement to
provide investment advice and, in general, to supervise the Fund's business
affairs and investment program, subject to the general control of the Directors
of the Fund. The Advisor is a subsidiary of Oppenheimer Capital, one of the
nation's largest independent investment managers, presently having in excess of
$30 billion in assets under its supervision. The management fee rate for each
Portfolio is at an annual rate of .50% on the first $100 million of average
daily net assets, .45% on the next $200 million of average daily net assets, and
.40% of average daily net assets in excess of $300 million, payable monthly.
DISTRIBUTION PLAN. Under a Distribution Assistance and Administrative
Services Plan (the "Plan") adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, each Portfolio pays the Advisor monthly at an
annual rate of .25 of 1% of the Portfolio's average daily net assets.
Substantially all such monies are paid by the Advisor to broker-dealers, banks
and other depository institutions, and other financial intermediaries for
distribution assistance and administrative services provided to the Portfolio,
with any remaining amounts being used to partially defray other expenses
incurred by the Advisor in distributing shares. The Plan has been approved by
the Board of Directors and by the Fund's shareholders. The Statement of
Additional Information contains additional information about the Advisory
Agreement and the Plan.
EXPENSES--EXPENSE LIMITATION. Principal operating expenses of the Fund
consist of the Advisor's fee, costs of the Plan, legal and accounting expenses,
custodian fees, and transfer agent and other shareholder servicing costs.
Shareholders pay no direct charges or fees for investment services. Each
Portfolio's expenses are paid out of its gross investment income. The Advisor
reimburses each Portfolio to the extent that the combined aggregate operating
expenses of the Portfolio exceed 1% of its average daily net assets for any
fiscal year.
FUND ORGANIZATION. The Fund, which is an open-end investment company
registered under the Investment Company Act of 1940, was organized as a Maryland
corporation in series form in April 1989. The Fund's activities are supervised
by its Board of Directors. Each share of a Portfolio is entitled to one vote;
shares vote as a single series on matters that affect all Portfolios in
substantially the same manner. The Fund does not intend to
14
<PAGE>
hold regular annual shareholder meetings. Directors are required to call a
special meeting of a Portfolio's shareholders if owners of at least 10% of the
Portfolio's outstanding shares so request in writing. The Fund may establish
additional Portfolios which may have different investment objectives from those
stated in this prospectus. The Fund issues shares only for full monetary
consideration, and it does not issue share certificates.
REPORTS. You will receive semi-annual and annual reports of the Portfolio
in which you are invested. To reduce expenses, only one copy of financial
reports will be mailed to your household, even if you have more than one
account. If you wish to receive additional copies of financial reports, please
call 1-800-401-6672 during business hours. You can arrange for a copy of each of
your account statements to be sent to other parties.
YIELD DEFINITIONS. From time to time we may advertise yield, effective
yield, and tax equivalent yield. Yield refers to income generated by an
investment in a Portfolio over a seven day or other stated period, expressed as
an annual percentage rate. Effective yield of a Portfolio results from the
compounding of periodically reinvested dividends. Tax-equivalent yield
represents the amount of income subject to a particular tax rate which would
have to be earned to give an investor an amount of income equal to tax-exempt
income. In addition, reference in advertisements may be made to ratings and
ratings among similar funds by independent evaluators, such as Lipper's
Analytical Services, Inc. The performance of the Portfolios may be compared to
recognized indices of market performance.
CUSTODIAN AND TRANSFER AGENT. The custodian of the assets, transfer agent
and shareholder servicing agent for the Fund is State Street Bank and Trust
Company. 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 SERVICING AGENT FOR CERTAIN SHAREHOLDERS. Unified Management
Corporation (800-UMC-FUND(862-3863)) is the shareholder servicing agent for
former shareholders of the AMA Family of Funds and clients of AMA Investment
Advisers, Inc., 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.
PURCHASE AND REDEMPTION OF SHARES
OPENING ACCOUNTS--NEW INVESTMENTS
A. WHEN FUNDS ARE SENT BY WIRE (the wire method permits immediate credit)
1) Telephone the Fund toll-free at
800-401-6672 during business hours. Our service representative will ask
you for (a) the name of the account as you wish it to be registered, (b)
the address of the account, (c) your taxpayer identification number
(social security number for an individual) and (d) the name of the
Portfolio in which you wish to invest. You will then be provided with an
account number.
2) Instruct your bank to wire Federal Funds
(minimum $1,000) to the Fund's custodian and transfer agent (P.O. Box
8505, Boston, MA 02266) exactly as follows and precisely in the order
presented:
15
<PAGE>
RECEIVING BANK INFORMATION:
State Street Bank and Trust Company
Attn: Custody
ABA#011000028
BENEFICIARY INFORMATION:
BNF=OCC Cash Reserves
SPECIFY PRIMARY, GOVERNMENT, GENERAL
MUNICIPAL, CALIFORNIA OR NEW YORK MUNICIPAL PORTFOLIO
AC-99043838
OTHER BENEFICIARY INFORMATION
OBI=OCC Cash Reserves
<TABLE>
<S> <C> <C>
Shareholder account name as registered
Shareholder account number with the Fund
</TABLE>
3)Mail a completed Application Form to:
OCC Cash Reserves
P.O. Box 8505
Boston, MA 02266
FOR OTHER THAN U.S. POSTAL SERVICE MAIL:
OCC Cash Reserves
2 Heritage Drive
North Quincy, MA 02171
B. WHEN FUNDS ARE SENT BY CHECK
1) Fill out an Application Form
2) Mail the completed Application Form
along with your check or negotiable bank draft (minimum $1,000) payable
to OCC Cash Reserves--Primary, Government, General Municipal, California
Municipal or New York Municipal Portfolio, to the address in A(3) above.
SUBSEQUENT INVESTMENTS (Purchases)
A. INVESTMENTS BY WIRE (to obtain immediate credit)
Instruct your bank to wire Federal Funds (minimum $100) as in A(2)
above.
B. INVESTMENTS BY CHECK
Mail your check or negotiable bank draft (minimum $100), payable to OCC Cash
Reserves--Primary, Government, General Municipal, California Municipal or New
York Municipal Portfolio, to the address in A(3) above. Include with the check
or draft the "next investment" stub from one of your previous monthly or interim
account statements. For added identification, place your Fund account number on
the check or draft.
C. INVESTMENTS BY AUTOMATED CLEARING HOUSE (requires pre-arrangement; see page
)
You may transfer amounts of $100 and more by ACH from your bank account to
your Fund account by telephoning the Fund toll-free at 800-401-6672 and talking
with our service representative during business hours. When placing an order, be
prepared to provide your Portfolio number (Primary-55, Government-56, General
Municipal-57, California Municipal-23 and New York Municipal-24) and your
account and personal identification numbers. Allow approximately two business
days after your order for the money to be received by the Fund.
WITHDRAWALS (Redemptions)
A. WITHDRAWALS BY TELEPHONE (requires pre-arrangement; see page )
You may transfer any amount from your Fund account to your designated bank
account by telephoning the FUND toll-free at 800-401-6672 and talking with our
service representative during business hours. You may order such withdrawals of
$1,000 or more to be sent by wire, withdrawals of $100 or more to be sent by the
Automated Clearing House (ACH) system, or withdrawals of any amount to be sent
by check. When placing an order, be prepared to provide your Portfolio number
and your account and personal identification numbers.
For withdrawals being sent by wire: if your telephone order is received by
the Fund prior to 12:00 Noon (New York time), your bank will receive the
requested amount the same day; if your telephone order is received after 12:00
Noon, your bank will receive the requested amount the next business day; for ACH
transfers, allow approximately two business days for the amount to be
16
<PAGE>
received by your bank. For transfers you order to be sent by check, the Fund
will mail the check the next business day. Withdrawals by any method are made
without any charge to you.
B. WITHDRAWALS BY CHECKWRITING
Under the Fund's Regular Checkwriting Service, you may write checks made
payable to any payee in any amount of $250 or more. Different checkwriting
services may be offered by participating broker-dealers and through Unified
Management Corporation. There are no separate charges for regular checkwriting.
The Fund's agent for all checkwriting services, State Street Bank, will impose
its normal charges for checks which are returned unpaid because of insufficient
funds or for checks upon which you have placed a stop order. To establish
check-writing, you must fill out the Signature Card which is with the
Application Form. If you wish to establish this checkwriting service subsequent
to the opening of your Fund Account, contact the Fund by telephone or mail. The
checkwriting service enables you to receive the daily dividends declared on the
shares to be redeemed until the day that your check is presented to State Street
Bank for payment.
You cannot close out your account by checkwriting, however, because your
shares continue to earn dividends and fluctuate in value until the check is
presented for payment.
C. WITHDRAWALS BY MAIL
You may withdraw any amount from your account at any time by mail. Written
orders for withdrawals should be mailed to OCC Cash Reserves, P.O. Box 8505
Boston, MA 02266. Such orders must include the account name as registered with
the Fund and the account number. All written orders for redemption must be
signed by all owners of the account with the signatures guaranteed by an
eligible guarantor.
<TABLE>
<S> <C>
OBTAINING AN APPLICATION FORM--ASSISTANCE If your account with the Fund is to be
If you wish to obtain an Application Form, maintained through a brokerage firm or
or if you have any questions about the other institution, do not fill out the
Form, purchasing shares, or other Fund Application Form or the Signature Card.
procedures, please telephone the Fund Instead, contact your account
toll-free at 800-401-6672 during business representative at such institution.
hours. Institutions may charge a fee for providing
such assistance.
</TABLE>
17
<PAGE>
OCC Cash Reserves (the "Fund") is an open-end money market fund investment
company with five separate Portfolios. Though the Portfolios have the same
investment objectives of safety of principal, liquidity and maximum current
income, they may in the pursuit of these objectives invest in different types of
money market securities or in different proportions of the same types of
securities. This prospectus sets forth information about the Fund and its
Primary, Government, General Municipal, California Municipal and New York
Municipal Portfolios that a prospective investor should know before investing.
Please retain this prospectus for future reference.
A Statement of Additional Information dated March 29, 1996 provides further
discussion of certain areas in this prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. A free copy may be obtained
by writing the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS PAGE
Introduction................................................................ 1
Expense Information......................................................... 2
Financial Highlights........................................................ 3
Primary Portfolio........................................................... 5
Government Portfolio........................................................ 6
General Municipal Portfolio................................................. 7
California Municipal Portfolio.............................................. 10
New York Municipal Portfolio................................................ 11
Additional Information...................................................... 12
Purchase and Redemption of Shares........................................... 15
<PAGE>
MARCH 29, 1996
OCC CASH RESERVES
- PRIMARY PORTFOLIO
- GOVERNMENT PORTFOLIO
- GENERAL MUNICIPAL PORTFOLIO
- CALIFORNIA MUNICIPAL PORTFOLIO
- NEW YORK MUNICIPAL PORTFOLIO
PROSPECTUS
<PAGE>
[LOGO] ................... with investment objectives of
SAFETY - LIQUIDITY - INCOME
OCC Cash Reserves (the "Fund") is a money market fund with five distinct
Portfolios--the Primary Portfolio, the Government Portfolio, the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolio (the "Portfolios").
Safety of principal is sought by investing in securities which are selected
for their high quality, liquidity and stability of principal. A security at the
time of purchase cannot have a maturity exceeding thirteen months, and the
average weighted maturity of all securities in the Portfolio cannot exceed 90
days. Such a short average maturity enhances the ability of each Portfolio to
provide both liquidity and stability of value to you and your fellow
shareholders. WHILE EACH PORTFOLIO SEEKS TO MAINTAIN (AND HAS MAINTAINED) ITS
SHARE PRICE AT $1.00, INVESTMENTS IN THE PORTFOLIOS ARE NOT GUARANTEED OR
INSURED BY THE U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT A PORTFOLIO WILL
MAINTAIN A CONSTANT PRICE OF $1.00 PER SHARE.
There are no minimums for investments in, or withdrawals from, a Portfolio
maintained through an Oppenheimer securities account, and withdrawals can be
made in any amount at any time without fee or penalty. The Portfolio's dividends
are declared daily and compounded monthly.
IS OCC CASH RESERVES FOR YOU?
The Fund is designed for individuals, institutions, advisors, custodians,
charities, fiduciaries and corporations who can benefit from a fund seeking
maximum current income and who place value on an investment having safety of
principal, liquidity, stability, simplicity, and convenience. The availability
of five separate Portfolios provides you with the advantage of selecting a
combination of investment characteristics particularly suitable to your needs.
The five Portfolios described in this Prospectus compare to one another as
follows:
Primary Portfolio -- highest money market income;
conservative investments
Government Portfolio -- high money market income; very
conservative investments
General Municipal -- highest money market tax-exempt income;
Portfolio conservative investments
California Municipal -- highest money market income exempt from
Portfolio Federal and California personal income
taxes; conservative investments
New York Municipal -- highest money market income exempt from
Portfolio Federal, New York State and New York
City income taxes; conservative
investments
<PAGE>
EXPENSE INFORMATION
The expense summary format below was developed for use by all mutual funds
to help investors understand the various direct costs and expenses related to a
fund investment.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (FOR EACH PORTFOLIO)
<S> <C>
Sales Load Imposed on Purchases............................... None
Sales Load Imposed on Reinvested Dividends.................... None
Redemption Fees............................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF EACH PORTFOLIO'S AVERAGE NET ASSETS)
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Management fees............. .41% .48% .47% .50% .50%
12b-1 (Distribution Plan)
expenses.................... .25% .25% .25% .25% .25%
Other Expenses.............. .28% .27% .28% .20% .25%
-- --
--- --- ---
Total Operating Expenses.... .94% 1.00% 1.00% .95% 1.00%
</TABLE>
During the fiscal year ended November 30, 1995, OpCap Advisors (the
"Advisor") voluntarily waived part of its advisory fee with respect to the
Government Portfolio, the General Municipal Portfolio, the California Municipal
Portfolio and the New York Municipal Portfolio in order to maintain a
competitive yield. After giving effect to such waivers, the management fees for
the Government Portfolio, the General Municipal Portfolio, the California
Municipal Portfolio and the New York Municipal Portfolio were .48%, .40%, .37%
and .29%, respectively, and the total operating expenses were 1.00%, .93%, .82%
and .79% respectively. Such advisory fee waivers are voluntary and may be
discontinued at any time, except that the Advisor has agreed to assume expenses
of any Portfolio in excess of 1.00% in any fiscal year. Had such waivers not
occurred, the total operating expenses would have been 1.02%, 1.02%, .95%, and
1.00%, respectively. The expenses listed for the Government and General
Municipal Portfolio have been restated to reflect the Advisor's agreement to
assume expenses in excess of 1.00% and the expenses for the California Municipal
Portfolio and the New York Municipal Portfolio have been restated to reflect
what the expenses would have been without the voluntary waivers. In addition,
the expense information has been restated to reflect the reduction in the 12b-1
expenses for each Portfolio from .30% of average net assets to .25% of average
net assets, effective March 31, 1995, and an increase in administrative
expenses.
The following table illustrates the expenses that an investor would pay on a
hypothetical $1,000 investment in each of the Portfolios assuming a 5% annual
return (cumulatively through the end of each time period). Neither the 5% return
nor the estimated expenses should be considered an indication of actual or
expected performance or expenses, both of which may vary.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary Portfolio..................................... $ 9.59 $ 29.96 $ 52.02 $ 115.48
Government Portfolio.................................. 10.20 31.84 55.24 122.46
General Municipal Portfolio........................... 10.20 31.84 55.24 122.46
California Municipal Portfolio........................ 9.69 30.26 52.54 116.63
New York Municipal Portfolio.......................... 10.20 31.84 55.24 122.46
</TABLE>
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The financial information presented below has been audited by Price
Waterhouse LLP, independent accountants, whose unqualified report thereon
appears in the Statement of Additional Information ("SAI"). Investors should
understand that all the following information should be read in conjunction with
the financial statements and related notes thereto appearing in the SAI.
<TABLE>
<CAPTION>
DIVIDENDS AND
INCOME FROM DISTRIBUTIONS
INVESTMENT OPERATIONS ------------------------------------
----------------------------------- DIVIDENDS DISTRIBUTIONS
NET TO DISTRIBUTIONS TO
NET ASSET REALIZED TOTAL SHAREHOLDERS TO SHAREHOLDERS
VALUE, NET GAIN/(LOSS) FROM FROM NET SHAREHOLDERS FROM NET
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT FROM OTHER REALIZED
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME SOURCES GAINS
<S> <C> <C> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $ .051 $ 0.000(1) $0.051 $(0.051) -- $(0.000)(1)
1994.......................... 1.00 .032 0.000(1) 0.032 (0.032) $(0.000)(1) (0.000)(1)
1993.......................... 1.00 .024 0.000(1) 0.024 (0.024) (0.000)(1) (0.000)(1)
1992.......................... 1.00 .033 0.000(1) 0.033 (0.033) -- (0.000)(1)
1991.......................... 1.00 .057 (0.000)(1) 0.057 (0.057) -- --
December 13, 1989(3)
to November 30, 1990......... 1.00 .073(4) 0.000(1) 0.073 (0.073) -- (0.000)(1)
<CAPTION>
RATIOS TO AVERAGE
NET NET ASSETS
NET ASSET ASSETS, ---------------------
VALUE, END OF NET NET
END OF TOTAL PERIOD OPERATING INVESTMENT
PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
PRIMARY PORTFOLIO
Year ended November 30,
1995.......................... $1.00 5.19% $1,671.1 0.94%(2) 5.07%(2)
1994.......................... 1.00 3.26% 1,453.8 0.91% 3.21%
1993.......................... 1.00 2.44% 1,413.9 0.90% 2.41%
1992.......................... 1.00 3.38% 1,168.3 0.88% 3.34%
1991.......................... 1.00 5.89% 1,249.0 0.86% 5.74%
December 13, 1989(3)
to November 30, 1990......... 1.00 7.80%(5) 1,244.2 0.87%(4,5) 7.47%(4,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Average net assets for the year ended November 30, 1995 were $1,594,387,722.
(3) Commencement of operations.
(4) Reflects a voluntary waiver of $.00004 per share in advisory fees. Had such
waiver not occurred, the net operating expense and net investment income
ratios would have been 0.88% and 7.46%, respectively.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $ 0.049(2) $ 0.000(1) $0.049 $(0.049) -- $(0.000)(1)
1994.......................... 1.00 0.031(2) 0.000(1) 0.031 (0.031) $(0.000)(1) --
1993.......................... 1.00 0.022 -- 0.022 (0.022) (0.000)(1) --
1992.......................... 1.00 0.032(2) 0.000(1) 0.032 (0.032) -- (0.000)(1)
1991.......................... 1.00 0.055(2) -- 0.055 (0.055) -- --
February 14, 1990(4)
to November 30, 1990......... 1.00 0.059(2) 0.000(1) 0.059 (0.059) -- (0.000)(1)
<CAPTION>
GOVERNMENT PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995.......................... $1.00 5.02% $ 108.6 1.00%(2,3) 4.91%(2,3)
1994.......................... 1.00 3.12% 113.2 0.95%(2) 3.08%(2)
1993.......................... 1.00 2.26% 127.9 1.00% 2.24%
1992.......................... 1.00 3.24% 131.7 0.93%(2) 3.23%(2)
1991.......................... 1.00 5.69% 142.2 0.84%(2) 5.62%(2)
February 14, 1990(4)
to November 30, 1990......... 1.00 7.67%(5) 150.1 0.67%(2,5) 7.34%(2,5)
</TABLE>
(1) Less than $.0005 per share.
(2) Reflects a voluntary waiver of $.0002, $.0002, $.0002 and $.001 per share,
respectively, in advisory fees and $.004 per share in advisory fees and
reimbursement of other operating expenses, respectively, in effect during
each period. Had such waivers and reimbursements not occurred, the ratio of
net operating expenses would have been 1.02%, 0.97%, 0.94%, 0.92% and 1.19%,
respectively and the ratio of net investment income would have been 4.89%,
3.06%, 3.22%, 5.54% and 6.82%, respectively.
(3) Average net assets for the year ended November 30, 1995 were $111,066,046.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
3
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
----------------------------------- DIVIDENDS
NET TO
NET ASSET REALIZED TOTAL SHAREHOLDERS
VALUE, NET GAIN/(LOSS) FROM FROM NET CAPITAL
BEGINNING INVESTMENT ON SECURITY INVESTMENT INVESTMENT CONTRIBUTION BY
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME ADVISOR
<S> <C> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $ 0.031(1) $(0.000)(2) $0.031 $(0.031) --
1994.......................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993.......................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992.......................... 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
1991.......................... 1.00 0.042(1) 0.000(2) 0.042 (0.042) --
February 14, 1990(4)
to November 30, 1990......... 1.00 0.042(1) (0.000)(2) 0.042 (0.042) --
<CAPTION>
RATIOS TO AVERAGE
NET NET ASSETS
NET ASSET ASSETS, ---------------------
VALUE, END OF NET NET
END OF TOTAL PERIOD OPERATING INVESTMENT
PERIOD RETURN* (MILLIONS) EXPENSES INCOME
<S> <C> <C> <C> <C> <C>
GENERAL MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 3.11% $ 116.0 0.93%(1,3) 3.07%(1,3)
1994.......................... 1.00 2.04% 108.7 0.90%(1,3) 2.01%(1)
1993.......................... 1.00 1.74% 109.7 0.98%(1) 1.73%(1)
1992.......................... 1.00 2.66% 112.9 0.90%(1) 2.62%(1)
1991.......................... 1.00 4.24% 100.1 0.88%(1) 4.20%(1)
February 14, 1990(4)
to November 30, 1990......... 1.00 5.45%(5) 107.9 0.71%(1,5) 5.32%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.0003, $.001, $.001 and $.002
per share, respectively, in advisory fees in effect during each period. Had
such waivers not occurred, the ratio of net operating expenses would have
been 1.02%, 1.01%, 1.01%, 1.00%, 0.98% and 1.00%, respectively and the ratio
of net investment income would have been 2.98%, 1.90%, 1.70%, 2.52%, 4.10%
and 5.03%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $126,528,413.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $ 0.031(1) ($0.008) $0.023 ($0.031) $ 0.008
1994.......................... 1.00 0.020(1) 0.000(2) 0.020 (0.020) --
1993.......................... 1.00 0.017(1) (0.000)(2) 0.017 (0.017) --
1992.......................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
March 20, 1991(4)
to November 30, 1991......... 1.00 0.026(1) (0.000)(2) 0.026 (0.026) --
<CAPTION>
CALIFORNIA MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995.......................... $1.00 3.10% $ 75.9 0.82%(1,2) 3.05%(1,2)
1994.......................... 1.00 1.99% 61.3 0.85%(1) 1.99%(1)
1993.......................... 1.00 1.76% 62.3 0.85%(1) 1.75%(1)
1992.......................... 1.00 2.57% 61.2 0.60%(1) 2.51%(1)
March 20, 1991(4)
to November 30, 1991......... 1.00 4.24%(5) 45.4 0.54%(1,5) 3.75%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.001, $.001, $.001 and $.004 per share in
advisory fees and $.004 per share in advisory fees and reimbursement of
other operating expenses, respectively, in effect during each period. Had
such waivers and reimbursements not occurred, the ratio of net operating
expenses would have been .95%, 0.97%, 0.98%, 1.02% and 1.08%, respectively
and the ratio of net investment income would have been 2.92%, 1.87%, 1.62%,
2.09% and 3.21%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $63,810,311.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1995.......................... $1.00 $ 0.030(1) $(0.000)(2) $0.030 $(0.030) --
1994.......................... 1.00 0.019(1) 0.000(2) 0.019 (0.019) --
1993.......................... 1.00 0.016(1) (0.000)(2) 0.016 (0.016) --
1992.......................... 1.00 0.025(1) (0.000)(2) 0.025 (0.025) --
April 10, 1991(4)
to November 30, 1991......... 1.00 0.024(1) (0.000)(2) 0.024 (0.024) --
<CAPTION>
NEW YORK MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C>
Year ended November 30,
1995.......................... $1.00 3.07% $ 52.3 0.79%(1.3) 3.02%
1994.......................... 1.00 1.92% 48.0 0.82%(1) 1.90%(1)
1993.......................... 1.00 1.66% 42.2 0.79%(1) 1.64%(1)
1992.......................... 1.00 2.56% 32.9 0.74%(1) 2.43%(1)
April 10, 1991(4)
to November 30, 1991......... 1.00 4.29%(5) 18.4 0.56%(1,5) 3.80%(1,5)
</TABLE>
(1) Reflects a voluntary waiver of $.002, $.002, $.002 and $.005 per share in
advisory fees and $.006 per share in advisory fees and reimbursement of
other operating expenses, respectively, in effect during each period. Had
such waivers and reimbursements not occurred, the ratio of net operating
expenses would have been 1.00%, 1.01%, 1.03%, 1.19% and 1.43%, respectively
and the ratio of net investment income would have been 2.81%, 1.71%, 1.40%,
1.98% and 2.93%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $52,398,588.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
4
<PAGE>
OCC CASH RESERVES PRIMARY PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The Primary Portfolio's investment objectives are in the following order of
priority-safety of principal, liquidity, and maximum current income from money
market securities to the extent consistent with the first two objectives. As a
matter of fundamental policy, the Primary Portfolio pursues its objectives by
maintaining a diversified portfolio of high quality money market securities of
the types described in the succeeding section, all of which at the time of
investment have remaining maturities of thirteen months or less. While the
Portfolio may not change this policy or the other "fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Primary Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Primary Portfolio invests are (1)
marketable obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities (collectively "U.S. Government Securities"); (2)
U.S. dollar-denominated certificates of deposit and bankers' acceptances of
prime quality issued or guaranteed by, and interest-bearing time deposits
maintained at, (a) U.S. banks or savings and loan associations having total
assets of more than $1 billion and which are insured under the administration of
the Federal Deposit Insurance Corporation ("FDIC"), (b) foreign branches of such
U.S. institutions, and U.S. or foreign branches of foreign banks having total
assets of at least $1 billion; (3) domestic or foreign commercial paper of prime
quality and participation interests in loans of equivalent quality extended by
banks to such companies; and (4) repurchase agreements that are collateralized
in full each day by U.S. Government Securities. For the purposes of this
prospectus, prime quality shall mean the security (or the issuer for a
comparable security) is rated in one of the two highest rating categories for
short term debt obligations by any two of Standard & Poor's Corporation ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service, Inc
("Fitch"), Duff & Phelps, Inc. ("Duff") or Thomson BankWatch, Inc., or by one of
such rating agencies if only one rating agency has issued a rating with respect
to the security, or, if not rated, judged by the Advisor pursuant to criteria
adopted by the Fund's Board of Directors to be of comparable quality.
In further regard to items (2) and (3) above, investments by the Primary
Portfolio which do not satisfy one of the following requirements are limited in
the aggregate to 5% of the Portfolio's total assets in regard to issues and to
1% of total assets (or $1 million if greater) in regard to any one issuer of
such issues: (i) issues rated in the highest category (or the issuer is so rated
for a comparable security) by at least two of the above-listed rating agencies;
or (ii) if rated only by one agency, rated in the highest category; or (iii) if
unrated, determined by the Board of Directors to be of quality comparable to
issues which qualify under (i) or (ii).
Certificates of deposit represent the obligation of a bank to repay funds
deposited with it for a specified period of time. Bankers' acceptances are
short-term collateralized credit instruments drawn on and evidencing the
obligation of a bank to pay the value at maturity. Commercial paper consists of
unsecured promissory notes issued by corporations to finance short-term credit
needs. Participation interests are undivided beneficial interests in loans
giving the purchaser the right to receive a pro rata share of a loan's cash
flow. Repurchase agreements are contracts under which the buyer acquires a
security subject to the obligation of the seller to repurchase at a fixed price,
usually within one week. The Fund enters into such agreements only with
5
<PAGE>
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government Securities and with the Fund's Custodian. The Fund could
experience a loss in the event of its failure to realize full value upon
collateral liquidation required by a dealer's default. Though investments in
obligations of foreign issuers may be higher yielding than those of domestic
issuers, they may involve certain different risks such as exchange control
regulations; limited availability of information about the issuer; differences
in accounting, auditing and financial reporting standards and government
regulation; the possibility of expropriation, nationalization or confiscatory
taxation; political or social instability or diplomatic developments; and the
differences between the economies of the United States and the applicable
foreign country, even though the Fund's investments are limited to those in
"developed countries." Each of these factors is carefully considered when
investments are made, but the Fund does not limit the amount of its assets which
can be invested in any particular type of eligible obligation or in any
developed foreign country.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Primary Portfolio may not (1) invest more than 25% of its total assets in the
securities of issuers conducting their principal business activities in any one
industry, except that under normal circumstances at least 25% of its total
assets will be invested in bank obligations; (2) invest more than 5% of its
total assets in the securities of any issuer (loan participations are considered
obligations of both the lender and the borrower); (3) invest more than 10% of
its total assets in repurchase agreements not terminable within seven days
(whether or not illiquid) or other illiquid investments including participation
interests and other instruments described above for which no secondary markets
exist: (4) borrow money except from banks for extraordinary or emergency
purposes in aggregate amounts not exceeding 15% of its total assets (and, when
such borrowings exceed 5% of its total assets, make any further investments);
and (5) mortgage, pledge or hypothecate its assets except to secure such
borrowings. Limitations (1) and (2) do not apply to U.S. Government Securities.
OCC CASH RESERVES GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVES AND PROCEDURES
The Government Portfolio's investment objectives are in the following order
of priority-safety of principal, liquidity, and maximum current income from
money market securities to the extent consistent with the first two objectives.
As a matter of fundamental policy, the Government Portfolio pursues its
objectives by maintaining a diversified portfolio of high quality money market
securities of types described in the succeeding paragraph, all of which at the
time of investment have remaining maturities of thirteen months or less. While
the Portfolio may not change this policy or the "other fundamental investment
policies" described below without shareholder approval, it may, upon notice to
shareholders but without such approval, change its other investment policies. As
is true with all investment companies, there can be no assurance that the
Government Portfolio's objectives will be achieved.
MONEY MARKET SECURITIES
The money market securities in which the Government Portfolio invests are
(1) marketable obligations of, or guaranteed by, the United States Government,
its agencies or instrumentalities (collectively "U.S. Government Securities"),
including direct obligations of the United States Treasury such as Bills, Notes
and Bonds, and issues of agencies and instrumentalities established under the
authority of an act of Congress such as the Federal Home Loan Banks, which have
the right to borrow
6
<PAGE>
from the U.S. Treasury, and the Federal National Mortgage Association, the
securities of which are solely dependent on the issuing instrumentality for
repayment; and (2) repurchase agreements that are collateralized in full each
day by the types of U.S. Government Securities listed above. These agreements
are entered into with "primary dealers" (as designated by the Federal Reserve
Bank of New York) in U.S. Government Securities and with the Fund's Custodian.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain portfolio diversification and reduce investment risk, the
Government Portfolio may not (1) invest more than 5% of its total assets in
repurchase agreements with any one vendor, although with respect to 25% of its
total assets it may invest without regard to such limitation; (2) invest more
than 10% of its total assets in repurchase agreements not terminable within
seven days (whether or not illiquid) or other illiquid investments; (3) borrow
money except from banks for extraordinary or emergency purposes in aggregate
amounts not exceeding 15% of its total assets (and, when such borrowings exceed
5% of its total assets, make any further investments); and (4) mortgage, pledge
or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES GENERAL MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The General Municipal Portfolio's investment objectives are in the following
order of priority-safety of principal, liquidity, and, to the extent consistent
with these objectives, maximum current income from money market securities that
is exempt from Federal income taxes. As a matter of fundamental policy, the
General Municipal Portfolio pursues its objectives by maintaining a diversified
portfolio of high-grade municipal securities of the types described in the
succeeding section, all of which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal income taxes. At
least 80% of the Portfolio's total assets will be invested in such securities
(not including securities treated as tax preference items) unless the Advisor
has determined that it is in the best interest of the Portfolio to assume a
temporary defensive position involving a greater commitment of assets to
obligations generating taxable income. Normally, substantially all of the
Portfolio's income will be exempt from Federal taxes, although it may be subject
to state or local income taxes. While the Portfolio may not change this policy
or the "other fundamental investment policies" described below without
shareholder approval, it may, upon notice to shareholders but without such
approval, change its other investment policies. As is true with all investment
companies, there can be no assurance that the General Municipal Portfolio's
objectives will be achieved.
Under the current Internal Revenue Code (1) interest on tax-exempt municipal
securities issued after August 7, 1986 and used to finance "private activities"
(e.g., industrial development bonds) shall be treated as an item of tax
preference for purposes of alternative minimum tax ("AMT") imposed on
individuals and corporations, though for Federal income tax purposes such
interest shall remain fully tax-exempt, and (2) interest on all tax-exempt
obligations shall be included in "adjusted net book income" of corporations for
AMT purposes. The General Municipal Portfolio may purchase "private activity"
municipal securities without limitation and therefore a substantial portion (and
potentially all) of any distribution from the Portfolio may be treated as a tax
preference item (with resulting tax) for those taxpayers subject to AMT.
Investors who are already subject to AMT
7
<PAGE>
should consider whether an investment in the Portfolio is suitable for them.
Investors are urged to consult their own tax advisors with respect to their own
tax situations.
MUNICIPAL SECURITIES
The municipal securities in which the General Municipal Portfolio invests
are municipal notes, short-term municipal bonds, short-term discount notes, and
participation interests in any of the foregoing. Municipal notes are generally
used to provide for short-term capital needs and generally have maturities of
thirteen months or less. Examples include tax anticipation and revenue anticipa-
tion notes which are generally issued in anticipation of various seasonal
revenues, bond anticipation notes, and tax-exempt commercial paper. Municipal
notes and short-term municipal bonds may either be secured by the issuer's
pledge of its faith, credit and taxing power for payment of principal and
interest, or paid from the revenues of a particular facility or a specific
excise or other source. Included within the revenue bonds category are
participations in lease obligations or installment purchase contracts
(hereinafter collectively called "lease obligations") of municipalities. States
and local agencies or authorities issue lease obligations to acquire equipment
and facilities. Short-term discount notes are short-term obligations issued at a
discount to face value. Participation interests are undivided interests in loans
giving the purchaser the right to a pro-rata share of a loan's cash flow.
All of the General Municipal Portfolio's municipal securities at the time of
purchase must be of prime quality, as previously defined. Securities must also
meet credit standards applied by the Advisor.
The General Municipal Portfolio may invest in variable rate obligations
whose interest rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the security's interest
rate is tied. Such adjustments minimize changes in the market value of the
obligation and, accordingly, enhance the ability of the Portfolio to maintain a
stable net asset value. Variable rate securities purchased may include
participation interests in industrial development bonds backed by letters of
credit of domestic or foreign banks having total assets of more than $1 billion;
the letters of credit of any single bank in respect of all variable rate
obligations will not cover more than 10% of the Portfolio's total assets.
The General Municipal Portfolio also may purchase tender option bonds. A
tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer, or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the municipal security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities coupled
with the tender option to trade at par on the date of such determination. Thus,
after payment of the fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Advisor, on behalf of the General Municipal Portfolio, will consider on an
ongoing basis the creditworthiness of the issuer of the underlying municipal
security, of any custodian, and of the third party provider of the tender
option. In certain instances and for certain tender option bonds, the option may
be terminable in the event of a default in payment of principal or interest on
the underlying municipal securities, and for other reasons. The Fund will
consider as illiquid securities tender option bonds as to which it cannot
exercise the tender feature on not more than seven days' notice if there is no
secondary market available for these obligations.
8
<PAGE>
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 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 General Municipal Portfolio will consider such securities to be illiquid
(the Portfolio 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.
The General Municipal Portfolio also may invest in forward commitments,
which obligate the Portfolio to purchase securities, and stand-by commitments or
puts, which give the Portfolio the right to resell securities, from or to a
dealer at a specified price. Such commitments, which may involve certain
expenses and risks, are not expected to comprise a significant portion of the
Portfolio's investments. The Portfolio may commit up to 15% of its net assets to
the purchase of when-issued securities. The underlying securities are subject to
market fluctuations and no interest accrues prior to delivery of such
securities.
TAXABLE INVESTMENTS
The taxable investments in which the General Municipal Portfolio may invest
include obligations of the U.S. Government and its agencies or
instrumentalities; high quality certificates of deposit and bankers'
acceptances; prime commercial paper; and repurchase agreements collateralized at
all times by such instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To maintain Portfolio diversification and reduce investment risk, the
General Municipal Portfolio may not (1) invest more than 25% of its total assets
in municipal securities whose issuers are located in the same state or more than
25% of its total assets in municipal securities whose interest is paid from
revenues of similar-type projects; (2) invest more than 5% of its total assets
in the securities of any one issuer (except the U.S. Government) although with
respect to 25% of its total assets it may invest without regard to such
limitation; (3) invest more than 10% of its total assets in repurchase
agreements not terminable within seven days (whether or not illiquid) or other
illiquid investments; (4) borrow money except from banks for extraordinary or
emergency purposes and in aggregate amounts not exceeding 15% of its total
assets (and, when such borrowings exceed 5% of its total assets, make any
further investments); and (5) mortgage, pledge or hypothecate its assets except
to secure such borrowings.
9
<PAGE>
OCC CASH RESERVES CALIFORNIA MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the California Municipal Portfolio (the
"Portfolio") are in the following order of priority-safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal and
California personal income taxes. The Portfolio pursues its objectives by
maintaining a portfolio of high-grade securities of the types described in the
succeeding section, which at the time of investment have remaining maturities of
thirteen months or less and generate, in the opinion of bond counsel to the
issuer, interest that is exempt from Federal and California personal income
taxes ("California Municipal Securities"). As a matter of fundamental policy, at
least 80% of the Portfolio's total assets will be invested in California
Municipal Securities unless the Advisor determines that it is in the best
interest of the Portfolio to assume a temporary defensive position involving a
greater commitment of assets to obligations generating taxable income. Normally,
substantially all of the Portfolio's income will be exempt from Federal and
California personal income taxes. While the Portfolio may not change the
foregoing policies or the "other fundamental investment policies" described
below without shareholder approval, it may, upon notice to shareholders but
without such approval, change its other investment policies. As is true with all
investment companies, there can be no assurance that the Portfolio's objectives
will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT (as defined on page ).
Investors already subject to AMT should consider whether an investment in the
Portfolio is suitable for them. Investors are urged to consult their own tax
advisors with respect to their own tax situations.
CALIFORNIA MUNICIPAL SECURITIES
The California Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under "Municipal
Securities" on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments, tender option bonds and lease obligations, as
described and according to the limitations set forth under "Municipal
Securities" on page .
Investors in the California Municipal Portfolio should consider the possible
greater risk arising from the geographic concentration and non-diversified
structure of the Portfolio's investments, as well as the current and past
financial condition of California municipal issuers which is discussed in the
Statement of Additional Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in California Municipal Securities, the Portfolio is
authorized, under normal circumstances, to invest up to 20% of its total assets
in taxable investments. The taxable investments are limited to obligations of
the U.S. Government and its agencies or instrumentalities; prime quality
certificates of deposit and bankers acceptances of domestic banks; prime quality
commercial paper; and repurchase agreements collateralized at all times by such
instruments.
10
<PAGE>
OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
OCC CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the New York Municipal Portfolio (the
"Portfolio") are in the following order of priority-safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income available from money market securities that is exempt from Federal, New
York State and New York City income taxes. The Portfolio pursues its objectives
by maintaining a portfolio of high-grade securities of the types described in
the succeeding section, which at the time of investment have remaining
maturities of thirteen months or less and generate, in the opinion of bond
counsel to the issuer, interest that is exempt from Federal, New York State and
New York City income taxes ("New York Municipal Securities"). As a matter of
fundamental policy, at least 80% of the Portfolio's total assets will be
invested in New York Municipal Securities unless the Advisor determines that it
is in the best interest of the Portfolio to assume a temporary defensive
position involving a greater commitment of assets to obligations generating
taxable income. Normally, substantially all of the Portfolio's income will be
exempt from Federal, New York State and New York City income taxes. While the
Portfolio may not change the foregoing policies or the "other fundamental
investment policies" described below without shareholder approval, it may, upon
notice to shareholders but without such approval, change its other investment
policies. As is true with all investment companies, there can be no assurance
that the Portfolio's objectives will be achieved.
The Portfolio may purchase "private activity" municipal securities without
limitation, and therefore a substantial portion (and potentially all) of any
distribution from the Portfolio may be treated as a tax preference item (with
resulting tax) for those taxpayers subject to AMT as defined on page .
Investors who are already subject to AMT should consider whether an investment
in the Portfolio is suitable for them. Investors are urged to consult their own
tax advisors with respect to their own tax situations.
NEW YORK MUNICIPAL SECURITIES
The New York Municipal Securities in which the Portfolio invests are
municipal notes, short-term municipal bonds, short-term discount notes and
participation interests in any of the foregoing as described under Municipal
Securities on page .
All of the Portfolio's securities at the time of purchase are of prime
quality as defined previously. Securities must also meet credit standards
applied by the Advisor.
The Portfolio may invest in variable rate obligations, forward commitments
and stand-by commitments or puts, tender option bonds and lease obligations as
described and according to the limitations set forth under "Municipal
Securities" on page .
Investors in the New York Municipal Portfolio should consider the possible
greater risk arising
11
<PAGE>
from the geographic concentration and non-diversified structure of the
Portfolio's investments, as well as the current and past financial condition of
New York municipal issuers which is discussed in the Statement of Additional
Information ("SAI").
TAXABLE INVESTMENTS
While it is anticipated that substantially all of the Portfolio's assets
will be invested in New York Municipal Securities, the Portfolio is authorized,
under normal circumstances, to invest up to 20% of its total assets in taxable
investments. The taxable investments are limited to obligations of the U.S.
Government and its agencies or instrumentalities; prime quality certificates of
deposit and bankers acceptances of domestic banks; prime quality commercial
paper; and repurchase agreements collateralized at all times by such
instruments.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the Portfolio may not (1) invest more than 25% of
its total assets in securities whose interest is paid from revenues of
similar-type projects; (2) with respect to 50% of its assets invest more than 5%
of its total assets in the securities of any one issuer (except the U.S.
Government); (3) invest any more than 25% of its assets in any one issuer; (4)
invest more than 10% of its total assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
borrow money except from banks for extraordinary or emergency purposes and in
aggregate amounts not exceeding 15% of its total assets, and when such
borrowings exceed 5% of its total assets, make any further investments; and (6)
mortgage, pledge or hypothecate its assets except to secure such borrowings.
ADDITIONAL INFORMATION
TIMING OF INVESTMENTS AND REDEMPTIONS. The Fund has two transaction times
each day, at 12:00 noon and 4:00 p.m. (New York time). New investments
represented by Federal Funds or bank wire monies received by the Custodian prior
to 12:00 noon are paid the full dividend for that day; such investments received
after 12:00 noon do not begin to receive daily dividends until the next day.
Redemption orders received prior to 12:00 noon are effected at 12:00 noon; the
shares redeemed do not earn that day's dividend but the redemption proceeds are
available that day. Redemption orders received after 12:00 noon are effected at
4:00 p.m.; the shares redeemed earn the daily dividend for that day and the
redemption proceeds are remitted the next business day.
GUARANTEED PAYMENT. A broker-dealer or other financial intermediary may
arrange for investments in shares of the Fund at the 4:00 p.m. transaction time
and guarantee that payments in Federal Funds for the shares purchased will be
made prior to 12:00 noon the next day.
SHARE PRICE. Shares are sold and redeemed on a continuing basis without
sales or redemption charges at their net asset value which is expected to be
constant at $1.00, although this share price is not guaranteed. The net asset
value is determined each business day at 12:00 noon and 4:00 p.m. (New York
time). The net asset value per share is calculated by taking the sum of the
value of investments (amortized cost value is used for this purpose) and any
cash or other assets, subtracting liabilities, and dividing by the total number
of shares outstanding. All expenses, including the fees payable to the Advisor,
are accrued daily.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of each
Portfolio is determined each business day and is declared payable pro rata to
shareholders of record as of 12:00 noon. Declared dividends are accrued and are
automatically paid into shareholders' accounts on a monthly basis. As such
additional reinvested shares earn subsequent dividends, a compounding growth of
income occurs.
12
<PAGE>
Net income of the Portfolios consists of all accrued interest income on
portfolio assets less the expenses applicable to that dividend period. All
realized gains and losses are reflected in the net asset value and are not
included in net investment income.
Distributions to your account of tax-exempt interest income are not subject
to Federal income tax (other than the alternative minimum tax described above),
but may be subject to state or local income taxes. Distributions of income
earned by the California General Municipal Portfolio from California tax-exempt
securities are not subject to Federal income tax (other than the alternative
minimum tax described above) or to California personal income taxes.
Distributions of income earned by the New York Municipal Portfolio from New York
Municipal Securities are not subject to Federal income tax (other than the
alternative minimum tax described above) or to New York State and New York City
income taxes. Distributions of taxable interest income, other investment income,
and net short-term capital gains are taxed to you as ordinary income; state and
local taxation of such distributions, if any, may be reduced in proportion to
the percentage of income that derives from U.S. Government obligations.
Distributions of net long-term capital gains would be taxable as long-term
capital gains irrespective of the length of time you may have held your shares.
Distributions of net short-term and long-term capital gains, if any, would be
made annually. Each January, each Portfolio will send you tax information for
the calendar year just ended stating the amounts and types of all its
distributions, including the percentage of income derived from U.S. Government
obligations, for the calendar year just ended.
THE ADVISOR. The Fund retains OpCap Advisors (the "Advisor"), One World
Financial Center, New York, New York, 10281, under an Advisory Agreement to
provide investment advice and, in general, to supervise the Fund's business
affairs and investment program, subject to the general control of the Directors
of the Fund. The Advisor is a subsidiary of Oppenheimer Capital, one of the
nation's largest independent investment managers, presently having in excess of
$30 billion in assets under its supervision. The management fee rate for each
Portfolio is at an annual rate of .50% on the first $100 million of average
daily net assets, .45% on the next $200 million of average daily net assets, and
.40% of average daily net assets in excess of $300 million, payable monthly.
DISTRIBUTION PLAN. Under a Distribution Assistance and Administrative
Services Plan (the "Plan") adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, each Portfolio pays the Advisor monthly at an
annual rate of .25 of 1% of the Portfolio's average daily net assets.
Substantially all such monies are paid by the Advisor to broker-dealers, banks
and other depository institutions, and other financial intermediaries for
distribution assistance and administrative services provided to the Portfolio,
with any remaining amounts being used to partially defray other expenses
incurred by the Advisor in distributing shares. The Plan has been approved by
the Board of Directors and by the Fund's shareholders. The Statement of
Additional Information contains additional information about the Advisory
Agreement and the Plan.
EXPENSES--EXPENSE LIMITATION. Principal operating expenses of the Fund
consist of the Advisor's fee, costs of the Plan, legal and accounting expenses,
custodian fees, and transfer agent and other shareholder servicing costs.
Shareholders pay no direct charges or fees for investment services. Each
Portfolio's expenses are paid out of its gross investment income. The Advisor
reimburses each Portfolio to the extent that the combined aggregate operating
expenses of the Portfolio exceed 1% of its average daily net assets for any
fiscal year.
FUND ORGANIZATION. The Fund, which is an open-end investment company
registered under the Investment Company Act of 1940, was organized as a Maryland
corporation in series form in April 1989. The Fund's activities are supervised
by its Board of Directors. Each share of a Portfolio is entitled to one vote;
shares vote as a single series on matters that affect all Portfolios in
substantially
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the same manner. The Fund does not intend to hold regular annual shareholder
meetings. Directors are required to call a special meeting of a Portfolio's
shareholders if owners of at least 10% of the Portfolio's outstanding shares so
request in writing. The Fund may establish additional Portfolios which may have
different investment objectives from those stated in this prospectus. The Fund
issues shares only for full monetary consideration, and it does not issue share
certificates.
REPORTS. You will receive semi-annual and annual reports of the Portfolio
in which you are invested. To reduce expenses, only one copy of financial
reports will be mailed to your household, even if you have more than one
account. If you wish to receive additional copies of financial reports, please
call 1-800-401-6672. Your Portfolio transactions and balances will be reported
each month on your Oppenheimer securities account statements.
YIELD DEFINITIONS. From time to time we may advertise yield, effective
yield, and tax equivalent yield. Yield refers to income generated by an
investment in a Portfolio over a seven day or other stated period, expressed as
an annual percentage rate. Effective yield of a Portfolio results from the
compounding of periodically reinvested dividends. Tax-equivalent yield
represents the amount of income subject to a particular tax rate which would
have to be earned to give an investor an amount of income equal to tax-exempt
income. In addition, reference in advertisements may be made to ratings and
ratings among similar funds by independent evaluators, such as Lipper's
Analytical Services, Inc. The performance of the Portfolios may be compared to
recognized indices of market performance.
CUSTODIAN AND TRANSFER AGENT. The custodian of the assets, transfer agent
and shareholder servicing agent for the Fund is State Street Bank and Trust
Company. 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.
PURCHASE AND REDEMPTION OF SHARES
THERE ARE NO MINIMUM AMOUNTS REQUIRED FOR EITHER INVESTMENTS OR WITHDRAWALS
INITIAL INVESTMENTS (Purchases)
Contact your Oppenheimer Account Executive to arrange for an initial
investment in a Portfolio of the Fund. You may use the Portfolio either as the
money market fund tied to your Oppenheimer securities account through
Oppenheimer's sweep service or as an additional investment position held in your
securities account.
The "sweep" means that cash is automatically invested in the Portfolio of
your choice when the cash becomes available in your Oppenheimer securities
account from any source such as proceeds from securities sales, receipt of
dividends or interest income, or a check deposit from you. Amounts of $10,000 or
more are invested on the next business day; amounts less than $10,000 are
invested once a week on the first business day of the following week. The sweep
automatically withdraws cash from your Portfolio when appropriate to cover
purchases or other activities in your securities account.
SUBSEQUENT INVESTMENTS (Purchases)
Mail or deliver your check, payable to Oppenheimer & Co., Inc., to your
Oppenheimer Account Executive. Please write your securities account number and
the Portfolio name on the check. If you wish to make an investment by sending a
wire from your bank, contact your Oppenheimer Account Executive to obtain wiring
instructions.
WITHDRAWALS (Redemptions)
For withdrawals other than those automatically activated by the sweep (see
"Initial Investments" above), please instruct your Oppenheimer Account Executive
as to the withdrawal amount and the delivery of the proceeds.
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<PAGE>
OCC Cash Reserves (the "Fund") is an open-end money market fund investment
company with five separate Portfolios. Though the Portfolios have the same
investment objectives of safety of principal, liquidity and maximum current
income, they may in the pursuit of these objectives invest in different types of
money market securities or in different proportions of the same types of
securities. This prospectus sets forth information about the Fund and its
Primary, Government, General Municipal, California Municipal and New York
Municipal Portfolios that a prospective investor should know before investing.
Please retain this prospectus for future reference.
A Statement of Additional Information dated March 29, 1996 provides further
discussion of certain areas in this prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. A free copy may be obtained
by writing the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS PAGE
Introduction................................................................. 1
Expense Information.......................................................... 2
Financial Highlights......................................................... 3
Primary Portfolio............................................................ 5
Government Portfolio......................................................... 6
General Municipal Portfolio.................................................. 7
California Municipal Portfolio............................................... 10
New York Municipal Portfolio................................................. 11
Additional Information....................................................... 12
Purchase and Redemption of Shares............................................ 14
<PAGE>
MARCH 29, 1996
OCC CASH RESERVES
- PRIMARY PORTFOLIO
- GOVERNMENT PORTFOLIO
- GENERAL MUNICIPAL PORTFOLIO
- CALIFORNIA MUNICIPAL PORTFOLIO
- NEW YORK MUNICIPAL PORTFOLIO
PROSPECTUS
OPPENHEIMER & CO., INC.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OCC CASH RESERVES, INC.
- Primary Portfolio
- Government Portfolio
- General Municipal Portfolio
- California Municipal Portfolio
- New York Municipal Portfolio
One World Financial Center
New York, New York 10281
(800) 401-6672/(212) 374-6187
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 for OCC Cash Reserves, Inc. (the
"Fund") dated March 29, 1996. Prospectuses may be obtained by contacting the
Fund.
The date of this Additional Statement is March 29, 1996
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OF THE FUND'S ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 3
SPECIAL CONSIDERATIONS REGARDING NEW YORK MUNICIPAL
OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SPECIAL CONSIDERATIONS REGARDING CALIFORNIA MUNICIPAL
OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . .27
INVESTMENT MANAGEMENT AND OTHER SERVICES . . . . . . . . . . . . . . . . . . .28
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .32
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
PORTFOLIO YIELD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
2
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INVESTMENT OF THE FUND'S ASSETS
The investment objective and policies of each portfolio of the Fund (the
"Portfolio(s)") are described in the applicable prospectus for the Portfolio. A
further description of the Portfolios' investments and investment methods
appears below.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities (i.e., obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities) include securities issued by the U.S. Government, which in
turn include Treasury Bills (which mature within one year of the date they are
issued), Treasury Notes (which mature more than one year after the date they are
issued and less than ten years after the date they are issued) and Treasury
Bonds (which mature more than ten years after the date they are issued). All
Treasury securities are backed by the full faith and credit of the United States
Government. U.S. Government agencies and instrumentalities that issue or
guarantee securities include, but are not limited to, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Services Administration, Bank for Cooperatives, Federal Home Loan Banks, Federal
Home Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Student Loan Marketing Association, Maritime Administration, the
Tennessee Valley Authority and the District of Columbia Advisory Board.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of the
United States. Some, such as securities issued by the Federal Home Loan Banks,
are backed by the right of the agency or instrumentality to borrow from the
Treasury. Others, such as securities issued by the Federal National Mortgage
Association ("Fannie Mae"), are supported only by the credit of the
instrumentality and not by the Treasury. If the securities are not backed by
the full faith and credit of the United States, the owner of the securities must
look principally to the agency issuing the obligation for repayment and may not
be able to assert a claim against the United States Government in the event that
the agency or instrumentality does not meet its commitment.
TIME DEPOSITS AND COMMERCIAL PAPER. The Portfolios 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 Portfolio.
Commercial paper consists of short-term, unsecured promissory notes issued
to finance short-term credit needs. The commercial paper purchased by the
Portfolios will consist only of direct obligations issued by domestic and
foreign entities which, at the time of their purchase are (a) rated high quality
(in one of the two highest categories) by two of the following nationally
recognized statistical rating organizations ("NRSROs")(or if only one NRSRO has
issued a rating at the time the Fund purchases or rolls over the security, that
NRSRO): Moody's Investors Service, Inc. ("Moodys"), Standard & Poor's
Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps,
Inc. ("Duff & Phelps"), Thomson BankWatch, Inc. and with respect to debt issued
by banks, bank holding companies, United Kingdom building societies, broker-
dealers and broker-dealers' parent companies, and bank-supported debt, IBCA
Limited and its affiliate, IBCA Inc. or (b) if unrated, determined by
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OpCap Advisors (the "Advisor") under guidelines established by the Board of
Directors ("Board") to be of comparable quality to those rated obligations which
may be purchased by the Portfolios. The other corporate obligations in which
the Portfolios may invest consist of high quality, U.S. dollar denominated
short-term bonds and notes (including variable amount demand notes) issued by
domestic and foreign corporations.
The commercial paper obligations which the Portfolios buy are unsecured and
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 Master Note.
The issuer may prepay at any time and without penalty any part of, or the full
amount of, the principal balance outstanding under the Master Note. The Master
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 Portfolio, 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, the Advisor will, subject to policies established by
the Board of Directors of the Fund, consider and monitor on a continuous basis
the ratings, 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 make demand simultaneously. A Portfolio will
not invest more than 5% of its total assets in such variable rate notes.
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 Portfolio 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 will
not be insured. Insured bank obligations have limited marketability and the
Portfolios will not limit investment in banks to the insured amount. Unless the
Board of Directors determines that a readily available market exists for such
obligations, a Portfolio will treat such obligations as subject to the 10% limit
for illiquid investments unless such obligations are payable at principal amount
plus accrued interest on demand or within seven days after demand.
MUNICIPAL SECURITIES. The General Municipal Portfolio, California Municipal
Portfolio and New York Municipal Portfolio (collectively the "Municipal
Portfolios") invest primarily in tax-exempt securities. "Municipal Securities"
refers to debt obligations issued by a state and its political subdivisions (for
example, counties, cities, towns, villages, districts and authorities) and by
territories and possessions of the U.S. the interest from which is, in the
opinion of bond counsel, exempt from federal income tax and (i) California
personal income taxes in the case of the California Municipal Portfolio, or (ii)
New York State and New York City income taxes in the case of the New York
Municipal Portfolio. Such obligations are issued to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, such as airports, bridges, highways, housing,
4
<PAGE>
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Securities may be issued include the
refunding of outstanding obligations or obtaining funds for general operating
expenses. Short-term Municipal Securities are generally issued by state and
local governments and public authorities as interim financing in anticipation of
collections, revenue receipts, or bond sales to finance such public purposes.
In addition, certain types of "private activity" bonds may be issued by public
authorities to finance privately operated housing facilities, and certain local
facilities for water supply, gas, electricity, sewage or solid waste disposal,
student loans, or the obtaining of funds to lend to public or private
institutions for the construction of facilities such as educational, hospital
and housing facilities. Such obligations are considered as Municipal Securities
if the interest paid thereon is, in the opinion of bond counsel, exempt from
federal income tax and (i) California personal income taxes in the case of the
California Municipal Portfolio or (ii) New York State and New York City income
taxes in the case of the New York Municipal Portfolio. Other types of private
activity bonds, the proceeds of which are used for the construction, equipment,
repair or improvement of privately operated industrial or commercial facilities,
constitute Municipal Securities, although the current federal laws place
substantial limitations on the size of such issues. Municipal Securities also
include short-term discount notes (tax-exempt commercial paper), which are
promissory notes issued by municipalities to enhance their cash flows.
PARTICIPATION INTERESTS. The Municipal Portfolios may invest in Municipal
Securities either by purchasing them directly or by purchasing certificates of
actual or similar instruments evidencing direct ownership of interest payments
or principal payments, or both, on Municipal Securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on the certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related Municipal
Securities will be exempt from federal income tax (and in the case of the
California and New York Municipal Portfolios applicable State and local tax) to
the same extent as interest on the Municipal Securities. The Portfolio may also
invest in Municipal Securities by purchasing from banks participation interests
in all or part of specific holdings of Municipal Securities. These
participations may be backed in whole or in part by an irrevocable letter of
credit or guarantees of the selling bank and have "put" provisions allowing the
Portfolio to compel the seller of the interest to purchase it on pre-determined
terms. The selling bank may receive a fee from the Fund in connection with the
arrangement. A Municipal Portfolio will not purchase such participation
interests unless it receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by it on Municipal Securities in which it
holds such participation interests is exempt from federal income tax and (i)
California personal income tax in the case of the California Municipal Portfolio
or (ii) New York State and New York City income tax in the case of the New York
Municipal Portfolio. The Municipal Portfolios do not expect to invest more than
5% of their respective total assets in participation interests.
LOAN PARTICIPATIONS. The Primary Portfolio may invest in short-term loan
participations pursuant to agreements between the Fund and commercial banks
which have been approved by the Board of Directors. Generally, these short-term
loans have maturities ranging between fourteen days and six months (the Fund
will not purchase any participation having maturities of longer than one year)
and bear interest at a fixed rate payable at maturity. Loan participations do
not provide recourse to the selling banks but are solely the obligation of the
borrower, although the bank will have continuing
5
<PAGE>
responsibility for administering the loan, collecting payment at maturity and
passing funds on to the Fund as they are received for which it receives a fee.
The Fund will only participate in loans to companies whose outstanding
securities and commercial paper are of a quality permissible for investment by
the Fund. Loan participations are evidenced by non-negotiable Participation
Certificates.
STAND-BY COMMITMENTS. The Municipal Portfolios have the authority to acquire
stand-by commitments from banks and broker-dealers in connection with the
purchase of Municipal Securities. A stand-by commitment may be considered a
security independent of the Municipal Security to which it relates. The amount
payable by a bank or dealer during the time a stand-by commitment is
exercisable, absent unusual circumstances, would be substantially the same as
the market value of the underlying Municipal Security to a third party at any
time. Each Portfolio anticipates that stand-by commitments generally will be
available without the payment of direct or indirect consideration. The
Portfolios do not expect to assign any value to stand-by commitments.
TENDER OPTION BONDS. The Municipal Portfolios may invest in long-term tax-
exempt fixed rate instruments that have been converted into short-term tax-
exempt variable rate demand instruments ("tender option bonds") by virtue of
certain third party demand features. Tender option bonds are tax-exempt bonds
with maturities of 5 to 25 years that bear interest at a fixed rate
substantially higher than prevailing short-term tax-exempt rates, that have been
coupled with the agreement of a third party such as a bank pursuant to which
such institution grants bondholders the option at periodic intervals (usually
every six months but in no event less than every twelve months) to tender (put)
their bonds to the institution and receive the face value thereof. Holders of
tender option bonds are assessed periodic variable tender fees by the
institution. Such fees are established for each tender period at a rate equal
to the difference between the bonds' fixed coupon rate and the rate as
determined by a remarketing or similar agent at or near the commencement of such
period, that would cause the tender option bonds to trade at par on the date of
such determination. The purchase by the Municipal Portfolios of tender option
bonds must comply with certain conditions established by the Securities and
Exchange Commission.
FORWARD COMMITMENTS. The Municipal Portfolios may purchase money market
securities on a forward commitment basis, which means that delivery and payment
for such securities normally take place within 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate that will
be received on the securities are fixed at the time the buyer enters into the
commitment. The Portfolios will make commitments to purchase such securities
only with the intention of actually acquiring the securities, but the Portfolio
may sell these securities before the settlement date if it is deemed advisable.
The Portfolios will not accrue income in respect of a security purchased on a
forward commitment basis prior to its stated delivery date.
WHEN-ISSUED SECURITIES. The Government and Municipal Portfolios 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 municipal securities occurs within one month of the transaction
date and settlement in U.S. Government Securities takes place within ten days.
A Portfolio will only make when-issued commitments on eligible securities with
the intention of actually acquiring the securities. If a Portfolio
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<PAGE>
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 a loss due to market fluctuation. No when-issued
commitments will be made if, as a result, more than 15% of a Portfolio's net
assets would be so committed.
REPURCHASE AGREEMENTS. Each Portfolio may acquire securities subject to
repurchase agreements. Under a typical repurchase agreement, a Portfolio would
acquire a debt security for a relatively short period (usually from day to day
and seldom for more than one week) subject to an obligation of the seller to
repurchase and of the Portfolio to resell the debt security at an agreed-upon
higher price and time, thereby establishing a fixed investment return during the
Portfolio's holding period which is not subject to market fluctuations. The
Portfolios will enter into repurchase agreements with primary dealers in U.S.
Government securities as designated by the Federal Reserve Bank of New York or
their subsidiaries or with the Fund's custodian. Under each repurchase
agreement, the selling institution will be required to provide, as collateral,
securities subject to such repurchase agreement whose market value is not less
than the repurchase price. Repurchase agreements could involve certain risks in
the event of default or insolvency of the selling institution, including costs
of disposing of such securities and any loss resulting from delays or
restrictions upon a Portfolio's ability to dispose of the underlying securities.
The Advisor considers the creditworthiness of those dealers with which the Fund
enters into repurchase agreements and monitors on an ongoing basis the value of
securities subject to repurchase agreements to ensure that such value is
maintained at the required level.
The Portfolios may also enter into reverse repurchase agreements which
involve the sale of securities held by a Portfolio with an agreement to
repurchase the securities at an agreed-upon price, date and interest payment.
Under normal circumstances there should be no need to enter into reverse
repurchase agreements.
ILLIQUID INVESTMENTS. The Advisor will not make investments as to which there
exists the possibility of limited liquidity if thereafter more than 10% of the
total assets of any Portfolio would consist of such investments. Such
investments include (i) repurchase agreements maturing in more than seven days;
(ii) fixed time deposits subject to withdrawal penalties, other than overnight
deposits; (iii) restricted securities, I.E., securities which cannot be sold
freely due to legal or contractual restrictions on resale (the Fund does not
expect to own such securities); (iv) securities and other assets for which a
bona fide market does not exist at the time of purchase or subsequent valuation;
(v) insured bank obligations, unless the Board of Directors determines that a
readily available market exists for such obligations; (vi) participation
interest in loans extended by banks; (vii) variable rate obligations for which
there is no readily available market; and (viii) securities of foreign issuers
which are not listed on a recognized domestic or foreign securities exchange,
but not including certain certificates of deposits of major foreign banks,
banker's acceptances of major foreign banks and high quality commercial paper of
major foreign issuers for which the Board of Directors determines that a readily
available market exists. Notwithstanding the foregoing, obligations payable at
principal amount plus accrued interest on or within seven days after demand are
not included with the 10% limitation.
OBLIGATIONS OF FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS. Each Portfolio
may invest in U.S. dollar-denominated securities of foreign banks, their
branches and foreign branches of U.S. banks
7
<PAGE>
which are rated in one of the two highest rating categories or which are deemed
to be of comparable quality, as determined by the Board of Directors. To the
extent a Portfolio makes such investments, it will be subject to additional
investment risks which differ from those incurred by an investment company that
invests only in debt obligations of domestic U.S. banks. Such risks include
political and economic developments of the country in which the bank or branch
is located, possible imposition of withholding taxes on interest payable on the
securities, possible seizure or nationalization of foreign deposits and the
possible establishment of exchange control regulations or the adoption of other
governmental restrictions that might affect the payment of principal and
interest on such securities. Additionally, not all of the U.S. Federal and
state banking laws and regulations applicable to domestic banks relating to
maintenance of reserves (which are often lower), loan limits and promotion of
financial soundness apply to foreign branches of domestic banks, and none of the
laws and regulations apply to foreign banks. There may be greater difficulty in
commencing legal action against foreign issuers than against U.S. issuers of
securities.
RISKS. No Portfolio will make investments with the objective of capital growth.
However, the market value of the securities held by the Portfolios, including
U.S. Government Securities, may be affected by changes in general interest
rates. Because the current market value of debt securities varies inversely
with changes in prevailing interest rates, if interest rates increase after a
security is purchased, the market value of that security would normally decline.
Conversely, should interest rates decrease after a security is purchased, its
market value would rise. However, those fluctuations in market value will not
generally result in realized gains or losses to the Portfolios since the
Portfolios do not usually intend to dispose of securities prior to their
maturity. A debt security held to maturity is redeemable by its issuer at full
principal value plus accrued interest. To a limited degree, the Portfolios may
engage in short-term trading to attempt to take advantage of short-term
variations, or may dispose of a portfolio security prior to its maturity if, on
the basis of a revised credit evaluation of the issuer or other considerations,
the Portfolio believes such disposition advisable or if it needs to generate
cash to satisfy redemptions. In such cases, the Portfolios may realize a
capital gain or loss. The securities in which the Portfolios will invest may
not earn as high a level of current income as longer-term or lower-quality
securities, which generally have less liquidity, greater market risk and more
fluctuation in market value. Securities in which the Portfolios may invest are
subject to the provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, 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. There is also 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 interest and principal on their securities
may be materially affected.
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. Federal legislation limits the types and
amounts of tax-exempt bonds issuable for certain purposes, especially for
industrial development bonds and other types of so-called "private activity
bonds." Such limits may affect the future supply and yields of these types of
Municipal Securities. Further proposals limiting the issuance of Municipal
Securities may well be introduced in the future. If it appeared that the
availability of Municipal Securities and the value of that Portfolio could be
materially affected by
8
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such changes in law, the Board of Directors would reevaluate its investment
objective and policies and consider changes in the structure of that Portfolio
or its dissolution. Any changes in basic investment objective or fundamental
investment policies of any of the Portfolios must be approved by that
Portfolio's shareholders before being effected.
SPECIAL CONSIDERATIONS REGARDING
NEW YORK MUNICIPAL OBLIGATIONS
The economic and 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 such as the Federal
government, 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 of, the New
York Municipal Portfolio, or result in the default of existing obligations,
including obligations which may be held by the New York Municipal Portfolio.
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 national economy began the current expansion in 1991 and has added over
7 million jobs since early 1992. However, the recession lasted longer in the
State and the State's economic recovery has lagged behind the nation's.
Although the State has added approximately 185,000 jobs since November 1992,
employment growth in the State has been hindered during recent years by
significant cutbacks in the computer and instrument manufacturing, utility,
defense, and banking industries.
In recent years, State actions affecting the level of receipts and
disbursements, as well as the relative strength of the State and regional
economy, actions of the Federal government and other factors, have created
structural budget gaps for the State. These gaps resulted from a significant
disparity between recurring revenues and the costs of maintaining or increasing
the level of support for State programs. The 1995-96 enacted budget combines
significant tax and program reductions which will, in the current and future
years, lower both the recurring receipts base (before the effect of any economic
stimulus from such tax reductions) and the historical annual growth in State
program spending. Notwithstanding these changes, the State can expect to
continue to confront structural deficits in future years.
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The 1995-96 State Financial Plan includes actions that will have an effect
on the budget outlook for State fiscal year 1996-97 and beyond. The Division of
the Budget estimates that the 1995-96 State Financial Plan contains actions that
provide nonrecurring resources or savings totaling approximately $900 million.
These include the use of balances set aside originally for mass transportation
aid ($220 million), the use of a reserve established to fund pension
supplementation costs ($110 million) and the use of lottery balances ($62
million). The Comptroller believes that the amount of nonrecurring resources or
savings exceeds $1.0 billion. The Division of the Budget also estimates that
the 1995-96 State Financial Plan contains nonrecurring expenditures totalling
nearly $250 million. These include the payment of social services litigation
($65 million), the deposit to the Contingency Reserve Fund ($40 million), the
payment of 1993-94 pension charges ($56 million) and aid for maintenance costs
of local schools ($45 million). The net amount of nonrecurring resources used
in the 1995-96 State Financial Plan, accordingly, is estimated by the Division
of the Budget at over $600 million.
In addition to this use of nonrecurring resources, the 1995-96 State
Financial Plan reflects actions that will directly affect the State's 1996-97
fiscal year baseline receipts and disbursements. The three-year plan to reduce
State personal income taxes will decrease State tax receipts by an estimated
$1.7 billion in State fiscal year 1996-97, in addition to the amount of
reduction in State fiscal year 1995-96. Further significant reductions in the
personal income tax are scheduled for the 1997-98 State fiscal year. Other tax
reductions enacted in 1994 and 1995 are estimated to cause an additional
reduction in receipts of over $500 million in 1996-97, as compared to the level
of receipts in 1995-96. Similarly, many actions taken to reduce disbursements
in the State's 1995-96 fiscal year are expected to provide greater reductions in
State fiscal year 1996-97. These include actions to reduce the State workforce,
reduce Medicaid and welfare expenditures and slow community mental hygiene
program development.
The net impact of these and other factors is expected to produce a
potential imbalance in receipts and disbursements in State fiscal year 1996-97.
The Governor has indicated that in the 1996-97 Executive Budget he will propose
to close this potential imbalance primarily through General Fund expenditure
reductions and without increases in taxes or deferrals of scheduled tax
reductions.
To address a potential imbalance in any given fiscal year, the State would
be required to take actions to increase receipts and/or reduce disbursements as
it enacts the budget for that year, and under the State Constitution, the
Governor is required to propose a balanced budget each year. To correct
recurring budgetary imbalances, the State would need to take significant actions
to align recurring receipts and disbursement in future fiscal years. There can
be no assurance, however that the Legislature will enact the Governor's
proposals or that the State's actions will be sufficient to preserve budgetary
balance in a given fiscal year or to align recurring receipts and disbursements
in future fiscal years.
New York State's financial operations have improved during recent fiscal
years. During the period 1989-90 through 1991-92, the State incurred General
Fund operating deficits that were closed with receipts from the issuance of tax
and revenue anticipation notes ("TRANs"). First, the national recession, and
then the lingering economic slowdown in the New York and regional economy,
resulted
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in repeated shortfalls in receipts and three budget deficits. For its 1992-93,
1993-94 and 1994-95 fiscal years, the State recorded balanced budgets on a cash
basis, with substantial fund balances in 1992-93 and 1993-94, and a smaller fund
balance in 1994-95.
The State historically has been one of the wealthiest states in the nation.
For decades, however, the State has grown more slowly than the nation as a
whole, gradually eroding its relative economic position. Statewide, urban
centers have experienced significant changes involving migration of the more
affluent to the suburbs and an influx of generally less affluent residents.
Regionally, the older Northeast cities have suffered because of the relative
success that the South and the West have had in attracting people and business.
New York City (the "City") has also had to face greater competition as other
major cities have developed financial and business capabilities which make them
less dependent on the specialized services traditionally available almost
exclusively in the City.
State financing activities include general obligation debt of the State and
State-guaranteed debt, to which the full faith and credit of the State has been
pledged, as well as lease-purchase and contractual-obligation financings, moral
obligation financings and other financings, through public authorities and
municipalities, where the State's legal obligation to make payments to those
public authorities and municipalities for their debt service is subject to
annual appropriation by the Legislature.
GENERAL OBLIGATION AND STATE-GUARANTEED FINANCING
There are a number of methods by which the State itself may incur debt.
The State may issue general obligation bonds. Under the State Constitution, the
State may not, with limited exceptions for emergencies, undertake long-term
general obligation borrowing (i.e., borrowing for more than one year) unless the
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State. With the exception of general obligation housing bonds
(which must be paid in equal annual installments or installments that result in
substantially level or declining debt service payments, within 50 years after
issuance, commencing no more than three years after issuance), general
obligation bonds must be paid in equal annual installments or installments that
result in substantially level or declining debt service payments, within 40
years after issuance, beginning not more than one year after issuance of such
bonds.
The State may undertake short-term borrowings without voter approval (i) in
anticipation of the receipt of taxes and revenues, by issuing tax and revenue
anticipation notes ("TRANs"), and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation bonds,
by issuing bond anticipation notes ("BANs"). TRANs must mature within one year
from their dates of issuance and may not be refunded or refinanced beyond such
period. BANs may only be issued for the purposes and within the amounts for
which bonds may be issued pursuant to voter authorizations. Such BANs must be
paid from the proceeds of the sale of bonds in anticipation of which they were
issued or from other sources within two years of the date of issuance or, in the
case of BANs for housing purposes, within five years of the date of issuance.
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The State may also, pursuant to specific constitutional authorization,
directly guarantee certain public authority obligations. The State Constitution
provides for the State guarantee of the repayment of certain borrowings for
designated projects of the New York State Thruway Authority, the Job Development
Authority and the Port Authority of New York and New Jersey. The State has
never been called upon to make any direct payments pursuant to such guarantees.
The constitutional provisions allowing a State-guarantee of certain Port
Authority of New York and New Jersey debt stipulates that no such guaranteed
debt may be outstanding after December 31, 1996. Payments of debt service on
State general obligation and State-guaranteed bonds and notes are legally
enforceable obligations of the State.
LEASE-PURCHASE AND CONTRACTUAL-OBLIGATION FINANCING
The State employs additional long-term financing mechanisms, lease-purchase
and contractual-obligation financings, which involve obligations of public
authorities or municipalities that are State-supported but not general
obligations of the State. Under these financing arrangements, certain public
authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments.
The State also participates in the issuance of certificates of
participation ("COPs") in a pool of leases entered by the State's Office of
General Services on behalf of several State departments and agencies interested
in acquiring operational equipment, or in certain cases, real property.
Legislation enacted in 1986 established restrictions upon and centralized State
control, through the State Comptroller and the Director of the Budget, over the
issuance of COPs representing the State's contractual obligation, subject to
appropriation by the Legislature and availability of money, to make installment
or lease-purchase payments for the State's acquisition of such equipment or real
property.
The State has never defaulted on any of its general obligation indebtedness
or its obligations under lease-purchase or contractual-obligation financing
arrangements and has never been called upon to make any direct payments pursuant
to its guarantees.
MORAL OBLIGATION AND OTHER FINANCING
Moral obligation financing generally involves the issuance of debt by a
public authority to finance a revenue-producing project or other activity. The
debt is secured by project revenues and includes statutory provisions requiring
the State, subject to appropriation by the Legislature, to make up any
deficiencies which may occur in the issuer's debt service reserve fund. There
has never been a default on any moral obligation debt of any public authority.
The State does not intend to increase
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statutory authorizations for moral obligation bond programs. From 1976 through
1987, the State was called upon to appropriate and make payments totaling $162.8
million to make up deficiencies in the debt service reserve funds of the Housing
Finance Agency pursuant to moral obligation provisions. In the same period, the
State also expended additional funds to assist the Project Finance Agency, Urban
Development Corporation and other public authorities which had moral obligation
debt outstanding. The State has not been called upon to make any payments
pursuant to any moral obligations since the 1986-87 fiscal year and no such
requirements are anticipated during the 1995-96 fiscal year.
In addition to the moral obligation financing arrangements described above,
State law provides for State municipal assistance corporations, which are public
authorities established to aid financially troubled localities. The Municipal
Assistance Corporation For The City of New York ("MAC"), created in 1975 to
provide financing assistance to New York City, is the only municipal assistance
corporation created to date. To enable MAC to pay debt service on its
obligations, MAC receives, subject to annual appropriation by the Legislature,
receipts from the 4 percent New York State sales tax for the benefit of New York
City, the State-imposed stock transfer tax and , subject to certain prior liens,
certain local assistance payments otherwise payable to New York City. The
legislation creating MAC also includes a moral obligation provision. Under its
enabling legislation, MAC's authority to issue moral obligation bonds and notes
(other than refunding bonds and notes) expired on December 31, 1984.
The State also provides for contingent contractual-obligation financing for
the Secured Hospital Program pursuant to legislation enacted in 1985. Under
this financing method, the State contracts to pay debt service, subject to
annual appropriations, on bonds issued by the New York State Medical Care
Facilities Finance Agency ("MCFFA") in the event there are shortfalls of
revenues from other sources. The State has never been required to make any
payments pursuant to this financing arrangement, nor does it anticipate being
required to do so during the 1995-96 fiscal year.
STATE FISCAL REFORM
LOCAL GOVERNMENT ASSISTANCE CORPORATION
In 1990, as part of a State fiscal reform program, legislation was enacted
creating the Local Government Assistance Corporation ("LGAC"), a public benefit
corporation empowered to issue long-term obligations to fund certain payments to
local governments traditionally funded through the State's annual seasonal
borrowing. The legislation authorized LGAC to issue its bonds and notes in an
amount not in excess of $4.7 billion (exclusive of certain refunding bonds) plus
certain other amounts. Over a period of years, the issuance of these long-term
obligations, which are to be amortized over no more than 30 years, was expected
to eliminate the need for continued short-term seasonal borrowing. The
legislation also dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The legislation also
imposed a cap on the annual seasonal borrowing of the State at $4.7 billion,
less net proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the legislative
leaders have certified the need for additional borrowing and provided a schedule
for reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth
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fiscal year after the limit was first exceeded. This provision capping the
seasonal borrowing was included as a covenant with LGAC's bondholders in the
resolution authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide net proceeds of
$4.7 billion completing the program. The impact of LGAC's borrowing is that the
State is able to meet its cash flow needs in the first quarter of the fiscal
year without relying on short-term seasonal borrowings. The 1995-96 State
Financial Plan includes no spring borrowing nor did the 1994-95 State Financial
Plan, which was the first time in 35 years there was no short-term seasonal
borrowing. This reflects the success of the LGAC program in permitting the
State to accelerate local aid payments from the first quarter of the current
fiscal year to the fourth quarter of the previous fiscal year.
PUBLIC AUTHORITIES
The fiscal stability of the State is related, in part, to the fiscal
stability of its public authorities. Public authorities refer to public benefit
corporations, created pursuant to State law, other than local authorities.
Public authorities are not subject to the constitutional restrictions on the
incurrence of debt which apply to the State itself and may issue bonds and notes
within the amounts, and as otherwise restricted by, their legislative
authorization. The State's access to the public credit markets could be
impaired, and the market price of its outstanding debt may be materially
adversely affected, if any of its public authorities were to default on their
respective obligations, particularly those using the financing techniques
referred to as State-supported or State-related debt.
There are numerous public authorities, with various responsibilities,
including those which finance, construct and/or operate revenue producing public
facilities. Public authority operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or operated, such
as tolls charged for the use of highways, bridges or tunnels, rental charges for
housing units, and charges for occupancy at medical care facilities.
In addition, State legislation authorizes several financing techniques for
public authorities. Also, there are statutory arrangements providing for State
local assistance payments, otherwise payable to localities, to be made under
certain circumstances to public authorities. Although the State has no
obligation to provide additional assistance to localities whose local assistance
payments have been paid to public authorities under these arrangements if local
assistance payments are so diverted, the affected localities could seek
additional State assistance.
Some authorities also receive monies from State appropriations to pay for
the operating costs of certain of their programs. As described below, the MTA
receives the bulk of this money in order to carry out mass transit and commuter
services.
METROPOLITAN TRANSPORTATION AUTHORITY
The Metropolitan Transportation Authority (the"MTA") oversees the operation
of subway and bus lines in New York City by is affiliates, the New York City
Transit Authority and the Manhattan and Bronx Surface Transit Operating
Authority (collectively, the "TA"). The MTA operates certain
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commuter rail and bus lines in the New York Metropolitan areas through MTA's
subsidiaries, the Long Island Rail Road Company, the Metro-North Commuter
Railroad Company, and the Metropolitan Suburban Bus Authority. In addition, the
Staten Island Rapid Transit Operating Authority, an MTA subsidiary, operates a
rapid transit line on Staten Island. Through its affiliated agency, the
Triborough Bridge and Tunnel Authority (the "TBTA"), the MTA operates certain
intrastate toll bridges and tunnels. Because fare revenues are not sufficient
to finance the mass transit portion of these operations, the MTA has depended
and will continue to depend, for operating support upon a system of State, Local
government and TBTA support, and to the extent available, Federal operating
assistance, including loans, grants and subsidies. If current revenue
projections are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek additional
State assistance, raise fares or take other actions.
THE CITY OF NEW YORK
The fiscal health of the State may also be affected by the fiscal health of
the City, which has required and continues to require significant financial
assistance from the State. The City depends on State aid both to enable the
City to balance its budget and to meet its cash requirements. The City has
achieved balanced operating results for each of its fiscal years since 1981 as
reported in accordance with the then-applicable GAAP standards.
FISCAL OVERSIGHT
In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among those actions, the
State established the Municipal Assistance Corporation For The City of New York
("MAC") to provide financing assistance to the City; the New York State
Financial Control Board (the "Control Board") to oversee the City's financial
affairs; the Office of the State Deputy Comptroller for the City of New York
("OSDC") to assist the Control Board in exercising its powers and
responsibilities; and a "Control Period" which existed from 1975 to 1986 during
which the City was subject to certain statutorily-prescribed fiscal controls.
Although the Control Board terminated the Control Period in 1986 when certain
statutory conditions were met, thus suspending certain Control Board powers, the
Control Board, MAC and OSDC continue to exercise various fiscal monitoring
functions over the City, and upon the occurrence or "substantial likelihood and
imminence" of the occurrence of certain events, including, but not limited to, a
City operating budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control period. Currently, the City and its
Covered Organizations (i.e., those which receive or may receive moneys from the
City directly, indirectly or contingently) operate under a four-year financial
plan (the "Financial Plan") which the City prepares annually and periodically
updates. The City's Financial Plan includes its capital, revenue and expense
projections and outlines proposed gap-closing programs for years with projected
budget gaps.
The City's projections set forth in the Financial Plan are based on various
assumptions and contingencies, some of which are uncertain and may not
materialize. Unforeseen developments and changes in major assumptions could
significantly affect the City's ability to balance its budget as required by
State law and to meet its annual cash flow and financing requirements.
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The State could be affected by the ability of the City and certain Covered
Organizations to market their securities successfully in the public credit
markets. Future developments concerning the City or certain of the Covered
Organizations, and public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the ability or cost
to sell securities issued by the City or such Covered Organizations and may also
affect the market for their outstanding securities.
MONITORING AGENCIES
The staffs of OSDC, the Control Board and the City Comptroller issue
periodic reports on the City's Financial Plans, as modified, analyzing forecasts
of revenues and expenditures, cash flow, and debt service requirements, as well
as compliance with the Financial Plan, as modified, by the City and its Covered
Organizations. OSDC staff reports issued during the mid-1980's noted that the
City's budgets benefited from a rapid rise in the City's economy, which boosted
the City's collection of property, business and income taxes. These resources
were used to increase the City's workforce and the scope of discretionary and
mandated City services. Subsequent OSDC staff reports, including its periodic
economic reports, examined the 1987 stock market crash and the 1989-92
recession, which affected the New York City region more severely than the
nation, and these reports attributed an erosion of City revenues and increasing
strain on City expenditures to that recession. According to a recent OSDC
economic report, the City's economy was slow to recover from the recession and
is expected to experience a weak employment situation, and moderate wage and
income growth, during the 1995-96 period. Also, Financial Plan reports of OSDC,
the Control Board, and the City Comptroller have variously indicated that many
of the City's balanced budgets have been accomplished, in part, through the use
of non-recurring resources, tax and fee increases, personnel reductions and
additional State assistance; that the City has not yet brought its long-term
expenditures in line with recurring revenues; that the City's proposed gap-
closing programs, if implemented, should narrow future budget gaps; that these
programs tend to rely heavily on actions outside the direct control of the City;
and that the City is therefore likely to continue to face future projected
budget gaps requiring the City to reduce expenditures and/or increase revenues.
According to the most recent staff reports of OSDC, the Control Board and the
City Comptroller during the four-year period covered by the current Financial
Plan, the City is relying on obtaining substantial resources from initiatives
needing approval and cooperation of its municipal labor unions, Covered
Organizations, and City Council, as well as the State and Federal governments,
among others, and there can be no assurance that such approval can be obtained.
OTHER LOCALITIES
Certain localities in addition to the City could have financial problems
leading to requests for additional State assistance during the State's 1995-96
fiscal years and thereafter. The potential impact on the State of such requests
by localities is not included in the projections of the State's receipts and
disbursements for the State's 1995-96 fiscal year.
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Fiscal difficulties experienced by the City of Yonkers resulted in the re-
establishment of the Financial Control Board for the City of Yonkers by the
State in 1984. That Board is charged with oversight of the fiscal affairs of
Yonkers. Future actions taken by the State to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1993, the total indebtedness of all localities in
the State other than New York City was approximately $17.7 billion. A small
portion (approximately $105 million) of that indebtedness represented borrowing
to finance budgetary deficits and was issued pursuant to State enabling
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. Fifteen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1993.
From time to time, Federal expenditure reductions could reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities.
If the State, the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial decisions
and long-range economic trends. Long-range potential problems of declining
urban population, increasing expenditures and other economic trends could
adversely affect localities and require increasing State assistance in the
future.
Ratings. On January 13, 1992, Standard and Poor's Corporation ("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 February 14, 1994, S&P
raised its outlook to positive and , on October 3, 1995, confirmed its A-
rating. On January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced
its ratings on outstanding limited-liability State lease-purchase and
contractual obligations from A to Baa1. On October 2, 1995, Moody's reconfirmed
its A rating on the State's general long-term indebtedness.
On July 10, 1995, S&P revised downward its rating on City general
obligation bonds from A - to BBB+ and removed City bonds from CreditWatch. S&P
stated that "structural budgetary balance remains elusive because of persistent
softness in the City's economy, highlighted by weak job growth and a growing
dependence on the historically volatile financial services sector". Other
factors identified by S&P in lowering its rating on City bonds included a trend
of using one-time measures, including debt refinancing, to close projected
budget gaps, dependence on unratified labor savings to help balance the
Financial Plan, optimistic projections of additional federal and State aid or
mandate relief, a history of cash flow difficulties caused by State budget
delays and continued high debt levels. Fitch
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Investors Service, Inc. ("Fitch") continues to rate the City general obligation
bonds A-. Moody's rating for City general obligation bonds is Baa1.
SPECIAL CONSIDERATIONS REGARDING
CALIFORNIA MUNICIPAL OBLIGATIONS
Since the California Municipal Portfolio concentrates its investments in
California tax-exempt securities, the Portfolio will be affected by any
political, economic or regulatory developments affecting the ability of
California issuers to pay interest or repay principal. Various subsequent
developments regarding the California Constitution and State of California
("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. Of particular impact are constitutional
voter initiatives, which have become common in recent years. The following
information constitutes only a brief summary and is not intended as a complete
description.
California is the most populous state in the nation with a total population
at the 1990 census of 29,976,000. Growth has been incessant since World War II,
with population gains in each decade since 1950 of between 18% and 49%. During
the last decade, the population rose 20%. The State now comprises 12.3% of the
nation's population and 12.9% of its total personal income. Its economy is
broad and diversified with major concentrations in high technology research and
manufacturing, aerospace and defense-related manufacturing, trade, real estate,
and financial services. After experiencing strong growth throughout much of the
1980s, the State was adversely affected by both the national recession and the
cutbacks in aerospace and defense spending which had a severe impact on the
economy in Southern California. California is still experiencing some effects
of the recession. Unemployment has remained above the national average since
1990. Substantial contraction in California's defense related industries,
overbuilding in commercial real estate and consolidation and decline in the
State's financial services industry will likely produce slower overall growth
for several years. Economists predict that the State's economy will experience
modest growth in 1996.
These economic difficulties have exacerbated the structural budget
imbalance which has been evident since fiscal year 1985-1986. Since that time,
budget shortfalls have become increasingly more difficult to solve and the State
has recorded in its general fund (the "General Fund") operating deficits in
several fiscal years. Many of these problems have been attributable to the fact
that the great population influx has produced increased demand for education and
social services at a far greater pace than the growth in the State's tax
revenues. Despite substantial tax increases, expenditure reductions and the
shift of some expenditure responsibilities to local government, the budget
condition remains problematic.
On August 3, 1995, the Governor signed into law a new $57.5 billion budget
which, among other things, reduces welfare payments and increases education
spending from the previous fiscal year. The fiscal 1995-96 budget calls for
$44.1 billion in revenues and $43.4 billion in spending, an increase of over
3.5% and 4.0%, respectively, from the fiscal 1994-95 budget. Although the
State's budget projects an operating surplus of approximately $600 million, it
continues to rely on federal actions, both to fund programs relating to MediCal
and incarceration costs associated with illegal immigrants
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and to relieve the State from federally mandated spending, which are not certain
of occurring. Accordingly, the surplus may not be realized unless the economy
outperforms expectations or spending falls below planned levels.
Because of California's continuing budget problems, the State's General
Obligation bonds were downgraded in July 1994 from A1 to Aa by Moody's and from
A+ to A by Standard & Poor's and from AA to A by Fitch Investment Service, Inc.
All three ratings companies expressed uncertainty in the State's ability to
balance its budget by 1996.
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, reallocation of revenues to local
governments, and assumption by the State of certain local government
obligations. However, more recent legislation reduced such state assistance.
There can be no assurance that any particular level of State aid to local
governments will be maintained in future years. In NORDLINGER V. HAHN, the
United States Supreme Court upheld certain provisions of Proposition 13 against
claims that it violated the equal protection clause of the Constitution.
In 1979, an amendment was passed adding Article XIIIB to the State
Constitution. As amended in 1990, Article XIIIB imposes an "appropriations
limit" on the spending authority of the State and local government entities. In
general, the appropriations limit is based on certain 1978-1979 expenditures,
adjusted annually to reflect changes in the cost of living, population and
certain services provided by State and local government entities.
"Appropriations limit" does not include appropriations for qualified capital
outlay projects, certain increases in transportation-related taxes, and certain
emergency appropriations.
If a government entity raises revenues beyond its "appropriations limit" in
any year, a portion of the excess which cannot be appropriated within the
following year's limit must be returned to the entity's taxpayers within two
subsequent fiscal years, generally by a tax credit, refund or temporary
suspension of tax rates or fee schedules. "Debt service" is excluded from these
limitations, and is defined as "appropriations required to pay the cost of
interest and redemption charges, including the funding of any reserve or sinking
fund required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter approved
[by the voters]." In addition, Article XIIIB requires the State Legislature to
establish a prudent State reserve, and to require the transfer of 50% of excess
revenue to the State School Fund; any amounts allocated to the State School Fund
will increase the appropriations limit.
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, California death taxes. California voters also passed an initiative
measure to increase, for taxable years commencing on or after January 1, 1982,
the amount 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.
19
<PAGE>
In 1986, California voters approved an initiative statute known as
Proposition 62. This initiative (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental entity's legislative
body and by a majority vote of the electorate of the governmental entity, (ii)
requires that any special tax (defined as tax levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction, (iii) restricts the use
of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on
real property by local governmental entities except as permitted by the
Proposition 13 amendment, (v) prohibits the imposition of transaction taxes and
sales taxes on the sale of real property by local governments, (vi) requires
that any tax imposed by a local government on or after August 1, 1985, be
ratified by a majority vote of the electorate within two years of the adoption
of the initiative or be terminated by November 15, 1989, (vii) requires that, in
the event a local government fails to comply with the provisions of this
measure, a reduction of the amount of property tax revenue allocated to such
local government occurs in an amount equal to the revenues received by such
entity attributable to the tax levied in violation of the initiative, and (viii)
permits these provisions to be amended exclusively by the voters of the State of
California.
In September 1995, the California Supreme Court upheld the
constitutionality of Proposition 62, creating uncertainty as to the legality of
certain local taxes enacted by non-charter cities in California without voter
approval. It is not possible to predict the impact of the decision.
In 1988, State voters approved Proposition 87, which amended Article XVI of
the State Constitution to authorize the State Legislature to prohibit
redevelopment agencies from receiving any property tax revenues raised by
increased property taxes to repay bonded indebtedness of local government which
is not approved by voters on or before January 1, 1989. It is not possible to
predict whether the State Legislature will enact such a prohibition, nor is it
possible to predict the impact of Proposition 87 on redevelopment agencies and
their ability to make payments on outstanding debt obligations.
In November 1988, California voters approved Proposition 98. This
initiative requires that revenues in excess of amounts permitted to be spent and
which would otherwise be returned by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 40%) to the State School Fund and
be expended solely for purposes of instructional improvement and accountability.
No such transfer or allocation of funds will be required if certain designated
state officials determine that annual student expenditures and class size meet
certain criteria as set forth in Proposition 98. Any funds allocated to the
State School Fund shall cause the appropriation limits to be annually increased
for any such allocation made in the prior year. Proposition 98 also requires
the State of California to provide a minimum level of funding for public schools
and community colleges. The initiative permits the enactment of legislation, by
a two-thirds vote, to suspend the minimum funding requirement for one year.
20
<PAGE>
The State is a party to numerous legal proceedings, many of which normally
occur in governmental operations and if decided against the State, might require
the State to make significant future expenditures or impair future revenue
sources.
Since 1990, California has faced the worst economic, fiscal and budget
conditions since the 1930s. After experiencing strong growth throughout mush of
the 1980s, the State was adversely affected by the national recession and
cutbacks in aerospace and defense spending, both of which had a severe impact on
the economy in Southern California. California is still experiencing some
effects of the recession. However, economic data indicate that the State's
economy grew at a modest rate in 1995, and continued growth is expected in 1996.
On December 6, 1994, Orange County (California) became the largest
municipality in the United States to file for protection under the Federal
bankruptcy laws. The filing stemmed from approximately $1.7 billion in losses
suffered by the County's investment pool due to investments in high risk
"derivative" securities. In September 1995 the state legislature approved
legislation permitting Orange County to use for bankruptcy recovery $820 million
over 20 years in sales taxes previously earmarked for highways, transit and
development. Such legislation also permits the Governor to appoint a trustee to
take over Orange County's financial affairs if the county does not have a full
recovery plan filed with the Bankruptcy Court by May 1996.
Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the county's long-
term bonds was downgraded for the third time since 1992 as a result of, among
other things, severe operating deficits for the county's health care system. In
September 1995, federal and state aid to Los Angeles County totaling $514
million was pledged, providing a short-term solution to the County's budget
problems. Despite such efforts, the County is facing a potential budget gap of
$1.0 billion in the 1996-97 fiscal year.
The effect of these various constitutional and statutory amendments and
budget developments upon the ability of California issuers to pay interest and
principal on their obligations remains unclear and in any event may depend upon
whether a particular California tax-exempt security is a general or limited
obligation bond and on the type of security provided for the bond. It is
possible that other measures affecting the taxing or spending authority of
California or its political subdivisions may be approved or enacted in the
future.
21
<PAGE>
INVESTMENT RESTRICTIONS
The significant investment restrictions applicable to each Portfolio are
described in the applicable Prospectus for the Portfolio. The following are
also fundamental policies and, together with the restrictions and other
fundamental policies described for each Portfolio, cannot be changed without the
vote of a majority of the outstanding voting securities of that Portfolio, as
defined in the Investment Company Act of 1940 (the "Act"). Such a majority is
defined as the lesser of (a) 67% or more of the shares of a Portfolio present at
a meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares of a Portfolio are present or represented by proxy or (b)
more than 50% of the outstanding shares of a Portfolio. 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 Portfolio.
Under these additional restrictions, each Portfolio cannot: (a) invest in
commodities or commodity contracts; (b) purchase or sell real property
(including limited partnership interests); however, each Portfolio 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"; (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 securities of other investment
companies except in connection with merger, consolidation, reorganization or
acquisition of assets; (f) invest in interests, including leases, in oil, gas or
other mineral exploration or development; (g) invest in securities of any issuer
if, to the knowledge of the Advisor, any officer or director of the Fund 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, directors who own more than 1/2 of
1% own in the aggregate more than 5% of the outstanding securities of such
issuer; (h) pledge its assets or assign or otherwise encumber its assets in
excess of 15% of its total 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. While such borrowings exceed 5% of any Portfolio's net
assets no further portfolio investments may be made. The Fund is required under
the Act to maintain continuous asset coverage of 300% with respect to such
borrowing; (i) invest for the purpose of exercising control or management of
another company; and (j) issue senior securities as defined in the Act except
insofar as the Portfolio may be deemed to have issued a senior security by
reason of: (1) entering into any repurchase agreement; or (2) borrowing money
in accordance with restrictions described above; (k) invest in warrants. In
addition, 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.
22
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Fund, and their principal occupations
during the past five years, are set forth below. Directors who are "interested
persons," as defined in the 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 March 8, 1996, all of the directors and officers of the Fund as a group
owned less than 1% of the outstanding shares of each Portfolio of the Fund
except for the New York Municipal Portfolio. The officers and directors as a
group owned 1,772,737 shares (2.7%) of the New York Municipal Portfolio on March
8, 1996.
JOSEPH M. LA MOTTA, CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT*
President of Oppenheimer Capital and Chairman of OpCap Advisors, registered
investment advisers; Chairman of OCC Distributors; Chairman of the Board and
President of Quest for Value Accumulation Trust, and Chairman 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, DIRECTOR
946 Morris Avenue
Bryn Mawr, Pennsylvania 19010
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; formerly 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 Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Global Value Fund, Inc., Rochester Fund
Municipals, Rochester Portfolio Series Limited Term New York Municipals and Bond
Fund Series, Oppenheimer Bond Fund for Growth, Trustee of Quest for Value
Accumulation Trust and Oppenheimer Quest for Value Funds, each of which is an
open-end investment company; 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., DIRECTOR
P.O. Box 8186
Naples, Florida 33941
Principal of Courtney Associates, Inc., a venture capital business, former
General Partner of Trivest Venture Fund, a private venture capital fund; former
President of Federated Investment Counseling, Inc.; former President of Boston
Company Institutional Investors, Inc.; Trustee of Cash Assets Trust, a money
market fund; Director of Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest
Global Value Fund, Inc., Rochester Fund Municipals, Rochester Portfolio Series
Limited Term New York
23
<PAGE>
Municipals and Bond Fund Series, Oppenheimer Bond Fund for Growth, Trustee of
Oppenheimer Quest for Value Funds and Quest for Value Accumulation Trust, each
of which is an open-end investment company; Trustee of Hawaiian Tax-Free Trust
and Tax-Free Trust of Arizona, tax-exempt bond funds; Director of several
privately owned corporations; and former Director of Financial Analysts
Federation.
LACY B. HERRMANN, DIRECTOR
Suite 2300
380 Madison Avenue
New York, New York 10017
Founder, President, and Chairman of the Board of Aquila Management Corporation
since 1984, the sponsoring organization and Administrator and/or Sub-Adviser to
the following open-end investment companies, and Founder, Chairman of the Board
of Trustees, and President of each: Prime Cash Fund, 1982-1996; Pacific Capital
Cash Assets Trust since 1984; Short Term Asset Reserves since 1984; Churchill
Cash Reserves Trust since 1985; Pacific Capital U.S. Treasuries Cash Assets
Trust since 1988; Pacific Capital Tax-Free Cash Assets Trust since 1988; each of
which is a money market fund; and of Hawaiian Tax-Free Trust since 1984; Tax-
Free Trust of Arizona since 1986; Tax-Free of Oregon since 1986; Tax-Free Fund
of Colorado since 1987; Churchill Tax-Free Fund of Kentucky since 1987; Tax-Free
Fund for Utah since 1992; and Narragansett Insured Tax-Free Fund since 1992;
each of which is a tax-free municipal bond fund, and an equity fund, Aquila
Rocky Mountain Equity Fund since 1993; Vice President, Director, Secretary, and
formerly Treasurer of Aquila Distributors, Inc. since 1981, distributor 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-adviser to CCMT; Chairman, President,
and a Director since 1984, of InCap Management Corporation, formerly sub-adviser
and administrator of Prime Cash Fund and Short Term Asset Reserves and Founder
and Chairman of several other money-market funds; Director of Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Global Value Fund, Inc., Rochester Fund
Municipals, Rochester Portfolio Series Limited Term New York Municipals and Bond
Fund Series, Oppenheimer Bond Fund for Growth, Trustee of Oppenheimer Quest for
Value Funds, Quest for Value Accumulation Trust and The Saratoga Advantage
Trust, each of which is an open-end investment company; Trustee of Brown
University since 1990; actively involved for many years in leadership roles with
university, school, and charitable organizations.
GEORGE LOFT, DIRECTOR
51 Herrick Road
Sharon, Connecticut 06069
Private Investor; Director of Oppenheimer Quest Value Fund, Inc., Rochester Fund
Municipals, Rochester Portfolio Series Limited Term New York Municipals and Bond
Fund Series, Oppenheimer Bond Fund for Growth, Oppenheimer Quest Global Value
Fund, Inc., Trustee of Quest for Value Accumulation Trust, Oppenheimer Quest for
Value Funds and The Saratoga Advantage Trust, all of
24
<PAGE>
which are open-end investment companies; and Director of Quest for Value Dual
Purpose Fund, Inc., a closed-end investment company.
EVERETT ALCENAT, VICE PRESIDENT
Vice President of OCC Cash Management Services, a Division of the Advisor since
October 1993; Assistant Vice President-Mutual Fund Operations at Pershing from
2/93 to 10/93 and prior thereto, Assistant Vice President-Syndicate Operations
at Prudential Securities Inc.
ROBERT J. BLUESTONE, VICE PRESIDENT
Managing Director, Oppenheimer Capital; Vice President of Quest for Value
Accumulation Trust, an open-end investment company; formerly Vice President,
Bankers Trust Co.
MARIA CAMACHO, ASSISTANT SECRETARY
Assistant Vice President of Oppenheimer Capital since 1994 and Registrations
Department Administrator with Oppenheimer Capital since 1989; Assistant
Secretary of The Saratoga Advantage Trust, an open-end investment company.
BERNARD H. GARIL, VICE PRESIDENT
President and Chief Operating Officer of OpCap Advisors; Senior Vice President
of Oppenheimer Capital; 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.
JOHN GIUSIO, VICE PRESIDENT
Vice President, Oppenheimer Capital; Vice President of Quest for Value
Accumulation Trust, an open-end investment company; previously Vice President,
Salomon Brothers.
MATTHEW GREENWALD, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital; Assistant Vice President, Oppenheimer
Capital, 1989-1992.
VIKKI HANGES, VICE PRESIDENT & PORTFOLIO MANAGER
Vice President, Oppenheimer Capital; Vice President and Portfolio Manager, Quest
for Value Accumulation Trust; Assistant Vice President, Oppenheimer Capital,
1987-1992.
25
<PAGE>
SUSAN A. MURPHY, VICE PRESIDENT
President of OCC Cash Management Services, a Division of the Fund's Advisor,
since 1994; Senior Vice President of that division from 1989-1994.
DEBORAH KABACK, SECRETARY
Senior Vice President of Oppenheimer Capital; Secretary of Quest for Value
Accumulation Trust 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.
THOMAS E. DUGGAN, ASSISTANT SECRETARY
General Counsel and Secretary of Oppenheimer Capital and OpCap Advisors;
Assistant Secretary of The Saratoga Advantage Trust, an open-end investment
company, and Secretary of Quest for Value Dual Purpose Fund, Inc., a closed-end
investment company.
SHELDON M. SIEGEL, TREASURER
Managing Director of Oppenheimer Capital; Treasurer of OpCap Advisors; Treasurer
of Quest for Value Accumulation Trust and The Saratoga Advantage Trust, open-end
investment companies, and 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
Accumulation Trust 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 employees of Oppenheimer Capital and receive no salary or fee from the Fund.
The following table sets forth the aggregate compensation paid by the Fund to
each of the Directors during its fiscal year ended November 30, 1995 and the
aggregate compensation paid to each of the Directors by all of the funds in the
Advisor's Fund Complex during each such fund's 1995 fiscal year.
<TABLE>
<CAPTION>
Name of Director of the Aggregate Pension or Retirement Estimated Annual Total Compensation
Fund Compensation from the Benefits Accrued as Part Benefits upon from the Fund and the
Fund of Fund Expenses Retirement Quest Fund Complex
<S> <C> <C> <C> <C>
Paul Clinton 21,750 0 0 74,650
Thomas Courtney 21,000 0 0 73,900
Lacy Herrmann 21,750 0 0 74,650
Joseph LaMotta 0 0 0 0
George Loft 21,750 0 0 81,350
</TABLE>
26
<PAGE>
Mr. Clinton, Mr. Courtney and Mr. Herrmann earned directors fees with respect to
16 investment companies in the Advisor's Fund Complex and the fees earned by Mr.
Loft were with respect to 17 investment companies in the Advisor's Fund Complex.
During such periods the independent Directors received fees from ten investment
companies which are no longer part of the Advisor's Fund Complex. In addition
during such periods, Mr. Clinton and Mr. Courtney each served as director with
respect to six investment companies in the Advisor's Fund Complex for which they
received no fees; Mr. Loft and Mr. Herrmann each served as director with respect
to 13 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.
PRINCIPAL HOLDERS OF SECURITIES
As of March 7, 1996, the following persons owned of record or were known by the
Fund to own beneficially 5% of the outstanding shares of any Portfolio of the
Fund.
Holder Portfolio Percentage
Oppenheimer & Co., Inc. Government Portfolio 9.97%
for the benefit of a client
Oppenheimer Tower
World Financial Center
New York, NY 10281
Unified Management Corp. Government Portfolio 5.63%
Omnibus Account
for the benefit of clients, no one
of which held 5% or more of the
shares of the Government
Portfolio
429 N. Pennsylvannia St.
Indianapolis, IN 46204-1873
Unified Management Corp. Government Portfolio 5.36%
Omnibus Account
for the benefit of clients, no one
of which held 5% or more of the
shares of the Govenment
Portfolio
429 N. Pennsylvannia St.
Indianapolis, IN 46204-1873
27
<PAGE>
Oppenheimer & Co., Inc. California Municipal Portfolio 6.38%
for the benefit of a client
Oppenheimer Tower
World Financial Center
New York, NY 10281
INVESTMENT MANAGEMENT AND OTHER SERVICES
THE ADVISORY AGREEMENT. The Advisory Agreement pursuant to which the
investments of each Portfolio of the Fund are managed by the Advisor was first
approved by the Board of Directors and by Oppenheimer Capital as then sole
shareholder of the Fund on August 11, 1989 (the "Initial Advisory Agreement").
An amendment to the initial Advisory Agreement was approved by the Board of
Directors, including a majority of the Directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) on January 20, 1992 and by the
shareholders of each Portfolio of the Fund on April 29, 1992. The amendment
eliminated the provision in the initial Advisory Agreement that provided for
quarterly payments to be made to the Advisor or its parent Oppenheimer Capital
as reimbursement for the costs of providing administrative services and
increased the advisory fee by approximately the same amount.
Under the Advisory Agreement, the Advisor is required to: (i) regularly
provide investment advice and recommendations to each Portfolio 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 Portfolio and the portion, if any, of each Portfolio's assets to be held
uninvested; and (iii) arrange for the purchase of securities and other
investments by each Portfolio and the sale of securities and other investments
held in each Portfolio's assets.
The Advisory Agreement also requires the Advisor to provide for the
business management for the Fund and its Portfolios, including (1) making
arrangements for accountants, counsel and other parties to perform services for
the Portfolios, (2) preparation and filing of reports required by federal
securities and "blue sky" laws, shareholder reports and proxy materials and
(3) arranging for and supervising the continuous distribution of each Portfolio
and the provision of continuous administrative services to Portfolio
shareholders.
Expenses not expressly assumed by the Advisor under the Advisory Agreement
are paid by the Portfolios. These include fees to the Advisor, custodian,
transfer agent and shareholder servicing expenses, directors' fees and expenses,
legal and audit expenses, stock issuance costs, certain printing, postage,
federal and state registration costs, annual meeting costs, and organizational
and non-recurring expenses, including litigation.
The Fund may pay certain broker-dealers, including its affiliate
Oppenheimer & Co., Inc. ("Opco") or other financial intermediaries whose
customers are Fund shareholders for performing shareholder servicing functions,
such as opening new shareholder accounts, processing purchase and redemption
transactions and responding to inquiries regarding the Portfolios' current yield
and the status of shareholder accounts. The Fund may pay for the electronic
communications equipment
28
<PAGE>
maintained at the broker-dealers' offices that permits access to the Fund's
computer files and, in addition, reimburses the broker-dealers at cost for
personnel expenses involved in providing these services. All such payments and
reimbursements must be approved in advance by the Fund's Board of Directors.
Currently, any such payments to Opco are capped at 2 basis points of average
daily net assets. The following amounts were paid to Opco as reimbursement for
shareholder services: for the fiscal year ended November 30, 1995--$281,524;
$18,693; $22,314; $12,642 and $9,181, respectively; for the fiscal year ended
November 30, 1994 -- $259,449; $21,158; $19,615; $12,051 and $8,842,
respectively; for the fiscal year ended November 30, 1993 -- $242,478, $22,809,
$21,240, $11,382 and $7,349, respectively, with respect to the Primary,
Government, General Municipal, California Municipal and New York Municipal
Portfolios.
The Fund also may pay certain broker-dealers including its affiliate Opco,
for performing certain administrative services for accounts in the Fund
including providing beneficial owners with statements showing their positions in
the Fund, posting dividend payments to beneficial owners' accounts, forwarding
shareholder communications such as dividend and tax notices and providing
shareholder information to enable the Fund to mail prospectuses, annual and
semi-annual reports to beneficial owners. Such payments are capped at 5 basis
points of average daily net assets.
The Advisory Agreement provides that in 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 adviser for any other person, firm or
corporation.
Under the initial Advisory Agreement, the Fund's advisory fee was at the
annual rate of .40 of 1% of the average daily value of the Fund's net assets.
Effective April 29, 1992, the advisory fee was changed to the rate of .50% on
the first $100 million of average daily net assets, .45% on the next $200
million of average daily net assets, and .40% of average daily net assets in
excess of $300 million. The fee is accrued daily and paid monthly. Under the
Advisory Agreement, the Advisor guarantees that the total expenses of each
Portfolio in any fiscal year, exclusive of taxes, interest, and brokerage fees,
shall not exceed, and undertakes to pay or refund to the Portfolio any amount by
which such expenses do exceed, 1% of that Portfolio's average annual net assets.
For the fiscal year ended November 30, 1995, the total advisory fee paid by the
Primary Portfolio was $6,577,551 and the total advisory fees accrued or paid by
the Government, General Municipal, California Municipal and New York Municipal
Portfolios were $549,734, $619,378, $319,052 and $261,993, of which $20,074,
$112,617, $83,794 and $110,219, respectively was waived by the Advisor. For the
fiscal year ended November 30, 1994, the total advisory fee paid by the Primary
Portfolio was $6,143,853 and the total advisory fees accrued or paid by the
Government, General Municipal, California Municipal and New York Municipal
Portfolios were $626,670, $573,408, $305,560 and $250,541, of which $26,922,
$132,333, $70,831 and $94,564, respectively, was waived by the Advisor. For the
fiscal year ended November 30, 1993, the total advisory fees paid by the Primary
and Government Portfolios were $5,655,644 and $656,218, respectively, and the
total advisory fees accrued or paid by the General Municipal, California
Municipal and New York Municipal Portfolios were $614,481, $287,200 and
$214,761, respectively, of which $37,700, $76,788 and $102,497, respectively,
was waived by the Advisor.
29
<PAGE>
THE DISTRIBUTION ASSISTANCE PLAN. The Fund has a Distribution Assistance and
Administrative Services Plan (the "Plan") with the Advisor which was adopted in
accordance with the requirements of Rule 12b-1 under the 1940 Act and has been
approved by the Fund's Board of Directors, including a majority of the Directors
who are not "interested persons" of a Portfolio 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 Directors") and by
Oppenheimer Capital as then sole shareholder of the Fund. Shareholders of each
Portfolio approved the Plan at the Annual Meeting of Shareholders held on April
29, 1992.
Under the Plan, the Fund may be provided with distribution assistance
and/or administrative services through broker-dealers, banks and other
depository institutions and other financial intermediaries and administrative
services. The fee payable by the Fund's portfolios under the Plan was reduced
from .30% to .25% of the average daily value of each Portfolio's net assets,
effective March 31, 1995. The services to be obtained are believed to be
permissible activities under present banking laws and regulations, and the
Directors of the Fund will take appropriate actions (which should not adversely
affect the Fund or its shareholders) in the future to maintain such legal
conformity should any changes in, or interpretations of, such laws or
regulations occur. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. For
the fiscal year ended November 30, 1995 the total distribution fees accrued or
paid by the Primary, Government, General Municipal, California Municipal and New
York Municipal Portfolios were $4,231,722, $296,807, $336,589, $169,188 and
$139,776, respectively.
The Plan provides that, as long as the Plan remains in effect, the
selection and nomination of directors of the Fund who are not "interested
persons" shall be committed to the discretion of the directors who are not
"interested persons" of the Fund. The Plan can be terminated at any time with
regard to each Portfolio, without penalty, by the vote of a majority of the
Disinterested Directors or by the vote of the holders of a majority of the
outstanding voting securities of that Portfolio. Finally, the Plan cannot be
amended materially without shareholder approval, and all material amendments are
required to be approved by the vote of the Board of Directors of the Fund,
including a majority of the Disinterested Directors, cast in person at a meeting
called for that purpose.
30
<PAGE>
It is estimated that the Advisor spent approximately the following amounts
with respect to the Primary, Government, General Municipal, California Municipal
and New York Municipal Portfolios for the fiscal year ended November 30, 1995:
<TABLE>
<CAPTION>
Primary Government General California New York
Portfolio Portfolio Municipal Municipal Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Sales Material and Advertising -0- -0- -0- -0- -0-
Printing and Mailing of -0- -0- -0- -0- -0-
Prospectuses to Other than
Current Shareholders
Compensation to Dealers $6,787,349 $485,822 $558,024 $285,233 $235,185
Compensation to Sales -0- -0- -0- -0- -0-
Personnel
Other (1) -0- -0- -0- -0- -0-
(1) Includes cost of telephone and overhead.
</TABLE>
THE DISTRIBUTION AGREEMENT. The Fund has entered into a Distribution Agreement
with OCC Distributors (the "Distributor"), an affiliated broker-dealer of the
Advisor. Under the Distribution Agreement, the Distributor acts as the Fund's
agent (underwriter) in the continuous public offering of its shares. Also under
the Agreement, the Fund makes no payment to the Distributor or any other party
and expenses normally attributable to sales, other than those paid by the
Advisor, are borne by the Distributor.
PORTFOLIO TRANSACTIONS. Portfolio decisions are based on the judgment and
actions of the Advisor. As most, if not all, purchases made by the Fund are
principal transactions at net prices, the Fund pays little brokerage commission.
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 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 useful to one or
more of the Portfolios 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
Portfolios. 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 activities of the Advisor, to make available additional views for
consideration and comparison, to enable the Advisor to obtain market information
for the valuation of securities held in a Portfolio's assets.
A Portfolio will not purchase any securities from or sell any securities to
Opco acting as principal for its account. The Advisor currently serves as
investment manager to a number of clients, including other investment companies,
and in the future may act as investment manager or adviser to
31
<PAGE>
others. It is the practice of the Advisor to cause purchase or sale
transactions to be allocated among the Portfolios and others whose assets it
manages in such manner as it deems equitable. In making such allocations among
the Portfolios 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 Portfolio and other client
accounts.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Portfolio is determined each day the
New York Stock Exchange (the "Exchange") is open, as of 12:00 noon and 4:00
p.m., New York time that day by dividing the value of a Portfolio's net assets
by the number of its shares outstanding.
The Portfolios operate under a rule (the "Rule") of the Securities and
Exchange Commission under the Act which permits them to value their portfolios
on the basis of amortized cost. The amortized cost method of valuation is
accomplished by valuing a security at its cost adjusted by straight-line
amortization to maturity of any discount with respect to the Primary and
Government Portfolios or premium with respect to all Portfolios, regardless of
the impact of fluctuating interest rates on the market value of the security.
The method does not take into account unrealized gains or losses.
There may be periods during which the value, as determined by amortized
cost, may be higher or lower than the price a Portfolio would receive if it sold
its securities on a particular day. During periods of declining interest rates,
the daily yield on a Portfolio's shares may tend to be higher (and net
investment income and daily dividends lower) than under a like computation made
by a fund with identical investments which utilizes a method of valuation based
upon market prices. The converse would apply in a period of rising interest
rates.
The Fund's Board of Directors has established procedures designed to
stabilize the Portfolios' price per share as computed for purpose of sales and
redemptions at $1.00. Under the Rule, such procedures must include review of
portfolio holdings by the Board of Directors at such intervals as it deems
appropriate, and at such intervals as are reasonable in light of current market
conditions, to determine whether the Portfolios' net asset value calculated by
using available market quotations deviates from the per share value based on
amortized cost. "Available market quotations" may include actual quotations,
estimates of market value reflecting current market conditions based on
quotations or estimates of market value for individual portfolio instruments or
values obtained from yield data relating to a directly comparable class of
securities published by reputable sources. Under the Rule, whenever the net
asset value based on available market quotations reaches $.995 per share or
$1.005 per share, the Board must promptly consider what action, if any, will be
initiated. However, the Board has adopted a policy under which it will be
required to consider what action to take whenever the net asset value per share,
based on available market quotations, reaches $.997 per share or $1.003 per
share. When the Board believes that the extent of any deviation may result in
material dilution or other unfair results to potential investors or existing
shareholders, it is to take such action as it deems
32
<PAGE>
appropriate to eliminate or reduce to the extent reasonably practicable such
dilution or unfair results. Such actions could include the sale of portfolio
securities prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends or payment of distributions
from capital or capital gains, redemptions of shares in kind, or establishing a
net asset value per share using available market quotations.
A "business day," during which purchases and redemptions of Fund shares can
become effective and the transmittal of redemption proceeds can occur, is
considered for Fund purposes as any day the New York Stock Exchange is open for
trading; however, on any such day that is an official bank holiday in
Massachusetts, neither purchases nor wired redemptions can become effective
because Federal Funds cannot be received or sent by State Street Bank & Trust
Company. On such days, therefore, the Fund can only accept redemption orders
for which shareholders desire remittance by check. The right of redemption may
be suspended or the date of a redemption payment postponed for any period during
which the New York Stock Exchange is closed (other than customary weekend and
holiday closings), when trading in the markets which the Fund normally utilizes
is restricted, or an emergency (as determined by the Securities and Exchange
Commission) exists, or the Commission has ordered such a suspension for the
protection of shareholders. The New York Stock 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 4th, Labor Day,
Thanksgiving and Christmas Day. It may also close on other days. The value of
a shareholder's investment at the time of redemption may be more or less than
his cost, depending on the market value of the securities held by the Fund at
such time and the income earned.
TAXES
Each Portfolio intends to continue to qualify each year as a regulated
investment company under the Internal Revenue Code ("Code"). Provided that a
Portfolio (a) is a regulated investment company and (b) distributes at least 90%
of its taxable net investment income (including, for this purpose, net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced by
certain expenses), the Portfolio will not be liable for Federal income taxes to
the extent that its taxable net investment income and its net realized long-term
and short-term capital gains are distributed to its shareholders. Any net short-
term and long-term capital gains realized by a Portfolio will be distributed
annually as described in the Prospectus. Distributions of short-term capital
gains are taxable as ordinary income, however, distributions of long-term
capital gains will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held shares of the Portfolio, and will
be designated as long-term capital gain dividends in a written notice mailed by
the Portfolio to shareholders after the close of the Portfolio's taxable year.
If a shareholder receives a long-term 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 below 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
long-term capital gain dividend. At November 30, 1995, accumulated net realized
capital loss carry forwards available as a reduction against future net realized
capital gains were: General Municipal Portfolio - $92,095, of which $13,684 will
expire in 1997, $29,512 will expire in 1998, $1,302 will expire in 1999, $13,801
will expire in 2000, $299 will expire
33
<PAGE>
in 2001 and $33,497 will expire in 2003; California Municipal Portfolio--
$21,550, of which $730 will expire in 1999, $5,856 will expire in 2000, $1,137
will expire in 2001 and $13,827 will expire in 2003; and New York Municipal
Portfolio--$23,801, of which $3,198 will expire in 2000, $934 will expire in
2001 and $19,669 will expire in 2003.
The Municipal Portfolios are designed to provide investors with current
income which is excluded from gross income for Federal income tax purposes and
with respect to the New York Municipal and California Municipal Portfolios,
exempt from New York State and New York City personal income taxes and from
California personal income tax, respectively. Investment in the Portfolios would
not be suitable for tax-exempt institutions, qualified retirement plans, H.R. 10
plans and individual retirement accounts since such investors would not gain any
additional tax benefit from the receipt of tax-exempt income. Although each of
the Municipal Portfolios expects to be relieved of all or substantially all
Federal and state income or franchise taxes, depending upon the extent of its
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, that portion of a Portfolio's income
which is treated as earned in any such state or locality could be subject to
state and local tax. Any such taxes paid by a Portfolio would reduce the amount
of income and gains available for distribution to shareholders.
Because the Municipal Portfolios will distribute exempt-interest dividends,
interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Portfolio 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 Portfolio which represents income derived from
private activity bonds held by the Portfolio 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 applicable Prospectus for the Municipal Portfolios, some (and potentially
all) of a Portfolio'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 with resulting tax for individuals and corporations
subject to such alternative minimum tax ("AMT"). In addition, the receipt of
dividends and distributions from a Portfolio 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 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. At the Annual Meeting of Shareholders held on April 29,
1992, the shareholders of the Municipal Portfolios approved a change in each
Portfolio's fundamental investment policies to permit the purchase of securities
treated as tax preference items without limitation. Consequently, investors
34
<PAGE>
already subject to the AMT should consider whether an investment in the
Municipal Portfolios is suitable for them.
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 Portfolio 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 General Municipal Portfolio 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 Portfolio during the
preceding year. Each shareholder of the New York Municipal Portfolio 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 Portfolio
for the prior calendar year and each shareholder of the California Municipal
Portfolio will receive an annual statement as to the California State personal
income tax status of his or her dividends and distributions from such Portfolio
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
distributions. In the event that a Municipal Portfolio 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" with respect to (a) taxable dividends and
distributions, and (b) the proceeds of any redemptions of shares of a Portfolio.
An individual's taxpayer identification number is his or her social security
number. The 31% backup withholding tax is not an additional tax and may be
credited against a taxpayer's regular Federal income tax liability.
The foregoing is only a summary of certain tax considerations generally
affecting each Portfolio 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. Shareholders are urged to consult their tax
advisors with specific reference to their own tax situations.
35
<PAGE>
PORTFOLIO YIELD
YIELDS. Yields on portfolio securities depend on a variety of factors,
including general money market conditions, effective marginal tax rates, the
financial condition of the issuer, general conditions of the fixed-income or
tax-exempt securities market, the size of particular offerings, the maturity of
obligations and the rating of an issue. The ratings of the rating organizations
represent their opinions as to the quality of the securities which they
undertake to rate. It should be emphasized, however, that ratings are general
and are not absolute standards of quality. Consequently, securities with the
same maturity and interest rate with different ratings may have the same yield.
Yield disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates, due to
such factors as changes in the overall demand or supply of various types of
securities or changes in the investment objectives of investors. Subsequent to
purchase, an issue of Municipal Securities or other investments may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by a Portfolio. Neither event will require the elimination of an
investment by a Portfolio, but the Advisor will consider such an event in its
determination of whether a Portfolio should continue to hold an investment.
Yield information may be useful to investors in reviewing a Portfolio'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 Portfolios of the Fund is not insured as is typically
the case with deposits in a bank or savings and loan; 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 Portfolio'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.
From time to time the Fund may advertise yield figures. Reference in
advertisements may be made to ratings and rankings among similar funds by
independent evaluators such as Lipper Analytical Services Inc. and Donoghue's
Money Fund Report, and the performance of the Portfolios may be compared to
recognized indices of market performance.
There are two methods by which the Portfolios' yield for a specified period
of time is calculated.
The first method, which results in an amount referred to as the "current
yield," assumes an account containing exactly one share at the beginning of the
period. The net asset value of this share will be $1.00. The net change in the
value of the account during the period is then determined by subtracting this
beginning value from the value of the account at the end of the period; however,
capital changes (i.e., realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) are excluded from the calculation.
Thus, the dividends used in the yield computation may not be the same as the
dividends actually declared, as the capital changes in question may be included
in the dividends declared; see "Daily Dividends, Other Distributions, and Taxes"
in the Prospectus. Instead, the dividends used in the yield calculation will be
those which would have been declared if the
36
<PAGE>
capital changes had not affected the dividends. This net change in the account
value is then divided by the value of the account at the beginning of the period
and the resulting figure (referred to as the "period base return") is then
annualized by multiplying it by 365 and dividing it by the number of days in the
period; the result is the "current yield." Normally a seven day period will be
used in determining yields (both the current and the effective yield discussed
below) in published or mailed advertisements.
The second method results in an amount referred to as the "effective
yield." This represents an annualization of the current yield with dividends
reinvested daily. This effective yield for a seven day period would be computed
by compounding the unannualized base period return by adding one to the base
period return, raising the sum to a power equal to 365 divided by 7 and
subtracting 1 from the result.
"Tax equivalent yield" is calculated by dividing the percentage of the
current yield or the effective yield which is not subject to federal income tax
by the reciprocal of the applicable federal tax rate and adding the percentage
of the current or effective yield to the quotient.
TAX EQUIVALENT CURRENT YIELD = T/r + R
r = reciprocal of applicable tax rate (1.00 - tax rate = r)
T = % of yield which is tax-exempt
R = % of yield taxable
The "current yield" is calculated for the indicated period according to the
following formula:
CURRENT YIELD = (Base Period Return) x 365/7
The "effective yield" is calculated for the indicated period according to the
following formula:
EFFECTIVE YIELD = [(Base Period Return + 1) to the power of 365/7 ]-1
Where: Base Period Return is the net change, exclusive of capital changes, in
the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts and dividing
the difference by the value of the account at the beginning of the
base period.
37
<PAGE>
YIELD FOR SEVEN DAY PERIOD
Portfolio Yield for seven-day period ended 11/30/95
- --------- -----------------------------------------
CURRENT EFFECTIVE
Primary 4.90% 5.01%
Government* 4.77% 4.88%
General Municipal 3.03% 3.08%
California Municipal 3.09% 3.14%
New York Municipal* 3.13% 3.18%
* During the seven day period ended November 30, 1995, the Advisor
voluntarily waived a portion of its advisory fees with respect to the
Government and New York Municipal Portfolios in order to maintain the
Portfolios' yields at a competitive level. Had the fee waivers not been in
effect, the current yield and effective yield for the Government and New
York Municipal Portfolios would have been 4.78% and 4.89% and 3.07% and
3.12% respectively.
TAX EQUIVALENT YIELD -- 30 DAY PERIOD
for the 30-day period ended November 30, 1995
Portfolio At Federal Income Tax Rate of 39.6%
- --------- -----------------------------------
General Municipal 4.85%*
California Municipal 5.77%*
New York Municipal 5.57%*
* During the fiscal year ended November 30, 1995, the Advisor voluntarily
waived a portion of its advisory fees with respect to the Portfolios.
These waivers have been made in order to maintain the Portfolios' yields at
a competitive level but have not been made at a constant rate from week to
week. Had the fee waivers not been in effect during the above 30-day
period, the tax-equivalent yield for the California and New York Municipal
Portfolios would have been 5.77% and 5.41%, respectively. A portion of the
tax-exempt dividends paid by the Portfolios is treated as a tax preference
item for individuals subject to the alternative minimum tax. For the
fiscal year ended November 30, 1995, approximately 40.9%, 19.8%, and 25.1%,
respectively, of distributions of the General, California and New York
Municipal Portfolios were tax preference items; for the calendar year ended
December 31, 1995, approximately 37.0%, 18.3% and 24.0%, respectively, of
distributions were tax preference items. In addition, certain corporate
shareholders which are subject to the alternative minimum tax may also have
to take remaining distributions by the Portfolio into account in computing
the alternative minimum tax. The tax equivalent yield for the California
Municipal Portfolio is based on an assumed California State tax rate of
11%. The tax equivalent yield for the New York Municipal Portfolio is
based on an assumed New York state tax rate of 7.59375%; if a shareholder
was a New York City resident, the tax-equivalent yield would have been
5.85% accounting for advisory fee waivers and 5.68% without such fee
waivers, based on an assumed New York City tax rate of 4.46%.
38
<PAGE>
2. ADDITIONAL INFORMATION
DESCRIPTION OF THE FUND. The Fund was formed under the laws of Maryland on
April 27, 1989. It is not contemplated that share certificates will be issued
or regular annual meetings of the shareholders will be held. The Fund will
provide without charge to any stockholder, upon request to the Secretary at the
Corporation's principal office, (a) a full statement of the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the shares of each class of stock which the Corporation is
authorized to issue, (b) the differences in the relative rights and preferences
between the shares of each series to the extent they have been set, and (c) the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Portfolios are created by
the Board of Directors, shares of each such Portfolio 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 Directors. Expenses not otherwise identified with a
particular Portfolio will be allocated fairly among two or more Portfolios by
the Board of Directors.
Under Rule 18f-2 of the 1940 Act, any matter 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 directors or the ratification of the selection of
accountants. 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.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP serves as the independent
accountants of the Fund and of each Portfolio; their services include examining
the annual financial statements of each Portfolio as well as other related
services. Price Waterhouse LLP also serves as independent accountants for the
Advisor and its affiliates.
TELEPHONE REDEMPTIONS AND EXCHANGES. In the absence of negligence on the part
of the Transfer Agent or gross negligence on the part of the Fund, neither the
Fund, the Transfer Agent nor their affiliates shall be liable for any loss, cost
or expense caused by unauthorized telephone redemption and exchange
instructions.
g/fund/qcr/sai-396.blk
39
<PAGE>
Appendix
DESCRIPTION OF COMMERCIAL PAPER AND MUNICIPAL BOND AND NOTE RATINGS
COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers to
repay promissory obligations when due. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1 - Superior Ability for Repayment;
Prime 2 - Strong Ability for Repayment; Prime 3 - Acceptable Ability for
Repayment.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment. Ratings are graded into four categories, ranging
from "A" for the highest quality obligations to "D" for the lowest. Issues
assigned the highest rating, "A", are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with the numbers
"1", "2" and "3" to indicate the relative degree of safety. The designation
"A-1" indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. The "A+" designation is applied to those issues
rated "A-1" which possess overwhelming safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated "A-1."
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.
A-1
<PAGE>
BOND RATINGS
A bond rated "Aaa" by Moody's is judged to be the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is deemed secure.
While the various protective elements may change, such foreseeable changes are
unlikely to impair the fundamentally strong position of such issues. 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. Margins of protection on "Aa" bonds may not be as large as on
"Aaa" securities or fluctuations of protective elements may be of greater
magnitude or there may be other elements present which make the long-term risks
appear somewhat larger than "Aaa" securities. 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 some time in the future. Bonds rated "Baa" are considered medium
grade obligations whose interest payments and principal security appear adequate
for the present but lack certain protective elements or may be
characteristically unreliable over any great length of time. Moody's applies
numerical figures "1", "2" and "3" in each generic rating classification from
"Aa" through "B" in its corporate bond rating system. The modifier "1"
indicates that the security ranks in the higher end of its generic rating
category; the modifier "2" indicates a mid-range ranking and the modifier "3"
indicates that the issue ranks in the lower end of its generic rating category.
Debt rated "AAA" by Standard & Poor's has the highest rating assigned by
it. Capacity to pay interest and repay principal is extremely strong. Debt
rated "AA" has a strong capacity to pay interest and repay principal and differs
from "AAA" issues only in small degree. Debt rated "A" has a strong capacity to
pay interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
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.
A-2
<PAGE>
Debt rated AAA, the highest rating by Duff & Phelps, is considered to be of
the highest credit quality. The risk factors are negligible being only slightly
more than for risk-free U.S. Treasury debt. Debt rated AA is regarded as high
credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
NOTE RATINGS
Moody's
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.
Standard & Poor's
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
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
A-3
<PAGE>
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 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
A-4
<PAGE>
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-5
<PAGE>
November 30, 1995
SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIMARY PORTFOLIO
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
U.S. Government Securities--4.2%
Federal Farm Credit Bank,
$ 15,000 5.63%, 1/4/96.................................. $ 14,920,242
20,000 VRDN*, 5.87%-5.95%,
3/21/96-5/9/96................................. 19,997,576
36,200 Federal National
Mortgage Association,
5.585%-5.63%,
12/7/95-1/10/96................................ 36,035,887
------------
Total U.S. Government Securities
(amortized cost--$70,953,705).................................. $ 70,953,705
------------
Bankers' Acceptances--2.1%
$ 9,900 First Union National Bank,
5.60%, 12/21/95................................ $ 9,869,200
7,000 National Bank of Detroit,
5.64%, 1/23/96-1/24/96......................... 6,941,250
6,000 National Westminster Bank PLC,
5.63%, 12/12/95................................ 5,989,678
12,000 Republic National Bank of New York,
5.60%, 1/8/96.................................. 11,929,067
------------
Total Bankers' Acceptances
(amortized cost--$34,729,195).................................. $ 34,729,195
------------
Certificates of Deposit--5.2%
$ 36,000 National Westminster Bank PLC,
5.78%-5.81%,
1/12/96-2/1/96................................. $ 36,000,636
50,000 Societe Generale Bank,
5.76%-5.80%,
12/18/95-1/4/96................................ 50,000,000
------------
Total Certificates of Deposit
(amortized cost--$86,000,636).................................. $ 86,000,636
------------
Commercial Paper--85.2%
$ 39,600 Abbey National North America,
5.64%-5.71%,
1/5/96-3/6/96.................................. $ 39,289,074
37,450 ABN-Amro North America Finance Inc.,
5.57%-5.70%,
12/5/95-2/16/96................................ 37,229,441
18,875 A. H. Robbins Co. Inc.,
5.70%-5.71%,
1/16/96-2/8/96................................. 18,703,847
17,400 Alberta (Province of),
5.65%-5.71%,
12/28/95-1/12/96............................... 17,302,026
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 54,000 American Express Credit Corp.,
5.60%-5.75%,
12/4/95-2/5/96................................. $ 53,738,806
30,000 American Home Products Corp.,
5.70%-5.72%,
12/18/95-2/2/96................................ 29,790,731
35,000 American Telephone & Telegraph Co.,
5.62%-5.64%, 12/18/95.......................... 34,906,925
20,000 AVCO Financial Services Inc.,
5.70%-5.72%,
1/9/96-1/10/96................................. 19,874,700
60,250 Bayerische Landesbank Girozentrale,
5.61%-5.76%,
1/2/96-2/26/96................................. 59,771,439
15,000 Cheltenham & Gloucester Building
Society, 5.74%, 1/3/96......................... 14,921,075
41,100 Commerzbank U.S. Finance Inc.,
5.62%-5.71%,
1/5/96-2/5/96.................................. 40,801,871
8,800 Compagnie Bancaire USA Funding
Corp., 5.65%-5.76%,
1/4/96-2/5/96.................................. 8,727,536
25,570 Daimler Benz North America Corp.,
5.65%-5.72%,
1/3/96-2/14/96................................. 25,357,128
47,748 Deere (John) Capital Corp.,
5.60%-5.68%,
12/4/95-2/5/96................................. 47,486,806
25,400 Dresdner U.S. Finance Inc.,
5.71%-5.72%,
1/22/96-1/23/96................................ 25,187,919
31,465 Eksportfinans A/S,
5.62%-5.66%,
12/1/95-12/20/95............................... 31,410,132
25,915 Finnish Export Credit LTD,
5.70%-5.72%,
1/23/96-1/24/96................................ 25,694,189
6,000 Ford Credit Europe PLC,
5.74%, 12/19/95................................ 5,982,780
36,000 Ford Motor Credit Co.,
5.68%-5.69%,
12/6/95-1/12/96................................ 35,854,611
10,000 General Electric Capital Services Inc.,
5.62%, 1/22/96................................. 9,918,967
60,000 General Motors Acceptance Corp.,
5.62%-5.65%,
12/8/95-12/28/95............................... 59,825,010
30,000 Generale Bank Inc.,
5.59%-5.61%,
1/16/96-2/2/96................................. 29,758,969
B-1
<PAGE>
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Commercial Paper--85.2% (cont'd)
$ 63,000 Glaxo Holdings PLC,
5.64%-5.66%,
2/12/96-2/22/96................................ $ 62,202,545
33,285 Halifax Building Society,
5.63%-5.73%,
12/11/95-1/3/96................................ 33,180,815
35,000 Hanson Finance (U.K.) PLC,
5.63%-5.65%,
12/4/95-3/1/96................................. 34,639,507
6,000 Hewlett-Packard Co.,
5.60%, 2/29/96................................ 5,916,000
20,000 IBM Credit Corp.,
5.65%, 1/29/96................................. 19,814,806
62,400 Merrill Lynch & Co. Inc.,
5.65%-5.70%,
12/4/95-2/29/96................................ 61,927,528
55,000 Morgan (J.P.) & Co. Inc.,
5.61%-5.62%,
1/5/96-1/31/96................................. 54,537,808
54,300 Morgan Stanley Group Inc.,
5.70%, 2/5/96-2/12/96.......................... 53,688,232
5,000 Oesterreichische Kontrollbank AG,
5.72%, 1/8/96.................................. 4,969,811
8,000 Pitney Bowes Credit Corp.,
5.64%, 12/1/95................................. 8,000,000
4,000 Prudential Funding Corp.,
5.65%, 12/14/95................................ 3,991,839
25,000 Queensland Treasury Corp.,
5.64%, 1/8/96.................................. 24,851,167
15,000 Rabobank USA Financial Corp.,
5.60%, 2/26/96................................. 14,797,000
51,650 Republic New York Corp.,
5.60%-5.66%,
12/11/95-1/18/96............................... 51,380,037
63,000 Royal Bank of Canada,
5.61%-5.70%,
1/29/96-2/2/96................................. 62,393,393
10,000 Societe Generale N.A. Inc.,
5.61%, 12/22/95................................ 9,967,275
8,500 Student Loan Corp.,
5.705%, 1/22/96................................ 8,429,955
64,150 Svenska Handelsbanken Inc.,
5.62%-5.73%,
12/27/95-3/29/96............................... 63,532,516
41,000 Sweden (Kingdom of),
5.65%-5.70%,
1/16/96-2/28/96................................ 40,508,444
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 52,000 Swedish Export Credit Corp.,
5.62%-5.64%,
12/11/95-12/22/95..............................$ 51,863,308
15,400 Toronto-Dominion Holdings
USA Inc., 5.71%, 1/8/96........................ 15,307,181
52,965 Transamerica Finance Corp.,
5.62%-5.76%,
12/5/95-1/30/96................................ 52,688,478
14,100 U.S. Borax & Chemical Corp.,
5.63%, 3/4/96.................................. 13,892,722
--------------
Total Commercial Paper
(amortized cost--$1,424,014,349)...............................$1,424,014,349
--------------
Corporate Notes--2.9%
$ 15,000 CIT Group Holdings Inc., VRDN*,
5.89%, 9/26/96.................................$ 14,989,835
33,500 General Electric Capital Corp.,
VRDN*, 5.84%-6.05%,
1/10/96-8/16/96................................ 33,499,946
--------------
Total Corporate Notes
(amortized cost--$48,489,781)..................................$ 48,489,781
--------------
Repurchase Agreement--.8%
$ 14,000 J.P. Morgan Securities Inc.,
dtd. 11/30/95, 5.90%, 12/1/95
(proceeds at maturity $14,002,294,
collateralized by $14,035,000 par,
$14,280,613 value U.S. Treasury
Notes, 6.875%, 10/31/96)
(amortized cost-$14,000,000)...................$ 14,000,000
--------------
Total Investments
(amortized cost $1,678,187,666+).......................100.4% $1,678,187,666
Other Liabilities in Excess
of Other Assets........................................ (0.4) (7,058,305)
----- --------------
Total Net Assets
(applicable to 1,671,168,463 shares
outstanding at $1.00 per share)........................100.0% $1,671,129,361
===== ==============
GOVERNMENT PORTFOLIO
U.S. Government Securities--96.6%
$ 15,000 Federal Farm Credit Bank, VRDN*,
5.87%-5.95%,
3/21/96-5/9/96.................................$ 14,997,946
B-2
<PAGE>
November 30, 1995
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO (cont'd)
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
U.S. Government Securities (cont'd)
$ 47,300 Federal Home Loan Bank,
5.56%-5.80%,
12/1/95-2/6/96................................. $ 47,173,400
43,000 Federal National
Mortgage Association,
5.53%-5.61%,
12/7/95-1/30/96................................ 42,740,515
------------
Total U.S. Government Securities
(amortized cost--$104,911,861)................................. $104,911,861
------------
Repurchase Agreement--9.2%
$ 10,000 J.P. Morgan Securities Inc.,
dtd. 11/30/95, 5.90%, 12/1/95
(proceeds at maturity $10,001,639,
collateralized by $10,165,000 par,
$10,203,119 value Federal Home
Loan Mortgage Corp., 5/13/96)
(amortized cost-$10,000,000)................... $ 10,000,000
------------
Total Investments
(amortized cost--$114,911,861+)......................... 105.8% $114,911,861
Other Liabilities in Excess of
Other Assets............................................ (5.8) (6,336,831)
----- ------------
Total Net Assets (applicable to 108,596,523
shares outstanding at $1.00 per share).................. 100.0% $108,575,030
===== ============
GENERAL MUNICIPAL PORTFOLIO
Alabama--1.9%
$ 1,600 Alabama Pvt. Clges. & Univs., FAR,
Ser. A, VRDN* (Insd.; FGIC),
3.60%, 12/6/95................................. $ 1,600,000
575 Fairfield IDB, EIR,
USX Corp. Proj. (LC;
Wachovia Bank), 3.70%,
5/1/96** 575,000
------------
2,175,000
------------
Alaska--4.8%
3,600 Alaska St. HF Corp.,
Ser. A, VRDN*,
3.625%, 12/6/95................................ 3,600,000
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Alaska (cont'd)
$ 2,000 Valdez Marine Term. Rev.,
Arco Transn. Proj.,
Ser. B, VRDN*,
3.75%, 12/6/95................................. $ 2,000,000
------------
5,600,000
------------
Arizona--6.0%
1,000 Arizona Edl. Ln. Mktg. Corp.,
ELR, Ser. A, VRDN*
(LC; Dresdner Bank AG),
3.80%, 12/6/95................................. 1,000,000
4,000 Cochise Cnty. PCR, SWDR,
Arizona Elec. Pwr. Coop. Inc.
Proj., 3.90%, 3/1/96***........................ 4,000,000
2,000 Maricopa Cnty. PCC, PCR,
So. California Edison Palo Verdi
Proj., 3.70%, 2/1/96........................... 2,000,000
------------
7,000,000
------------
California--6.1%
California HEL Auth.,
1,000 Ser. A (LC; Nat'l. Westminster
Bank PLC), 4.35%, 5/1/96**..................... 1,000,000
1,000 Ser. E-5 (CS; SLMA),
4.25%, 6/1/96**................................ 1,000,000
1,000 California Hsg. FAGR,
Home Mtg. Prog., Ser. E,
4.60%, 2/1/96**................................ 1,000,000
2,000 California St. RAW's,
Ser. C, dtd. 7/26/94,
5.75%, 4/25/96................................. 2,008,508
2,000 Ukiah Elec. Rev.,
Ser. A,
8.00%, 6/1/96.................................. 2,121,806
------------
7,130,314
------------
Colorado--1.7%
2,000 Colorado St. GFR, TRAN's,
Ser A, dtd. 7/6/95,
4.50%, 6/27/96................................. 2,008,805
------------
Florida--1.2%
1,350 Putnam Cnty. Dev. Auth., PCR,
Seminole Elec. Co. Proj.,
Ser. H-1, VRDN*,
3.65%, 12/6/95................................. 1,350,000
------------
Hawaii--.9%
1,000 Secondary Mkt. Svcs. Corp., SLR,
Ser. II, VRDN* (LC; Nat'l.
Westminster Bank PLC),
3.70%, 12/6/95................................. 1,000,000
------------
B-3
<PAGE>
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Illinois--10.3%
$ 6,300 Chicago O'Hare Int'l. Arpt.,
Ser. B, VRDN*
(LC; Societe Generale Bank),
3.80%, 12/6/95................................. $ 6,300,000
1,000 Chicago Tender Notes,
Ser. A (LC; Morgan Guaranty
Trust Co., Inc.), 3.75%, 5/1/96**.............. 1,000,000
1,800 Illinois Hlth. FAR,
Hosp. Sisters Svc. Proj., Ser. E,
VRDN* (Insd.; MBIA),
3.60%, 12/6/95................................. 1,800,000
2,800 Parkside Dev. Corp. Proj.,
VRDN* (LC: First Nat'l. Bank
of Chicago), 3.70%, 12/6/95.................... 2,800,000
------------
11,900,000
------------
Indiana--3.9%
3,830 Indiana Bond Bank,
Com. Sch. Fd., Adv. Pur. Fdg.,
(Insd.; AMBAC),
3.90%, 2/1/96**................................ 3,832,494
650 Mt. Vernon PCR, SWDR,
General Elec. Co. Proj.,
3.95%, 1/29/96................................. 650,000
------------
4,482,494
------------
Kansas--.7%
800 Butler Cnty. SWDR,
Texaco Inc. Refng. & Marketing
Proj., Ser. A, VRDN*,
3.85%, 12/1/95................................. 800,000
------------
Kentucky--6.7%
200 Boone Cnty. PCR,
Cincinnati Gas & Elec. Co.
Proj., Ser. A, VRDN*
(LC; Union Bank of Switzerland),
3.85%, 12/1/95................................. 200,000
4,000 Graves Cnty. IDA,
Seaboard Farms of Kentucky Inc.
Proj., VRDN* (LC; Bank of New
York), 3.85%, 12/7/95.......................... 4,000,000
3,600 Mayfield Cnty. IDR,
Seaboard Farms of Kentucky Inc.
Proj., VRDN* (LC; Bank of New
York), 3.85%, 12/7/95.......................... 3,600,000
------------
7,800,000
------------
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Louisiana--4.5%
$ 200 Calcasieu Parish Inc. IDB, Env.
Rev., Citgo Petroleum Corp.
Proj., VRDN* (LC; Banque
Nationale de Paris),
3.90%, 12/1/95................................. $ 200,000
2,950 Louisiana Public FAR,
Clge. & Univ. Equip.
& Cap. Proj., Ser. A,
VRDN* (Insd.; FGIC),
3.60%, 12/6/95................................. 2,950,000
1,000 Orleans Parish Sch. Brd.,
Ser. A (Insd.; MBIA),
7.00%, 6/1/96.................................. 1,035,881
1,000 St. Charles Parish PCR,
Shell Oil Co. NorCo. Proj.,
VRDN*,
3.80%, 12/1/95................................. 1,000,000
------------
5,185,881
------------
Maryland--2.8%
3,300 Anne Arundel Cnty. EDR,
Baltimore Gas & Elec. Co.
Proj.,
3.80%-3.95%,
12/13/95-1/29/96............................... 3,300,000
------------
Massachusetts--1.0%
1,165 Massachusetts Hsg. FAGR,
Single Fam. Mtg. Prog.,
4.15%, 6/1/96**................................ 1,165,000
------------
Minnesota--3.4%
3,000 Hubbard Cnty. SWDR,
Potlatch Corp. Proj.,
VRDN* (LC; Credit Suisse),
3.80%, 12/6/95................................. 3,000,000
250 Minnesota St. HFA,
Ser. D (Insd.; MBIA),
3.80%, 8/1/96.................................. 250,000
750 University of Minn., Univ. Revs.,
Ser. G, 3.65%, 2/1/96***....................... 750,000
------------
4,000,000
------------
Missouri--1.4%
Missouri EIERA, PCR,
Union Elec. Co. Proj.,
600 Ser. A (LC; Swiss Bank Corp.),
4.00%, 6/1/96***............................... 600,000
1,000 Ser. B (LC; Union Bank of
Switzerland), 4.00%, 6/1/96***................. 1,000,000
------------
1,600,000
------------
B-4
<PAGE>
November 30, 1995
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
GENERAL MUNICIPAL PORTFOLIO (cont'd)
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Nebraska--2.2%
$ 1,600 Nebraska HEL Prog.,
Ser. C, VRDN*
(CS; SLMA),
3.75%, 12/6/95................................. $ 1,600,000
1,000 Omaha Pub. Pwr. Dist., Elec.
Rev., Ser. A,
3.90%, 2/1/96.................................. 1,000,651
------------
2,600,651
------------
Nevada--.6%
700 Clark Cnty. AIR,
Sub Lien, Ser. A-2,
VRDN* (LC; Toronto Dominion
Bank), 3.75%, 12/6/95.......................... 700,000
------------
New Hampshire--1.8%
1,100 New Hampshire St. BFA, PCR,
Pub. Svc. Co. of New Hampshire
Proj., Ser. D, VRDN* (LC; Barclays
Bank PLC), 3.85%, 12/6/95...................... 1,100,000
1,000 New Hampshire St. HFA,
Single Fam. Mtg. Rev., Ser. F,
4.55%, 4/1/96**................................ 1,000,000
------------
2,100,000
------------
New Mexico--2.2%
2,600 Farmington PCR,
Arizona Pub. Svc. Co. Proj.,
Ser C,VRDN* (LC; Union Bank
of Switzerland), 3.80%, 12/1/95................ 2,600,000
------------
New York--4.5%
1,200 Nassau Cnty. TAN's,
Ser. B, dtd. 9/26/95,
4.50%, 4/15/96................................. 1,202,618
1,000 New York St. ERDA, PCR,
Rochester Gas & Elec. Corp.
Proj., (LC; Credit Suisse),
3.75%, 11/15/96***............................. 1,000,000
1,000 New York St. JDA, St. Gtd.,
Ser. B, VRDN*,
4.05%, 12/1/95................................. 1,000,000
2,000 New York St. PAR,
3.85%, 3/1/96***............................... 2,000,000
------------
5,202,618
------------
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Ohio--.9%
$ 1,000 Ohio St. Air Quality DAR,
JMG Fdg. Ltd. Proj., Ser. B,
VRDN* (LC; Societe Generale
Bank), 3.70%, 12/6/95.......................... $ 1,000,000
------------
Oregon--1.7%
Oregon St. GO, Ser. C,
1,000 Higher Ed.,
3.95%, 3/1/96.................................. 1,000,000
905 Pollution Ctl.,
8.75%, 6/1/96.................................. 927,454
------------
1,927,454
------------
Pennsylvania--6.3%
1,700 Emmaus GAR,
Ser. C-8, VRDN*
(LC; Midland Bank PLC),
3.80%, 12/6/95................................. 1,700,000
2,000 Pennsylvania St. HEA, SLR,
Ser. A, VRDN*
(CS; SLMA),
3.80%, 12/7/95................................. 2,000,000
1,000 Philadelphia TRAN's,
Ser. A, dtd. 7/6/95,
4.50%, 6/27/96................................. 1,003,027
2,000 Upper Allegheny JSA,
4.50%, 1/15/96**............................... 2,001,667
600 York Cnty. IDA, IDR,
Preston Trucking Co. Proj.,
VRDN* (LC; Mellon Bank),
3.65%, 12/1/95................................. 600,000
------------
7,304,694
------------
Rhode Island--.9%
1,000 Rhode Island HMFC,
Home Ownership Oppty. Prog.,
Ser. B, 3.90%, 6/27/96**....................... 1,000,000
------------
South Carolina--.8%
985 York Cnty. PCR,
Saluda River Proj., Ser. '84E,
3.80%, 2/15/96***.............................. 985,000
------------
Tennessee--3.7%
2,300 Hamilton Cnty. IDR,
Seaboard Feed of Chattanooga
Proj., VRDN* (LC; Bank of
New York), 3.85%, 12/7/95...................... 2,300,000
B-5
<PAGE>
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Tennessee (cont'd)
$ 2,000 Metropolitan Nashville Arpt.,
VRDN* (Insd.; FGIC),
3.65%, 12/6/95................................. $ 2,000,000
------------
4,300,000
------------
Texas--8.2%
1,000 Brazos HEA,
Ser. B-1, VRDN*
(CS; SLMA),
3.75%, 12/6/95................................. 1,000,000
2,300 Brazos River Auth., PCR,
Texas Utils. Elec. Co. Proj., Ser. A,
(LC; Canadian Imperial Bank),
3.95%, 2/8/96.................................. 2,300,000
300 Grapevine IDR,
American Airlines Inc. Proj.,
Ser. B-3, VRDN* (LC; Morgan
Guaranty Trust Co., Inc.),
3.85%, 12/1/95................................. 300,000
1,000 Harris Cnty. Hosp. Dist., Mtg. Rev.,
8.50%, 4/1/96.................................. 1,057,811
2,000 Texas A&M Univ., Perm.
Univ. Fd., Ser. B,
3.80%, 12/8/95................................. 2,000,000
790 Texas HEA, EEIR,
Ser. B, VRDN*
(Insd.; FGIC),
3.60%, 12/6/95................................. 790,000
2,000 Texas St. TRAN's,
Ser. A, dtd. 9/1/95,
4.75%, 8/30/96................................. 2,010,885
------------
9,458,696
------------
Utah--2.6%
1,000 Intermountain Pwr. Agy.,
PSR, Ser. E
(LC; Swiss Bank Corp.),
3.80%, 3/15/96***.............................. 1,000,000
2,000 Utah St. Brd. Regents SLR,
Ser. L, VRDN*
(Insd.; AMBAC),
3.85%, 12/6/95................................. 2,000,000
------------
3,000,000
------------
Washington--.5%
615 Washington St. HF Cmnty.,
Single Fam. Mtg. Prog., Ser. 1A,
4.10%, 6/1/96**................................ 615,000
------------
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Wisconsin--3.6%
$ 4,200 Wisconsin HFFAR,
Hosp. Sisters Svc. Proj.,
Ser. G, VRDN* (Insd.; MBIA),
3.60%, 12/6/95................................. $ 4,200,000
------------
Wyoming--.9%
1,000 Sweetwater Cnty. EIR,
Pacificorp Proj., Ser. A
(LC; Westdeutsche Landesbank),
3.90%, 1/26/96................................. 1,000,000
------------
Total Investments
(amortized cost--$114,491,607+)......................... 98.7% 114,491,607
Other Assets in Excess
of Other Liabilities.................................... 1.3 1,472,966
----- ------------
Total Net Assets
(applicable to 116,057,333 shares
outstanding at $1.00 per share)......................... 100.0% $115,964,573
===== ============
CALIFORNIA MUNICIPAL PORTFOLIO
California--98.8%
$ 1,000 Alameda Cnty. TA, STR,
(Insd.; FGIC),
4.50%, 5/1/96.................................. $ 1,003,236
500 California EFAR,
Stanford Univ. Proj., Ser. G.,
8.10%, 12/1/95................................. 518,777
1,000 California HFF,
Scripps Mem. Hosp. Proj., Ser. A,
VRDN* (LC; Morgan Guaranty
Trust Co., Inc.), 3.40%, 12/7/95............... 1,000,000
California HFFAR, Kaiser
Permanente Proj., VRDN*,
3,000 Ser. A, 3.45%, 12/6/95......................... 3,000,000
500 Ser. B, 3.45%, 12/6/95......................... 500,000
4,300 Mem. Hlth. Svcs. Proj.,
VRDN*,
3.45%, 12/6/95................................. 4,300,000
1,000 California Hsg. FAGR,
Home Mtg. Prog., Ser. E,
4.60%, 2/1/96**................................ 1,000,000
B-6
<PAGE>
November 30, 1995
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL PORTFOLIO (cont'd)
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
California PCFA, PCR,
Homestake Mining Proj.,
VRDN* (LC; Bank of Nova Scotia),
$ 2,200 Ser. 84A, 3.50%, 12/6/95....................... $ 2,200,000
800 Ser. 84B, 3.50%, 12/6/95....................... 800,000
Pacific Gas & Elec. Co. Proj.,
2,000 Ser. A (LC; Swiss Bank Corp.),
3.80%, 12/7/95................................. 2,000,000
1,500 Ser. C (LC; Credit Suisse),
3.55%, 12/11/95................................ 1,500,000
So. Cal. Edison Proj.,
2,000 Ser. B,
3.55%, 2/2/96.................................. 2,000,000
VRDN*,
100 Ser. B, 3.85%, 12/1/95......................... 100,000
500 Ser. C, 3.85%, 12/1/95......................... 500,000
200 Ser. D, 3.85%, 12/1/95......................... 200,000
4,400 California PCFA, PCR, RRR,
Wadham Energy Proj., Ser. C,
VRDN* (LC; Banque Nationale de
Paribas), 3.90%, 12/6/95....................... 4,400,000
California PCFA, RRR,
200 Burney Forest Prod. Proj., Ser. A,
VRDN* (LC; Nat'l. Westminster
Bank PLC), 3.85%, 12/1/95...................... 200,100
1,300 Delano Proj.,
VRDN* (LC; ABN-Amro Bank),
3.75%, 12/1/95................................. 1,300,000
600 Ultrapower Malaga Corp. Proj.,
VRDN* (LC; Bank of America),
Ser. B, 3.80%, 12/1/95......................... 600,000
1,100 California St. DWR,
Cent. Vy. Proj.,
VRDN* (LC; Canadian Imperial
Bank), 3.50%, 12/6/95.......................... 1,100,000
4,507 California St. DWR, Rev.,
3.50%-3.65%, 12/5/95-12/21/95.................. 4,507,000
5,700 California St. RAW's,
Ser. C, dtd. 7/26/94,
5.75%, 4/25/96................................. 5,749,840
California SCD Corp. Rev., Ind'l. Dev.,
445 Florestone Prod. Proj.,
VRDN* (LC; Bank of Tokyo),
3.95%, 12/6/95................................. 445,000
1,800 South Bay Circuits Proj.,
VRDN* (CS; California St. Tchrs.
Ret. Fd.), 3.95%, 12/6/95...................... 1,800,000
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 200 California SCD Auth., SWFR,
Chevron USA Inc. Proj.,
VRDN*, 3.70%, 12/1/95.......................... $ 200,000
3,000 Contra Costa TA, STR,
Ser. A, VRDN* (Insd.; FGIC),
3.45%, 12/6/95................................. 3,000,000
1,000 East Bay MUD,
3.50%, 1/22/96................................. 1,000,000
2,000 Loma Linda HR,
Loma Linda Univ. Med. Ctr.
Proj., Ser. C, VRDN*
(LC; Ind'l. Bank of Japan),
4.35%, 12/7/95................................. 2,000,000
900 Long Beach HFR,
Mem. Hlth. Svcs. Proj.,
VRDN*, 3.45%, 12/6/95.......................... 900,000
2,300 Los Angeles Cnty. DWP,
3.55%, 1/31/96................................. 2,300,000
680 Los Angeles Cnty. IDA, IDR,
Hon Industries Inc. Proj.,
VRDN*, 3.40%, 12/6/95.......................... 680,000
3,000 Los Angeles Cnty. Met. TA, Ser. A,
(LC; ABN-Amro Bank, Banque
Nationale de Paribas and Nat'l.
Westminster Bank PLC),
3.55%-3.70%, 12/6/95-12/18/95.................. 3,000,000
1,000 Metropolitan WD of So. California,
3.70%, 12/7/95................................. 1,000,000
1,000 Monterey Cnty. FAR,
Reclamation & Dist. Proj., VRDN*
(LC; Dai-Ichi Kangyo Bank),
4.15%, 12/7/95................................. 1,000,000
890 Morgan Hill Redev. Agy., Tax Alloc.,
Ojo De Agua Cmnty. Dev. Proj.,
7.875%, 3/1/96................................. 931,556
1,100 Northern California Pwr. Agy.,
PPR, (Insd.; AMBAC),
7.50%, 7/1/96.................................. 1,160,997
2,000 Sacramento Cnty. TRAN's,
dtd. 7/5/95, 4.75%, 10/4/96.................... 2,013,901
2,000 Sacramento MUD, Ser. I
(LC; Bayerische Landesbank
Girozentrale), 3.60%, 12/13/95................. 2,000,000
2,300 San Joaquin Cnty. TA, STR,
VRDN* (LC; Sumitomo Bank),
3.95%, 12/6/95................................. 2,300,000
500 Santa Ana HFR,
Multi Modal-Town & Ctry. Proj.,
VRDN* (LC; Banque Nationale de
Paribas), 3.70%, 12/1/95....................... 500,000
B-7
<PAGE>
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 5,700 Santa Clara Cnty. Fing. Auth., Lease
Rev., VMC Fac. Replacement Proj.,
Ser. B, VRDN* (LC; Union Bank
of Switzerland), 3.45%, 12/6/95................ $ 5,700,000
500 Santa Clara Vy. WD,
5.75%, 6/1/96.................................. 506,374
2,000 Ukiah Elec. Rev.,
Ser. A, 8.00%, 6/1/96.......................... 2,121,806
2,000 West Basin WD,
3.50%-3.70%, 1/24/96-2/26/96................... 2,000,000
------------
Total Investments
(amortized cost-$75,038,587+)......................... 98.8% $ 75,038,587
Other Assets in Excess
of Other Liabilities.................................. 1.2 873,500
----- ------------
Total Net Assets
(applicable to 75,933,638 shares
outstanding at $1.00 per share)....................... 100.0% $ 75,912,087
===== ============
NEW YORK MUNICIPAL PORTFOLIO
New York--101.1%
$ 2,000 Albany GO,
(Insd.; AMBAC),
3.65%, 1/15/96................................. $ 2,000,000
1,000 Albany Cnty. GO,
South Mall Constr. Proj.,
Ser. A (Insd.; FGIC),
4.30%, 4/1/96.................................. 1,001,378
1,000 Monroe Cnty. BAN's,
Ser. A, dtd. 6/8/95,
4.50%, 6/7/96.................................. 1,002,977
Nassau Cnty. BAN's,
1,000 Ser. E, dtd. 6/30/95,
4.25%, 3/15/96................................. 1,001,671
1,000 Ser. F, dtd. 8/30/95,
4.50%, 3/15/96................................. 1,001,824
1,000 Nassau Cnty. GO,
Ser. H (Insd.; MBIA),
3.80%, 6/15/96................................. 1,001,564
New York City GO,
200 Ser. A-7, VRDN*
(LC; Morgan Guaranty Trust
Co., Inc.), 3.70%, 12/1/95..................... 200,000
500 Ser. B-4, VRDN*
(LC; Union Bank of Switzerland),
4.00%, 12/1/95................................. 500,000
100 Ser. E-2, VRDN*
(LC; Ind'l. Bank of Japan),
3.85%, 12/1/95................................. 100,000
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 500 New York City IDA, CFR,
Childrens Oncology Soc. Proj.,
VRDN* (LC; Barclays Bank PLC),
3.45%, 12/6/95................................. $ 500,000
New York City IDA, IDR,
1,000 JFK Field Hotel Assoc. Proj.,
VRDN* (LC; Banque Indosuez),
3.60%, 12/6/95................................. 1,000,000
1,000 La Guardia Arpt. Assoc. Proj.,
VRDN* (LC; Banque Indosuez),
3.60%, 12/6/95................................. 1,000,000
700 New York City IDA, SFR,
Compagnie Nationale Air Proj.,
VRDN* (LC; Societe Generale Bank),
3.50%, 12/6/95................................. 700,000
2,000 New York City MFA,
3.80%-3.90%, 12/4/95-12/8/95................... 2,000,000
New York City MWFASSR, Ser. A,
1,500 7.00%, 6/15/96................................. 1,555,290
200 VRDN*, 4.00%, 12/1/95.......................... 200,000
1,000 New York City TAN's,
Ser. A, dtd. 8/2/95,
4.50%, 2/15/96................................. 1,001,368
New York City Trust CRR,
2,000 Carnegie Hall Proj., VRDN*
(LC; Dai-Ichi Kangyo Bank),
4.05%, 12/6/95................................. 2,000,000
1,500 Museum of Broadcasting Proj.,
VRDN* (LC; Sumitomo Bank),
4.00%, 12/6/95................................. 1,500,000
New York St. DAR,
1,100 Cornell Univ. Proj., Ser. B, VRDN*,
3.70%, 12/1/95................................. 1,100,000
2,615 Metropolitan Museum of Art Proj.,
Ser. B, VRDN* (Insd.; MBIA),
3.25%, 12/6/95................................. 2,615,000
1,400 Miriam Osborn Mem. Home Proj.,
Ser. A, VRDN* (LC; Banque
Nationale de Paribas),
3.60%, 12/6/95................................. 1,400,000
1,980 New York Univ. Proj.,
(Insd.; MBIA),
6.625%, 7/1/96................................. 2,059,890
Sloan Kettering Mem. Hosp. Proj.,
VRDN* (LC; Chemical Bank),
1,000 Ser. C, 3.65%, 12/8/95......................... 1,000,000
800 Ser. D, 3.65%, 12/13/95........................ 800,000
750 Spl. Oblig. Bonds, St. Univ. Edl.
Fac. Proj., Ser. A, 6.40%, 5/1/96.............. 758,094
B-8
<PAGE>
November 30, 1995
SCHEDULES OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
NEW YORK MUNICIPAL PORTFOLIO (cont'd)
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 500 New York St. EFC, PCR,
Revolving Fd. Pooled Ln. Prog.,
Ser. A, 3.70%, 9/15/96......................... $ 500,170
2,000 New York St. EFC, SWDR,
General Elec. Co. Proj., Ser. A,
3.65%, 12/13/95................................ 2,000,000
New York St. ERDA, PCR,
1,300 Cent. Hudson Gas & Elec. Co.
Proj., Ser. A, VRDN*
(LC; Union Bank of Switzerland),
3.80%, 12/7/95................................. 1,300,000
1,000 New York St. Elec. & Gas Co. Proj.,
Ser. B, 3.85%, 10/15/96***..................... 1,000,000
Rochester Gas & Elec. Co. Proj.,
VRDN*,
1,500 (LC; Bank of New York),
3.65%, 12/1/95................................. 1,500,000
1,000 (LC; Credit Suisse),
3.75%, 11/15/96***............................. 1,000,000
1,000 New York St. GO,
6.50%, 3/1/96.................................. 1,007,033
New York St. JDA, St. Gtd.,
VRDN*,
785 Ser. B, 4.05%, 12/1/95......................... 785,000
Spl. Purp.,
1,020 Ser. A, 4.05%, 12/1/95......................... 1,020,000
810 Ser. B, 4.05%, 12/1/95......................... 810,000
3,000 New York St. LGAC,
Ser. E, VRDN* (LC; Canadian
Imperial Bank), 3.55%, 12/6/95................. 3,000,000
New York St. MCF, FAGR,
1,200 Mt. Sinai Hosp. Proj., Ser. C,
VRDN*, 8.875%, 1/15/96......................... 1,258,976
1,000 Insd. Mtg. Hosp. Prog., Ser. A.,
8.50%, 1/15/96................................. 1,025,916
<CAPTION>
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
<C> <S> <C>
$ 1,000 New York St. PAR,
3.85%, 3/1/96***............................... $ 1,000,000
635 Niagra Cnty. IDA, IDR,
Pyron Corp. Proj., VRDN*
(LC; Chemical Bank),
3.65%, 12/6/95................................. 635,000
1,000 Port Auth. of New York & New Jersey,
Spl. Oblig. Bonds, Ser. 1, VRDN*,
3.65%, 12/1/95................................. 1,000,000
851 Rensselaer Cnty. GO,
Ser. A (Insd.; FGIC), 5.50%, 5/1/96............ 856,133
1,000 St. Lawrence Cnty. IDA, EIR,
Reynolds Metals Co. Proj., VRDN*
(LC; Royal Bank of Canada),
3.60%, 12/6/95................................. 1,000,000
1,000 Suffolk Cnty. IDA, IDR,
Nissequogue Cogen Ptnrs. Proj.,
VRDN* (LC; Toronto Dominion
Bank), 3.75%, 12/6/95.......................... 1,000,000
1,000 Suffolk Cnty. Wtr. Auth., BAN's,
VRDN*, dtd. 12/21/94,
3.65%, 12/6/95................................. 1,000,000
450 Walkill IDA, PCR,
Reynolds Metals Co. Proj., VRDN*
(LC; Nat'l. Westminster Bank PLC),
3.80%, 12/6/95................................. 450,000
750 Westchester Cnty. GO,
5.50%, 12/15/95................................ 750,466
------------
Total Investments
(amortized cost-$52,897,750+)........................... 101.1% $ 52,897,750
Other Liabilities in Excess
of Other Assets......................................... (1.1) (554,625)
----- ------------
Total Net Assets
(applicable to 52,366,926 shares
outstanding at $1.00 per share)......................... 100.0% $ 52,343,125
===== ============
</TABLE>
- --------------------------------------------------------------------------------
+ Federal income tax basis of portfolio securities is the same as for
financial reporting purposes.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date)
and/or whose interest rates vary with changes in a designated base rate
(such as the prime interest rate). Maturity shown is date of next rate
change.
** These issues carry a mandatory put feature. Date shown is the exercise date
of the put.
*** These issues carry an optional put feature. Date shown is the exercise date
of the put.
See accompanying notes to financial statements.
B-9
<PAGE>
General Abbreviations:
AIR Airport Improvement Revenue
AMBAC American Mortgage Bond Assurance Corporation
BAN Bond Anticipation Note
BFA Business Finance Authority
CFR Civic Facility Revenue
CRR Cultural Resources Revenue
CS Credit Support
DAR Dormitory Authority Revenue
DWP Department of Water & Power
DWR Department of Water Resources
EDR Economic Development Revenue
EEIR Educational Equipment & Improvement Revenue
EFAR Educational Facilities Authority Revenue
EFC Environmental Facilities Corporation
EIERA Environmental Improvement & Energy
Resource Authority
EIR Environment Improvement Revenue
ELR Educational Loan Revenue
ERDA Energy Research & Development Authority
FAR Finance Authority Revenue
FAGR Finance Agency Revenue
FGIC Financial Guaranty Insurance Corporation
GAR General Authority Revenue
GFR General Fund Revenue
GO General Obligation
HEA Higher Education Authority
HEL Higher Education Loan
HF Housing Finance
HFA Housing Finance Authority
HFF Health Facilities Financing
HFFAR Health Facilities Financing Authority Revenue
HFR Health Facilities Revenue
HMFC Housing & Mortgage Finance Corporation
HR Hospital Revenue
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue
JDA Job Development Authority
JSA Joint Sanitation Authority
LC Letter of Credit
LGAC Local Government Assistance Corporation
MBIA Municipal Bond Investors Assurance Corporation
MCF Medical Care Facilities
MFA Municipal Finance Authority
MUD Municipal Utility District
MWFASSR Municipal Water Finance Authority Sewer System
Revenue
PAR Power Authority Revenue
PCFA Pollution Control Financing Authority
PCC Pollution Control Corporation
PCR Pollution Control Revenue
PPR Public Power Revenue
PSR Power Supply Revenue
RAW Revenue Anticipation Warrant
RRR Resource Recovery Revenue
SCD Statewide Communities Development
SFR Special Facilities Revenue
SLMA Student Loan Marketing Association
SLR Student Loan Revenue
SWDR Solid Waste Disposal Revenue
SWFR Solid Waste Facilities Revenue
STR Sales Tax Revenue
TA Transportation Authority
TAN Tax Anticipation Note
TRAN Tax Revenue Anticipation Note
WD Water District
B-10
<PAGE>
November 30, 1995
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General California New York
Primary Government Municipal Municipal Municipal
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Assets
Investments, at value
(amortized cost-$1,678,187,666,
$114,911,861, $114,491,607,
$75,038,587 and $52,897,750,
respectively)........................ $1,678,187,666 $114,911,861 $114,491,607 $ 75,038,587 $52,897,750
Cash................................. 505,758 123,350 173,667 237,882 97,605
Receivable for investments sold...... -- -- 1,100,090 100,292 --
Receivable for capital stock sold.... 31,031,767 396,891 2,448,150 523,397 376,568
Interest receivable.................. 1,045,635 95,405 1,004,640 541,166 484,815
Deferred organization and
prepaid expenses..................... 62,165 5,564 2,988 2,274 2,577
-------------- ------------ ------------ ------------ -----------
Total Assets......................... 1,710,832,991 115,533,071 119,221,142 76,443,598 53,859,315
-------------- ------------ ------------ ------------ -----------
Liabilities
Payable for investments purchased.... -- -- 250,739 -- 504,230
Payable for capital stock redeemed... 35,848,885 6,700,816 2,812,594 401,356 913,553
Investment advisory fee payable...... 37,708 5,185 3,203 2,347 1,772
Distribution assistance fee payable.. 22,882 1,564 1,605 1,040 726
Shareholder services fee payable..... 75,554 4,468 5,645 3,771 2,316
Administrative services fee payable.. 4,576 313 321 208 145
Dividends payable.................... 3,131,422 206,292 140,284 92,337 65,064
Other payables and accrued
expenses............................. 582,603 39,403 42,178 30,452 28,384
-------------- ------------ ------------ ------------ -----------
Total Liabilities.................... 39,703,630 6,958,041 3,256,569 531,511 1,516,190
-------------- ------------ ------------ ------------ -----------
Net Assets
Par value ($.0001 per share,
10 billion shares authorized
for each portfolio).................. 167,117 10,860 11,606 7,593 5,237
Paid-in-surplus...................... 1,670,962,176 108,563,470 116,045,062 75,926,044 52,361,689
Accumulated undistributed net
realized gain (loss)
on investments....................... 68 700 (92,095) (21,550) (23,801)
-------------- ------------ ------------ ------------ -----------
Total Net Assets..................... $1,671,129,361 $108,575,030 $115,964,573 $75,912,087 $52,343,125
============== ============ ============ ============ ============
Fund shares outstanding.............. 1,671,168,463 108,596,523 116,057,333 75,933,638 52,366,926
-------------- ------------ ------------- ------------ ------------
Net asset value, offering and
redemption price per share $1.00..... $1.00 $1.00 $1.00 $1.00 $1.00
============== ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
B-11
<PAGE>
Year ended November 30, 1995
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General California New York
Primary Government Municipal Municipal Municipal
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Investment Income
Interest................................... $95,791,581 $6,569,203 $5,063,373 $2,471,976 $1,997,808
----------- ---------- ---------- ---------- ----------
Operating Expenses
Investment advisory fee (note 2a).......... 6,577,551 549,734 619,378 319,052 261,993
Distribution assistance fee (note 2b)...... 4,231,722 296,807 336,589 169,188 139,776
Transfer agent and dividend
disbursement agent fees................... 2,405,213 100,539 97,057 24,360 30,189
Administrative services fee................ 551,441 36,391 42,996 22,243 17,419
Registration fees.......................... 464,679 33,314 78,474 5,192 1,675
Shareholder services fee................... 295,993 21,429 24,182 12,678 12,895
Reports and notices to shareholders........ 145,964 5,998 7,762 4,609 4,084
Custodian fees............................. 109,932 40,946 39,797 3,657 8,310
Auditing, consulting and tax return
preparation fees.......................... 40,884 17,533 17,233 17,555 17,534
Legal fees................................. 21,563 5,661 3,255 2,547 2,403
Directors' fees and expenses............... 18,090 18,090 18,090 17,277 17,277
Miscellaneous.............................. 133,160 9,898 10,339 11,003 12,422
----------- ---------- ---------- ---------- ----------
Total operating expenses................. 14,996,192 1,136,340 1,295,152 609,361 525,977
Less: Investment advisory fee
waived (note 2a)........................ --- (20,074) (112,617) (83,794) (110,219)
----------- ---------- ---------- ---------- ----------
Net operating expenses................... 14,996,192 1,116,266 1,182,535 525,567 415,758
----------- ---------- ---------- ---------- ----------
Net investment income.................... 80,795,389 5,452,937 3,880,838 1,946,409 1,582,050
----------- ---------- ---------- ---------- ----------
Net realized gain (loss)
on security transactions
(note 2e)............................... 68 700 (33,497) (618,234) (19,669)
----------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations................. $80,795,457 $5,453,637 $3,847,341 $1,328,175 $1,562,381
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
B-12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Primary Portfolio Government Portfolio
Year ended November 30, Year ended November 30,
------------------------------------ -------------------------------
1995 1994 1995 1994
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations
Net investment income.................... $ 80,795,389 $ 47,757,069 $ 5,452,937 $ 3,944,731
Net realized gain (loss)
on security transactions................ 68 482 700 494
--------------- --------------- ------------- -------------
Net increase in net assets
resulting from operations............... 80,795,457 47,757,551 5,453,637 3,945,225
--------------- --------------- ------------- -------------
Dividends and Distributions
to Shareholders
Net investment income.................... (80,795,389) (47,757,069) (5,452,937) (3,944,731)
From other sources....................... -- (22,925) -- (19,562)
Net realized gains....................... (482) (519) (494) --
--------------- --------------- ------------- -------------
Total dividends and
distributions to
shareholders.......................... (80,795,871) (47,780,513) (5,453,431) (3,964,293)
--------------- --------------- ------------- -------------
Fund Share Transactions
Net increase (decrease) in
net assets derived from
fund share transactions................. 217,361,004 39,885,122 (4,642,930) (14,644,277)
--------------- --------------- ------------- -------------
Increase due to voluntary capital
contribution by adviser (note 2e)..... -- -- -- --
--------------- --------------- ------------- -------------
Total increase (decrease) in
net assets............................ 217,360,590 39,862,160 (4,642,724) (14,663,345)
Net Assets
Beginning of year........................ 1,453,768,771 1,413,906,611 113,217,754 127,881,099
--------------- --------------- ------------- -------------
End of year.............................. $ 1,671,129,361 $ 1,453,768,771 $ 108,575,030 $ 113,217,754
=============== =============== ============= =============
Shares Issued and Redeemed
(all at $1.00 per share)
Issued.................................. 8,545,299,477 7,161,861,617 561,063,508 532,176,675
Issued in reinvestment of
dividends and distributions............ 77,748,816 44,984,290 5,335,254 3,749,627
Redeemed................................ (8,405,687,289) (7,166,960,785) (571,041,692) (550,570,579)
--------------- --------------- ------------- -------------
Net increase (decrease)............... 217,361,004 39,885,122 (4,642,930) (14,644,277)
=============== =============== ============= =============
</TABLE>
See accompanying notes to financial statements.
B-13
<PAGE>
<TABLE>
<CAPTION>
General Municipal Portfolio California Municipal Portfolio New York Municipal Portfolio
Year ended November 30, Year ended November 30, Year Ended November 30,
--------------------------- --------------------------- ----------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income................ $ 3,880,838 $ 2,339,750 $ 1,946,409 $ 1,213,588 $ 1,582,050 $ 950,379
Net realized gain (loss)
on security transactions............ (33,497) 541 (618,234) 1,178 (19,669) 1,510
------------ ------------ ------------ ------------ ------------- -----------
Net increase in net assets
resulting from operations........... 3,847,341 2,340,291 1,328,175 1,214,766 1,562,381 951,889
------------ ------------ ------------ ------------ ------------- -----------
Dividends and Distributions
to Shareholders
Net investment income................ (3,880,838) (2,339,750) (1,946,409) (1,213,588) (1,582,050) (950,379)
From other sources................... -- -- -- -- -- --
Net realized gains................... -- -- -- -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Total dividends and
distributions to
shareholders...................... (3,880,838) (2,339,750) (1,946,409) (1,213,588) (1,582,050) 950,379
------------ ------------ ------------ ------------- ------------- ------------
Fund Share Transactions
Net increase (decrease) in
net assets derived from
fund share transactions............. 7,256,685 (931,784) 14,607,520 (1,019,116) 4,385,876 5,739,456
----------- ------------ ------------ ------------- ------------- ------------
Increase due to voluntary capital
contribution by adviser (note 2e). -- -- 604,407 -- -- --
------------ ------------ ------------ ------------- ------------- ------------
Total increase (decrease) in
net assets....................... 7,223,188 (931,243) 14,593,693 (1,017,938) 4,366,207 5,740,966
Net Assets
Beginning of year................... 108,741,385 109,672,628 61,318,394 62,336,332 47,976,918 42,235,952
------------ ------------ ------------ ------------ ------------- ------------
End of year......................... $115,964,573 $108,741,385 $ 75,912,087 $ 61,318,394 $ 52,343,125 $ 47,976,918
============ ============ ============ ============ ============= ============
Shares Issued and Redeemed
(all at $1.00 per share)
Issued............................. 667,188,766 492,775,657 296,613,031 248,723,997 303,848,325 258,534,314
Issued in reinvestment of
dividends and distributions....... 3,738,051 2,232,370 1,848,545 1,143,418 1,487,169 888,182
Redeemed........................... (663,670,132) (495,939,811) (283,854,056) (250,886,531) (300,949,618) (253,683,040)
------------ ------------ ------------ ------------ ------------- ------------
Net increase (decrease).......... 7,256,685 (931,784) 14,607,520 (1,019,116) 4,385,876 5,739,456
============ ============ ============ ============ ============= ============
</TABLE>
B-14
<PAGE>
November 30, 1995
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Quest Cash Reserves, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as an open-end management investment company. The Fund has
five portfolios (the "Portfolio"): the Primary Portfolio ("Primary"), the
Government Portfolio ("Government"), the General Municipal Portfolio
("General"), the California Municipal Portfolio ("California") and the New York
Municipal Portfolio ("New York"). Each Portfolio is considered to be a
separate entity for financial reporting and tax purposes. OpCap Advisors (the
"Adviser") and OCC Distributors (the "Distributor"), both majority-owned (99%)
subsidiaries of Oppenheimer Capital, serve as each Portfolio's adviser and
distributor, respectively. 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
Each Portfolio values its investments on the basis of amortized cost which
approximates market value.
(b) Federal Income Taxes
Each Portfolio intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and distributes all
of its taxable income to its shareholders; accordingly, no Federal income tax
provision is required.
(c) Deferred Organization Expenses
The following costs were incurred by each Portfolio, respectively, in
connection with its organization: Primary--$124,000, Government--$800,
General--$9,000, California--$19,000 and New York--$21,000. These costs have
been deferred and are being amortized to expense on a straight line basis over
sixty months from commencement of each Portfolio's operations.
(d) Security Transactions and Other Income
Security transactions are accounted for on the trade date. Cost of
securities sold is determined on the basis of identified cost. Interest income
is accrued as earned. Premiums are amortized by each Portfolio and discounts
are accreted by Primary and Government to interest income over the lives of the
respective securities.
(e) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly by
each Portfolio. Distributions of net realized short-term capital gains are
declared and paid annually by each Portfolio.
(f) Repurchase Agreements
Each Portfolio may enter into repurchase agreements as part of its
investment program. The Portfolio's custodian takes possession of the
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 of the obligor to repurchase, the
Portfolio 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.
B-15
<PAGE>
(g) Allocation of Expenses
Expenses specifically identifiable to a particular Portfolio are borne by
that Portfolio. Other expenses are allocated to each Portfolio based on its
net assets in relation to the total net assets of all the applicable Portfolios
or another reasonable basis.
2. Investment Advisory Fee, Distribution Plan and Other Transactions with
Affiliates
(a) Under the Investment Advisory Agreement, each Portfolio pays the Adviser
an investment advisory fee monthly at the annual rate of .50% of the first $100
million of average daily net assets, .45% on the next $200 million of average
daily net assets, and .40% on average daily net assets in excess of $300
million. The Adviser has agreed to reimburse each Portfolio to the extent that
the combined operating expenses of the Portfolio exceed 1.00% of its average
daily net assets for any fiscal year. For the year ended November 30, 1995,
the Adviser waived $20,074, $112,617, $83,794 and $110,219 in investment
advisory fees for Government, General, California and New York, respectively.
(b) The Fund has adopted a Distribution Assistance Plan (the "Plan")
pursuant to which each Portfolio pays the Adviser a fee monthly at an annual
rate of .25% of each Portfolio's average daily net assets and the Adviser uses
such amounts in their entirety for (i) payments to broker-dealers, banks and
other financial intermediaries for their distribution assistance provided to
the Portfolio and (ii) otherwise promoting the sale of shares of the Fund. For
the year ended November 30,1995, the vast majority of all fees under the Plan
were paid by the Adviser to Oppenheimer & Co., Inc., an affiliated
broker-dealer of the Adviser.
(c) A portion of the shareholder services fee for each Portfolio is payable
to Oppenheimer & Co., Inc. Each Portfolio reimburses Oppenheimer & Co., Inc.
for a portion of its costs in providing it with shareholder services; for the
year ended November 30, 1995, such reimbursements were: Primary $281,524;
Government $18,693; General $22,314; California $12,642; and New York $9,181.
(d) Each Portfolio pays Oppenheimer & Co., Inc. and certain other
broker-dealers for administrative services performed for shareholder accounts;
for the year ended November 30, 1995, payments to Oppenheimer & Co., Inc. were:
Primary $486,997; Government $30,484; General $37,882; California $22,006; and
New York $15,049.
(e) On December 7, 1994 the Adviser voluntarily purchased from the
California Municipal Portfolio $1,000,000 par, Orange County Tax and Revenue
Anticipation Fixed Rate Notes, 4.50% coupon maturing July 19, 1995 and
$1,000,000 par, Orange County Tax and Revenue Anticipation Floating Rate Notes
at an amount $604,407 in excess of the securities' fair market value. The
Portfolio recognized a realized loss on the sale and received a capital
contribution of an equal amount from the Adviser. For tax purposes, the capital
contribution was applied against the realized losses for the year ended
November 30, 1995. Accordingly, such amount has been reclassified from
paid-in-surplus to accumulated undistributed net realized loss on investments
in the Statement of Assets and Liabilities.
3. Purchases and Sales of Securities
For the year ended November 30, 1995, purchases and sales/maturities of
investment securities were: Primary $9,736,213,188 and $9,600,638,852,
respectively; Government $4,638,483,933 and $4,640,660,354, respectively;
General $559,109,333 and $554,830,890, respectively; California $302,827,251
and $286,833,293, respectively; and New York $253,352,155 and $246,642,194,
respectively.
4. Financial Instruments and Associated Risks
Each Portfolio invests in issues which mature in thirteen months or less and
are rated high quality by a nationally-recognized rating organization or, if
not rated, are judged by the Adviser to be of comparable quality. Primary, in
pursuing its policy of portfolio diversification, may have industry
concentrations in excess of 5%; at November 30, 1995, such concentrations were
Banking--34.4%, Finance--14.9%, Sovereign--11.5%, Brokerage--10.2%,
Automotive--7.6% and
B-16
<PAGE>
November 30, 1995
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Health/Hospital--6.6%. Government's portfolio is concentrated in issues of, or
guaranteed by, the U.S. Government and/or its agencies and is diversified with
respect to its investments in repurchase agreements. General maintains a
diversified portfolio of short-term obligations issued by states, territories
and possessions of the United States and by the District of Columbia and by
their political subdivisions and duly constituted authorities. California and
New York maintain non-diversified portfolios of short-term obligations issued by
the States of California and New York, respectively, and their political
subdivisions. Issuers' abilities to meet their obligations may be affected by
economic and political developments in a specific state, region or industry.
Certain short-term debt obligations held by the Portfolios may be entitled to
the benefit of standby letters of credit or other guarantees of banks or other
financial institutions.
5. Capital Loss Carryforward
At November 30, 1995, accumulated net realized capital loss carryforwards
available as a reduction against future net realized capital gains for Federal
income tax puposes were: General--$92,095 of which $13,684 will expire in 1997,
$29,512 will expire in 1998, $1,302 will expire in 1999, $13,801 will expire in
2000, $299 will expire in 2001 and $33,497 will expire in 2003; California--
$21,550 of which $730 will expire in 1999, $5,856 will expire in 2000, $1,137
will expire in 2001 and $13,827 will expire in 2003; and New York--$23,801 of
which $3,198 will expire in 2000, $934 will expire in 2001 and $19,669 will
expire in 2003.
B-17
<PAGE>
Financial Highlights (For a share outstanding throughout each year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO
INCOME FROM DIVIDENDS AVERAGE
INVESTMENT OPERATIONS AND DISTRIBUTIONS NET ASSETS
---------------------------------- -------------------------------- --------------------
Divi- Distri-
dends to butions to
to Share- Distri- Share- Net
Net Asset Net Realized holders butions to holders Asset Net Assets,
Value, Net Gain/(Loss) Total from from Net holders from Net Value, End of Net Net
Beginning Investment on Security Investment Investment from Other Realized End of Total Year Operating Investment
of Year Income Transactions Operations Income Sources Gains Year Return* (millions) Expenses Income
--------- ---------- ------------ ---------- ---------- ---------- ---------- -------- ------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Primary Portfolio
Year
ended
November
30,
1995 $1.00 $0.051 $0.000 (1) $0.051 ($0.051) -- ($0.000)(1) $1.00 5.19% $1,671.1 0.94%(2) 5.07%(2)
1994 1.00 0.032 0.000 (1) 0.032 (0.032) ($0.000)(1) (0.000)(1) 1.00 3.26% 1,453.8 0.91% 3.21%
1993 1.00 0.024 0.000 (1) 0.024 (0.024) (0.000)(1) (0.000)(1) 1.00 2.44% 1,413.9 0.90% 2.41%
1992 1.00 0.033 0.000 (1) 0.033 (0.033) -- (0.000)(1) 1.00 3.38% 1,168.3 0.88% 3.34%
1991 1.00 0.057 (0.000)(1) 0.057 (0.057) -- -- 1.00 5.89% 1,249.0 0.86% 5.74%
</TABLE>
(1) Less than $.0005 per share.
(2) Average net assets for the year ended November 30, 1995 were
$1,594,387,722.
<TABLE>
<CAPTION>
Government Portfolio
Year
ended
November
30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $1.00 $0.049(2) $0.000(1) $0.049 ($0.049) -- ($0.000)(1) $1.00 5.02% $108.6 1.00%(2,3)4.91%(2,3)
1994 1.00 0.031(2) 0.000(1) 0.031 (0.031) ($0.000)(1) -- 1.00 3.12% 113.2 0.95%(2) 3.08%(2
1993 1.00 0.022 -- 0.022 (0.022) (0.000)(1) -- 1.00 2.26% 127.9 1.00% 2.24%
1992 1.00 0.032(2) 0.000(1) 0.032 (0.032) -- (0.000)(1) 1.00 3.24% 131.7 0.93%(2) 3.23%(2)
1991 1.00 0.055(2) -- 0.055 (0.055) -- -- 1.00 5.69% 142.2 0.84%(2) 5.62%(2)
</TABLE>
(1) Less than $.0005 per share.
(2) Reflects a waiver of $.0002, $.0002, $.0002 and $.001 per share,
respectively, in advisory fees in effect during each year. Had such waivers
not occurred, the ratio of net operating expenses would have been 1.02%,
0.97%, 0.94% and 0.92%, respectively, and the ratio of net investment income
would have been 4.89%, 3.06%, 3.22% and 5.54%, respectively.
(3) Average net assets for the year ended November 30, 1995 were $111,066,046.
- ---------------
* Assumes reinvestment of all dividends and distributions.
B-18
<PAGE>
Financial Highlights (For a share outstanding throughout each period (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO
General Municipal Portfolio
Year ended November 30,
INCOME FROM AVERAGE
INVESTMENT OPERATIONS NET ASSETS
------------------------------------ --------------------
Dividends to
Net Asset Net Realized Shareholders Net Asset Net Assets,
Value, Net Gain/(Loss) Total from from Net Capital Value, End of Net Net
Beginning Investment on Security Investment Investment Contribution End of Total Year Operating Investment
of Year Income Transactions Operations Income by Advisor Period Return* (millions) Expenses Income
--------- ---------- ------------- ---------- ------------ ------------ --------- ------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $1.00 $0.031(1) ($0.000)(2) $0.031 ($0.031) -- $1.00 3.11% $116.0 0.93%(1,3)3.07%(1,3)
1994 1.00 0.020(1) 0.000 (2) 0.020 (0.020) -- 1.00 2.04% 108.7 0.90%(1) 2.01%(1)
1993 1.00 0.017(1) (0.000)(2) 0.017 (0.017) -- 1.00 1.74% 109.7 0.98%(1) 1.73%(1)
1992 1.00 0.026(1) (0.000)(2) 0.026 (0.026) -- 1.00 2.66% 112.9 0.90%(1) 2.62%(1)
1991 1.00 0.042(1) 0.000 (2) 0.042 (0.042) -- 1.00 4.24% 100.1 0.88%(1) 4.20%(1)
</TABLE>
(1) Reflects a waiver of $.001, $.001, $.0003, $.001 and $.001 per share,
respectively, in advisory fees in effect during each year. Had such waivers not
occurred, the ratio of net operating expenses would have been 1.02%, 1.01%,
1.01%, 1.00% and 0.98%, respectively and the ratio of net investment income
would have been 2.98%, 1.90%, 1.70%, 2.52% and 4.10%, respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were
$126,528,413.
<TABLE>
<CAPTION>
California Municipal Portfolio
Year ended November 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $1.00 $0.031(1) ($0.008) $0.023 ($0.031) $0.008 $1.00 3.10% $75.9 0.82%(1,2) 3.05%(1,2)
1994 1.00 0.020(1) 0.000(3) 0.020 (0.020) -- 1.00 1.99% 61.3 0.85%(1) 1.99%(1)
1993 1.00 0.017(1) (0.000)(3) 0.017 (0.017) -- 1.00 1.76% 62.3 0.85%(1) 1.75%(1)
1992 1.00 0.025(1) (0.000)(3) 0.025 (0.025) -- 1.00 2.57% 61.2 0.60%(1) 2.51%(1)
March 20, 1991 (4)
to November
30, 1991 1.00 0.026(1) (0.000)(3) 0.026 (0.026) -- 1.00 4.24%(5) 45.4 0.54%(1,5) 3.75%(1,5)
</TABLE>
(1) Reflects a waiver of $.001, $.001, $.001 and $.004 per share in advisory
fees and $.004 per share in advisory fees and reimbursement of other operating
expenses, respectively, in effect during each period. Had such waivers and
reimbursements not occurred, the ratio of net operating expenses would have
been 0.95%, 0.97%, 0.98%, 1.02% and 1.08%, respectively and the ratio of net
investment income would have been 2.92%, 1.87%, 1.62%, 2.09% and 3.21%,
respectively.
(2) Average net assets for the year ended November 30, 1995 were $63,810,311.
(3) Less than $.0005 per share.
(4) Commencement of operations.
(5) Annualized.
<TABLE>
<CAPTION>
New York Municipal Portfolio
Year ended November 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $1.00 $0.030(1) ($0.000)(2) $0.030 ($0.030) -- $1.00 3.07% $52.3 0.79%(1,3) 3.02%(1,3)
1994 1.00 0.019(1) 0.000 (2) 0.019 (0.019) -- 1.00 1.92% 48.0 0.82%(1) 1.90%(1)
1993 1.00 0.016(1) (0.000)(2) 0.016 (0.016) -- 1.00 1.66% 42.2 0.79%(1) 1.64%(1)
1992 1.00 0.025(1) (0.000)(2) 0.025 (0.025) -- 1.00 2.56% 32.9 0.74%(1) 2.43%(1)
April 10, 1991 (4) to
November 30, 1991 1.00 0.024(1) (0.000)(2) 0.024 (0.024) -- 1.00 4.29%(5) 18.4 0.56%(1,5) 3.80%(1,5)
</TABLE>
(1) Reflects a waiver of $.002, $.002, $.002 and $.005 per share in advisory
fees and $.006 per share in advisory fees and reimbursement of other operating
expenses, respectively, in effect during each period. Had such waivers and
reimbursements not occurred, the ratio of net operating expenses would have
been 1.00%, 1.01%, 1.03%, 1.19% and 1.43%, respectively and the ratio of net
investment income would have been 2.81%, 1.71%, 1.40%, 1.98% and 2.93%,
respectively.
(2) Less than $.0005 per share.
(3) Average net assets for the year ended November 30, 1995 were $52,398,588.
(4) Commencement of operations.
(5) Annualized.
* Assumes reinvestment of all dividends and distributions.
B-19
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors
of Quest Cash Reserves, Inc.
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 Primary
Portfolio, the Government Portfolio, the General Municipal Portfolio, the
California Municipal Portfolio and the New York Municipal Portfolio
(constituting Quest Cash Reserves, Inc., hereafter referred to as the
"Portfolio") at November 30, 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 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
Portfolio'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 November 30, 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
January 19, 1996
B-20
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Quest Cash Reserves, Inc.
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 Primary
Portfolio, the Government Portfolio, the General Municipal Portfolio, the
California Municipal Portfolio and the New York Municipal Portfolio
(constituting Quest Cash Reserves, Inc., hereafter referred to as the
"Portfolio") at November 30, 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 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
Portfolio'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 November 30, 1995 by
correspondence with the custodian and brokers, 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 10036
January 19, 1996
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS:
Included in the Prospectus:
Financial Highlights
Included in Part B:
AUDITED FINANCIALS: Schedules of Investments, Statements of
Assets and Liabilities, Statement of Operations, Statement of
Changes in Net Assets, Notes to the Financial Statements,
Financial Highlights, Report of Independent Accountants for the
fiscal year ended November 30, 1995.
Included in Part C:
None
EXHIBITS:
(1) Articles of Incorporation.
(2) Bylaws of Registrant.
(3) Not Applicable.
(4) Not Applicable.
(5) Advisory Agreement.
(6) (a) Distribution Agreement.
(b) Dealer Agreement.
(7) Not Applicable.
(8) Custody Agreement.
(9) Not Applicable.
C-1
<PAGE>
(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) Not Applicable.
(15) Distribution Assistance and Administrative Services Plan Pursuant
to Rule 12b-1.
(16) Performance Computations.^
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
Number of Record
Holders as of
Title of Class March 7, 1996
-------------- -------------
Common Stock Primary Portfolio.....................115,289
Common Stock Government Portfolio....................2,814
Common Stock General Municipal Portfolio.............2,966
Common Stock California Municipal Portfolio..........1,161
Common Stock New York Municipal Portfolio............1,702
ITEM 27. INDEMNIFICATION
See Article Eighth, Sections (6) and (7) of Registrant's Articles of
Incorporation, Exhibit 1.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Fund" in the Prospectus and "Investment
Management and Other Services" in the Additional Statement regarding
the business of the investment
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adviser. SET FORTH BELOW IS information as to the business,
profession, vocation or employment of a substantial nature of each of
the officers and directors of the investment adviser.
Name & Current Position with OpCap Advisors Other Business and Connections
During the Past Two Years
- ------------------------------------------- ------------------------------
Robert J. Bluestone, Director of Fixed Managing Director of
Income Management Oppenheimer Capital; Director
of Oppenheimer Capital Trust
Company.
Eugene D. Brody, Director of Options and Managing Director of
Futures Management Oppenheimer Capital.
Thomas E. Duggan, General Counsel & Secretary Managing Director & General
Counsel of Oppenheimer
Capital; Assistant Secretary
of Oppenheimer Financial Corp.
Linda S. Ferrante, Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Bernard H. Garil, President Senior Vice President of
Oppenheimer Capital; Director
of Oppenheimer Capital Trust
Company.
John Giusio, Portfolio Manager Vice President of Oppenheimer
Capital.
Richard J. Glasebrook, II, Portfolio Manager Managing Director of
Oppenheimer Capital.
Colin Glinsman, Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Louis Goldstein, Assistant Portfolio Manager Senior Vice President of
Oppenheimer Capital.
Matthew Greenwald, Portfolio Manager Vice President of Oppenheimer
Capital.
Vikki Y. Hanges, Portfolio Manager Vice President of Oppenheimer
Capital.
Joseph M. LaMotta, Chairman President of Oppenheimer
Capital; Director & Executive
Vice President of Oppenheimer
Financial Corp. and
Oppenheimer Group, Inc.;
General Partner of Oppenheimer
& Co., L.P.; Director of
Oppenheimer Capital Trust
Company; Director and
President of Oppenheimer
Capital Limited.
George A. Long, Director of Research Managing Director of
Oppenheimer Capital.
Elisa A. Mazen, Portfolio Manager Vice President of Oppenheimer
Capital International
Division.
Timothy J. McCormack, Portfolio Manager Vice President of Oppenheimer
Capital; formerly Assistant
Vice President of Oppenheimer
Capital.
Susan A. Murphy, President, OCC President of OCC Cash
Cash Management Services Management Services and
Oppenheimer Capital Trust
Company
Eileen Rominger, Portfolio Manager Managing Director of
Oppenheimer Capital,
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Sheldon M. Siegel, Treasurer and Managing
Chief Financial Officer Director/Treasurer/Chief
Financial Officer of
Oppenheimer Capital; Director
of Oppenheimer Captial Trust
Company; Treasurer and Chief
Financial Officer of
Oppenheimer Capital Limited.
Bruce E. Ventimiglia, Chief Operating General Partner of Saratoga
Officer for Wrap Fee Products Capital Management; Senior
Vice President/Agent of OCC
Distributors.
Jeffrey Whittington, Portfolio Manager Senior Vice President of
Oppenheimer Capital.
The address of OpCap Advisors is 200 Liberty Street, New York, New York
10281.
ITEM 29. PRINCIPAL UNDERWRITER
(a) OCC Distributors acts as principal underwriter for the
Registrant, Quest for Value Dual Purpose Fund, 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 OCC Distributors, Registrant's Principal
Underwriter; THE PRINCIPAL BUSINESS ADDRESS OF EACH IS ONE WORLD
FINANCIAL CENTER, NEW YORK, NY, 10281:
Positions and Offices with Positions and Offices with
Name Underwriter Registrant
- ---------------- ---------------- -------------------
Oppenheimer Capital General Partner None
Oppenheimer
Financial Corp. General Partner None
Peter Muratore President None
Sheldon M. Siegel Treasurer Treasurer
Thomas E. Duggan Secretary Assistant Secretary
(c) Not applicable.
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ITEM 30. LOCATION OF REQUIRED RECORDS -- RULE 31A-1
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 01271
Will maintain records required by Rule 31a-1(b)(1), (b)(2), (b)(3),
(b)(6), (b)(7) and (b)(8).
OpCap Advisors
One World Financial Center
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 31. 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 Director or
Directors when requested in writing to do so by the holders of at
least 10% of the Registrant's outstanding shares of common stock.
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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 the State of New York on the 21
day of March, 1996.
OCC CASH RESERVES, INC.
/s/ Joseph M. La Motta
-----------------------------
Joseph M. La Motta, President
Attest:
/s/ 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:
OCC CASH RESERVES, INC.
Date
/s/ Joseph M. La Motta 3/21/96
- ---------------------------------------- -------------------
Joseph M. La Motta, President, Director
/s/ Paul Y. Clinton 3/21/96
- ---------------------------------------- -------------------
Paul Y. Clinton, Director
/s/ Thomas T. Courtney 3/21/96
- ---------------------------------------- -------------------
Thomas T. Courtney, Director
/s/ Lacy B. Herrmann 3/21/96
- ---------------------------------------- -------------------
Lacy B. Herrmann, Director
/s/ George Loft 3/21/96
- ---------------------------------------- -------------------
George Loft, Director
/s/ Deborah Kaback 3/21/96
- ---------------------------------------- -------------------
Deborah Kaback, Secretary
/s/ Sheldon Siegel 3/21/96
- ---------------------------------------- -------------------
Sheldon Siegel, Treasurer
<PAGE>
OCC CASH RESERVES, INC.
INDEX TO EXHIBITS
EXHIBIT NO.
(1) Articles of Incorporation
(2) Bylaws
(5) Advisory Agreement
(6) (a) Distribution Agreement
(b) Dealer Agreement
(8) Custody Agreement
(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.
(15) Distribution Assistance and Administrative Services Plan Pursuant to
Rule 12b-1.
(16) Performance Computations
<PAGE>
QUEST CASH RESERVES, INC.
ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, Jay A. Radov, whose address is 1100 Charles
Center South, 36 South Charles Street, Baltimore, Maryland 21201, being at least
eighteen years of age, as incorporator, does hereby form a corporation under and
by virtue of the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
Quest Cash Reserves, Inc.
THIRD: a) The purposes for which and any of which the Corporation is
formed and the business and objects to be carried on and promoted by it are:
1) To engage generally in the business of investing, reinvesting, owning,
holding and trading in securities, as defined in the Investment Company Act of
1940, as from time to time amended (hereinafter referred to as the "1940 Act")
or repurchase agreements, to issue redeemable securities, and to engage
generally in the business of an open-end investment company of the management
type.
2) To acquire by purchase, subscription or otherwise, and to receive,
hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or
otherwise dispose of or deal in and with any of the shares of capital stock, or
any voting trust certificates or depository receipts in respect of the shares of
capital stock, scrip, warrants, rights, options, bonds, debentures, notes, trust
receipts, and other securities, obligations, chooses in action and evidences of
indebtedness or other rights in or interests issued or created by any
corporation, joint stock company, syndicate, association, firm, trust,
partnership, join venture or person, public or private, or by the government of
the United States of America, or by any foreign government, or by any state,
territory, province,
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municipality or other political subdivision, or by any governmental agency, or
by any other entity, and to issue in exchange therefor or in payment thereof its
own capital stock, bonds or other obligations or securities, or otherwise pay
therefor in money or other property; to possess and exercise as owner thereof
all the rights, powers and privileges of ownership including the right to
execute consents and vote thereon, and to do any and all acts and things
necessary or advisable for the preservation, protection, improvement and
enhancement in value thereof.
3) To purchase, redeem or otherwise acquire, and to hold, sell or
otherwise dispose of, and to retire and reissue, shares of its own stock of any
class and any other securities issued by it in any manner now or hereafter
authorized or permitted by law.
4) To carry out all or any part of the objects and purposes of the
Corporation and to conduct its business in all or any of its branches, in any or
all states, territories, districts and possessions of the United States of
America and in foreign countries; and to maintain offices and agencies in any or
all states, territories, districts and possessions of the United States of
America and in foreign countries.
b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the Charter of the Corporation, and each
shall be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the General Law of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation in
this State is c/o The Prentice-Hall Corporation System, Maryland, 1123 North
Eutaw Street, Baltimore, Maryland 21201.
FIFTH: The name and address of the resident agent of the Corporation are
The Prentice-Hall Corporation System, Maryland, 1123 North Eutaw Street,
Baltimore, Maryland 21201. Said resident agent is a Maryland corporation.
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SIXTH: (a) The total number of shares of stock of all classes which the
Corporation initially has authority to issue is three billion (3,000,000,000)
shares of capital stock (par value $.0001 per share), amounting in aggregate par
value to $300,000. All of such shares are classified as "Common Stock". The
Board of Directors may classify and reclassify any unissued shares of capital
stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock; provided, that the Board of Directors
shall not classify or reclassify any of such shares into any class or series of
stock which is prior to any class or series of stock then outstanding with
respect to rights upon the liquidation, then outstanding with respect to rights
upon the liquidation, dissolution, or winding up of the affairs of, or upon any
distribution of the general assets of, the Corporation and provided further that
there may be variations so fixed and determined among different series and
classes as to investment objectives, purchase price, right of redemption,
special rights as to dividends, and in liquidation, with respect to assets
belonging to a particular series of class, voting powers, and conversion rights.
b) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the "Primary Portfolio"
Series (of which there are initially classified 1,000,000,000 shares), the
"Government Portfolio" Series (of which there are initially classified
1,000,000,000 shares) and the "Tax-Exempt Portfolio" Series (of which there are
initially classified 1,000,000,000 shares) and any additional class or series of
Common Stock of the Corporation (unless provided otherwise by the Board of
Directors with respect to any such additional class or series at the time of
establishing and designating such additional class of series).
1) ASSETS BELONGING TO CLASS OR SERIES. All consideration received by the
Corporation from the issue or sale of shares of a particular class or series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including
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any proceeds derived from the sale, exchange of 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 class or series for all
purposes, subject only to the rights of creditors, and shall be so recorded upon
the books of account of the Corporation. Such consideration, assets, 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,
together with any General Items allocated to that class or series as provided in
the following sentence, are herein referred to as "assets belonging to" that
class or series. 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 class or series (collectively
"General Items"), such General Items shall be allocated by or under the
supervision of the Board of Directors to and among any one or more of the
classes or series established and designated from time to time in such manner
and on such basis as the Board of Directors, in its sole discretion, deems fair
and equitable; and any General Items so allocated to a particular class or
series shall belong to that class or series. Each such allocation by the Board
of Directors shall be conclusive and binding for all purposes.
2) LIABILITIES BELONGING TO CLASS OR SERIES. The assets belonging to
each particular class or series shall be charged with the liabilities of the
Corporation in respect of that class or series and all expenses, costs, charges
and reserves attributable to that class or series, and any general liabilities,
expenses, costs, charges or reserves of the Corporation which are not readily
identifiable as belonging to any particular class or series shall be allocated
and charged by or under the supervision of the Board of Directors to and among
any one or more of the classes or series established and designated from time to
time in such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. The liabilities, expenses, costs, charges
and reserves allocated and so charged to a class or series are herein referred
to as "liabilities belonging to" that class or series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Board of Directors
shall be conclusive and binding for all purposes.
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<PAGE>
(3) INCOME BELONGING TO CLASS OR SERIES. The Board of Directors shall
have full discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding.
Income belonging to a class or series includes all income, earnings and
profits derived from assets belonging to that class or series, less any
expenses, costs, charges or reserves belonging to that class or series, for the
relevant time period, all determined in accordance with generally accepted
accounting principles.
(4) DIVIDENDS. Dividends and distributions on shares of a particular
class or series may be paid with such frequency, in such form and in such amount
as the Board of Directors may from time to time determine. Dividends may be
daily or otherwise pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Board of Directors may determine, after
providing for actual and accrued liabilities belonging to that class.
All dividends on shares of a particular class or series shall be paid only
out of the income belonging to that class or series and capital gains
distributions on shares of a particular class or series shall be paid only out
of the capital gains belonging to that class or series. All dividends and
distributions on shares of a particular class or series shall be distributed pro
rata to the holders of that class or series in proportion to the number of
shares of that class or series held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure, the
Board of Directors may determine that no dividend or distribution shall be
payable on shares as to which the stockholder's purchase order and/or payment
have not been received by the time or times established by the Board of
Directors under such program or procedure.
The Corporation intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, or any successor or comparable statute
thereto, and regulations promulgated thereunder.
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<PAGE>
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 Corporation,
the Board of Directors shall have the power, in its sole discretion, to
distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gains distributions, amounts sufficient, in the
opinion of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company and to avoid liability of the Corporation for
Federal income tax in respect of that year. However, nothing in the foregoing
shall limit the authority of the Board of Directors to make distributions
greater than or less than the amount necessary to qualify as a regulated
investment company and to avoid liability of the Corporation for such tax.
Dividends and distributions may be made in cash, property or additional
shares of the same or another class or series, or a combination thereof, as
determined by the Board of Directors or pursuant to any program that the Board
of Directors may have in effect at the time for the election by each stockholder
of the mode of the making of such dividend or distribution to that stockholder.
Any such dividend or distribution paid in shares will be paid at the net asset
value thereof as defined in subsection (9) below.
(5) LIQUIDATION. In the event of the liquidation or dissolution of
the Corporation or of a particular class or series, the stockholders of each
class or series that has been established and designated and is being liquidated
shall be entitled to receive, as a class or series, when and as declared by the
Board of Directors, the excess of the assets belonging to that class or series
over the liabilities belonging to that class or series. The holders of shares
of any particular class or series shall not be entitled thereby to any
distribution upon liquidation of any other class or series. The assets so
distributable to the stockholders of any particular class or series shall be
distributed among such stockholders in proportion to the number of shares of
that class or series held by them and recorded on the books of the Corporation.
The liquidation of any particular class or series in which there are shares then
outstanding may be authorized by vote of a majority of the Board of Directors
than in office, subject to the approval of a majority of the outstanding
securities of that class or series, as defined in the 1940 Act, and without the
vote of the holders of any other class or
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series. The liquidation or dissolution of a particular class or series may be
accomplished, in whole or in part, by the transfer of assets of such class or
series to another class or series or by the exchange of shares of such class or
series for the shares of another class or series.
(6) VOTING. On each matter submitted to a vote of the stockholders,
each holder of a share shall be entitled to one vote for each share standing in
his name on the books of the Corporation, irrespective of the class or series
thereof, and all shares of all classes or series shall vote as a single class or
series ("Single Class Voting"); provided, however, that (A) as to any matter
with respect to which a separate vote of any class or series is required by the
1940 Act or by the Maryland General Corporation Law, such requirement as to a
separate vote by that class or series shall apply in lieu of Single Class Voting
as described above; (B) in the event that the separate vote requirements
referred to in (A) above apply with respect to one or more classes of series,
then, subject to (C) below, the shares of all other classes or series shall vote
as a single class or series, and (C) as to any matter which does not affect the
interest of a particular class or series, including liquidation of a particular
class or series as described in subsection (5) above, only the holders of shares
of the one or more affected classes shall be entitled to vote.
(7) REDEMPTION AT THE SHAREHOLDER'S OPTION. Each holder of shares of
a particular class or series shall have the right at such times as may be
permitted by the Corporation, but no less frequently than once each week, to
require the Corporation to redeem all or any part of his shares of that class or
series at a redemption price per share equal to the net asset value per share of
that class or series next determined (in accordance with subsection (9)) after
the shares are properly tendered for redemption. Payment of the redemption
price shall be in cash; provided, however, that if the Board of Directors
determines, which determination shall be conclusive, that conditions exist which
make payment wholly in cash unwise or undesirable, the Corporation may make
payment wholly or partly in securities or other assets belonging to the class or
series of which the shares being redeemed are part at the value of such
securities or assets used in such determination of net asset value.
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Notwithstanding the foregoing, the Corporation may postpone payment of the
redemption price and may suspend the right of the holders of shares of any class
or series to require the Corporation to redeem shares of that class or series
during any period or at any time when and to the extent permissible under the
1940 Act.
(8) REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of any class from a holder
(i) if such redemption is, in the opinion of the Board of Directors of the
Corporation, desirable in order to prevent the Corporation from being deemed a
"personal holding company" within the meaning of the Internal Revenue Code of
1986, as amended, or (ii) if such holder has had, for a period of more than six
months, shares of that class or series having an aggregate net asset value
(determined in accordance with subsection (9)) of $500 or less in his account,
provided that in the case of a redemption pursuant to clause (ii) hereof at
least sixty (60) days prior written notice of the proposed redemption has been
given to such holder by postage paid mail to his last known address. Upon
redemption of shares pursuant to this subsection, the Corporation shall promptly
cause payment of the full redemption price to be made to the holder of shares so
redeemed.
(9) NET ASSET VALUE PER SHARE. The net asset value per share of any
class or series shall be the quotient obtained by dividing the value of the net
assets of that class or series (being the value of the assets belonging to that
class less the liabilities belonging to that class or series) by the total
number of shares of that class or series outstanding, all determined by the
Board of Directors in accordance with generally accepted accounting principles
and not inconsistent wit the 1940 act.
The Board of Directors may determine to maintain the net asset value per
share of any class or series at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that class or series as
dividends payable in additional shares of that class or series at the designated
constant dollar amount and for the handling of any losses attributable to that
class or series. Such procedures may provide that in the event of any loss,
each stockholder shall be deemed to have contributed to the capital of the
Corporation attributable to that class or
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series his pro rata portion of the total number of shares required to be
canceled in order to permit the net asset value per share of that class or
series to be maintained, after reflecting such loss, at the designated constant
dollar amount. Each stockholder of the Corporation shall be deemed to have
agreed, by his investment in any class or series with respect to which the Board
of Directors shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(10) EQUALITY. All shares of each particular class or series shall
represent an equal proportionate interest in the assets belonging to that class
or series (subject to the liabilities belonging to that class or series), and
each share of any particular class or series shall be equal to each other share
of that class or series. The Board of Directors may from time to time divide or
combine the shares of any particular class or series into a greater or lesser
number of shares of that class or series without thereby changing the
proportionate beneficial interest in the assets belonging to that class or
series or in any way affecting the rights of shares of any other class or
series.
(11) CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of shares of any class or series shall have the right to
convert or exchange said shares into shares of one or more other classes or
series of shares in accordance with such requirements and procedures as may be
established by the Board of Directors.
(12) FRACTIONAL SHARES. The Corporation may issue and sell fractions of
shares having pro rata all the rights of full shares, including, without
limitation, the right to vote and to receive dividends, and wherever the words
"share" or "shares" are used in the Charter or in the By-Laws, they shall be
deemed to include fractions of shares, where the context does not clearly
indicate that only full shares are intended.
(13) STOCK CERTIFICATES. The Corporation shall not be obligated to issue
certificates representing shares of any class or series unless the Board of
Directors shall so require.
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(14) TRANSFER RESTRICTIONS. If, in the opinion of the Board of Directors
of the Corporation, concentration of ownership of shares of Common Stock may
cause the Corporation to be deemed a personal holding company within the meaning
of the Internal revenue Code of 1986, as amended, the Corporation may at any
time and from time to time refuse to give effect on the books of the Corporation
to any transfer or transfers of any share or shares of Common Stock in an effort
to prevent such personal holding company status.
(c) Subject to the foregoing and to the requirements of the 1940 Act, the
power of the Board of Directors to classify and reclassify any of the shares of
capital stock shall include, without limitation, subject to the provisions of
the Charter, authority to classify or reclassify any unissued shares of such
stock into one or more classes or series of common stock, special stock or other
stock, and to subdivide and resubdivide shares of any class or series into one
or more subclasses or subseries of such class or series, by determining, fixing,
or altering one or more of the following:
(1) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of
the authorized capital stock and be subject to classification and
reclassification as provided in this Section.
(2) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any such
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dividends as cumulative, cumulative to a limited extent or non-cumulative
and as participating or non-participating.
(3) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.
(5) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase account in
respect thereof, and if so, the terms thereof.
(6) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of stock.
(7) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
Section, and, if so, the terms and conditions thereof.
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(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.
(d) Unless otherwise prohibited by law, so long as the Corporation is
registered as an open-end investment company under the 1940 Act, the Board of
Directors shall have the power and authority, without the approval of the
holders of any outstanding shares, to increase or decrease the number of shares
of capital stock of any class or series that the Corporation has authority to
issue.
SEVENTH: The number of directors of the Corporation shall be three,
which number may be increased or decreased pursuant to the By-Laws of the
Corporation, but shall never be less than the minimum number permitted by the
General Laws of the State of Maryland now or hereafter in force. The names of
the directors who will serve until the first annual meeting and until their
successors are elected and qualify are as follows:
Joseph M. LaMotta
Philip H. Didriksen, Jr.
Thomas E. Duggan
EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Corporation and of the
directors and stockholders.
(1) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or series, whether now or hereafter authorized, for such
consideration (which shall consist only of cash or securities) as may be deemed
advisable by the Board of Directors and without any action by the stockholders.
(2) No holder of any stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the Corporation
other than such, if any, as the Board of
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Directors, in its sole discretion, may determine and at such price or prices and
upon such other terms as the Board of Directors, in its sole discretion, may
fix; and any stock or other securities which the Board of Directors may
determine to offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series or
type of stock or other securities at the time outstanding to the exclusion of
the holders of any or all other classes, series or types of stock or other
securities at the time outstanding.
(3) The Board of Directors of the Corporation shall have power from time
to time and in its sole discretion to determine whether and to what extent and
at what times and places and under what conditions and regulations the books,
accounts and documents of the Corporation, or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by statute, regulation
or by the By-Laws, and, except as so provided, no stockholder shall have any
right to inspect any book, account or document of the Corporation unless
authorized so to do by resolution of the Board of Directors.
(4) Unless the By-Laws otherwise provide, any officer or employee of the
Corporation (other than a director) may be removed at any time with or without
cause by the Board of Directors or by any committee or superior officer upon
whom such power of removal may be conferred by the By-Laws or by authority of
the Board of Directors.
5) Notwithstanding any provision of law requiring the authorization of
any action by a greater proportion than a majority of the total number of shares
of all classes or series of capital stock or of the total number of shares of
any class or series of capital stock entitled to vote as a separate class of
series, such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the total number of shares of
all classes or series outstanding and entitled to vote thereon or of the class
or series entitled to vote thereon as a separate class or series, as the case
may be, except as otherwise provided in the Charter.
(6) The Corporation shall indemnify (A) its directors and officers,
whether serving the Corporation or at its request any other entity, to the full
extent required or permitted by the General Laws of the State of
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Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
charter of the Corporation shall limit or eliminate the right to indemnification
provided hereunder with respect to acts or omissions occurring prior to such
amendment or repeal. Nothing contained herein shall be construed to authorize
the Corporation to indemnify any director or officer of the Corporation or of
any subsidiary of the Corporation against any liability to the Corporation or to
any holders of securities of the Corporation or to any subsidiary of the
Corporation to which he is subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office.
(7) To the fullest extent permitted by Maryland statutory and decisional
law and the 1940 Act, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that nothing herein shall be construed to
protect any director or officer of the Corporation against any liability to
which such director or officer 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. No amendment, modification or repeal of
this Article EIGHTH, Section 7 shall adversely affect any right or protection of
a director or officer that exists at the time of such amendment, modification or
repeal.
(8) The Corporation reserves the right from time to time to make any
amendments of its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its charter, of any of its outstanding stock by classification,
reclassification or otherwise.
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(b) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on May 1, 1989.
WITNESS:
_____________________________ _____________________________
Cheryl Komatinsky Jay A. Radov
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QUEST CASH RESERVES, INC.
ARTICLES SUPPLEMENTARY
Quest Cash Reserves, Inc., a Maryland corporation, having its principal
office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: (a) In accordance with Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors has increased the authorized capital
stock of the Corporation to 50,000,000,000 shares of common stock (par value
$.0001 per share).
(b) Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article SIXTH of the Charter of the Corporation,
the Board of Directors has duly divided and classified 10,000,000,000 shares of
the Common Stock of the Corporation into a series designated "California Tax-
Exempt Portfolio" Series Fund and has duly divided and classified
10,000,000,000 shares of the Common Stock of the Corporation into a series
designated "New York Tax-Exempt Portfolio" Series common stock and has provided
for the issuance of such shares.
(c) Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article SIXTH of the Charter of the Corporation,
the Board of Directors has duly divided and classified an additional
9,000,000,000 shares of Common Stock of the Corporation into the Primary
Portfolio Series, 9,000,000,000 shares of Common Stock into the General Tax-
Exempt Portfolio Series, and 9,000,000,000 Shares of Common Stock into the
Government Portfolio Series and has provided for the issuance of such shares.
THIRD: The terms of the California Tax-Exempt Portfolio Series and the
New York Tax-Exempt Series Common Stock are set forth in Article SIXTH of the
Charter of the Corporation.
FOURTH: (a) As of immediately before the increase the total number of
shares of stock of all classes which the Corporation has authority to issue is
3,000,000,000 shares, of which no shares are Preferred Stock and 3,000,000,000
shares are Common Stock (par value $.0001 per share).
(b) As increased, the total number of shares of stock of all
classes which the Corporation has authority to issue is 50,000,000,000 shares,
of which no shares
<PAGE>
are Preferred Stock and 50,000,000,000 shares are Common Stock (par value $.0001
per share).
(c) There are 10,000,000,000 shares classified as Primary
Portfolio Series Common Stock, 10,000,000,000 shares classified as Government
Portfolio Series Common Stock, 10,000,000,000 shares classified as General Tax-
Exempt Portfolio Series Common Stock, 10,000,000,000 shares classified as New
York Tax-Exempt Portfolio Series Common Stock, and 10,000,000,000 shares
classified as California Tax-Exempt Portfolio Series Common Stock.
(d) The aggregate par value of all shares having a par value is
$300,000 before the increase and $5,000,000 as increased.
IN WITNESS WHEREOF, Quest Cash Reserves, Inc. has caused these presents to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on September 26, 1990.
WITNESS: QUEST CASH RESERVES, INC.
_____________________________ By___________________________
Thomas E. Duggan Philip H. Didriksen, Jr.
Secretary President
<PAGE>
QUEST CASH RESERVES, INC.
ARTICLES OF AMENDMENT
Quest Cash Reserves, Inc., a Maryland corporation having its principal
office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended as follows:
The name and designation of the "General Tax-Exempt Portfolio" shall be
changed to "General Municipal Portfolio".
The name and designation of the "California Tax-Exempt Portfolio" shall be
changed to the "California Municipal Portfolio."
The name and designation of the "New York Tax-Exempt Portfolio" shall be
changed to the "New York Municipal Portfolio".
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation has
been advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, Quest Cash Reserves, Inc., has caused these presents to
be signed in its name and its behalf by its President and witnessed by its
Secretary on April 29, 1992.
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<PAGE>
WITNESS: QUEST CASH RESERVES, INC
__________________________ _____________________________
Thomas E. Duggan Joseph M. La Motta
Secretary President
THE UNDERSIGNED, President of Quest Cash Reserves, Inc. who executed on
behalf of the Corporation the foregoing Articles of Amendment of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Amendment to be the corporate act of
said Corporation and hereby certifies that to the best of his knowledge,
information, and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
_______________________________
Joseph M. La Motta
President
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<PAGE>
QUEST CASH RESERVES, INC.
ARTICLES OF AMENDMENT
CHANGING NAMES OF SERIES
PURSUANT TO MGCL SECTION 2-605(B)
Quest Cash Reserves, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to provide that
the name of the Corporation is changed to "OCC Cash Reserves, Inc."
SECOND: The amendment does not change the outstanding capital stock of
the corporation or the aggregate par value thereof.
THIRD: The foregoing amendment to the Charter of the Corporation has
been approved by the Board of Directors and is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its Vice President and witnessed by its
Secretary on this 30th day of January 1996.
QUEST CASH RESERVES, INC.
By:__________________________
Name: Susan A. Murphy
Title: Vice President
ATTEST:
______________________________
Name: Deborah Kaback
Title: Secretary
<PAGE>
THE UNDERSIGNED, the Vice President of Quest Cash Reserves, Inc., who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of the Corporation the foregoing Articles of Amendment to be the
corporate act of the Corporation and hereby certifies to the best of her
knowledge, information and belief the matters and facts set forth herein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
__________________________
Name: Susan A. Murphy
Title: Vice President
<PAGE>
BY-LAWS OF
QUEST CASH RESERVES, INC.
ARTICLE I
FISCAL YEAR AND OFFICES
Section 1. FISCAL YEAR. Unless otherwise provided by resolution of the
board of directors, the fiscal year of the Corporation shall begin November 1
and end on the last day of October.
Section 2. REGISTERED OFFICE. The registered office of the Corporation in
Maryland shall be located at 32 South Street, Baltimore, Maryland 21202, and
the name of its resident agent at such address is The Corporation Trust
Incorporated.
Section 3. OTHER OFFICES. The Corporation shall have the power to open
offices for the conduct of its business, either within or outside the State of
Maryland, at such places as the board of directors may from time to time
designate.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETING. Meetings of the stockholders for the
election of directors shall be held in such place as the board of directors may
be resolution establish. In the absence of any specific resolution, meetings of
stockholders shall be held at the Corporation's principal office. Meetings of
stockholders for any other purpose may be held at such place and time as shall
be fixed by resolution of the board of directors and stated in the notice of the
meeting, or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETINGS. No annual meeting of stockholders shall be
held.
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Section 3. SPECIAL MEETINGS. Special meetings of stockholders may be
called at any time by the chairman of the board or the president, or by a
majority of the board of directors, and shall be called by the chairman of the
board, president or secretary upon written request of the holders of shares
entitled to cast not less than twenty-five percent of all the votes entitled to
be cast at such meeting provided that (a) such request shall state the purpose
of such meeting and the matters proposed to be acted on, and (b) the
stockholders requesting such meeting shall have paid to the Corporation the
reasonably estimated cost of preparing and mailing the notice thereof, which the
secretary shall determine and specify to such stockholders. No special meeting
need be called to consider any matter which is substantially the same as a
matter voted on at any meeting of the stockholders held during the preceding
twelve months.
Section 4. NOTICE. Not less than ten days before the date of every
stockholders' meeting, the secretary shall cause to be mailed to each
stockholder entitled to vote at such meeting at his address (as it appears on
the records of the Corporation at the time of mailing) written notice stating
the time and place of the meeting and, in the case of a special meeting of
stockholders shall be limited to the purposes stated in the notice. Notice of
any stockholders' meeting need not be given to any stockholder who shall sign a
written waiver of such notice whether before or after the time of such meeting,
or to any stockholder who shall attend such meeting in person or by proxy.
Notice of adjournment of a stockholders' meeting to another time or place need
not be given, if such time and place are announced at the meeting.
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Section 5. RECORD DATE FOR MEETINGS. The board of directors may fix in
advance a date not more than sixty days, nor less than ten days, prior to the
date of any annual or special meeting of the stockholders as a record date for
the determination of the stockholders entitled to receive notice of, and to vote
at any meeting and any adjournment thereof; and in such case such stockholders
and only such stockholders as shall be stockholders of record on the date so
fixed shall be entitled to receive notice of and to vote at such meeting and any
adjournment thereof, notwithstanding any transfer of any stock on the books of
the Corporation after any such record date fixed as aforesaid.
Section 6. QUORUM. At any meeting of stockholders, the presence in person
or by proxy of the holders of a majority of the aggregate number of common
shares of any series at the time outstanding shall constitute a quorum for the
transaction of business at the meeting, except that where any provision of law
or the Articles of Incorporation require that the holders of any class of shares
shall vote as a class, then a majority of the aggregate number of shares of that
class at the time outstanding shall be necessary to constitute a quorum for the
transaction of such business. If, however, such quorum shall not be present or
represented at any meeting of stockholders, any officer entitled to preside at
or act as secretary of such meeting shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed.
Section 7. VOTING. Each stockholder shall have one vote for each full
share and a fractional vote for each fractional share of stock held by such
stockholder on the record
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<PAGE>
date set pursuant to Section 5 of this Article II on each matter submitted to a
vote at a meeting of stockholders. Such vote may be made in person or by proxy.
If no record date has been fixed for the determination of stockholders entitled
to notice of or to vote at a meeting of stockholders, the record date for such
determination shall be (a) at the close of business (i) on the day ten days
before the day on which notice of the meeting is mailed or (ii) on the day sixty
days before the meeting, whichever is the closer date to the meeting; or (b) if
notice is waived by all stockholders entitled to notice of or to vote at the
meeting, at the close of business on the tenth day next preceding the day on
which the meeting is held. At all meetings of the stockholders at which a
quorum is present, all matters shall be decided by majority vote of the shares
of stock entitled to vote held by stockholders present in person or by proxy,
unless the question is one which by express provisions of the laws of the State
of Maryland, the Investment Company Act of 1940, as from time to time amended,
or the Articles of Incorporation, a different vote is required, in which case
such express provision shall control the decision of such question. At all
meetings of stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualifications of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of the
meeting.
Section 8. VOTING - PROXIES. The right to vote by proxy shall exist only
if the instrument authorizing such proxy to act shall have been executed in
writing by the stockholder himself or by his attorney thereunto duly authorized.
No proxy shall be voted after eleven months from its date unless the proxy
provides for a longer period. Each proxy shall be in writing subscribed by the
stockholder or his duly authorized attorney and shall be dated, but need not be
sealed, witnessed or acknowledged. Proxies shall be
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<PAGE>
delivered to the secretary of the Corporation or person acting as secretary of
the meeting before being voted. A proxy with respect to stock held in the name
of two or more persons shall be valid if executed by one of them unless at or
prior to exercise of such proxy the Corporation receives a specific written
notice to the contrary from any one of them. A proxy purporting to be executed
by or on behalf of a stockholder shall be deemed valid unless challenged at or
prior to its exercise.
Section 9. INSPECTORS. At any election of directors, the board of
directors prior thereto may, or if it has not so acted, the chairman of the
meeting may appoint one or more inspectors of election who shall first subscribe
an oath or affirmation to execute faithfully the duties of inspectors at such
election with strict impartiality and according to the best of their ability,
and shall after the election make a certificate of the result of the vote taken.
No candidate for the office of director shall be appointed as an inspector.
Section 10. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty
of the secretary or assistant secretary of the Corporation to cause an original
or duplicate stock ledger to be maintained at the office of the Corporation's
transfer agent. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection. Any one or more persons, each of whom has been a stockholder of
record of the Corporation for more than six months next preceding such request,
who owns or own in the aggregate 5% or more of the outstanding capital stock of
the Corporation, may submit a written request to any officer of the Corporation
or its resident agent in Maryland for a list of the stockholders of the
Corporation. Within twenty days after such a request, there shall be prepared
and filed at the Corporation's principal office a list containing the names and
addresses of all
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stockholders of the corporation and the number of shares of each class held by
each stockholder, certified as correct by an officer of the Corporation, by its
stock transfer agent, or by its registrar.
Section 11. ACTION WITHOUT MEETING. Any action to be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing, and the written consents are
filed with the records of the meetings of stockholders. Such consent shall be
treated for all purposes as a vote at a meeting.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business of the Corporation shall be under
the direction of its board of directors, which may exercise all powers of the
Corporation, except such as are by the laws of the State of Maryland, the
Articles of Incorporation, or these By-laws conferred upon or reserved to the
stockholders. All acts done by any meeting of the directors or by any person
acting as a director, so long as his successor shall not have been duly elected
or appointed, notwithstanding that it be afterwards discovered that there was
some defect in the election of the directors or of such person acting as
aforesaid or that they or any of them were disqualified, shall be as valid as if
the directors or such other person, as the case may be, had been duly elected
and were or was qualified to be directors or a director of the corporation.
Section 2. NUMBER AND TERM OF OFFICE. The number of directors which shall
constitute the whole board shall be determined from time to time by the board of
directors, but shall not be fewer than 3, nor more than 7. Each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
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Section 3. ELECTION. Initially the directors shall be those persons named
as such in the Articles of Incorporation. Each director shall be elected
annually by the vote of a majority of the shares entitled to elect such
director, as provided in the Articles of Incorporation, present in person or by
proxy at the annual meeting of the stockholders. Vacancies in the board of
directors may be filled by a majority vote of the board of directors, if
permitted by the Articles of Incorporation. A newly-created directorship may be
filled only by a vote of the entire board of directors.
Section 4. REMOVAL OF DIRECTORS . At any stockholders' meeting, provided
a quorum is present, any director may be removed (either with or without cause)
by the vote of the holders of a majority of the shares entitled to elect such
director as provided in the Articles of Incorporation, present or represented at
the meeting, and at the same meeting a duly qualified person may be elected in
his stead by a majority of the votes validly cast.
Section 5. PLACE OF MEETING. Meetings of the board of directors, regular
or special, may be held at any place in or out of the State of Maryland as the
board may from time to time determine.
Section 6. QUORUM. At all meetings of the board of directors a majority
of the entire board of directors shall constitute a quorum for the transaction
of business, and the action of a majority of the directors present at any
meeting at which a quorum is present shall be the action of the board of
directors unless the concurrence of a greater proportion is required for such
action by the laws of the State of Maryland, the Investment Company Act of 1940,
these By-laws or the Articles of Incorporation. If a quorum shall not be
present at any meeting of directors, the directors present thereat may by a
majority vote
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adjourn the meeting from time to time without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. REGULAR MEETINGS. Regular meetings of the board of directors
may be held without notice at such time and place as shall from time to time be
determined by the board of directors provided that notice of any change in the
time or place of such meetings shall be sent promptly to each director not
present at the meeting at which such change was made in the manner provided for
notice of special meetings. Members of the board of directors or any committee
designated thereby may participate in a meeting of such board or committee by
means of a conference telephone call or similar communications equipment by
means of which all persons participating in the meeting can hear one another at
the same time, and participating by such means shall constitute presence in
person at a meeting.
Section 8. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the chairman of the board or the president on one day's notice
to each director. Special meetings shall be called by the chairman of the
board, president or secretary in like manner and on like notice on the written
request of two directors.
Section 9. INFORMAL ACTIONS. Any action required or permitted to be taken
at any meeting of the board of directors or of any committee thereof may be
taken without a meeting, if a written consent to such action is signed in one or
more counterparts by all members of the board or of such committee, as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
Section 10. COMMITTEES. The board of directors may by resolution passed
by a majority of the entire board appoint from among its members an executive
committee and
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other committees compose of two or more directors, and may delegate to such
committees, in the intervals between meetings of the board of directors, any or
all of the powers of the board of directors in the management of the business
and affairs of the Corporation, except the powers to declare dividends, to issue
stock or to recommend to stockholders any action requiring stockholder approval.
Section 11. ACTION OF COMMITTEES. In the absence of an appropriate
resolution of the board of directors, each committee may adopt such rules and
regulations governing the proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
directors. The committees shall keep minutes of their proceedings and shall
report the same to the board of directors at the meeting next succeeding, and
any action by the committee shall be subject to revision and alteration by the
board of directors, provided that no rights of third persons shall be affected
by any such revisions or alteration. In the absence of any member of such
committee the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the board of directors to act in
the place of such absent member.
Section 12. COMPENSATION. Any director, whether or not he is a salaried
officer or employee of the Corporation, may be compensated for his services as
director or as a member of a committee of directors, or as chairman of the board
or chairman of a committee by fixed periodic payments or by fees for attendance
at meetings or by both, and in addition may be reimbursed for transportation and
other expenses, all in such manner and amounts as the board of directors may
from time to time determine.
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ARTICLE IV
NOTICES
Section 1. FORM. Notices to stockholders shall be in writing and
delivered personally or mailed to the stockholders at their addresses appearing
on the books of the Corporation. Notices to directors shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
directors at their addresses appearing on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be mailed.
Notice to directors need not state the purpose of a regular or special meeting.
Section 2. WAIVER. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or a committee is required to be given
under the provisions of Maryland law or under the provisions of the Articles of
Incorporation or these By-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of stockholders in person or by proxy, or at the meeting of
directors of committee in person, shall be deemed equivalent to the giving of
such notice to such persons.
ARTICLE V
OFFICERS
Section 1. EXECUTIVE OFFICERS. The officers of the Corporation shall be
chosen by the board of directors and shall include a president, who shall be a
director, a secretary and a treasurer. The board of directors may, from time to
time, elect or appoint a controller, one or more vice presidents, assistant
secretaries and assistant treasurers. The
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board of directors, at its discretion, may also appoint a director as chairman
of the board who shall perform and execute such executive and administrative
duties and powers as the board of directors shall from time to time prescribe.
The same person may hold two or more offices, except that no person shall be
both president and secretary and no officer shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is required by law,
the Articles of Incorporation or these By-laws to be executed, acknowledged or
verified by two or more officers.
Section 2. ELECTION. The board of directors shall choose a president, a
secretary and a treasurer at its first meeting and thereafter at the next
meeting following a stockholders' meeting at which directors were elected.
Section 3. OTHER OFFICERS. The board of directors from time to time may
appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board. The board of
directors from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agent and to prescribe their
respective rights, terms of office, authorities and duties.
Section 4. COMPENSATION. The salaries or other compensation of all
officers and agents of the Corporation shall be fixed by the board of directors,
except that the board of directors may delegate to any person or group of
persons the power to fix the salary or other compensation of any subordinate
officers or agents appointed pursuant to Section 3 of this Article V.
Section 5. TENURE. The officers of the Corporation shall serve for one
year and until their successors are chosen and shall qualify. Any officer or
agent may be removed
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by the affirmative vote of a majority of the board of directors whenever, in its
judgment, the best interests of the Corporation will be served thereby. In
addition, any officer or agent appointed pursuant to Section 3 of this Article V
may be removed, either with or without cause, by any officer upon whom such
power of removal shall have been conferred by the board of directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the board of directors, unless pursuant
to Section 3 of this Article V the power of appointment has been conferred by
the board of directors on any other officer.
Section 6. PRESIDENT. The president, unless the chairman has been so
designated, shall be the chief executive officer of the Corporation. He shall
preside at all meetings of the stockholders and directors, and shall see that
all orders and resolutions of the board are carried into effect. The president,
unless the chairman has been so designated, shall also be the chief
administrative officer of the Corporation and shall perform such other duties
and have such other powers as the board of directors may from time to time
prescribe.
Section 7. CHAIRMAN OF THE BOARD. The chairman of the board, if one shall
be chosen, shall preside at all meetings of the board of directors and
stockholders, and shall perform and execute such executive duties and
administrative powers as the board of directors shall from time to time
prescribe.
Section 8. VICE PRESIDENT. The vice-presidents, in the order of their
seniority, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties as the board of directors or the chief executive officer may from time to
time prescribe.
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Section 9. SECRETARY. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. He shall give, or cause to be given, notice of meetings of the
stockholders and of the board of directors, shall have charge of the records of
the Corporation, including the stock books, and shall perform such other duties
as may be prescribed by the board of directors or chief executive officer, under
whose supervision he shall be. He shall keep in safe custody the seal of the
Corporation and, when authorized by the board of directors, shall affix and
attest the same to any instrument requiring it. The board of directors may give
general authority to any officer to affix the seal for the Corporation and to
attest the affixing by his signature.
Section 10. ASSISTANT SECRETARIES. The assistant secretaries in order of
their seniority, 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 as the board of directors shall prescribe.
Section 11. TREASURER. The treasurer, unless another officer has been so
designated, shall be the chief financial officer of the Corporation. He shall
have general supervision of the funds and property of the Corporation and of the
performance by the custodian of its duties with respect thereto. He shall
render to the board of directors whenever directed by the board, an account of
the financial condition of the Corporation and of all his transactions as
Treasurer; and as soon as possible after the close of each financial year he
shall make and submit to the board of directors a like report for such financial
year. He shall cause to be prepared annually a full and correct statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operation
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for the preceding fiscal year, which shall be submitted at the annual meeting of
stockholders and filed within twenty days thereafter at the principal office of
the Corporation in the State of Maryland. He shall perform all the acts
incidental to the office of treasurer, subject to the control of the board of
directors.
Section 12. CONTROLLER. The controller shall be under the direct
supervision of the chief financial officer of the Corporation. He shall
maintain adequate records of all assets, liabilities and transactions of the
Corporation, establish and maintain internal accounting control and, in
cooperation with the independent public accountants selected by the board of
directors shall supervise internal auditing. He shall have such further powers
and duties as may be conferred upon him from time to time by the president or
the board of directors.
Section 13. ASSISTANT TREASURER. The assistant treasurers, in the order
of their seniority, 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 as the board of directors may from time to time prescribe.
Section 14. SURETY BONDS. The board of directors may require any officer
or agent of the Corporation to execute a bond (including, without limitation,
any bond required by the federal Investment Company Act of 1940, as amended, and
the rules and regulations of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or sureties as the board of
directors may determine, conditioned upon the faithful performance of his duties
to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his hands.
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ARTICLE VI
INVESTMENT LIMITATIONS
Without the approval of the lesser of (i) 67% or more of the voting
securities present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Corporation are present or represented by
proxy, or (ii) more than 50% of the outstanding voting securities of the
Corporation, the Corporation shall not:
(a) with respect to 75% of its total assets, invest more than 5% of the
value of its total assets (taken at market value at the time of purchase) in the
securities of any one issuer, excluding obligations issued or guaranteed by the
U.S. Government or any agency or instrumentality thereof;
(b) own more than 10% of the outstanding voting securities of any one
issuer (other than securities issued or guaranteed by the U.S. Government or any
agency or instrumentality thereof);
(c) purchase shares of other investment companies in an amount exceeding
the limitations set forth in Section 12(d) of the Investment Company Act of 1940
and the rules and regulations thereunder, except as part of a plan of
reorganization, merger, consolidation or an offer of exchange;
(d) borrow money, except as a temporary measure for extraordinary or
emergency purposes, and in no event in excess of 10% of the lower of the market
value or cost of its total assets and shall not purchase any securities at a
time when such borrowings exceed 5% of total assets;
(e) purchase securities or margin, except such short-term credits as may
be necessary for the clearance of transactions;
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(f) invest for the purpose of exercising control over management of any
company;
(g) purchase or retain securities of any company if, to the knowledge of
the Corporation, any officer or director of the Corporation or its investment
adviser owns more than 1/2 of 1% of the outstanding securities of such Company
and such officers or directors who own 1/2 of 1% in the aggregate own more than
5% of such securities;
(h) make loans of money or property to any person, except (1) through
loans of portfolio securities in an amount not to exceed 33 1/3% of the value
of the Corporation's total assets; (2) the purchase of fixed income securities
consistent with the Corporation's investment objectives and policies, and (3) by
entering into repurchase agreements. For purposes of this restriction,
collateral arrangements with respect to stock options, options on stock indices,
stock index futures an options on such futures are not deemed to be loans of
assets;
(i) underwrite the securities of other issuers except to the extent that,
in connection with the disposition of portfolio securities or the sale of its
own shares the Corporation may be deemed to be an underwriter;
(j) purchase real estate or interests therein, although the Corporation
may purchase or sell securities of companies which deal in real estate or
interests therein;(k) purchase oil, gas or other mineral leases, rights or
royalty contracts or exploration or development programs, except that the
Corporation may invest in the securities of companies which invest in or sponsor
such programs;
(l) purchase or sell commodities or commodities futures contracts, except
stock index futures and options on such futures under policies adopted by the
board of directors and disclosed to shareholders;
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(m) invest more than 25% of the value of its total assets in any one
industry excluding U.S. Government securities and domestic bank instruments;
(n) make short sales of securities, except short sales "against-the-box,"
but no more than 15% of the Corporation's net assets (taken at current value)
may be held as collateral arrangements with respect to options and futures;
(p) issue senior securities, as defined in the Investment Company Act of
1940, except that the Corporation may enter into purchase agreements, lend its
portfolio securities and borrow money from banks for temporary or emergency
purposes;
(q) invest more than 5% of its assets at the time of purchase in warrants
(other than warrants acquired in units or attached to securities) or more than
2% of assets at time of purchase in warrants not listed on the New York or
American Stock Exchanges;
(r) invest in restricted securities or securities for which there is no
readily available market (including private placements and repurchase
transactions maturing beyond seven days), if such acquisition will cause the
current value of such securities to exceed 10% of the value of the Company's net
assets;
(s) invest more than 25% of the Corporation's net assets (at time of
purchase) in securities of issuers located in any single foreign country;
(t) invest in debt securities which are rated lower than A-2 by Standard
and Poor's Corporation or Prime-2 by Moody's Investors Service, Inc.
If a percentage restriction on investment or use of assets set forth above
is adhered to at the time a transaction is effected, later changes in percentage
resulting from changing values will not considered a violation.
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Notwithstanding these limitations, the Corporation may own all or any
portion of the securities of, or make loans to, or contribute to the costs or
other financial requirements of any company which will be wholly-owned by the
Corporation and one or more other investment companies and is primarily engaged
in the business of providing, at-cost, management, administrative distribution
or related services to the Corporation and other investment companies.
ARTICLES VII
OTHER RESTRICTIONS
Section 1. TRADING IN SECURITIES. Neither the investment adviser or any
officer or director thereof, nor any officer or director of the Corporation
shall take a long or short position in the securities issued by the Corporation,
except as permitted by applicable laws and regulations; PROVIDED, that the
foregoing shall not prevent the purchase from the Corporation of shares issued
by it by the officers or directors of the Corporation or of the investment
adviser or by the investment adviser at the price available to the public at the
moment of such purchase.
In any case where an officer or director of the Corporation or of the
investment adviser or a member of an advisory or portfolio committee of the
Corporation is also an officer or director of another corporation and the
purchase or sale of shares issued by that other corporation is under
consideration, the officer or director or committee member concerned will
abstain from participating in any decision made on behalf of the Corporation to
purchase or sell any securities issued by the other corporation.
Section 2. LOANS TO AFFILIATES. The Corporation shall not lend assets of
the Corporation to any officer or director of the Corporation, or to any
partner, officer,
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director or stockholder of, or person who has a material financial interest in
the investment adviser of the Corporation, or the distributor of the
Corporation, or to the investment adviser of the Corporation or to the
distributor of the Corporation.
Section 3. CONFLICT OF INTEREST TRANSACTIONS. The Corporation shall not
permit any officer or director, or any officer or director of the investment
adviser or distributor of the Corporation to deal for or on behalf of the
Corporation with himself as principal or agent, or with any partnership,
association or corporation in which he has a material financial interest;
PROVIDED that the foregoing provisions shall not prevent
(a) officers or directors of the Corporation from buying, holding or
selling shares in the Corporation, or from being partners, officers or directors
of or otherwise financially interested in the investment adviser, sponsor,
manager or distributor of the Corporation;
(b) purchases or sales of securities or other property in the Corporation
from or to an affiliated person or to the investment adviser or distributor of
the Corporation if such transaction is exempt from the applicable provisions of
the Investment Company Act of 1940;
(c) purchases of investments owned by the Corporation through a security
dealer who is, or one or more of whose partners, stockholders, officers or
directors is, an officer or director of the Corporation, if such transactions
are handled in the capacity of brokers only and commissions charged do not
exceed customary brokerage charges for such services;
(d) employment of legal counsel, registrar, transfer agent, dividend
disbursing agent or custodian who is, or has a partner, stockholder, officer or
director, who is an
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officer or director of the Corporation, if only customary fees are charged for
services to the Corporation;
(e) sharing statistical, research, legal and management expenses with a
firm of which an officer or director of the Corporation is an officer or
director or otherwise financially interested;
(f) purchase for the portfolio of the Corporation of securities issued by
an issuer having an officer, director or security holder who is an officer or
director of the Corporation or of any investment adviser of the Corporation,
unless the retention of such securities in the portfolio of the Corporation
would be a violation of these By-laws or the Articles of Incorporation of the
Corporation.
ARTICLE VIII
STOCK
Section 1. CERTIFICATES. No stockholder shall be entitled to a
certificate or certificates in connection with the purchase of shares of the
Corporation unless specifically authorized by the board of directors. Each
certificate issued shall be signed by the president or vice-president and
countersigned by the secretary or an assistant secretary or the treasurer or an
assistant treasurer.
Section 2. SIGNATURE. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf
of the Corporation and a registrar, the signature of any such president, vice-
president, treasurer, assistant treasurer, secretary or assistant secretary may
be a facsimile. In case any officer who has signed any certificate ceases to be
an officer of the Corporation before the certificate is issued, the
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certificate may nevertheless be issued by the Corporation with the same effect
as if the officer had not ceased to be such officer as of the date of its issue.
Section 3. RECORDING AND TRANSFER WITHOUT CERTIFICATES. Notwithstanding
the foregoing provisions of this Article VIII, the Corporation shall have full
power to participate in any program approved by the board of directors providing
for the recording and transfer of ownership of shares of the Corporation's
stock by electronic or other means without the issuance of certificates.
Section 4. LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been stolen,
lost or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to have been stolen, lost or destroyed, or
upon other satisfactory evidence of such theft, loss or destruction. When
authorizing such issuance of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and to give the Corporation a bond with sufficient surety,
to the Corporation to indemnify it against any loss or claim that may be made by
reason of the issuance of a new certificate.
Section 5. TRANSFER OF CAPITAL STOCK. Transfers of shares of the stock of
the Corporation shall be made on the books of the Corporation by the holder of
record thereof (in person or by his attorney thereunto duly authorized by a
power of attorney duly executed in writing and filed with the secretary of the
Corporation) (i) if a certificate or certificates have been issued, upon the
surrender of the certificate or certificates, properly
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endorsed or accompanied by proper instruments of transfer representing such
shares, or (ii) as otherwise prescribed by the board of directors. Every
certificate exchanged, surrender for redemption or otherwise returned to the
Corporation shall be marked "Cancelled" with the date of cancellation.
Section 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the
General Laws of the State of Maryland.
Section 7. TRANSFER AGENTS AND REGISTRARS. The board of directors may,
from time to time, appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares to stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfer or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 8. STOCK LEDGER. The Corporation shall maintain an original stock
ledger containing the names and addresses of all stockholders and the number and
class of shares held by each stockholder. Such stock ledger may be in written
form or any other form
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capable of being converted into written form within a reasonable time for visual
inspection.
ARTICLE IX
GENERAL PROVISIONS
Section 1. RIGHTS IN SECURITIES. The board of directors, on behalf of the
Corporation, shall have the authority to exercise all of the rights of the
Corporation as owner of any securities which might be exercised by any
individual owning such securities in his own right, including, but not limited
to, the right to vote by proxy for any and all purposes, to consent to the
reorganization, merger or consolidation of any issuer or to consent to the sale,
lease or mortgage of all or substantially all of the property and assets of any
issuer; and to exchange any of the shares of stock of any issuer for the shares
of stock issued therefor upon any such reorganization, merger, consolidation,
sale, lease or mortgage. The board of directors shall have the right to
authorize any officer of the investment adviser to execute proxies and the right
to delegate the authority granted to any officer of the Corporation by this
Section 1 of Article IX.
Section 2. CUSTODIANSHIP.
(a) The Corporation shall place and at all time maintain in the custody of
a custodian (including any subcustodian for the custodian) all funds, securities
and similar investments owned by the Corporation. Subject to the approval of
the board of directors, the custodian may enter into arrangements with
securities depositories, as long as such arrangements comply with the provisions
of the Investment Company Act of 1940 and the rules and regulations promulgated
thereunder. The custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided
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profits and shall be appointed from time to time by the board of directors,
which shall fix its remuneration.
(b) Upon termination of a custodian agreement or inability of the
custodian to continue to serve, the board of directors shall promptly appoint a
successor custodian. In the event that no successor custodian can be found who
has the required qualifications and is willing to serve, the board of directors
shall call as promptly as possible a special meeting of the stockholders to
determine whether the Corporation shall function without a custodian or shall be
liquidated. If so directed by vote of the holders of a majority of the
outstanding shares of stock of the Corporation, the custodian shall deliver and
pay over all property of the Corporation held by it as specified in such vote.
(c) The following provisions shall apply to the employment of a custodian
and to any contract entered into with the custodian so employed:
The board of directors shall cause to be delivered to the custodian
all securities owned by the Corporation or to which it may become entitled,
and shall order the same to be delivered by the custodian only in
completion of a sale, exchange, transfer, pledge, or other disposition
thereof, all as the board of directors may generally or from time to time
require or approve or to a successor custodian; and the board of directors
shall cause all funds owned by the Corporation or to which it may become
entitled to be paid to the custodian, and shall order the same disbursed
only for investment against delivery of the securities acquired, or in
payment of expenses, including management compensation, and liabilities of
the Corporation, including distributions to shareholders or proper payments
to borrowers of securities representing partial return of collateral, or to
a successor custodian.
Section 3. REPORTS. Not less than semi-annually, the Corporation shall
transmit to the stockholders a report of the operations of the Corporation,
based at least annually upon an audit by independent public accountants, which
report shall clearly set forth, in addition to the information customarily
furnished in a balance sheet and profit and loss
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statement, a statement of all amounts paid to security dealers, legal counsel,
transfer agent, disbursing agent, registrar or custodian or trustee, where such
payments are made to a firm, corporation, bank or trust company, having a
partner, officer or director who is also an officer or director of the
Corporation. A copy, or copies, of all reports submitted to the stockholders of
the Corporation shall also be sent, as required, to the regulatory agencies of
the United States and of the states in which the securities of the Corporation
are registered and sold.
Section 4. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 5. EXECUTION OF INSTRUMENTS. All deeds, documents, transfers,
contracts, agreements and other instruments requiring execution by the
Corporation shall be signed by the chairman or the president or a vice-president
and by the treasurer or secretary or an assistant treasurer or an assistant
secretary, or as the board of directors may otherwise, from time to time,
authorize. Any such authorization may be general or confined to specific
instances. Except as otherwise authorized by the board of directors, all
requisitions or orders for the assignment of securities standing in the name of
the custodian or its nominee, or for the execution of powers to transfer the
same, shall be signed in the name of the Corporation by the chairman or the
president or a vice-president and by the secretary, treasurer or an assistant
treasurer.
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ARTICLE X
AMENDMENTS
The By-laws of the Corporation may be altered, amended or repealed either
by the affirmative vote of a majority of the stock issued and outstanding and
entitled to vote in respect thereof and represented in person or by proxy at any
annual or special meeting of the stockholders, or by the board of directors at
any regular or special meeting of the board of directors; PROVIDED, that the
board of directors may not alter, amend or repeal Article VI, and that the vote
of stockholders required for alteration, amendment or repeal of any such
provisions shall be subject to all applicable requirements of federal or state
laws or of the Articles of Incorporation.
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ADVISORY AGREEMENT
AGREEMENT made as of the 11th day of August, 1989 as amended April 29, 1992
by and between QUEST CASH RESERVES, INC., a Maryland corporation (the "Fund")
and QUEST FOR VALUE ADVISORS, a Delaware general partnership (the "Advisor").
WHEREAS, the Fund is an open-end investment company registered with the
Securities and Exchange Commission (the "SEC") pursuant to the Investment
Company Act of 1940 (the "1940 Act");
WHEREAS, the Fund is organized in series form and each of the Primary,
Government, General Municipal, California Municipal and New York Municipal
Portfolios is a separately capitalized series ("Portfolio") of shares of common
stock to be issued by the Fund ("Shares") pursuant to the Fund's registration
statement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Fund and the Advisor agree as follows:
1. GENERAL PROVISIONS
The Fund hereby employs the Advisor and the Advisor hereby undertakes to
act as the investment advisor of the Fund in connection with and for the benefit
of each Portfolio, including any Portfolio hereafter created, and to perform for
the Fund such other duties and functions in connection with each Portfolio for
the period and on such terms as are set forth in this Agreement. The Advisor
shall in all matters give to the Fund and its Board of Directors (the
"Directors") the benefit of its best judgment, effort, advice and
recommendations and shall at all times conform to and use its best efforts to
enable the Fund to conform to:
(a) The provisions of the 1940 Act and any rules or regulations
promulgated thereunder;
(b) Any other applicable provisions of state or federal law;
(c) The provisions of the Articles of Incorporation and By-Laws of the
Fund as amended from time to time;
(d) The policies and determinations of the Directors;
(e) The investment objectives, policies and investment restrictions of
each Portfolio as reflected in the registration statement of the Fund under the
1940 Act or as such objectives, policies and restrictions may from time to time
be amended; and
(f) The prospectus, if any, relating to each Portfolio in effect from time
to time.
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The appropriate officers and employees of the Advisor shall be available
upon reasonable notice for consultation with any of the Directors or officers
with respect to any matters dealing with the Fund's business affairs, including
the valuation of any securities held by the Fund for the benefit of any of its
Portfolios that are either not registered for public sale or not being traded on
any securities market.
2. INVESTMENT MANAGEMENT
(a) The Advisor shall, subject to the direction and control by the
Directors, separately with respect to each Portfolio: (i) Regularly provide
investment advice and recommendations to the Fund with respect to investments,
investment policies and the purchase and sale of securities and other
investments; (ii) Supervise continuously and determine the securities and other
investments to be purchased or sold by the Fund and the portion, if any, of the
Fund's assets to be held uninvested; and (iii) Arrange for the purchase and sale
of securities and other investments by the Fund.
(b) The Advisor may obtain investment information, research or assistance
from any other person, firm or corporation to supplement, update or otherwise
improve its investment management services, including entering into subadvisory
agreements with other affiliated or unaffiliated registered investment advisors
in order to obtain specialized services, provided, however, that the Fund shall
not be required to pay any compensation other than as provided by the terms of
this Agreement and subject to the provisions of Section 5 hereof.
(c) So long as the Advisor shall have acted with due care and in good
faith, the Advisor shall not be liable to the Fund or its shareholders for any
error in judgment, mistake of law or any other act or omission in the course of
or connected with rendering services hereunder, including without limitation any
losses which may be sustained by the Fund or its shareholders as a result of the
purchase, retention, redemption or sale of any security or other investment by
the Fund irrespective of whether the determinations of the Advisor relative
thereto shall have been based, in whole or in part, upon the investigation,
research or recommendation of any other individual, firm or corporation believed
by the Advisor to be reliable. Nothing contained herein, however, shall be
construed to protect the Advisor against any liability to the Fund or its
shareholders arising out of the Advisor's willful misfeasance, bad faith or
gross negligence in the performance of its duties, or reckless disregard of its
obligations and duties under this Agreement.
(d) Nothing in this Agreement shall prevent the Advisor, any parent,
subsidiary or affiliate, or any director or officer thereof, from acting as
investment advisor for any other person, firm or corporation and shall not in
any way limit or restrict the Advisor or any of its directors, officers,
stockholders or employees from buying, selling or trading any securities or
commodities for its or their own account or for the accounts of others for whom
it or they may be acting, if such activities will not adversely affect or
otherwise impair the performance by the Advisor of its duties and obligations
under this Agreement.
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3. OTHER DUTIES OF THE ADVISOR
The Advisor shall provide and supervise all administrative and clerical
activities undertaken for the benefit of each Portfolio of the Fund and shall
provide effective corporate administration for the Fund, including (1) the
overseeing of accountants, legal counsel, custodians, transfer agents,
shareholder servicing agents and other parties performing services for the Fund,
(2) the preparation and filing of such reports related to the Fund or to any
Portfolio as shall be required by federal securities laws and by various state
"blue sky" laws, (3) the composition of periodic reports with respect to the
operations of each Portfolio for distribution to shareholders, (4) composition
of proxy materials for and the organization of meetings of the shareholders of
each Portfolio as required under applicable laws, and (5) continuous
distribution and redemption of the shares of each Portfolio and the continuous
servicing of shareholders of the Fund both directly and through appropriate
intermediaries.
The Advisor's duties under this Agreement will include preparation and
maintenance of separate books, records and other documents for each Portfolio,
as follows: (1) journals containing daily itemized records of all purchases and
sales and receipts and deliveries of securities, all receipts and disbursements
of cash and all other debits and credits, in the form required by Rule 31a-
1(b)(1) under the 1940 Act; (2) general and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income and expense accounts, in the form
required by Rules 31a-1(b)(2)(i) and (ii) under the 1940 Act; (3) a securities
record or ledger reflecting separately for each portfolio security as of the
trade date all "long" and "short" positions, if any, carried by the Fund for the
account of such Portfolio and showing the location of all such securities long
and the offsetting position to all such securities short, in the form required
by Rule 31a-1(b)(3) under the 1940 Act; (4) a record of all purchases or sales
of portfolio assets, in the form required by Rule 31a-1(b)(6) under the 1940
Act; and (5) a record of the proof of money balances in all ledger accounts
maintained pursuant to this Agreement, in the form required by Rule 31a-1(b)(8)
under the 1940 Act. The foregoing books and records shall be maintained by the
Advisor in accordance with and for the time periods specified by applicable
rules and regulations, including Rule 31a-2 under the 1940 Act. All such books
and records shall be the property of the Fund and upon request therefor the
Advisor shall surrender to the Fund such of the books and records as are
requested.
4. ALLOCATION OF EXPENSES
All expenses shall be paid by the Fund, allocated as appropriate to each
Portfolio, including but not limited to:
(a) the fee of the Advisor;
(b) interest expense, taxes and governmental fees;
(c) brokerage commissions (if any) and other expenses incurred in
acquiring or disposing of the Fund's portfolio securities and other
investments;
3
<PAGE>
(d) insurance premiums for fidelity and other coverage requisite to the
Fund's operations;
(e) fees of the Directors who are not interested persons of the Fund, out-
of-pocket travel expenses for all Directors and other expenses
incurred by the Fund in connection with Directors' meetings;
(f) outside legal, accounting and audit expenses;
(g) custodian and dividend disbursing fees;
(h) transfer agent fees and other shareholder servicing expenses;
(i) expenses in connection with the issuance, offering, sale or
underwriting of securities issued by the Fund, including preparation
of stock certificates;
(j) fees and expenses incident to the registration or qualification of the
Fund's shares for sale with the SEC and in various states and foreign
jurisdictions;
(k) expenses of printing and mailing reports, notices and proxy material
to the shareholders of each Portfolio;
(l) all other expenses incidental to holding meetings of the shareholders
of each Portfolio including fees and expenses of proxy solicitation;
(m) expenses of organizing the Fund and trade association dues and fees;
(n) such extraordinary non-recurring expenses as may arise, including
litigation affecting the Fund and the obligation the Fund may have to
indemnify its officers and Directors with respect thereto; and
(o) expenses incident to servicing Fund shareholders by broker-dealers
(including Oppenheimer & Co., Inc., an affiliate of the Advisor),
banks and other organizations and individuals.
The Advisor, in return for its fee, will bear all costs and expenses
incurred in connection with its investment management services to the Fund. The
Advisor will also bear the expense of its business management and other
management and supervisory duties and functions assumed by it under this
Agreement, but the Fund itself will bear the costs of the services managed and
supervised; e.g., the Advisor will arrange for and supervise, among other
services, the provision of outside audit, custodian and transfer agency services
to the Fund, but the Fund will pay for each of these provided services.
4
<PAGE>
The Advisor at its expense will provide persons satisfactory to the
Directors to perform the duties of officers of the Fund.
5. COMPENSATION OF THE ADVISOR
(a) The Fund agrees to pay the Advisor, and the Advisor agrees to accept
as full compensation for the performance of all its functions and duties to be
performed hereunder, a fee based on the total net assets of each Portfolio at
the end of each business day at an annual rate of .50% of the first $100 million
of average daily net assets, .45% of the next $200 million of average daily net
assets and .40% of average daily net assets in excess of $300 million of each
Portfolio. Determination of the net asset value of each Portfolio will be made
in accordance with the policies disclosed in the Fund's registration statement
under the 1940 Act. The fee is payable as of the close of business on the last
day of each calendar month and shall be made on the following business day. The
payment due on such day shall be computed by (1) adding together the results of
multiplying (i) the total net assets of each Portfolio on each day of the month
by (ii) the applicable daily fraction (based upon a 365-day year) of the annual
advisory fee percentage rate for such Portfolio and then (2) adding together the
total monthly amounts computed for each Portfolio.
(b) In the event that the operating expenses of the Fund exceed 1%,
including amounts payable to the Advisor pursuant to subsection (a) hereof, but
excluding the amount of any interest, taxes, brokerage commissions and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification related thereto) paid
or payable with respect to a Portfolio for any fiscal year ending on a date
during which this Agreement is in effect, the Advisor will pay or refund for the
account of that Portfolio any such excess amount.
6. DURATION
This Agreement will become effective with respect to each Portfolio of the
Fund upon approval by the Directors and by the shareholders of each Portfolio.
This Agreement will continue in effect for two years from the initial effective
date and thereafter (unless sooner terminated in accordance with this Agreement)
for successive periods of twelve months so long as each continuance shall be
specifically approved at least annually with respect to each Portfolio by the
vote of (1) a majority of those Directors who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval and (2) a majority of the Directors or a
majority of the outstanding voting securities of the respective Portfolio. Such
vote will be deemed to have continued this Agreement if it takes place within 60
days of the Anniversary date of this Agreement.
5
<PAGE>
7. TERMINATION
This agreement may be terminated with respect to one or more Portfolios (i)
by the Advisor at any time, without payment of any penalty, upon giving the Fund
ninety (90) days' written notice (which notice may be waived by the Fund); or
(ii) by the Fund at any time, without payment of any penalty, upon sixty (60)
days' written notice to the Advisor (which notice may be waived by the Advisor),
provided that such termination by the Fund shall be directed or approved by the
vote of the majority of all of the Directors or by the vote of a majority of the
outstanding voting securities of the Portfolio with respect to which notice of
termination has been given to the Advisor.
8. AMENDMENT OR ASSIGNMENT
This Agreement may be amended with respect to a Portfolio only if such
amendment is specifically approved by (i) the vote of the outstanding voting
securities of such Portfolio and (ii) a majority of the Directors, including a
majority of those Directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, provided that this Agreement may be amended to add a
new series of Shares or delete an existing series of Shares without a vote of
the holders of Shares of any other Portfolio covered by this Agreement. This
Agreement shall automatically and immediately terminate in the event of its
assignment, as that term is defined in the 1940 Act and the rules thereunder.
9. GOVERNING LAW
This Agreement shall be interpreted in accordance with the laws of the
State of New York and the applicable provisions of the 1940 Act, other
securities laws, and the rules thereunder. To the extent that the applicable
laws of the State of New York, other securities laws or any of the provisions
herein. conflict with the applicable provisions of the 1940 Act, the latter
shall control.
10. SEVERABILITY
If any provisions of this Agreement shall be held or made unenforceable by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11. DEFINITIONS
As used in this Agreement, the terms "interested persons" and "vote of a
majority of the outstanding voting securities" shall have the respective
meanings set forth in Sections 2(a)(19) and 2(a)(42) of the 1940 Act.
6
<PAGE>
12. RESERVATION OF "QUEST" NAME
The Fund acknowledges that the name "Quest" is and shall remain sole
property of the Advisor, notwithstanding the use thereof by the Fund, and the
Fund agrees that it will not assert or attempt to assert any property right in
such name.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Quest Cash Reserves, Inc.
By: Bernard H. Garil
------------------------------
Title: Vice President
------------------------------
Attest: Deborah Kaback
--------------------
Quest for Value Advisors
By: Thomas E. Duggan
-------------------------------
Title: Secretary
------------------------------
Attest: Evelyn Grant
--------------------
7
<PAGE>
May , 1989
Quest for Value Distributors
c/o Oppenheimer Capital
Oppenheimer Tower, 37th Floor
World Financial Center
New York, NY 10281
Dear Sirs:
QUEST CASH RESERVES, INC., a Maryland corporation (the "Fund"), is
preparing to register as an investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and an indefinite number of shares of its
capital stock (hereinafter referred to as "shares") will be registered under the
Securities Act of 1933, as amended (the "1933 Act") to be offered for sale to
the public in a continuous public offering in accordance with the terms and
conditions set forth in the Prospectus included in the Fund's Registration
Statement as it may be amended from time to time.
In this connection, the Fund desires that your firm act as General
Distributor and as Agent of the Fund for the sale and distribution of shares
which have been registered as described above and of any additional shares which
may become registered during the term of this Agreement. You have advised the
Fund that you are willing to act as such General Distributor and Agent, and it
is accordingly agreed between us as follows:
1. The Fund hereby appoints you as General Distributor and Agent for sale
of its shares, pursuant to the aforesaid continuous public offering.
2. You hereby accept such appointment and agree to use your best efforts
to sell such shares, provided, however, that when requested by the Fund at any
time you will suspend such efforts. The Fund may withdraw the offering of the
shares at any time. You will arrange for printing and distributing any
prospectuses, reports or other literature, advertising or other promotional
activities in connection with offering Fund shares for sale to the public and
for such direct shareholder servicing activities as you deem necessary and
appropriate. It is understood that you do not undertake to sell all or any
specific portion of the shares of the Fund. The expenses incurred by you
pursuant to this Agreement will
<PAGE>
be for your account, subject to reimbursement by Quest for Value Advisors, the
Fund's investment adviser out of any of its resources.
3. The shares shall be sold by you at net asset value, as next determined
after a valid order for purchase has been received.
4 There will be no compensation payable to you for services rendered
pursuant to this Agreement.
5. The Fund will deliver to you a copy of its current prospectus. The
Fund agrees that it will use its best efforts to continue the effectiveness of
the Fund's Registration Statement under the 1933 Act. The Fund further agrees
to prepare and file any amendments to its Registration Statement as may be
necessary and any supplemental data in order to comply with the 1933 Act. The
Fund will furnish you with a reasonable number of copies of the Prospectus and
any amended Prospectus for use in connection with the sale of shares.
6. The Fund is preparing to register under the 1940 Act as an investment
company, and it will use its best efforts to maintain such registration and to
comply with the requirements of the 1940 Act.
7. At your request, the Fund will take such steps as may be necessary and
feasible to qualify shares for sale in states, territories or dependencies of
the United States of America, in the District of Columbia and in foreign
countries, in accordance with the laws thereof, and to renew or extend any such
qualification; provided however, that the Fund shall not be required to qualify
shares or to maintain the qualification of shares in any state, territory,
dependency, district or country where it shall deem such qualification
disadvantageous to the Fund.
8. You agree that:
(a) Neither you nor any of your officers will take any long or short
position in the shares of the Fund, but this provision shall not prevent you or
your officers from acquiring shares of the Fund for investment purposes only;
(b) You shall furnish to the fund any pertinent information required
to be inserted with respect to you as General Distributor within the purview of
the 1933 Act in any reports or registration required to be filed with any
governmental authority; and
(c) You will not make any representations inconsistent with the
information contained in the Registration Statement or Prospectus of the Fund
filed under the 1933 Act, as in effect from time to time.
9. Unless earlier terminated pursuant to paragraph 10 hereof, this
Agreement shall remain in effect until two years from the date hereof. This
Agreement shall continue in effect from year to year thereafter provided that
such continuance shall be specifically approved at least annually (a) by the
Fund's Board of Directors, including a vote of a
<PAGE>
majority of the Directors who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such persons, cast in person at a
meeting called for the purpose of voting on such approval or (b) by the vote of
the holders of a majority of the outstanding voting securities of the fund and
by such a vote of the Directors.
10. This Agreement may be terminated (a) by the General Distributor at any
time without penalty by giving sixty days' written notice (which notice may be
waived by the Fund); or (b) by the Fund at any time without penalty upon sixty
day's written notice to the General Distributor (which notice may be waived by
the General Distributor), provided that such termination by the Fund shall be
directed or approved by the Directors or by vote of the holders of a majority of
the outstanding voting securities of the Fund.
11. This Agreement may not be amended or changed except in writing and
shall be binding upon and shall enure to the benefits of the parties hereto and
their respective successors, but this Agreement shall not be assigned by either
party and shall automatically terminate upon assignment.
If the foregoing is in accordance with your understanding, kindly so
indicate by signing in the space provided below.
QUEST CASH RESERVES, INC.
By: Philip H. Didriksen, Jr.
------------------------
Accepted:
QUEST FOR VALUE DISTRIBUTORS
By: Richard M. Reilly
-----------------
<PAGE>
DEALER AGREEMENT
OCC CASH RESERVES, INC.
FROM:
TO:
OCC Distributors
World Financial Center
225 Liberty Street
New York, NY 10281
Gentlemen:
We desire to enter into an agreement with you for the sale and distribution
of the shares of each of the portfolios of OCC Cash Reserves, Inc. for which you
are Distributor (hereinafter referred to as the "Fund") and whose shares are
offered to the public at an offering price of $1.00 per share which does not
include a sales charge (hereinafter referred to as "Shares"). Upon acceptance
of this Agreement by you, we understand that we may offer and sell Shares
subject, however, to all of the terms and conditions hereof and to your right,
without notice, to suspend or terminate the sale of the Shares of the Fund.
1. We understand that the Shares will be offered and sold at the public
offering price in effect at the time the order for such Shares is confirmed and
accepted by you. All purchase requests and applications submitted by us are
subject to acceptance or rejection in your sole discretion, and, if accepted,
each purchase will be deemed to have been consummated at the office of your
shareholder servicing agent, Boston Financial Data Services, Inc.
2. We certify (a) that we are a member of the National Association of
Securities Dealers, Inc. ("NASD") and agree to maintain membership in the NASD
or in the alternative (b) that we are a foreign dealer not eligible for
membership in the NASD. In either case, we agree to abide by all the rules and
regulations of the Securities and Exchange Commission and the NASD which are
binding upon underwriters and dealers in the distribution of the securities of
open-end investment companies, including without limitation, Section 26 of
Article III of the NASD Rules of Fair Practice, all of which are incorporated
herein as if set forth in full. We agree that we will not sell or offer for
sales Shares in any state of jurisdiction where they have not been qualified for
sale.
<PAGE>
3. We will offer and sell Shares of the Fund only in accordance with the
terms and conditions of its then current Prospectus and we will make no
representations not included in said Prospectus or in any authorized
supplemental material supplied by you. We will use our best efforts in the
development and promotion of sales of Shares and agree to be responsible for the
proper instruction and training of all sales personnel employed by us, in order
that the Shares will be offered in accordance with the terms and conditions of
this Agreement and all applicable laws, rules and regulations. We agree to hold
you harmless and indemnify you in the event that we, or any of our sales
representatives, should violate any law, rule or regulation, or any provisions
of this Agreement, which violation may result in liability to you or any Fund;
and in the event you determine to refund any amounts paid by any investor by
reason of any such violation on our part, we shall return to you any commissions
previously paid or discounts allowed by you to us with respect to the
transaction for which the refund is made. All expenses which we incur in
connection with our activities under this Agreement shall be borne by us.
4. Pursuant to plans adopted in compliance with Rule 12b-1 under the
Investment Company Act of 1940, we understand that it is your intention to pay a
fee based on the average daily net asset value of each account serviced by us at
an annual rate set forth in the appendix to this Agreement and in the Fund
prospectus. Such fee shall be computed and paid quarterly or otherwise as of
such times as are agreeable to you for accounts for which we are the dealer of
record. In consideration of these fees we agree to provide shareholder and
administrative services to such accounts, which include: answering client
inquiries concerning the Funds; assisting clients in liquidating or in
purchasing shares; maintaining client account records; serving as liaison
between clients, the Fund's transfer agent and us. We understand that the
Plans, payments thereunder and this paragraph of the Agreement may be amended or
terminated at any time, without penalty by (a) the vote of a majority of the
Directors of a Fund who are not "interested persons: or (b) the vote of a
majority of the outstanding voting securities of the affected fund.
5. We understand that the payment of 12b-1 fees are subject to change by
you from time to time, upon written or telegraphic notice to us, and any orders
placed after the effective date of such changes shall be subject to the rates in
effect at the time of receipt of the payment by you.
6. Payments for purchases of Shares made by wire order from us shall be
made to you and received by you together with all necessary applications and
other documents required to establish an account within five business days after
the acceptance of our order or such shorter time as may be required by law. If
such timely payment is not received by you, we understand that you reserve the
right, without notice, forthwith to cancel the sale, or, at your options, to
sell the Shares ordered by us back to the Fund, in which latter case we will be
held responsible for any loss, including loss of profit, suffered by you
resulting from our failure to make the aforesaid payment. Where sales of Fund's
Shares are contingent upon the Fund's receipt of funds in payment therefore, we
will forward promptly to you any purchase orders and/or payments received by us
from investors.
7. We agree to purchase Shares only from you or from our customers. If we
purchase Shares from you, we agree that all such purchases shall be made only to
cover orders received by us from our customers, or for own bona fide investment.
If we purchase Shares from our customers, we agree to pay such customers not
less than the applicable repurchase price as established by the then current
Fund Prospectus.
<PAGE>
8. Your obligations to us under this Agreement are subject to all the
provisions of any distributorship agreement entered into between you and the
Fund. We understand and agree that in performing our services covered by this
Agreement we are acting as principal, and you are in no way responsible for the
manner of our performance or for any of our acts, employees or representatives
as your agent, partner or employee, or the agent or employee of the Fund.
9. We may terminate this Agreement by notice in writing to you, which
termination shall become effective thirty days after the date of mailing to you.
We agree that you have and reserve the right, in your sole discretion without
notice, to suspend sales of Shares of the Fund, or to withdraw entirely the
offering of Shares of the Fund, or, in your sole discretion, to modify, amend or
cancel this Agreement upon written notice to us of such modification, amendment
or cancellation, which shall be effective on the date stated in such notice.
Without limiting the foregoing, you may terminate this Agreement for cause on
violation by us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such termination.
Without limiting the foregoing, any provision hereof to the contrary
notwithstanding, our expulsion from the NASD will automatically terminate this
Agreement without notice; our suspension from the NASD, the appointment of a
trustee for all or substantially all of our business assets, or violation of
applicable State or Federal laws or rules and regulations of authorized
regulatory agencies will terminate this Agreement effective upon the date of
your mailing notice to us of such termination. Your failure to terminate for
any cause shall not constitute a waiver of your right to terminate at a later
date for any such cause. All notices hereunder shall be to the respective
parties at the addresses listed hereon, unless changed by notice given in
accordance with this Agreement.
10. This Agreement shall become effective as of the date when it is
executed and dated by you below and shall be in substitution of any prior
agreement between you and us covering any of the Funds. This Agreement and all
the rights and obligations of the parities hereunder shall be governed by and
construed under the laws of the State of New York. This Agreement is not
assignable or transferable, except that your firm may assign or transfer this
Agreement to any successor firm or corporation which becomes the Distributor or
Sub-distributor of the Funds.
"Accepted"
By: __________________________ OCC DISTRIBUTORS
(Authorized Signature)
By: _______________________
__________________________ Peter F. Muratore
(Please Print Name) President
Date:__________________________
<PAGE>
CUSTODIAN CONTRACT
BETWEEN
QUEST CASH RESERVES, INC.
AND
STATE STREET BANK AND TRUST COMPANY
1
<PAGE>
TABLE OF CONTENTS
PAGE
1. Employment of Custodian and Property to be Held By It. . . . . . .1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian . . . . . . . . . . . . . . . . . . . .2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . .2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . .3
2.3 Registration of Securities . . . . . . . . . . . . . . .8
2.4 Bank Accounts. . . . . . . . . . . . . . . . . . . . . .9
2.5 Payments for Shares. . . . . . . . . . . . . . . . . . 10
2.6 Availability of Federal Funds. . . . . . . . . . . . . 10
2.7 Collection of Income . . . . . . . . . . . . . . . . . 10
2.8 Payment of Fund Monies . . . . . . . . . . . . . . . . 11
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. . . . . . . . . . . . 14
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund. . . . . . . . . . . . . . . . . 15
2.11 Appointment of Agents. . . . . . . . . . . . . . . . . 15
2.12 Deposit of Fund Assets in Securities System. . . . . . 16
2.12A Fund Assests held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . 19
2.13 Segregated Account . . . . . . . . . . . . . . . . . . 21
2.14 Ownership Certificates for Tax Purposes. . . . . . . . 22
2.15 Proxies. . . . . . . . . . . . . . . . . . . . . . . . 22
2.16 Communications Relating to Portfolio
Securities . . . . . . . . . . . . . . . . . . . . . . 23
2.17 Proper Instructions. . . . . . . . . . . . . . . . . . 23
2.18 Actions Permitted Without Express Authority. . . . . . 24
2.19 Evidence of Authority. . . . . . . . . . . . . . . . . 25
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income. . . . . . . . 26
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5. Opinion of Fund's Independent Accountants. . . . . . . . . . . . 27
6. Reports to Fund by Independent Public Accountants. . . . . . . . 27
7. Compensation of Custodian. . . . . . . . . . . . . . . . . . . . 28
8. Responsibility of Custodian. . . . . . . . . . . . . . . . . . . 28
9. Effective Period, Termination and Amendment. . . . . . . . . . . 30
10. Successor Custodian. . . . . . . . . . . . . . . . . . . . . . . 31
11. Interpretive and Additional Provisions . . . . . . . . . . . . . 33
12. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . 33
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . 34
14. Prior Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 34
2
<PAGE>
CUSTODIAN CONTRACT
This Contract between Quest Cash Reserves, Inc., a corporation organized
and existing under the laws of Maryland, having its principal place of business
at 200 Liberty Street, New York, New York, 10281 hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in three series, the
Primary Portfolio, Government Portfolio, and Tax Exempt Portfolio (such series
together with all other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 12, being herein referred
to as the "Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
3
<PAGE>
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the Meaning of Section
2.17), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, but only in accordance with an
applicable vote by the Board of Directors of the Fund on behalf of the
applicable Portfolio(s), and provided that the Custodian shall have no more or
less responsibility or liability to the Fund on account of any actions or
omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, including all
securities owned by such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct Paper") which
is deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
4
<PAGE>
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that , in any such case, the cash or other consideration is to
be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
5
<PAGE>
name of any sub-custodian appointed pursuant of Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for
6
<PAGE>
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon form time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of assets
by the Fund on behalf of the Portfolio, BUT ONLY against receipt
of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the
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rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of
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Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Portfolio or in
the name of any nominee of the Fund on behalf of the Portfolio or of any
nominee of the Custodian which nominee shall be assigned exclusively to
the Portfolio, UNLESS the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered investment
companies having the same investment adviser as the Portfolio, or in the
name or nominee name of any agent appointed pursuant to Section 2.11 or in
the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the
Portfolio under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities and
to notify the Fund on a best efforts basis only of relevant corporate
actions including, without limitation, tendency of calls, maturities,
tender or exchange offers.
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<PAGE>
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Portfolio of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio in a bank account
established and used n accordance with Rule 17f-3 under the Investment
Company Act of 1940. Funds held by the Custodian for a Portfolio may be
deposited by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; PROVIDED, however, that every such
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall
on behalf of each applicable portfolio be approved by vote of a majority
of the Board of Directors of the Fund. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 PAYMENTS FOR SHARES. The Custodian shall receive from the distributor for
the Shares or from the Transfer Agent of the Fund and deposit into the
account of the appropriate Portfolio such payments as are received for
Shares of the Portfolio issued or sold from time to time by the Fund. The
Custodian will provide timely nonfiction to the Fund on behalf of each
such Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
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2.6 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.7 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or its
Agent thereof and shall credit such income, as collected to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the
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<PAGE>
Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.
2.8 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of title
to such securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or any
bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company Act
of 1940 as amended, to act as a custodian and has ben designated by
the Custodian as its agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12 hereof; (c)
in the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.12A; (d) in the
case of repurchase agreements entered into between the Fund on
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<PAGE>
behalf of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to repurchase
such securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a confirmation from
a broker and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Section 2.17;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
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<PAGE>
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper purpose
for which such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such payment
is to be made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
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<PAGE>
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND. From such
funds as may be available for the purpose but subject to the limitations
of the Articles of Incorporation and any applicable votes of the Board of
Directors of the Fund pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds available for payment
to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares
of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
2.11 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; PROVIDED, however, that the appointment
15
<PAGE>
of any agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall not
include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio are maintained in a Securities System shall identify by
book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and
(ii) the
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<PAGE>
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Portfolio. Copies of all
advices from the Securities System of transfers of securities for the
account of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice or notice
and shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 9 hereof;
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<PAGE>
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such loss
or damage.
2.12A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented
in an account ("Account") of the Custodian in the Direct Paper
System which shall
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<PAGE>
not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities of the Portfolio
which are maintained in the Direct Paper System shall identify
by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of
the Portfolio;
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6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal
accounting control as the Fund may reasonably request from
time to time.
2.13 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions
from the Fund on behalf of each applicable Portfolio establish and maintain
a segregated account or accounts for and on behalf of each such Portfolio,
into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD
(or any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for
purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for
the purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies and
(iv) for other proper corporate
20
<PAGE>
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Directors or
of the Executive Committee signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of each Portfolio held by it and in connection with
transfers of securities.
2.15 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of securities and expirations
of rights in connection therewith and notices of exercise of call and put
options written by the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the securities being held for the Portfolio.
With respect to tender or exchange offers,
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<PAGE>
the Custodian shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used throughout this Article
2 means a writing signed or initialed by one or more person or persons as
the Board of Directors shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such
action is requested. Oral Instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given
by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of Directors
of the Fund accompanied by a detailed description of procedures approved
by the Board of Directors, Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Board of Directors and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolios' assets.
For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.13.
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<PAGE>
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Fund on behalf of each
applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to the
Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise
directed by the Board of Directors of the Fund.
2.19 EVIDENCE OF AUTHORITY. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of a vote of the Board of Directors of the Fund as
conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by
the Board of Directors pursuant to the Articles of Incorporation as
described in such vote, and such vote may be considered as in full force
and effect until receipt by the Custodian of written notice to the
contrary.
3. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
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<PAGE>
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amount of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculation of the net asset value per
share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.
4. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder, applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the Fund.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each Portfolio
and held by the Custodian and shall, when requested to do
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<PAGE>
so by the Fund and for such compensation as shall be a greed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
5. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
6. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
7. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
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<PAGE>
8. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate, or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parities,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be keep indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian with respect to redemption
effected by check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
If the Fund on behalf of a Portfolio requires the Custodian to take
any action respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian to advance cash or securities for
any purpose for the benefit of a Portfolio or in the event that the Custodian or
its nominee shall
26
<PAGE>
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent necessary
to obtain reimbursement.
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
however that the Custodian shall not with respect to the Portfolio act under
Section 2.12 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System by such Portfolio and
the receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect to
a Portfolio act under Section 2.12A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
27
<PAGE>
Assistant Secretary that the Board of Directors has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Directors (i) substitute another bank
or trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
10. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Directors of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Directors of the Fund, deliver
28
<PAGE>
at the office of the Custodian and transfer such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Directors shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000 all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds, and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. INTERPRETIVE AND ADDITIONAL PROVISIONS
29
<PAGE>
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Articles of Incorporation
of the Fund. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Contract.
12. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the Primary Portfolio, Government Portfolio, and Tax Exempt
Portfolio with respect to which it desires to have the Custodian render services
as custodian under the terms hereof, it shall so notify the Custodian in
writing, and if the Custodian agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
13. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
14. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
30
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 20th day of October, 1989.
ATTEST QUEST CASH RESERVES, INC.
TERRY TRICE By THOMAS E. DUGGAN
- ----------- ----------------
ATTEST STATE STREET BANK AND TRUST COMPANY
C. MEYERS By ROBERT F. DANE
- ----------- --------------
Assistant Secretary Vice President
31
<PAGE>
GORDON HURWITZ BUTOWSKY WEITZEN SHALOV & WEIN
A PARTNERSHIP CONSISTING OF INDIVIDUALS AND PROFESSIONAL CORPORATIONS
101 PARK AVENUE NEW YORK, NY 10178
November 9, 1989
Quest Cash Reserves, Inc.
c/o Oppenheimer Capital
Two World Financial Center
225 Liberty Street
New York, NY 10080
Re: REGISTRATION STATEMENT
----------------------
Gentlemen:
This opinion is being furnished in connection with the registration by
Quest Cash Reserves, Inc., a Maryland corporation, (the "Fund"), of an
indefinite number of shares of its Common Stock, under the Securities Act of
1933 (the "Securities Act") which such registration is to be effected in
accordance with Rule 24f-2 under the Investment Company Act of 1940 as amended,
pursuant to the Fund's Registration Statement on Form N-1A under the Securities
Act.
As counsel for the Fund, we have examined such Fund records, certificates
and other documents and reviewed such questions of law as we have considered
necessary or appropriate for the purposes of this opinion.
As to matters of Maryland law contained in this opinion, We have relied
upon the opinion of Piper & Marbury. Based upon the foregoing, we are of the
opinion that:
The Shares of Common Stock to be sold by the Fund will be duly and validly
issued, fully paid and nonassessable when issued and sold upon the terms
and in the manner set forth in said Registration Statement of the Fund.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to us as under the caption "Legal Opinions and
Experts" in the prospectus
<PAGE>
Quest Cash Reserves, Inc.
November 9, 1989
Page 2
forming a part of the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Gordon Hurwitz Butowsky
Weitzen Shalov & Wein
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 12 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
January 19, 1996, relating to the financial statements and financial highlights
of Quest Cash Reserves, Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectuses which constitute part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectuses.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 15, 1996
<PAGE>
QUEST CASH RESERVES, INC.
One World Financial Center
New York, NY 10281
October 12, 1989
Oppenheimer Capital
One World Financial Center
New York, NY 10281
Ladies and Gentlemen:
In connection with your purchase today of an aggregate of 100,000 shares of
common stock of the Primary Portfolio, a portfolio of Quest Cash Reserves, Inc.,
for $100,000 (the "Shares"), 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 Shares purchased by you cannot be sold,
assigned, or transferred, except upon redemption by Oppenheimer Capital.
Furthermore, you hereby confirm that you are party to no arrangement,
agreement or understanding regarding Quest Cash Reserves, Inc. (the "Fund") or
its securities, with the Fund, or any other person, made in consideration of
your purchase of the Shares.
If the foregoing correctly expresses your understanding and our agreement,
please so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
Quest Cash Reserves, Inc.
By: /s/ Thomas E. Duggan
---------------------
Thomas E. Duggan
Secretary
Confirmed and Agreed:
Oppenheimer Capital
By: /s/ Thomas E. Duggan
--------------------
Thomas E. Duggan
Managing Director
<PAGE>
DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
PURSUANT TO RULE 12b-1
DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN (the "Plan") made
as of the 1st day of August, 1989, as amended March 31, 1995, by and among Quest
Cash Reserves, Inc., a Maryland corporation (the "Fund"), and Quest for Value
Advisors ("Adviser"), a Delaware general partnership:
WHEREAS, the Fund engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act");
WHEREAS, the Fund issues its common shares ("Shares") in separately
capitalized series ("Portfolios");
WHEREAS, the Fund desires to adopt a Distribution Assistance and
Administrative Services Plan pursuant to Rule 12b-1 under the Act and;
WHEREAS, the Board of Directors has determined that there is a reasonable
likelihood that adoption of the Plan will benefit the Fund and its shareholders;
and
WHEREAS, the Fund desires that the Adviser promote the sale of Shares of
each Portfolio and arrange for the provision of continuous service to Fund
shareholders in accordance with this plan and the Adviser is willing to provide
such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Fund hereby adopts the Plan in accordance with Rule
12b-1 under the Act, and the parties hereto enter into this Agreement, as
amended, on the following terms and conditions:
1. The Fund is hereby authorized to use its assets to finance certain
activities in connection with distribution of its shares.
2. Under the Plan, subject to the supervision of the Board of Directors,
the Fund hereby authorizes and directs the Adviser (1) to promote the
distribution of Shares through broker-dealers, other financial intermediaries,
and others and (2) to arrange with financial intermediaries, including
depository institutions, for the provision of administrative services to Fund
shareholders.
3. The Fund agrees to pay the Adviser, and the Adviser agrees to accept
as full compensation for the performance of all its functions and duties to be
performed hereunder, a fee at an annual rate of .25 of 1% of net assets of each
Portfolio, as calculated each business day. Determination of net asset value of
each Portfolio will be made in accordance with the policies disclosed in the
Fund's registration statement under the 1940 Act. The fee is payable as of the
close of business on the last day of each calendar month and shall be made on
the following
<PAGE>
- 2 -
business day. The payment due on such day shall be computed by (1) adding
together the results of multiplying (i) the total net assets of each Portfolio
on each day of the month by (ii) the applicable daily fraction (based upon a 365
day year) of .25 of 1% and then (2) adding together the total monthly amounts
computed for each Portfolio. To the extent that any expenditures by the Advisor
or its affiliates to support the objectives of this Plan may be deemed by anyone
to constitute the use of Fund assets, such use is hereby authorized.
4. The Fund shall, from time to time, furnish or otherwise make available
to the Adviser such financial reports, proxy statements and other information
relating to the business and affairs of the Fund and of each Portfolio as the
Adviser may reasonably require in order to discharge its duties and obligations
hereunder.
5. The Adviser will use its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations hereunder, the Adviser shall not be liable
to the Fund or any of its shareholders.
6. Nothing contained in this Plan shall prevent the Adviser or any
affiliated person thereof from performing services similar to those to be
performed hereunder for any other person, firm or corporation or for its or
their own accounts or for the accounts of others.
7. After the end of each fiscal quarter, the Adviser shall provide the
Fund for review by the Board, and the Board shall review, a written report
regarding the distribution activities undertaken on behalf of the Fund and,
separately, on behalf of each Portfolio as required by law, during such fiscal
quarter.
8. This Plan shall become effective with respect to any Portfolio upon
approval by a vote of at least a majority, as defined in the Act, of the
outstanding voting securities of that Portfolio and upon approval by a vote of
the Board, and of the Directors who are not interested persons of the Fund, as
defined in the Act, and who have no direct or indirect financial interest in the
operation of this Plan and Agreement, cast in person at a meeting called for the
purpose of voting on this Plan.
9. This Plan shall remain in effect until one year from the date on which
the Registration Statement on Form N-1A is declared effective by the Securities
and Exchange Commission and from year to year thereafter, provided such
continuance is approved annually by a vote of the Board and of the Directors who
are not interested persons of the Fund, as defined in the Act, and who have no
direct or indirect financial interest in the operation of this Plan, cast in
person at a meeting called for the purpose of voting on this Plan. This Plan
may not be amended materially without shareholder approval, and all material
amendments of this Plan must be approved by the Board in the manner provided in
the foregoing sentence.
10. The Plan may be terminated at any time, without the payment of any
penalty, by vote of a majority of the Directors who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of this Plan or, with respect to a particular
<PAGE>
- 3 -
Portfolio, by a vote of a majority, as defined in the Act, of the outstanding
voting securities of that Portfolio, on not more than 30 days' written notice to
any other party to this Plan. Any Agreement(s) entered into in furtherance of
the objectives of the Plan may be terminated by any party thereto upon at least
30 days written notice to any other party to such agreement(s).
11. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Fund shall be committed to the
discretion of the Directors who are not interested persons.
12. To the extent that this Plan constitutes a Plan of Distribution
adopted pursuant to Rule 12b-1 under the Act with respect to a particular
Portfolio, it shall remain in effect as such, so as to authorize the use of
assets for the purposes set forth herein, notwithstanding the occurrence of an
"assignment", as defined by the Act and the rules thereunder. To the extent it
constitutes an agreement pursuant to a plan, it shall terminate automatically in
the event of such "assignment," and the Fund may continue to make payments
pursuant to this Plan with respect to that Portfolio only (1) upon the approval
of the Fund's Board in accordance with the procedures set forth in paragraph 9
above and (2) if the obligations of the Adviser under this Plan are to be
performed by any organization other than the Adviser, upon such organization
adopting and assuming in writing all provisions of this Plan as a party hereto.
13. The Fund shall preserve copies of this Plan and all reports made
pursuant to paragraph 7 hereof, for a period of not less than six years from the
date of this Plan or any such report, as the case may be, the most recent two
years in an easily accessible place.
14. This Plan shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Plan on the day and year first above written in New York, New York.
QUEST CASH RESERVES, INC.
By: Sheldon Siegel
-----------------
Treasurer
Attest: Deborah Kaback
---------------
QUEST FOR VALUE ADVISORS
Attest: Deborah Kaback By: Thomas E. Duggan
--------------- -----------------
Secretary
<PAGE>
QUEST CASH RESERVES PRIMARY PORTFOLIO
Daily Dividend
Date Rate
- ---------------- --------------
11/24/95 0.000378773
11/25/95
11/26/95
11/27/95 0.000154416
11/28/95 0.000137329
11/29/95 0.000135628
11/30/95 0.000132638
--------------
0.000938784
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000938784 4.90%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000938784 1.000938784 5.01%
<PAGE>
QUEST CASH RESERVES GOVERNMENT PORTFOLIO
Daily Dividend
Date Rate
- ---------------- --------------
11/24/95 0.000394312
11/25/95
11/26/95
11/27/95 0.000131283
11/28/95 0.000130011
11/29/95 0.000129587
11/30/95 0.000129068
--------------
0.000914261
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000914261 4.77%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000914261 1.000914261 4.88%
<PAGE>
QUEST CASH RESERVES GOVERNMENT PORTFOLIO
(WITHOUT REIMBURSEMENT OF EXPENSES)
Daily Dividend
Date Rate
- ---------------- --------------
11/24/95 0.000389059
11/25/95
11/26/95
11/27/95 0.000130133
11/28/95 0.000129714
11/29/95 0.000132649
11/30/95 0.000134424
--------------
0.000915979
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000915979 4.78%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000915979 1.000915979 4.89%
<PAGE>
QUEST CASH RESERVES GENERAL MUNICIPAL PORTFOLIO
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000077697
11/02/95 0.000077626
11/03/95 0.000233892
11/04/95
11/05/95
11/06/95 0.000078168
11/07/95 0.000079332
11/08/95 0.000079218
11/09/95 0.000079929
11/10/95 0.000240958
11/11/95
11/12/95
11/13/95 0.000080255
11/14/95 0.000081071
11/15/95 0.000081378
11/16/95 0.000082032
11/17/95 0.000243168
11/18/95
11/19/95
11/20/95 0.000080663
11/21/95 0.000080995
11/22/95 0.000153443
11/23/95
11/24/95 0.000241678
11/25/95
11/26/95
11/27/95 0.000083396
11/28/95 0.000086599
11/29/95 0.000085529
11/30/95 0.000084571
--------------
0.002411598
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000581773 3.03%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000581773 1.000581773 3.08%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .396) x 365/30 = Yield
- ---------------- ------------------
0.002411598 0.604 4.86%
<PAGE>
QUEST CASH RESERVES GENERAL MUNICIPAL PORTFOLIO
(WITHOUT REIMBURSEMENT OF EXPENSES)
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000077697
11/02/95 0.000077626
11/03/95 0.000233892
11/04/95
11/05/95
11/06/95 0.000078168
11/07/95 0.000079332
11/08/95 0.000079218
11/09/95 0.000079929
11/10/95 0.000240958
11/11/95
11/12/95
11/13/95 0.000080255
11/14/95 0.000081071
11/15/95 0.000081378
11/16/95 0.000082032
11/17/95 0.000243168
11/18/95
11/19/95
11/20/95 0.000080663
11/21/95 0.000080995
11/22/95 0.000153443
11/23/95
11/24/95 0.000241678
11/25/95
11/26/95
11/27/95 0.000083396
11/28/95 0.000086599
11/29/95 0.000085529
11/30/95 0.000084571
--------------
0.002411599
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000581773 3.03%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000581773 1.000581773 3.08%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .396) x 365/30 = Yield
- ---------------- ------------------
0.002411599 0.604 4.86%
<PAGE>
QUEST CASH RESERVES CALIFORNIA MUNICIPAL PORTFOLIO
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000083410
11/02/95 0.000083453
11/03/95 0.000251015
11/04/95
11/05/95
11/06/95 0.000082786
11/07/95 0.000083988
11/08/95 0.000085111
11/09/95 0.000085754
11/10/95 0.000256825
11/11/95
11/12/95
11/13/95 0.000084944
11/14/95 0.000085260
11/15/95 0.000086428
11/16/95 0.000087104
11/17/95 0.000256779
11/18/95
11/19/95
11/20/95 0.000086729
11/21/95 0.000085675
11/22/95 0.000168935
11/23/95
11/24/95 0.000256192
11/25/95
11/26/95
11/27/95 0.000084978
11/28/95 0.000085145
11/29/95 0.000083507
11/30/95 0.000083380
--------------
0.002547398
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000593202 3.09%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000593202 1.000593202 3.14%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .46244) x 365/30 = Yield
- ---------------- ------------------
0.002547398 0.53756 5.77%
<PAGE>
QUEST CASH RESERVES CALIFORNIA MUNICIPAL PORTFOLIO
(WITHOUT REIMBURSEMENT OF EXPENSES)
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000083410
11/02/95 0.000083453
11/03/95 0.000251015
11/04/95
11/05/95
11/06/95 0.000082786
11/07/95 0.000083988
11/08/95 0.000082372
11/09/95 0.000085754
11/10/95 0.000256825
11/11/95
11/12/95
11/13/95 0.000084944
11/14/95 0.000085260
11/15/95 0.000086428
11/16/95 0.000087104
11/17/95 0.000256779
11/18/95
11/19/95
11/20/95 0.000086729
11/21/95 0.000085675
11/22/95 0.000168935
11/23/95
11/24/95 0.000256192
11/25/95
11/26/95
11/27/95 0.000084978
11/28/95 0.000085145
11/29/95 0.000083507
11/30/95 0.000087454
--------------
0.002548733
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000597276 3.11%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000597276 1.000597276 3.16%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .46244) x 365/30 = Yield
- ---------------- ------------------
0.002548733 0.53756 5.77%
<PAGE>
QUEST CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
NYC RESIDENT
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000080976
11/02/95 0.000080447
11/03/95 0.000246564
11/04/95
11/05/95
11/06/95 0.000082721
11/07/95 0.000083143
11/08/95 0.000084453
11/09/95 0.000085832
11/10/95 0.000255471
11/11/95
11/12/95
11/13/95 0.000085223
11/14/95 0.000085324
11/15/95 0.000084358
11/16/95 0.000089053
11/17/95 0.000263078
11/18/95
11/19/95
11/20/95 0.000087652
11/21/95 0.000087455
11/22/95 0.000173309
11/23/95
11/24/95 0.000264983
11/25/95
11/26/95
11/27/95 0.000088147
11/28/95 0.000082518
11/29/95 0.000079417
11/30/95 0.000084762
--------------
0.002554886
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000599827 3.13%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000599827 1.000599827 3.18%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - ..468804650 x 365/30 = Yield
- ---------------- ------------------
0.002554886 0.5311954 5.85%
<PAGE>
QUEST CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
(WITHOUT REIMBURSEMENT OF EXPENSES)
NYC RESIDENT
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000078236
11/02/95 0.000077707
11/03/95 0.000238345
11/04/95
11/05/95
11/06/95 0.000079982
11/07/95 0.000080403
11/08/95 0.000081713
11/09/95 0.000083092
11/10/95 0.000247252
11/11/95
11/12/95
11/13/95 0.000082483
11/14/95 0.000082585
11/15/95 0.000081618
11/16/95 0.000086313
11/17/95 0.000254859
11/18/95
11/19/95
11/20/95 0.000084912
11/21/95 0.000084716
11/22/95 0.000167830
11/23/95
11/24/95 0.000256764
11/25/95
11/26/95
11/27/95 0.000085407
11/28/95 0.000082518
11/29/95 0.000079417
11/30/95 0.000084762
--------------
0.002480914
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000588868 3.07%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000588868 1.000588868 3.12%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .468804650) x 365/30 = Yield
- ---------------- ------------------
0.002480914 0.5311954 5.68%
<PAGE>
QUEST CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000080976
11/02/95 0.000080447
11/03/95 0.000246564
11/04/95
11/05/95
11/06/95 0.000082721
11/07/95 0.000083143
11/08/95 0.000084453
11/09/95 0.000085832
11/10/95 0.000255471
11/11/95
11/12/95
11/13/95 0.000085223
11/14/95 0.000085324
11/15/95 0.000084358
11/16/95 0.000089053
11/17/95 0.000263078
11/18/95
11/19/95
11/20/95 0.000087652
11/21/95 0.000087455
11/22/95 0.000173309
11/23/95
11/24/95 0.000264983
11/25/95
11/26/95
11/27/95 0.000088147
11/28/95 0.000082518
11/29/95 0.000079417
11/30/95 0.000084762
--------------
0.002554886
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000599827 3.13%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000599827 1.000599827 3.18%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .441866250 x 365/30 = Yield
- ---------------- ------------------
0.002554886 0.5581338 5.57%
<PAGE>
QUEST CASH RESERVES NEW YORK MUNICIPAL PORTFOLIO
(WITHOUT REIMBURSEMENT OF EXPENSES)
Daily Dividend
Date Rate
- ---------------- --------------
11/01/95 0.000078236
11/02/95 0.000077707
11/03/95 0.000238345
11/04/95
11/05/95
11/06/95 0.000079982
11/07/95 0.000080403
11/08/95 0.000081713
11/09/95 0.000083092
11/10/95 0.000247252
11/11/95
11/12/95
11/13/95 0.000082483
11/14/95 0.000082585
11/15/95 0.000081618
11/16/95 0.000086313
11/17/95 0.000254859
11/18/95
11/19/95
11/20/95 0.000084912
11/21/95 0.000084716
11/22/95 0.000167830
11/23/95
11/24/95 0.000256764
11/25/95
11/26/95
11/27/95 0.000085407
11/28/95 0.000082518
11/29/95 0.000079417
11/30/95 0.000084762
--------------
0.002480914
--------------
--------------
Seven-Day
Base Period
Return ending Seven-Day
11/30/95 x 365/7 = Current Yield
-------------- -------------- ------------------
0.000588868 3.07%
Seven-Day Raised to a
Base Period power of 365/7
Return ending and subtract 1
1 + 11/30/95 = = from the result
- ---------------- -------------- -------------- ------------------
1 0.000588868 1.000588868 3.12%
Thirty-Day
Base Period
Return ending Divided by Tax Equivelent
11/30/95 (1 - .441866250) x 365/30 = Yield
- ---------------- ------------------
0.002480914 0.5581338 5.41%
