<PAGE>
As filed with the Securities and Exchange Commission on March 29, 2000
Registration Nos.: 033-29070
811-05731
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post-Effective Amendment No. 21 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 |X|
Amendment No. 24 |X|
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OCC Cash Reserves, Inc.
(a Maryland corporation)
(Exact Name of Registrant as Specified in Charter)
(Previously called Quest Cash Reserves, Inc.)
1345 Avenue of the Americas
New York, New York 10105
(Address of Principal Executive Office)
Registrant's Telephone Number, Including Area Code: (212) 739-3191
Frank Poli, Esq.
OpCap Advisors
1345 Avenue of the Americas
New York, New York 10105
(Name and Address of Agent for Service)
Copy to:
Ronald M. Feiman, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
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Approximate Date of Proposed Public Offering:
As soon as practicable after this Post-Effective Amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
on March 29, 2000 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on [date], 1999 pursuant to paragraph (a) of rule 485.
Amending the Prospectus and Updating Financial Statements
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<PAGE>
CROSS REFERENCE SHEET
Form N-1A
Item
<TABLE>
<CAPTION>
Part A Caption Prospectus
- ------- ------- ----------
<S> <C> <C>
1. (a) Front Cover Page Front Cover Page
(b) Back Cover Page Back Cover Page
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks and Performance Principal Investment
Strategies and Related Risks
3. Risk/Return Summary: Fee Table Risk/Return Summary
4. Investment Objectives, Principal Principal Investment Strategies and Related Risks
Investment Strategies, and Related Risks
5. Management's Discussion of Fund N/A
Performance
6. Management, Organization, and Capital Fund Management Dividends and Distributions; Taxes
Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Distribution Plan
9. Financial Highlights Information Financial Highlights
<CAPTION>
Part B Caption Statement of Additional Information
- ------ ------- -----------------------------------
<S> <C> <C>
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Additional Information--Description of the Fund
12. Description of the Fund and Its Investment of the Fund's Assets; Investment Restrictions
Investments and Risks
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
13. Management of the Fund Investment Management and Other Services
14. Control Persons and Principal Holders Directors and Officers; Principal Holders of Securities
of Securities
15. Investment Advisory and Other Services Investment Management and Other Services - Distribution
Assistance Plan
16. Brokerage Allocation and Other Purchases Portfolio Transactions
17. Capital Stock and Other Securities Determination of Net Asset Value; Capital Stock;
Additional Information-Possible Additional Series
18. Purchase, Redemption and Pricing of Determination of Net Asset Value
Securities
19. Taxation of the Fund Taxes
20. Underwriters Investment Management and Other Services - Distribution
Assistance Plan
21. Calculations of Performance Data Performance Data
22. Financial Statements Financial Statements
</TABLE>
<PAGE>
OCC CASH RESERVES, INC.
PROSPECTUS MARCH 29, 2000
OCC CASH RESERVES, INC. is an open-end investment company with the following
investment portfolios.
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
The Securities and Exchange Commission has not approved or disapproved any
Portfolio's securities or determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk/Return Summary........................................................................................ 3
Fees and Expenses of the Portfolios........................................................................ 7
Principal Investment Strategies and Related Risks.......................................................... 8
Fund Management............................................................................................ 12
Shareholder Information.................................................................................... 12
Dividends and Distributions................................................................................ 13
Taxes...................................................................................................... 13
Distribution Plan.......................................................................................... 14
Financial Highlights....................................................................................... 15
Appendix................................................................................................... 17
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOALS
<TABLE>
<S> <C>
Primary Portfolio....................................... Safety of principal, liquidity and maximum current
income from money market securities
Government Portfolio.................................... Safety of principal, liquidity and maximum current
income from money market securities
General Municipal Portfolio............................. Safety of principal, liquidity and maximum current
income exempt from Federal income taxes from money
market securities
California Municipal Portfolio.......................... Safety of principal, liquidity and maximum current
income exempt from Federal and California personal
income taxes from money market securities
New York Municipal Portfolio............................ Safety of principal, liquidity and maximum current
income exempt from Federal, New York State and New York
City income taxes from money market securities
The Portfolios are money market funds.
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES
o The Primary Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less, including U.S.
government securities, U.S. dollar denominated certificates of deposit
and bankers acceptances, domestic or foreign commercial paper and
repurchase agreements. The Primary Portfolio normally invests at least
25% of its total assets in bank obligations.
o The Government Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less including U.S.
government securities and repurchase agreements.
o The General Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less including
municipal notes, short-term municipal bonds, short-term discount notes
and participation interests in those securities. The Portfolio normally
invests at least 80% of its total assets in municipal securities.
o The California Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal and California personal income taxes. The
Portfolio normally invests at least 80% of its total assets in California
municipal securities.
o The New York Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal, New York State and New York City income
taxes. The Portfolio normally invests at least 80% of its total assets in
New York municipal securities.
3
<PAGE>
PRINCIPAL RISKS
An investment in any of the Portfolios is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
each Portfolio seeks to preserve the value of your investment at $1.00 per share
it may not do so and therefore it is possible to lose money by investing in a
Portfolio. A Portfolio's yield will vary with fluctuations in available market
interest rates.
Your Portfolio's net asset value, yield and total return could be affected
by:
o Interest Rate Risk--When interest rates rise, the value of fixed income
securities falls
o Credit Risk--Issuers of debt instruments cannot make principal and/or
interest payments on time
o Market Risk--Changes in the economy in general that cause the prices of
fixed income securities to fall.
The California Municipal Portfolio concentrates in California municipal
securities and the New York Municipal Portfolio concentrates in New York
municipal issuers so credit risk and market risk may be greater for those
Portfolios.
BAR CHART AND PERFORMANCE TABLE
The bar charts below show the performance of each Portfolio from year to
year over the past full calendar years during the life of each Portfolio and
describe the best and worst calendar quarter returns during the same periods for
each Portfolio.
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future.
Primary Portfolio
[Bar Chart]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.75% 5.62% 3.24% 2.42% 3.47% 5.19% 4.67% 4.88% 4.85% 4.45%
During the periods shown in the bar chart, the highest quarterly return was
1.91% (for the quarter ended 6/30/1990) and the lowest quarterly return was
0.59% (for the quarter ended 6/30/1993).
4
<PAGE>
Government Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
5.46% 3.06% 2.25% 3.33% 5.03% 4.47% 4.63% 4.58% 4.21%
During the periods shown in the bar chart, the highest quarterly return was
1.88% (for the quarter ended 9/30/1990) and the lowest quarterly return was
0.55% (for the quarter ended 9/30/1993).
General Municipal Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
4.10% 2.52% 1.70% 2.17% 3.12% 2.51% 2.76% 2.61% 2.32%
During the periods shown in the bar chart, the highest quarterly return was
1.11% (for the quarter ended 3/31/1991) and the lowest quarterly return was
0.39% (for the quarter ended 9/30/1993).
5
<PAGE>
California Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.45% 1.71% 2.12% 3.10% 2.40% 2.65% 2.35% 2.08%
During the periods shown in the bar chart, the highest quarterly return was
0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.41% (for the quarter ended 6/30/1993).
New York Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.41% 1.62% 2.04% 3.09% 2.44% 2.68% 2.45% 2.19%
During the periods shown in the bar chart, the highest quarterly return was
0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.38% (for the quarter ended 6/30/1993).
6
<PAGE>
The table below shows the average annual returns for one and five years and
for the life of each Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
PAST YEAR PAST 5 YEARS SINCE INCEPTION*
--------- ------------ ----------------
<S> <C> <C> <C>
Primary Portfolio................................................. 4.45% 4.81% 4.66%
Government Municipal Portfolio.................................... 4.21% 4.58% 4.41%
General Municipal Portfolio....................................... 2.32% 2.66% 2.89%
California Municipal Portfolio.................................... 2.08% 2.51% 2.48%
New York Municipal Portfolio...................................... 2.19% 2.57% 2.48%
</TABLE>
* The Primary Portfolio began operations on December 13, 1989. Each of the
Government Portfolio and the General Municipal Portfolio began operations on
February 14, 1990. The California Municipal Portfolio began operations on
March 20, 1991. The New York Municipal Portfolio began operations on
April 10, 1991.
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future. For the current yield of the Portfolios,
call 1-800-401-6672.
FEES AND EXPENSES OF THE PORTFOLIOS
This table describes the fees and expenses that you may pay if you buy and
hold shares in the Portfolios.
SHAREHOLDER FEES--FEES YOU PAY DIRECTLY
There are no fees or sales loads charged to your account when you buy or
sell shares of a Portfolio.
ANNUAL FUND OPERATING EXPENSES--EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
<TABLE>
<CAPTION>
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Management Fees........................................ .41% .50% .49% .50% .50%
12b-1 (Distribution Plan) Fees......................... .25% .25% .25% .25% .25%
Other Expenses......................................... .16% .20% .19% .16% .21%
----- ---- ----- ----- ----
Total Annual Fund Operating Expenses................... .82% .95% .93% .91% .96%
----- ---- ----- ----- ----
----- ---- ----- ----- ----
</TABLE>
7
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds. Although your
actual costs may be higher or lower, you would pay the following expenses on a
$10,000 investment assuming (1) 5% annual return, (2) the Portfolios' operating
expenses remain the same and (3) you redeem all of your shares at the end of the
period in the table.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Primary Portfolio.......................................................... $ 84 $ 262 $ 455 $1,014
Government Portfolio....................................................... 97 303 525 1,166
General Municipal Portfolio................................................ 95 296 515 1,143
California Municipal Portfolio............................................. 93 290 504 1,120
New York Municipal Portfolio............................................... 98 306 531 1,178
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
PRIMARY PORTFOLIO
Q What is the Portfolio's investment program?
A The Primary Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations with remaining maturities of
13 months or less.
Q What types of securities does the Portfolio buy?
A The Primary Portfolio invests in:
o Certificates of deposit and bankers acceptances of prime quality and
interest bearing time deposits issued, guaranteed or maintained at U.S.
or foreign banks having total assets of $1 billion.
o Commercial paper and participation interests in loans made by banks to
corporations.
o Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. These securities are called U.S. Government
securities.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Primary Portfolio's investments?
A The Primary Portfolio invests at least 95% of its total assets in prime money
market instruments. When we use the term "prime" we mean securities with a
credit rating in the highest category by at least two established rating
agencies or by one rating agency if the security is rated only by one or if
the security is unrated, determined by OpCap Advisors to be equivalent to an
issue having the highest rating from such a rating agency. The Primary
Portfolio invests no more than 5% of its total assets in securities rated in
the second highest category and not more than 1% of its total assets in any
one issuer of securities rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The Primary Portfolio will not invest more than 5% of its total assets in any
one issuer. The Primary Portfolio expects to invest at least 25% of its total
assets in bank obligations but otherwise will not invest more than 25% of its
total assets in securities of issuers in any one industry. U.S. Government
securities are not counted for the 5% limit on issuers or the 25% limit on any
one industry.
8
<PAGE>
GOVERNMENT PORTFOLIO
Q What is the Portfolio's investment program?
A The Government Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations with remaining maturities of
13 months or less.
Q What types of securities does the Portfolio buy?
A The Government Portfolio invests in:
o U.S. Government securities including direct obligations of the United
States Treasury such as Bills, Notes and Bonds; issues of agencies and
instrumentalities established by an act of Congress which have the right
to borrow from the U.S. Treasury; and securities which depend solely on
the issuing instrumentality for repayment.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Government Portfolio's investments?
A Securities backed by the full faith and credit of the U.S. Government are
considered to be free of credit risk. Other securities may have somewhat
greater risk.
GENERAL MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The General Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term money market securities exempt from Federal
income taxes with remaining maturities of 13 months or less. The Portfolio can
invest without limit in industrial development bonds. Interest on industrial
development bonds is treated as an item of tax preference for purposes of the
alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The General Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in municipal
securities except in times of adverse market conditions when the Portfolio
may invest up to 100% of its assets in taxable money market securities.
Q What is the credit quality of the General Municipal Portfolio's investments?
A The General Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The General Municipal Portfolio invests no more than 5% of its total assets in
industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The General Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer except that for a period of three business days, up
to 25% of the Portfolio's total assets may be invested in prime quality
securities of a single issuer. When we use the term "prime" we mean securities
with a credit rating in the highest category by at least two established
rating agencies or by one rating agency if the security is
9
<PAGE>
rated only by one or if the security is unrated, determined by OpCap Advisors
to be equivalent to an issue having the highest rating from such a rating
agency. The General Municipal Portfolio will not invest more than 25% of its
total assets in securities of issuers located in the same state or in
securities whose interest is paid from revenues of similar projects. U.S.
Government securities are not counted for the 5% limit on issuers or the 25%
limit on similar projects.
CALIFORNIA MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The California Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal and
California personal income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated as an item of tax
preference for purposes of the alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The California Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in
California municipal securities except in times of adverse market
conditions when the Portfolio may invest up to 100% of its assets in money
market securities that may be subject to Federal and/or California
personal income taxes.
Q What is the credit quality of the California Municipal Portfolio's
investments?
A The California Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The California Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The California Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime." The California Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
NEW YORK MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The New York Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal, New York
State and New York City income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated
10
<PAGE>
as an item of tax preference for purposes of the alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The New York Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in New York
municipal securities except in times of adverse market conditions when the
Portfolio may invest up to 100% of its assets in money market securities
that may be subject to Federal and/or New York personal income taxes.
Q What is the credit quality of the New York Municipal Portfolio's investments?
A The New York Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The New York Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The New York Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime". The New York Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
RISKS OF THE PORTFOLIOS
Q What are the main risks of investing in the Portfolios?
A We manage the Portfolios to maintain a constant share price of $1.00 per share
but there is no assurance that we will be able to do so. The U.S. Government
does not guarantee or insure the shares of the Portfolios so there is some
risk. The Portfolios limit their investments to securities that OpCap Advisors
believes present minimal credit risk.
There is always the risk that the issuer of a security held by a Portfolio
will fail to pay interest or principal when due. We try to keep this risk low
by investing only in securities rated in one of the two highest categories for
short term securities or if not rated, of comparable quality.
There is also the risk that rising interest rates will cause the value of a
Portfolio's securities to decline. The short maturity of the securities held
by the Portfolios reduces the potential for price fluctuation.
The risks described above could be greater for the California Municipal
Portfolio which concentrates in California issues and for the New York
Municipal Portfolio which concentrates in New York issues. California and New
York tax exempt securities may be affected by political, economic or other
events that limit the ability of California or New York issuers to pay
interest or repay
11
<PAGE>
principal or may depress the entire market for California or New York tax
exempt securities. The General, California and New York Municipal Portfolios
invest in lease obligations which are not as liquid as other municipal
obligations. The Portfolios look at the following factors to determine the
liquidity of a lease obligation.
o frequency of trades and quoted prices for the obligation
o the number of dealers willing to purchase or sell the security and the
number of other potential purchasers
o the willingness of dealers to undertake to make a market in the security
o 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.
FUND MANAGEMENT
The Board of Directors of the Fund has hired OpCap Advisors to serve as
manager of the Fund.
OpCap Advisors is a subsidiary of Oppenheimer Capital, an investment
advisory firm with approximately $48 billion of assets under management as of
January 31, 2000. The mailing address is 1345 Avenue of the Americas, New York,
New York 10105.
OpCap Advisors has been in business as an investment adviser since 1987 and
Oppenheimer Capital has been in business as an investment adviser since 1969.
OpCap Advisors manages the investments of the Fund and its business
affairs. Employees of Oppenheimer Capital as well as employees of OpCap Advisors
perform these services.
The Portfolios of the Fund paid OpCap Advisors the following fees as a
percentage of average net assets during the fiscal year ended November 30, 1999:
<TABLE>
<S> <C>
Primary Portfolio....................... .41%
Government Portfolio.................... .50%
General Municipal Portfolio............. .49%
California Municipal Portfolio.......... .50%
New York Municipal Portfolio............ .50%
</TABLE>
SHAREHOLDER INFORMATION
PRICING OF PORTFOLIO SHARES
You can buy and sell Portfolio shares without sales or redemption charges
at their net asset value which is expected to be constant at $1.00. The Fund
calculates net asset value per share each day that the New York Stock Exchange
is open for trading at 4:00 p.m. using the amortized cost method which
approximates the current market value of the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
There are no minimum amounts required for either investments or
withdrawals.
INITIAL INVESTMENTS (Purchases)
Contact your CIBC 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 CIBC Oppenheimer securities account through CIBC
Oppenheimer's sweep service or as an additional investment position held in your
securities account.
12
<PAGE>
The "sweep" means that cash is automatically invested in the Portfolio of
your choice when the cash becomes available in your CIBC 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 account.
SUBSEQUENT INVESTMENTS (Purchases)
Mail or deliver your check, payable to CIBC World Markets, to your CIBC
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 CIBC Oppenheimer Account Executive to obtain
wiring instructions.
WITHDRAWALS (Redemptions)
For withdrawals other than those automatically activated by the sweep,
please instruct your CIBC Oppenheimer Account Executive as to the withdrawal
amount and the delivery of the proceeds. Redemption orders are processed the
next business day after they are received by the Fund's transfer agent.
REDEMPTIONS OVER $250,000
If in any 90 day period, you redeem more than $250,000 or your sale amounts
to more than 1% of a Portfolio's net assets, the Portfolio has the right to pay
the difference between the redemption amount and the lesser of $250,000 or 1% of
the Portfolio's net assets with securities from the Portfolio.
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and paid into shareholders accounts
monthly. Dividends are automatically reinvested in additional shares unless
we receive different instructions from you.
TAXES
In January you will be sent a statement indicating the tax status of any
dividends paid to you for the previous calendar year. Since the Portfolios are
managed to maintain a constant share price, we do not expect the Portfolios to
make significant capital gain distributions.
We anticipate that at least 80% of the annual income of the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolios will be exempt from federal income taxes (but not from the
alternative minimum tax) and from California income taxes in the case of the
California Municipal Portfolio and from New York State and New York City income
taxes in the case of the New York Municipal Portfolio. The General Municipal
Portfolio, the California Municipal Portfolio and the New York Municipal
Portfolio can invest in industrial development bonds and other private activity
bonds so a portion of the distributions from those Portfolios may be treated as
a tax preference item for shareholders subject to the alternative minimum tax.
This tax information is general. You should consult your own tax adviser with
respect to your own tax situation.
13
<PAGE>
DISTRIBUTION PLAN
The Fund has adopted a Distribution Assistance and Administrative Services
Plan that allows each Portfolio to pay OpCap Advisors .25 of 1% of the
Portfolio's average daily net assets. OpCap Advisors pays these fees to
broker-dealers, banks and other financial institutions for distribution
assistance and for administrative services provided to shareholders. Because
these fees are paid out of a Portfolio's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost more than
paying other types of sales charges.
14
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The financial highlights table is intended to help you understand the
Portfolios' financial performance for the past five years. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned on an investment
in a Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Portfolios' financial statements, are
included in the Fund's Statement of Additional Information, which is available
upon request.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT END TOTAL
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME OF YEAR RETURN*
PRIMARY PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999....................................... $1.00 $ 0.04 $ 0.00 $ 0.04 $ (0.04) $1.00 4.41%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.90%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.85%
1996....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.69%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.19%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $1.00 $ 0.04 $ 0.00 $ 0.04 $ (0.04) $1.00 4.17%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.63%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.60%
1996....................................... 1.00 0.04 (0.00) 0.04 (0.04) 1.00 4.51%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.02%
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
YEAR NET INVESTMENT
(MILLIONS) EXPENSES(2) INCOME
PRIMARY PORTFOLIO
<S> <C> <C> <C>
Year ended November 30,
1999....................................... $ 2,463.3 0.82% 4.32%
1998....................................... 2,572.4 0.83% 4.78%
1997....................................... 2,166.6 0.85% 4.75%
1996....................................... 1,712.6 0.91% 4.60%
1995....................................... 1,671.1 0.94% 5.07%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $ 84.0 0.95% 4.09%
1998....................................... 112.1 0.98%(1) 4.53%(1)
1997....................................... 100.0 0.98%(1) 4.51%(1)
1996....................................... 101.1 1.00%(1) 4.41%(1)
1995....................................... 108.6 1.00%(1) 4.91%(1)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 4.52%, respectively, for the
year ended November 30, 1998, 0.99% and 4.50%, for the year ended
November 30, 1997, 1.00% and 4.41%, respectively, for the year ended
November 30, 1996, and 1.02% and 4.89%, respectively, for the year ended
November 30, 1995.
(2) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
15
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS CAPITAL NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET CONTRIBUTION VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT BY INVESTMENT END
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME ADVISER OF YEAR
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999................................. $1.00 $ 0.02 $ (0.00) $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $ -- $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1995................................. 1.00 0.03 (0.01) 0.02 (0.03) $0.01 1.00
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $0.00 $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
TOTAL YEAR NET INVESTMENT
RETURN* (MILLIONS) EXPENSES(4) INCOME
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C>
Year ended November 30,
1999................................. 2.29% $120.0 0.93% 2.26%
1998................................. 2.66% 171.8 0.92% 2.62%
1997................................. 2.74% 137.0 0.96%(1) 2.70%(1)
1996................................. 2.56% 122.3 0.99%(1) 2.53%(1)
1995................................. 3.11% 116.0 0.93%(1) 3.07%(1)
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.06% $66.5 0.91% 2.03%
1998................................. 2.39% 70.4 0.95% 2.36%
1997................................. 2.68% 55.7 0.90%(2) 2.64%(2)
1996................................. 2.42% 53.4 0.85%(2) 2.42%(2)
1995................................. 3.10% 75.9 0.82%(2) 3.05%(2)
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.16% $55.3 0.96% 2.11%
1998................................. 2.50% 84.1 0.98% 2.46%
1997................................. 2.66% 73.2 0.98%(3) 2.63%(3)
1996................................. 2.50% 60.0 0.97%(3) 2.45%(3)
1995................................. 3.07% 52.3 0.79%(3) 3.02%(3)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.70%, respectively, for the
year ended November 30, 1997, 0.99% and 2.53%, respectively, for the year
ended November 30, 1996, and 1.02% and 2.98%, respectively, for the year
ended November 30, 1995.
(2) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.58%, respectively, for the
year ended November 30, 1997, 0.97% and 2.30%, respectively, for the year
ended November 30, 1996, and 0.95% and 2.92%, respectively, for the year
ended November 30, 1995.
(3) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 2.62%, respectively, for the
year ended November 30, 1997, 0.98% and 2.44%, respectively, for the year
ended November 30, 1996, and 1.00% and 2.81%, respectively, for the year
ended November 30, 1995.
(4) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
16
<PAGE>
APPENDIX
THE FOLLOWING ARE DESCRIPTIONS OF CERTAIN TYPES OF SECURITIES IN WHICH WE
MAY INVEST ASSETS OF THE PORTFOLIOS.
PRIMARY PORTFOLIO
Certificates of Deposit
Receipts for funds deposited at banks that guarantee a fixed interest rate
over a specified time period.
Commercial Paper
Unsecured promissory notes that corporations issue to finance current
operations and other expenditures.
Repurchase Agreements
Contracts that require one party to repurchase securities at a fixed price
on a designated date.
Banker's Acceptances
Bank-issued commitments to pay for merchandise sold in the import/export
market.
GENERAL MUNICIPAL, CALIFORNIA MUNICIPAL AND NEW YORK MUNICIPAL PORTFOLIOS
Variable Rate Obligations
Interest rates are adjusted periodically to market rates. Value of these
securities is less affected by changes in interest rates than fixed coupon
securities.
Put Bonds
Tax-exempt securities which may be redeemed or sold back (put) to the
issuer of the security or a third party prior to stated maturity.
Municipal Lease Obligations
Some lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease obligation payments in
future years unless money is appropriated for the purchase on a yearly basis.
We attempt to invest at least 90% of each Portfolio's net assets in
securities that are liquid which means securities that can be disposed of in the
ordinary course of business, seven days or less, at approximately the value at
which the Portfolio has valued the securities. We may invest up to 10% of each
Portfolio's net assets in securities we believe are illiquid. In determining the
liquidity of a lease obligation we consider these factors: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the obligation and the number of other potential purchases;
(3) the willingness of dealers to make a market in the obligation; (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.
17
<PAGE>
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<PAGE>
[This page intentionally left blank]
<PAGE>
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and is incorporated into this prospectus by
reference.
The SAI and the Portfolios' annual and semi-annual reports are available
without charge upon request to your account executive or by calling the Fund at
1-800-401-6672.
You can review and copy the Portfolios' reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text-only
copies:
After paying a duplicating fee, by electronic request at the following
email address: [email protected], or by writing to or calling the Public
Reference Room of the Commission, Washington, D.C. 20549-0102
Telephone: 1-202-942-8090
Free from the EDGAR Database on the Commission's Internet website at
http://www.sec.gov.
(Investment Company Act file no. 811-05731)
OCC CASH RESERVES
o Primary Portfolio
o Government Portfolio
o General Municipal Portfolio
o California Municipal Portfolio
o New York Municipal Portfolio
PROSPECTUS
MARCH 29, 2000
<PAGE>
GENERIC
VERSION
OCC CASH RESERVES, INC.
PROSPECTUS MARCH 29, 2000
OCC CASH RESERVES, INC. is an open-end investment company with the following
investment portfolios.
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
The Securities and Exchange Commission has not approved or disapproved any
Portfolio's securities or determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk/Return Summary........................................................................................ 3
Fees and Expenses of the Portfolios........................................................................ 7
Principal Investment Strategies and Related Risks.......................................................... 8
Fund Management............................................................................................ 12
Shareholder Information.................................................................................... 12
Dividends and Distributions................................................................................ 15
Taxes...................................................................................................... 15
Distribution Plan.......................................................................................... 15
Financial Highlights....................................................................................... 16
Appendix................................................................................................... 18
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOALS
<TABLE>
<S> <C>
Primary Portfolio....................................... Safety of principal, liquidity and maximum current
income from money market securities
Government Portfolio.................................... Safety of principal, liquidity and maximum current
income from money market securities
General Municipal Portfolio............................. Safety of principal, liquidity and maximum current
income exempt from Federal income taxes from money
market securities
California Municipal Portfolio.......................... Safety of principal, liquidity and maximum current
income exempt from Federal and California personal
income taxes from money market securities
New York Municipal Portfolio............................ Safety of principal, liquidity and maximum current
income exempt from Federal, New York State and New York
City income taxes from money market securities
</TABLE>
The Portfolios are money market funds.
PRINCIPAL INVESTMENT STRATEGIES
o The Primary Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less, including U.S.
government securities, U.S. dollar denominated certificates of deposit
and bankers acceptances, domestic or foreign commercial paper and
repurchase agreements. The Primary Portfolio normally invests at least
25% of its total assets in bank obligations.
o The Government Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less including U.S.
government securities and repurchase agreements.
o The General Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less including
municipal notes, short-term municipal bonds, short-term discount notes
and participation interests in those securities. The Portfolio normally
invests at least 80% of its total assets in municipal securities.
o The California Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal and California personal income taxes. The
Portfolio normally invests at least 80% of its total assets in California
municipal securities.
o The New York Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal, New York State and New York City income
taxes. The Portfolio normally invests at least 80% of its total assets in
New York municipal securities.
3
<PAGE>
PRINCIPAL RISKS
An investment in any of the Portfolios is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
each Portfolio seeks to preserve the value of your investment at $1.00 per share
it may not do so and therefore it is possible to lose money by investing in a
Portfolio. A Portfolio's yield will vary with fluctuations in available market
interest rates.
Your Portfolio's net asset value, yield and total return could be affected
by:
o Interest Rate Risk--When interest rates rise, the value of fixed income
securities falls
o Credit Risk--Issuers of debt instruments cannot make principal and/or
interest payments on time
o Market Risk--Changes in the economy in general that cause the prices of
fixed income securities to fall.
The California Municipal Portfolio concentrates in California municipal
securities and the New York Municipal Portfolio concentrates in New York
municipal issuers so credit risk and market risk may be greater for those
Portfolios.
BAR CHART AND PERFORMANCE TABLE
The bar charts below show the performance of each Portfolio from year to
year over the past full calendar years during the life of each Portfolio and
describe the best and worst calendar quarter returns during the same periods
for each Portfolio.
Primary Portfolio
[Bar Chart]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.75% 5.62% 3.24% 2.42% 3.47% 5.19% 4.67% 4.88% 4.85% 4.45%
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future.
During the periods shown in the bar chart, the highest quarterly return was
1.91% (for the quarter
ended 6/30/1990 and the lowest quarterly return was 0.59% (for the quarter ended
6/30/1993).
4
<PAGE>
Government Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
5.46% 3.06% 2.25% 3.33% 5.03% 4.47% 4.63% 4.58% 4.21%
During the periods shown in the bar chart, the highest quarterly return was
1.88% (for the quarter ended 9/30/1990 and the lowest quarterly return was 0.55%
(for the quarter ended 9/30/1993).
General Municipal Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
4.10% 2.52% 1.70% 2.17% 3.12% 2.51% 2.76% 2.61% 2.32%
During the periods shown in the bar chart, the highest quarterly return was
1.11% (for the quarter ended 3/31/1991) and the lowest quarterly return was
0.39% (for the quarter ended 9/30/1993).
5
<PAGE>
California Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.45% 1.71% 2.12% 3.10% 2.40% 2.65% 2.35% 2.08%
During the periods shown in the bar chart, the highest quarterly return was
0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.41% (for the quarter ended 6/30/1993).
New York Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.41% 1.62% 2.04% 3.09% 2.44% 2.68% 2.45% 2.19%
During the periods shown in the bar chart, the highest quarterly return was
0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.38% (for the quarter ended 6/30/1993).
6
<PAGE>
The table below shows the average annual returns for one and five years and
for the life of each Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
PAST YEAR PAST 5 YEARS SINCE INCEPTION*
--------- ------------ ----------------
<S> <C> <C> <C>
Primary Portfolio................................................. 4.45% 4.81% 4.66%
Government Municipal Portfolio.................................... 4.21% 4.58% 4.41%
General Municipal Portfolio....................................... 2.32% 2.66% 2.89%
California Municipal Portfolio.................................... 2.08% 2.51% 2.48%
New York Municipal Portfolio...................................... 2.19% 2.57% 2.48%
</TABLE>
* The Primary Portfolio began operations on December 13, 1989. Each of the
Government Portfolio and the General Municipal Portfolio began operations on
February 14, 1990. The California Municipal Portfolio began operations on
March 20, 1991. The New York Municipal Portfolio began operations on
April 10, 1991.
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future. For the current yield of the Portfolios,
call 1-800-401-6672.
FEES AND EXPENSES OF THE PORTFOLIOS
This table describes the fees and expenses that you may pay if you buy and
hold shares in the Portfolios.
SHAREHOLDER FEES--FEES YOU PAY DIRECTLY
There are no fees or sales loads charged to your account when you buy or
sell shares of a Portfolio.
ANNUAL FUND OPERATING EXPENSES--EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
<TABLE>
<CAPTION>
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Management Fees........................................ .41% .50% .49% .50% .50%
12b-1 (Distribution Plan) Fees......................... .25% .25% .25% .25% .25%
Other Expenses......................................... .16% .20% .19% .16% .21%
----- ---- ----- ----- ----
Total Annual Fund Operating Expenses................... .82% .95% .93% .91% .96%
----- ---- ----- ----- ----
----- ---- ----- ----- ----
</TABLE>
7
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds. Although your
actual costs may be higher or lower, you would pay the following expenses on a
$10,000 investment assuming (1) 5% annual return, (2) the Portfolios' operating
expenses remain the same and (3) you redeem all of your shares at the end of the
period in the table.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Primary Portfolio.......................................................... $ 84 $ 262 $ 455 $1,014
Government Portfolio....................................................... 97 303 525 1,166
General Municipal Portfolio................................................ 95 296 515 1,143
California Municipal Portfolio............................................. 93 290 504 1,120
New York Municipal Portfolio............................................... 98 306 531 1,178
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
PRIMARY PORTFOLIO
Q What is the Portfolio's investment program?
A The Primary Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations with remaining maturities of
13 months or less.
Q What types of securities does the Portfolio buy?
A The Primary Portfolio invests in:
o Certificates of deposit and bankers acceptances of prime quality and
interest bearing time deposits issued, guaranteed or maintained at U.S.
or foreign banks having total assets of $1 billion.
o Commercial paper and participation interests in loans made by banks to
corporations.
o Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. These securities are called U.S. Government
securities.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Primary Portfolio's investments?
A The Primary Portfolio invests at least 95% of its total assets in prime money
market instruments. When we use the term "prime" we mean securities with a
credit rating in the highest category by at least two established rating
agencies or by one rating agency if the security is rated only by one or if
the security is unrated, determined by OpCap Advisors to be equivalent to an
issue having the highest rating from such a rating agency. The Primary
Portfolio invests no more than 5% of its total assets in securities rated in
the second highest category and not more than 1% of its total assets in any
one issuer of securities rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The Primary Portfolio will not invest more than 5% of its total assets in any
one issuer. The Primary Portfolio expects to invest at least 25% of its total
assets in bank obligations but otherwise will not invest more than 25% of its
total assets in securities of issuers in any one industry. U.S. Government
securities are not counted for the 5% limit on issuers or the 25% limit on any
one industry.
8
<PAGE>
GOVERNMENT PORTFOLIO
Q What is the Portfolio's investment program?
A The Government Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations with remaining maturities of
13 months or less.
Q What types of securities does the Portfolio buy?
A The Government Portfolio invests in:
o U.S. Government securities including direct obligations of the United
States Treasury such as Bills, Notes and Bonds; issues of agencies and
instrumentalities established by an act of Congress which have the right
to borrow from the U.S. Treasury; and securities which depend solely on
the issuing instrumentality for repayment.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Government Portfolio's investments?
A Securities backed by the full faith and credit of the U.S. Government are
considered to be free of credit risk. Other securities may have somewhat
greater risk.
GENERAL MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The General Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term money market securities exempt from Federal
income taxes with remaining maturities of 13 months or less. The Portfolio can
invest without limit in industrial development bonds. Interest on industrial
development bonds is treated as an item of tax preference for purposes of the
alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The General Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in municipal
securities except in times of adverse market conditions when the Portfolio may
invest up to 100% of its assets in taxable money market securities.
Q What is the credit quality of the General Municipal Portfolio's investments?
A The General Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The General Municipal Portfolio invests no more than 5% of its total assets in
industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The General Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer except that for a period of three business days, up
to 25% of the Portfolio's total assets may be invested in prime quality
securities of a single issuer. When we use the term "prime" we mean securities
with a credit rating in the highest category by at least two established
rating
9
<PAGE>
agencies or by one rating agency if the security is rated only by one or if
the security is unrated, determined by OpCap Advisors to be equivalent to an
issue having the highest rating from such a rating agency. The General
Municipal Portfolio will not invest more than 25% of its total assets in
securities of issuers located in the same state or in securities whose
interest is paid from revenues of similar projects. U.S. Government securities
are not counted for the 5% limit on issuers or the 25% limit on similar
projects.
CALIFORNIA MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The California Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal and
California personal income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated as an item of tax
preference for purposes of the alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The California Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in California
municipal securities except in times of adverse market conditions when the
Portfolio may invest up to 100% of its assets in money market securities
that may be subject to Federal and/or California personal income taxes.
Q What is the credit quality of the California Municipal Portfolio's
investments?
A The California Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The California Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The California Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime." The California Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
NEW YORK MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The New York Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal, New York
State and New York City income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated as an item of tax
preference for purposes of the alternative minimum tax.
10
<PAGE>
Q What types of securities does the Portfolio buy?
A The New York Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in New York
municipal securities except in times of adverse market conditions when the
Portfolio may invest up to 100% of its assets in money market securities
that may be subject to Federal and/or New York personal income taxes.
Q What is the credit quality of the New York Municipal Portfolio's investments?
A The New York Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The New York Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The New York Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime." The New York Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
RISKS OF THE PORTFOLIOS
Q What are the main risks of investing in the Portfolios?
A We manage the Portfolios to maintain a constant share price of $1.00 per share
but there is no assurance that we will be able to do so. The U.S. Government
does not guarantee or insure the shares of the Portfolios so there is some
risk. The Portfolios limit their investments to securities that OpCap Advisors
believes present minimal credit risk.
There is always the risk that the issuer of a security held by a Portfolio
will fail to pay interest or principal when due. We try to keep this risk low
by investing only in securities rated in one of the two highest categories for
short term securities or if not rated, of comparable quality.
There is also the risk that rising interest rates will cause the value of a
Portfolio's securities to decline. The short maturity of the securities held
by the Portfolios reduces the potential for price fluctuation.
The risks described above could be greater for the California Municipal
Portfolio which concentrates in California issues and for the New York
Municipal Portfolio which concentrates in New York issues. California and New
York tax exempt securities may be affected by political, economic or other
events that limit the ability of California or New York issuers to pay
interest or repay principal or may depress the entire market for California or
New York tax exempt securities. The General, California and New York Municipal
Portfolios invest in lease obligations which are not as liquid as other
municipal obligations. The
11
<PAGE>
Portfolios look at the following factors to determine the liquidity of a lease
obligation.
o frequency of trades and quoted prices for the obligation
o the number of dealers willing to purchase or sell the security and the
number of other potential purchasers
o the willingness of dealers to undertake to make a market in the security
o 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.
FUND MANAGEMENT
The Board of Directors of the Fund has hired OpCap Advisors to serve as
manager of the Fund.
OpCap Advisors is a subsidiary of Oppenheimer Capital, an investment
advisory firm with approximately $48 billion of assets under management as of
January 31, 2000. The mailing address is 1345 Avenue of the Americas, New York,
New York 10105.
OpCap Advisors has been in business as an investment adviser since 1987 and
Oppenheimer Capital has been in business as an investment adviser since 1969.
OpCap Advisors manages the investments of the Fund and its business
affairs. Employees of Oppenheimer Capital as well as employees of OpCap Advisors
perform these services.
The Portfolios of the Fund paid OpCap Advisors the following fees as a
percentage of average net assets during the fiscal year ended November 30, 1999:
<TABLE>
<S> <C>
Primary Portfolio................... .41%
Government Portfolio................ .50%
General Municipal Portfolio......... .49%
California Municipal Portfolio...... .50%
New York Municipal Portfolio........ .50%
</TABLE>
SHAREHOLDER INFORMATION
PRICING OF PORTFOLIO SHARES
You can buy and sell Portfolio shares without sales or redemption charges
at their net asset value which is expected to be constant at $1.00. The Fund
calculates net asset value per share each day that the New York Stock Exchange
is open for trading at 4:00 p.m. using the amortized cost method which
approximates the current market value of the Portfolio.
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,
12
<PAGE>
MA 02266) exactly as follows and precisely in the order presented:
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
225 Liberty Street
New York, NY 10281-1698
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)
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
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 received by
13
<PAGE>
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 checkwriting, 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.
D. 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.
REDEMPTIONS OVER $250,000
If in any 90 day period, you redeem more than $250,000 or your sale amounts
to more than 1% of a Portfolio's net assets, the Portfolio has the right to pay
the difference between the redemption amount and the lesser of $250,000 or 1% of
the Portfolio's net assets with securities from the Portfolio.
OBTAINING AN APPLICATION FORM--ASSISTANCE
If you wish to obtain an Application Form, or if you have any questions
about the Form, purchasing shares, or other Fund procedures, please telephone
the Fund toll-free at 800-401-6672 during business hours.
If your account with the Fund is to be maintained through a brokerage firm
or other institution, do not fill out the Application Form or the Signature
Card. Instead, contact your account representative at such institution.
Institutions may charge a fee for providing such assistance.
14
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and paid into shareholders accounts
monthly. Dividends are automatically reinvested in additional shares unless we
receive different instructions from you.
TAXES
In January you will be sent a statement indicating the tax status of any
dividends paid to you for the previous calendar year. Since the Portfolios are
managed to maintain a constant share price, we do not expect the Portfolios to
make significant capital gain distributions.
We anticipate that at least 80% of the annual income of the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolios will be exempt from federal income taxes (but not from the
alternative minimum tax) and from California income taxes in the case of the
California Municipal Portfolio and from New York State and New York City income
taxes in the case of the New York Municipal Portfolio. The General Municipal
Portfolio, the California Municipal Portfolio and the New York Municipal
Portfolio can invest in industrial development bonds and other private activity
bonds so a portion of the distributions from those Portfolios may be treated as
a tax preference item for shareholders subject to the alternative minimum tax.
This tax information is general. You should consult your own tax adviser with
respect to your own tax situation.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Assistance and Administrative Services
Plan that allows each Portfolio to pay OpCap Advisors .25 of 1% of the
Portfolio's average daily net assets. OpCap Advisors pays these fees to
broker-dealers, banks and other financial institutions for distribution
assistance and for administrative services provided to shareholders. Because
these fees are paid out of a Portfolio's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost more than
paying other types of sales charges.
15
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The financial highlights table is intended to help you understand the
Portfolios' financial performance for the past five years. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned on an investment
in a Portfolio (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Portfolios' financial statements,
are included in the Fund's Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT END TOTAL
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME OF YEAR RETURN*
PRIMARY PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999....................................... $1.00 $ 0.04 $0.00 $ 0.04 $(0.04) $1.00 4.41%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.90%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.85%
1996....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.69%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.19%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $1.00 $ 0.04 $0.00 $ 0.04 $(0.04) $1.00 4.17%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.63%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.60%
1996....................................... 1.00 0.04 (0.00) 0.04 (0.04) 1.00 4.51%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.02%
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
YEAR NET INVESTMENT
(MILLIONS) EXPENSES(2) INCOME
PRIMARY PORTFOLIO
<S> <C> <C> <C>
Year ended November 30,
1999....................................... $ 2,463.3 0.82% 4.32%
1998....................................... 2,572.4 0.83% 4.78%
1997....................................... 2,166.6 0.85% 4.75%
1996....................................... 1,712.6 0.91% 4.60%
1995....................................... 1,671.1 0.94% 5.07%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $84.0 0.95% 4.09%
1998....................................... 112.1 0.98%(1) 4.53%(1)
1997....................................... 100.0 0.98%(1) 4.51%(1)
1996....................................... 101.1 1.00%(1) 4.41%(1)
1995....................................... 108.6 1.00%(1) 4.91%(1)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 4.52%, respectively, for the
year ended November 30, 1998, 0.99% and 4.50%, for the year ended
November 30, 1997, 1.00% and 4.41%, respectively, for the year ended
November 30, 1996, and 1.02% and 4.89%, respectively, for the year ended
November 30, 1995.
(2) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
16
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS CAPITAL NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET CONTRIBUTION VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT BY INVESTMENT END
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME ADVISER OF YEAR
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999................................. $1.00 $ 0.02 $ (0.00) $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $ -- $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1995................................. 1.00 0.03 (0.01) 0.02 (0.03) $0.01 1.00
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $0.00 $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
TOTAL YEAR NET INVESTMENT
RETURN* (MILLIONS) EXPENSES(4) INCOME
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C>
Year ended November 30,
1999................................. 2.29% $ 120.0 0.93% 2.26%
1998................................. 2.66% 171.8 0.92% 2.62%
1997................................. 2.74% 137.0 0.96%(1) 2.70%(1)
1996................................. 2.56% 122.3 0.99%(1) 2.53%(1)
1995................................. 3.11% 116.0 0.93%(1) 3.07%(1)
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.06% $66.5 0.91% 2.03%
1998................................. 2.39% 70.4 0.95% 2.36%
1997................................. 2.68% 55.7 0.90%(2) 2.64%(2)
1996................................. 2.42% 53.4 0.85%(2) 2.42%(2)
1995................................. 3.10% 75.9 0.82%(2) 3.05%(2)
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.16% $55.3 0.96% 2.11%
1998................................. 2.50% 84.1 0.98% 2.46%
1997................................. 2.66% 73.2 0.98%(3) 2.63%(3)
1996................................. 2.50% 60.0 0.97%(3) 2.45%(3)
1995................................. 3.07% 52.3 0.79%(3) 3.02%(3)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.70%, respectively, for the
year ended November 30, 1997, 0.99% and 2.53%, respectively, for the year
ended November 30, 1996, and 1.02% and 2.98%, respectively, for the year
ended November 30, 1995.
(2) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.58%, respectively, for the
year ended November 30, 1997, 0.97% and 2.30%, respectively, for the year
ended November 30, 1996, and 0.95% and 2.92%, respectively, for the year
ended November 30, 1995.
(3) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 2.62%, respectively, for the
year ended November 30, 1997, 0.98% and 2.44%, respectively, for the year
ended November 30, 1996, and 1.00% and 2.81%, respectively, for the year
ended November 30, 1995.
(4) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
17
<PAGE>
APPENDIX
THE FOLLOWING ARE DESCRIPTIONS OF CERTAIN TYPES OF SECURITIES IN WHICH WE
MAY INVEST ASSETS OF THE PORTFOLIOS.
PRIMARY PORTFOLIO
Certificates of Deposit
Receipts for funds deposited at banks that guarantee a fixed interest rate
over a specified time period.
Commercial Paper
Unsecured promissory notes that corporations issue to finance current
operations and other expenditures.
Repurchase Agreements
Contracts that require one party to repurchase securities at a fixed price
on a designated date.
Banker's Acceptances
Bank-issued commitments to pay for merchandise sold in the import/export
market.
GENERAL MUNICIPAL, CALIFORNIA MUNICIPAL AND NEW YORK MUNICIPAL PORTFOLIOS
Variable Rate Obligations
Interest rates are adjusted periodically to market rates. Value of these
securities is less affected by changes in interest rates than fixed coupon
securities.
Put Bonds
Tax-exempt securities which may be redeemed or sold back (put) to the
issuer of the security or a third party prior to stated maturity.
Municipal Lease Obligations
Some lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease obligation payments in
future years unless money is appropriated for the purchase on a yearly basis.
We attempt to invest at least 90% of each Portfolio's net assets in
securities that are liquid which means securities that can be disposed of in the
ordinary course of business, seven days or less, at approximately the value at
which the Portfolio has valued the securities. We may invest up to 10% of each
Portfolio's net assets in securities we believe are illiquid. In determining the
liquidity of a lease obligation we consider these factors: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the obligation and the number of other potential purchases;
(3) the willingness of dealers to make a market in the obligation; (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.
18
<PAGE>
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<PAGE>
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and is incorporated into this prospectus by
reference.
The SAI and the Portfolios' annual and semi-annual reports are available
without charge upon request to your broker or by calling the Fund at
1-800-401-6672.
You can review and copy the Portfolios' reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text-only
copies:
After paying a duplicating fee, by electronic request at the following email
address: [email protected], or by writing to or calling the Public Reference
Room of the Commission, Washington, D.C. 20549-0102
Telephone: 1-202-942-8090
Free from the EDGAR Database on the Commission's Internet website at
http://www.sec.gov.
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OCC cash Reserves [Logo]
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o Primary Portfolio
o Government Portfolio
o General Municipal Portfolio
o California Municipal Portfolio
o New York Municipal Portfolio
(Investment Company Act file no. 811-05731)
PROSPECTUS
March 29, 2000
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<PAGE>
UNIFIED
VERSION
OCC CASH RESERVES, INC.
PROSPECTUS MARCH 29, 2000
OCC CASH RESERVES, INC. is an open-end investment company with the following
investment portfolios.
PRIMARY PORTFOLIO
GOVERNMENT PORTFOLIO
GENERAL MUNICIPAL PORTFOLIO
CALIFORNIA MUNICIPAL PORTFOLIO
NEW YORK MUNICIPAL PORTFOLIO
The Securities and Exchange Commission has not approved or disapproved any
Portfolio's securities or determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk/Return Summary....................................................................................... 3
Fees and Expenses of the Portfolios....................................................................... 7
Principal Investment Strategies and Related Risks......................................................... 8
Fund Management........................................................................................... 12
Shareholder Information................................................................................... 12
Dividends and Distributions............................................................................... 14
Taxes..................................................................................................... 14
Distribution Plan......................................................................................... 15
Financial Highlights...................................................................................... 16
Appendix.................................................................................................. 18
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOALS
<TABLE>
<S> <C>
Primary Portfolio....................................... Safety of principal, liquidity and maximum current
income from money market securities
Government Portfolio.................................... Safety of principal, liquidity and maximum current
income from money market securities
General Municipal Portfolio............................. Safety of principal, liquidity and maximum current
income exempt from Federal income taxes from money
market securities
California Municipal Portfolio.......................... Safety of principal, liquidity and maximum current
income exempt from Federal and California personal
income taxes from money market securities
New York Municipal Portfolio............................ Safety of principal, liquidity and maximum current
income exempt from Federal, New York State and New York
City income taxes from money market securities
The Portfolios are money market funds.
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES
o The Primary Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less, including U.S.
government securities, U.S. dollar denominated certificates of deposit
and bankers acceptances, domestic or foreign commercial paper and
repurchase agreements. The Primary Portfolio normally invests at least
25% of its total assets in bank obligations.
o The Government Portfolio invests in high quality money market securities
with remaining maturities of thirteen months or less including U.S.
government securities and repurchase agreements.
o The General Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less including
municipal notes, short-term municipal bonds, short-term discount notes
and participation interests in those securities. The Portfolio normally
invests at least 80% of its total assets in municipal securities.
o The California Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal and California personal income taxes. The
Portfolio normally invests at least 80% of its total assets in California
municipal securities.
o The New York Municipal Portfolio invests in high quality municipal
securities with remaining maturities of thirteen months or less that pay
interest exempt from Federal, New York State and New York City income
taxes. The Portfolio normally invests at least 80% of its total assets in
New York municipal securities.
PRINCIPAL RISKS
An investment in any of the Portfolios is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
each Portfolio seeks to preserve the value of your investment at $1.00 per share
it may not do so and therefore it is possible to lose money by
3
<PAGE>
investing in a Portfolio. A Portfolio's yield will vary with fluctuations in
available market interest rates.
Your Portfolio's net asset value, yield and total return could be affected
by:
o Interest Rate Risk--When interest rates rise, the value of fixed income
securities falls
o Credit Risk--Issuers of debt instruments cannot make principal and/or
interest payments on time
o Market Risk--Changes in the economy in general that cause the prices of
fixed income securities to fall.
The California Municipal Portfolio concentrates in California municipal
securities and the New York Municipal Portfolio concentrates in New York
Municipal issuers so credit risk and market risk may be greater for those
Portfolios.
BAR CHART AND PERFORMANCE TABLE
The bar charts below show the performance of each Portfolio from year to
year over the past full calendar years during the life of each Portfolio and
describe the best and worst calendar quarter returns during the same periods for
each Portfolio.
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future.
Primary Portfolio
[Bar Chart]
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
7.75% 5.62% 3.24% 2.42% 3.47% 5.19% 4.67% 4.88% 4.85% 4.45%
During the periods shown in the bar chart, the highest quarterly return was
1.91% (for the quarter ended 6/30/1990) and the lowest quarterly return was
0.59% (for the quarter ended 6/30/1993).
4
<PAGE>
Government Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
5.46% 3.06% 2.25% 3.33% 5.03% 4.47% 4.63% 4.58% 4.21%
During the periods shown in the bar chart, the highest quarterly return was
1.88% (for the quarter ended 9/30/1990) and the lowest quarterly return was
0.55% (for the quarter ended 9/30/1993).
General Municipal Portfolio
[Bar Chart]
1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----
4.10% 2.52% 1.70% 2.17% 3.12% 2.51% 2.76% 2.61% 2.32%
During the periods shown in the bar chart, the highest quarterly return was
1.11% (for the quarter ended 3/31/1991) and the lowest quarterly return was
0.39% (for the quarter ended 9/30/1993).
5
<PAGE>
California Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.45% 1.71% 2.12% 3.10% 2.40% 2.65% 2.35% 2.08%
During the periods shown in the bar chart, the highest quarterly return
was 0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.41% (for the quarter ended 6/30/1993).
New York Municipal Portfolio
[Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ----
2.41% 1.62% 2.04% 3.09% 2.44% 2.68% 2.45% 2.19%
During the periods shown in the bar chart, the highest quarterly return
was 0.82% (for the quarter ended 6/30/1995) and the lowest quarterly return was
0.38% (for the quarter ended 6/30/1993).
6
<PAGE>
The table below shows the average annual returns for one and five years and
for the life of each Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
PAST YEAR PAST 5 YEARS SINCE INCEPTION*
--------- ------------ ----------------
<S> <C> <C> <C>
Primary Portfolio................................................. 4.45% 4.81% 4.66%
Government Municipal Portfolio.................................... 4.21% 4.58% 4.41%
General Municipal Portfolio....................................... 2.32% 2.66% 2.89%
California Municipal Portfolio.................................... 2.08% 2.51% 2.48%
New York Municipal Portfolio...................................... 2.19% 2.57% 2.48%
</TABLE>
* The Primary Portfolio began operations on December 13, 1989. Each of the
Government Portfolio and the General Municipal Portfolio began operations on
February 14, 1990. The California Municipal Portfolio began operations on
March 20, 1991. The New York Municipal Portfolio began operations on
April 10, 1991.
The Portfolios' past performance does not necessarily indicate how each
Portfolio will perform in the future. For the current yield of the Portfolios,
call 1-800-401-6672.
FEES AND EXPENSES OF THE PORTFOLIOS
This table describes the fees and expenses that you may pay if you buy and
hold shares in the Portfolios.
SHAREHOLDER FEES--FEES YOU PAY DIRECTLY
There are no fees or sales loads charged to your account when you buy or
sell shares of a Portfolio.
ANNUAL FUND OPERATING EXPENSES--EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
<TABLE>
<CAPTION>
GENERAL CALIFORNIA NEW YORK
PRIMARY GOVERNMENT MUNICIPAL MUNICIPAL MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Management Fees........................................ .41% .50% .49% .50% .50%
12b-1 (Distribution Plan) Fees......................... .25% .25% .25% .25% .25%
Other Expenses......................................... .16% .20% .19% .16% .21%
----- ---- ----- ----- ----
Total Annual Fund Operating Expenses................... .82% .95% .93% .91% .96%
----- ---- ----- ----- ----
----- ---- ----- ----- ----
</TABLE>
7
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds. Although your
actual costs may be higher or lower, you would pay the following expenses on a
$10,000 investment assuming (1) 5% annual return, (2) the Portfolios' operating
expenses remain the same and (3) you redeem all of your shares at the end of
the period in the table.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Primary Portfolio.......................................................... $ 84 $ 262 $ 455 $1,014
Government Portfolio....................................................... 97 303 525 1,166
General Municipal Portfolio................................................ 95 296 515 1,143
California Municipal Portfolio............................................. 93 290 504 1,120
New York Municipal Portfolio............................................... 98 306 531 1,178
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
PRIMARY PORTFOLIO
Q What is the Portfolio's investment program?
A The Primary Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations with remaining maturities of
13 months or less.
Q What types of securities does the Portfolio buy?
A The Primary Portfolio invests in:
o Certificates of deposit and bankers acceptances of prime quality and
interest bearing time deposits issued, guaranteed or maintained at U.S.
or foreign banks having total assets of $1 billion.
o Commercial paper and participation interests in loans made by banks to
corporations.
o Obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. These securities are called U.S. Government
securities.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Primary Portfolio's investments?
A The Primary Portfolio invests at least 95% of its total assets in prime money
market instruments. When we use the term "prime" we mean securities with a
credit rating in the highest category by at least two established rating
agencies or by one rating agency if the security is rated only by one or if
the security is unrated, determined by OpCap Advisors to be equivalent to an
issue having the highest rating from such a rating agency. The Primary
Portfolio invests no more than 5% of its total assets in securities rated in
the second highest category and not more than 1% of its total assets in any
one issuer of securities rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The Primary Portfolio will not invest more than 5% of its total assets in any
one issuer. The Primary Portfolio expects to invest at least 25% of its total
assets in bank obligations but otherwise will not invest more than 25% of its
total assets in securities of issuers in any one industry. U.S. Government
securities are not counted for the 5% limit on issuers or the 25% limit on any
one industry.
GOVERNMENT PORTFOLIO
Q What is the Portfolio's investment program?
A The Government Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term
8
<PAGE>
debt obligations with remaining maturities of 13 months or less.
Q What types of securities does the Portfolio buy?
A The Government Portfolio invests in:
o U.S. Government securities including direct obligations of the United
States Treasury such as Bills, Notes and Bonds; issues of agencies and
instrumentalities established by an act of Congress which have the right
to borrow from the U.S. Treasury; and securities which depend solely on
the issuing instrumentality for repayment.
o Repurchase agreements collateralized in full by U.S. Government
securities.
Q What is the credit quality of the Government Portfolio's investments?
A Securities backed by the full faith and credit of the U.S. Government are
considered to be free of credit risk. Other securities may have somewhat
greater risk.
GENERAL MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The General Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term money market securities exempt from Federal
income taxes with remaining maturities of 13 months or less. The Portfolio can
invest without limit in industrial development bonds. Interest on industrial
development bonds is treated as an item of tax preference for purposes of the
alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The General Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in municipal
securities except in times of adverse market conditions when the Portfolio may
invest up to 100% of its assets in taxable money market securities.
Q What is the credit quality of the General Municipal Portfolio's investments?
A The General Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The General Municipal Portfolio invests no more than 5% of its total assets in
industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The General Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer except that for a period of three business days, up
to 25% of the Portfolio's total assets may be invested in prime quality
securities of a single issuer. When we use the term "prime" we mean securities
with a credit rating in the highest category by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having the highest rating from such a rating agency. The General
Municipal Portfolio will not invest more than 25% of its total assets in
securities of issuers located in the same state or in
9
<PAGE>
securities whose interest is paid from revenues of similar projects. U.S.
Government securities are not counted for the 5% limit on issuers or the 25%
limit on similar projects.
CALIFORNIA MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The California Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal and
California personal income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated as an item of tax
preference for purposes of the alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The California Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in California
municipal securities except in times of adverse market conditions when the
Portfolio may invest up to 100% of its assets in money market securities that
may be subject to Federal and/or California personal income taxes.
Q What is the credit quality of the California Municipal Portfolio's
investments?
A The California Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The California Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The California Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime." The California Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
NEW YORK MUNICIPAL PORTFOLIO
Q What is the Portfolio's investment program?
A The New York Municipal Portfolio is a money market fund that invests in U.S.
dollar-denominated, short term debt obligations exempt from Federal, New York
State and New York City income taxes with remaining maturities of 13 months or
less. The Portfolio can invest without limit in industrial development bonds.
Interest on industrial development bonds is treated as an item of tax
preference for purposes of the alternative minimum tax.
Q What types of securities does the Portfolio buy?
A The New York Municipal Portfolio invests in the following types of municipal
securities:
o Municipal notes and short term municipal bonds that either are secured by
the issuer's pledge of its full faith and credit including its taxing
power, or are payable from the revenues of a particular facility or the
proceeds of a special tax, but not from the general taxing power.
10
<PAGE>
o Lease obligations which are paid by money appropriated by the legislature
on a periodic basis.
o Industrial development bonds issued by public authorities to obtain funds
for privately operated facilities.
At least 80% of the Portfolio's total assets will be invested in New York
municipal securities except in times of adverse market conditions when the
Portfolio may invest up to 100% of its assets in money market securities that
may be subject to Federal and/or New York personal income tax.
Q What is the credit quality of the New York Municipal Portfolio's investments?
A The New York Municipal Portfolio invests in high quality money market
instruments. When we use the term "high quality" we mean securities with a
credit rating in one of the two highest categories by at least two established
rating agencies or by one rating agency if the security is rated only by one
or if the security is unrated, determined by OpCap Advisors to be equivalent
to an issue having one of the two highest ratings from such a rating agency.
The New York Municipal Portfolio invests no more than 5% of its total assets
in industrial revenue bonds rated in the second highest category and not more
than the greater of 1% of its total assets or $1 million in any one issuer of
industrial revenue bonds rated in the second highest rating category.
Q Are the Portfolio's investments diversified?
A The New York Municipal Portfolio will not invest more than 5% of its total
assets in any one issuer with respect to 75% of its total assets and will not
invest more than 5% of its total assets in any one issuer that is not prime
quality. See page 8 for our description of "prime." The New York Municipal
Portfolio will not invest more than 25% of its total assets in securities
whose interest is paid from revenues of similar projects.
RISKS OF THE PORTFOLIOS
Q What are the main risks of investing in the Portfolios?
A We manage the Portfolios to maintain a constant share price of $1.00 per share
but there is no assurance that we will be able to do so. The U.S. Government
does not guarantee or insure the shares of the Portfolios so there is some
risk. The Portfolios limit their investments to securities that OpCap Advisors
believes present minimal credit risk.
There is always the risk that the issuer of a security held by a Portfolio
will fail to pay interest or principal when due. We try to keep this risk low by
investing only in securities rated in one of the two highest categories for
short term securities or if not rated, of comparable quality.
There is also the risk that rising interest rates will cause the value of a
Portfolio's securities to decline. The short maturity of the securities held by
the Portfolios reduces the potential for price fluctuation.
The risks described above could be greater for the California Municipal
Portfolio which concentrates in California issues and for the New York Municipal
Portfolio which concentrates in New York issues. California and New York tax
exempt securities may be affected by political, economic or other events that
limit the ability of California or New York issuers to pay interest or repay
principal or may depress the entire market for California or New York tax exempt
securities. The General, California and New York Municipal Portfolios invest in
lease obligations which are not as liquid as other municipal obligations. The
Portfolios look at the following factors to determine the liquidity of a lease
obligation.
o frequency of trades and quoted prices for the obligation
o the number of dealers willing to purchase or sell the security and the
number of other potential purchasers
o the willingness of dealers to undertake to make a market in the security
o 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.
11
<PAGE>
FUND MANAGEMENT
The Board of Directors of the Fund has hired OpCap Advisors to serve as
manager of the Fund.
OpCap Advisors is a subsidiary of Oppenheimer Capital, an investment
advisory firm with approximately $48 billion of assets under management as of
January 31, 2000. The mailing address is 1345 Avenue of the Americas, New York,
New York 10105.
OpCap Advisors has been in business as an investment adviser since 1987 and
Oppenheimer Capital has been in business as an investment adviser since 1969.
OpCap Advisors manages the investments of the Fund and its business
affairs. Employees of Oppenheimer Capital as well as employees of OpCap
Advisors perform these services.
The Portfolios of the Fund paid OpCap Advisors the following fees as a
percentage of average net assets during the fiscal year ended November 30, 1999:
<TABLE>
<S> <C>
Primary Portfolio....................... .41%
Government Portfolio.................... .50%
General Municipal Portfolio............. .49%
California Municipal Portfolio.......... .50%
New York Municipal Portfolio............ .50%
</TABLE>
SHAREHOLDER INFORMATION
PRICING OF PORTFOLIO SHARES
You can buy and sell Portfolio shares without sales or redemption charges
at their net asset value which is expected to be constant at $1.00. The Fund
calculates net asset value per share each day that the New York Stock Exchange
is open for trading at 4:00 p.m. using the amortized cost method which
approximates the current market value of the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
SHAREHOLDER SERVICING AGENT
Unified Management Corporation
(800-UMC-FUND (800-862-3863)) is the shareholder servicing agent for
o former shareholders of the AMA Family of Funds
o clients of 225 Liberty Street Advisors, L.P.
o former shareholders of the Unified Funds and Liquid Green Trust
o accounts that participated or participate in a retirement plan for which
Unified Investment Advisors, L.P. or one of its affiliates acts as a
custodian or trustee
o accounts for which Unified Management Corporation is the broker or dealer
OPENING ACCOUNTS--NEW INVESTMENTS
A. WHEN FUNDS ARE SENT BY WIRE (the wire method permits immediate cash 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.
12
<PAGE>
2) Instruct your bank to wire Federal Funds (see minimums below) exactly as
follows and precisely in the order presented:
RECEIVING BANK INFORMATION:
Fifth Third Bank (Cincinnati, OH)
ABA#42000314
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
Your account name } As registered
Your account number with the Fund
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.
431 North Pennsylvania Street
Indianapolis, IN 46204-1806
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.
2) By Telephone--Call Unified at 800-UMC-FUND (800-862-3863).
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.
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
13
<PAGE>
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.
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.)
REDEMPTIONS OVER $250,000
If in any 90 day period, you redeem more than $250,000 or your sale amounts
to more than 1% of a Portfolio's net assets, the Portfolio has the right to pay
the difference between the redemption amount and the lesser of $250,000 or 1% of
the Portfolio's net assets with securities from the Portfolio.
OBTAINING AN APPLICATION FORM--ASSISTANCE
If you wish to obtain an Application Form, or if you have any questions
about the Form, purchasing shares, or other Fund procedures, please telephone
the Fund toll-free at 800-UMC-FUND (800-862-3863).
If your account with the Fund is to be maintained through a brokerage firm
or other institution, do not fill out the Application Form or the Signature
Card. Instead, contact your account representative at such institution.
Institutions may charge a fee for providing such assistance.
DIVIDENDS AND DISTRIBUTIONS
Net investment income is accrued daily and paid into shareholders accounts
monthly. Dividends are automatically reinvested in additional shares unless
we receive different instructions from you.
TAXES
In January you will be sent a statement indicating the tax status of any
dividends paid to you for the previous calendar year. Since the Portfolios are
managed to maintain a constant share price, we do not expect the Portfolios to
make significant capital gain distributions.
We anticipate that at least 80% of the annual income of the General
Municipal Portfolio, the California Municipal Portfolio and the New York
Municipal Portfolios will be exempt from federal income taxes (but not from the
alternative minimum tax) and from California income taxes in the case of the
California Municipal Portfolio and from New York State and New York City income
taxes in the case of the New York Municipal Portfolio. The General Municipal
Portfolio, the California Municipal Portfolio and the New York Municipal
Portfolio can invest in industrial development bonds and other private activity
bonds so a portion of the distributions from those Portfolios may be treated as
14
<PAGE>
a tax preference item for shareholders subject to the alternative minimum tax.
This tax information is general. You should consult your own tax adviser with
respect to your own tax situation.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Assistance and Administrative Services
Plan that allows each Portfolio to pay OpCap Advisors .25 of 1% of the
Portfolio's average daily net assets. OpCap Advisors pays these fees to
broker-dealers, banks and other financial institutions for distribution
assistance and for administrative services provided to shareholders. Because
these fees are paid out of a Portfolio's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost more than
paying other types of sales charges.
15
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
The financial highlights table is intended to help you understand the
Portfolios' financial performance for the past five years. Certain information
reflects financial results for a single Portfolio share. The total returns in
the table represent the rate that an investor would have earned on an investment
in a Portfolio (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Portfolios' financial statements,
are included in the Fund's Statement of Additional Information, which is
available upon request.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT END TOTAL
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME OF YEAR RETURN*
PRIMARY PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999....................................... $1.00 $ 0.04 $ 0.00 $ 0.04 $ (0.04) $1.00 4.41%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.90%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.85%
1996....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.69%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.19%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $1.00 $ 0.04 $ 0.00 $ 0.04 $ (0.04) $1.00 4.17%
1998....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 4.63%
1997....................................... 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.60%
1996....................................... 1.00 0.04 (0.00) 0.04 (0.04) 1.00 4.51%
1995....................................... 1.00 0.05 0.00 0.05 (0.05) 1.00 5.02%
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
YEAR NET INVESTMENT
(MILLIONS) EXPENSES(2) INCOME
PRIMARY PORTFOLIO
<S> <C> <C> <C>
Year ended November 30,
1999....................................... $ 2,463.3 0.82% 4.32%
1998....................................... 2,572.4 0.83% 4.78%
1997....................................... 2,166.6 0.85% 4.75%
1996....................................... 1,712.6 0.91% 4.60%
1995....................................... 1,671.1 0.94% 5.07%
GOVERNMENT PORTFOLIO
Year ended November 30,
1999....................................... $ 84.0 0.95% 4.09%
1998....................................... 112.1 0.98%(1) 4.53%(1)
1997....................................... 100.0 0.98%(1) 4.51%(1)
1996....................................... 101.1 1.00%(1) 4.41%(1)
1995....................................... 108.6 1.00%(1) 4.91%(1)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 4.52%, respectively, for the
year ended November 30, 1998, 0.99% and 4.50%, for the year ended
November 30, 1997, 1.00% and 4.41%, respectively, for the year ended
November 30, 1996, and 1.02% and 4.89%, respectively, for the year ended
November 30, 1995.
(2) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
16
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
-------------------------------------
NET TOTAL DIVIDENDS TO
NET ASSET REALIZED INCOME SHAREHOLDERS CAPITAL NET ASSET
VALUE, NET GAIN (LOSS) FROM FROM NET CONTRIBUTION VALUE,
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT BY INVESTMENT END
OF YEAR INCOME INVESTMENTS OPERATIONS INCOME ADVISER OF YEAR
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended November 30,
1999................................. $1.00 $ 0.02 $ (0.00) $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $ -- $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.02 -- 0.02 (0.02) -- 1.00
1995................................. 1.00 0.03 (0.01) 0.02 (0.03) $0.01 1.00
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. $1.00 $ 0.02 $0.00 $ 0.02 $(0.02) -- $1.00
1998................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1997................................. 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00
1996................................. 1.00 0.03 -- 0.03 (0.03) -- 1.00
1995................................. 1.00 0.03 0.00 0.03 (0.03) -- 1.00
<CAPTION>
RATIOS TO
AVERAGE NET
ASSETS
NET ASSETS, -------------------------
END OF NET
TOTAL YEAR NET INVESTMENT
RETURN* (MILLIONS) EXPENSES(4) INCOME
GENERAL MUNICIPAL PORTFOLIO
<S> <C> <C> <C> <C>
Year ended November 30,
1999................................. 2.29% $ 120.0 0.93% 2.26%
1998................................. 2.66% 171.8 0.92% 2.62%
1997................................. 2.74% 137.0 0.96%(1) 2.70%(1)
1996................................. 2.56% 122.3 0.99%(1) 2.53%(1)
1995................................. 3.11% 116.0 0.93%(1) 3.07%(1)
CALIFORNIA MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.06% $66.5 0.91% 2.03%
1998................................. 2.39% 70.4 0.95% 2.36%
1997................................. 2.68% 55.7 0.90%(2) 2.64%(2)
1996................................. 2.42% 53.4 0.85%(2) 2.42%(2)
1995................................. 3.10% 75.9 0.82%(2) 3.05%(2)
NEW YORK MUNICIPAL PORTFOLIO
Year ended November 30,
1999................................. 2.16% $55.3 0.96% 2.11%
1998................................. 2.50% 84.1 0.98% 2.46%
1997................................. 2.66% 73.2 0.98%(3) 2.63%(3)
1996................................. 2.50% 60.0 0.97%(3) 2.45%(3)
1995................................. 3.07% 52.3 0.79%(3) 3.02%(3)
</TABLE>
- ------------------
(1) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.70%, respectively, for the
year ended November 30, 1997, 0.99% and 2.53%, respectively, for the year
ended November 30, 1996, and 1.02% and 2.98%, respectively, for the year
ended November 30, 1995.
(2) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.96% and 2.58%, respectively, for the
year ended November 30, 1997, 0.97% and 2.30%, respectively, for the year
ended November 30, 1996, and 0.95% and 2.92%, respectively, for the year
ended November 30, 1995.
(3) During the fiscal years indicated above, the Investment Adviser waived a
portion of its fees. If such waivers had not been in effect, the ratios of
net expenses to average net assets and the ratios of net investment income
to average net assets would have been 0.99% and 2.62%, respectively, for the
year ended November 30, 1997, 0.98% and 2.44%, respectively, for the year
ended November 30, 1996, and 1.00% and 2.81%, respectively, for the year
ended November 30, 1995.
(4) Inclusive of expenses offset by earnings credits.
* Assumes reinvestment of all dividends.
17
<PAGE>
APPENDIX
THE FOLLOWING ARE DESCRIPTIONS OF CERTAIN TYPES OF SECURITIES IN WHICH WE
MAY INVEST ASSETS OF THE PORTFOLIOS.
PRIMARY PORTFOLIO
Certificates of Deposit
Receipts for funds deposited at banks that guarantee a fixed interest rate
over a specified time period.
Commercial Paper
Unsecured promissory notes that corporations issue to finance current
operations and other expenditures.
Repurchase Agreements
Contracts that require one party to repurchase securities at a fixed price
on a designated date.
Banker's Acceptances
Bank-issued commitments to pay for merchandise sold in the import/export
market.
GENERAL MUNICIPAL, CALIFORNIA MUNICIPAL AND NEW YORK MUNICIPAL PORTFOLIOS
Variable Rate Obligations
Interest rates are adjusted periodically to market rates. Value of these
securities is less affected by changes in interest rates than fixed coupon
securities.
Put Bonds
Tax-exempt securities which may be redeemed or sold back (put) to the
issuer of the security or a third party prior to stated maturity.
Municipal Lease Obligations
Some lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease obligation payments in
future years unless money is appropriated for the purchase on a yearly basis.
We attempt to invest at least 90% of each Portfolio's net assets in
securities that are liquid which means securities that can be disposed of in the
ordinary course of business, seven days or less, at approximately the value at
which the Portfolio has valued the securities. We may invest up to 10% of each
Portfolio's net assets in securities we believe are illiquid. In determining the
liquidity of a lease obligation we consider these factors: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the obligation and the number of other potential purchases;
(3) the willingness of dealers to make a market in the obligation; (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.
18
<PAGE>
[This page intentionally left blank]
19
<PAGE>
For investors who want more information about the Portfolios, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Portfolios'
investments is available in the Portfolios' annual and semi-annual reports to
shareholders. In each Portfolio's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected the
Portfolio's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Portfolios and is incorporated into this prospectus by
reference.
The SAI and the Portfolios' annual and semi-annual reports are available
without charge upon request to your broker or by calling the Fund at
1-800-862-3863.
You can review and copy the Portfolios' reports and SAIs at the Public
Reference Room of the Securities and Exchange Commission. You can get text-only
copies:
After paying a duplicating fee, by electronic request at the following email
address: [email protected], or by writing to or calling the Public Reference
Room of the Commission, Washington, D.C. 20549-0102
Telephone:
1-202-942-8090
Free from the EDGAR Database on the Commission's Internet website at
http://www.sec.gov.
--------------------------------------------
--------------------------------------------
--------------------------------------------
OCC cash reserves [Logo]
--------------------------------------------
--------------------------------------------
--------------------------------------------
o Primary Portfolio
o Government Portfolio
o General Municipal Portfolio
o California Municipal Portfolio
o New York Municipal Portfolio
(Investment Company Act file no. 811-05731)
Offered through Unified Management Corporation
431 N. Pennsylvania St.
Indianapolis, IN 46204-1806
PROSPECTUS
March 29, 2000
--------------------------------------------
--------------------------------------------
--------------------------------------------
<PAGE>
Statement of Additional Information
OCC CASH RESERVES, INC.
- Primary Portfolio
- Government Portfolio
- General Municipal Portfolio
- California Municipal Portfolio
- New York Municipal Portfolio
1345 Avenue of the Americas
New York, New York 10105-4800
(800) 401-6672
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, 2000 Prospectuses may be obtained by contacting the Fund.
The date of this Additional Statement is March 29, 2000.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OF THE FUND'S ASSETS......................................3
SPECIAL CONSIDERATIONS REGARDING NEW YORK MUNICIPAL OBLIGATIONS......9
SPECIAL CONSIDERATIONS REGARDING CALIFORNIA MUNICIPAL OBLIGATIONS...18
INVESTMENT RESTRICTIONS.............................................33
DIRECTORS AND OFFICERS..............................................34
PRINCIPAL HOLDERS OF SECURITIES.....................................39
INVESTMENT MANAGEMENT AND OTHER SERVICES............................39
DETERMINATION OF NET ASSET VALUE....................................44
CAPITAL STOCK.......................................................45
TAXES...............................................................45
PERFORMANCE DATA....................................................48
ADDITIONAL INFORMATION..............................................51
APPENDIX...........................................................A-1
Financial Statements...............................................B-1
2
<PAGE>
INVESTMENT OF THE FUND'S ASSETS
The Fund is an open-end management investment company with five
portfolios, each of which is diversified. 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 (a) have received a
short-term rating in one of the two highest short-term rating 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
3
<PAGE>
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 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
4
<PAGE>
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, 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.
5
<PAGE>
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 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 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.
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When-Issued Securities. The 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 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
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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 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
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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 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
Since the New York Municipal Portfolio concentrates its investments in
New York tax-exempt securities, the Portfolio is significantly affected by any
political, economic or regulatory developments affecting the ability of New York
tax-exempt issuers to pay interest or repay principal. Investors should be aware
that certain issuers of New York tax-exempt securities have experienced serious
financial difficulties in recent years. A reoccurrence of these difficulties may
impair the ability of certain New York issuers to maintain debt service on their
obligations.
The fiscal stability of New York State is related to the fiscal
stability of the State's municipalities, its Agencies and Authorities (which
generally finance, construct and operate revenue-producing public benefit
facilities). This is due in part to the fact that Agencies, Authorities and
local governments in financial trouble often seek State financial assistance.
The experience has been that if New York City or any of the Agencies or
Authorities suffers serious financial difficulty, both the ability of the State,
the City, the State's political subdivisions, the Agencies and the Authorities
to obtain financing in the public credit markets and the market price of
outstanding New York tax-exempt securities are adversely affected.
Over the long term, the State and City face potential economic
problems. The City accounts for a large portion of the State's population and
personal income, and the City's financial health affects the State in numerous
ways. The City 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 State could also be affected by
the ability of the City to market its securities successfully in the public
credit markets.
The economic and financial condition of the State also may be affected
by various financial, social, economic and political factors. Such factors can
be very complex, may
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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 following summary information on risk factors in concentrating in
New York municipal obligations is based on the State's Annual Information
Statement, dated August 24, 1999, as supplemented on October 20, 1999 and as
updated on February 2, 2000, and on publicly available official statements
relating to offerings of the City of municipal securities on or prior to
November 3, 1999, and it does not purport to be a complete description of the
considerations contained therein. No representation is made as to the accuracy
of such information.
During the mid-1970's New York State, some of its agencies,
instrumentalities and public benefit corporations, and certain of its
municipalities faced serious financial difficulties. To address many of these
financial problems, the State developed various programs, many of which were
successful in ameliorating the financial crisis. Any further financial problems
experienced by these Authorities or municipalities could have a direct adverse
effect on the New York Municipal Obligations in which the Fund invests.
New York City. The national economic downturn which began in July 1990
adversely affected the local economy, which had been declining since late 1989.
As a result, New York City experienced job losses in 1990 and 1991 and real
Gross City Product (GCP) fell in those two years. For the 1992 fiscal year, the
City closed a projected budget gap of $3.3 billion in order to achieve a
balanced budget as required by the laws of the State. Beginning in 1992, the
improvement in the national economy helped stabilize conditions in the City.
Employment losses moderated toward year-end and real GCP increased, boosted by
strong wage gains. After noticeable improvements in the City's economy during
calendar year 1994, economic growth slowed in 1995 and thereafter improved
commencing in calendar year 1996, reflecting improved securities industry
earnings and employment in other sectors. Overall, the City's economic
improvement accelerated significantly in 1997 and 1998. Much of the increase can
be traced to the performance of the securities industry, but the City's economy
also produced gains in the retail trade sector, the hotel and tourism industry,
and business services, with private sector employment higher than previously
forecasted. The City's current financial plan assumes that, after strong growth
in 1998-1999, moderate economic growth will exist through calendar year 2003,
with moderate job growth and wage increases.
For each of the 1981 through 1999 fiscal years, the City had an
operating surplus, before discretionary and other transfers, and achieved
balanced operating results as reported in accordance with then applicable
generally accepted accounting principles ("GAAP") after discretionary and other
transfers. The City has been required to close substantial gaps between forecast
revenues and forecast expenditures in order to maintain balanced operating
results. There can be no assurance that the City will continue to maintain
balanced operating results as required by State law without tax or other revenue
increases or reductions in City services or entitlement programs, which could
adversely affect the City's economic base.
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2000-2003 New York City Financial Plan. The Mayor is responsible for
preparing the City's four-year financial plan including the current financial
plan for the 2000 through 2003 fiscal years (the "2000-2003 Financial Plan," the
"Financial Plan" or "City Plan").
The Financial Plan projects revenues and expenditures for the 2000
fiscal year balanced in accordance with GAAP and projects gaps of $1.8 billion,
$1.9 billion and $1.8 billion for the years 2001 through 2003, respectively. The
Financial Plan takes into account an increase in projected tax revenues in
fiscal years 2000 through 2003; projected resources in fiscal years 2000 through
2003, respectively, from the receipt by the City of funds from the settlement of
litigation with the leading cigarette companies; a reduction in the assumed
collection of projected rent payments for the City"s airports and a delay in the
receipt of such payments from fiscal year 2000 to fiscal year 2001; net
increases in spending in fiscal years 2000 through 2003, including spending for
Medicaid, education initiatives, anti-smoking programs, employee fringe benefit
costs, and other agency programs. In addition, the Financial Plan includes a
proposed discretionary transfer in fiscal year 2000 to pay debt service due in
fiscal year 2001 totaling $429 million, and a proposed discretionary transfer in
fiscal year 2001 to pay debt service due in fiscal year 2002 totaling $345
million.
The Financial Plan is based on numerous assumptions, including the
condition of the City"s and the region"s economies and modest employment growth
and the concomitant receipt of economically sensitive tax revenues in the
amounts projected. The Financial Plan is subject to various other uncertainties
and contingencies relating to, among other factors, the extent, if any, to which
wage increases for City employees exceed the annual wage costs assumed for the
2000 through 2003 fiscal years; continuation of projected interest earnings
assumptions for pension fund assets and current assumptions with respect to
wages for City employees affecting the City"s required pension fund
contributions; the willingness and ability of the State to provide the aid
contemplated by the Financial Plan and to take various other actions to assist
the City; the ability of the Health and Hospitals Corporation, the Board of
Education and other such agencies to maintain balanced budgets; the willingness
of the Federal government to provide the amount of Federal aid contemplated in
the Financial Plan; the impact on City revenues and expenditures of Federal and
State welfare reform and any future legislation affecting Medicare or other
entitlement programs; adoption of the City's budgets by the City Council in
substantially the forms submitted by the Mayor; the ability of the City to
implement cost reduction initiatives, and the success with which the City
controls expenditures; the impact of conditions in the real estate market on
real estate tax revenues; the City's ability to market its securities
successfully in the public credit markets; and unanticipated expenditures that
may be incurred as a result of the need to maintain the City's infrastructure.
On July 14, 1999, the City Comptroller issued a report which projected
a surplus for fiscal year 2000 of between $223 million and $891 million. In
addition, the report projected budget gaps of between $1.8 billion and $3.5
billion, $1.7 billion and $3.6 billion, and $1.7 billion and $4.1 billion in
fiscal years 2001 through 2003, respectively. The report further noted that the
City Comptroller's forecast is contingent on the continued growth of the City
economy and that the fear of renewed inflationary pressures has created
uncertainty in the bond market which may dampen economic growth in the future.
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The City depends on aid from the State both to enable the City to
balance its budget and to meet its cash requirements. There can be no assurance
that there will not be reductions in State aid to the City from amounts
currently projected; that, in future years, State budgets will be adopted by the
April 1 statutory deadline, or interim appropriations will be enacted; or that
any such reductions or delays will not have adverse effects on the City's cash
flow or expenditures. In addition, the Federal budget negotiation process could
result in a reduction or a delay in the receipt of Federal grants which could
have additional adverse effects on the City's cash flow or revenues.
The City projections set forth in the City Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Implementation of the Financial Plan is also dependent upon the City's
ability to market its securities successfully. The City's financing program for
fiscal years 2000 through 2003 contemplates the issuance of $7.449 billion of
general obligation bonds and $3.35 billion of bonds to be issued by the New York
City Transitional Finance Authority (the "Finance Authority"). In addition, the
City Plan anticipates access to approximately $2.4 billion in financing capacity
of TSASC, Inc. ("TSASC"), which will issue debt secured by revenues derived from
the settlement of litigation with tobacco companies selling cigarettes in the
United States. The Finance Authority and TSASC were created to assist the City
in its capital program while keeping the City's indebtedness within the forecast
level of the constitutional restrictions on the amount of debt the City is
authorized to incur. In addition, the City issues revenue and tax anticipation
notes to finance its seasonal working capital requirements. The success of
projected public sales of City, New York City Municipal Water Finance Authority
(the "Water Authority"), Finance Authority, TSASC and other bonds and notes will
be subject to prevailing market conditions. The City's planned capital and
operating expenditures are dependent upon the sale of its general obligation
debt, as well as debt of the Water Authority, Finance Authority and TSASC.
Future developments concerning the City and public discussion of such
developments, as well as prevailing market conditions, may affect the market for
outstanding City general obligation bonds and notes.
The City Comptroller and other agencies and public officials, from time
to time, issue reports and make public statements which, among other things,
state that projected revenues and expenditures may be different from those
forecasted in the City Plan.
Ratings. Moody's, S&P and Fitch IBCA, Inc. ("Fitch") currently rate the
City's outstanding general obligation bonds A3, A" and A, respectively. Such
ratings reflect only the views of Moody's, S&P and Fitch from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that such ratings will continue for any given period of time or that
they will not be revised downward or withdrawn entirely. Any such downward
revision or withdrawal could have an adverse effect on the market prices of the
Bonds. On July 10, 1995, S&P revised its rating of City bonds downward to BBB+.
On July 16, 1998, S&P revised its rating of City bonds upward to A". Moody's
rating of City bonds was revised in February 1998 to A3 from Baa1. On March 8,
1999, Fitch revised its rating of City bonds upward to A.
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Outstanding Net Indebtedness. As of September 30, 1999, the City and
the Municipal Assistance Corporation for the City of New York had, respectively,
$26.15 billion and $2.846 billion of outstanding net long-term debt.
Litigation. The City is a defendant in lawsuits pertaining to material
matters, including claims asserted which are incidental to performing routine
governmental and other functions. This litigation includes, but is not limited
to actions commenced and claims asserted against the City arising out of alleged
constitutional violations, torts, breaches of contracts, and other violations of
law and condemnation proceedings. While the ultimate outcome and fiscal impact,
if any, of the proceedings and claims brought against the City are not currently
predictable, adverse determinations in certain of them might have a material
adverse effect upon the City's ability to carry out the Financial Plan. The
Financial Plan includes provisions for judgments and claims of $393 million,
$407 million, $429 million and $448 million for the 2000 through 2003 fiscal
years, respectively. The City has estimated that its potential future liability
on account of outstanding claims against it as of June 30, 1999 amounted to
approximately $3.5 billion.
New York State. Recent Developments. The national economy has
maintained a robust rate of growth, during the past six quarters as the
expansion, which is well into its ninth year, continues. The national expansion,
if it continues through February 2000, will be the longest on record. Since
early 1992, approximately 19 million jobs have been added nationally. Output
growth has averaged 3.2 percent over this period, essentially the same as the
3.3 percent average annual growth during the post-World War II period. The State
economy has also continued to expand, with over 600,000 jobs added since late
1992. Employment growth has been slower than in the nation during this period,
although the State's relative performance has improved in the last two years.
Growth in average wages in New York has generally outperformed the nation, while
growth in personal income per capita has kept pace with the nation.
The forecast for continued growth, and any resultant impact on the
1999-2000 New York State Financial Plan (the "State Plan"), contains some
uncertainties. Stronger-than-expected gains in employment and wages could lead
to unanticipated strong growth in consumer spending. Also, improvements in
foreign economies may be weaker than expected and therefore, may have
unanticipated effects on the domestic economy. The inflation rate may differ
significantly from expectations due to the conflicting impacts of a tight labor
market and improved productivity growth as well as to the future direction and
magnitude of fluctuations of oil prices. In addition, the State economic
forecast could over-or-under-estimate the level of future bonus payments,
financial sector profits or inflation growth, resulting in unexpected economic
impacts. Similarly, the State forecast could fail to correctly estimate the
amount of employment change in the banking, financial and other business service
sectors as well as the direction of employment change that is likely to
accompany telecommunications and energy deregulation.
The 1999-2000 Fiscal Year. The 1999-2000 Financial Plan projects a
closing balance of $2.85 billion in the General Fund. Total receipts and
transfers from other funds are projected to reach $39.31 billion, an increase of
over $2.57 billion from the prior fiscal
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year, and disbursements and transfers to other funds are projected to be $37.36
billion, an increase of $868 million from the total disbursed in the prior
fiscal year.
As a result of the late budget, the State issued its Annual Information
Statement and the first of the three required quarterly updates (the"First
Quarterly Update") to the State Plan on August 24, 1999. The State issued its
second quarterly update to the State Plan (the "Mid-Year Update") on October 29,
1999. The Mid-Year Update projected continued balance in the State's 1999-2000
Financial Plan with estimated receipts and transfers of $39.32 Billion,
increased by $15 million as compared to the First Quarterly Update. The State
also lowered its disbursement projections by $10 million, with total
disbursements of $37.35 billion expected for the current fiscal year. The
additional receipts and lower disbursements increased the State's projected
cash-basis surplus by $25 million over the First Quarterly Update. The State
earmarked the additional resources for the Contingency Reserve Fund. The State
Plan projected a closing balance in the General Fund of $2.87 billion. The
balance was comprised of $1.82 billion reserved to finance already-enacted tax
cuts, $473 million in the Tax Stabilization Reserve Fund, $250 million in the
Debt Reduction Reserve Fund, $132 million in the Contingency Reserve Fund (after
the proposed deposit of $25 million) and $200 million in the Community Projects
Fund.
The State issued its Third Quarterly Update to the 1999-2000 Financial
Plan on January 11, 2000, in conjunction with the release of the 2000-01
Executive Budget. On January 31, 2000, the Governor submitted amendments to his
2000-01 Executive Budget as permitted by law. Accordingly, the State published a
revised Financial Plan on January 31, 2000 that reflects the impact of the
Governor's amendments. The State revised the cash-basis 1999-2000 State
Financial Plan on January 11, 2000, with the release of the 2000-01 Executive
Budget. The State updated the Financial Plan on January 31, 2000 to reflect the
Governor's amendments to his Executive Budget. After these changes, the Division
of the Budget (the "DoB") now expects the State to close the 1999-2000 fiscal
year with an available cash surplus of $758 million in the General Fund, an
increase of $733 million over the surplus estimate in the Mid-Year Update. The
larger projected surplus derives from $499 million in net higher projected
receipts and $259 million in net lower estimated disbursements. The DoB revised
both its projected receipts and disbursements based on a review of actual
operating results through December 1999, as well as an analysis of underlying
economic and programmatic trends it believes may affect the Financial Plan for
the balance of the year. The State plans to use the entire $758 million surplus
to make additional deposits to reserve funds. At the close of the current fiscal
year, the State expects to deposit $75 million from the surplus into the State's
Tax Stabilization Reserve Fund. In the 2000-01 Executive Budget, as amended, the
Governor is proposing to use the remaining $683 million from the 1999-2000
surplus to fully finance the estimated 2001-02 and 2002-03 costs of his proposed
tax reduction package ($433 million) and to increase the Debt Reduction Reserve
Fund ($250 million). Through the first nine months of 1999-2000, General Fund
receipts, including transfers from other funds, have totaled $30.07 billion.
General Fund disbursements, including transfers to other funds, totaled $25.19
billion over the same period.
Projections of total State receipts in the State Plan are based on the
State tax structure in effect during the fiscal year and on assumptions relating
to basic economic
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factors and their historical relationships to State tax receipts. In preparing
projections of State receipts, economic forecasts relating to personal income,
wages, consumption, profits and employment have been particularly important. The
projection of receipts from most tax or revenue sources is generally made by
estimating the change in yield of such tax or revenue source caused by economic
and other factors, rather than by estimating the total yield of such tax or
revenue source from its estimated tax base. The forecasting methodology,
however, ensures that State fiscal year collection estimate for taxes that are
based on a computation of annual liability, such as the business and personal
income taxes, are consistent with estimates of total liability under such taxes.
Projections of total State disbursements are based on assumptions
relating to economic and demographic factors, potential collective bargaining
agreements, levels of disbursements for various services provided by local
governments (where the cost is partially reimbursed by the State), and the
results of various administrative and statutory mechanisms in controlling
disbursements for State operations. Factors that may affect the level of
disbursements in the fiscal year include uncertainties relating to the economy
of the nation and the State, the policies of the federal government, collective
bargaining negotiations and changes in the demand for and use of State services.
Despite recent budgetary surpluses recorded by the State, actions
affecting the level of receipts and disbursements, the relative strength of the
State and regional economy, and actions by the federal government could impact
projected budget gaps for the State. These gaps would result from a disparity
between recurring revenues and the costs of increasing the level of support for
State programs. For example, the fiscal effects of tax reductions adopted in the
last several fiscal years are projected to grow more substantially in the
forecast period, continuing to restrain receipts levels and placing pressure on
future spending levels. 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 each year, and under the State
Constitution, the Governor is required to propose a balanced budget each year.
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.
2000-01 Fiscal Year (Executive Budget Forecast). The Governor presented
his 2000-01 Executive Budget to the Legislature on January 10, 2000. The
Executive Budget contains financial projections for the State's 1999-2000
through 2002-03 fiscal years, a detailed explanation of receipts estimates and
the economic forecast on which it is based, and a proposed Capital Program and
Financing Plan for the 2000-01 through 2004-05 fiscal years. On January 31,
2000, the Governor submitted amendments to his Executive Budget, the most
significant of which recommends eliminating all gross receipts taxes on energy
providers. There can be no assurance that the Legislature will enact into law
the Governor's Executive Budget, as amended, or that the State's adopted budget
projections will not differ materially and adversely from the projections set
forth in this Update.
The 2000-01 Financial Plan is projected to have receipts in excess of
disbursements on a cash basis in the General fund, after accounting for the
transfer of available receipts
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from 1999-2000 to 2000-01. Under the Governor's Executive Budget, as amended,
total General Fund receipts, including transfers from the other funds, ` are
projected at $38.62 billion, an increase of $1.28 billion (3.4 percent) over the
current fiscal year. General Fund disbursements, including transfers to other
funds, are recommended to grow by 2.3 percent to $37.93 billion, an increase of
$869 million over 1999-2000. State Funds spending (the portion of the budget
supported exclusively by State taxes, fees, and revenues) is projected to total
$52.46 billion, an increase of $2.57 billion or 5.1 percent. Spending from All
Governmental Funds is expected to grow by 5.5 percent, increasing by $4.0
billion to $76.82 billion.
The economic forecast of the state has also been modified for 2000 and
2001 from the mid-year forecast to reflect a stronger-than-expected economy.
Continued growth is projected for 2000 and 2001 for employment, wages, and
personal income, although the growth in employment will moderate from the 1999
pace. Personal income is estimated to have grown by 4.7 percent in 1999, fueled
in part by a large increase in financial sector bonus payments at the year's
end. Personal income is projected to grow 5.5 percent in 2000 and 4.8 percent
2001. Total bonus payments are projected to increase by 11 percent in 2000 and
10.5 percent in 2001. Overall employment growth is expected to continue at a
more modest pace than in 1999, reflecting the slower growth in the national
economy, continued spending restraint by government employers, and restructuring
in the manufacturing, health care, social service, and banking sectors.
Many uncertainties exist in any forecast of the national and State
economies. Given the recent volatility in the international and domestic
financial markets, such uncertainties are particularly present at this time. The
timing and impact of changes in economic conditions are difficult to estimate
with a high degree of accuracy. Unforeseeable events may occur. The actual rate
of change, in any, or all, of the concepts that are forecasted may differ
substantially and adversely from the outlook described.
New York Local Government Assistance Corporation. In 1990, as part of a
State fiscal program, legislation was enacted creating the New York Loan
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 empowered LGAC to issue bonds and notes in an amount to yield
net proceeds not in excess of $4.7 billion (exclusive of certain refunding
bonds). Over a period of years, the issuance of those long-term obligations,
which will be amortized over no more than 30 years, is expected to result in
eliminating the need for continued short-term seasoning borrowing. The
legislation also dedicated revenues equal to one-percent of the four- percent
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 both 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 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.
16
<PAGE>
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
borrowings, as well as other changes in revenue and spending patterns, is that
the State has been able to meet its cash flow needs throughout the fiscal year
without relying on short-term seasonal borrowings.
Composition of State Cash Governmental Funds Group. Substantially all
State non-pension financial operations are accounted for in the State's
governmental funds group. Governmental funds include: (i) the General Fund,
which receives all income not required by law to be deposited in another fund;
(ii) Special Revenue Funds, which receives the preponderance of moneys received
by the State from the Federal government and other income the use of which is
legally restricted to certain purposes; (iii) Capital Projects Funds, used to
finance the acquisition and construction of major capital facilities by the
State and to aid in certain of such projects conducted by local governments or
public authorities; and (iv) Debt Service Funds, which are used for the
accumulation of moneys for the payment of principal of and interest of long-term
debt and to meet lease-purchase and other contractual-obligation commitments.
Authorities. The fiscal stability of the State is related to the fiscal
stability of its public Authorities. Authorities have various responsibilities,
including those which finance, construct and/or operate revenue-producing public
facilities. 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 restrictions set forth in their legislative
authorization. As of December 31, 1998, there were 17 Authorities that had
outstanding debt of $100 million or more and the aggregate outstanding debt,
including refunding bonds, of all Authorities was $94 billion, only a portion of
which constitutes State-supported or State-related debt.
Authorities generally pay their operating expenses and debt service
costs from revenues generated by the projects they finance or operate, such as
tolls charged for use of highways, bridges or tunnels, changes for electric
power, electric and gas utility services, rentals charged for housing units and
charges for occupancy at medical care facilities. In addition, State legislation
authorizes several financing techniques for Authorities. Also, there are
statutory arrangements providing for State local assistance payments otherwise
payable to localities to be made under certain circumstances to Authorities.
Although the State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements, if local assistance payments are diverted the affected
localities could seek additional State assistance. Some Authorities also receive
moneys from State appropriations to pay for the operating costs of certain of
their programs.
Ratings. S&P rates the State's general obligation bonds A, Moody's
rates the State's general obligation bonds A2. Ratings reflect only the
respective views of such organizations, and an explanation of the significance
of such ratings must be obtained from the rating agency furnishing the same.
There is no assurance that a particular rating will continue for any given
period of time or that any such rating will not be revised downward or withdrawn
entirely if, in the judgment of the agency originally establishing the rating,
circumstances so
17
<PAGE>
warrant. A downward revision or withdrawal of such ratings, or either of them,
may have an effect on the market price of the State Municipal Obligations in
which the Portfolio invests.
General Obligation Debt. As of March 31, 1999, the State had
outstanding approximately $4.8 billion in general obligation bonds, including
$185 million in bond anticipation notes outstanding. Principal and interest due
on general obligation bonds and interest due on bond anticipation notes were
$748.2 million for the 1998-1999 fiscal year and are estimated to be $730.7
million for the State's 1999-2000 fiscal year.
Litigation. The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine governmental
operations. Such litigation includes, but is not limited to, claims asserted
against the State arising from alleged torts, alleged breaches of contracts,
condemnation proceedings, miscellaneous civil rights cases and other alleged
violations of State and Federal laws. These proceedings could affect adversely
the financial condition of the State in the 1999-2000 fiscal year or thereafter.
The State believes that the State Plan includes sufficient reserves for
the payment of judgments that may be required during the 1999-2000 fiscal year.
There can be no assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of all potential State Plan reserves
available for the payment of judgments and, therefore, could affect the ability
of the State to maintain a balanced 1999-2000 State Plan. The General Purpose
Financial Statements for the 1998-1999 fiscal year report estimated probable
awarded and anticipated unfavorable judgments of $895 million, of which $132
million is expected to be paid during the 1999-2000 fiscal year.
In addition, the State is party to other claims and litigation which
its legal counsel has advised are not probable of adverse court decisions or are
not deemed adverse and material. Although the amounts of potential losses
resulting from this litigation, if any, are not presently determinable, it is
the State's opinion that its ultimate liability in these cases is not expected
to have a material adverse effect on the State's financial position in the
1999-2000 fiscal year or thereafter.
Other Localities. Certain localities outside the City have experienced
financial problems and have requested and received additional State assistance
during the last several State fiscal years. The potential impact on the State of
any future requests by localities for additional oversight and financial
assistance is not included in the projections of the State receipts and
disbursements in the State's 1999-2000 fiscal year.
SPECIAL CONSIDERATIONS REGARDING
CALIFORNIA MUNICIPAL OBLIGATIONS
The following describes certain risks with respect to municipal
obligations of California issuers in which the California Municipal Portfolio
may invest. This summarized information is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State of California and other public documents available as of the date of this
Statement of Additional Information. No representation is made as to the
accuracy of such information.
18
<PAGE>
Overview
The Portfolio will be affected by any political, economic or regulatory
developments affecting the ability of California issuers to pay interest or
repay principal. Provisions of the California Constitution and State statutes
which limit the taxing and spending authority of California governmental
entities may impair the ability of California issuers to maintain debt service
on their obligations. Future California political and economic developments,
constitutional amendments, legislative measures, executive orders,
administrative regulations, litigation and voter initiatives could have an
adverse effect on the debt obligations of California issuers.
Certain debt obligations held by the Portfolio may be obligations of
issuers which rely in whole or in substantial part on California State revenues
for the continuance. Whether and to what extent the California Legislature will
continue to appropriate a portion of the State's General Fund to counties,
cities and their various entities, is not entirely certain. To the extent local
entities do not receive money from the State to pay for their operations and
services, their ability to pay debt service on obligations held by the Portfolio
may be impaired.
The effect of the State's 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 subsidiaries may be approved or enacted in the
future.
Certain tax-exempt securities in which the Portfolio may invest may be
obligations payable solely from the revenues of specific institutions, or may be
secured by specific properties, which are subject to provisions of California
law which could adversely affect the holders of such obligations. For example,
the revenues of California health care institutions may be subject to state
laws, and California law limits the remedies of a creditor secured by a mortgage
or deed of trust on real property.
Rating. In 1996, citing California's improving economy and budget
situation, both Fitch and S&P raised their ratings from A to A+. In October,
1997, Fitch raised its rating from A+ to AA- referring to the State's
fundamental strengths, the extent of its economic recovery and the return of
financial stability. In October 1998, Moody's raised its rating from A1 to Aa3
citing the State's continuing economic recovery and a number of actions taken to
improve the State's credit condition, including the rebuilding of cash and
budget reserves. The most recent ratings by each of Moody's, S&P and Fitch are
Aa3, AA- and AA, respectively.
Litigation. The State is a party to numerous legal proceedings, many of
which normally occur in governmental operations and which, if decided against
the State, might require the State to make significant future expenditures or
impair future revenue sources.
19
<PAGE>
Year 2000-Related Information Technology
The State's Department of Information Technology reports that the State
experienced no interruption in the delivery of mission critical services as a
result of Year 2000. The State will continue to monitor its information
technology systems through the remaining crucial leap year dates (February 28,
29 and March 1, 2000) to ensure the continued delivery of essential services.
State Indebtedness
General
The State Treasurer is responsible for the sale of debt obligations of
the State and its various authorities and agencies. The State has always paid
the principal of and interest on its general obligation bonds, general
obligation commercial paper, lease-purchase debt and short-term obligations,
including revenue anticipation notes and revenue anticipation warrants, when
due.
Capital Facilities Financing
General Obligation Bonds - The State Constitution prohibits the
creation of general obligation indebtedness of the State unless a bond law is
approved by a majority of the electorate voting at a general election or a
direct primary. General obligation bond acts provide that debt service on
general obligation bonds shall be appropriated annually from the General Fund
and all debt service on general obligation bonds is paid from the General Fund.
Under the State Constitution, debt service on general obligation bonds is the
second charge to the General Fund after the application of moneys in the General
Fund to the support of the public school system and public institutions of
higher education. Certain general obligation bond programs receive revenues from
sources other than the sale of bonds or the investment of bond proceeds.
As of January 1, 2000, the State had outstanding $20,506,076,000
aggregate principal amount of long-term general obligation bonds, and unused
voter authorizations for the future issuance of $11,827,414,000 of long-term
general obligation bonds. This latter figure consists of $4,123,734,000 of
authorized commercial paper notes, described below (of which $681,065,000 was
outstanding), which had not yet been refunded by general obligation bonds, and
$7,703,680,000 of other authorized but unissued general obligation debt.
The General Obligation Bond Law permits the State to issue variable
rate indebtedness, up to 20 percent of the aggregate amount of long-term general
obligation bonds outstanding. As of January 1, 2000, there was no variable rate
indebtedness outstanding; however, the State plans to issue such indebtedness in
the future.
In its 1999 session, the Legislature passed and the Governor signed
five bond acts, totaling $4.69 billion in new authorizations. These bond acts
will appear on the March 7, 2000 ballot for voter approval.
20
<PAGE>
Commercial Paper Program - Pursuant to legislation enacted in 1995,
voter approved general obligation indebtedness may be issued either as long-term
bonds, or, for some but not all bond acts, as commercial paper notes. Commercial
paper notes may be renewed or may be refunded by the issuance of long-term
bonds. The State issues long-term general obligation bonds from time to time to
retire its general obligation commercial paper notes. Pursuant to the terms of
the bank credit agreement presently in effect supporting the general obligation
commercial paper program, not more than $1.5 billion of general obligation
commercial paper notes may be outstanding at any time; this amount may be
increased or decreased in the future. Commercial paper notes are deemed issued
upon authorization by the respective Finance Committees, whether or not such
notes are actually issued. As of January 1, 2000, the Finance Committees had
authorized the issuance of up to $4,123,734,000 of commercial paper notes; as of
that date $681,065,000 aggregate principal amount of general obligation
commercial paper notes was outstanding.
Lease-Purchase Debt - In addition to general obligation bonds, the
State builds and acquires capital facilities through the use of lease-purchase
borrowing. Under these arrangements, the State Public Works Board, another State
or local agency or a joint powers authority issues bonds to pay for the
construction of facilities such as office buildings, university buildings or
correctional institutions. These facilities are leased to a State agency or the
University of California under a long-term lease which provides the source of
payment of the debt service on the lease-purchase bonds. In some cases, there is
not a separate bond issue, but a trustee directly creates certificates of
participation in the State's lease obligation, which are marketed to investors.
Under applicable court decisions, such lease arrangements do not constitute the
creation of "indebtedness" within the meaning of the Constitutional provisions
which require voter approval. For purposes of this section of the Statement of
Additional Information, "lease-purchase debt" or "lease-purchase financing"
means principally bonds or certificates of participation for capital facilities
where the rental payments providing the security are a direct or indirect charge
against the General Fund and also includes revenue bonds for a State energy
efficiency program secured by payments made by various State agencies under
energy service contracts. Certain of the lease-purchase financings are supported
by special funds rather than the General Fund. The State had $6,719,629,434
General Fund-supported lease-purchase debt outstanding at January 1, 2000. The
State Public Works Board, which is authorized to sell lease revenue bonds, had
$1,836,518,000 authorized and unissued as of January 1, 2000.
Non-Recourse Debt - Certain State agencies and authorities issue
revenue obligations for which the General Fund has no liability. Revenue bonds
represent obligations payable from State revenue-producing enterprises and
projects, which are not payable from the General Fund, and conduit obligations
payable only from revenues paid by private users of facilities financed by the
revenue bonds. The enterprises and projects include transportation projects,
various public works projects, public and private educational facilities
(including the California State University and University of California
systems), housing, health facilities and pollution control facilities. There are
17 agencies and authorities authorized to issue revenue obligations (excluding
lease-purchase debt). State agencies and authorities had $26,008,006,628
aggregate principal amount of revenue bonds and notes which are non-recourse to
the General Fund outstanding as of June 30, 1999.
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<PAGE>
Cash Flow Borrowings
As part of its cash management program, the State has regularly issued
short-term obligations to meet cash flow needs. The following table shows the
amount of revenue anticipation notes ("Notes") issued over the past five fiscal
years. See "Prior Fiscal Years' Financial Results" and "Current State Budget"
below.
The State issued $1.0 billion of revenue anticipation notes for the 1999-2000
Fiscal Year to mature on June 30, 2000.
State of California
Revenue Anticipation Notes Issued
Fiscal Years 1995-1996 to 1999-2000
<TABLE>
<S> <C> <C> <C> <C>
Principal Amount
Fiscal Year Type (Billions) Date of Issue Maturity Date
- ---------- ---- ---------- ------------- -------------
1995-1996 Notes $ 2.0 April 25, 1996 June 28, 1996
1996-1997 Notes Series A-C 3.0 August 6, 1996 June 30, 1997
1997-1998 Notes 3.0 September 9, 1997 June 30, 1998
1998-1999 Notes 1.7 October 1, 1998 June 30, 1999
1999-2000 Notes Series A-B 1.0 October 1, 1999 June 30, 2000
- --------------
</TABLE>
SOURCE: State of California, Office of the Treasurer.
State Finances
The Budget Process
The State's fiscal year begins on July 1 and ends on June 30. The State
operates on a budget basis, using a modified accrual system of accounting, with
revenues credited in the period in which they are measurable and available and
expenditures debited in the period in which the corresponding liabilities are
incurred.
The annual budget is proposed by the Governor by January 10 of each
year for the next fiscal year (the "Governor's Budget"). Under state law, the
annual proposed Governor's Budget cannot provide for projected expenditures in
excess of projected revenues and balances available from prior fiscal years.
Following the submission of the Governor's Budget, the Legislature takes up the
proposal.
Under the State Constitution, money may be drawn from the Treasury only
through an appropriation made by law. The primary source of the annual
expenditure authorizations is the Budget Act as approved by the Legislature and
signed by the Governor. The Budget Act must be approved by a two-thirds majority
vote of each House of the Legislature. The Governor may reduce or eliminate
specific line items in the Budget Act or any other appropriations bill without
vetoing the entire bill. Such individual line-item vetoes are subject to
override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the
Budget Act. Bills containing appropriations (except for K-14 education) must be
approved by a two-thirds
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<PAGE>
majority vote in each House of the Legislature and be signed by the Governor.
Bills containing K-14 education appropriations only require a simple majority
vote. Continuing appropriations, available without regard to fiscal year, may
also be provided by statute or the State Constitution. There is litigation
pending concerning the validity of such continuing appropriations.
Funds necessary to meet an appropriation need not be in the State
Treasury at the time such appropriation is enacted; revenues may be appropriated
in anticipation of their receipt.
The General Fund
The moneys of the State are segregated into the General Fund and over
900 special funds, including bond, trust and pension funds. The General Fund
consists of revenues received by the State Treasury and not required by law to
be credited to any other fund, as well as earnings from the investment of state
moneys not allocable to another fund. The General Fund is the principal
operating fund for the majority of governmental activities and is the depository
of most of the major revenue sources of the State. The General Fund may be
expended as a consequence of appropriation measures enacted by the Legislature
and approved by the Governor, as well as appropriations pursuant to various
constitutional authorizations and initiative statutes.
The Special Fund for Economic Uncertainties
The Special Fund for Economic Uncertainties ("SFEU") is funded with
General Fund revenues and was established to protect the State from unforeseen
revenue reductions and/or unanticipated expenditure increases. Amounts in the
SFEU may be transferred by the State Controller as necessary to meet cash needs
of the General Fund. The State Controller is required to return moneys so
transferred without payment of interest as soon as there are sufficient moneys
in the General Fund.
The June 30, 2000, SFEU projection reflects the latest revenue
projections and expenditure amounts as updated in 2000-2001 Governor's Budget.
As in any year, the Budget Act and related trailer bills are not the only pieces
of legislation which appropriate funds. Other factors including re-estimates of
revenues and expenditures, existing statutory requirements, and additional
legislation introduced and passed by the Legislature may impact the reserve
amount.
At the time of the release of the 2000-2001 Governor's Proposed Budget,
on January 10, 2000, the Department of Finance projected the SFEU would have a
balance of about $2.420 billion at June 30, 2000, compared to the amount of $880
million projected at the time the 1999 Budget Act was signed on June 29, 1999.
See "Current State Budget" below.
Welfare Reform
The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (P.L. 104-193, the "Law") has fundamentally reformed the nation's welfare
system. Among its many provisions, the Law includes: (i) conversion of Aid to
Families with Dependent
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Children from an entitlement program to a block grant titled Temporary
Assistance for Needy Families (TANF), with lifetime time limits on TANF
recipients, work requirements and other changes; (ii) provisions denying certain
federal welfare and public benefits to legal noncitizens (this provision has
been amended by subsequent federal law), allowing states to elect to deny
additional benefits (including TANF) to legal noncitizens, and generally denying
almost all benefits to illegal immigrants; and (iii) changes in the Food Stamp
program, including reducing maximum benefits and imposing work requirements. The
block grant formula under the Law is operative through federal fiscal year 2002.
California's response to the federal welfare reforms is embodied in
Chapter 270, Statutes of 1997. This basic state welfare program, called
California Work Opportunity and Responsibility to Kids ("CalWORKs"), replaced
the former Aid to Families with Dependent Children (AFDC) and Greater Avenues to
Independence (GAIN) programs, effective January 1, 1998. Consistent with the
federal law, CalWORKs contains time limits on receipt of welfare aid, both
lifetime as well as for any current period on aid. The centerpiece of CalWORKs
is the linkage of eligibility to work participation requirements. Administration
of the CalWORKs program is largely at the county level, and the counties receive
financial incentives for success in this program. Counties have been successful
in earning performance incentive payments and have earned amounts in excess of
the available appropriation for 1998-1999 and, it is estimated, for 1999-2000 as
well. The Administration proposes to repeal or modify the current incentive
structure in 2000-2001 to permit adequate funding for other CalWORKs program
demands in the future.
To date, the implementation of the CalWORKs program has continued the
trend of declining welfare caseloads. The CalWORKs caseload is projected to be
589,000 in 1999-2000 and 557,000 in 2000-2001, down from a high of 921,000 cases
in 1994-1995. The longer-term impact of the new federal Law and CalWORKs is
being evaluated by the RAND Corporation, with a series of reports to be
furnished and the final report due October 2001.
The 2000-2001 CalWORKs budget reflects California's success in meeting
the federally- mandated work participation requirements for federal fiscal year
1998. With that goal being met, the federally-imposed maintenance-of-effort
(MOE) level for California is reduced from 80 percent of the federal fiscal year
1994 baseline expenditures for the former AFDC program ($2.9 billion) to 75
percent ($2.7 billion). It is still uncertain if the state will meet the work
participation requirements for federal fiscal year 1999; however, due to program
changes, it is expected that California will meet the work participation goal in
federal fiscal year 2000 and beyond. In addition, California will receive a TANF
High Performance Bonus award of $45.5 million. This one-time bonus is awarded to
states for their successes in moving welfare recipients to work and sustaining
their participation in the workforce.
The 2000-2001 Governor's Budget proposes expenditures which will
continue to meet, but not exceed, the federally-required $2.7 billion combined
State and county MOE requirement. Total CalWORKs-related expenditures are
estimated to be $7.2 billion for 1999-2000 and $6.9 billion for 2000-2001,
including child care transfer amounts for the Department of Education.
24
<PAGE>
Local Governments
The primary units of local government in California are the counties,
ranging in population from 1,200 in Alpine County to over 9,600,000 in Los
Angeles County. Counties are responsible for the provision of many basic
services, including indigent health care, welfare, jails and public safety in
unincorporated areas. There are also about 470 incorporated cities, and
thousands of special districts formed for education, utility and other services.
The fiscal condition of local governments has been constrained since the
enactment of "Proposition 13" in 1978, which reduced and limited the future
growth of property taxes and limited the ability of local governments to impose
"special taxes" (those devoted to a specific purpose) without two-thirds voter
approval. Counties, in particular, have had fewer options to raise revenues than
many other local government entities, and have been required to maintain many
services.
In the aftermath of Proposition 13, the State provided aid to local
governments from the General Fund to make up some of the loss of property tax
moneys, including taking over the principal responsibility for funding K-12
schools and community colleges. During the recession of the early 1990's, the
Legislature eliminated most of the remaining components of post-Proposition 13
aid to local government entities other than K-14 education districts by
requiring cities and counties to transfer some of their property tax revenues to
school districts. However, the Legislature also provided additional funding
sources (such as sales taxes) and reduced certain mandates for local services.
Since then the State has also provided additional funding to counties and cities
through such programs as health and welfare realignment, welfare reform, trial
court restructuring, the COPS program supporting local public safety
departments, and various other measures.
The 1999 Budget Act includes a $150 million one-time subvention from
the General Fund to local agencies for relief from the 1992 and 1993 property
tax shifts. Legislation has been passed, subject to voter approval at the
election in November, 2000, to provide a more permanent payment to local
governments to offset the property tax shift. In addition, legislation was
enacted in 1999 to provide approximately $35.8 million annual relief to cities
based on 1997-1998 costs of jail booking and processing fees paid to counties.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of 1997,
implemented a restructuring of the State's trial court funding system. Funding
for the courts, with the exception of costs for facilities, local judicial
benefits, and revenue collection, was consolidated at the State level. The
county contribution for both their general fund and fine and penalty amounts is
capped at the 1994-1995 level and becomes part of the Trial Court Trust Fund,
which supports all trial court operations. The State assumed responsibility for
future growth in trial court funding. The consolidation of funding is intended
to streamline the operation of the courts, provide a dedicated revenue source,
and relieve fiscal pressure on the counties. Beginning in 1998-1999, the county
general fund contribution for court operations was reduced by $290 million, and
cities retained $62 million in fine and penalty revenue previously remitted to
the State. The General Fund reimbursed the $352 million revenue loss to the
Trial Court Trust Fund. The 1999 Budget Act included funds to further reduce the
county general fund contribution by an additional $96 million. The entire
statewide welfare system has been
25
<PAGE>
changed in response to the change in federal welfare law enacted in 1996 (see
"Welfare Reform" above). Under the CalWORKs program, counties are given
flexibility to develop their own plans, consistent with state law, to implement
the program and to administer many of its elements, and their costs for
administrative and supportive services are capped at the 1996-1997 levels.
Counties are also given financial incentives if, at the individual county level
or statewide, the CalWORKs program produces savings associated with specified
standards. Counties will still be required to provide "general assistance" aid
to certain persons who cannot obtain welfare from other programs. In 1996,
voters approved Proposition 218, entitled the "Right to Vote on Taxes Act,"
which incorporates new Articles XIII C and XIII D into the California
Constitution. These new provisions place limitations on the ability of local
government agencies to impose or raise various taxes, fees, charges and
assessments without voter approval. Certain "general taxes" imposed after
January 1, 1995, must be approved by voters in order to remain in effect. In
addition, Article XIII C clarifies the right of local voters to reduce taxes,
fees, assessments or charges through local initiatives. There are a number of
ambiguities concerning the Proposition and its impact on local governments and
their bonded debt which will require interpretation by the courts or the
Legislature. Proposition 218 does not affect the State or its ability to levy or
collect taxes.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed by
Article XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on
voter-authorized bonds.
Article XIII B prohibits the State from spending "appropriations
subject to limitation" in excess of the Appropriations Limit. "Appropriations
subject to limitation," with respect to the State, are authorizations to spend
"proceeds of taxes," which consist of tax revenues, and certain other funds,
including proceeds from regulatory licenses, user charges or other fees to the
extent that such proceeds exceed "the cost reasonably borne by that entity in
providing the regulation, product or service," but "proceeds of taxes" exclude
most state subventions to local governments, tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on appropriations
of funds which are not "proceeds of taxes," such as reasonable user charges or
fees and certain other non-tax funds.
Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government, appropriations for qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and
appropriation of certain special taxes imposed by initiative (e.g., cigarette
and tobacco taxes).
The Appropriations Limit may also be exceeded in cases of emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in state per capita personal
income and changes in population,
26
<PAGE>
and adjusted, when applicable, for any transfer of financial responsibility of
providing services to or from another unit of government or any transfer of the
financial source for the provisions of services from tax proceeds to non tax
proceeds. The measurement of change in population is a blended average of
statewide overall population growth, and change in attendance at local school
and community college ("K-14") districts. The Appropriations Limit is tested
over consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to K-14
districts and refunds to taxpayers.
The Legislature has enacted legislation to implement Article XIII B
which defines certain terms used in Article XIII B and sets forth the methods
for determining the Appropriations Limit. California Government Code Section
7912 requires an estimate of the Appropriations Limit to be included in the
Governor's Budget, and thereafter to be subject to the budget process and
established in the Budget Act.
The following table shows the State's Appropriations Limit for the past
three fiscal years, the current fiscal year and the proposed budget year. As of
the release of the 2000-2001 Governor's Budget, the Department of Finance
projects the State's Appropriations Subject to Limitations will be $3.8 billion
under the State's Appropriations Limit in Fiscal Year 1999-2000 and $4.0 billion
in Fiscal Year 2000-2001.
State Appropriations Limit
(Millions)
<TABLE>
<CAPTION>
Fiscal Years
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996-1997 1997-1998 1998-1999* 1999-2000* 2000-2001*
State Appropriations Limit $42,002 $44,778 $47,573 $50,673 $53,419
Appropriations Subject to Limit (35,103) (40,743) (43,695) (46,896) (49,444)
Amount (Over)/Under Limit $6.899 $4.035 $3,878 $3,777 $3,975
- --------------
</TABLE>
*Estimated/Projected
SOURCE: State of California, Department of Finance.
Proposition 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State Appropriations Limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent of General Fund revenues ("Test l"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for changes in
the cost of living (measured as in Article XIII B by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace Test 2 in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
Test 3, schools would receive the amount appropriated in
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the prior year adjusted for changes in enrollment and per capita General Fund
revenues, plus an additional small adjustment factor. If Test 3 is used in any
year, the difference between Test 3 and Test 2 would become a "credit" to
schools which would be the basis of payments in future years when per capita
General Fund revenue growth exceeds per capita personal income growth.
Legislation adopted prior to the end of the 1988-1989 Fiscal Year, implementing
Proposition 98, determined the K-14 schools' funding guarantee under Test 1 to
be 40.3 percent of the General Fund tax revenues, based on 1986-1987
appropriations. However, that percent has been adjusted to approximately 35
percent to account for a subsequent redirection of local property taxes, since
such redirection directly affects the share of General Fund revenues to schools.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools' minimum
funding formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools (see "State Finances--State Appropriations Limit" above).
During the recession in the early 1990s General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. By implementing these actions, per-pupil funding
from Proposition 98 sources stayed almost constant at approximately $4,200 from
Fiscal Year 199l-1992 to Fiscal Year 1993-1994.
In 1992, a lawsuit was filed, called California Teachers' Association
v. Gould, which challenged the validity of these off-budget loans. The
settlement of this case, finalized in July, 1996, provides, among other things,
that both the State and K-14 schools share in the repayment of prior years'
emergency loans to schools. Of the total $1.76 billion in loans, the State is
repaying $935 million by forgiveness of the amount owed, while schools will
repay $825 million. The State share of the repayment will be reflected as an
appropriation above the current Proposition 98 base calculation. The schools'
share of the repayment will count as appropriations that count toward satisfying
the Proposition 98 guarantee, or from "below" the current base. Repayments are
spread over the eight-year period of 1994-1995 through 200l-2002 to mitigate any
adverse fiscal impact.
Substantially increased General Fund revenues, above initial budget
projections, in the fiscal years 1994-1995 through 1999-2000 have resulted in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
years' budgets. Because of the State's increasing revenues, per-pupil funding at
the K-12 level has increased by about 50 percent from the level in place in
199l-1992, and is estimated at about $6,313 per ADA in 2000-2001. A significant
amount of the "extra" Proposition 98 monies in the last few years has been
allocated to special programs, including an initiative to increase the number of
computers in schools throughout the State. Furthermore, since General Fund
revenue growth is expected to continue in 2000-2001, the Governor has also
proposed new
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initiatives to improve student achievement, provide better teacher recruitment
and training, and provide schools with advanced technology and the opportunity
to form academic partnerships to help them meet increased expectations. See
"Current State Budget" for further discussion of education funding.
Prior Fiscal Years' Financial Results
Following a severe recession beginning in 1990, the State's financial
condition improved markedly during the fiscal years starting in 1995-1996, with
a combination of better than expected revenues, slowdown in growth of social
welfare programs, and continued spending restraint based on actions taken in
earlier years. The State's cash position also improved, and no external deficit
borrowing occurred over the end of the last four fiscal years.
The economy grew strongly during the fiscal years beginning in
1995-1996, and as a result, the General Fund took in substantially greater tax
revenues (around $2.2 billion in 1995-1996, $1.6 billion in 1996-1997 and $2.4
billion in 1997-1998 and $1.7 billion in 1998-1999) than were initially planned
when the budgets were enacted. These additional funds were largely directed to
school spending as mandated by Proposition 98, to make up shortfalls from
reduced federal health and welfare aid in 1995-1996 and 1996-1997 and
particularly in 1998-1999 to fund new program incentives.
The following were major features of the 1998 Budget Act and certain
additional fiscal bills enacted before the end of the legislative session:
1. The most significant feature of the 1998-1999 budget was agreement
on a total of $1.4 billion of tax cuts. The central element was a bill which
provided for a phased-in reduction of the Vehicle License Fee ("VLF"). Since the
VLF is transferred to cities and counties under existing law, the bill provided
for the General Fund to replace the lost revenues. Starting on January 1, 1999,
the VLF has been reduced by 25 percent, at a cost to the General Fund of
approximately $500 million in the 1998-1999 Fiscal Year and about $1 billion
annually thereafter.
In addition to the cut in VLF, the 1998-1999 budget included both
temporary and permanent increases in the personal income tax dependent credit
($612 million General Fund cost in 1998-1999, but less in future years), a
nonrefundable renters tax credit ($133 million), and various targeted business
tax credits ($106 million).
2. Proposition 98 funding for K-14 schools was increased by $1.7
billion in General Fund moneys over revised 1997-1998 levels, over $300 million
higher than the minimum Proposition 98 guarantee. Of the 1998-1999 funds, major
new programs included money for instructional and library materials, deferred
maintenance, support for increasing the school year to 180 days and reduction of
class sizes in Grade 9. The Budget also included $250 million as repayment of
prior years' loans to schools, as part of the settlement of the CTA v.
Gould lawsuit. (See "State Finances - Proposition 98" above.)
3. Funding for higher education increased substantially above the
actual 1997-1998 level. General Fund support was increased by $340 million (15.6
percent) for the
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<PAGE>
University of California and $267 million (14.1 percent) for the California
State University system. In addition, Community Colleges funding increased by
$300 million (6.6 percent).
4. The Budget included increased funding for health, welfare and social
services programs. A 4.9 percent grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years.
5. Funding for the judiciary and criminal justice programs increased by
about 11 percent over 1997-1998, primarily to reflect increased State support
for local trial courts and rising prison population.
6. Major legislation enacted after the 1998 Budget Act included new
funding for resources projects, a share of the purchase of the Headwaters
Forest, funding for the Infrastructure and Economic Development Bank ($50
million) and funding for the construction of local jails. The State realized
savings of $433 million from a reduction in the State's contribution to the
State Teacher's Retirement System in 1998-1999.
Final tabulation of revenues and expenditures contained in the
2000-2001 Governor's Budget reveals that stronger than expected economic
conditions in the State produced total 199% 99 General Fund revenues of about
$58.6 billion, almost $1.6 billion above the 1998 Budget Act estimates. Actual
General Fund expenditures were $57.8 billion, the amount estimated at the 1998
Budget Act. Some of this additional revenue will be directed to K-14 schools
pursuant to Proposition 98. The Governor's Budget projects a balance in the SFEU
at June 30, 1999, of approximately $3.1 billion.
Current State Budget
Periodic reports on revenues and/or expenditures during the fiscal year
are issued by the Administration, the State Controller's Office and the
Legislative Analyst's Office. The Department of Finance issues a monthly
Bulletin which reports the most recent revenue receipts as reported by state
departments, comparing them to Budget projections. The Administration also
formally updates its budget projections three times during each fiscal year, in
January, May, and at budget enactment. These bulletins and other reports are
available on the Internet at the following websites:
Department of Finance www.dof.ca.gov
State Controller www.sco.ca.gov
Legislative Analyst www.lao.ca.gov
1999-2000 Fiscal Year Budget
On January 8, 1999, Governor Davis released his proposed budget for
Fiscal Year 1999-2000 (the "January Governor's Budget"). The January Governor's
Budget generally reported that General Fund revenues for FY 1998-1999 and FY
1999-2000 would be lower than earlier projections (primarily due to weaker
overseas economic conditions perceived in late 1998), while some caseloads would
be higher than earlier projections. The January Governor's Budget proposed $60.5
billion of General Fund expenditures in FY 1999-2000, with a $415 million SFEU
reserve at June 30, 2000.
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<PAGE>
The 1999 May Revision showed an additional $4.3 billion of revenues for
combined fiscal years 1998-1999 and 1999-2000. The completion of the 1999 Budget
Act occurred in a timely fashion. The final Budget Bill was adopted by the
Legislature on June 16, 1999, and was signed by the Governor on June 29, 1999
(the "1999 Budget Act"), meeting the Constitutional deadline for budget
enactment for only the second time in the 1990's.
The final 1999 Budget Act estimated General Fund revenues and transfers
of $63.0 billion, and contained expenditures totaling $63.7 billion after the
Governor used his line-item veto to reduce the legislative Budget Bill
expenditures by $581 million (both General Fund and Special Fund). The 1999
Budget Act also contained expenditures of $16.1 billion from special funds and
$1.5 billion from bond funds. The Administration estimated that the SFEU would
have a balance at June 30, 2000, of about $880 million. Not included in this
amount was an additional $300 million which (after the Governor's vetoes) was
"set aside" to provide funds for employee salary increases (to be negotiated in
bargaining with employee unions), and for litigation reserves. The 1999 Budget
Act anticipated normal cash flow borrowing during the fiscal year. See "State
Indebtedness-Cash Flow Borrowings."
The principal features of the 1999 Budget Act include the following:
1. Proposition 98 funding for K-12 schools was increased by $1.6
billion in General Fund moneys over revised 1998-1999 levels, $108.6 million
higher than the minimum Proposition 98 guarantee. Of the 1999-2000 funds, major
new programs included money for reading improvement, new textbooks, school
safety, improving teacher quality, funding teacher bonuses, providing greater
accountability for school performance, increasing preschool and after school
care programs and funding deferred maintenance of school facilities. The Budget
also includes $310 million as repayment of prior years' loans to schools, as
part of the settlement of the CTA v. Gold lawsuit. See also "State Finances -
Proposition 98" above.
2. Funding for higher education increased substantially above the
actual 1998-1999 level. General Fund support was increased by $184 million (7.3
percent) for the University of California and $126 million (5.9 percent) for the
California State University system. In addition, Community Colleges funding
increased by $324.3 million (6.6 percent). As a result, undergraduate fees at UC
and CSU will be reduced for the second consecutive year, and the per-unit charge
at Community Colleges will be reduced by $1.
3. The Budget included increased funding of nearly $600 million for
health and human services.
4. About $800 million from the general fund will be directed toward
infrastructure costs, including $425 million in additional funding for the
Infrastructure Bank, initial planning costs for a new prison in the Central
Valley, additional equipment for train and ferry service, and payment of
deferred maintenance for state parks.
5. The Legislature enacted a one-year additional reduction of 10
percent of the VLF for calendar year 2000, at a General Fund cost of about $250
million in each of FY 1999-2000 and 2000-2001 to make up lost funding to local
governments. Conversion of this
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<PAGE>
one-time reduction to a permanent cut will remain subject to the revenue tests
in the legislation adopted last year. Several other targeted tax cuts, primarily
for businesses, were also approved, at a cost of $54 million in 1999-2000.
6. A one-time appropriation of $150 million, to be split between cities
and counties, was made to offset property tax shifts during the early 1990's.
Additionally, an ongoing $50 million was appropriated as a subvention to cities
for jail booking or processing fees charged by counties when an individual
arrested by city personnel is taken to a county detention facility.
The revised 1999-2000 budget included in the 2000-2001 Governor's
Budget also reflects the latest estimated costs or savings as provided in
various pieces of legislation passed and signed after the 1999 Budget Act. The
revised budget includes $730 million for various departments for enrollment,
caseload and population changes and $562 million for Smog Impact Fee refunds.
Revised 1999-2000 revenues are $65.2 billion or $2.2 billion higher
than projections at the 1999 Budget Act. Revised 1999-2000 expenditures are
$65.9 billion or $2.1 billion higher than projections at the 1999 Budget Act.
The State's Legislative Analyst (LAO) issued a report in January 2000, following
the receipt of actual revenues for the month of December 1999, which were not
available at the time the Governor's Budget estimates were prepared. The LAO
report indicates General Fund revenues for the 18-month period (January 2000
through June 2001) could be as much as $3 billion higher than the 2000-2001
Governor's Budget estimates. The LAO report assumed the continuation of strong
economic growth in the State during this period. The Department of Finance will
provide new projections of 1999-2000 and 2000-2001 revenues in May 2000.
Proposed 2000-2001 Fiscal Year Budget
On January 10, 2000, Governor Davis released his proposed budget for
Fiscal Year 2000-2001. The 2000-2001 Governor's Budget generally reflects that
General Fund revenues for Fiscal Year 1999-2000 will be higher than projections
made at the time of the 1999 Budget Act.
The Governor's Budget projects General Fund revenues and transfers in
2000-2001 of $68.2 billion. This includes anticipated payments from the tobacco
litigation settlement of $387.9 million and the receipt of one-time revenue from
the sale of assets. More accurate revenue estimates will be available in May and
June before the adoption of the Budget. The Governor has proposed $167 million
in tax reduction initiatives.
The Governor's Budget proposes General Fund expenditures of $68.8
billion. Included in the Budget are set-asides of $500 million for legal
contingencies and $100 million for various one-time legislative initiatives.
Based on the proposed revenues and expenditures, the Governor's Budget projects
the June 30, 200l balance in the SFEU to be $1.238 billion.
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Economy And Population
California's economy, the largest among the 50 states and one of the
largest in the world, has major components in high technology, trade,
entertainment, agriculture, manufacturing, tourism, construction and services.
Since 1994, California's economy has been performing strongly after suffering a
deep recession between 1990-1993.
The State's July 1, 1999 population of over 34 million represented over
12 percent of the total United States population. California's population is
concentrated in metropolitan areas. As of the April 1, 1990 census, 96 percent
resided in the 23 Metropolitan Statistical Areas in the State. As of July 1,
1998, the 5-county Los Angeles area accounted for 49 percent of the State's
population, with over 16.0 million residents, and the 10-county San Francisco
Bay Area represented 21 percent, with a population of over 7.0 million.
County Information
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. On June 12, 1996, it emerged from bankruptcy after the
successful sale of $880 million in municipal bonds allowed the county to pay off
the last of its creditors. On January 7, 1997, Orange County returned to the
municipal bond market with a $136 million bond issue maturing in 13 years at an
insured yield of 7.23%. In December, 1997, Moody's raised its ratings on $325
million of Orange County pension obligation bonds to Baa3 from Ba. In February
1998, Fitch assigned outstanding Orange County pension obligation bonds a BBB
rating. The most recent ratings by each of Moody's, S&P and Fitch are AA, A and
AA-, respectively.
Los Angeles County, the nation's largest county, has also experienced
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, and among
other things, severe operating deficits for the county's health care system. In
addition, the county was affected by an ongoing loss of revenue caused by state
property tax shift initiatives in 1993 through 1995. In April 1998, the Los
Angeles County Chief Administrative Officer proposed an approximately $13.2
billion 1998-1999 budget, which would be 5.4% larger than the 1997-1998 budget,
reserving the right to make further changes to reflect revenue allocation
decisions in the final State budget. In December 1998, Moody's raised the
ratings on the County's general obligation bonds to A1 from A2. The City of Los
Angeles is the largest city in the county and its general obligation bonds are
rated AA by S&P and Aa2 by Moody's. The most recent rating by Moody's is A1.
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
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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.
DIRECTORS AND OFFICERS
The Fund is governed by a Board of Directors which is responsible for
protecting the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee the Fund's activities, review the
performance and to review the actions of the Advisor.
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The directors and officers of the Fund, and their principal occupations
during the past five years, are set forth below. The Director who is an
"interested person," as defined in the Act, is denoted by an asterisk. The
address of the interested Director and all officers of the Fund is 1345 Avenue
of the Americas, New York, New York 10105-4800. As of March 14, 2000, 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.
Joseph M. La Motta, Chairman of the Board of Directors and President*
Age: 66
Chairman Emeritus of Oppenheimer Capital, registered investment adviser since
1997; Chairman of the Board and President of OCC Accumulation Trust, an open-end
investment company.
V. Lee Barnes, Director
185 Clapboard Ridge Road
Greenwich, Connecticut 06831
Age: 64
President and Chief Executive Officer of Net Learning Inc. since January 1999;
Director of Davis International Banking Consultants since July 1993; previously
a consultant and acting Executive Vice President of Smyth, Sanford & Gerard
L.L.C., an insurance underwriting agency; Trustee of OCC Accumulation Trust
since January 2000.
Paul Y. Clinton, Director
39 Blossom Avenue
Osterville, MA 02655
Age: 68
Principal of Clinton Management Associates, a financial and venture capital
consulting firm; former Director, External Affairs, Kravco Corporation, a
national real estate owner and property management corporation; Trustee of
Capital Cash Management Trust, a money market fund and Director of Narragansett
Tax-Free Fund, a tax-exempt bond fund; Director of Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Global Value Fund, Inc., Oppenheimer Quest Capital Value
Fund, Inc., Rochester Fund Municipals, Rochester Portfolio Series Limited Term
New York Municipals and Bond Fund Series, Oppenheimer Convertible Securities
Fund, Oppenheimer Mid Cap Fund, Trustee of OCC Accumulation Trust and
Oppenheimer Quest for Value Funds, each of which is an open-end investment
company.
Thomas W. Courtney, C.F.A., Director
833 Wyndemere Way
Naples, Florida 34105
Age: 65
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
Capital Value Fund, Inc., Oppenheimer Quest Global Value Fund, Inc., Rochester
Fund Municipals, Rochester Portfolio Series Limited Term
35
<PAGE>
New York Municipals and Bond Fund Series, Oppenheimer Mid Cap Fund, Oppenheimer
Convertible Securities Fund, Trustee of Oppenheimer Quest for Value Funds and
OCC 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
Age: 69
President and Chairman of the Board of Aquila Management Corporation (since
1984), the sponsoring organization and administrator and/or advisor or
sub-advisor to the following open-end investment companies, and Chairman of the
Board of Trustees and President of each: Churchill Cash Reserves Trust (since
1985), Pacific Capital U.S. Treasuries Cash Assets Trust (since 1988), Pacific
Capital Tax-Free Cash Assets Trust (since 1988), and Prime Cash Fund (from 1982
to 1996), each of which is a money market fund, and of Churchill Tax-Free Fund
of Kentucky (since 1986), Tax-Free Fund of Colorado (since 1986), Tax-Free Trust
of Oregon (since 1985), Tax-Free Trust of Arizona (since 1985), Tax-Free Fund
for Utah (since 1992), Narragansett Insured Tax Free Income Fund (since 1992),
and Hawaiian Tax-Free Trust (since 1984), each of which is a tax-free municipal
bond fund; Vice President, Director, Secretary, and formerly Treasurer of Aquila
Distributors, Inc. (since 1981), distributor of each of the above funds;
President and Chairman of the Board of Trustees of Capital Cash Management Trust
(CCMT), a money market fund (since 1981) and an Officer and Trustee/Director of
its predecessors (since 1974); President and Director of STCM Management
Company, Inc., sponsor and Sub-Advisor to CCMT; Director of Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest Capital 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 Convertible
Securities Fund, Oppenheimer Mid Cap Fund, Trustee of Oppenheimer Quest for
Value Funds, and OCC Accumulation Trust, each of which is an open-end investment
company; Trustee Emeritus of Brown University since 1996; Trustee of the Hopkins
School since 1993.
Theodore T. Mason, Director
26 Circle Drive
Hastings-On-Hudson, New York 10706
Age: 64
Executive Director of Louisiana Power Partners, LLC since 1999 and of East Wind
Power Partners since 1994; Second Vice President of the Alumni Association of
SUNY Maritime College since 1998 and Director for the same organization since
1997; Director of Cogeneration Development of Willamette Industries, Inc., a
forest products company, 1991-1993; Vice Chairman of the Board of Trustees of
CCMT since 1981; Vice Chairman of the Board of Trustees and Trustee of Prime
Cash Fund (which is inactive) since 1982; Trustee of Short Term Asset Reserves,
1984-1986 and 1988-1996, of
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<PAGE>
Hawaiian Tax-Free Trust and Pacific Capital Cash Assets Trust since 1984, of
Churchill Cash Reserves Trust since 1985, of Pacific Capital Tax-Free Cash
Assets Trust and Pacific Capital U.S. Government Securities Cash Assets Trust
since 1988 and of Churchill Tax-Free Fund of Kentucky since 1992; Trustee of OCC
Accumulation Trust since January 2000.
William McDaniel, Vice President
Age: 54
Managing Director of Oppenheimer Capital since 1995; Senior Vice President of
Oppenheimer Capital 1988-1995.
Maria Camacho, Assistant Secretary
Age: 45
Vice President of Oppenheimer Capital since 1997; Assistant Vice President from
1994 to 1997 and Registrations Department Administrator with Oppenheimer Capital
since 1989.
John L. Giusio, Jr., Vice President
Age: 56
Vice President, Oppenheimer Capital since 1992; Vice President of OCC
Accumulation Trust, an open-end investment company; previously Vice President,
Salomon Brothers.
Matthew Greenwald, Vice President & Portfolio Manager
Age: 45
Senior Vice President, Oppenheimer Capital since 1997; Vice President from 1992
to 1997 and Assistant Vice President from 1989-1992; Executive Vice President of
Municipal Advantage Fund Inc., a closed-end investment company.
Benjamin Gutstein, Vice President & Portfolio Manager
Age: 31
Assistant Vice President, Oppenheimer Capital since 1996; joined Oppenheimer
Capital in 1993; previously, associate at Lehman Brothers.
Brian S. Shlissel, Treasurer Age: 35 Vice President of PIMCO Advisors since July
1999; Vice President of Mitchell Hutchins Asset Management Inc., from 1993 to
1999; Treasurer of OCC Accumulation Trust, Municipal Advantage Fund, Inc. and
Assistant Treasurer, The Central European Value Fund, Inc. since August 1999;
Treasurer and Secretary Jardine Fleming India Fund from 1997 to 1999; Assistant
Treasurer Paine Webber PACE Select Advisers Trust from 1998 to 1999.
Elliot M. Weiss, Secretary
Age: 38
Vice President of OpCap Advisors since March 1996; Vice President of Oppenheimer
Capital from 1995 to 1996; Assistant Vice President of Oppenheimer Capital from
1991 to 1995; Secretary of the OCC Accumulation Trust and Municipal Advantage
Fund Inc., and Assistant Secretary of The Central European Value Fund, Inc.
since 1999.
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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, 1999 and the
aggregate compensation paid to each of the Directors by all of the funds in the
Advisor's Fund Complex during the 1999 calendar year.
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Total Compensation
Name of Director of the Compensation from Benefits Accrued as from the Fund and
Fund the Fund(2) Part of Fund Expenses(2)* the Fund Complex(3)**
- ------------------------ ----------------- ----------------------- -------------------
<S> <C> <C> <C>
V. Lee Barnes(1) 0 0 0
Paul Clinton $ 33,037 $ 24,524 $ 200,812
Thomas Courtney 33,037 24,524 176,230
Lacy Herrmann 32,537 24,524 214,284
Joseph La Motta 0 0 0
Theodore Mason(1) 0 0 0
- --------------
</TABLE>
(1.)Messrs. Barnes and Mason were not Directors of the Fund during the 1999
calendar year.
(2.)For the Fund's fiscal year ended November 30, 1999.
(3.)For the 1999 calendar year.
*Under the retirement plan adopted by the Board in 1998, a retired Director may
receive up to 80% of his or her average compensation paid during that Director's
five years of service in which the highest compensation was paid. A Director
must serve in that capacity for the Fund or OCC Accumulation Trust for at least
15 years to be eligible for the maximum payment.
**Total compensation includes fees paid by the Oppenheimer Quest Funds for which
OpCap Advisors acts as subadvisor. The Oppenheimer Quest Funds are not
affiliated with OpCap Advisors. The amount of total compensation in fees paid to
the independent Directors by the Oppenheimer Quest Funds during the 1999
calendar year was as follows: Mr. Clinton: $135,337; Mr. Courtney: $110,755; and
Mr. Herrmann: $149,709.
For the purpose of the chart above, "Fund Complex" includes the Fund, other
funds advised by the Advisor and the Oppenheimer Quest Funds for which the
Advisor serves as subadvisor.
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<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of March 14, 2000, 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
- -------------------------- ------------------------------- --------------
CIBC Oppenheimer Primary Portfolio 98.33%
Omnibus Account
For the benefit of clients
Oppenheimer Tower
World Financial Center
New York, NY 10281
CIBC Oppenheimer Government Portfolio 87.16%
Omnibus Account
For the benefit of clients
World Financial Center
New York, NY 10281
CIBC Oppenheimer General Municipal Portfolio 93.79%
Omnibus Account
For the benefit of clients
World Financial Center
New York, NY 10281
CIBC Oppenheimer New York Municipal Portfolio 83.98%
Omnibus Account
For the benefit of clients
World Financial Center
New York, NY 10281
CIBC Oppenheimer California Municipal Portfolio 99.84%
Omnibus Account
For the benefit of clients
Oppenheimer Tower
World Financial Center
New York, NY 10281
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Investment Advisor. OpCap Advisors, the investment adviser to the Fund, is a
majority owned subsidiary of Oppenheimer Capital, a registered investment
adviser whose employees perform all investment advisory and management services
provided to the Fund by the Advisor. Oppenheimer Capital is an indirect wholly
owned subsidiary of PIMCO Advisors L.P. ("PIMCO Advisors"), a registered
investment adviser. The general partners of PIMCO Advisors are PIMCO Partners
G.P. and PIMCO Advisors Holdings L.P. ("PAH"). PIMCO Partners G.P. is a general
partnership between PIMCO Holding LLC, a Delaware limited liability company and
an indirect wholly-owned subsidiary of Pacific Life Insurance
39
<PAGE>
Company, and PIMCO Partners LLC, a California limited liability company
controlled by the current Managing Directors and two former Managing Directors
of Pacific Investment Management. PIMCO Partners, G.P. is the sole general
partner of PIMCO Advisors Holdings L.P.
On October 31, 1999, PIMCO Advisors, PAH and Allianz AG ("Allianz")
announced that they had reached a definitive agreement pursuant to which Allianz
will acquire majority ownership of PIMCO Advisors and its subsidiaries,
including OpCap Advisors (the "Allianz Transaction"). Under the terms of the
transaction, Allianz will acquire all of PAH, the publicly traded general
partner of PIMCO Advisors. Pacific Life Insurance Company will retain an
approximately 30% interest in PIMCO Advisors. The Allianz Transaction is
currently expected to be completed on or about May 5, 2000.
Allianz is the world's second largest insurance company and a leading
provider of financial services, particularly in Europe, and is represented in 68
countries world-wide through subsidiaries, branch and representative offices,
and other affiliated entities. Allianz currently has assets under management of
more than $390 billion, and in its last fiscal year wrote approximately $50
billion in gross insurance premiums. After consummation of the transaction, the
combined firms will have over $650 billion in assets under management.
Affiliates of Allianz currently include Dresdner Bank AG, Deutsche Bank
AG, Munich Re, and Hypo Vereinsbank. These entities, as well as certain
broker-dealers controlled by or affiliated with these entities, such as Bankers
Trust Company and BT Alex Brown, Inc. are considered the "Affiliated Brokers".
Once the Allianz transaction is consummated, absent an SEC exemption or other
relief, the Fund's Portfolios would generally be precluded from effecting
principal transactions with the Affiliated Brokers, and each Portfolio's ability
to purchase securities being underwritten by an Affiliated Broker or to utilize
the Affiliated Brokers for agency transactions would be subject to restrictions.
OpCap Advisors does not believe that the restrictions on transactions with the
Affiliated Brokers described above will materially adversely affect its ability,
post-closing, to provide services to the Fund, the ability of the Portfolios to
take advantage of market opportunities, or the overall performance of the
Portfolios.
The consummation of the Allianz Transaction is subject to the approval
of the public unitholders of PAH, as well as to certain regulatory and client
approvals, and other conditions customary to transactions of this kind.
This Statement of Additional Information will be supplemented or
revised if the Allianz Transaction does not occur substantially as set forth
above.
The Advisory Agreement. OpCap Advisors provides investment advisory and
management services to the Fund pursuant to an Advisory Agreement dated November
5, 1997.
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
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<PAGE>
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 former affiliate
CIBC Oppenheimer Corp. ("CIBC Oppenheimer") 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 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 CIBC Oppenheimer
are capped at 2 basis points of average daily net assets of CIBC Oppenheimer's
customers. The following amounts were paid or accrued to CIBC Oppenheimer as
reimbursement for shareholder services: for the fiscal year ended November 30,
1999 -- $477,012, $18,299, $27,648, $12,841 and $13,462, respectively; for the
fiscal year ended November 30, 1998 -- $439,219, $17,330, $31,265, $12,843 and
$12,503, respectively; and for the fiscal year ended November 30, 1997 --
$372,639, $18,205, $25,734, $11,463 and $11,004, 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 former
affiliate CIBC Oppenheimer, 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, and providing shareholder information to enable the Fund to
mail prospectuses, annual and semi-annual reports to beneficial owners. Such
payments are limited to 5 basis points of average daily net assets of each
broker-dealer's customers. CIBC Oppenheimer also is paid a fee of $9.25 per
shareholder account for performing recordkeeping.
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<PAGE>
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.
The Fund's advisory fee is at the 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. 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% (net of any expense offsets) of that Portfolio's
average annual net assets. For the fiscal year ended November 30, 1999, the
total advisory fee paid by the Primary Portfolio was $9,867,390 and the total
advisory fees accrued or paid by the Government, General Municipal, California
Municipal and New York Municipal Portfolios were $478,975, $653,803, $335,555
and $344,235. For the fiscal year ended November 30, 1998, the total advisory
fee paid by the Primary Portfolio was $9,186,601; the total advisory fee accrued
or paid by the Government Portfolio was $471,925, of which $1,581 was waived by
the Advisor; the total advisory fee paid by the General Municipal Portfolio was
$777,022; the total advisory fee paid by the California Municipal Portfolio was
$321,580 and the total advisory fee paid by the New York Municipal Portfolio was
$381,464. For the fiscal year ended November 30, 1997, the total advisory fee
paid by the Primary Portfolio was $7,907,076 and the total fees accrued or paid
by the Government, General Municipal, California Municipal and New York
Municipal Portfolios were $493,349, $656,681, $287,248 and $323,434,
respectively, of which $7,876, $2,257, $31,822 and $954, respectively was waived
by the Advisor.
The Distribution Assistance Plan. The Fund has a Distribution Assistance and
Administrative Services Plan (the "Plan") with the Advisor. 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 is .25% of the average daily value of each
Portfolio's net assets. 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, 1999, the total fees accrued or paid by the
Primary, Government, General Municipal, California Municipal and New York
Municipal Portfolios under the Plan were $6,042,119, $239,980, $335,446,
$167,778 and $172,391, respectively. Although the Plan compensates the Advisor
regardless of its expense, the Advisor has spent more on distribution expenses
for the Fund that it has received in distribution fees during each fiscal year
that the Fund has been in operation.
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<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, 1999:
<TABLE>
<CAPTION>
General California New York
Primary Government Municipal Municipal Municipal
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Sales Material and Advertising -0- -0- -0- -0- -0-
Printing and Mailing of Prospectuses
to Other than Current Shareholders -0- -0- -0- -0- -0-
Compensation to Dealers $9,569,736 $383,202 $524,891 $287,006 $297,290
Compensation to Sales Personnel -0- -0- -0- -0- -0-
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.
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 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
43
<PAGE>
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 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
amortizating to maturity 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
deviation of the current net asset value per share based on available market
quotations from a Portfolio's amortized cost price per share reaches 1/2 of 1%,
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 deviation of the current net asset
value per share based on available market quotations from a Portfolio's
amortized cost price per share reaches .003. 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 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
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<PAGE>
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 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 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, Martin Luther King 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.
CAPITAL STOCK
The Fund has authority to issue shares of capital stock classified as
"Common Stock." The shares of common stock are classified into five separate
series. The shares of each series are freely transferable and equal as to
earnings, assets and voting privileges with all other shares of that series.
There are no conversion preemptive or other subscription rights. Upon
liquidation of the Fund or any series, shareholders of a series are entitled to
share pro rata in the net assets of that series available for distribution to
shareholders after all debts and expenses have been paid. The shares do not have
cumulative voting rights.
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. In addition,
provided that a Portfolio distributes to its shareholders in each calendar year
a sufficient amount of ordinary income and capital gains, the Portfolio will
avoid the imposition of a 4% excise tax.
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<PAGE>
Shareholders normally will be liable for federal income taxes, and any
applicable state and/or local income taxes, on distributions of taxable net
investment income and net realized capital gains. Any net short-term and
long-term capital gains realized by a Portfolio will be distributed annually as
described in the Prospectus. Distributions of taxable net investment income and
short-term capital gains are taxable as ordinary income, regardless of whether
the shareholder receives such distributions in additional shares or in cash.
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 regardless of whether the distribution is received in
additional shares or in cash, 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, 1999, accumulated net realized capital loss available
as a reduction against future net realized capital gains were: General--$44,985
of which $8,627 will expire in 2000, $299 will expire in 2001, $33,497 will
expire in 2003, $1,853 will expire in 2005 and $709 will expire in 2006;
California--$30,717 of which $5,856 will expire in 2000, $1,137 will expire in
2001, $13,827 will expire in 2003, $9,304 will expire in 2004 and $593 will
expire in 2005; California had $725 in capital loss carryforwards expire on
November 30, 1999; New York--$24,595 of which $3,198 will expire in 2000, $934
will expire in 2001, $19,669 will expire in 2003 and $794 will expire in 2005.
To the extent that these capital loss carryforwards are used to offset future
net realized capital gains, the gains offset will not be distributed to
shareholders. Primary, General and California utilized $656, $6,476 and $5,
respectively, of capital loss carryforwards during the year ended November 30,
1999.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by a Portfolio of any taxable net investment income and net
realized short-term capital gains.
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.
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<PAGE>
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.
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 calendar 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
47
<PAGE>
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.
PERFORMANCE DATA
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.
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<PAGE>
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. Instead, the dividends used in the
yield calculation will be those which would have been declared if the 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:
49
<PAGE>
365/7
EFFECTIVE YIELD = [(Base Period Return + 1) ]-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.
Yield for Seven Day Period
Portfolio Yield for seven-day period ended 11/30/99
- --------- -----------------------------------------
Current Effective
Primary 4.80% 4.91%
Government 4.50% 4.60%
General Municipal 2.77% 2.81%
California Municipal 2.45% 2.48%
New York Municipal 2.65% 2.69%
Tax Equivalent Yield -- 30 day period
FOR THE 30-DAY PERIOD ENDED NOVEMBER 30, 1999
Portfolio At Federal Income Tax Rate of 39.6%*
- --------- ------------------------------------
General Municipal 4.40%
California Municipal 3.96%
New York Municipal 4.17%
* 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, 1999, approximately
23.63%, 7.99%, and 11.66%, respectively, of distributions of the
General, California and New York Municipal Portfolios were tax
preference items; for the calendar year ended December 31, 1999,
approximately 24.76%, 6.72% and 11.01%, 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 Portfolios 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
9.3%. The tax equivalent yield for the New York Municipal Portfolio is
based on an assumed New York state tax rate of 6.85%; if a shareholder
was a New York City resident, the tax-equivalent yield would have been
4.67%, based on an assumed New York City tax rate of 3.8276%.
50
<PAGE>
ADDITIONAL INFORMATION
Description of the Fund. The Fund was formed under the laws of Maryland on April
27, 1989 under the name Quest Cash Reserves, Inc. The name of the Fund was
changed to OCC Cash Reserves, Inc. on January 31, 1996. 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. PricewaterhouseCoopers LLP, 1177 Avenue of the
Americas, New York, NY 10036, serves as the independent accountants of the Fund
and of each Portfolio; their services include auditing the annual financial
statements of each Portfolio as well as other related services.
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,
225 Franklin Street, Boston, MA 02110.
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.
51
<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 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.
A-3
<PAGE>
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 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:
A-4
<PAGE>
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>
Financial Statements
16887503 03/29/00 1:16E 99566085 B-19
November 30, 1999
Schedules of Investments
Primary Portfolio
Principal
Amount
(000) Value
U.S. Government Agencies--5.9%
$38,000 Federal Home Loan Bank,
5.00%, 2/11/00.............. $ 38,000,000
29,713 Federal Home Loan Mortgage
Corporation, 5.45%, 12/10/99 29,672,516
78,000 Student Loan
Marketing Association,
5.05%-5.16%, 1/19/00-3/8/00. 78,000,000
----------
Total U.S. Government Agencies
(amortized cost--$145,672,516)............... 145,672,516
-----------
Bank Notes--1.6%
40,000 Wachovia Bank, NC,
4.99%-5.38%, 12/28/99-2/7/00
(amortized cost--$39,695,417)................ 39,695,417
----------
Certificates of Deposit--15.8%
95,000 Bank of Nova Scotia,
5.40%-6.06%, 12/6/99-1/24/00 95,000,000
60,000 Canadian Imperial Bank of
Commerce, 5.39%-5.40%,
12/20/99-12/27/99........... 60,000,000
85,000 National Westminister Bank plc,
5.29%-5.37%, 12/13/99-12/27/99 85,000,000
95,000 Rabobank Nederland NV,
4.92%-5.36%, 12/14/99-2/7/00 95,000,767
55,000 Societe Generale 5.45%-6.00%,
12/29/99-3/1/00............. 55,000,000
----------
Total Certificates of Deposit
(amortized cost--$390,000,767)............... 390,000,767
-----------
Commercial Paper--71.5%
50,000 Abbey National North America,
5.77%, 2/7/00............... 49,455,056
30,000 ABN-Amro North America Finance Inc.,
5.41%, 12/20/99............. 30,000,000
52,415 American Express Credit Corp.,
5.23%-5.98%, 12/16/99-1/24/00 52,062,849
50,000 BankAmerica Corp.,
5.80%-5.98%, 1/5/00-2/3/00.. 49,618,211
74,700 British Columbia (Province of),
5.64%-5.70%, 2/22/00-5/15/00 73,266,326
Principal
Amount
(000) Value
$50,000 Canadian Wheat Board
5.67%, 2/4/00............... $49,488,125
83,050 Daimler-Chrysler North America
Holding Corp., 5.73%-5.92%,
2/14/00-2/28/00............. 81,932,598
10,000 Deere (John) Capital Corp.,
5.29%, 12/13/99............. 9,982,367
35,000 Diageo Capital plc,
5.87%, 1/18/00.............. 34,726,067
60,000 Dover Corp.,
5.32%-5.53%, 12/9/99-12/16/99 59,895,408
25,000 Exxon Asset Management Co.,
5.80%, 1/27/00.............. 24,770,417
67,000 Ford Motor Credit Co.,
5.24%-5.83%, 12/15/99-2/2/00 66,548,547
32,000 General Electric Capital Corp.,
5.31%, 12/8/99.............. 31,966,960
50,000 General Electric Capital Services Inc.,
5.15%, 12/6/99.............. 49,964,236
50,000 General Motors Acceptance Corp.,
5.75%, 2/14/00.............. 49,401,042
32,200 Glaxo Wellcome plc,
5.85%, 3/2/00............... 31,718,610
50,000 Goldman Sachs Group L.P.,
5.98%, 2/3/00............... 49,468,444
95,000 Halifax plc,
5.20%-5.82%, 12/1/99-3/30/00 94,425,750
45,000 IBM Corp.,
5.25%-5.79%, 12/15/99-1/14/00 44,782,250
86,000 Merrill Lynch & Co. Inc.,
5.30%-5.92%, 12/3/99-2/15/00 85,302,844
70,000 Morgan Stanley Dean Witter & Co.,
5.95%-6.04%, 1/6/00-1/13/00. 69,548,400
75,000 Norwest Financial Inc.,
5.45%-5.75%, 12/6/99-2/28/00 74,539,480
85,000 Oesterreichische Kontrollbank AG,
5.62%-5.92%, 1/18/00-4/25/00 83,852,766
50,000 Prudential Funding Corp.,
5.83%, 1/10/00.............. 49,676,111
60,000 Rio Tinto America Inc.,
5.80%-5.82%, 2/16/00-2/28/00 59,196,383
60,000 Royal Bank of Canada,
5.30%-5.39%, 12/29/99-5/4/00 59,889,533
50,000 Svenska Handelsbanken Inc.,
5.33%, 12/21/99............. 49,851,944
50,000 Swedish Export Credit Corp.,
5.25%-5.28%, 1/18/00-1/31/00 49,601,333
80,000 Toronto-Dominion Holdings USA Inc.,
5.29%-5.32%, 12/2/99-12/14/99 79,935,310
30,000 TransAmerica Financial Corp.,
5.34%, 12/7/99.............. 29,973,300
B-1
<PAGE>
Principal
Amount
(000) Value
Commercial Paper (cont'd.)
$90,000 UBS Finance Delaware Inc.,
5.69%, 12/1/99.............. $ 90,000,000
45,000 Wachovia Bank
5.35%, 12/21/99-12/30/99.... 45,000,000
----------
Total Commercial Paper
(amortized cost--$1,759,840,667)............. 1,759,840,667
-------------
Total Investments
(amortized cost--$2,335,209,367+)....94.8% 2,335,209,367
Other assets less liabilities....... 5.2 128,092,791
--- -----------
Net Assets .................... 100.0% $2,463,302,158
====== ==============
Government Portfolio
U.S. Government Agencies--99.6%
Federal Home Loan Bank--19.1%
$2,000 5.00%, 2/11/00.............. $ 2,000,000
1,500 5.18%, 12/23/99.............. 1,495,252
1,386 5.40%, 12/22/99.............. 1,381,634
2,000 5.47%, 2/9/00.............. 1,978,728
3,500 5.53%, 2/4/00.............. 3,465,053
1,500 5.53%, 3/8/00.............. 1,477,419
3,350 5.57%, 12/1/99.............. 3,350,000
1,000 5.61%, 4/26/00.............. 977,093
----------
Total Federal Home Loan Bank
(amortized cost--$16,125,179)................ 16,125,179
----------
Federal Home Loan Mortgage Corporation--32.7%
1,000 5.04%, 12/8/99.............. 999,020
129 5.10%, 12/10/99 .............. 128,836
5,170 5.14%, 12/20/99-12/30/99...... 5,155,019
6,000 5.17%, 12/31/99 .............. 5,974,150
2,000 5.21%, 1/24/00.............. 1,984,370
2,000 5.23%, 1/25/00.............. 1,984,020
3,000 5.26%, 12/15/99 .............. 2,993,863
2,500 5.40%, 12/29/99 .............. 2,489,500
1,405 5.43%, 12/29/99 .............. 1,399,066
1,200 5.48%, 12/14/99 .............. 1,197,625
3,000 5.56%, 3/2/00.............. 2,957,373
189 5.62%, 1/25/00.............. 187,377
---------
Total Federal Home Loan Mortgage Corporation
(amortized cost--$27,450,219)................ 27,450,219
----------
Principal
Amount
(000) Value
Federal National Mortgage Association--45.4%
$5,000 5.24%, 12/13/99 .............. $ 4,991,267
160 5.26%, 12/7/99 .............. 159,860
7,883 5.28%, 12/2/99-12/17/99....... 7,874,967
3,500 5.29%, 12/9/99 .............. 3,495,886
3,000 5.30%, 12/2/99 .............. 2,999,558
3,000 5.47%, 3/6/00 .............. 2,956,240
4,000 5.48%, 4/10/00-4/24/00 ....... 3,915,973
2,735 5.52%, 5/11/00 .............. 2,667,062
2,000 5.53%, 2/17/00 .............. 1,976,037
1,500 5.59%, 1/20/00 .............. 1,488,354
1,700 5.60%, 1/20/00 .............. 1,686,778
4,000 5.64%, 5/18/00 .............. 3,894,093
---------
Total Federal National Mortgage Association
(amortized cost--$38,106,075)................ 38,106,075
----------
Student Loan Marketing Association--2.4%
2,000 5.05%, 1/19/00
(amortized cost--$2,000,000)................. 2,000,000
---------
Total Investments
(amortized cost--$83,681,473+).......... 99.6% 83,681,473
Other assets less liabilities.......... 0.4 341,570
--- -----------
Net Assets ....................... 100.0% $84,023,043
===== ===========
General Municipal Portfolio
Alabama--1.8%
$2,150 Phenix City Environ. Improv.
Rev., Mead Proj., Ser. A, VRDN*
3.80%, 6/1/28............... $ 2,150,000
-----------
Alaska--3.4%
1,105 Anchorage Water Rev.
4.50%, 9/1/00............... 1,109,794
3,000 Valdez Marine Term. Rev.,
Arco Trans. Proj.,
3.60%, 12/1/99.............. 3,000,000
----------
............................ 4,109,794
---------
B-2
<PAGE>
November 30, 1999
Schedules of Investments (continued)
General Municipal Portfolio (cont'd.)
Principal
Amount
(000) Value
Arizona--1.7%
$1,000 Arizona Edl. Ln. Mktg. Corp.,
ELR, Ser. A, VRDN*
(LC; Dresdner Bank AG),
4.00%, 12/1/20.............. $1,000,000
1,000 Maricopa Cnty PCR., VRDN*
3.75%, 5/1/29............... 1,000,000
---------
............................ 2,000,000
---------
Colorado--2.7%
3,300 Denver City & Cnty.,
Colorado Airport Sys.,
(LC; Bayerische Landesbank
Girozentrale),
3.70%, 2/7/00............... 3,300,000
---------
Delaware--3.4%
400 Delaware Cnty. IDA,
Parcel Services,VRDN*
3.60%, 12/1/15 ............. 400,000
1,000 Delaware St. EDA Rev.,
Ser. A, VRDN*
3.85%, 10/1/17.............. 1,000,000
1,300 Delaware St. EDAR,
Delmarva Light & Power Co.
Proj., VRDN*
3.85%, 10/1/17.............. 1,300,000
1,400 Delaware St. EDAR,
Gas Power Proj., VRDN*
3.85%, 10/1/29.............. 1,400,000
---------
............................ 4,100,000
---------
Florida--1.7%
1,000 Jacksonville EAR Ser. 16,
4.00%, 10/1/00.............. 1,002,425
1,000 Sarasota Water & Sewer Util.
Rev., Ser. H-1, VRDN*
3.75%, 10/1/00.............. 1,016,178
----------
............................ 2,018,603
---------
Principal
Amount
(000) Value
Georgia--3.2%
$1,780 Gwinnett Cnty Sch Dist.,
Ser. A, 5.10%, 2/1/00....... $1,785,490
2,000 Georgia Muni. Elec. Auth.,
Ser. A, (LC; Morgan Guaranty Trust),
3.60%, 12/2/99.............. 2,000,000
---------
............................ 3,785,490
---------
Hawaii--0.8%
1,000 Hawaii St. Secondary Mkt. Svcs.
Corp., SLR, Ser. III, VRDN*
(LC; National Westminster
Bank plc), 3.95%, 9/1/10.... 1,000,000
---------
Iowa--1.7%
2,000 Iowa St. Sch. Cash Antic.
Prog., 4.00%, 6/23/00....... 2,008,346
---------
Indiana--1.7%
1,000 Indiana Univ.,
4.35%, 8/1/00............... 1,003,218
1,000 Indianapolis PIB,
Ser. A,
4.00%, 1/10/00.............. 1,000,806
---------
............................ 2,004,024
---------
Kentucky--7.3%
200 Boone Cnty. PCR,
Cincinnati Elec. & Gas Co. Proj.,
Ser. A, VRDN*
(LC; Union Bank of Switzerland),
3.80%, 8/1/13............... 200,000
5,000 Jefferson Cnty,
1996 Ser. A.
3.65%, 3/6/00............... 5,000,000
2,000 Kentucky HEL, Student Loan Corp.,
SLR, Ser. E, VRDN*
(Insd.; AMBAC),
3.90%, 12/1/11.............. 2,000,000
1,600 Louisville & Jefferson Cnty,
Worldwide Ser. A, VRDN*
3.75%, 1/1/29............... 1,600,000
---------
............................ 8,800,000
---------
B-3
<PAGE>
Principal
Amount
(000) Value
Maryland--2.5%
$3,000 Anne Arundel Cnty. EDR,
Ser. B,
3.90%, 1/24/00.............. $3,000,000
----------
Massachusetts--0.8%
1,000 Brookline GO,
4.90%, 9/1/00............... 1,009,282
---------
Michigan--1.2%
1,400 Michigan St. Strategic,
Dow Chem. Co. Proj., VRDN*
3.65%, 2/1/09............... 1,400,000
---------
Missouri--1.0%
1,190 Missouri St. GO,
Fourth State, Ser. A,
6.25%, 6/1/00............... 1,205,191
---------
Nebraska--3.1%
Nebraska HEL Prog.,
Student Loan, (LC; SLMA),
2,100 Ser. A, VRDN*
4.05%, 12/1/16.............. 2,100,000
1,600 Ser. C, VRDN*
4.05%, 8/1/18............... 1,600,000
---------
............................ 3,700,000
---------
New Jersey--1.5%
1,750 Somerset Cnty.,
5.10%, 9/15/00.............. 1,768,803
New York--8.2%
2,000 New York City GO,
Ser. 5B, (Insd.; MBIA),
3.50%, 12/6/99.............. 2,000,000
1,300 New York St. JDA,
Ser. A1-A13, VRDN*
3.80%, 7/1/02............... 1,300,000
Principal
Amount
(000) Value
$2,295 New York St. JDA,
Ser. A1-A42, VRDN*
3.80%, 3/1/05............... $2,295,000
1,500 New York St. JDA,
Ser. B1-B21, VRDN*
3.80%, 3/1/02-3/5/02........ 1,500,000
2,800 Triborough Bridge & Tunnel
Auth. Rev., Ser. A,
5.00%, 1/1/00............... 2,804,800
---------
............................ 9,899,800
---------
Oregon--4.2%
5,000 Port of Portland Special
Oblig. Rev.,
Horizon Air Industries Proj.
VRDN* (LC; Bank of Montreal),
3.80%, 6/15/27.............. 5,000,000
---------
Pennsylvania--1.7%
2,000 Pennsylvania St. HEA, SLR,
Ser. A, VRDN*
(LC; SLMA),
3.95%, 12/1/24.............. 2,000,000
---------
South Carolina--3.8%
500 Berkeley Cnty. Exempt, IFR
Amoco Chem. Co. Proj., VRDN*
3.85%, 4/1/28............... 500,000
4,070 South Carolina Jobs EDA,
St. Francis Hospital Proj., VRDN*
3.85%, 7/1/22............... 4,070,000
---------
............................ 4,570,000
---------
Tennessee--1.9%
2,300 Hamilton Cnty. IDR,
Seaboard Feeds Inc. Proj., VRDN*
(LC; Bank of New York),
4.00%, 12/1/17.............. 2,300,000
---------
B-4
<PAGE>
November 30, 1999
Schedules of Investments (continued)
General Municipal Portfolio (cont'd.)
Principal
Amount
(000) Value
Texas--22.8%
$2,000 Austin Util. Sys.,
3.85%, 2/16/00.............. $2,000,000
1,000 Brazos HEA, Ser. B-1,
VRDN* (CS; SLMA),
3.85%, 6/1/23............... 1,000,000
5,000 City of Fort Worth GO,
3.45%, 1/18/00.............. 5,000,000
1,500 Fort Worth Water & Sewer,
4.00%, 2/15/00.............. 1,501,718
1,800 Dallas Area Rapid Transit,
STR, Ser. B
(LC; Westdeutsche Landesbank),
3.20%, 1/18/00.............. 1,800,000
2,000 El Paso Water & Sewer,
Ser. A, (LC; Bank of America),
3.55%, 2/2/00............... 2,000,000
3,400 Grapevine IDR,
Multiple Mode, American Airlines
Proj., Ser. B1, VRDN*
(LC; Morgan Guaranty Trust),
3.70%, 12/1/24.............. 3,400,000
1,000 Gulf Coast WDA, Env.
Facs. Rev., Amoco Oil Co. Proj.,
VRDN* 3.85%, 1/1/26......... 1,000,000
800 Gulf Coast WDA, PCR,
Amoco Oil Co. Proj., VRDN*
3.60%, 10/1/17.............. 800,000
1,800 Harris Cnty., PCR, VRDN*
3.70%, 8/15/27.............. 1,800,000
500 Port Arthur Navigation Dist.,
Texaco Inc. Proj., VRDN*
3.75%, 10/1/24.............. 500,000
480 Texas HEA, Ser. B, VRDN*
(Insd.; FGIC),
3.85%, 12/1/25.............. 480,000
5,000 Texas St., GO, Ser. A,
4.50%, 12/31/00............. 5,028,789
1,000 Univ. of Texas,
Sys. Rev., Ser. A,
3.20%, 2/1/00............... 1,000,000
---------
............................ 27,310,507
----------
Principal
Amount
(000) Value
Utah--1.7%
$2,000 Utah St. Brd. Regents SLR,
Ser. L, VRDN*
(Insd.; AMBAC),
3.95%, 11/4/25.............. $ 2,000,000
Washington--5.8%
3,000 King Cnty., Sewer Rev., Ser.A,
3.65%, 12/6/99.............. 3,000,000
2,500 Port Sea. GO,
3.85%, 2/9/00............... 2,500,000
1,500 Seattle City,
Muni. Power & Light Rev.,
3.40%, 2/28/00.............. 1,500,000
............................ 7,000,000
Wisconsin--2.7%
1,500 Kenosha Univ. TRAN,
School Dist. No. 001,
4.15%, 10/6/00 ............ 1,504,893
1,763 Wisconsin St. GO,
3.80%, 2/14/00.............. 1,763,000
............................ 3,267,893
Wyoming--3.0%
700 Kemmerer PCR., VRDN*
3.60%, 11/1/14.............. 700,000
1,200 Lincoln Cnty. PCR, VRDN*
3.60%, 11/1/14.............. 1,200,000
1,700 Sweetwater Cnty. PCR, VRDN*
Idaho Power Co. Proj.,
3.65%, 7/15/26.............. 1,700,000
............................ 3,600,000
Total Investments
(amortized cost--$114,307,733+) 95.3% 114,307,733
Other assets less liabilities 4.7 5,694,723
--- ---------
Net Assets 100.0% $120,002,456
====== ============
B-5
<PAGE>
California Municipal Portfolio
Principal
Amount
(000) Value
California Municipal Bonds & Notes--89.1%
$ 385 Alameda Cnty.,
Var. Cap. Impts. Fing., VRDN*
3.65%, 7/1/23 .............. $ 385,000
1,700 Anaheim Ctfs. Partn.,
1993 Ref. Projs., VRDN*
(Insd.; AMBAC),
3.50%, 8/1/19............... 1,700,000
1,800 California HFFAR,
Var. Insd., Hospital Adventist,
Ser. B, (Insd.; MBIA), VRDN*
3.55%, 9/1/28............... 1,800,000
800 Var. Insd. Sutter Chs.,
Ser. B, (Insd.; MBIA), VRDN*
3.40%, 7/1/12............... 800,000
4,800 California PCFA, PCR,
Pacific Elec. & Gas,
Ser. C, VRDN*
(LC; Bank of America),
3.25%-3.95%, 2/28/08-11/1/2 64,800,000
1,308 California SWDR,
Ser. 1, 3.30%, 12/7/99...... 1,308,000
2,400 California St. EDFAR,
(LC; Bank of America), VRDN*
3.70%, 4/1/08............... 2,400,000
3,000 California St. GO,
3.20%-3.25%, 12/1/99-12/2/ 993,000,000
2,400 California SCD Auth. Rev.
Ctfs. Partn., VRDN* (Insd.; MBIA),
3.55%, 4/1/28............... 2,400,000
1,300 John Muir/Mt. Diablo Health Proj.,
VRDN* (Insd.; AMBAC),
3.55%, 8/15/27.............. 1,300,000
2,000 California SCD Corp. Rev., ID,
4.00%, 6/30/00.............. 2,009,200
600 Chula Vista IDR,
San Diego Elec. & Gas Co.,
Ser. A, VRDN*
3.50%, 3/1/23............... 600,000
700 Chula Vista IDR,
San Diego Elec. & Gas Co.,
Ser. B, VRDN*
4.00%, 12/1/21.............. 700,000
Principal
Amount
(000) Value
$3,000 East Bay Muni Util. Dist.,
3.10%, 12/6/99.............. $3,000,000
2,000 Kern Cnty. TRAN,
4.00%, 6/30/00.............. 2,009,537
2,000 Los Angeles Cnty. TRAN, Ser. A,
4.00%, 6/30/99.............. 2,010,106
3,000 Los Angeles Wastewater Sys.,
3.20%-3.25%, 12/2/99........ 3,000,000
2,000 Los Angeles Cnty. Cap. Assets,
3.40%, 12/6/99.............. 2,000,000
2,000 Metropolitan Water,
Dist. of So. Calif., Ser. B,
3.40%, 12/7/99.............. 2,000,000
1,400 Orange Cnty. Impt. Act 1915,
1915 Adj., VRDN*
(Insd.; FGIC),
3.55%, 9/2/18............... 1,400,000
1,200 Orange Cnty. WD Ctfs. Partn.,
Ser. B, VRDN*
(LC; National Westminster Bank plc),
3.55%, 8/15/15.............. 1,200,000
2,000 San Bernardino Cnty. TRAN,
3.75%, 9/29/00.............. 2,005,911
3,000 San Diego Cty WD,
Ser. 1
3.40%, 12/9/99.............. 3,000,000
2,800 San Diego Regional Transportation,
Ser. A,
3.40%, 12/8/99.............. 2,800,000
1,500 San Diego Unified Port. Dist, Ser. B,
3.50%, 1/24/00.............. 1,500,000
1,100 San Diego Unified School District,
4.25%, 9/29/00.............. 1,107,616
3,000 San Francisco Bay,
(LC; Union Bank of Switzerland),
3.20%, 2/7/00............... 3,000,000
1,000 Santa Barbara Cnty.,
4.25%, 9/29/00.............. 1,006,917
872 Santa Clara Cnty. El Camino
Dist. Hosp. FAR,
Lease--VY Med. Ctr. Proj.,
Ser. A, VRDN*
(LC; Bayerische Vereinsbank AG),
3.65%, 8/1/15............... 872,000
1,000 So. Calif. Edison Co.,
3.60%, 2/2/00............... 1,000,000
B-6
<PAGE>
November 30, 1999
Schedules of Investments (continued)
California Municipal Portfolio (cont'd.)
Principal
Amount
(000) Value
California Municipal Bonds & Notes (cont'd.)
$1,100 So. Calif. Pub. Power
Auth. Rev., Transmission Proj.,
VRDN* (LC; Barclays Bank plc),
3.50%, 7/1/19............... $ 1,100,000
2,000 University of California,
Board of Regents, Ser. A,
3.35%, 12/8/99.............. 2,000,000
-----------
Total California Municipal Bonds & Notes
(amortized cost--$59,214,287)................ 59,214,287
-----------
Tax-Exempt Commercial Paper--4.3%
Puerto Rico--4.3%
2,839 Puerto Rico Gov't. Dev. Bank,
3.30%, 2/7/00
(amortized cost--$2,839,000)................ 2,839,000
---------
Total Investments
(amortized cost--$62,053,287+)..... 93.4% 62,053,287
Other assets less liabilities..... 6.6 4,415,691
--- ---------
Net Assets .................. 100.0% $66,468,978
====== ===========
New York Municipal Portfolio
Principal
Amount
(000) Value
New York Municipal Bonds & Notes--90.4%
$1,000 Broome Cnty., BAN,
3.50%, 4/5/00............... $1,001,536
1,800 City of New York GO,
Sub. Ser. H3,
3.70%, 2/14/00.............. 1,800,000
2,100 Long Island Power Auth.,
Elec. Sys. Rev.,
Ser. 3, (LC; Westdeutsche
Landesbank),,
3.55%, 2/7/00 ............. 2,100,000
3,000 MTA Transit Fac. TRAN,
Special Obligation,
Ser. CP1-Sub. Ser. B,
(LC; ABN-Amro Bank NV),
3.50%-3.60%, 1/8/00-2/7/00 . 3,000,000
1,500 Municipal Assistance Corp.,
5.50%, 1/7/00 .............. 1,517,861
1,100 Nassau Cnty. IDA,
Civic Fac. Rev.,
Van Winthrop Univ. Hospital, VRDN*
3.75%, 3/1/28............... 1,100,000
1,000 New York City,
Ser. H, VRDN*
7.875%, 8/1/00.............. 1,027,789
2,500 New York City,
Water Fin. Ser. 5B
3.50%, 12/9/99.............. 2,500,000
New York City Trust CRR,
1,700 Museum of Broadcasting Proj.,
VRDN* (LC; Kredietbank NV),
3.70%, 5/1/14............... 1,700,000
2,900 Museum of Modern Art Proj.,
Ser. 1, (Insd.; AMBAC),
3.70%-5.00%, 1/1/00-12/1/15. 2,901,713
1,400 New York St. DAR,
Memorial Sloan-Kettering Cancer
Center Proj., VRDN*
(LC; Chase Manhattan Bank),
3.70%, 7/1/19............... 1,400,000
1,200 Ser. 1996, (LC; Morgan Guaranty
Trust),
3.70%, 7/1/19............... 1,200,000
2,075 St. Univ. Edl.--Ser. B
7.25%, 5/15/00.............. 2,075,375
B-7
<PAGE>
Principal
Amount
(000) Value
New York Municipal Bonds & Notes (cont'd.)
$1,600 Oxford Univ. Press Inc.,
VRDN* (LC; Landesbank Hessen),
3.85%, 7/1/25............... $1,600,000
2,000 New York St. ERDA, Gas Fac. Rev.,
Brooklyn Union Gas Proj.,
Ser. A2, VRDN* (Insd.; MBIA),
3.80%, 12/1/20.............. 2,000,000
New York St. ERDA, PCR,
1,700 Niagara Mohawk Power Co. Proj.,
VRDN* (LC; Morgan Guaranty Trust),
4.00%, 7/1/15............... 1,700,000
1,300 Rochester Elec. & Gas Co. Proj.,
Ser. A, VRDN*
(Insd.; MBIA),
3.85%, 8/1/23............... 1,300,000
1,400 New York St., HFFAR
Normandie Ct. I Proj, VRDN*
3.70%, 5/15/15.............. 1,400,000
1,000 New York St. GO, Ser. U,
3.50%, 1/25/00.............. 1,000,000
1,200 New York St. JDA, VRDN*
New York St. GO, Ser. U,
3.60%, 2/10/00.............. 1,200,000
2,240 New York St. JDA, VRDN*
Ser. A1-A13, Ser. B1-B8,
3.80%, 3/1/02............... 2,240,000
2,050 New York St. LGAC,
Ser. E, VRDN*
(LC; Canadian Imperial Bank of
Commerce),
3.70%, 4/1/25............... 2,050,000
700 New York St. MCF,
Ser. A, VRDN*
3.80%, 11/1/08.............. 700,000
2,500 New York St. PAR,
(LC; Commerzbank),
3.50%, 12/6/99 ............. 2,500,000
Principal
Amount
(000) Value
$2,500 New York St. Env. GO,
Ser. 1997A,
3.60%, 1/19/00.............. $ 2,500,000
1,900 Port Auth. of New York &
New Jersey, VRDN*
3.65%, 8/1/24............... 1,900,000
1,000 St. Lawrence Cnty. IDA, EIR,
Reynolds Metals Co. Proj., VRDN*
(LC; Royal Bank of Canada),
3.85%, 5/1/25............... 1,000,000
2,004 Smithtown Central Sch. Dist.
3.80%, 6/26/00.............. 2,004,380
1,100 Syracuse IDA,
Syracuse Univ. Proj.,
3.75%, 3/1/23............... 1,100,000
450 Wallkill IDA, PCR,
Reynolds Metals Co. Proj.,
VRDN* (LC; Dresdner Bank AG),
3.90%, 5/1/25............... 450,000
-------
Total New York Municipal Bonds & Notes
(amortized cost--$49,968,654)................ 49,968,654
----------
Tax-Exempt Commercial Paper--1.8%
Puerto Rico--1.8%
1,000 Puerto Rico Gov't. Dev. Bank,
3.50%, 4/5/00
(amortized cost $1,000,000)................. 1,000,000
---------
Total Investments
(amortized cost--$50,968,654+)..... 92.2% 0,968,654
Other assets less liabilities..... 7.8 4,311,958
--- ---------
Net Assets .................. 100.0% $55,280,612
===== ===========
+ Federal income tax basis is the same as 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 date shown is date of
next rate change.
B-8
<PAGE>
November 30, 1999
Schedules of Investments (concluded)
Abbreviations:
AMBAC American Mortgage Bond Assurance Corporation
BAN Bond Anticipation Notes
CRR Cultural Resources Revenue
CS Credit Support
DAR Dormitory Authority Revenue
EAR Electric Authority Revenue
EDA Economic Development Authority
EDFAR Economic Development Financing Authority Revenue
EDR Economic Development Revenue
EIR Environment Improvement Revenue
ELR Educational Loan Revenue
ERDA Energy Research & Development Authority
FAR Finance Authority Revenue
FGIC Financial Guaranty Insurance Corporation
GO General Obligation
HEA Higher Education Authority
HEL Higher Education Loan
HFFAR Health Facilities Financing Authority Revenue
IDA Industrial Development Agency
IDR Industrial Development Revenue
IFR Industrial Facilities Revenue
JDA Job Development Authority
LC Letter of Credit
LGAC Local Government Assistance Corp.
MBIA Municipal Bond Investors Assurance
MCF Medical Care Facility
MTA Metropolitan Transportation Authority
PAR Power Authority Revenue
PCFA Pollution Control Financing Authority
PCR Pollution Control Revenue
PIB Public Improvement Board
SCD Statewide Communities Development
SLMA Student Loan Marketing Association
SLR Student Loan Revenue
STR Sales Tax Revenue
SWDR Solid Waste Disposal Revenue
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
WD Water District
WDA Waste Disposal Authority
See accompanying notes to financial statements.
B-9
<PAGE>
November 30, 1999
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--
$2,335,209,367, $83,681,473,
$114,307,733, $62,053,287 and
$50,968,654, respectively) .... $2,335,209,367 $83,681,473 $114,307,733 $62,053,287 $50,968,654
Cash ............................. 232,241 170,812 23,729 148,099 228,727
Receivable for investments
sold/called .................... -- -- 2,880,000 1,200,000 2,800,000
Receivable for capital stock sold. 120,413,663 168,996 2,204,488 2,791,710 1,058,658
Interest receivable............... 12,363,279 167,811 802,890 363,477 309,746
Prepaid expenses and other assets. 46,034 10,151 8,491 737 775
-----------------------------------------------------------------------------------------
Total Assets...................... 2,468,264,584 84,199,243 120,227,331 66,557,310 55,366,560
------------------------------------------------------------------------------------------
Liabilities:
Payable for capital stock redeemed 4,142 -- 51,933 -- --
Investment advisory fee payable... 52,449 2,272 3,169 1,739 1,474
Distribution fee payable ......... 32,096 1,139 1,609 870 727
Dividend payable ................. 3,742,468 123,852 107,631 52,070 46,514
Other payables and accrued
expenses ...................... 1,131,271 48,937 60,533 33,653 37,233
----------------------------------------------------------------------------------
Total Liabilities................. 4,962,426 176,200 224,875 88,332 85,948
-----------------------------------------------------------------------------------
Net Assets........................ $2,463,302,158 $84,023,043 $120,002,456 $66,468,978 $55,280,612
------------------------------------------------------------------------------------------
Composition of Net Assets:
Par value ($.0001 per share,
10 billion shares
authorized for each portfolio). $ 246,334 $ 8,404 $ 12,009 $ 6,650 $ 5,531
Paid-in-capital in excess of par . 2,463,053,113 84,013,895 120,035,432 66,493,045 55,299,676
Accumulated net realized gain
(loss) on investments.......... 2,711 744 (44,985) (30,717) (24,595)
-------------------------------------------------------------------------------
Net Assets........................ $2,463,302,158 $84,023,043 $120,002,456 $66,468,978 $55,280,612
------------------------------------------------------------------------------------------
Shares outstanding................ 2,463,338,617 84,044,491 120,089,945 66,500,420 55,305,207
---------------------------------------------------------------------------------------
Net asset value per share......... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
B-10
<PAGE>
Year ended November 30, 1999
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.......................... $124,298,680 $4,842,820 $4,274,943 $1,975,153 $2,122,890
------------ ---------- ---------- ---------- ----------
Operating Expenses:
Investment advisory fees.......... 9,867,390 478,975 653,803 335,555 344,235
Distribution fees................. 6,042,119 239,980 335,446 167,778 172,391
Transfer agent fees............... 1,733,273 45,536 65,352 20,154 51,965
Administrative services fees...... 1,198,105 46,245 66,125 33,460 32,475
Shareholder servicing fees........ 372,204 15,762 22,295 9,984 13,607
Directors' fees and expenses...... 196,145 8,267 11,595 5,379 6,055
Reports to shareholders .......... 159,870 3,426 5,160 1,709 1,719
Custodian fees ................... 157,657 35,118 40,181 14,874 18,427
Audit and tax service fees ....... 45,410 22,659 21,186 18,618 19,550
Registration fees................. 22,706 13,703 15,449 1,031 1,490
Legal fees........................ 11,543 927 1,335 320 379
Miscellaneous..................... 100,307 7,222 9,731 5,878 5,996
--------------------------------------------------------------------------------
Total operating expenses....... 19,906,729 917,820 1,247,658 614,740 668,289
Less: expense offset........... (4,182) (1,262) (2,002) (2,477) (3,199)
--------------------------------------------------------------------------------
Net operating expenses......... 19,902,547 916,558 1,245,656 612,263 665,090
-----------------------------------------------------------------------------------
Net investment income.......... 104,396,133 3,926,262 3,029,287 1,362,890 1,457,800
Net realized gain on investments.... 3,367 484 6,476 5 --
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations......... $104,399,500 $3,926,746 $3,035,763 $1,362,895 $1,457,800
-------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
B-11
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Primary Portfolio Government Portfolio
Year ended November 30, Year ended November 30,
----------------------- -----------------------
1999 1998 1999 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income................. $ 104,396,133 $ 107,471,188 $ 3,926,262 $ 4,285,012
Net realized gain (loss)
on investments..................... 3,367 449 484 523
------------------------------------------------------------------------------
Net increase in net assets
resulting from operations.......... 104,399,500 107,471,637 3,926,746 4,285,535
------------------------------------------------------------------------------
Dividends to Shareholders from:
Net investment income................. (104,396,133) (107,471,188) (3,926,262) (4,285,012)
------------------------------------------------------------------------------
Capital Stock Transactions (at $1.00 per share):
Net proceeds from sales............... 16,680,730,656 14,416,847,565 389,179,482 642,903,095
Reinvestment of dividends............. 103,977,710 107,839,942 3,933,944 4,257,414
Cost of shares redeemed............... (16,893,848,229) (14,117,821,757) (421,236,776) (634,993,342)
------------------------------------------------------------------------------
Net increase (decrease) in
net assets from capital stock
transactions....................... (109,139,863) 405,865,750 (28,123,350) 12,167,167
------------------------------------------------------------------------------
Total increase (decrease) in
net assets......................... (109,136,496) 405,866,199 (28,122,866) 12,167,690
Net Assets:
Beginning of year..................... 2,572,438,654 2,166,572,455 112,145,909 99,978,219
------------------------------------------------------------------------------
End of year........................... $2,463,302,158 $2,572,438,654 $84,023,043 $112,145,909
=============== ============== =========== ============
</TABLE>
See accompanying notes to financial statements.
B-12
<PAGE>
<TABLE>
<CAPTION>
General Municipal Portfolio California Municipal Portfolio
Year ended November 30, Year ended November 30,
----------------------- -----------------------
1999 1998 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income................. $ 3,029,287 $ 4,240,610 $ 1,362,890 $ 1,515,431
Net realized gain (loss)
on investments..................... 6,476 (709) 5 --
------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations.......... 3,035,763 4,239,901 1,362,895 1,515,431
------------------------------------------------------------------------------------
Dividends to Shareholders from:
Net investment income................. (3,029,287) (4,240,610) (1,362,890) (1,515,431)
------------------------------------------------------------------------------------
Capital Stock Transactions (at $1.00 per share):
Net proceeds from sales...............
Reinvestment of dividends............. 861,154,301 1,032,098,542 416,303,954 429,969,028
Cost of shares redeemed............... 3,040,600 4,223,116 1,355,458 1,513,776
------------------------------------------------------------------------------------
(916,014,947) (1,001,476,568) (421,583,010) (416,803,566)
------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from capital stock
transactions.......................
(51,820,046) 34,845,090 (3,923,598) 14,679,238
------------------------------------------------------------------------------------
Total increase (decrease) in
net assets......................... (51,813,570) 34,844,381 (3,923,593) 14,679,238
Net Assets:
Beginning of year..................... 171,816,026 136,971,645 70,392,571 55,713,333
------------------------------------------------------------------------------------
End of year........................... $120,002,456 $171,816,026 $66,468,978 $70,392,571
============ ============ =========== ===========
<CAPTION>
New York Municipal Portfolio
Year ended November 30,
-----------------------
1999 1998
----------------------------------------
Operations: <C> <C>
Net investment income................. $ 1,457,800 $ 1,876,324
Net realized gain (loss)
on investments..................... -- --
----------------------------------------
Net increase in net assets
resulting from operations.......... 1,457,800 1,876,324
----------------------------------------
Dividends to Shareholders from:
Net investment income................. (1,457,800) (1,876,324)
----------------------------------------
Capital Stock Transactions (at $1.00 per share)
Net proceeds from sales............... 403,092,986 500,835,718
Reinvestment of dividends............. 1,433,608 1,879,639
Cost of shares redeemed............... (433,394,287) (491,805,768)
----------------------------------------
Net increase (decrease) in
net assets from capital stock (28,867,693) 10,909,589
transactions....................... ----------------------------------------
Total increase (decrease) in
net assets......................... (28,867,693) 10,909,589
Net Assets:
Beginning of year..................... 84,148,305 73,238,716
----------------------------------------
End of year........................... $55,280,612 $84,148,305
=========== ===========
</TABLE>
See accompanying notes to financial statements.
B-13
<PAGE>
November 30, 1999
Notes to Financial Statements
1. Organization and Significant Accounting Policies
OCC Cash Reserves (the "Fund") is registered under the Investment Company Act of
1940 as an open-end management investment company. The Fund has five portfolios:
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 "Investment Adviser") and OCC Distributors (the
"Distributor"), both subsidiaries of Oppenheimer Capital, an indirect
wholly-owned subsidiary of PIMCO Advisors L.P., serve as each Portfolio's
investment adviser and distributor, respectively.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. 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. The amortized cost method involves valuing a security
at cost on the date of purchase and thereafter assuming a constant dollar
amortization to maturity of the difference between the principal amount due at
maturity and the initial cost of the security.
(b) Federal Income Taxes
Each Portfolio intends to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
distributes substantially all of its taxable and non-taxable income to its
shareholders; accordingly, no federal income tax provision is required.
(c) Securities Transactions and Other Income
Securities 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 and discounts are accreted to interest income
over the lives of the respective securities.
(d) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly by each
Portfolio. Distributions of net realized capital gains, if any, are declared and
paid at least annually.
During the year ended November 30, 1999, California reclassified $725 from
accumulated net realized loss on investments to paid-in-capital in excess of par
relating to the expiration of capital loss carryforwards from prior periods.
(e) Repurchase Agreements
Each Portfolio may enter into repurchase agreements as part of its investment
program. The Portfolios' 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 counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
B-14
<PAGE>
(f) Expense Allocation
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 applicable Portfolios or on
another reasonable basis.
(g) Expense Offset
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian
expenses. Had these cash balances been invested in income producing securities,
they would have generated income for the Fund.
(h) Directors' Retirement Plan
The Fund's Directors have adopted a Retirement Plan (the "Plan") effective
December 1, 1998. The Plan provides for payments upon retirement to independent
directors based upon the average annual compensation paid to them during their
five highest paid years of service. An independent director must serve for a
minimum of seven years (or such lesser period as may be approved by the board)
to become eligible to receive benefits. For the year ended November 30, 1999,
the Primary, Government, General, California and New York portfolios accrued
$84,589, $3,573, $5,000, $2,319 and $2,614, respectively in connection with the
Plan.
2. Investment Advisory and Distribution Fees
(a) Under the Investment Advisory Agreement, each Portfolio pays the Investment
Adviser a monthly investment advisory fee at the annual rate of 0.50% on the
first $100 million of average daily net assets, 0.45% on the next $200 million
of average daily net assets, and 0.40% on average daily net assets in excess of
$300 million. The Investment Adviser is contractually obligated to waive its
fees and/or reimburse operating expenses to the extent total operating expenses
of a Portfolio exceeds 1.00% of its average daily net assets (net of any expense
offset) for any fiscal year.
(b) Under the Distribution Assistance Plan, each Portfolio pays the Investment
Adviser a monthly fee at an annual rate of 0.25% of its average daily net assets
and the Investment 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 Portfolios and (ii) otherwise promoting
the sale of shares of the Fund.
3. Financial Instruments and Associated Risks
Each Portfolio invests in issues with a remaining maturity of thirteen months or
less and are rated high quality by a nationally recognized statistical rating
organization or, if not rated, are judged by the Investment Adviser to be of
comparable quality. Primary maintains portfolio diversification to reduce
investment risk by not investing more than 25% of its total assets in 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. At November 30, 1999, major industry
concentrations were: Banking--38.7%, Finance--13.6%, Diversified--9.6%,
Brokerage--8.4% and Sovereign--8.1%. 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 portfolios of short-term obligations issued by the States
of California and New York, respectively, and their political subdivisions.
Effective July 1, 1998, and in accordance with Rule 2a-7 of the Investment
Company Act of 1940, as amended, single state funds were required to be
diversified with respect to 75% of their total assets. Accordingly, California
and New York maintain diversified portfolios with respect to 75% of their total
assets. An issuers' ability 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.
4. Capital Loss Carryforwards
At November 30, 1999, accumulated net realized capital loss carryforwards
available as a reduction against future net realized capital gains for federal
income tax purposes were: General--$44,985 of which $8,627 will expire in 2000,
$299
B-15
<PAGE>
will expire in 2001, $33,497 will expire in 2003, $1,853 will expire in 2005 and
$709 will expire in 2006; California--$30,717 of which $5,856 will expire in
2000, $1,137 will expire in 2001, $13,827 will expire 2003, $9,304 will expire
in 2004 and $593 will expire in 2005. New York--$24,595 of which $3,198 will
expire in 2000, $934 will expire in 2001, $19,669 will expire in 2003, and $794
will expire in 2005. To the extent that these capital loss carryforwards are
used to offset future net realized capital gains, the gains offset will not be
distributed to shareholders. California had $725 of capital loss carryforwards
expire on November 30, 1999. Such amount has been reclassified to
paid-in-capital in excess of par to reflect California's federal tax basis of
available accumulated capital loss carryforwards. During the year ended November
30, 1999, Primary, General and California utilized $656, $6,476 and $5,
respectively, of capital loss carryforwards.
5. Acquisition of Investment Adviser
On October 31, 1999, PIMCO Advisors Holdings L.P. ("PAH"), its operating
subsidiary, PIMCO Advisors L.P. ("PIMCO Advisors"), the parent company of
Oppenheimer Capital, and Allianz AG ("Allianz") announced that they have reached
a definitive agreement for Allianz, a German insurance company, to acquire
majority ownership of PIMCO Advisors, including all of the interests held by PAH
(the "Allianz Transaction"). For the Fund, the change of control as a result of
the consummation of the Allianz Transaction (expected to close by the end of the
first quarter of 2000) will result in the automatic termination of the current
investment advisory agreement with OpCap Advisors. The Board of Directors has
approved new agreements with OpCap Advisors to become effective upon
consummation of the Allianz Transaction. The new agreements will be submitted
for approval by the stockholders of the Fund.
B-16
<PAGE>
Financial Highlights (For a share outstanding throughout each year)
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
---------------------
Dividends to
Net Asset Net Total Shareholders Net Asset
Value, Net Realized Income from From Net Value,
Beginning Investment Gain (Loss) Investment Investment End of Total
of Year Income on Investments Operations Income Year Return*
<S> <C> <C> <C> <C> <C> <C> <C>
Primary Portfolio
Year ended November 30, 1999 $1.00 $0.04 $ 0.00 $0.04 $(0.04) $1.00 4.41%
November 30, 1998 1.00 0.05 0.00 0.05 (0.05) 1.00 4.90%
November 30, 1997 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.85%
November 30, 1996 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.69%
November 30, 1995 1.00 0.05 0.00 0.05 (0.05) 1.00 5.19%
Government Portfolio
Year ended November 30, 1999 $1.00 $0.04 $ 0.00 $0.04 $(0.04) $1.00 4.17%
November 30, 1998 1.00 0.05 0.00 0.05 (0.05) 1.00 4.63%
November 30, 1997 1.00 0.05 (0.00) 0.05 (0.05) 1.00 4.60%
November 30, 1996 1.00 0.04 (0.00) 0.04 (0.04) 1.00 4.51%
November 30, 1995 1.00 0.05 0.00 0.05 (0.05) 1.00 5.02%
RATIOS TO
AVERAGE
NET ASSETS
---------------
Net ANet Assets,
Valu End of Net Net
Begin Year Operating Investment
of Y(millions) Expenses (2) Income
<S> <C> <C> <C> <C>
Primary Portfolio
Year ended November 30, 1999 $2,463.3 0.82% 4.32%
November 30, 1998 2,572.4 0.83% 4.78%
November 30, 1997 2,166.6 0.85% 4.75%
November 30, 1996 1,712.6 0.91% 4.60%
November 30, 1995 1,671.1 0.94% 5.07%
Government Portfolio
Year ended November 30, 1999 $ 84.0 0.95% 4.09%
November 30, 1998 112.1 0.98%(1) 4.53%(1)
November 30, 1997 100.0 0.98%(1) 4.51%(1)
November 30, 1996 101.1 1.00%(1) 4.41%(1)
November 30, 1995 108.6 1.00%(1) 4.91%(1)
</TABLE>
- -----------------------
(1) During the fiscal years noted above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratios of net operating
expenses to average net assets and the ratios of net investment income to
average net assets would have been 0.99% and 4.52%, respectively, for the
year ended November 30, 1998, 0.99% and 4.50%, for the year ended November
30, 1997, 1.00% and 4.41%, respectively, for the year ended November 30,
1996, and 1.02% and 4.89%, respectively, for the year ended November 30,
1995.
(2) Inclusive of expenses offset by earnings credits (See Note 1g in Notes to
Financial Statements).
* Assumes reinvestment of all dividends and distributions.
B-17
<PAGE>
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS
---------------------
Dividends to
Net Asset Net Total Shareholders Capital Net Asset
Value, Net Realized Income from from Net Contribution Value,
Beginning Investment Gain (Loss) Investment Investment by Investment End of
Investment of Year Income on Investments Operations Income Adviser Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General Municipal
Portfolio
Year ended
November 30, 1999 $1.00 $0.02 $(0.00) $0.02 $(0.02) -- $1.00 2.29%
November 30, 1998 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00 2.66%
November 30, 1997 1.00 0.03 0.00 0.03 (0.03) -- 1.00 2.74%
November 30, 1996 1.00 0.03 0.00 0.03 (0.03) -- 1.00 2.56%
November 30, 1995 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00 3.11%
California Municipal
Portfolio
Year ended
November 30, 1999 $1.00 $0.02 -- $0.02 $(0.02) -- $1.00 2.06%
November 30, 1998 1.00 0.02 -- 0.02 (0.02) -- 1.00 2.39%
November 30, 1997 1.00 0.03 $(0.00) 0.03 (0.03) -- 1.00 2.68%
November 30, 1996 1.00 0.02 -- 0.02 (0.02) -- 1.00 2.42%
November 30, 1995 1.00 0.03 (0.01) 0.02 (0.03) $0.01 1.00 3.10%
New York Municipal
Portfolio
Year ended
November 30, 1999 $1.00 $0.02 $ 0.00 $0.02 $(0.02) -- $1.00 2.16%
November 30, 1998 1.00 0.03 -- 0.03 (0.03) -- 1.00 2.50%
November 30, 1997 1.00 0.03 (0.00) 0.03 (0.03) -- 1.00 2.66%
November 30, 1996 1.00 0.03 -- 0.03 (0.03) -- 1.00 2.50%
November 30, 1995 1.00 0.03 0.00 0.03 (0.03) -- 1.00 3.07%
</TABLE>
<TABLE>
<CAPTION>
RATIOS TO
AVERAGE
NET ASSETS
----------
Net Assets,
End of Net Net
Total Year Operating
Investment (millions) Expenses (4)Income
<S> <C> <C> <C>
General Municipal
Portfolio
Year ended
November 30, 1999 $120.0 0.93% 2.26%
November 30, 1998 171.8 0.92% 2.62%
November 30, 1997 137.0 0.96%(1) 2.70%(1)
November 30, 1996 122.3 0.99%(1) 2.53%(1)
November 30, 1995 116.0 0.93%(1) 3.07%(1)
California Municipal
Portfolio
Year ended
November 30, 1999 $66.5 0.91% 2.03%
November 30, 1998 70.4 0.95% 2.36%
November 30, 1997 55.7 0.90%(2) 2.64%(2)
November 30, 1996 53.4 0.85%(2) 2.42%(2)
November 30, 1995 75.9 0.82%(2) 3.05%(2)
New York Municipal
Portfolio
Year ended
November 30, 1999 $55.3 0.96% 2.11%
November 30, 1998 84.1 0.98% 2.46%
November 30, 1997 73.2 0.98%(3) 2.63%(3)
November 30, 1996 60.0 0.97%(3) 2.45%(3)
November 30, 1995 52.3 0.79%(3) 3.02%(3)
</TABLE>
- -----------------------
(1) During the fiscal years noted above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratios of net operating
expenses to average net assets and the ratios of net investment income to
average net assets would have been 0.96% and 2.70%, respectively, for the
year ended November 30, 1997, 0.99% and 2.53%, respectively, for the year
ended November 30, 1996, and 1.02% and 2.98%, respectively, for the year
ended November 30, 1995.
(2) During the fiscal years noted above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratios of net operating
expenses to average net assets and the ratios of net investment income to
average net assets would have been 0.96% and 2.58%, respectively, for the
year ended November 30, 1997, 0.97% and 2.30%, respectively, for the year
ended November 30, 1996, and 0.95% and 2.92%, respectively, for the year
ended November 30, 1995.
(3) During the fiscal years noted above, the Adviser waived a portion of its
fees. If such waivers had not been in effect, the ratios of net operating
expenses to average net assets and the ratios of net investment income to
average net assets would have been 0.99% and 2.62%, respectively, for the
year ended November 30, 1997, 0.98% and 2.44%, respectively, for the year
ended November 30, 1996, and 1.00% and 2.81%, respectively, for the year
ended November 30, 1995.
(4) Inclusive of expenses offset by earnings credits (See Note 1g in Notes to
Financial Statements).
*Assumes reinvestment of all dividends and distributions
B-18
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors
of OCC 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 Primary Portfolio, Government
Portfolio, General Municipal Portfolio, California Municipal Portfolio and New
York Municipal Portfolio (constituting OCC Cash Reserves, hereafter referred to
as the "Fund") at November 30, 1999, 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 five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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, 1999 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 10, 2000
B-19
<PAGE>
Part C Other Information
Item 23. Financial Statements and Exhibits
Financial Statements:
- --------------------
Included in the Prospectus:
None
Included in Part B:
Fiscal Year ended November 30, 1999
Included in Part C:
None
Exhibits:
- --------
(a) Articles of Incorporation.*
(b) Bylaws of Registrant.*
(c) Not Applicable.
(d) Not Applicable.
(e) Advisory Agreement.**
(f) (1) Distribution Agreement.**
(2) Dealer Agreement.*
(g) Not Applicable.
(h) Custody Agreement.*
(i) Not Applicable.
(j) 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.*
(k) Consent of Independent Accountants.***
(l) Not Applicable.
(m) Agreement relating to initial capital.*
- ----------------
* Incorporated by reference to exhibits filed with
Post-Effective Amendment No. 12
** Incorporated by reference to exhibits filed with
Post-Effective Amendment No. 18.
*** Filed with Post Effective Amendment 21.
C-1
<PAGE>
(n) Not Applicable.
(o) Distribution Assistance and Administrative Services
Plan Pursuant to Rule 12b-1.**
(p) Performance Computations.*
Item 24. Persons Controlled by or Under Common Control with Registrant
No person is presently controlled by or under common control with
Registrant.
Item 25. Indemnification
See Article Eight, Sections (6) and (7) of Registrant's
Articles of Incorporation, Exhibit 1.
Item 26. 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 of
Information regarding the business of the investment 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.
<TABLE>
<CAPTION>
Name & Current Position with OpCap Advisors Other Business and Connections During the Past Two Years
- ------------------------------------------- --------------------------------------------------------
<S> <C>
Frank Poli, Secretary Chief Legal Officer of PIMCO Advisors, L.L.P.; Secretary
of Oppenheimer Capital and OCC Distributors.
Kenneth M. Poovey, Chief Executive Officer Chief Executive Officer of Oppenheimer Capital; Chief
Operating Officer of PIMCO Advisors, L.P.
Robert Fitzgerald, Chief Financial Officer Managing Director/Treasurer/Chief Financial Officer of
Oppenheimer Capital; Treasurer and Chief Financial Officer
of OCC Distributors.
Richard M. Weil, Managing Director General Counsel/Head of Corporate Services, PIMCO Advisors.
Susan Murphy, Senior Vice President President, PIMCO Trust Company.
Eric Retzlaff, Senior Vice President Senior Vice President, Oppenheimer Capital.
Steven Calabria, Vice President
Angie Clark, Vice President Vice President/National Sales Manager,
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
Oppenheimer Capital.
Ken Corba, Vice President Chief Investment Officer, PIMCO Equity Advisors.
Mark Degenhart, Vice President Vice President and Portfolio Manager, OCC Accumulation
Trust; Vice President, Oppenheimer Capital; formerly Director
of Research and Portfolio Manager of Palisades Capital
Management.
Michael Gaffney, Vice President Portfolio Manager, OCC Accumulation Trust; Managing Director,
PIMCO Equity Advisors; formerly Senior Vice President and Portfolio
Manager for Alliance Capital Management.
John Giusio, Vice President Vice President, Oppenheimer Capital.
Richard Glasebrook, Vice President Vice President and Portfolio Manager, OCC Accumulation Trust;
Managing Director, Oppenheimer Capital.
Colin Glinsman, Vice President Portfolio Manager, OCC Accumulation Trust; Chief Investment
Officer, Oppenheimer Capital.
Louis Goldstein, Vice President Vice President and Portfolio Manager, OCC Accumulation Trust;
Senior Vice President, Oppenheimer Capital.
Matthew Greenwald, Vice President Senior Vice President, Oppenheimer Capital; Executive Vice President
of Municipal Advantage Fund Inc.
Benjamin Gutstein, Vice President Assistant Vice President, Oppenheimer Capital.
Alan Gutmann, Vice President Senior Vice President, Oppenheimer Capital.
Vikki Hanges, Vice President Vice President and Portfolio Manager, OCC Accumulation Trust;
Senior Vice President, Oppenheimer Capital.
Jeffrey Hughes, Vice President
Francis LeCates, Jr., Vice President Managing Director, Oppenheimer Capital.
Eliza Mazen, Vice President Vice President and Portfolio Manager, OCC Accumulation Trust;
Senior Vice President, Oppenheimer Capital.
Tim McCormack, Vice President Senior Vice President, Oppenheimer Capital.
Dennis McKechnie, Vice President Portfolio Manager, OCC Accumulation Trust; Managing Director,
PIMCO Equity Advisors; formerly Vice President, Columbus Circle
Investors.
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
Geoff Mullen, Vice President Senior Vice President, Oppenheimer Capital.
Jeff Parker, Vice President Portfolio Manager, OCC Accumulation Trust; Senior Portfolio Manager,
PIMCO Equity Advisors; formerly Assistant Portfolio Manager, Eagle
Asset Management.
Brian Shlissel, Treasurer and Vice President Treasurer, OCC Accumulation Trust; Vice President, Oppenheimer
Capital; Vice President of Mitchell Hutchins Asset Management
Inc. from 1993 to 1999; Assistant Treasurer of the Municipal
Advantage Fund, Inc. and the Central European Value Fund since August
1999; Treasurer and Secretary, Jardene Fleming India Fund from 1997
to 1999; Assistant Treasurer PaineWebber PACE Select Advisors Trust
from 1998 to 1999.
Elliot M. Weiss, Vice President Secretary, OCC Accumulation Trust; Secretary of the Municipal
Advantage Fund Inc. and Assistant Secretary of The Central European
Value Fund, Inc.; Vice President, Oppenheimer Capital.
Jeff Whittington, Vice President Senior Vice President, Oppenheimer Capital.
</TABLE>
The address of OpCap Advisors is 1345 Avenue of the Americas, New York,
New York 10105-4800.
Item 27. Principal Underwriter
(a) OCC Distributors acts as principal underwriter for the Registrant,
and OCC 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 1345 Avenue of the Americas, New York, NY, 10105:
<TABLE>
<CAPTION>
Name Positions and Offices with Underwriter Positions and Offices with Registrant
- ---- -------------------------------------- -------------------------------------
<S> <C> <C>
Oppenheimer Capital General Partner None
Value Advisors LLC General Partner None
Frank Poli Principal Secretary/Vice President
David J. Ungar Financial Principal None
Richard M. Weil Managing Director Managing Director
Robert Fitzgerald Chief Financial Officer None
</TABLE>
C-4
<PAGE>
(c) Not applicable.
Item 28. Location of Required Records -- Rule 31a-1
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Will maintain records required by Rule 31a-1(b)(1), (b)(2),
(b)(3), (b)(6), (b)(7) and (b)(8).
OpCap Advisors
1345 Avenue of the Americas
New York, NY 10105-4800
Will maintain records required by Rule 31a-1(b)(4), (b)(9),
(b)(10) and (b)(11).
Item 29. Management Services
Not Applicable.
Item 30. 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.
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 under 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, duly authorized in the
City of New York, and State of New York on the 7th day of February, 2000.
OCC CASH RESERVES, INC.
/s/ Joseph M. La Motta
----------------------------
Joseph M. La Motta, President
Attest:
/s/Elliot M. Weiss
- -----------------------
Elliott M.Weiss, Secretary
C-5
<PAGE>
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.
<TABLE>
<CAPTION>
Date
----
<S> <C>
/s/ Joseph M. La Motta 2/7/2000
--------------------------------------------
Joseph M. La Motta, President, Director
/s/ Paul Y. Clinton 2/7/2000
--------------------------------------------
Paul Y. Clinton, Director
/s/ Thomas W. Courtney 2/7/2000
--------------------------------------------
Thomas W. Courtney, Director
/s/ Lacy Herrmann 2/7/2000
--------------------------------------------
Lacy Herrmann, Director
/s/ V. Lee Barnes 2/7/2000
--------------------------------------------
V. Lee Barnes, Director
/s/ Theodore Mason 2/7/2000
--------------------------------------------
Theodore Mason, Director
/s/ Brian Shlissel 2/7/2000
--------------------------------------------
Brian S. Shlissel, Treasurer
/s/ Elliott M. Weiss 2/7/2000
--------------------------------------------
Elliott M. Weiss, Secretary
</TABLE>
C-6
<PAGE>
(Exhibit K)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated January 10, 2000, relating to the financial statements and
financial highlights of OCC Cash Reserves, Inc., which appear in such
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and Independent Accountants" in such
Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
March 28, 2000
