U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
--
Pre-Effective Amendment No.
Post-Effective Amendment No. 1
and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
--
Amendment No. 2
(Check appropriate box or boxes)
THE NEW YORK STATE OPPORTUNITY FUNDS
(Exact Name of Registrant as Specified in Charter)
4605 E. Genesee Street
DeWitt, New York 13214
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (315) 251-1101
Gregg A. Kidd
Pinnacle Advisors LLC
4605 E. Genesee Street
DeWitt, New York 13214
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/X / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on (date) pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
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THE NEW YORK STATE OPPORTUNITY FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
PART A
ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Operation of the Fund;
Investment Objective,
Investment Policies and Risk
Considerations
5. Management of the Fund Operation of the Fund
6. Capital Stock and Other Securities Cover Page; Operation of the
Fund; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Distribution Plan;
Calculation of Share Price
and Public Offering Price;
Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Distribution Plan
9. Pending Legal Proceedings Inapplicable
PART B
CAPTION IN STATEMENT
OF ADDITIONAL
ITEM NO. REGISTRATION STATEMENT CAPTION INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Principal Security Holders
of Securities
16. Investment Advisory and Other Services The Investment Advisor;
Distribution Plan;
Custodian; Auditors;
Countrywide Fund Services,
Inc.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price and Public Offering
Price; Redemption in Kind
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Financial Statements
PART C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
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PROSPECTUS
October 30, 1997
NEW YORK EQUITY FUND
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The investment objective of the New York Equity Fund (the "Fund") is to
provide long-term capital growth. The Fund seeks to obtain its investment
objective by investing primarily in the common stocks and other equity
securities of publicly-traded companies headquartered in the state of New York
and those companies having a significant presence in the state. While there is
no assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the investment policies described in this Prospectus.
INVESTMENT ADVISOR
Pinnacle Advisors LLC
4605 E. Genesee Street, DeWitt, New York 13214
The New York Equity Fund is a non-diversified series of The New York
State Opportunity Funds, a registered open-end management investment company.
This Prospectus provides you with the basic information you should know before
investing. You should read it and keep it for future reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES ARE
SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
A Statement of Additional Information, dated October 30, 1997,
containing additional information about the Fund, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus in its entirety. The Fund's address is 4605 E. Genesee Street,
DeWitt, New York 13214, and its telephone number is 1-888-899-8344. A copy of
the Statement of Additional Information may be obtained at no charge by calling
or writing the Fund.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY..................................................
EXPENSE INFORMATION.................................................
FINANCIAL HIGHLIGHTS................................................
INVESTMENT OBJECTIVE, INVESTMENT POLCIES AND
RISK CONSIDERATION................................................
HOW TO PURCHASE SHARES..............................................
SHAREHOLDER SERVICES................................................
HOW TO REDEEM SHARES................................................
DIVIDENDS AND DISTRIBUTIONS.........................................
TAXES...............................................................
OPERATION OF THE FUND...............................................
DISTRIBUTION PLAN...................................................
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE................
PERFORMANCE INFORMATION.............................................
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
THE FUND. The New York Equity Fund (the "Fund") is a non-diversified series of
The New York State Opportunity Funds, a registered open-end management
investment company commonly known as a "mutual fund." The Fund's investment
objective is to provide long-term capital growth.
INVESTMENT APPROACH. In seeking to achieve the Fund's investment objective, the
Fund invests primarily in the common stocks and other equity securities of
publicly-traded companies headquartered in the state of New York and those
companies having a significant presence in the state. Realization of current
income is not a significant investment consideration and any income realized
will be incidental to the Fund's objective. (See "Investment Objective,
Investment Policies and Risk Considerations.")
RISK FACTORS. The Fund's concentration in companies located in New York
generally ties the performance of the Fund to the economic environment of the
state. The Advisor believes that New York's combination of a strong economic
infrastructure and prudent fiscal and legislative policy provides its companies
with greater than average potential for capital appreciation. However, there is
no assurance that these factors and the other demographic and economic
characteristics that the Advisor believes favor these companies will continue in
the future. The Fund's portfolio may include securities of smaller companies,
which are generally more volatile in price and less liquid than those of larger
companies. As a non-diversified fund, the Fund may invest greater than 5% of its
total assets in the securities of one or more issuers. (See "Investment
Objective, Investment Policies and Risk Considerations.")
INVESTMENT ADVISOR. Pinnacle Advisors LLC (the "Advisor") serves as investment
advisor to the Fund. For its services, the Advisor receives compensation at an
annual rate equal to 1% of the average daily net assets of the Fund. Such fees
are reduced when the assets of the Fund exceed $100 million. The Advisor has not
previously provided investment advisory services to a registered investment
company. (See "Operation of the Fund.")
PURCHASE OF SHARES. Shares are offered at the net asset value next determined
after receipt of a purchase request by the Fund, plus a maximum 4.75% initial
sales charge. Shares are also subject to 12b-1 distribution fees at an annual
rate of up to .25% of the Fund's average daily net assets. Shares of the Fund
may be purchased with a reduced initial sales charge or with no initial sales
charge through purchases described in "How to Purchase Shares" in this
Prospectus. The minimum initial investment in the Fund is $1,000 ($250 for
tax-deferred retirement accounts). (See "How to Purchase Shares" and
"Distribution Plan.")
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REDEMPTION OF SHARES. There is currently no charge for redemptions. Shares may
be redeemed on each day the Fund is open for business at the net asset value
next determined after receipt of a redemption request by the Fund. (See "How to
Redeem Shares.")
DIVIDENDS AND DISTRIBUTIONS. Net investment income and net capital gains, if
any, are distributed annually. Shareholders will receive dividends and
distributions in additional Fund shares; however, shareholders may elect to
receive dividends and distributions in cash. (See "Dividends and
Distributions.")
MANAGEMENT. The Fund is a series of The New York State Opportunity Funds (the
"Trust"), the Board of Trustees of which is responsible for overall management
of the Trust and the Fund. The Trust has employed Countrywide Fund Services,
Inc. (the "Transfer Agent") to provide administration, accounting and transfer
agent services. (See "Operation of the Fund.")
UNDERWRITER. Pinnacle Investments, Inc. (the "Underwriter") serves as principal
underwriter for the Fund. For its services, the Underwriter receives commissions
on the sale of shares of the Fund consisting of the portion of the initial sales
charge remaining after the discounts it allows to securities dealers. (See "How
to Purchase Shares.")
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EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Initial Sales Charge Imposed on Purchases
(as a percentage of offering price)................................... 4.75%
Deferred Sales Charge................................................. None
Sales Charge Imposed on Reinvested Dividends.......................... None
Redemption Fee........................................................ None*
* A wire transfer fee is charged in the case of redemptions
made by wire. Such fee is subject to change and is
currently $8. See "How to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees(1) .25%
Other Expenses .73%
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Total Fund Operating Expenses 1.98%
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(1) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by the National Association
of Securities Dealers.
EXAMPLE: You would pay the following expenses on a $1,000 investment, whether or
not you redeem at the end of the period, assuming 5% annual return:
1 Year $ 67
3 Years 107
The purpose of the foregoing table is to assist investors in the Fund in
understanding the various costs and expenses that they will bear directly or
indirectly. See "Operation of the Fund" for more information about the fees and
costs of operating the Fund. The percentages expressing "Other Expenses" are
based on estimated amounts for the current fiscal year. THE EXAMPLE SHOWN SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
IN THE FUTURE MAY BE GREATER OR LESS THAN THOSE SHOWN.
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FINANCIAL HIGHLIGHTS
The following information, which is unaudited, is an integral part of the
Fund's financial statements and should be read in conjunction with the financial
statements. The financial statements as of September 30, 1997 appear in the
Statement of Additional Information of the Fund, which can be obtained at no
charge by calling Countrywide Fund Services, Inc. (Nationwide call toll-free
888-899-8344; in Cincinnati call 629-2286) or by writing to the Trust at the
address on the front of this Prospectus.
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
For the Period Ended
September 30, 1997(A)
(UNAUDITED)
Net asset value at beginning of period..........................$ 10.00
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Income from investment operations:
Net investment income...................................... 0.00
Net unrealized gains on investments ....................... 0.66
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Total from investment operations................................ 0.66
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Less distributions:
Dividends from net investment income....................... 0.00
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Total distributions............................................. 0.00
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Net asset value at end of period................................$ 10.66
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Total return ................................................... 6.60%
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Net assets at end of period ....................................$ 685,244
Ratio of expenses to average net assets(B)...................... 1.81%(C)
Ratio of net investment income to average net assets............ 0.13%(C)
Portfolio turnover rate......................................... 0.00%(C)
Average commission rate per share...............................$ 0.3075
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(A) Represents the period from the initial public offering of shares (May
12, 1997) through September 30, 1997.
(B) Ratio of expenses to average net assets assuming no waiver of fees or
reimbursement of expenses by the Advisor was 19.47%(C).
(C) Annualized.
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INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
The investment objective of the Fund is to provide long-term capital
growth. The Fund seeks to obtain its investment objective by investing primarily
in common stocks and other equity securities of publicly-traded companies
headquartered in the state of New York and those companies having a significant
presence in the state ("New York Securities"). Realization of current income
will not be a significant investment consideration and any such income realized
should be considered incidental to the Fund's objective. Any investment involves
risk, and there can be no assurance that the Fund will achieve its investment
objective. The Fund's investment objective may not be altered without the prior
approval of a majority (as defined by the Investment Company Act of 1940) of the
Fund's shares. Unless otherwise indicated, all investment practices and
limitations of the Fund are nonfundamental policies which may be changed by the
Board of Trustees without shareholder approval.
The Advisor believes that the demographic and economic characteristics
of New York, including population, employment, retail sales, personal income,
bank loans, bank deposits and residential construction are such that many
companies headquartered in the state, or having a significant presence in the
state, have a greater than average potential for capital appreciation. For
example, New York's Gross State Product is over $600 billion per year, making it
the tenth largest economy in the world, and foreign investment exceeds $7
billion, far exceeding that of any other state. In addition, state taxes have
recently been reduced by $3.6 billion and, for the first time in 50 years,
growth in state spending has stopped. In the Advisor's opinion, this rare
combination - a great, dynamic business and economic environment and a
government committed to prudent fiscal and legislative policy - provides an
exciting arena for business and investment. If a company is not headquartered in
New York, the Advisor will consider such company as having a "significant
presence" in the state if (i) 50% or more of its profits are generated from
operations (including plants, offices or a sales force) based in New York or
(ii) if the company employs 500 or more in its operations within New York and
such number of employees as a percentage of the company's total employees is
higher than the percentage of the company's total employees employed in any
other state.
INVESTMENT SELECTION. Through fundamental analysis the Advisor attempts
to identify securities and groups of securities with potential for capital
appreciation. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in New York Securities. The Advisor will generally focus
on common stocks and other equity securities of companies headquartered or
having a significant presence in New York. The Advisor intends to limit
portfolio turnover in the Fund to no more than 100%, believing that a long-term
rather than a short-term selection of investments is preferable.
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The equity securities in which the Fund may invest include common
stocks, convertible preferred stocks, straight preferred stocks and convertible
bonds. Preferred stocks and bonds will be rated at the time of purchase in the
four highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A or
Baa) or Standard & Poor's Ratings Group (AAA, AA, A or BBB) or, if unrated, will
have been determined by the Advisor to be of comparable quality. Preferred
stocks and bonds rated Baa or BBB have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to pay principal and interest or to pay the preferred stock
obligations than is the case with higher grade securities. Subsequent to its
purchase by the Fund, a security may cease to be rated or its rating may be
reduced to below Baa or BBB. The Advisor will consider such an event to be
relevant in its determination of whether the Fund should continue to hold such
security. The Fund may also invest in warrants or rights to acquire equity
securities other than those acquired in units or attached to other securities.
The Fund's concentration in companies headquartered in or having a
significant presence in New York generally ties the performance of the Fund to
the economic environment of the state and the surrounding area. There is no
assurance that the demographic and economic characteristics and other factors
that the Advisor believes favor companies in New York will continue in the
future. Moreover, the Fund's portfolio may include securities of smaller
companies and companies that are not nationally recognized. The prices of stocks
of such companies generally are more volatile than those of larger or more
mature companies, their securities are generally less liquid, and they are more
likely to be negatively affected by adverse economic or market conditions.
Moreover, because of its concentration, the Fund's portfolio may be invested in
a smaller number of companies than that of a general equity mutual fund. This
may result in investments by the Fund in a smaller number of industry sectors.
These limitations may also prevent the Advisor from using certain traditional
analytical measures employed to select investments and also exclude some
strategies that could offer superior performance or reduce fluctuations in the
values of such assets.
Under normal market conditions, at least 90% of the Fund's total assets
will be invested in equity securities (with at least 65% of the Fund's total
assets invested in New York Securities). Warrants and rights will be excluded
for purposes of this calculation. As a temporary defensive measure, however, the
Fund may invest up to 100% of its total assets in investment grade bonds, U.S.
Government Securities, repurchase agreements or money market instruments. When
the Fund invests in investment grade bonds, U.S. Government Securities or money
market instruments as a temporary defensive measure, it is not pursuing its
stated investment objective.
FACTORS TO CONSIDER. The Fund is not intended to be a complete
investment program and there can be no assurance that the Fund will achieve its
investment objective. The Fund's net asset
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value will be subject to market fluctuation. The Fund is a non-diversified fund
and therefore may invest more than 5% of its total assets in the securities of
one or more issuers. Because a relatively high percentage of the assets of the
Fund may be invested in the securities of a limited number of issuers, the value
of shares of the Fund may be more sensitive to any single economic, business,
political or regulatory occurrence than the value of shares of a diversified
investment company. The Fund may borrow using its assets as collateral, but only
under certain limited conditions. Borrowing, if done, would tend to exaggerate
the effects of market fluctuations on the Fund's net asset value until repaid.
(See "Borrowing.")
OPTIONS. When the Advisor believes that individual portfolio securities
are approaching the Advisor's growth and price expectations, covered call
options (calls) may be written (sold) against such securities in a disciplined
approach to selling portfolio securities.
If the Fund writes a call, it receives a premium and agrees to sell the
underlying security to a purchaser of a corresponding call at a specified price
("strike price") by a future date ("exercise date"). To terminate its obligation
on a call the Fund has written, it may purchase a corresponding call in a
"closing purchase transaction". A profit or loss will be realized, depending
upon whether the price of the closing purchase transaction is more or less than
the premium (net of transaction costs) previously received on the call written.
The Fund may also realize a profit if the call it has written lapses
unexercised, in which case the Fund keeps the premium and retains the underlying
security as well. If a call written by the Fund is exercised, the Fund forgoes
any possible profit from an increase in the market price of the underlying
security over the exercise price plus the premium received. The Fund writes
options only for hedging purposes and not for speculation where the aggregate
value of the underlying obligations will not exceed 25% of the Fund's net
assets. If the Advisor is incorrect in its expectations and the market price of
a stock subject to a call option rises above the exercise price of the option,
the Fund will lose the opportunity for further appreciation of that security.
Profits on closing purchase transactions and premiums on lapsed calls
written are considered capital gains for financial reporting purposes and are
short term gains for federal income tax purposes. When short term gains are
distributed to shareholders, they are taxed as ordinary income. If the Fund
desires to enter into a closing purchase transaction, but there is no market
when it desires to do so, it would have to hold the securities underlying the
call until the call lapses or until the call is exercised.
The Fund will only write options which are issued by the Options
Clearing Corporation and listed on a national securities exchange. Call writing
affects the Fund's portfolio turnover rate and the
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brokerage commissions it pays. Commissions for options, which are normally
higher than for general securities transactions, are payable when writing calls
and when purchasing closing purchase transactions.
FOREIGN SECURITIES. Foreign securities investment presents special
considerations not typically associated with investments in domestic securities.
Foreign taxes may reduce income. Currency exchange rates and regulations may
cause fluctuations in the value of foreign securities. Foreign securities are
subject to different regulatory environments than exist in the United States
and, compared to the United States, there may be a lack of uniform accounting,
auditing and financial reporting standards, less volume and liquidity and more
volatility, less public information and less regulation of foreign issuers.
Countries have been known to expropriate or nationalize assets, and foreign
investments may be subject to political, financial or social instability or
adverse diplomatic developments. There may be difficulties in obtaining service
of process on foreign issuers and difficulties in enforcing judgments with
respect to claims under the U.S. securities laws against such issuers. Favorable
or unfavorable differences between U.S. and foreign economies could affect
foreign securities values. The U.S. Government has, in the past, discouraged
foreign investments by U.S. investors through taxation or other restrictions and
it is possible that such restrictions could be imposed again.
The Fund may invest in foreign issuers directly or though the purchase
of American Depository Receipts (ADRs). ADRs, which are traded domestically, are
receipts issued by a U.S. bank or trust company evidencing ownership of
securities of a foreign issuer. ADRs may be listed on a national securities
exchange or may trade in the over-the-counter market. The prices of ADRs are
denominated in U.S. dollars while the underlying security may be denominated in
a foreign currency. Direct investments in foreign securities will generally be
limited to foreign securities traded on foreign securities exchanges.
Although the Fund is not limited in the amount of foreign securities it
may acquire, it is presently expected that the Fund will not invest more than
10% of its assets (as measured at the time of purchase) in direct investments in
foreign securities traded on foreign securities exchanges.
MONEY MARKET INSTRUMENTS. Money market instruments may be purchased for
temporary defensive purposes, in an amount up to 100% of the Fund's assets, when
the Advisor believes the prospect for capital appreciation in the equity
securities markets is not attractive. Money market instruments will typically
represent a portion of the Fund's portfolio, as funds awaiting investment, to
accumulate cash for anticipated purchases of portfolio securities and to provide
for shareholder redemptions and operational expenses of the Fund. Money market
instruments mature in thirteen months or less from the date of
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purchase and may include U.S. Government Securities (defined below) and
corporate debt securities (including those subject to repurchase agreements),
bankers' acceptances and certificates of deposit of domestic branches of U.S.
banks, and commercial paper (including variable amount demand master notes). At
the time of purchase, money market instruments will have a short-term rating in
the highest category from any nationally recognized statistical rating
organization ("NRSRO") or, if not rated, will have been issued by a corporation
having an outstanding unsecured debt issue rated in the three highest categories
of any NRSRO or, if not so rated, will be of equivalent quality in the Advisor's
opinion.
U.S. GOVERNMENT SECURITIES. The Fund also may invest for temporary
defensive purposes all or a portion of its assets in U.S. Government Securities,
which include direct obligations of the U.S. Treasury, securities guaranteed as
to interest and principal by the U.S. Government such as obligations of the
Government National Mortgage Association, as well as securities issued or
guaranteed as to interest and principal by U.S. Government authorities, agencies
and instrumentalities such as the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, the Federal Land Bank, the Federal Farm
Credit Banks, the Federal Home Loan Banks, the Student Loan Marketing
Association, the Small Business Administration, the Bank for Cooperatives, the
Federal Intermediate Bank, the Federal Financing Bank, the Resolution Funding
Corporation, the Financing Corporation of America and the Tennessee Valley
Authority. U.S. Government Securities may be acquired subject to repurchase
agreements. While obligations of some U.S. Government sponsored entities are
supported by the full faith and credit of the U.S. Government, several are
supported by the right of the issuer to borrow from the U.S. Government, and
still others are supported only by the credit of the issuer itself. The
guarantee of the U.S. Government does not extend to the yield or value of the
U.S. Government Securities held by the Fund or to the Fund's shares.
BORROWING. The Fund may borrow, temporarily, up to 5% of its total
assets for extraordinary purposes and may increase this limit to 33.3% of its
total assets to meet redemption requests which might otherwise require untimely
disposition of portfolio holdings. To the extent the Fund borrows for these
purposes, the effects of market price fluctuations on portfolio net asset value
will be exaggerated. If, while such borrowing is in effect, the value of the
Fund's assets declines, the Fund would be forced to liquidate portfolio
securities when it is disadvantageous to do so. The Fund would incur interest
and other transaction costs in connection with such borrowing. The Fund will not
make any additional investments while its borrowings are outstanding.
ILLIQUID INVESTMENTS. The Fund may invest up to 15% of its net assets
in illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within
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seven days at approximately the price at which they are valued. Under the
supervision of the Board of Trustees, the Advisor determines the liquidity of
the Fund's investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
securities before maturity may be time consuming and expensive, and it may be
difficult or impossible for the Fund to sell illiquid securities promptly at an
acceptable price.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain, in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund will generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
PORTFOLIO TURNOVER. The Fund sells portfolio securities, without regard
to the length of time they have been held, in order to take advantage of new
investment opportunities or changes in business fundamentals, or if price
targets have been met. Nevertheless, the Fund's annual portfolio turnover
generally is not expected to exceed 100%. The degree of portfolio activity
affects the brokerage costs of the Fund and may have an impact on the amount of
taxable distributions to shareholders.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities
or other high-grade debt securities subject to repurchase agreements. A
repurchase agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an agreed
upon future date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to five days of
the purchase. The Fund's risk with respect to repurchase agreements is limited
to the ability of the vendor to pay the agreed upon sum upon the delivery date;
in the event of bankruptcy or other default by the vendor, there may be possible
delays and expenses in liquidating the instrument purchased, decline
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in its value and loss of interest. Under guidelines issued by the Trustees, the
Advisor will carefully consider the creditworthiness of a vendor during the term
of the repurchase agreement. For purposes of the Investment Company Act of 1940,
a repurchase agreement is considered to be a loan collateralized by the
securities subject to the repurchase agreement. The Fund will not enter into a
repurchase agreement which will cause more than 15% of its assets to be invested
in repurchase agreements which extend beyond seven days.
HOW TO PURCHASE SHARES
Your initial investment in the Fund ordinarily must be at least $1,000
($250 for tax-deferred retirement plans). The Fund may, in the Advisor's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. You may open an account and make an initial investment through
securities dealers having a sales agreement with the Fund's principal
underwriter, Pinnacle Investments, Inc. (the "Underwriter"). You may also make a
direct initial investment by sending a check and a completed account application
form to The New York State Opportunity Funds, P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable to "New York Equity Fund". Third party
checks will not be accepted. An account application is included in this
Prospectus. You may purchase additional shares through the Open Account Program
described below.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Fund.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Transfer Agent by 5:00 p.m., Eastern time,
that day are confirmed at the public offering price determined as of the close
of the regular session of trading on the New York Stock Exchange on that day. It
is the responsibility of dealers to transmit properly completed orders so that
they will be received by the Transfer Agent by 5:00 p.m., Eastern time. Dealers
may charge a fee for effecting purchase orders. Direct purchase orders received
by the Transfer Agent by 4:00 p.m., Eastern time, are confirmed at that day's
public offering price. Direct investments received by the Transfer Agent after
4:00 p.m., Eastern time, and orders received from dealers after 5:00 p.m.,
Eastern time, are confirmed at the public offering price next determined on the
following business day.
The public offering price of the Fund's shares is the next determined
net asset value per share plus an initial sales charge as shown in the following
table.
Dealer
Initial Sales Reallowance
Charge as % Of: as % of
Public Net Public
Offering Amount Offering
Amount Of Investment Price Invested Price
- -------------------- -------- -------- --------
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 4.00 4.17 3.25
$100,000 but less than $250,000 3.25 3.36 2.75
$250,000 but less than $500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 1.50 1.52 1.00
$1,000,000 or more None None
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<PAGE>
Under certain circumstances, the Underwriter may increase or decrease
the reallowance to dealers. Dealers engaged in the sale of shares of the Fund
may be deemed to be underwriters under the Securities Act of 1933. The
Underwriter retains the entire initial sales charge on all direct initial
investments in the Fund and on all investments in accounts with no designated
dealer of record.
The Fund mails you confirmations of all purchases or redemptions of
Fund shares. Certificates representing shares are not issued. The Fund and the
Underwriter reserve the right to limit the amount of investments and to refuse
to sell to any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Fund, the Underwriter, the Transfer Agent and certain
of their affiliates, excluding such entities from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services made available to investors.
Should an order to purchase shares be canceled because your check does
not clear, you will be responsible for any resulting losses or fees incurred by
the Fund or the Transfer Agent in the transaction.
OPEN ACCOUNT PROGRAM. Please direct inquiries concerning the services
described in this section to the Transfer Agent at the address or telephone
number listed below.
After an initial investment, all investors are considered participants
in the Open Account Program. The Open Account Program helps investors make
purchases of shares of the Fund over a period of years and permits the automatic
reinvestment of dividends and distributions of the Fund in additional shares.
Reinvestment of dividends and distributions in additional shares will be made
without an initial sales charge.
Under the Open Account Program, you may purchase and add shares to your
account at any time either through your securities dealer or by sending a check
to The New York State Opportunity Funds, P.O. Box 5354, Cincinnati, Ohio
45201-5354. The check should be made payable to "New York Equity Fund".
Under the Open Account Program, you may also purchase shares of the
Fund by bank wire. Please telephone the Transfer Agent (Nationwide call
toll-free 888-899-8344) for instructions. Your bank may impose a charge for
sending your wire. There is presently no fee for receipt of wired funds, but the
Fund reserves the right to charge shareholders for this service upon thirty
days' prior notice to shareholders.
Each additional purchase request must contain the name of your account
and your account number to permit proper crediting to your account. While there
is no minimum amount required for subsequent investments, the Fund reserves the
right to impose such a requirement. All purchases under the Open Account Program
are made at the public offering price next determined after receipt of a
purchase order by
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<PAGE>
the Fund. If a broker-dealer received concessions for selling shares of the Fund
to a current shareholder, such broker-dealer will receive the concessions
described above with respect to additional investments by the shareholder.
REDUCED INITIAL SALES CHARGE. A "purchaser" (defined below) may use the
Right of Accumulation to combine the cost or current net asset value (whichever
is higher) of his or her existing Fund shares with the amount of his or her
current purchases in order to take advantage of the reduced initial sales
charges set forth in the table above. Purchases made pursuant to a Letter of
Intent may also be eligible for the reduced initial sales charges. The minimum
initial investment under a Letter of Intent is $10,000. Shareholders should
contact the Transfer Agent for information about the Right of Accumulation and
Letter of Intent.
PURCHASES AT NET ASSET VALUE. You may purchase shares of the Fund at
net asset value when the payment for your investment represents the proceeds
from the redemption of shares of any other mutual fund which has an initial
sales charge. Your investment will qualify for this provision if the purchase
price of the shares of the other fund included an initial sales charge and the
redemption occurred within one year of the purchase of such shares and no more
than sixty days prior to your purchase of shares of the Fund. To make a purchase
at net asset value pursuant to this provision, you must submit photocopies of
the confirmations (or similar evidence) showing the purchase and redemption of
shares of the other fund. Your payment may be made with the redemption check
representing the proceeds of the shares redeemed, endorsed to the order of the
Fund. The redemption of shares of the other fund is, for federal income tax
purposes, a sale on which you may realize a gain or loss. These provisions may
be modified or terminated at any time. Contact your securities dealer or the
Transfer Agent for further information.
Banks, bank trust departments and savings and loan associations, in
their fiduciary capacity or for their own accounts, may also purchase shares of
the Fund at net asset value. To the extent permitted by regulatory authorities,
a bank trust department may charge fees to clients for whose account it
purchases shares at net asset value. Federal and state credit unions may also
purchase shares at net asset value.
In addition, shares of the Fund may be purchased at net asset value by
broker-dealers who have a sales agreement with the Underwriter, and their
registered personnel and employees, including members of the immediate families
of such registered personnel and employees.
Clients of investment advisors and financial planners may also purchase
shares of the Fund at net asset value if their investment advisor or financial
planner has made arrangements to permit them to do so with the Fund and the
Underwriter. The investment advisor or financial planner must notify the Fund
that an investment qualifies as a purchase at net asset value.
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<PAGE>
Trustees, directors, officers and employees of the Fund, the Advisor,
the Underwriter or the Transfer Agent, including members of the immediate
families of such individuals and employee benefit plans established by such
entities, may also purchase shares of the Fund at net asset value.
ADDITIONAL INFORMATION. For purposes of determining the applicable
initial sales charge and for purposes of the Letter of Intent and Right of
Accumulation privileges, a purchaser includes an individual, his or her spouse
and their children under the age of 21, purchasing shares for his, her or their
own account; a trustee or other fiduciary purchasing shares for a single
fiduciary account although more than one beneficiary is involved; employees of a
common employer, provided that economies of scale are realized through
remittances from a single source and quarterly confirmation of such purchases;
or an organized group, provided that the purchases are made through a central
administration, or a single dealer, or by other means which result in economy of
sales effort or expense. Contact the Transfer Agent for additional information
concerning purchases at net asset value or at reduced initial sales charges.
SHAREHOLDER SERVICES
Contact the Transfer Agent (Nationwide call toll-free 888-899-8344) for
additional information about the shareholder services described below.
AUTOMATIC WITHDRAWAL PLAN
If the shares in your account have a value of at least $5,000, you may
elect to receive, or may designate another person to receive, monthly or
quarterly payments in a specified amount of not less than $50 each. There is no
charge for this service. Purchases of additional shares of the Fund while the
plan is in effect are generally undesirable because an initial sales charge is
incurred whenever purchases are made.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Fund are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for individuals
and their non-employed spouses
-- Qualified pension and profit-sharing plans for employees,
including those profit-sharing plans with a 401(k) provision
-- 403(b)(7) custodial accounts for employees of public school
systems, hospitals, colleges and other non-profit
organizations meeting certain requirements of the Internal
Revenue Code
- 15 -
<PAGE>
DIRECT DEPOSIT PLANS
Shares of the Fund may be purchased through direct deposit plans
offered by certain employers and government agencies. These plans enable a
shareholder to have all or a portion of his or her payroll or social security
checks transferred automatically to purchase shares of the Fund.
AUTOMATIC INVESTMENT PLAN
You may make automatic monthly investments in the Fund from your bank,
savings and loan or other depository institution account. The minimum initial
and subsequent investments must be $50 under the plan. The Fund pays the costs
associated with these transfers, but reserves the right, upon thirty days'
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce the your return from an investment in the Fund.
REINVESTMENT PRIVILEGE
If you have redeemed shares of the Fund, you may reinvest all or part
of the proceeds without any additional sales charge. This reinvestment must
occur within ninety days of the redemption and the privilege may only be
exercised once per year.
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Fund is open for
business by sending a written request to the Fund. The request must state the
number of shares or the dollar amount to be redeemed and your account number.
The request must be signed exactly as your name appears on the Fund's account
records. If the shares to be redeemed have a value of $25,000 or more, your
signature must be guaranteed by any eligible guarantor institution, including
banks, brokers and dealers, municipal securities brokers and dealers, government
securities brokers and dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
You may also redeem shares by placing a wire redemption request through
a securities broker or dealer. Unaffiliated broker-dealers may impose a fee on
the shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Transfer Agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
If your instructions request a redemption by wire, you will be charged
an $8 processing fee. The Fund reserves the right, upon thirty days' written
notice, to change the processing fee. All charges will be deducted from the your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
- 16 -
<PAGE>
Redemption requests may direct that the proceeds be deposited directly
in your account with a commercial bank or other depository institution via an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Fund for more information about ACH transactions.
Shares are redeemed at the net asset value per share next determined
after receipt by the Transfer Agent of a proper redemption request in the form
described above, less any applicable charges imposed by unaffiliated brokers,
dealers or your bank, as described herein. Payment is normally made within three
business days after tender in such form, provided that payment in redemption of
shares purchased by check will be effected only after the check has been
collected, which may take up to fifteen days from the purchase date. To
eliminate this delay, you may purchase shares of the Fund by certified check or
wire.
At the discretion of the Fund or the Transfer Agent, corporate
investors and other associations may be required to furnish an appropriate
certification authorizing redemptions to ensure proper authorization. The Fund
reserves the right to require you to close your account if at any time the value
of your shares is less than $1,000 (based on actual amounts invested including
any initial sales charge paid, unaffected by market fluctuations), or $250 in
the case of tax-deferred retirement plans, or such other minimum amount as the
Fund may determine from time to time. After notification to the you of the
Fund's intention to close the your account, you will be given thirty days to
increase the value of your account to the minimum amount.
The Fund reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to distribute substantially all of its net investment
income, if any, on an annual basis. The Fund expects to distribute any net
realized long-term capital gains at least once each year. Management will
determine the timing and frequency of the distributions of any net realized
short-term capital gains.
Shareholders will receive dividends and distributions in additional
Fund shares; however, shareholders may elect to receive dividends and
distributions in cash. The following options are available to shareholders:
Share Option - income distributions and capital gains
distributions reinvested in additional shares.
Income Option - income distributions and short-term capital
gains distributions paid in cash; long-term
- 17 -
<PAGE>
capital gains distributions reinvested in
additional shares.
Cash Option - income distributions and capital gains
distributions paid in cash.
You should indicate your choice of option on the application. If no option is
selected, distributions will automatically be reinvested in additional shares.
All distributions will be based on the net asset value in effect on the payable
date.
If you choose to receive cash and the U.S. Postal Service cannot
deliver your checks or if the your checks remain uncashed for six months, your
dividends may be reinvested in your account at the then-current net asset value
and thereafter may continue to be reinvested in such shares. No interest will
accrue on amounts represented by uncashed distribution checks.
An investor who has received any dividend or capital gains distribution
from the Fund in cash may return the distribution to the Fund within thirty days
of the distribution date for reinvestment at the net asset value next determined
after its return. The investor or his or her dealer must notify the Fund that a
distribution is being reinvested pursuant to this provision.
TAXES
The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. The Fund intends to distribute substantially all of its net
investment income and any net realized capital gains to its shareholders.
Distributions of net investment income as well as from net realized short-term
capital gains, if any, are taxable as ordinary income. Dividends distributed by
the Fund from net investment income may be eligible, in whole or in part, for
the dividends received deduction available to corporations. Distributions of net
realized long-term capital gains are taxable as long-term capital gains
regardless of how long you have held your Fund shares. Redemptions of shares of
the Fund are taxable events on which a shareholder may realize a gain or loss.
The Fund will mail to each of its shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Fund may be subject to
state and local taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals from the Fund and
the use of the Automatic Withdrawal Plan. The tax consequences described in this
section apply whether distributions are taken in cash or reinvested in
additional shares.
- 18 -
<PAGE>
OPERATION OF THE FUND
The Fund is a non-diversified series of The New York State Opportunity
Funds, an open-end management investment company organized as a Massachusetts
business trust on November 20, 1996. The Board of Trustees supervises the
business activities of the Trust. Like other mutual funds, the Trust retains
various organizations to perform specialized services for the Fund.
The Trust retains Pinnacle Advisors LLC, 4605 E. Genesee Street,
DeWitt, New York (the "Advisor"), to manage the Fund's investments. The
controlling shareholder of the Advisor is Gregg A. Kidd. The Advisor has not
previously provided investment advisory services to a registered investment
company. The Fund pays the Advisor a fee equal to the annual rate of 1% of the
average value of its daily net assets up to $100 million; .95% of such assets
from $100 million to $200 million; and .85% of such assets in excess of $200
million.
Mr. Kidd is primarily responsible for the day-to-day management
of the Fund's portfolio. Prior to founding the Advisor in 1996, Mr.
Kidd was a Vice President of Smith Barney, Inc., a registered broker-
dealer and investment advisor.
The Fund is responsible for the payment of all operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, expenses related to the distribution of the Fund's shares (see
"Distribution Plan"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Fund, fees and expenses of members of the Board of Trustees who are not
interested persons of the Fund, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
non-recurring expenses as may arise, including litigation to which the Fund may
be a party and indemnification of the Fund's officers and Trustees with respect
thereto.
Pinnacle Investments, Inc., 4605 E. Genesee Street, DeWitt, New York
(the "Underwriter"), an affiliate of the Advisor, serves as principal
underwriter for the Fund and, as such, is the exclusive agent for the
distribution of shares of the Fund.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent") to serve as the Fund's transfer agent,
dividend paying agent and shareholder service agent. The Transfer Agent is a
wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in residential mortgage
lending.
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<PAGE>
The Transfer Agent also provides accounting and pricing services to the
Fund. The Transfer Agent receives a monthly fee from the Fund for calculating
daily net asset value per share and maintaining such books and records as are
necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained to provide
administrative services to the Fund. In this capacity, the Transfer Agent
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
Commission and state securities authorities. The Fund pays the Transfer Agent a
fee for these administrative services at the annual rate of .15% of the average
value of its daily net assets up to $25,000,000, .125% of such assets from
$25,000,000 to $50,000,000 and .1% of such assets in excess of $50,000,000;
provided, however, that the minimum fee is $1,000 per month.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its objective of seeking best
execution of portfolio transactions, the Advisor may give consideration to sales
of shares of the Fund as a factor in the selection of brokers and dealers to
execute portfolio transactions of the Fund. Subject to the requirements of the
Investment Company Act of 1940 (the "1940 Act") and procedures adopted by the
Board of Trustees, the Fund may execute portfolio transactions through any
broker or dealer and pay brokerage commissions to a broker (i) which is an
affiliated person of the Fund, or (ii) which is an affiliated person of such
person, or (iii) an affiliated person of which is an affiliated person of the
Fund, the Advisor or the Underwriter.
Shares of the Fund have equal voting rights and liquidation rights.
When matters are submitted to shareholders for a vote, each shareholder is
entitled to one vote for each full share owned and fractional votes for
fractional shares owned. The Fund does not normally hold annual meetings of
shareholders. The Trustees shall promptly call and give notice of a meeting of
shareholders for the purpose of voting upon the removal of any Trustee when
requested to do so in writing by shareholders holding 10% or more of the Fund's
outstanding shares. The Fund will comply with the provisions of Section 16(c) of
the 1940 Act in order to facilitate communications among shareholders.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a plan
of distribution (the "Plan") under which the Fund may directly incur or
reimburse the Underwriter for certain distribution-related expenses, including
payments to securities dealers and others who are engaged in the sale of shares
of the Fund and who may be advising investors regarding the purchase, sale or
retention of Fund shares;
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<PAGE>
expenses of maintaining personnel who engage in or support distribution of
shares or who render shareholder support services not otherwise provided by the
Transfer Agent or the Fund; expenses of formulating and implementing marketing
and promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports for
recipients other than existing shareholders of the Fund; expenses of obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Fund may, from time to time, deem advisable; and any other
expenses related to the distribution of the Fund's shares.
The annual limitation for payment of expenses pursuant to the Plan is
.25% of the Fund's average daily net assets. In the event the Plan is terminated
by the Fund in accordance with its terms, the Fund will not be required to make
any payments for expenses incurred by the Underwriter after the date the Plan
terminates.
Pursuant to the Plan, the Fund may also make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the Fund
believes that the Glass-Steagall Act should not preclude a bank from providing
such services. However, 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. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Fund believes that there would be no material impact on the
Fund or its shareholders. Banks may charge their customers fees for offering
these services to the extent permitted by applicable regulatory authorities, and
the overall return to those shareholders availing themselves of the bank
services will be lower than to those shareholders who do not. The Fund may from
time to time purchase securities issued by banks which provide such services;
however, in selecting investments for the Fund, no preference will be shown for
such securities.
The National Association of Securities Dealers, in its Rules of Fair
Practice, places certain limitations on asset-based sales charges of mutual
funds. These Rules require fund-level accounting in which all sales charges -
initial sales charge, 12b-1 fees or contingent deferred sales charge - terminate
when a percentage of gross sales is reached.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
On each day that the Fund is open for business, the public offering
price (net asset value plus applicable initial sales charge)
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<PAGE>
of the shares of the Fund is determined as of the close of the regular session
of trading on the New York Stock Exchange, currently 4:00 p.m., Eastern time.
The Fund is open for business on each day the New York Stock Exchange is open
for business and on any other day when there is sufficient trading in the Fund's
investments that its net asset value might be materially affected. The net asset
value per share of the Fund is calculated by dividing the sum of the value of
the securities held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares outstanding
of the Fund, rounded to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices
as obtained from one or more of the major market makers for such securities.
Other portfolio securities are valued as follows: (i) securities which are
traded on stock exchanges or are quoted by NASDAQ are valued at the last
reported sale price as of the close of the regular session of trading on the New
York Stock Exchange on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price, (ii) securities traded in
the over-the-counter market, and which are not quoted by NASDAQ, are valued at
the last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (iii) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (iv) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total
return." Average annual total return figures are based on historical earnings
and are not intended to indicate future performance.
The "average annual total return" of the Fund refers to the average
annual compounded rates of return over the most recent 1, 5 and 10 year periods
or, where the Fund has not been in operation for such period, over the life of
the Fund (which periods will be stated in the advertisement) that would equate
an initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions and the
deduction of the current maximum sales charge from the initial investment. The
Fund may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the
- 22 -
<PAGE>
account other than reinvestment of dividends and capital gains distributions. A
nonstandardized quotation of total return may also indicate average annual
compounded rates of return over periods other than those specified for "average
annual total return." These nonstandardized returns do not include the effect of
the applicable initial sales charge which, if included, would reduce total
return. A nonstandardized quotation of total return will always be accompanied
by the Fund's "average annual total return" as described above.
From time to time, the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, FORTUNE or MORNINGSTAR MUTUAL FUND VALUES. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within its category as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average and the Standard & Poor's
500 Stock Index. In connection with a ranking, the Fund may provide additional
information, such as the particular category of funds to which the ranking
relates, the number of funds in the category, the criteria upon which the
ranking is based, and the effect of fee waivers and/or expense reimbursements,
if any. The Fund may also present its performance and other investment
characteristics, such as volatility or a temporary defensive posture, in light
of the Advisor's view of current or past market conditions or historical trends.
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<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
4605 E. Genesee Street
DeWitt, New York 13214
BOARD OF TRUSTEES
Gregg A. Kidd
Joseph Masella
R. Earnie Seibert
Joseph E. Stanton
INVESTMENT ADVISOR
PINNACLE ADVISORS LLC
4605 E. Genesee Street
DeWitt, New York 13214
UNDERWRITER
PINNACLE INVESTMENTS, INC.
4605 E. Genesee Street
DeWitt, New York 13214
LEGAL COUNSEL
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 Third Avenue
41st Floor
New York, New York 10022-3852
INDEPENDENT AUDITORS
MCGLADREY & PULLEN, LLP
555 Fifth Avenue
New York, New York 10017-2416
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street
New York, New York 10286
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
312 Walnut Street
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICES
Nationwide: (Toll-Free) 888-899-8344
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell
shares in any State to any person to whom it is unlawful for the Fund to make
such offer in such State.
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<PAGE>
[Artist's rendition of New York state.]
New York State
Opportunity Funds
Invest close to home...
PROSPECTUS
October 30, 1997
<PAGE>
NEW YORK EQUITY FUND ACCOUNT NO. 38 -___________________
Account Application (For Fund Use Only)
Please mail completed account application to FOR BROKER/DEALER USE ONLY
Countrywide Fund Services, Inc. Firm Name:______________________
P.O. Box 5354 Home Office Address:____________
Cincinnati, Ohio 45201-5354 Branch Address:_________________
Rep Name & No.:_________________
Rep Signature:__________________
Initial Investment of $______________ ($1,000 minimum).
o Check or draft enclosed payable to the New York Equity Fund.
o Bank Wire From: _____________________________________________________________
Account Name S.S. #/Tax I.D.#
_________________________________________________ _____________________________
Name of Individual, Corporation, Organization, (In case of custodial
or Minor, etc. account please list
minor's S.S.#)
_________________________________________________ Citizenship: o U.S.
Name of Joint Tenant, Partner, Custodian o Other________
Address Phone
_________________________________________________ ( )________________________
Street or P.O. Box Business Phone
_________________________________________________ ( )________________________
City State Zip Home Phone
Check Appropriate Box:o Individual o Joint Tenant(Right of Survivorship Presumed
o Partnership o Corporation o Trust o Custodial o Non-Profit o Other
Occupation and Employer Name/Address____________________________________________
Are you an associated person of an NASD member? o Yes o No
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends; or the
Internal Revenue Service has notified me that I am no longer subject to backup
withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me and I have mailed or delivered an application to receive a
Taxpayer Identification Number to the Internal Revenue Service Center or Social
Security Administration Office. I understand that if I do not provide a Taxpayer
Identification Number within 60 days that 31% of all reportable payments will be
withheld until I provide a number.
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short term capital gains
distributions paid in cash, long term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions paid
in cash. (o By Check o By ACH - Please attach a voided
check.)
REDUCED SALES CHARGES
Right of Accumulation: I apply for Right of Accumulation subject to the Agent's
confirmation of the following holdings of the New York Equity Fund.
Account Number/Name Account Number/Name
______________________________________ ______________________________________
______________________________________ ______________________________________
Letter of Intent: (Complete the Right of Accumulation section if related
accounts are being applied to your Letter of Intent.)
o I agree to the Letter of Intent in the current Prospectus of the New York
Equity Fund. Although I am not obligated to purchase, and the Fund is not
obligated to sell, I intend to invest over a 13 month period beginning
______________________ 19 _______ (purchase date of not more than 90 days prior
to this Letter) an aggregate amount in the Fund at least equal to (check
appropriate box):
o $50,000 o $100,000 o $250,000 o $500,000 o $1,000,000
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for
shares, to receive dividends and distributions for automatic reinvestment in
additional shares of the Fund for credit to the investor's account and to
surrender for redemption shares held in the investor's account for payment of
service charges incurred by the investor. The investor further agrees that
Countrywide Fund Services, Inc. can cease to act as such agent upon ten days'
notice in writing to the investor at the address contained in this Application.
The investor hereby ratifies any instructions given pursuant to this Application
and for himself and his successors and assigns does hereby release the Fund,
Pinnacle Investments, Inc., Pinnacle Advisors LLC, Countrywide Fund Services,
Inc., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. The Internal
Revenue Service does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.
____________________________________ ___________________________________
Signature of Individual Owner, Signature of Joint Owner, if Any
Corporate Officer, Trustee, etc.
____________________________________ ___________________________________
Title of Corporate Officer, Date
Trustee, etc.
NOTE: Corporations, business trusts and other organizations
must complete the resolution form on the reverse side. Unless
otherwise specified, each joint owner shall have full authority
to act on behalf of the account.
<PAGE>
AUTOMATIC INVESTMENT PLAN (Complete for Investments into the Fund)
The Automatic Investment Plan is available for all established accounts of the
New York Equity Fund. There is no charge for this service, and it offers the
convenience of automatic investing on a regular basis. The minimum investment is
$50.00 per month. For an account that is opened by using this Plan, the minimum
initial and subsequent investments must be $50.00. Though a continuous program
of 12 monthly investments is recommended, the Plan may be discontinued by the
shareholder at any time.
Please invest $ _________ per month
in the New York Equity Fund ABA Routing Number_____________________
FI Account Number______________________
o Checking Account o Savings Account
_____________________________________
Name of Financial Institution (FI) Please make my automatic investment on:
o the last business day of each month
o the 15th day of each month
_____________________________________ o both the 15th and last business day
City State
X____________________________________ X______________________________________
(Signature of Depositor EXACTLY (Signature of Joint Tenant - if any)
as it appears on FI Records)
(Joint Signatures are required when bank account is in joint names. Please sign
exactly as signature appears on your FI's records.)
Please attach a voided check for the Automatic Investment Plan.
Indemnification to Depositor's Bank
In consideration of your participation in a plan which Countrywide Fund
Services, Inc. ("Countrywide") has put into effect, by which amounts, determined
by your depositor, payable to the Fund, for purchase of shares of the Fund, are
collected by Countrywide, Countrywide hereby agrees:
Countrywide will indemnify and hold you harmless from any liability to any
person or persons whatsoever arising out of the payment by you of any amount
drawn by the Fund to its own order on the account of your depositor or from any
liability to any person whatsoever arising out of the dishonor by you whether
with or without cause or intentionally or inadvertently, of any such amount.
Countrywide will defend, at its own cost and expense, any action which might be
brought against you by any person or persons whatsoever because of your actions
taken pursuant to the foregoing request or in any manner arising by reason of
your participation in this arrangement. Countrywide will refund to you any
amount erroneously paid by you to the Fund if the claim for the amount of such
erroneous payment is made by you within six (6) months from the date of such
erroneous payment; your participation in this arrangement and that of the Fund
may be terminated by thirty (30) days' written notice from either party to the
other.
AUTOMATIC WITHDRAWAL PLAN (Complete for Withdrawals from the Fund)
This is an authorization for you to withdraw $__________ from my mutual fund
account beginning the last business day of the month of ___________.
Please Indicate Withdrawal Schedule (Check One):
o Monthly -- Withdrawals will be made on the last business day of each month.
o Quarterly -- Withdrawals will be made on or about 3/31, 6/30, 9/30 and 12/31.
o Annually -- Please make withdrawals on the last business day
of the month of: ____________.
Please Select Payment Method (Check One):
o Check: Please mail a check for my withdrawal proceeds to the mailing address
on this account.
o ACH Transfer: Please send my withdrawal proceeds via ACH transfer to my bank
checking or savings account as indicated below. I understand that the
transfer will be completed in two to three business days and that there is no
charge.
o Bank Wire: Please send my withdrawal proceeds via bank wire, to the account
indicated below. I understand that the wire will be completed in one business
day and that there is an $8.00 fee.
Please attach a voided ______________________________________________
check for ACH or bank wire Bank Name Bank Address
______________________________________________
Bank ABA# Account # Account Name
o Send to special payee (other than applicant): Please mail a check for my
withdrawal proceeds to the mailing address below:
Name of payee___________________________________________________________________
Please send to:_________________________________________________________________
Street address City State Zip
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the
New York Equity Fund (the Fund) and that
________________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Fund,
and it is
FURTHER RESOLVED: That any one of the above noted officers is authorized to sign
any documents necessary or appropriate to appoint Countrywide Fund Services,
Inc. as redemption agent of the corporation or organization for shares of the
applicable series of the Fund, to establish or acknowledge terms and conditions
governing the redemption of said shares and to otherwise implement the
privileges elected on the Application.
Certificate
I hereby certify that the foregoing resolutions are in conformity with the
Charter and Bylaws or other empowering documents of the
________________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of________________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on ____________ at which a
quorum was present and acting throughout, and that the same are now in full
force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the foregoing
resolutions.
Name Title
____________________________________ ___________________________________
____________________________________ ___________________________________
____________________________________ ___________________________________
Witness my hand and seal of the corporation or organization this__________day
of___________________, 19______
____________________________________ ___________________________________
*Secretary-Clerk Other Authorized Officer
(if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
October 30, 1997
New York Equity Fund
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of The New York State Opportunity Funds dated
October 30, 1997. A copy of the Fund's Prospectus can be obtained by writing the
Fund at 4605 E. Genesee Street, DeWitt, New York 13214, or by calling the Fund
nationwide toll-free 888-899-8344.
- 1 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The New York State Opportunity Funds
4605 E. Genesee Street
DeWitt, New York 13214
TABLE OF CONTENTS
PAGE
THE TRUST................................................................ 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS.............................. 3
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS.................... 7
INVESTMENT LIMITATIONS..................................................... 9
TRUSTEES AND OFFICERS......................................................10
THE INVESTMENT ADVISOR.....................................................12
THE UNDERWRITER............................................................13
DISTRIBUTION PLAN..........................................................14
SECURITIES TRANSACTIONS....................................................15
PORTFOLIO TURNOVER.........................................................17
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE.......................17
OTHER PURCHASE INFORMATION.................................................17
TAXES......................................................................19
REDEMPTION IN KIND.........................................................20
HISTORICAL PERFORMANCE INFORMATION.........................................20
PRINCIPAL SECURITY HOLDERS.................................................22
CUSTODIAN..................................................................22
INDEPENDENT AUDITORS.......................................................23
COUNTRYWIDE FUND SERVICES, INC.............................................23
FINANCIAL STATEMENTS.......................................................24
- 2 -
<PAGE>
THE TRUST
The New York State Opportunity Funds (the "Trust") was organized as a
Massachusetts business trust on November 20, 1996. The Trust currently offers
one series of shares to investors, the New York Equity Fund (the "Fund").
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to the Fund with each other share of the
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
the Fund into a greater or lesser number of shares so long as the proportionate
beneficial interest in the assets belonging to the Fund are in no way affected.
In case of any liquidation of the Fund, the holders of shares of the Fund being
liquidated will be entitled to receive as a class a distribution out of the
assets, net of the liabilities, belonging to the Fund. No shareholder is liable
to further calls or to assessment by the Fund without his express consent.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of any instance where such result has occurred. In addition, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Agreement and Declaration of Trust also provides for the
indemnification out of the Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Moreover,
it provides that the Trust will, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. As a result, and particularly because the Trust assets are
readily marketable and ordinarily substantially exceed liabilities, management
believes that the risk of shareholder liability is slight and limited to
circumstances in which the Trust itself would be unable to meet its obligations.
Management believes that, in view of the above, the risk of personal liability
is remote.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objective, Investment
Policies and Risk Considerations") appears below:
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<PAGE>
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Fund means the
lesser of (1) 67% or more of the Fund's outstanding shares present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented at such meeting or (2) more than 50% of the outstanding
shares of the Fund.
WRITING COVERED CALL OPTIONS. The writing of call options by the Fund
is subject to limitations established by each of the exchanges governing the
maximum number of options which may be written or held by a single investor or
group of investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one or
more accounts or through one or more different exchanges or through one or more
brokers. Therefore the number of calls the Fund may write (or purchase in
closing transactions) may be affected by options written or held by other
entities, including other clients of the Advisor. An exchange may order the
liquidation of positions found to be in violation of these limits and may impose
certain other sanctions.
WARRANTS AND RIGHTS. Warrants are essentially options to purchase
equity securities at specific prices and are valid for a specific period of
time. Prices of warrants do not necessarily move in concert with the prices of
the underlying securities. Rights are similar to warrants but generally have a
short duration and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer.
FOREIGN SECURITIES. The Fund may invest in foreign securities if the
Advisor believes such investment would be consistent with the Fund's investment
objective. The same factors would be considered in selecting foreign securities
as with domestic securities, as discussed in the Prospectus. Foreign securities
investment presents special considerations not typically associated with
investments in domestic securities. Foreign taxes may reduce income. Currency
exchange rates and regulations may cause fluctuation in the value of foreign
securities. Foreign securities are subject to different regulatory environments
than in the United States and, compared to the United States, there may be a
lack of uniform accounting, auditing and financial reporting standards, less
volume and liquidity and more volatility, less public information and less
regulation of foreign issuers. Countries have been known to expropriate or
nationalize assets, and foreign investments may be subject to political,
financial or social instability or adverse diplomatic developments. There may be
difficulties in obtaining service of process on foreign issuers and difficulties
in enforcing judgments with respect to claims under the U.S. securities laws
against such issuers. Favorable or unfavorable differences between U.S. and
foreign economies could affect
- 4 -
<PAGE>
foreign securities values. The U.S. Government has, in the past, discouraged
certain foreign investments by U.S. investors through taxation or other
restrictions and it is possible that such restrictions could be imposed again.
REPURCHASE AGREEMENTS. The Fund may acquire U.S. Government Securities
or other high-grade debt securities subject to repurchase agreements. A
repurchase transaction occurs when, at the time the Fund purchases a security
(normally a U.S. Treasury obligation), it also resells it to the vendor
(normally a member bank of the Federal Reserve System or a registered Government
Securities dealer) and must deliver the security (and/or securities substituted
for them under the repurchase agreement) to the vendor on an agreed upon date in
the future. Such securities, including any securities so substituted, are
referred to as the "Repurchase Securities." The repurchase price exceeds the
purchase price by an amount which reflects an agreed upon market interest rate
effective for the period of time during which the repurchase agreement is in
effect.
The majority of these transactions run day-to-day, and the delivery
pursuant to the resale typically will occur within one to five days of the
purchase. The Fund's risk is limited to the ability of the vendor to pay the
agreed upon sum upon the delivery date; in the event of bankruptcy or other
default by the vendor, there may be possible delays and expenses in liquidating
the instrument purchased, decline in its value and loss of interest. These risks
are minimized when the Fund holds a perfected security interest in the
Repurchase Securities and can therefore sell the instrument promptly. Under
guidelines issued by the Trustees, the Advisor will carefully consider the
creditworthiness of a vendor during the term of the repurchase agreement.
Repurchase agreements are considered loans collateralized by the Repurchase
Securities, such agreements being defined as "loans" under the Investment
Company Act of 1940 (the "1940 Act"). The return on such "collateral" may be
more or less than that from the repurchase agreement. The market value of the
resold securities will be monitored so that the value of the "collateral" is at
all times as least equal to the value of the loan, including the accrued
interest earned thereon. All Repurchase Securities will be held by the Fund's
custodian either directly or through a securities depository.
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may
include U.S. Government Securities or corporate debt obligations (including
those subject to repurchase agreements) as described herein, provided that they
mature in thirteen months or less from the date of acquisition and are otherwise
eligible for purchase by the Fund. Money market instruments also may include
Bankers' Acceptances and Certificates of Deposit of domestic branches of U.S.
banks, Commercial Paper and Variable Amount Demand Master Notes ("Master
Notes"). BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank,
which are the customary means of effecting
- 5 -
<PAGE>
payment for merchandise sold in import-export transactions and are a source of
financing used extensively in international trade. When a bank "accepts" such a
time draft, it assumes liability for its payment. When the Fund acquires a
Bankers' Acceptance, the bank which "accepted" the time draft is liable for
payment of interest and principal when due. The Bankers' Acceptance, therefore,
carries the full faith and credit of such bank. A CERTIFICATE OF DEPOSIT ("CD")
is an unsecured interest-bearing debt obligation of a bank. CDs acquired by the
Fund would generally be in amounts of $100,000 or more. COMMERCIAL PAPER is an
unsecured, short term debt obligation of a bank, corporation or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest-bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in the highest rating
category by any nationally recognized statistical rating organization ("NRSRO")
or, if not rated, if the issuer has an outstanding unsecured debt issue rated in
the three highest categories by any NRSRO or, if not so rated, is of equivalent
quality in the Advisor's assessment. Commercial Paper may include Master Notes
of the same quality. MASTER NOTES are unsecured obligations which are redeemable
upon demand of the holder and which permit the investment of fluctuating amounts
at varying rates of interest. Master Notes are acquired by the Fund only through
the Master Note program of the Fund's custodian, acting as administrator
thereof. The Advisor will monitor, on a continuous basis, the earnings power,
cash flow and other liquidity ratios of the issuer of a Master Note held by the
Fund.
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. The Fund may purchase
securities on a when-issued basis or for settlement at a future date if the Fund
holds sufficient assets to meet the purchase price. In such purchase
transactions the Fund will not accrue interest on the purchased security until
the actual settlement. Similarly, if a security is sold for a forward date, the
Fund will accrue the interest until the settlement of the sale. When-issued
security purchases and forward commitments have a higher degree of risk of price
movement before settlement due to the extended time period between the execution
and settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Fund would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Fund may sell such a security prior to the
settlement date if the Advisor felt such action was appropriate. In such a case
the Fund could incur a short-term gain or loss.
UNSEASONED ISSUERS. The Fund may invest a portion of its assets in
small, unseasoned companies. While smaller companies generally have potential
for rapid growth, they often involve higher risks because they lack the
management experience,
- 6 -
<PAGE>
financial resources, product diversification and competitive strengths of larger
corporations. In addition, in many instances, the securities of smaller
companies are traded only over-the-counter or on a regional securities exchange,
and the frequency and volume of their trading is substantially less than is
typical of larger companies. Therefore, the securities of smaller companies may
be subject to wider price fluctuations. When making large sales, the Fund may
have to sell portfolio holdings at discounts from quoted prices or may have to
make a series of small sales over an extended period of time. The Fund does not
currently intend to invest more than 5% of its net assets in the securities of
unseasoned issuers.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which the Funds may invest are as follows:
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payment and principal security appear adequate for the present but
certain protective elements may be
- 7 -
<PAGE>
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.
STANDARD & POOR'S RATINGS GROUP
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for preferred stocks in which the Funds may invest are as follows:
MOODY'S INVESTORS SERVICE, INC.
aaa - An issue which is rated aaa is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a - An issue which is rated a is considered to be an upper- medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
- 8 -
<PAGE>
STANDARD & POOR'S RATINGS GROUP
AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
INVESTMENT LIMITATIONS
The Fund has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Fund. These limitations may
not be changed without the affirmative vote of a majority of the outstanding
shares of the Fund.
Under these fundamental limitations, the Fund MAY NOT:
(1) Issue senior securities, borrow money or pledge its assets, except that it
may borrow from banks as a temporary measure (a) for extraordinary or
emergency purposes, in amounts not exceeding 5% of the Fund's total assets,
or (b) in order to meet redemption requests that might otherwise require
untimely disposition of portfolio securities if, immediately after such
borrowing, the value of the Fund's assets, including all borrowings then
outstanding, less its liabilities (excluding all borrowings), is equal to
at least 300% of the aggregate amount of borrowings then outstanding, and
may pledge its assets to secure all such borrowings;
(2) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
- 9 -
<PAGE>
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(4) Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.);
(5) Make loans of money or securities, except that the Fund may invest in
repurchase agreements;
(6) Write, purchase or sell commodities, commodities contracts, futures
contracts or related options (except that the Fund may write covered call
options as described in the Prospectus);
(7) Invest more than 25% of its total assets in the securities of issuers in
any particular industry, except that this restriction does not apply to
investment in securities of the United States Government, its agencies or
instrumentalities;
(8) Invest for the purpose of exercising control or management of another
issuer; or
(9) Invest in interests in real estate, real estate mortgage loans, oil, gas or
other mineral exploration or development programs, except that the Fund may
invest in the securities of companies (other than those which are not
readily marketable) which own or deal in such things.
Percentage restrictions stated as an investment limitation apply at the
time of investment; if a later increase or decrease in percentage beyond the
specified limits results from a change in securities values or total assets, it
will not be considered a violation. However, in the case of the borrowing
limitation (limitation number 1, above), the Fund will, to the extent necessary,
reduce its existing borrowings to comply with the limitation.
While the Fund has reserved the right to make short sales "against the
box" (limitation number 4, above), the Advisor has no present intention of
engaging in such transactions at this time or during the coming year.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the 1940 Act, is indicated by an asterisk.
- 10 -
<PAGE>
ESTIMATED ANNUAL
COMPENSATION
NAME AGE POSITION HELD FROM THE TRUST
*Gregg A. Kidd 35 President $
and Trustee 0
+Joseph Masella 47 Trustee 3,000
+R. Earnie Seibert 42 Trustee 3,000
+Joseph E. Stanton 69 Trustee 3,000
Robert G. Dorsey 40 Vice President 0
Mark J. Seger 35 Treasurer 0
Tina D. Hosking 28 Secretary 0
John F. Splain 40 Asst. Secretary 0
* Mr. Kidd, as an affiliated person of the Advisor and the
Underwriter, is an "interested person" within the meaning of
Section 2(a)(19) of the 1940 Act.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
GREGG A. KIDD, 4605 E. Genesee Street, DeWitt, New York, is President
of Pinnacle Advisors LLC, the Trust's investment advisor. He is also the
President of Pinnacle Investments, Inc., the Trust's principal underwriter. He
previously was a Vice President of Smith Barney, Inc. (a registered
broker-dealer and investment advisor).
JOSEPH MASELLA, One Unity Plaza at Franklin Square, Syracuse, New York,
is an officer and Director of Unity Life and a Director of Germantown Life (both
of which are insurance companies).
JOSEPH E. STANTON, 206 Lafayette Lane, Fayetteville, New York, is the
former owner of Stanton's (a grocery store).
R. EARNIE SEIBERT, 1929 Amnaste Lane, Marcellus, New York, is National
Sales Director of J.B. Hunt Transport Services, Inc. (a transportation company).
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is President and
Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent),
Treasurer of Countrywide Investments, Inc. (a registered broker-dealer and
investment adviser) and Vice President - Finance and Treasurer of Countrywide
Financial Services, Inc. (a financial services company and parent of Countrywide
Fund Services, Inc. and Countrywide Investments,
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Inc.). He is also Vice President of Brundage, Story and Rose Investment Trust,
PRAGMA Investment Trust, Markman MultiFund Trust, The Thermo Opportunity Fund,
Inc., Dean Family of Funds and Maplewood Investment Trust, a series company, and
Assistant Vice President of Interactive Investments, Schwartz Investment Trust,
The Tuscarora Investment Trust, Williamsburg Investment Trust and The Gannett
Welsh & Kotler Funds (all of which are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio, is Vice
President of Countrywide Financial Services, Inc. and Vice President and Chief
Operating Officer of Countrywide Fund Services, Inc. He is also Treasurer of
Countrywide Investment Trust, Countrywide Tax-Free Trust, Countrywide Strategic
Trust, Brundage, Story and Rose Investment Trust, Markman MultiFund Trust,
PRAGMA Investment Trust, Williamsburg Investment Trust, The Thermo Opportunity
Fund, Inc., Dean Family of Funds and Maplewood Investment Trust, a series
company, and Assistant Treasurer of Interactive Investments, Schwartz Investment
Trust, The Tuscarora Investment Trust and The Gannett Welsh & Kotler Funds.
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Assistant Vice
President and Counsel of Countrywide Fund Services, Inc. She is also Secretary
of PRAGMA Investment Trust, Dean Family of Funds and Assistant Secretary of The
Gannett Welsh & Kotler Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is Secretary and
General Counsel of Countrywide Investments, Inc. and Countrywide Financial
Services, Inc. and Vice President, Secretary and General Counsel of Countrywide
Fund Services, Inc. He is also Secretary of Countrywide Investment Trust,
Countrywide Tax-Free Trust, Countrywide Strategic Trust, Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust, The Tuscarora Investment Trust,
Williamsburg Investment Trust, PRAGMA Investment Trust, The Thermo Opportunity
Fund, Inc. and Maplewood Investment Trust, a series company, and Assistant
Secretary of Interactive Investments, Schwartz Investment Trust, Dean Family of
Funds and The Gannett Welsh & Kotler Funds.
Each non-interested Trustee will receive an annual retainer of $1,000
and a $500 fee for each Board meeting attended and will be reimbursed for travel
and other expenses incurred in the performance of their duties.
THE INVESTMENT ADVISOR
Pinnacle Advisors LLC (the "Advisor") is the Fund's investment manager.
Gregg A. Kidd is the controlling shareholder of the Advisor. Mr. Kidd, by reason
of such affiliation, may directly or indirectly receive benefits from the
advisory fees
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paid to the Advisor. Mr. Kidd is also the controlling shareholder of the
Underwriter and President and a Trustee of the Trust.
Under the terms of the advisory agreement between the Trust and the
Advisor, the Advisor manages the Fund's investments. The Fund pays the Advisor a
fee computed and accrued daily and paid monthly at an annual rate of 1% of its
average daily net assets up to $100 million, .95% of such assets from $100
million to $200 million and .85% of such assets in excess of $200 million.
The Fund is responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of the
Fund, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which the Fund may be a party. The Fund may have an obligation
to indemnify the Trust's officers and Trustees with respect to such litigation,
except in instances of willful misfeasance, bad faith, gross negligence or
reckless disregard by such officers and Trustees in the performance of their
duties. The Advisor bears promotional expenses in connection with the
distribution of the Fund's shares to the extent that such expenses are not
assumed by the Fund under their plan of distribution (see below). The
compensation and expenses of any officer, Trustee or employee of the Trust who
is an officer, director, employee or stockholder of the Advisor are paid by the
Advisor.
By its terms, the Trust's advisory agreement will remain in force until
April 4, 1999 and from year to year thereafter, subject to annual approval by
(a) the Board of Trustees or (b) a vote of the majority of the Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Trust's advisory agreement may be terminated at any time, on
sixty days' written notice, without the payment of any penalty, by the Board of
Trustees, by a vote of the majority of the Fund's outstanding voting securities,
or by the Advisor. The advisory agreement automatically terminates in the event
of its assignment, as defined by the 1940 Act and the rules thereunder.
THE UNDERWRITER
Pinnacle Investments, Inc. (the "Underwriter") is the principal
underwriter of the Fund and, as such, is the exclusive agent for distribution of
shares of the Fund. The Underwriter is obligated to sell the shares on a best
efforts basis only against purchase orders for the shares. Shares of the Fund
are offered to the public on a continuous basis.
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The Underwriter currently allows concessions to dealers who sell shares
of the Fund. The Underwriter receives that portion of the initial sales charge
which is not reallowed to the dealers who sell shares of the Fund. The
Underwriter retains the entire sales charge on all direct initial investments in
the Fund and on all investments in accounts with no designated dealer of record.
The Fund may compensate dealers, including the Underwriter and its
affiliates, based on the average balance of all accounts in the Fund for which
the dealer is designated as the party responsible for the account. See
"Distribution Plan" below.
By its terms, the Trust's underwriting agreement will remain in force
until April 4, 1999 and from year to year thereafter, subject to annual approval
by (a) the Board of Trustees or (b) a vote of the majority of the Fund's
outstanding voting securities; provided that in either event continuance is also
approved by a majority of the Trustees who are not interested persons of the
Trust, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Trust's underwriting agreement may be terminated at any time,
on sixty days' written notice, without the payment of any penalty, by the Board
of Trustees, by a vote of the majority of the Fund's outstanding voting
securities, or by the Advisor. The underwriting agreement automatically
terminates in the event of its assignment, as defined by the 1940 Act and the
rules thereunder.
DISTRIBUTION PLAN
As stated in the Prospectus, the Fund has adopted a plan of
distribution (the "Plan") pursuant to Rule 12b-1 under the 1940 Act which
permits the Fund to pay for expenses incurred in the distribution and promotion
of its shares, including but not limited to, the printing of prospectuses,
statements of additional information and reports used for sales purposes,
advertisements, expenses of preparation and printing of sales literature,
promotion, marketing and sales expenses, and other distribution-related
expenses, including any distribution fees paid to securities dealers or other
firms who have executed a distribution or service agreement with the Advisor.
The Plan expressly limits payment of the distribution expenses listed above in
any fiscal year to a maximum of .25% of the average daily net assets of the
Fund.
The continuance of the Plan must be specifically approved at least
annually by a vote of the Trust's Board of Trustees and by a vote of the
Trustees who are not interested persons of the Trust and have no direct or
indirect financial interest in the Plan (the "Independent Trustees") at a
meeting called for the purpose of voting on such continuance. The Plan may be
terminated at any time by a vote of a majority of the Independent Trustees or by
a vote of the holders of a majority of the
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outstanding shares of the Fund. In the event a Plan is terminated in accordance
with its terms, the Fund will not be required to make any payments for expenses
incurred by the Advisor after the termination date. The Plan may not be amended
to increase materially the amount to be spent for distribution without
shareholder approval. All material amendments to the Plan must be approved by a
vote of the Trust's Board of Trustees and by a vote of the Independent Trustees.
In approving the Plan, the Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties as Trustees, that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Board of Trustees believes that expenditure of the Fund's
assets for distribution expenses under the Plan should assist in the growth of
the Fund which will benefit the Fund and its shareholders through increased
economies of scale, greater investment flexibility, greater portfolio
diversification and less chance of disruption of planned investment strategies.
The Plan will be renewed only if the Trustees make a similar determination for
each subsequent year of the Plan. There can be no assurance that the benefits
anticipated from the expenditure of the Fund's assets for distribution will be
realized. While the Plan is in effect, all amounts spent by the Fund pursuant to
the Plan and the purposes for which such expenditures were made must be reported
quarterly to the Board of Trustees for its review. In addition, the selection
and nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Fund and the placing of
the Fund's securities transactions and negotiation of commission rates where
applicable are made by the Advisor and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Advisor seeks best execution for the Fund, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Advisor generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Fund attempts to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Fund may be purchased
directly from the issuer.
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The Advisor is specifically authorized to select brokers who also
provide brokerage and research services to the Fund and/or other accounts over
which the Advisor exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Advisor determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The determination
may be viewed in terms of a particular transaction or the Advisor's overall
responsibilities with respect to the Fund and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Fund and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Fund and the
Advisor, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Fund effects securities transactions may
be used by the Advisor in servicing all of its accounts and not all such
services may be used by the Advisor in connection with the Fund.
The Fund has no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Advisor and other affiliates
of the Trust or the Advisor may effect securities transactions which are
executed on a national securities exchange or transactions in the
over-the-counter market conducted on an agency basis. The Fund will not effect
any brokerage transactions in its portfolio securities with the Advisor if such
transactions would be unfair or unreasonable to its shareholders.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers. Although the Fund does not anticipate any
ongoing arrangements with other brokerage firms, brokerage business may be
transacted from time to time with other firms. Neither the Advisor nor
affiliates of the Trust or the Advisor will receive reciprocal brokerage
business as a result of the brokerage business transacted by the Fund with other
brokers.
CODE OF ETHICS. The Trust and the Advisor have each adopted a Code of
Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Advisor and, as described below, imposes additional, more onerous,
restrictions on investment personnel of the Advisor. The Code requires that all
employees of the Advisor preclear any personal securities investment (with
limited exceptions, such as U.S. Government obligations). The preclearance
requirement and associated procedures are designed to identify any substantive
prohibition or limitation applicable to the proposed investment. In
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addition, no employee may purchase or sell any security which at the time is
being purchased or sold (as the case may be), or to the knowledge of the
employee is being considered for purchase or sale, by the Fund. The substantive
restrictions applicable to investment personnel of the Advisor include a ban on
acquiring any securities in an initial public offering and a prohibition from
profiting on short-term trading in securities. Furthermore, the Code provides
for trading "blackout periods" which prohibit trading by investment personnel of
the Advisor within periods of trading by the Fund in the same (or equivalent)
security.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year, exclusive of
short-term instruments, by the monthly average of the value of the portfolio
securities owned by the Fund during the fiscal year. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Fund. The Advisor anticipates that
the Fund's portfolio turnover rate normally will not exceed 100%. A 100%
turnover rate would occur if all of the Fund's portfolio securities were
replaced once within a one year period.
Generally, the Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Advisor believes that portfolio
changes are appropriate.
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE
The share price (net asset value) and the public offering price (net
asset value plus applicable initial sales charge) of the shares of the Fund are
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each day the Trust is
open for business. The Trust is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Trust may also be open for business on
other days in which there is sufficient trading in the Fund's portfolio
securities that its net asset value might be materially affected. For a
description of the methods used to determine the share price and the public
offering price, see "Calculation of Share Price and Public Offering Price" in
the Prospectus.
OTHER PURCHASE INFORMATION
The Prospectus describes generally how to purchase shares of the Fund.
Additional information with respect to certain types of purchases of shares of
the Fund is set forth below.
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<PAGE>
RIGHT OF ACCUMULATION. A "purchaser" (as defined in the Prospectus) of
shares of the Fund has the right to combine the cost or current net asset value
(whichever is higher) of his existing Fund shares with the amount of his current
purchases in order to take advantage of the reduced initial sales charges set
forth in the tables in the Prospectus. The purchaser or his dealer must notify
Countrywide Fund Services, Inc. (the "Transfer Agent") that an investment
qualifies for a reduced initial sales charge. The reduced sales charge will be
granted upon confirmation of the purchaser's holdings by the Transfer Agent.
LETTER OF INTENT. The reduced initial sales charges set forth in the
tables in the Prospectus may also be available to any "purchaser" (as defined in
the Prospectus) of shares of the Fund who submits a Letter of Intent to the
Transfer Agent. The Letter must state an intention to invest in the Fund within
a thirteen month period a specified amount which, if made at one time, would
qualify for a reduced initial sales charge. A Letter of Intent may be submitted
with a purchase at the beginning of the thirteen month period or within ninety
days of the first purchase under the Letter of Intent. Upon acceptance of this
Letter, the purchaser becomes eligible for the reduced initial sales charge
applicable to the level of investment covered by such Letter of Intent as if the
entire amount were invested in a single transaction.
The Letter of Intent is not a binding obligation on the purchaser to
purchase, or the Fund to sell, the full amount indicated. During the term of a
Letter of Intent, shares representing 5% of the intended purchase will be held
in escrow. These shares will be released upon the completion of the intended
investment. If the Letter of Intent is not completed during the thirteen month
period, the applicable sales charge will be adjusted by the redemption of
sufficient shares held in escrow, depending upon the amount actually purchased
during the period. The minimum initial investment under a Letter of Intent is
$10,000.
A ninety-day backdating period can be used to include earlier purchases
at the purchaser's cost (without a retroactive downward adjustment of the sales
charge). The thirteen month period would then begin on the date of the first
purchase during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Letter of Intent. The purchaser or
his dealer must notify the Transfer Agent that an investment is being made
pursuant to an executed Letter of Intent.
OTHER INFORMATION. The Trust does not impose an initial sales charge or
imposes a reduced initial sales charge in connection with purchases of shares of
the Fund made under the reinvestment privilege or the purchases described in the
"Reduced Initial Sales Charge" or "Purchases at Net Asset Value" sections
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<PAGE>
in the Prospectus because such purchases require minimal sales effort by the
Advisor. Purchases described in the "Purchases at Net Asset Value" section may
be made for investment only, and the shares may not be resold except through
redemption by or on behalf of the Fund.
TAXES
The Prospectus describes generally the tax treatment of distributions
by the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. To so qualify the Fund must, among other things, (i) derive at
least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currency, or certain other income
(including but not limited to gains from options, futures and forward contracts)
derived with respect to its business of investing in stock, securities or
currencies and (ii) diversify its holdings so that at the end of each quarter of
its taxable year the following two conditions are met: (a) at least 50% of the
value of the Fund's total assets is represented by cash, U.S. Government
securities, securities of other regulated investment companies and other
securities (for this purpose such other securities will qualify only if the
Fund's investment is limited in respect to any issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's assets is
invested in securities of any one issuer (other than U.S. Government securities
or securities of other regulated investment companies).
The Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
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The Trust is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of the Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the 1940 Act. This election will
require the Fund to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net asset value of the Fund during any ninety day period for any one
shareholder. Should payment be made in securities, the redeeming shareholder
will generally incur brokerage costs in converting such securities to cash.
Portfolio securities which are issued in an in-kind redemption will be readily
marketable.
HISTORICAL PERFORMANCE INFORMATION
From time to time, the Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment
of all dividends and distributions and the deduction of the current maximum
initial sales charge from the initial $1,000 payment. If the Fund has been in
existence less than one, five or ten years, the time period since the date of
the initial public offering of shares will be substituted for the periods
stated. The Fund may also advertise total return (a "nonstandardized quotation")
which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains
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distributions. This computation does not include the effect of the applicable
initial sales charge which, if included, would reduce total return. A
nonstandardized quotation may also indicate average annual compounded rates of
return without including the effect of the applicable initial sales charge or
over periods other than those specified for average annual total return. A
nonstandardized quotation of total return will always be accompanied by the
Fund's average annual total return as described above.
The Fund's performance may be compared in advertisements, sales
literature and other communications to the performance of other mutual funds
having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Index, which is generally considered to be representative of the
performance of unmanaged common stocks that are publicly traded in the United
States securities markets. Comparative performance may also be expressed by
reference to a ranking prepared by a mutual fund monitoring service, such as
Lipper Analytical Services, Inc. or Morningstar, Inc., or by one or more
newspapers, newsletters or financial periodicals. Performance comparisons may be
useful to investors who wish to compare the Fund's past performance to that of
other mutual funds and investment products. Of course, past performance is not a
guarantee of future results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Investors may use such indices in addition to the Fund's Prospectus to
obtain a more complete view of the Fund's performance before investing. Of
course, when comparing the Fund's performance to any index, factors such as
composition of the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return, investors should take into consideration
any relevant differences in funds such as permitted portfolio compositions and
methods used to value portfolio securities and compute offering price.
Advertisements and other sales literature for the Fund may quote total returns
that are calculated on non-standardized base periods. The total returns
represent the historic change in the
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value of an investment in the Fund based on monthly reinvestment of dividends
over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as Standard & Poor's Ratings Group and Moody's Investors Service, Inc.).
The Fund may also depict the historical performance of the securities in which
the Fund may invest over periods reflecting a variety of market or economic
conditions either alone or in comparison with alternative investments,
performance indices of those investments, or economic indicators. The Fund may
also include in advertisements and in materials furnished to present and
prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
PRINCIPAL SECURITY HOLDERS
As of October 8, 1997, Craig B. Cuvelier, P.O. Box 207, Sodus, New York
14551, owned of record 9.6% of the outstanding shares of the Fund; Organics
Corporation, 5960 Broadway, Lancaster, New York 14086, owned of record 10.6% of
the outstanding shares of the Fund; Cowen & Co., Financial Square, New York, New
York 10005, owned of record 10.9% of the outstanding shares of the Fund; Richard
D. Lanning, 1510 Ivywood Way, Lansdale, PA 19446-4865, owned of record 7.8% of
the outstanding shares of the Fund; and James E. Miller, 11 E A Rexford Falls
Rd., Sherburne, NY 13460, owned of record 5.2% of the outstanding shares of the
Fund.
As of October 8, 1997, the Trustees and officers of the Trust as a
group owned of record or beneficially 4.4% of the outstanding shares of the
Fund.
CUSTODIAN
The Bank of New York, 90 Washington Street, New York, New York 10286,
has been retained to act as Custodian for the Fund's investments. The Bank of
New York acts as the Fund's depository, safekeeps its portfolio securities,
collects all income and other payments with respect thereto, disburses funds as
instructed and maintains records in connection with its duties.
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INDEPENDENT AUDITORS
The firm of McGladrey & Pullen, LLP has been selected as independent
auditors for the Trust for the fiscal year ending March 31, 1998. McGladrey &
Pullen, LLP, 555 Fifth Avenue, New York, New York 10017-2416, performs an annual
audit of the Trust's financial statements and advises the Trust as to certain
accounting matters.
COUNTRYWIDE FUND SERVICES, INC.
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent") to act as its transfer agent. The Transfer Agent is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Transfer Agent maintains the records of each shareholder's
account, answers shareholders' inquiries concerning their accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
The Transfer Agent receives from the Fund for its services as transfer agent a
fee payable monthly at an annual rate of $17 per account, provided, however,
that the minimum fee received is $1,000 per month. In addition, the Fund pays
out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
The Transfer Agent also provides accounting and pricing services to the
Fund. For calculating daily net asset value per share and maintaining such books
and records as are necessary to enable the Transfer Agent to perform its duties,
the Fund pays the Transfer Agent a fee in accordance with the following
schedule:
AVERAGE MONTHLY NET ASSETS MONTHLY FEE
$ 0 - $ 50,000,000 $2,000
$ 50,000,000 - 100,000,000 $2,500
$100,000,000 - 200,000,000 $3,000
Over 200,000,000 $4,000 + .001%
of average net assets
In addition, the Fund pays all costs of external pricing services.
The Transfer Agent also provides administrative services to the Fund.
In this capacity, the Transfer Agent supplies non-investment related statistical
and research data, internal regulatory compliance services and executive and
administrative services. The Transfer Agent supervises the preparation of tax
returns, reports to shareholders of the Fund, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance
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of these administrative services, the Fund pays the Transfer Agent a fee at the
annual rate of .15% of the average value of its daily net assets up to
$25,000,000, .125% of such assets from $25,000,000 to $50,000,000 and .1% of
such assets in excess of $100,000,000, provided, however, that the minimum fee
is $1,000 per month.
FINANCIAL STATEMENTS
The Fund's Statement of Assets and Liabilities as of February 18, 1997,
which has been audited by McGladrey & Pullen, LLP, and the Fund's unaudited
financial statements as of September 30, 1997 are attached to this Statement of
Additional Information.
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THE NEW YORK EQUITY FUND
OF
THE NEW YORK STATE OPPORTUNITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES
AS OF
FEBRUARY 18, 1997
TOGETHER WITH
AUDITORS' REPORT
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McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Trustees and Shareholders
New York Equity Fund:
We have audited the accompanying statement of assets and liabilities of
the New York Equity Fund, a series of New York Opportunity Funds Trust, as of
February 18, 1997. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures related to the schedule. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the financial position of New York Equity Fund
series of New York Opportunity Fund Trust as of February 18, 1997, in conformity
with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
February 25, 1997
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THE NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 18, 1997
ASSETS:
Cash $100,000
Organization costs (Note 2) 54,000
--------
Total assets 154,000
LIABILITIES:
Accrued expenses (Note 2) 54,000
--------
Total liabilities 54,000
Net assets for shares of
beneficial interest outstanding $100,000
Shares outstanding 10,000
Net asset value per share $ 10.00
========
The accompanying notes are an
integral part of this
statement.
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THE NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 18, 1997
(1) The New York State Opportunity Funds (the Trust) is an open-end
management investment company established as an Massachusetts
business trust under a Declaration of Trust dated December 4,
1996. The Trust has established one fund series to date, The
New York Equity Fund (the Fund). The Trust has had no
operations except for the initial issuance of shares. On
February 18, 1997, 10,000 shares of the Fund were issued for
cash at $10.00 per share.
(2) Expenses incurred in connection with the organization of the
Fund and the initial offering of shares are estimated to be
$54,000, which includes $30,000 paid to MGF Service Corp.,
the Fund's administrator. These expenses have been paid by
Pinnacle Advisors LLC (the Adviser). Upon commencement of
the public offering of shares of the Fund, the Fund will
reimburse the Adviser for such expenses, with that amount
being capitalized and amortized on a straight-line basis over
five years. As of February 18, 1997, all outstanding shares
of the Fund were held by the Adviser, who purchased these
initial shares in order to provide the Trust with its
required capital. In the event the initial shares of the
Fund are redeemed by any holder thereof at any time prior to
the complete amortization of organizational expenses, the
redemption proceeds payable with respect to such shares will
be reduced by the pro rata share (based upon the portion of
the shares redeemed in relation to the initial
capitalization) of the unamortized deferred organizational
expenses as of the date of such redemption.
(3) Reference is made to the Prospectus and this Statement of
Additional Information for a description of the Management
Agreement, the Underwriting Agreement, the Distribution Expense
Plan, the Administration Agreement, tax aspects of the Fund and
the calculation of the net asset value of shares
of the Fund.
The accompanying notes are an
integral part of this
statement.
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New York Equity Fund
Semi-Annual Report
September 30, 1997
(Unaudited)
Investment Advisor Administrator
Pinnacle Advisors LLC Countrywide Fund Services, Inc.
4605 E. Genesee Street 312 Walnut Street
DeWitt, New York 13214 P.O. Box 5354
1.315.251.1101 Cincinnati, Ohio 45201-5354
1.800.443.4249
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
(Unaudited)
ASSETS
Investments in securities, at value (cost $582,501) $ 615,391
Cash 11,335
Receivable for capital shares sold 1,910
Dividends receivable 1,243
Receivable from Advisor (Note 3) 17,527
Organization expenses, net (Note 1) 44,840
Other assets 14,185
------------
TOTAL ASSETS 706,431
------------
LIABILITIES
Payable for securities purchased 15,506
Payable to Administrator (Note 3) 4,000
Other accrued expenses 1,681
------------
TOTAL LIABILITIES 21,187
------------
NET ASSETS $ 685,244
============
Net assets consist of:
Paid-in capital $ 652,107
Accumulated undistributed net investment income 247
Net unrealized appreciation on investments 32,890
------------
Net assets $ 685,244
============
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 64,253
============
Net asset value and redemption price per share (Note 1) $ 10.66
============
Maximum offering price per share $ 11.19
============
See accompanying notes to the financial statements.
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NEW YORK EQUITY FUND
STATEMENT OF OPERATIONS
Six Months Ended September 30, 1997
(Unaudited)
INVESTMENT INCOME
Dividends $ 3,706
----------
TOTAL INVESTMENT INCOME 3,706
----------
EXPENSES
Accounting fees (Note 3) 6,000
Insurance expense 5,348
Amortization of organization expenses (Note 1) 4,981
Postage and supplies 3,539
Administrative fees (Note 3) 3,000
Shareholder service and transfer agent fees (Note 3) 3,000
Registration fees 2,552
Trustees' fees and expenses 2,250
Printing of shareholder reports 2,208
Investment advisory fees (Note 3) 1,896
Custodian fees 1,000
Distribution expense 851
Pricing costs 278
---------
TOTAL EXPENSES 36,903
Fees waived and expenses reimbursed
by the Advisor (Note 3) (33,444)
---------
NET EXPENSES 3,459
---------
NET INVESTMENT INCOME 247
---------
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 32,890
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 33,137
---------
See accompanying notes to the financial statements.
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NEW YORK EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended September 30, 1997
(Unaudited)
INCREASE(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 247
Net increase in unrealized appreciation
on investments 32,890
----------
Net increase in net assets from operations 33,137
----------
FROM FUND SHARE TRANSACTIONS (a):
Proceeds from shares sold 565,764
Payments for shares redeemed (13,657)
----------
Net increase in net assets from capital share transactions 552,107
----------
TOTAL INCREASE IN NET ASSETS 585,244
NET ASSETS:
Beginning of period 100,000
----------
End of period $ 685,244
==========
(a) Summary of Fund share activity follows:
Shares sold 55,549
Shares redeemed (1,296)
----------
Net increase in shares outstanding 54,253
Shares outstanding, beginning of period 10,000
----------
Shares outstanding, end of period 64,253
==========
See accompanying notes to the financial statements.
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NEW YORK EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding
Throughout Each Period
Period Ended September 30, 1997 (a)
(Unaudited)
Net asset value at beginning of period $ 10.00
--------
Income from investment operations:
Net investment income 0.00
Net unrealized gains on investments 0.66
--------
Total from investment operations 0.66
--------
Net asset value at end of period $ 10.66
========
Total return 6.60%
========
Net assets at end of period $ 685,244
========
Ratio of expenses to average net assets(b) 1.81%(c)
Ratio of net investment income to average net assets 0.13%(c)
Portfolio turnover rate 0.00%
Average commission rate per share $ 0.3075
(a) Represents the period from the initial public offering of shares (May 12,
1997) through September 30, 1997.
(b) Ratio of expenses to average net assets assuming no waiver of fees or
reimbursement of expenses by the Advisor was 19.47%(c) (Note 3).
(c) Annualized.
See accompanying notes to the financial statements.
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NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1997 (Unaudited)
Market
Shares Value
------ ----------
COMMON STOCKS - 86.6%
Basic Materials - 1.1%
310 Albany International Corporation $ 7,789
---------
Conglomerates - 4.3%
435 General Electric Company 29,607
---------
Consumer, Cyclical - 15.3%
500 Chrysler Corporation 18,406
475 Eastman Kodak Company 30,845
450 Oneida Limited 15,975
220 J.C. Penney Company, Inc. 12,815
540 Tommy Hilfiger Corporation (a) 26,967
---------
105,008
---------
Consumer, Non-Cyclical - 19.8%
300 Bristol-Myers Squibb Company 24,825
400 Colgate-Palmolive Company 27,875
670 PepsiCo, Inc. 27,177
425 Pfizer Inc. 25,526
730 Philip Morris Companies, Inc. 30,341
---------
135,744
---------
Energy - 7.5%
380 Amerada Hess Corporation 23,441
450 Texaco Inc. 27,647
---------
51,088
---------
Financial Services - 16.4%
525 The Bank of New York Company, Inc. 25,200
200 Citicorp 26,787
500 Community Bank System, Inc. 14,500
380 ONBANcorp, Inc. 21,755
350 Travelers Group, Inc. 23,888
---------
112,130
---------
Industrial - 4.0%
790 Paychex, Inc. 27,551
---------
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NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1997 (Unaudited)
Market
Shares Value
------ ----------
Technology - 16.2%
365 Computer Associates International, Inc. $ 26,212
590 Corning Inc. 27,878
300 International Business Machines Corporation 31,781
300 Xerox Corporation 25,256
---------
111,127
---------
Utilities - 2.0%
400 Consolidated Edison Company of New York 13,600
---------
Total Common Stocks (Cost $560,754) 593,644
---------
Shares Money Market Fund - 3.2%
21,747 The Milestone Funds Treasury Obligations
Portfolio - Investor Shares (Cost $21,747) 21,747
---------
Total Investments in Securities
(Cost $582,501) - 89.8% 615,391
Other Assets in Excess of Liabilities - 10.2% 69,853
---------
Net Assets - 100.0% $ 685,244
=========
(a) Non-income producing security.
See accompanying notes to the financial statements.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. Significant Accounting Policies
The New York Equity Fund (the Fund) is a non-diversified series of shares of The
New York State Opportunity Funds (the Trust). The Trust, registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the 1940 Act), was organized as a Massachusetts business trust on
November 20, 1996. The Fund began the public offering of shares on May 12, 1997.
The Fund seeks to provide long-term capital growth by investing primarily in
common stocks and other equity securities of companies headquartered or having a
significant presence in the State of New York.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the last reported sale price as
of the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, or, if not traded on a particular day,
at the closing bid price.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The maximum offering price per share is equal to
the net asset value per share plus a sales load equal to 4.99% of the net asset
value ( or 4.75% of the offering price). The redemption price per share is equal
to the net asset value per share.
Investment income and distributions -- Interest income is accrued as earned.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years.
Security transactions -- Security transactions are accounted for on trade date.
Realized gains and losses on security transactions are determined on a specific
identification basis.
Accounting estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of portfolio
investments of $582,501 as of September 30, 1997:
Gross unrealized appreciation.......................$ 46,184
Gross unrealized depreciation....................... (13,294)
-------
Net unrealized appreciation.........................$ 32,890
========
2. Investment Transactions
Purchases and proceeds from sales and maturities of investment securities, other
than short-term investments, amounted to $560,754 and $0, respectively, for the
period ended September 30, 1997.
3. Transactions with Affiliates
ADVISORY AGREEMENT
The Fund's investments are managed by Pinnacle Advisors LLC (the Advisor) under
the terms of an Advisory Agreement. Under the Advisory Agreement, the Fund pays
the Advisor a fee, which is computed and accrued daily and paid monthly, at an
annual rate of 1.00% of its average daily net assets up to $100 million; .95% of
such assets from $100 million to $200 million; and .85% of such assets in excess
of $200 million.
The Advisor currently intends to waive its investment advisory fees to the
extent necessary to limit the total operating expenses of the Fund to 1.98% of
average daily net assets. In accordance with the above limitation, the Advisor
voluntarily waived its entire investment advisory fees of $1,896 for the period
ended September 30, 1997 and reimbursed the Fund for $31,548 of other operating
expenses.
Certain trustees and officers of the Trust are also officers of the Advisor.
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement between the Trust and
Countrywide Fund Services, Inc. (CFS), CFS supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For the
performance of these administrative services, CFS receives a fee based on the
Fund's average daily net assets.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and CFS, CFS maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. CFS receives for its services a monthly fee based on the
number of shareholder accounts in the Fund. In addition, the Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement between the Trust and CFS,
CFS calculates the daily net asset value per share and maintains the financial
books and records of the Fund. For these services, CFS receives a monthly fee
from the Fund.
DISTRIBUTION PLAN
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 under the
1940 Act (the Plan). The Plan provides that the Fund may incur certain costs
related to the distribution of the Fund shares, not to exceed 0.25% of average
daily net assets. For the period ended September 30, 1997, the Fund incurred
$851 of such expenses under the Plan.
Certain officers of the Trust are also officers of CFS.
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial Statements included in Part A:
Financial Highlights for the Period Ended
September 30, 1997 (unaudited)
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, February 18,
1997, including Notes to Financial Statement and
Independent Auditor's Report
Statement of Assets and Liabilities,
September 30, 1997 (unaudited)
Statement of Operations for the Period Ended
September 30, 1997 (unaudited)
Statement of Changes in Net Assets for the Period
Ended September 30, 1997 (unaudited)
Financial Highlights for the Period Ended
September 30, 1997 (unaudited)
Portfolio of Investments, September 30, 1997
(unaudited)
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement with Pinnacle Advisors LLC
(6) Underwriting Agreement with Pinnacle
Investments, Inc.
(7) Inapplicable
(8) Custody Agreement with The Bank of New York
(9)(i) Administration Agreement with Countrywide
Fund Services, Inc.
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(ii) Accounting Services Agreement with
Countrywide Fund Services, Inc.
(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement with
Countrywide Fund Services, Inc.
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Form of Agreement Relating to Initial
Capital*
(14) Inapplicable
(15) Plan of Distribution Pursuant to Rule 12b-1
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
* Incorporated by reference to the Trust's registration
statement on Form N-1A.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
No person is directly or indirectly controlled by or under
common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of September 30, 1997, there are 56 holders of the shares
of beneficial interest of the Registrant.
ITEM 27. INDEMNIFICATION
Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"SECTION 6.4 INDEMNIFICATION OF TRUSTEES,
OFFICERS, ETC. Subject to and except as otherwise
provided in the Securities Act of 1933, as amended,
and the 1940 Act, the Trust shall indemnify each of
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its Trustees and officers, including persons who serve
at the Trust's request as directors, officers or
trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person") against
all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with
which such person may be or may have been threatened,
while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or
trustee, and except that no Covered Person shall be
indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office (disabling conduct). Anything herein contained to
the contrary notwithstanding, no Covered Person shall be
indemnified for any liability to the Trust or its
shareholders to which such Covered Person would
otherwise be subject unless (1) a final decision on the
merits is made by a court or other body before whom the
proceeding was brought that the Covered Person to be
indemnified was not liable by reason of disabling
conduct or, (2) in the absence of such a decision, a
reasonable determination is made, based upon a review of
the facts, that the Covered Person was not liable by
reason of disabling conduct, by (a) the vote of a
majority of a quorum of Trustees who are neither
"interested persons" of the Company as defined in the
Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party Trustees"), or (b)
an independent legal counsel in a written opinion.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust
shall advance attorneys' fees or other expenses
incurred by a Covered Person in defending a
proceeding, upon the undertaking by or on behalf of
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the Covered Person to repay the advance unless it is
ultimately determined that such Covered Person is
entitled to indemnification, so long as one of the
following conditions is met: (i) the Covered Person
shall provide security for his undertaking, (ii) the
Trust shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum
of the disinterested non- party Trustees of the Trust,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available
facts (as opposed to full trial-type inquiry), that
there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The
right of indemnification provided by this Article VI
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article VI, "Covered Person" shall include such
person's heirs, executors and administrators; an
"interested Covered Person" is one against whom the
action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of
such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar
grounds is then or has been pending or threatened.
Nothing contained in this article shall affect any
rights to indemnification to which personnel of the
Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Trustee, officer or
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<PAGE>
controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
Trustees and officers, Pinnacle Advisors LLC (the "Advisor")
and Pinnacle Investments, Inc., the Trust's principal
underwriter. Coverage under the policy includes losses by
reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
The Advisory Agreement with the Advisor provides that the
Advisor shall not be liable for any action taken, omitted or
suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by the
Advisory Agreement, or in accordance with (or in the absence
of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have
resulted from the Advisor's willful misfeasance, bad faith or
gross negligence, a violation of the standard of care
established by and applicable to the Advisor in its actions
under the Advisory Agreement or breach of its duty or of its
obligations under the Advisory Agreement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
(a) The Advisor is a registered investment advisor organized
in November, 1996 to provide investment advisory
services to the Registrant. The Adviser has no other
business of a substantial nature.
(b) The directors and officers of the Advisor and any other
business, profession, vocation or employment of a
substantial nature engaged in at any time during the
past two years:
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(i) Gregg A. Kidd - Managing Member and
Controlling Shareholder of the Advisor.
President and a Trustee of the Registrant.
President of Pinnacle Investments, Inc.,
4605 E. Genesee Street, DeWitt, New York
13214, a registered broker-dealer and
Registrant's principal underwriter.
Vice President of Smith Barney, Inc. until
September, 1995.
(ii) Daniel F. Raite - Managing Member of the
Advisor.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Inapplicable
(b) POSITION WITH POSITION WITH
NAME UNDERWRITER REGISTRANT
Gregg A. Kidd President President and
Trustee
Daniel F. Raite Vice President None
The address of the above-named persons is 4605 E. Genesee
Street, DeWitt, New York 13214.
(c) Inapplicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are maintained by the Registrant at its
offices located at 4605 E. Genesee Street, DeWitt, New York 13214 as
well as at the offices of the Registrant's transfer agent located at
312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 32. UNDERTAKINGS
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(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant undertakes to call a meeting of shareholders, if
requested to do so by holders of at least 10% of the Fund's
outstanding shares, for the purpose of voting upon the question
of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of DeWitt and State of New York, on the
30th day of October, 1997.
THE NEW YORK STATE OPPORTUNITY FUNDS
By:/S/ GREGG A. KIDD
Gregg A. Kidd
President
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 dates indicated.
SIGNATURE TITLE DATE
/S/ GREGG A. KIDD President October 30, 1997
Gregg A. Kidd and Trustee
/S/ MARK J. SEGER Treasurer October 30, 1997
Mark J. Seger
Trustee By:/S/ TINA D. HOSKING
Joseph Masella* Tina D. Hosking
Attorney-in-Fact*
October 30, 1997
Trustee
R. Earnie Seibert*
Trustee
Joseph E. Stanton*
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INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement
(6) Underwriting Agreement
(7) Inapplicable
(8) Custody Agreement
(9)(i) Administration Agreement
(9)(ii) Accounting Services Agreement
(9)(iii) Transfer, Dividend Disbursing, Shareholder
Service and Plan Agency Agreement
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital*
(14) Inapplicable
(15) Plan of Distribution Pursuant to Rule 12b-1
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
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* Incorporated by reference to the Trust's registration
statement on Form N1-A.
Pinnacle Advisors LLC
4605 E. Genesee Street
DeWitt, NY 13214
Re: Advisory Agreement
Ladies and Gentlemen:
The New York State Opportunity Funds (the "Trust") is an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and subject to the rules and regulations
promulgated thereunder. The Trust currently offers one series of shares to
investors, the New York Equity Fund (the "Fund"). Each share of the Fund
represents an undivided interest in the assets, subject to the liabilities, of
the Fund.
1. APPOINTMENT AS ADVISOR. The Trust being duly authorized hereby
appoints and employs Pinnacle Advisors LLC ("Advisor") as discretionary
portfolio manager, on the terms and conditions set forth herein, of the Fund.
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. Advisor accepts
the appointment as discretionary portfolio manager and agrees to use its best
professional judgment to make timely investment decisions for the Fund in
accordance with the provisions of this Agreement.
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3. PORTFOLIO MANAGEMENT SERVICES OF ADVISOR. Advisor is hereby employed
and authorized to select portfolio securities for investment by the Trust on
behalf of the Fund, to purchase and sell securities of the Fund, and upon making
any purchase or sale decision, to place orders for the execution of such
portfolio transactions in accordance with paragraphs 5 and 6 hereof. In
providing portfolio management services to the Fund, Advisor shall be subject to
such investment restrictions as are set forth in the Act and the rules
thereunder, the Internal Revenue Code of 1986, as amended, applicable state
securities laws, the supervision and control of the Trustees of the Trust, such
specific instructions as the Trustees may adopt and communicate to Advisor and
the investment objective, policies and restrictions of the Fund furnished
pursuant to paragraph 4. Advisor is not authorized by the Trust to take any
action, including the purchase or sale of securities for the Fund, in
contravention of any restriction, limitation, objective, policy or instruction
described in the previous sentence. Advisor shall maintain on behalf of the
Trust the records listed in Schedule A hereto (as amended from time to time). At
the Trust's reasonable request, Advisor will consult with the Trust with respect
to any decision made by it with respect to the investments of the Fund.
4. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Trust will
provide Advisor with the statement of investment objective, policies and
restrictions applicable to the Fund as contained in the Trust's registration
statements under the Act and the Securities Act of 1933, and any instructions
adopted by
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the Trustees supplemental thereto. The Trust will provide Advisor with such
further information concerning the investment objective, policies and
restrictions applicable thereto as Advisor may from time to time reasonably
request. The Trust retains the right, on written notice to Advisor from the
Trust, to modify any such objective, policies or restrictions in any manner at
any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by
payment to or delivery by The Bank of New York, or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or securities
due to or from the Fund, and Advisor shall not have possession or custody
thereof. Advisor shall advise Custodian and confirm in writing to the Trust and
to Countrywide Fund Services, Inc., or any other designated agent of the Trust,
all investment orders for the Fund placed by it with brokers and dealers.
Advisor shall issue to the Custodian such instructions as may be appropriate in
connection with the settlement of any transaction initiated by the Advisor.
6. ALLOCATION OF BROKERAGE. Advisor shall have authority and discretion
to select brokers and dealers to execute portfolio transactions initiated by
Advisor and to select the markets on or in which the transactions will be
executed.
In doing so, the Advisor will give primary consideration to securing
the most favorable price and efficient execution. Consistent with this policy,
the Advisor may consider the
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financial responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Advisor may be a
party. It is understood that neither the Trust nor the Advisor has adopted a
formula for allocation of the Fund's investment transaction business. It is also
understood that it is desirable for the Fund that the Advisor have access to
supplemental investment and market research and security and economic analyses
provided by certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to other
brokers on the basis of seeking the lowest commission. Therefore, the Advisor is
authorized to place orders for the purchase and sale of securities for the Fund
with such certain brokers, subject to review by the Trust's Trustees from time
to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Advisor in connection with its services to other clients.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the Advisor, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in
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the transaction, will be made by the Advisor in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund and
to such other clients.
For each fiscal quarter of the Trust, Advisor shall prepare and render
reports to the Trust's Trustees of the total brokerage business placed and the
manner in which the allocation has been accomplished. Such reports shall set
forth at a minimum the information required to be maintained by Rule 31a-1(b)(9)
under the Act.
7. PROXIES. The Trust will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be invested
from time to time. At the request of the Trust, Advisor shall provide the Trust
with its recommendations as to the voting of such proxies.
8. REPORTS TO ADVISOR. The Trust will provide Advisor with such
periodic reports concerning the status of the Fund as Advisor may reasonably
request.
9. FEES FOR SERVICES. For all of the services to be rendered and
payments made as provided in this Agreement, the Fund will pay the Advisor a
fee, computed and accrued daily and paid monthly, at the annual rate of 1.00% of
the Fund's average daily net assets up to $100 million; .95% of such assets from
$100 million to $200 million; and .85% of such assets in excess of $200 million.
10. ALLOCATION OF CHARGES AND EXPENSES. Advisor shall employ or provide
and compensate the executive, administrative, secretarial and clerical personnel
necessary to provide the
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services set forth herein, and shall bear the expense thereof. Advisor shall
compensate all trustees, officers and employees of the Trust who are also
partners or employees of Advisor. Advisor will pay all expenses incurred in
connection with the sale or distribution of the Fund's shares to the extent such
expenses are not assumed by the Fund under the Trust's Distribution Plan.
The Fund will be responsible for the payment of all operating expenses
of the Fund, including fees and expenses incurred by the Trust in connection
with membership in investment company organizations, brokerage fees and
commissions, legal, auditing and accounting expenses, expenses of registering
shares under federal and state securities laws, insurance expenses, taxes or
governmental fees, fees and expenses of the custodian, the transfer, shareholder
service and dividend disbursing agent and the accounting and pricing agent of
the Fund, expenses including clerical expenses of issue, sale, redemption or
repurchase of shares of the Fund, the fees and expenses of Trustees of the Trust
who are not interested persons of the Trust, the cost of preparing, printing and
distributing prospectuses, statements, reports and other documents to
shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto, or any other expense not specifically described
above incurred in the performance of the Trust's
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obligations. All other expenses not expressly assumed by Advisor herein incurred
in connection with the organization, registration of shares and operations of
the Fund will be borne by the Fund.
11. OTHER INVESTMENT ACTIVITIES OF ADVISOR. The Trust acknowledges that
Advisor or one or more of its affiliates may have investment responsibilities or
render investment advice to or perform other investment advisory services for
other individuals or entities and that Advisor, its affiliates or any of its or
their Trustees, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts"). Subject
to the provisions of paragraph 2 hereof, the Trust agrees that Advisor or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to other Affiliated Accounts which may differ from the
advice given or the timing or nature of action taken with respect to the Fund,
provided that Advisor acts in good faith, and provided further, that it is
Advisor's policy to allocate, within its reasonable discretion, investment
opportunities to the Fund over a period of time on a fair and equitable basis
relative to the Affiliated Accounts, taking into account the investment
objectives and policies of the Fund and any specific investment restrictions
applicable thereto. The Trust acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in
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transactions which involve the Fund or otherwise. Advisor shall have no
obligation to acquire for the Fund a position in any investment which any
Affiliated Account may acquire, and the Trust shall have no first refusal,
co-investment or other rights in respect of any such investment, either for the
Fund or otherwise.
12. CERTIFICATE OF AUTHORITY. The Trust and the Advisor shall furnish
to each other from time to time certified copies of the resolutions of their
Board of Trustees or executive committees, as the case may be, evidencing the
authority of officers and employees who are authorized to act on behalf of the
Trust, the Fund and/or the Advisor.
13. LIMITATION OF LIABILITY. Advisor shall not be liable for any action
taken, omitted or suffered to be taken by it in its reasonable judgment, in good
faith and believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement, or in accordance with (or in the
absence of) specific directions or instructions from the Trust, provided,
however, that such acts or omissions shall not have resulted from Advisor's
willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to Advisor in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in this
paragraph 13 shall be construed in a manner inconsistent with Sections 17(h) and
(i) of the Act.
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14. CONFIDENTIALITY. Subject to the duty of Advisor and the Trust to
comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to the Fund and the actions of Advisor and the Trust
in respect thereof.
15. ASSIGNMENT. No assignment of this Agreement shall be made by
Advisor, and this Agreement shall terminate automatically in the event of such
assignment. Advisor shall notify the Trust in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Trust to consider whether an assignment will occur, and to take
the steps necessary to enter into a new contract with Advisor.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST. The Trust
represents, warrants and agrees that:
A. Advisor has been duly appointed by the Trustees of the
Trust to provide investment services to the Fund as contemplated hereby.
B. The Trust will deliver to Advisor true and complete copies
of the Fund's then current prospectus and statement of additional information as
effective from time to time and such other documents or instruments governing
the investments of the Fund and such other information as is necessary for
Advisor to carry out its obligations under this Agreement.
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C. The Trust is currently in compliance and shall at all times
comply with the requirements imposed upon the Trust by applicable law and
regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ADVISOR. Advisor
represents, warrants and agrees that:
A. Advisor is registered as an investment advisor under the
Investment Advisers Act of 1940.
B. Advisor will maintain, keep current and preserve on behalf
of the Fund, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. Advisor agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Trust, and
will be surrendered to the Trust promptly upon request.
C. Advisor will complete such reports concerning purchases or
sales of securities on behalf of the Fund as the Trust may from time to time
require to ensure compliance with the Act, the Internal Revenue Code of 1986 and
applicable state securities laws.
D. Advisor has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the Act and will provide the Trust with a
copy of the code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this Agreement
is in effect, a partner of Advisor shall certify to the Trust that Advisor has
complied with the requirements of Rule 17j-1 during the previous year and that
there has been no violation of the
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Advisor's code of ethics or, if such a violation has occurred, that appropriate
action was taken in response to such violation. Upon the written request of the
Trust, Advisor shall permit the Trust, its employees or its agents to examine
the reports required to be made to Advisor by Rule 17j-1(c)(1).
E. Advisor will, promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV, furnish a copy of such
amendment to the Trust.
F. Upon request of the Trust, Advisor will provide assistance
to the Custodian in the collection of income due or payable to the Fund.
G. Advisor will immediately notify the Trust of the occurrence
of any event which would disqualify Advisor from serving as an investment
advisor of an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement between Advisor and the Trust, which amendment, other than
amendments to Schedule A, is subject to the approval of the Trustees and may be
subject to the approval of the shareholders of the Fund in the manner required
by the Act and the rules thereunder, subject to any applicable exemptive order
of the Securities and Exchange Commission modifying the provisions of the Act
with respect to approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the
date of its execution and shall remain in force for a period of two (2) years
from such date, and from year to
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year thereafter but only so long as such continuance is specifically approved at
least annually by the vote of a majority of the Trustees who are not interested
persons of the Trust or the Advisor, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of Trustees or of
a majority of the outstanding voting securities of the Fund. The aforesaid
requirement that this Agreement may be continued "annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
20. TERMINATION. This Agreement may be terminated by either party
hereto, without the payment of any penalty, immediately upon written notice to
the other in the event of a breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
21. LIMITATION OF LIABILITY. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
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22. DEFINITIONS. As used in paragraphs 15 and 19 of this Agreement, the
terms "assignment," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the Act and
the rules and regulations thereunder.
23. APPLICABLE LAW. To the extent that state law is not preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of New
York.
THE NEW YORK STATE OPPORTUNITY FUNDS
By: /s/ Gregg A. Kidd
Title: President
Date: April 4, 1997
ACCEPTANCE
The foregoing Agreement is hereby accepted.
PINNACLE ADVISORS LLC
By: /s/ Gregg A. Kidd
Title: /s/ Managing Member
Date: April 4, 1997
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE ADVISOR
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all
other portfolio purchases or sales, given by the Advisor on behalf of
the Fund for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any
modification or cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the
Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of portfolio securities to named brokers or dealers was effected,
and the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or
dealers.
(ii) The supplying of services or benefits by brokers
or dealers to:
(a) The Trust;
(b) The Advisor;
(c) The Trust's principal underwriter; and
(d) Any person affiliated with the foregoing
persons.
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(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate
memorandum identifying the person or persons, committees or
groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be
retained as part of this record any memorandum,
recommendation or instruction supporting or authorizing the
purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisors by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Advisor's transactions with respect to the Fund.
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* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from
brokerage firms (including their recommendation; i.e., buy, sell, hold)
or any internal reports or portfolio adviser reviews.
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UNDERWRITING AGREEMENT
This Agreement made as of April 4, 1997 by and between The New York
State Opportunity Funds, a Massachusetts business trust (the "Trust"), and
Pinnacle Investments, Inc., a New York corporation ("Underwriter").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, Underwriter is a broker-dealer registered with the Securities
and Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Trust (the "Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Trust hereby appoints Underwriter as its exclusive agent
for the distribution of the Shares, and Underwriter hereby accepts such
appointment under the terms of this Agreement. While this Agreement is in force,
the Trust shall not sell any
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Shares except on the terms set forth in this Agreement. Notwithstanding any
other provision hereof, the Trust may terminate, suspend or withdraw the
offering of Shares whenever, in its sole discretion, it deems such action to be
desirable.
2. Sale and Repurchase of Shares.
(a) Underwriter will have the right, as agent for the Trust,
to enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(e) hereof) less a discount determined by
Underwriter, which discount shall not exceed the amount of the sales charge
stated in the Trust's effective Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, including the then current prospectus and
statement of additional information (the "Registration Statement"). Upon receipt
of an order to purchase Shares from a dealer with whom Underwriter has a dealer
agreement, Underwriter will promptly cause such order to be filled by the Trust.
(b) Underwriter will also have the right, as agent for the
Trust, to sell such Shares to the public against orders therefor at the public
offering price.
(c) Underwriter will also have the right, as agent for the
Trust, to sell Shares at their net asset value to such persons as may be
approved by the Trustees of the Trust, all such sales to comply with the
provisions of the Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
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(d) Underwriter will also have the right to take, as agent for
the Trust, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(e) The public offering price for the Shares of each Series
shall be the respective net asset value of the Shares of that Series then in
effect, plus any applicable sales charge determined in the manner set forth in
the Registration Statement or as permitted by the Act and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder. In
no event shall any applicable sales charge exceed the maximum sales charge
permitted by the Rules of Fair Practice of the NASD.
(f) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Trust or by another entity on behalf of the Trust.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
(g) On every sale, the Trust shall receive the applicable net
asset value of the Shares promptly, but in no event later than the third
business day following the date on which Underwriter shall have received an
order for the purchase of the Shares. Underwriter shall have the right to retain
the sales charge less any applicable dealer discount.
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(h) Upon receipt of purchase instructions, Underwriter will
transmit such instructions to the Trust or its transfer agent for registration
of the Shares purchased.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
(j) Underwriter, as agent of and for the account of the Trust,
may repurchase the Shares at such prices and upon such terms and conditions as
shall be specified in the Registration Statement.
3. Sale of Shares by the Trust.
The Trust reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
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4. Basis of Sale of Shares.
Underwriter does not agree to sell any specific number of
Shares. Underwriter, as agent for the Trust, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Underwriter will conform to the Rules of Fair Practice of
the NASD and the securities laws of any jurisdiction in which it sells, directly
or indirectly, any Shares.
(b) Underwriter will require each dealer with whom Underwriter
has a dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Trust sufficient
copies of any agreements, plans or other materials it intends to use in
connection with any sales of Shares in adequate time for the Trust to file and
clear them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or
broker, or otherwise, under all applicable state or federal laws required in
order that Shares may be sold in such states as may be mutually agreed upon by
the parties.
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(e) Underwriter shall not make, or permit any representative,
broker or dealer to make, in connection with any sale or solicitation of a sale
of the Shares, any representations concerning the Shares except those contained
in the then current prospectus and statement of additional information covering
the Shares and in printed information approved by the Trust as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Trust to
Underwriter in reasonable quantities upon request.
6. Records to be Supplied by Trust.
The Trust shall furnish to Underwriter copies of all
information, financial statements and other papers which Underwriter may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, but shall not be limited to, one certified copy, upon
request by Underwriter, of all financial statements prepared for the Trust by
independent public accountants.
7. Expenses.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with
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the offering of the Shares will be paid by the Trust or the Trust's investment
advisor (the "Advisor") in accordance with agreements between them as permitted
by applicable law, including the Act and rules and regulations promulgated
thereunder.
8. Indemnification of Trust.
Underwriter, to the extent of the net commission received by
it from the sale of Shares but to no greater amount, agrees to indemnify and
hold harmless the Trust, the Advisor and each person who has been, is, or may
hereafter be a trustee, director, officer, employee, partner, shareholder or
control person of the Trust or the Advisor, against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with any claim or in connection with any action, suit or
proceeding to which any of them may be a party, which arises out of or is
alleged to arise out of or is based upon any untrue statement or alleged untrue
statement of a material fact, or the omission or alleged omission to state a
material fact necessary to make the statements not misleading, on the part of
Underwriter or any agent or employee of Underwriter or any other person for
whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Trust or the Advisor.
Underwriter likewise, to the extent of the net commission received by it from
the sale of Shares but to no greater amount, agrees to indemnify and hold
harmless the
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Trust, the Advisor and each such person in connection with any claim or in
connection with any action, suit or proceeding which arises out of or is alleged
to arise out of Underwriter's failure to exercise reasonable care and diligence
with respect to its services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares. The term
"expenses" for purposes of this and the next paragraph includes amounts paid in
satisfaction of judgments or in settlements which are made with Underwriter's
consent. The foregoing rights of indemnification shall be in addition to any
other rights to which the Trust, the Advisor or each such person may be entitled
as a matter of law.
9. Indemnification of Underwriter.
Underwriter, its directors, officers, employees,
shareholders and control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such persons in
the performance of Underwriter's duties or from the reckless disregard by any of
such persons of Underwriter's obligations and duties under this Agreement. The
Trust will advance attorneys' fees or other expenses incurred by any such person
in defending a proceeding, upon the undertaking by or on behalf of such person
to repay the advance if it is ultimately determined that such
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<PAGE>
person is not entitled to indemnification. Any person employed by Underwriter
who may also be or become an officer or employee of the Trust shall be deemed,
when acting within the scope of his employment by the Trust, to be acting in
such employment solely for the Trust and not as an employee or agent of
Underwriter.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the
payment of any penalty, in the event of its assignment. This Agreement may be
amended only if such amendment is approved (i) by Underwriter, (ii) either by
action of the Board of Trustees of the Trust or at a meeting of the Shareholders
of the Trust by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Trustees of the Trust who are not interested
persons of the Trust or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Trust or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and shall
remain in full force and effect for a period of two (2) years from the date of
its execution (unless terminated automatically as set forth in Section 10), and
from year to year
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<PAGE>
thereafter, subject to annual approval (i) by Underwriter, (ii) by the Board of
Trustees of the Trust or a vote of a majority of the outstanding Shares, and
(iii) by a majority of the Trustees of the Trust who are not interested persons
of the Trust or of Underwriter by vote cast in person at a meeting called for
the purpose of voting on such approval.
12. Limitation of Liability.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, Shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust, as provided in the Agreement and Declaration of Trust of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees and Shareholders of the Trust and signed by an officer of the
Trust, acting as such, and neither such authorization by such Trustees and
Shareholders nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as provided
in its Agreement and Declaration of Trust.
13. New Series.
The terms and provisions of this Agreement shall become
automatically applicable to any additional series of the Trust established
during the initial or renewal term of this Agreement.
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<PAGE>
14. Successor Investment Company.
Unless this Agreement has been terminated in accordance with
Paragraph 10, the terms and provisions of this Agreement shall become
automatically applicable to any investment company which is a successor to the
Trust as a result of reorganization, recapitalization or change of domicile.
15. Severability.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the State
of New York.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or provision of
the Act and to interpretation thereof, if any, by the United States courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said Act.
In addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
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<PAGE>
17. Notices.
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
for this purpose shall be 312 Walnut Street, 21st Floor, Cincinnati, Ohio 45202
and that the address of Underwriter for this purpose shall be 4605 E.
Genesee Street, DeWitt, New York 13214.
IN WITNESS WHEREOF, the Trust and Underwriter have each caused
this Agreement to be signed in duplicate on their behalf, all as of the day and
year first above written.
ATTEST: THE NEW YORK STATE OPPORTUNITY FUNDS
/s/ Tina D. Hosking By: /s/ Gregg A. Kidd
Its: President
ATTEST: PINNACLE INVESTMENTS, INC.
_______________________ By: /s/ Gregg A. Kidd
Its: President
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CUSTODY AGREEMENT
Agreement made as of this 4th day of April , 1997, between THE NEW
YORK STATE OPPORTUNITY FUNDS, a Massachusetts business trust
organized and existing under the laws of the Commonwealth of
Massachusetts, having its principal office and place of business at
4605 East Genesee Street, DeWitt, New York 13214 (hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities,
its successor or successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying
Securities.
3. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian which is actually received by the Custodian
and signed on behalf of the Fund by any two Officers, and the term
Certificate shall also include Instructions.
4. "Clearing Member" shall mean a registered broker-dealer which
is a clearing member under the rules of
<PAGE>
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
5. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and pledged
to the Custodian as security for, and in consideration of, the
Custodian's issuance of (a) any Put Option guarantee letter or
similar document described in paragraph 8 of Article V herein, or (b)
any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option
entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer
thereof the specified underlying Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange
Commission, its successor or successors and its nominee or nominees.
The term "Depository" shall further mean and include any other person
authorized to act as a depository under the Investment Company Act of
1940, its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of the
Fund's Board of Trustees specifically approving deposits therein by
the Custodian.
8. "Financial Futures Contract" shall mean the firm commitment
to buy or sell fixed income securities including, without limitation,
U.S. Treasury Bills, U.S. Treasury Notes, U.S. Treasury Bonds,
domestic bank certificates of deposit, and Eurodollar certificates of
deposit, during a specified month at an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures Contract
and/or Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect
to a Futures Contract.
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<PAGE>
11. "Instructions" shall mean instructions communications
transmitted by electronic or telecommunications media including
S.W.I.F.T., computer-to-computer interface, dedicated transmission
line, facsimile transmission (which may be signed by an Officer or
unsigned) and tested telex.
12. "Margin Account" shall mean a segregated account in the name
of a broker, dealer, futures commission merchant, or a Clearing
Member, or in the name of the Fund for the benefit of a broker,
dealer, futures commission merchant, or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or a
Clearing Member (a "Margin Account Agreement"), separate and distinct
from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in
connection with such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or the Depository
shall be deemed to have been deposited in, or withdrawn from, a
Margin Account upon the Custodian's effecting an appropriate entry in
its books and records.
13. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations
issued or guaranteed as to interest and principal by the government
of the United States or agencies or instrumentalities thereof, any
tax, bond or revenue anticipation note issued by any state or
municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase
agreements with respect to the same and bank time deposits, where the
purchase and sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale.
14. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee or
nominees.
15. "Officers" shall be deemed to include the President, any
Vice President, the Secretary, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Treasurer, and any other person or
persons, whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to execute
any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix A
or such other Certificate as may be received by the Custodian from
time to time.
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<PAGE>
16. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
17. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Officer or from a person reasonably
believed by the Custodian to be an Officer.
18. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities, to
sell such Securities to the writer thereof for the exercise price.
19. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to repurchase
such Securities at a described or specified date and price.
20. "Security" shall be deemed to include, without limitation,
Money Market Securities, Call Options, Put Options, Stock Index
Options, Stock Index Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial Futures Contract
Options, Reverse Repurchase Agreements, common stocks and other
securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and
by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing any other
rights or interest therein, or any property or assets.
21. "Senior Security Account" shall mean an account maintained
and specifically allocated to a Series under the terms of this
Agreement as a segregated account, by recorda- tion or otherwise,
within the custody account in which certain Securities and/or other
assets of the Fund specifically allocated to such Series shall be
deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
22. "Series" shall mean the various portfolios, if any, of the
Fund listed on Appendix B hereto as amended from time to time.
23. "Shares" shall mean the shares of beneficial interest of the
Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
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<PAGE>
24. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock index at
the close of the last business day of the contract and the price at
which the futures contract is originally struck.
25. "Stock Index Option" shall mean an exchange traded option
entitling the holder, upon timely exercise, to receive an amount of
cash determined by reference to the difference between the exercise
price and the value of the index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as
custodian of the Securities and moneys at any time owned by the Fund
during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, the Fund will deliver or cause to be delivered
to the Custodian all Securities and all moneys owned by it, at any
time during the period of this Agreement, and shall specify with
respect to such Securities and money the Series to which the same are
specifically allocated. The Custodian shall segregate, keep and
maintain the assets of the Series separate and apart. The Custodian
will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previously
made and moneys are not finally collected. The Fund shall deliver to
the Custodian a certified resolution of the Board of Trustees of the
Fund, substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated and to utilize the Book-Entry System
to the extent possible in connection with its performance hereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of
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<PAGE>
Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the
Depository, the Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the
form of Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian to
deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the
Depository to the extent possible with respect to such Securities in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys deposited in either the
Book-Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts
in a fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for the
applicable Series. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options and
transactions in Options for a Series as provided in this Agreement,
the Custodian shall have received a certified resolution of the
Fund's Board of Trustees, substantially in the form of Exhibit C
hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by a
Certificate actually received by the Custodian, to accept, utilize
and act in accordance with such confirmations as provided in this
Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts,
in the name of each Series, and shall credit to the separate account
for each Series all moneys received by it for the account of the Fund
with respect to such Series. Money credited to a separate account for
a Series shall be disbursed by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series
account from which payment is to be made and the purpose for which
payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a summary, on
a per Series basis, of all transfers to or from
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<PAGE>
the account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the
account of the Fund for a Series, the Custodian shall also by
book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities registered in
the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian
shall furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held by the Custodian for the
Fund.
4. Except as otherwise provided in paragraph 7 of this Article
and in Article VIII, all Securities held by the Custodian hereunder,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held hereunder may be
registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to
time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or
nominees. The Fund agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee or
in the name of the Book-Entry System or the Depository any Securities
which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in
the Book-Entry System or in the Depository in a separate account in
the name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and unless
otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities held hereunder and therein
deposited, shall with respect to all Securities held for the Fund
hereunder in accordance with preceding paragraph 4:
(a) Collect all income, dividends and distributions
due or payable;
(b) Give notice to the Fund and present payment and collect
the amount payable upon such Securities which are called, but only if
either (i) the Custodian receives a written notice of such call, or
(ii) notice of such call appears in one or more of the publications
listed in Appendix C annexed hereto, which may be amended at any time
by the
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<PAGE>
Custodian without the prior notification or consent of the
Fund;
(c) Present for payment and collect the amount payable upon
all Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the
laws or regulations of any other taxing authority now or hereafter in
effect; and
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of a Series, all rights and similar securities issued with
respect to any Securities held by the Custodian for such Series
hereunder.
(g) Deliver to the Fund all notices, proxies, proxy
soliciting materials, consents and other written information
(including, without limitation, notices of tender offers and exchange
offers, pendency of calls, maturities of Securities and expiration of
rights) relating to Securities held pursuant to this Agrement which
are actually received by the Custodian, such proxies and other
similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund),
but without indicating the manner in which proxies or consents are to
be voted.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations, and
any other instruments whereby the authority of the Fund as owner of
any Securities held by the Custodian hereunder for the Series
specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically
allocated to such Series any cash or other Securities received in
exchange;
(c) Deliver any Securities held by the Custodian hereunder
for the Series specified in such Certificate to any protective
committee, reorganization committee or other person
- 8 -
<PAGE>
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series
such certificates of deposit, interim receipts or other instruments
or documents as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as
shall be stated in such Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article
which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any
instrument or certificate representing any Futures Contract, any
Option, or any Futures Contract Option until after it shall have
determined, or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than
the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply
with Section 17(f) of the Investment Company Act of 1940, as amended,
in connection with the purchase, sale, settlement, closing out or
writing of Futures Contracts, Options, or Futures Contract Options by
making payments or deliveries specified in Certificates received by
the Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
brokers, dealers, or future commission merchants with respect to such
Futures Contracts, Options, or Futures Contract Options, as the case
may be, confirming that such Security is held by such broker, dealer
or futures commission merchant, in book-entry form or otherwise, in
the name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account, and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of
the Margin Account Agreement. Whenever any such instruments or
certificates are available, the Custodian shall, notwithstanding any
provision in this Agreement to the contrary, make payment for any
Futures Contract, Option, or Futures Contract Option for which such
instruments or such certificates are available only against
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<PAGE>
the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option
for which such instruments or such certificates are available only
against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be held by
the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other
than a purchase of an Option, a Futures Contract, or a Futures
Contract Option, the Fund shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market
Securities, a Certificate, and (ii) with respect to each purchase of
Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name
of the issuer and the title of the Securities; (c) the number of
shares or the principal amount purchased and accrued interest, if
any; (d) the date of purchase and settlement; (e) the purchase price
per unit; (f) the total amount payable upon such purchase; (g) the
name of the person from whom or the broker through whom the purchase
was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay
to the broker specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such
purchase, provided that the same conforms to the total amount payable
as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other
than a sale of any Option, Futures Contract, Futures Contract Option,
or any Reverse Repurchase Agreement, the Fund shall deliver to the
Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to each
sale of Money Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the
issuer and the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the date of
sale; (e) the sale price per unit; (f) the total amount payable to
the Fund upon such sale; (g) the name of the broker through whom or
the person to whom the sale was made, and the name of the clearing
broker, if
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<PAGE>
any; and (h) the name of the broker to whom the Securities are to be
delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such
sale, provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to each Option purchased: (a) the Series to which such Option
is specifically allocated; (b) the type of Option (put or call); (c)
the name of the issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options
purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the
Fund in connection with such purchase; (h) the name of the Clearing
Member through whom such Option was purchased; and (i) the name of
the broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the purchase
of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the
account of the Series to which such Option is to be specifically
allocated, the total amount payable upon such purchase to the
Clearing Member through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to each such sale:
(a) the Series to which such Option was specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the
title and number of shares subject to such Option or, in the case of
a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e)
the sale price; (f) the date of settlement; (g) the total amount
payable to the Fund upon such sale; and (h) the name of the Clearing
Member through whom the sale was made. The Custodian shall consent to
the delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding paragraph
1 of this Article with respect to such Option against payment to the
Custodian of the total amount payable to the Fund, provided that the
same
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conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Call Option: (a) the Series to which such Call Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Call Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per
share; (f) the total amount to be paid by the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such
Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of
the moneys held for the account of the Series to which such Call
Option was specifically allocated the total amount payable to the
Clearing Member through whom the Call Option was exercised, provided
that the same conforms to the total amount payable as set forth in
such Certificate.
4. Promptly after the exercise by the Fund of any Put Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect to
such Put Option: (a) the Series to which such Put Option was
specifically allocated; (b) the name of the issuer and the title and
number of shares subject to the Put Option; (c) the expiration date;
(d) the date of exercise and settlement; (e) the exercise price per
share; (f) the total amount to be paid to the Fund upon such
exercise; and (g) the name of the Clearing Member through whom such
Put Option was exercised. The Custodian shall, upon receipt of the
amount payable upon the exercise of the Put Option, deliver or direct
the Depository to deliver the Securities specifically allocated to
such Series, provided the same conforms to the amount payable to the
Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index
Option purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall deliver to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the Series to which such Stock Index
Option was specifically allocated; (b) the type of Stock Index Option
(put or call); (c) the number of Options being exercised; (d) the
stock index to which such Option relates; (e) the expiration date;
(f) the exercise price; (g) the total amount to be received by the
Fund in connection with such exercise; and (h) the Clearing Member
from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Covered Call Option: (a) the Series for which such
Covered Call Option was written; (b) the name of the issuer and the
title and number of shares for
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<PAGE>
which the Covered Call Option was written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Covered Call
Option was written; and (g) the name of the Clearing Member through
whom the premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Options and
shall impose, or direct the Depository to impose, upon the underlying
Securities specified in the Certificate specifically allocated to
such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon
prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian
and not deposited with the Depository underlying a Covered Call
Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall promptly deliver to the Custodian a Certificate
instructing the Custodian to deliver, or to direct the Depository to
deliver, the Securities subject to such Covered Call Option and
specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of
shares subject to the Covered Call Option; (c) the Clearing Member to
whom the underlying Securities are to be delivered; and (d) the total
amount payable to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6 of
this Article, the Custodian shall deliver, or direct the Depository
to deliver, the underlying Securities as specified in the Certificate
against payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put Option
was written; (b) the name of the issuer and the title and number of
shares for which the Put Option is written and which underlie the
same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is
written; (g) the name of the Clearing Member through whom the premium
is to be received and to whom a Put Option guarantee letter is to be
delivered; (h) the amount of cash, and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and (i) the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account
for such Series. The Custodian shall, after making the deposits into
the Collateral Account
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<PAGE>
specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date
hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall be
under no obligation to issue any Put Option guarantee letter or
similar document if it is unable to make any of the representations
contained therein.
9. Whenever a Put Option written by the Fund and described in
the preceding paragraph is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Put Option was written; (b) the name of the issuer and title and
number of shares subject to the Put Option; (c) the Clearing Member
from whom the underlying Securities are to be received; (d) the total
amount payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically allocated to
such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of
Securities, specifically allocated to such Series, if any, to be
withdrawn from the Senior Security Account. Upon the return and/or
cancellation of any Put Option guarantee letter or similar document
issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the moneys held for the account of the
Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as
set forth in such Certificate against delivery of such Securities,
and shall make the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Stock Index Option: (a) the Series for which such
Stock Index Option was written; (b) whether such Stock Index Option
is a put or a call; (c) the number of options written; (d) the stock
index to which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the Clearing Member through whom such Option was
written; (h) the premium to be received by the Fund; (i) the amount
of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior
Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Collateral Account for such Series; and
(k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has
been established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian
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<PAGE>
has specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is exercised,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the Series
for which such Stock Index Option was written; (b) such information
as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index
Option is being exercised; (d) the total amount payable upon such
exercise, and whether such amount is to be paid by or to the Fund;
(e) the amount of cash and/or amount and kind of Securities, if any,
to be withdrawn from the Margin Account; and (f) the amount of cash
and/or amount and kind of Securities, if any, to be withdrawn from
the Senior Security Account for such Series; and the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out of
the moneys held for the account of the Series to which such Stock
Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as
specified therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of this
Article in a transaction expressly designated as a "Closing Purchase
Transaction" in order to liquidate its position as a writer of an
Option, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to the Option being purchased:
(a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer
and the title and number of shares subject to the Option, or, in the
case of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price; (e)
the premium to be paid by the Fund; (f) the expiration date; (g) the
type of Option (put or call); (h) the date of such purchase; (i) the
name of the Clearing Member to whom the premium is to be paid; and
(j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin
Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium and the return and/or cancellation
of any receipt issued pursuant to paragraphs 6, 8 or 10 of this
Article with respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall remove,
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<PAGE>
or direct the Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing
Purchase Transaction with respect to any Option purchased or written
by the Fund and described in this Article, the Custodian shall delete
such Option from the statements delivered to the Fund pursuant to
paragraph 3 Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a
Certificate received in connection with such expiration, exercise, or
consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Futures Contract, (or with respect to any number of
identical Futures Contract(s)): (a) the Series for which the Futures
Contract is being entered; (b) the category of Futures Contract (the
name of the underlying stock index or financial instrument); (c) the
number of identical Futures Contracts entered into; (d) the delivery
or settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short)
on such Futures Contract(s); (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Senior
Security Account for such Series; (h) the name of the broker, dealer,
or futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to be
paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the
terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the moneys specifically allocated to such
Series of the fee or commission, if any, specified in the Certificate
and deposit in the Senior Security Account for such Series the amount
of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required
to be made by the Fund to a broker, dealer, or futures commission
merchant with respect to an outstanding Futures Contract, shall be
made by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
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<PAGE>
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with
respect to an outstanding Futures Contract, shall be received and
dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder
is retained by the Fund until delivery or settlement is made on such
Futures Contract, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the Futures Contract and the Series to
which the same relates; (b) with respect to a Stock Index Futures
Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker,
dealer, or futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Senior Security Account for such
Series. The Custodian shall make the payment or delivery specified in
the Certificate, and delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate specifying: (a) the
items of information required in a Certificate described in paragraph
1 of this Article, and (b) the Futures Contract being offset. The
Custodian shall make payment out of the money specifically allocated
to such Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from the
statements delivered to the Fund pursuant to paragraph 3 of Article
III herein, and make such withdrawals from the Senior Security
Account for such Series as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by
the Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Futures Contract Option:
(a) the Series to which such Option is specifically allocated; (b)
the type of Futures Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price;
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<PAGE>
(f) the dates of purchase and settlement; (g) the amount of premium
to be paid by the Fund upon such purchase; (h) the name of the broker
or futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series, the total amount
to be paid upon such purchase to the broker or futures commissions
merchant through whom the purchase was made, provided that the same
conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to each such sale: (a) Series to which such Futures Contract
Option was specifically allocated; (b) the type of Future Contract
Option (put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the
sale price; (f) the date of settlement; (g) the total amount payable
to the Fund upon such sale; and (h) the name of the broker of futures
commission merchant through whom the sale was made. The Custodian
shall consent to the cancellation of the Futures Contract Option
being closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option (put or call)
being exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the date of exercise; (e) the name of
the broker or futures commission merchant through whom the Futures
Contract Option is exercised; (f) the net total amount, if any,
payable by the Fund; (g) the amount, if any, to be received by the
Fund; and (h) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series for which
such Futures Contract Option was written;
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<PAGE>
(b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option;
(d) the expiration date; (e) the exercise price; (f) the premium to
be received by the Fund; (g) the name of the broker or futures
commission merchant through whom the premium is to be received; and
(h) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically
allocated to such Series the deposits into the Senior Security
Account, if any, as specified in the Certificate. The deposits, if
any, to be made to the Margin Account shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the Fund which
is a call is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such
Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any,
payable to the Fund upon such exercise; (f) the net total amount, if
any, payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited in the
Senior Security Account for such Series. The Custodian shall, upon
its receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the
Fund and which is a put is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to which
such Option was specifically allocated; (b) the particular Futures
Contract Option exercised; (c) the type of Futures Contract
underlying such Futures Contract Option; (d) the name of the broker
or futures commission merchant through whom such Futures Contract
Option is exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by
the Fund upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in, the
Senior Security Account for such Series, if any. The Custodian shall,
upon its receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Securities
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<PAGE>
specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in
the Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option described
in this Article in order to liquidate its position as a writer of
such Futures Contract Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Futures
Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Future Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e)
the premium to be paid by the Fund; (f) the expiration date; (g) the
name of the broker or futures commission merchant to whom the premium
is to be paid; and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the withdrawals
from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or
purchased by the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III herein
and, (b) make such withdrawals from and/or in the case of an exercise
such deposits into the Senior Security Account as may be specified in
a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise
of a Futures Contract Option described in this Article shall be
subject to Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series for which such short
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<PAGE>
sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and
settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of cash
and/or the amount and kind of Securities, if any, which are to be
deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited in
a Senior Security Account, and (i) the name of the broker through
whom such short sale was made. The Custodian shall upon its receipt
of a statement from such broker confirming such sale and that the
total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the account
of the Custodian (or any nominee of the Custodian) as custodian of
the Fund, issue a receipt or make the deposits into the Margin
Account and the Senior Security Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the
Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to each such closing out: (a) the Series for which such
transaction is being made; (b) the name of the issuer and the title
of the Security; (c) the number of shares or the principal amount,
and accrued interest or dividends, if any, required to effect such
closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the
net total amount payable to the Fund upon such closing-out; (g) the
net total amount payable to the broker upon such closing-out; (h) the
amount of cash and the amount and kind of Securities to be withdrawn,
if any, from the Margin Account; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom
the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such
closing-out, and the return and/or cancellation of the receipts, if
any, issued by the Custodian with respect to the short sale being
closed-out, pay out of the moneys held for the account of the Fund to
the broker the net total amount payable to the broker, and make the
withdrawals from the Margin Account and the Senior Security Account,
as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder,
the Fund shall deliver to the Custodian a
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<PAGE>
Certificate, or in the event such Reverse Repurchase Agreement is a
Money Market Security, a Certificate or Oral Instructions specifying:
(a) the Series for which the Reverse Repurchase Agreement is entered;
(b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker or dealer through or with whom the Reverse
Repurchase Agreement is entered; (d) the amount and kind of
Securities to be delivered by the Fund to such broker or dealer; (e)
the date of such Reverse Repurchase Agreement; and (f) the amount of
cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security Account
for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the
Fund specified in the Certificate or Oral Instructions make the
delivery to the broker or dealer, and the deposits, if any, to the
Senior Security Account, specified in such Certificate or Oral
Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or
Oral Instructions to the Custodian specifying: (a) the Reverse
Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection
with such termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series in
connection with such termination; (d) the date of termination; (e)
the name of the broker or dealer with or through whom the Reverse
Repurchase Agreement is to be terminated; and (f) the amount of cash
and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by the
Fund specified in the Certificate or Oral Instructions, make the
payment to the broker or dealer, and the withdrawals, if any, from
the Senior Security Account, specified in such Certificate or Oral
Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall
deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan: (a) the Series to which
the loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities, (c) the number of shares or
the
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principal amount loaned, (d) the date of loan and delivery, (e) the
total amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the premium,
if any, separately identified, and (f) the name of the broker,
dealer, or financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated to the broker,
dealer or financial institution to which the loan was made upon
receipt of the total amount designated as to be delivered against the
loan of Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance with
the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by
the Fund, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such loan
termination and return of Securities: (a) the Series to which the
loaned Securities are specifically allocated; (b) the name of the
issuer and the title of the Securities to be returned, (c) the number
of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any
offsetting credits as described in said Certificate), and (f) the
name of the broker, dealer, or financial institution from which the
Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits
to, or withdrawals from, a Senior Security Account as specified in a
Certificate received by the Custodian. Such Certificate shall specify
the Series for which such deposit or withdrawal is to be made and the
amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited in, or withdrawn from, such
Senior Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the issuer,
the title and the number of shares or the principal amount of any
particular Securities to be deposited by the
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Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or
Clearing Member in whose name, or for whose benefit, the account was
established as specified in the Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian in
any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on any
such property whenever the Custodian has made payment or delivery
pursuant to any Put Option guarantee letter or similar document or
any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are
less than the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency shall be a
debt owed the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the Fund
with a statement with respect to each Margin Account in which money
or Securities are held specifying as of the close of business on the
previous business day: (a) the name of the Margin Account; (b) the
amount and kind of Securities held therein; and (c) the amount of
money held therein. The Custodian shall make available upon request
to any broker, dealer, or futures commission merchant specified in
the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in
which cash and/or Securities are maintained in a Collateral Account
for any Series, the Custodian shall furnish the Fund with a statement
with respect to such Collateral Account specifying the amount of cash
and/or the amount and kind of Securities held therein. No later than
the close of business next succeeding the delivery to the Fund of
such statement, the Fund shall furnish to the Custodian a Certificate
specifying the then market value of the Securities described in such
statement. In the event such then market value is indicated to be
less than the Custodian's obligation with respect to any outstanding
Put Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be
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deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, either (i) setting forth with
respect to the Series specified therein the date of the declaration
of a dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable
to the Dividend Agent and any sub-dividend agent or co-dividend agent
of the Fund on the payment date, or (ii) authorizing with respect to
the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely
on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total amount
payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall
pay out of the moneys held for the account of each Series the total
amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to
the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate
account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the name
of the Series for which such money was received.
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<PAGE>
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of
the money held for the account of such Series, all original issue or
other taxes required to be paid by the Fund in connection with such
issuance upon the receipt of a Certificate specifying the amount to
be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian
hereunder in connection with a redemption of any Shares, it shall
furnish to the Custodian a Certificate specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting
forth the Series and number of Shares received by the Transfer Agent
for redemption and that such Shares are in good form for redemption,
the Custodian shall make payment to the Transfer Agent out of the
moneys held in the separate account in the name of the Series the
total amount specified in the Certificate issued pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption
of any Shares, whenever any Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Certificate,
shall, upon receipt of an advice from the Fund or its agent setting
forth that the redemption is in good form for redemption in
accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the
moneys held in the separate account of the Series of the Shares being
redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds
on behalf of any Series which results in an overdraft because the
moneys held by the Custodian in the separate account for such Series
shall be insufficient to pay the total amount payable upon a purchase
of Securities specifically allocated to such Series, as set forth in
a Certificate or Oral Instructions, or which results in an overdraft
in the separate account of such Series for some other reason, or if
the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New
York under the Fund's Cash
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<PAGE>
Management and Related Services Agreement, (except a borrowing for
investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such overdraft or
indebtedness shall be deemed to be a loan made by the Custodian to
the Fund for such Series payable on demand and shall bear interest
from the date incurred at a rate per annum (based on a 360-day year
for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to
time, such rate to be adjusted on the effective date of any change in
such prime commercial lending rate but in no event to be less than 6%
per annum. In addition, the Fund hereby agrees that the Custodian
shall have a continuing lien and security interest in and to any
property specifically allocated to such Series at any time held by it
for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discretion, at
any time to charge any such overdraft or indebtedness together with
interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby
covenants that on each Business Day on which either it intends to
enter a Reverse Repurchase Agreement and/ or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the
close of business the Fund had outstanding a Reverse Repurchase
Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by any
bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for investment
or for temporary or emergency purposes using Securities held by the
Custodian hereunder as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
each such borrowing: (a) the Series to which such borrowing relates;
(b) the name of the bank, (c) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the
total amount payable to the Fund on the borrowing date, (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and (h)
a
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<PAGE>
statement specifying whether such loan is for investment purposes or
for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date
specified in a Certificate the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to
all rights therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such Securities
as additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this paragraph.
The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall
receive from time to time such return of collateral as may be
tendered to it. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and number
of shares or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall not be
under any obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a
Fund in order for the Fund to transmit Instructions to the Custodian
(the "Software"), the Custodian grants to such Fund a personal,
nontransferable and nonexclusive license to use the Software solely
for the purpose of transmitting Instructions to, and receiving
communications from, the Custodian in connection with its account(s).
The Fund agrees not to sell, reproduce, lease or otherwise provide,
directly or indirectly, the Software or any portion thereof to any
third party without the prior written consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to
communications services, necessary for it to utilize the Software and
transmit Instructions to the Custodian. The Custodian shall not be
responsible for the reliability, compatibility with the Software or
availability of any such equipment or services or the performance or
nonperformance by any nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data
bases relating solely to the assets of the
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<PAGE>
Fund and transactions with respect thereto), and any proprietary
data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be
made available to the public) (collectively, the "Information"), are
the exclusive and confidential property of the Custodian. The Fund
shall keep the Information confidential by using the same care and
discretion that the Fund uses with respect to its own confidential
property and trade secrets and shall neither make nor permit any
disclosure without the prior written consent of the Custodian. Upon
termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all
copies of the Information which are in its possession or under its
control or which the Fund distributed to third parties.
4. The Custodian reserves the right to modify the Software from
time to time upon reasonable prior notice and the Fund shall install
new releases of the Software as the Custodian may direct. The Fund
agrees not to modify or attempt to modify the Software without the
Custodian's prior written consent. The Fund acknowledges that any
modifications to the Software, whether by the Fund or the Custodian
and whether with or without the Custodian's consent, shall become the
property of the Custodian.
5. The Custodian makes no warranties or representations of any
kind with regard to the Software or the method(s) by which the Fund
may transmit Instructions to the Custodian, express or implied,
including but not limited to any implied warranties or
merchantability or fitness for a particular purpose.
6. Where the method for transmitting Instructions by the Fund
involves an automatic systems acknowledgment by the Custodian of its
receipt of such Instructions, then in the absence of such
acknowledgment the Custodian shall not be liable for any failure to
act pursuant to such Instructions, the Fund may not claim that such
Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to
ensure that only persons duly authorized by the Fund transmit such
Instructions to the Custodian. The Fund will cause all persons
transmitting Instructions to the Custodian to treat applicable user
and authorization codes, passwords and authentication keys with
extreme care, and irrevocably authorizes the Custodian to act in
accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees
that it is fully informed of the protections and risks
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<PAGE>
associated with the various methods of transmitting Instructions to
the Custodian and that there may be more secure methods of
transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security
procedures (if any) to be followed in connection with the Fund's
transmission of Instructions provide to it a commercially reasonable
degree of protection in light of its particular needs and
circumstances.
8. The Fund hereby presents, warrants and covenants to the
Custodian that this Agreement has been duly approved by a resolution
of its Board of Trustees, and that its transmission of Instructions
pursuant hereto shall at all times comply with the Investment Company
Act of 1940, as amended.
9. The Fund shall notify the Custodian of any errors, omissions
or interruptions in, or delay or unavailability of, its ability to
send Instructions as promptly as practicable, and in any event within
24 hours after the earliest of (i) discovery thereof, (ii) the
Business Day on which discovery should have occurred through the
exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such
error, it being agreed that discovery and receipt of notice may only
occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or
interruption in, or delay or unavailability of, the Fund's ability to
send Instructions.
ARTICLE XVI.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its
nominee shall be liable for any loss or damage, including counsel
fees, resulting from its action or omission to act or otherwise,
either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful
misconduct. In no event shall the Custodian be liable to the Fund or
any third party for special, indirect or consequential damages or
lost profits or loss of business, arising under or in connection with
this Agreement, even if previously informed of the possibility of
such damages and regardless of the form of action. The Custodian may,
in good faith, with respect to questions of law arising hereunder or
under any Margin Account Agreement, apply for and obtain the advice
and opinion of counsel to the Fund or of its own counsel, at the
expense of the Fund, and shall be fully protected with respect to
anything done or omitted by
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<PAGE>
it in good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any Depository
arising by reason of any negligence or willful misconduct on the part
of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall not
be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase,
sale or writing thereof, or the propriety of the amount paid or
received therefor;
(b) The legality of the sale or redemption of any Shares,
or the propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that
any cash collateral delivered to it by a broker, dealer, or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the Fund
against any loss it might sustain as a result of such loan. The
Custodian specifically, but not by way of limitation, shall not be
under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall
be the sole responsibility of the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer
or financial institution to which portfolio Securities of the Fund
are lent pursuant to Article X of this Agreement makes payment to it
of any dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termination of
such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not
paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see
that any broker, dealer,
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futures commission merchant or Clearing Member makes payment to the
Fund of any variation margin payment or similar payment which the
Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures commission
merchant or Clearing Member is the amount the Fund is entitled to
receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be
the Custodian of, any money, whether or not represented by any check,
draft, or other instrument for the payment of money, received by it
on behalf of the Fund until the Custodian actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest at the Book-Entry System or the
Depository.
4. The Custodian shall have no responsibility and shall not be
liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar matters
relating to Securities unless notice of any such matters appears in
one or more of the publications listed in Appendix C attached hereto.
In no event shall the Custodian have any responsibility or liability
for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable
upon Securities deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on
Securities held in the Depository the Custodian shall make a claim
against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute
or defend any action suit or proceeding in respect to any Securities
held by the Depository which in its opinion may involve it in expense
or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount due to the Fund from
the Transfer Agent of the Fund nor to take any action to effect
payment or distribution by the Transfer Agent of the Fund of any
amount paid by the Custodian to the Transfer Agent of the Fund in
accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to
take action to effect collection of any amount if the Securities upon
which such amount is payable are in default, or if payment is refused
after due demand or presentation, unless and until (i) it shall be
directed to take such action by a Certificate and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
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<PAGE>
7. The Custodian may appoint one or more banking institutions as
Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys
at any time owned by the Fund, upon such terms and conditions as may
be approved in a Certificate or contained in an agreement executed by
the Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation (a)
to ascertain whether any Securities at any time delivered to, or held
by it for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series
under the provisions of its then current prospectus, or (b) to
ascertain whether any transactions by the Fund, whether or not
involving the Custodian, are such transactions as may properly be
engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and such
compensation as set forth in Appendix D attached hereto, which may be
revised from time to time as agreed to by the Custodian and the Fund.
The Custodian may charge such compensation and any expenses with
respect to a Series incurred by the Custodian in the performance of
its duties pursuant to such agreement against any money specifically
allocated to such Series. Unless and until the Fund instructs the
Custodian by a Certificate to apportion any loss, damage, liability
or expense among the Series in a specified manner, the Custodian
shall also be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such Series
net asset value at the time of the charge to the aggregate net asset
value of all Series at that time) of the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimbursement
hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in
settling outside of New York City transactions involving the purchase
and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any Oral
Instructions actually received by the Custodian hereinabove provided
for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so
that such Certificate or facsimile thereof is received by the
Custodian, whether by
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hand delivery, telecopier or other similar device, or otherwise, by
the close of business of the same day that such Oral Instructions are
given to the Custodian. The Fund agrees that the fact that such
confirming instructions are not received, or that contrary
instructions are received, by the Custodian shall in no way affect
the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the
Custodian shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions provided such instructions reasonably appear to have
been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably
believed by the Custodian to be given in accordance with the terms
and conditions of any Margin Account Agreement. Without limiting the
generality of the foregoing, the Custodian shall be under no duty to
inquire into, and shall not be liable for, the accuracy of any
statements or representations contained in any such instrument or
other notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in
the possession of the Custodian shall be the property of the Fund.
Such books and records shall be prepared and maintained as required
by the Investment Company Act of 1940, as amended, and other
applicable securities laws and rules and regulations. The Fund, or
the Fund's authorized representatives, shall have access to such
books and records during the Custodian's normal business hours. Upon
the reasonable request of the Fund, copies of any such books and
records shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the Custodian
its expenses of providing such copies. Upon reasonable request of the
Fund, the Custodian shall provide in hard copy or on micro-film,
whichever the Custodian elects, any records included in any such
delivery which are maintained by the Custodian on a computer disc, or
are similarly maintained, and the Fund shall reimburse the Custodian
for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and with
such reports on its own systems of internal accounting control as the
Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save
the Custodian harmless from all liability, claims,
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losses and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of or in connection with this Agreement,
including the Custodian's payment or non-payment of checks pursuant
to paragraph 6 of Article XIII as part of any check redemption
privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or
willful misconduct.
15. The Custodian agrees to indemnify the Fund against and save
the Fund harmless from all liability, claims, losses and demands
whatsoever, including attorney's fees, howsoever arising or incurred
because of or in connection with this Agreement, except for any such
liability, claim, loss and demand arising out of the Fund's own
negligence or willful misconduct.
16. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI and
XVII the Custodian may deliver and receive Securities, and receipts
with respect to such Securities, and arrange for payments to be made
and received by the Custodian in accordance with the customs
prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities
against payment, delivery of such Securities and receipt of payment
therefor may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall
continue until final payment in full has been received by the
Custodian.
17. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
ARTICLE XVII.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of
such termination, which shall be not less than sixety (60) days after
the date of giving of such notice. In the event such notice is given
by the Fund, it shall be accompanied by a copy of a resolution of the
Board of Trustees of the Fund, certified by the Secretary or any
Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall
be a bank or trust company having not less than
- 35 -
<PAGE>
$2,000,000 aggregate capital, surplus and undivided profits. In the
event such notice is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a copy of a
resolution of the Board of Trustees of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by the
Fund, the Custodian may designate a successor custodian which shall
be a bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall
upon receipt of a notice of acceptance by the successor custodian on
that date deliver directly to the successor custodian all Securities
and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall
upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Fund) and moneys then owned by the Fund be deemed to
be its own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry
System which cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XVIII.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two
of the present Officers of the Fund under its seal, setting forth the
names and the signatures of the present Officers. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the
event that any such present Officer ceases to be an Officer or in the
event that other or additional Officers are elected or appointed.
Until such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement upon
Oral Instructions or signatures of the Officers as set forth in the
last delivered Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90
- 36 -
<PAGE>
Washington Street, New York, New York 10286, or at such other place
as the Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or delivered
to it at its office at the address for the Fund first above written,
or at such other place as the Fund may from time to time designate in
writing.
4. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement and approved by a resolution of the Board
of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws
of the State of New York without giving effect to conflict of laws
principles thereof. Each party hereby consents to the jurisdiction of
a state or federal court situated in New York City, New York in
connection with any dispute arising hereunder and hereby waives its
right to trial by jury.
7. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
8. A copy of the Declaration of Trust of the Fund is on file
with the Secretary of The Commonwealth of Massachusetts, and notice
is hereby given that this instrument is executed on behalf of the
Board of Trustees of the Fund as Trustees and not individually and
that the obligations of this instrument are not binding upon any of
the Trustees or shareholders individually but are binding only upon
the assets and property of the Fund; provided, however, that the
Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged
with liabilities attributable to any other Series of the Fund and
that all persons extending credit to, or contracting with or having
any claim against a particular Series of the Fund shall look only to
the assets of that particular Series for payment of such credit,
contract or claim.
- 38 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto duly
authorized and their respective seals to be hereunto affixed, as of
the day and year first above written.
Attest: The New York State
Opportunity Funds
/s/ Tina D. Hosking
By: /s/ Gregg A. Kidd
Attest: THE BANK OF NEW YORK
/s/ Mayra M. Adonnino By: /s/ Stephen E. Grunston
Name: Stephen E. Grunston
Title: Vice President
- 39 -
<PAGE>
APPENDIX A
I, Gregg A. Kidd, President, and I, Tina D. Hosking , Secretary,
of THE NEW YORK STATE OPPORTUNITY FUNDS, a Massachusetts business
trust (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with
the Fund and each has been duly elected or appointed by the Board of
Trustees of the Fund to each such position and qualified therefor in
conformity with the Fund's Declaration of Trust and By-Laws, and the
signatures set forth opposite their respective names are their true
and correct signatures:
Name Position Signature
Gregg A. Kidd President /s/ Gregg A. Kidd
Robert G. Dorsey Vice President /s/ Robert G. Dorsey
Tina D. Hosking Secretary /s/ Tina D. Hosking
Mark J. Seger Treasurer /s/ Mark J. Seger
M. Kathleen Leugers Vice President of
Countrywide Fund
Services, Inc.
(the Fund's
transfer agent) /s/ M. Kathleen Leugers
/s/ Gregg A. Kidd /s/ Tina D. Hosking
Gregg A. Kidd, President Tina D. Hosking, Secretary
<PAGE>
APPENDIX B
PORTFOLIO LIST
NEW YORK EQUITY FUND
<PAGE>
APPENDIX C
I, Mayra Adonnino , a Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, Tina D. Hosking , hereby certifies that she is
the duly elected and acting Secretary of The New York State
Opportunity Funds, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on February 19,
1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
(the "Custody Agreement"), is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry
System, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Book-Entry System to the extent possible in connection with its
performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 4th
day of April, 1997.
/s/ Tina D. Hosking
Tina D. Hosking, Secretary
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, Tina D. Hosking, hereby certifies that she is
the duly elected and acting Secretary of The New York State
Opportunity Funds, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on February 19,
1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
(the "Custody Agreement"), is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically
allocated, and to utilize the Depository to the extent possible
in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases
and sales of securities, loans of securities, and deliveries and
returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 4th
day of April, 1997.
/s/ Tina D. Hosking
Tina D. Hosking, Secretary
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, Tina D. Hosking, hereby certifies that she is
the duly elected and acting Secretary of The New York State
Opportunity Funds, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on February 19,
1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
(the "Custody Agreement"), is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as
Depository, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection
with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 4th
day of April, 1997.
/s/ Tina D. Hosking
Tina D. Hosking, Secretary
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, Tina D. Hosking, hereby certifies that she is
the duly elected and acting Secretary of The New York State
Opportunity Funds, a Massachusetts business trust (the "Fund"), and
further certifies that the following resolution was adopted by the
Board of Trustees of the Fund at a meeting duly held on February 19,
1997, at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
(the "Custody Agreement"), is authorized and instructed on a
continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing
Member confirmations for Options and transaction in Options,
regardless of the Series to which the same are specifically
allocated, as such terms are defined in the Custody Agreement,
as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 4th
day of April, 1997.
/s/ Tina D. Hosking
Tina D. Hosking, Secretary
<PAGE>
EXHIBIT D
The undersigned, Tina D. Hosking, hereby certifies that she is
the duly elected and acting Secretary of The New York State
Opportunity Funds, a Massachusetts business trust (the "Fund"),
further certifies that the following resolutions were adopted by the
Board of Trustees of the Fund at a meeting duly held on February 19,
1997, at which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in full
force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to the Custody Agreement between The Bank of New York and the
(the "Custody Agreement"), is authorized and instructed on a
continuous and ongoing basis to act in accordance with, and to
rely on Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to Officers of the Fund as
defined in the Custody Agreement, shall establish internal
safekeeping procedures to safeguard and protect the
confidentiality and availability of user and access codes,
passwords and authentication keys, and shall use Instructions
only in a manner that does not contravene the Investment Company
Act of 1940, as amended, or the rules and regulations
thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 4th
day of April, 1997.
/s/ Tina D. Hosking
Tina D. Hosking, Secretary
<PAGE>
Securities Processing Services
- -------------------------------------------------------------------------------
Mutual Funds
THE
BANK OF
NEW
YORK
DOMESTIC CUSTODY FEE SCHEDULE
FOR
THE NEW YORK STATE OPPORTUNITY FUNDS
NEW YORK EQUITY FUND
SAFEKEEPING/INCOME COLLECTION/ALL REPORTING/DTC ID AFFIRMATIONS
2 basis points per annum on the first $50 million of the net assets of the fund.
1 basis point per annum on the excess.
MINIMUM FEE
There will be a minimum fee of $225 per month.
SECURITY TRANSACTION CHARGES
$ 7 book entry settlements - DTC/FRB
$15 physical transactions, options and futures.
FEDERAL FUND WIRES/OFFICIAL CHECKS
$5 for wires not related to securities transactions and checks requested to
pay your Fund expenses.
OUT-OF-POCKET EXPENSES
None
<PAGE>
Securities Processing Services
- -------------------------------------------------------------------------------
Mutual Funds
THE
BANK OF
NEW
YORK
DOMESTIC CUSTODY FEE SCHEDULE
FOR
THE NEW YORK STATE OPPORTUNITY FUNDS
NEW YORK EQUITY FUND
EARNINGS CREDIT ON BALANCES/INTEREST ON OVERDRAFTS
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-bill rate on the day of the
balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits
daily, computed at 1% above the average Federal Funds rate on the day of the
overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
Fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after
year-end.
BILLING CYCLE
Monthly.
The New York State Opportunity Funds The Bank of New York
New York Equity Fund
Accepted by: /s/ Gregg A. Kidd Acknowledge by: /s/ Mayra Adonnino
Name: Gregg A. Kidd Name: Mayra Adonnino
Title: President Title: Vice President
Date: 4/23/97 Date: 4/28/97
ADMINISTRATION AGREEMENT
AGREEMENT dated as of April 4, 1997 between The New York State
Opportunity Funds, a Massachusetts business trust (the "Trust"), and Countrywide
Fund Services, Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its administrative agent; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
<PAGE>
F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the
future by the Trust and for which Countrywide is to act as
plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of the Trustees of the
Trust, Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) tax returns, (ii) reports to shareholders of the Trust,
(iii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iv)
necessary materials for Board of Trustees' meetings unless prepared by other
parties under agreement with the Trust. Countrywide shall provide personnel to
serve as officers of the Trust if so elected by the Board of Trustees; provided,
however, that the Trust shall reimburse Countrywide for the reasonable
out-of-pocket expenses incurred by such personnel in attending Board of
Trustees' meetings and shareholders' meetings of the Trust.
4. RECORDKEEPING AND OTHER INFORMATION.
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall
- 2 -
<PAGE>
make available during regular business hours all records and other data created
and maintained pursuant to this Agreement for reasonable audit and inspection by
the Trust, any person retained by the Trust, or any regulatory agency having
authority over the Trust.
5. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
6. COMPENSATION.
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee at the annual rate of .15% of
such series' average daily net assets up to $25 million; .125% of such assets
from $25 to $50 million; and .1% of such assets in excess of $50 million;
provided, however, that the minimum fee shall be $1,000 per month for each
series.
7. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
8. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
- 3 -
<PAGE>
9. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
- 4 -
<PAGE>
10. INDEMNIFICATION OF THE TRUST.
Notwithstanding any other provision of this Agreement,
Countrywide shall indemnify and hold harmless the Trust, its trustees, officers,
employees, shareholders, agents, control persons and affiliates, from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which the Trust may
sustain or incur or which may be asserted against the Trust by any person by
reason of, or as a result of, Countrywide's gross negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
11. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in person at
a meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
12. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation
- 5 -
<PAGE>
(including other investment companies); provided, however, that Countrywide
expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the Trust
under this Agreement.
13. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
14. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
16. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
- 6 -
<PAGE>
To the Trust: The New York State Opportunity Funds
4605 E. Genesee Street
DeWitt, New York 13214
Attention: Gregg A. Kidd
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 16. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
17. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
18. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
20. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
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21. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW YORK STATE OPPORTUNITY FUNDS
By: /s/ Gregg A. Kidd
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
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ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of April 4, 1997 between The New York State
Opportunity Funds, a Massachusetts business trust (the "Trust"), and Countrywide
Fund Services, Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
provide the Trust with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each series
of the Trust and the per share net asset value of each series of the Trust, in
accordance with the Trust's current prospectus and statement of additional
information, once daily as of the time selected by the Trust's Board of
Trustees. Countrywide will prepare and maintain a daily valuation of all
securities and other assets of the Trust in accordance with instructions from a
designated officer of the Trust or its investment advisor and in the manner set
forth in the Trust's current prospectus and statement of additional information.
In valuing securities of the Trust, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
Countrywide will maintain and keep current the general ledger
for each series of the Trust, recording all income and expenses, capital share
activity and security transactions of the Trust. Countrywide will maintain such
further books and records as are necessary to enable it to perform its duties
under this Agreement, and will periodically provide reports to the Trust and its
authorized agents regarding share purchases and redemptions and trial balances
of each series of the Trust. Countrywide will
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prepare and maintain complete, accurate and current all records with respect to
the Trust required to be maintained by the Trust under the Internal Revenue Code
of 1986, as amended (the "Code"), and under the rules and regulations of the
1940 Act, and will preserve said records in the manner and for the periods
prescribed in the Code and the 1940 Act. The retention of such records shall be
at the expense of the Trust.
All of the records prepared and maintained by Countrywide pursuant to
this Section 3 which are required to be maintained by the Trust under the Code
and the 1940 Act will be the property of the Trust. In the event this Agreement
is terminated, all such records shall be delivered to the Trust at the Trust's
expense, and Countrywide shall be relieved of responsibility for the preparation
and maintenance of any such records delivered to the Trust.
4. PAYMENT OF TRUST EXPENSES.
Countrywide shall process each request received from the Trust
or its authorized agents for payment of the Trust's expenses. Upon receipt of
written instructions signed by an officer or other authorized agent of the
Trust, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide shall maintain such records within its control and
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
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<PAGE>
8. FEES.
For the performance of the services under this Agreement, each
series of the Trust shall pay Countrywide a monthly fee in accordance with the
schedule attached hereto as Schedule A. The fees with respect to any month shall
be paid to Countrywide on the last business day of such month. The Trust shall
also promptly reimburse Countrywide for the cost of external pricing services
utilized by Countrywide.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
10. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
11. EQUIPMENT FAILURES.
Countrywide shall take all steps necessary to minimize or
avoid service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
12. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be
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<PAGE>
subject to any liability for, or any damages, expenses or losses incurred by the
Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee,
shareholder, or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of those entities.
C. Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of the Trust or
upon the opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by Countrywide in connection with its
appointment in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
13. INDEMNIFICATION OF THE TRUST.
Notwithstanding any other provision of this Agreement,
Countrywide shall indemnify and hold harmless the Trust, its trustees, officers,
employees, shareholders, agents, control persons and affiliates, from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which the Trust may
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<PAGE>
sustain or incur or which may be asserted against the Trust by any person by
reason of, or as a result of, Countrywide's gross negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
14. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in person at
a meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
15. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
16. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust.
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<PAGE>
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust.
17. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
18. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to said 1940
Act. In addition, where the effect of a requirement of the 1940 Act, reflected
in any provision of this Agreement, is revised by rule, regulation or order of
the Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
19. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The New York State Opportunity Funds
4605 E. Genesee Street
DeWitt, New York 13214
Attention: Gregg A. Kidd
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 19. Each such notice shall be deemed delivered (a) on the
date delivered if by
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<PAGE>
personal delivery; (b) on the date telecommunicated if by telegraph; (c) on the
date of transmission with confirmed answer back if by telex, telefax or other
telegraphic method; and (d) on the date upon which the return receipt is signed
or delivery is refused or the notice is designated by the postal authorities as
not deliverable, as the case may be, if mailed.
20. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
21. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
22. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
24. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW YORK STATE OPPORTUNITY FUNDS
By: /s/ Gregg A. Kidd
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s Robert G. Dorsey
Its: President
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SCHEDULE A
COMPENSATION
The New York Equity Fund will pay Countrywide a monthly fee, according
to the average net assets of the Fund during such month, as follows:
Monthly Fee Average Monthly Net Assets
$2,000 $ 0 - $ 50,000,000
$2,500 $ 50,000,000 - $100,000,000
$3,000 $100,000,000 - $200,000,000
$4,000+ .001% of
average net assets Over $200,000,000
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TRANSFER, DIVIDEND DISBURSING, SHAREHOLDER SERVICE
AND PLAN AGENCY AGREEMENT
AGREEMENT dated as of April 4, 1997 between The New York State
Opportunity Funds, a Massachusetts business trust (the "Trust"), and Countrywide
Fund Services, Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its transfer, dividend disbursing, shareholder service and plan agent;
and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities and
Exchange Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
<PAGE>
F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment or
withdrawal plans which are offered or may be offered in the
future by the Trust and for which Countrywide is to act as
plan agent.
3. COUNTRYWIDE TO RECORD SHARES.
Countrywide shall record the issuance of shares of the Trust
and maintain pursuant to applicable rules of the SEC a record of the total
number of shares of the Trust which are authorized, issued and outstanding,
based upon data provided to it by the Trust. Countrywide shall also provide the
Trust on a regular basis or upon reasonable request the total number of shares
which are authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
4. COUNTRYWIDE TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide shall approve such transfer and shall take all necessary steps to
effectuate the transfer as indicated in the transfer request. Upon approval of
the transfer, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.
5. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, Countrywide will countersign and mail,
by insured first class mail, a share certificate to the investor at his address
as set forth on the transfer books of the Trust, subject to any other
instructions for delivery of certificates representing newly purchased shares
and subject to the limitation that no certificates representing newly purchased
shares shall be mailed to the investor until the cash purchase price of such
shares has been collected and credited to the account of the Trust maintained by
the Custodian. The Trust shall supply Countrywide
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with a sufficient supply of blank share certificates and from time to time shall
renew such supply upon request of Countrywide. Such blank share certificates
shall be properly signed, manually or, if authorized by the Trust, by facsimile;
and notwithstanding the death, resignation or removal of any officers of the
Trust authorized to sign share certificates, Countrywide may continue to
countersign certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Trust. In case of the alleged loss or
destruction of any share certificate, no new certificates shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to Countrywide and the Trust, and issued by a surety company
satisfactory to Countrywide and the Trust.
6. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust or Pinnacle Investments, Inc., as underwriter of the Trust (the
"Underwriter"), Countrywide shall stamp the check or instrument with the date of
receipt, determine the amount thereof due the Trust and shall forthwith process
the same for collection. Upon receipt of notification of receipt of funds
eligible for share purchases in accordance with the Trust's then current
prospectus and statement of additional information, Countrywide shall notify the
Trust, at the close of each business day, in writing of the amount of said funds
credited to the Trust and deposited in its account with the Custodian, and shall
similarly notify the Underwriter of the amount of said funds credited to the
Underwriter and deposited in its account with its designated bank.
7. PURCHASE ORDERS.
Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable Countrywide to establish
a shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
8. RETURNED CHECKS.
In the event that Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide will:
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A. Give prompt notification to the Trust and the Underwriter of
the non-payment of said check;
B. In the absence of other instructions from the Trust or the
Underwriter, take such steps as may be necessary to redeem any shares purchased
on the basis of such returned check and cause the proceeds of such redemption
plus any dividends declared with respect to such shares to be credited to the
account of the Trust and to request the Trust's Custodian to forward such
returned check to the person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's
records maintained by Countrywide pursuant to this Agreement.
9. SALES CHARGE.
In computing the number of shares to credit to the account of
a shareholder, Countrywide will calculate the total of the applicable sales
charges with respect to each purchase as set forth in the Trust's current
prospectus and statement of additional information and in accordance with any
notification filed with respect to combined and accumulated purchases.
Countrywide will also determine the portion of each sales charge payable by the
Underwriter to the dealer of record participating in the sale in accordance with
such schedules as are from time to time delivered by the Underwriter to
Countrywide; provided, however, Countrywide shall have no liability hereunder
arising from the incorrect selection by Countrywide of the gross rate of sales
charges except that this exculpation shall not apply in the event the rate is
specified by the Underwriter or the Trust and Countrywide fails to select the
rate specified.
10. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish Countrywide with appropriate evidence
of trustee action authorizing the declaration of dividends and other
distributions. Countrywide shall establish procedures in accordance with the
Trust's then current prospectus and statement of additional information and with
other authorized actions of the Trust's Board of Trustees under which it will
have available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so requests, invest the dividends and other distributions in
full and fractional shares in accordance with the Trust's then current
prospectus and statement of additional information. If a shareholder has elected
to receive dividends or other distributions in cash, then Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide shall,
on or before the mailing date of such checks,
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notify the Trust and the Custodian of the estimated amount of cash required to
pay such dividend or distribution, and the Trust shall instruct the Custodian to
make available sufficient funds therefor in the appropriate account of the
Trust. Countrywide shall mail to the shareholders periodic statements, as
requested by the Trust, showing the number of full and fractional shares and the
net asset value per share of shares so credited. When requested by the Trust,
Countrywide shall prepare and file with the Internal Revenue Service, and when
required, shall address and mail to shareholders, such returns and information
relating to dividends and distributions paid by the Trust as are required to be
so prepared, filed and mailed by applicable laws, rules and regulations.
11. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, of all shareholders for which there are, as of the
end of the calendar year, dividends, distributions or redemption proceeds for
which checks or share certificates mailed in payment of distributions have been
returned. Countrywide shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the Trust
concerning the disposition of any such unclaimed dividends, distributions or
redemption proceeds.
12. REDEMPTIONS AND EXCHANGES.
A. Countrywide shall process, in accordance with the Trust's
then current prospectus and statement of additional information, each order for
the redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental
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instructions as may be furnished by the Trust and accepted by Countrywide. If
Countrywide or the Trust determines that a request for redemption does not
comply with the requirements for redemptions, Countrywide shall promptly notify
the shareholder indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, Countrywide, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
C. Countrywide shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph 12, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between Countrywide and the Trust consistent with the Trust's then current
prospectus and statement of additional information.
D. The authority of Countrywide to perform its
responsibilities under Paragraph 7, Paragraph 10, and this Paragraph 12 shall be
suspended with respect to any series of the Trust upon receipt of notification
by it of the suspension of the determination of such series' net asset value.
13. AUTOMATIC WITHDRAWAL PLANS.
Countrywide will process automatic withdrawal orders pursuant
to the provisions of the withdrawal plans duly executed by shareholders and the
current prospectus and statement of additional information of the Trust.
Payments upon such withdrawal order shall be made by Countrywide from the
appropriate account maintained by the Trust with the Custodian on approximately
the last business day of each month in which a payment has been requested, and
Countrywide will withdraw from a shareholder's account and present for
repurchase or redemption as many shares as shall be sufficient to make such
withdrawal payment pursuant to the provisions of the shareholder's withdrawal
plan and the current prospectus and statement of additional information of the
Trust. From time to time on new automatic withdrawal plans a check for payment
date already past may be issued upon request by the shareholder.
- 6 -
<PAGE>
14. LETTERS OF INTENT.
Countrywide will process such letters of intent for investing
in shares of the Trust as are provided for in the Trust's current prospectus and
statement of additional information. Countrywide will make appropriate deposits
to the account of the Underwriter for the adjustment of sales charges as therein
provided and will currently report the same to the Underwriter.
15. WIRE-ORDER PURCHASES.
Countrywide will send written confirmations to the dealers of
record containing all details of the wire-order purchases placed by each such
dealer by the close of business on the business day following receipt of such
orders by Countrywide or the Underwriter, with copies to the Underwriter. Upon
receipt of any check drawn or endorsed to the Trust (or Countrywide, as agent)
or otherwise identified as being payment of an outstanding wire-order,
Countrywide will stamp said check with the date of its receipt and deposit the
amount represented by such check to Countrywide's deposit accounts maintained
with the Custodian. Countrywide will compute the respective portions of such
deposit which represent the sales charge and the net asset value of the shares
so purchased, will cause the Custodian to transfer federal funds in an amount
equal to the net asset value of the shares so purchased to the Trust's account
with the Custodian, and will notify the Trust and the Underwriter before noon of
each business day of the total amount deposited in the Trust's deposit accounts,
and in the event that payment for a purchase order is not received by
Countrywide or the Custodian on the tenth business day following receipt of the
order, will prepare an NASD "notice of failure of dealer to make payment" and
forward such notification to the Underwriter.
16. OTHER PLANS.
Countrywide will process such accumulation plans, group
programs and other plans or programs for investing in shares of the Trust as are
now provided for in the Trust's current prospectus and statement of additional
information and will act as plan agent for shareholders pursuant to the terms of
such plans and programs duly executed by such shareholders.
17. RECORD KEEPING AND OTHER INFORMATION.
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
- 7 -
<PAGE>
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, any
person retained by the Trust, or any regulatory agency having authority over the
Trust.
18. SHAREHOLDER RECORDS.
Countrywide shall maintain records for each shareholder
account showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in cash or
invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term
gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder with
respect to (i) dividend or distribution elections and (ii)
elections with respect to payment options in connection with
the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder
holding certificates;
I. Any stop or restraining order placed against a shareholder's
account;
J. Information with respect to withholding in the case of a
foreign account or any other account for which withholding is
required by the Internal Revenue Code of 1986, as amended; and
- 8 -
<PAGE>
K. Any information required in order for Countrywide to perform
the calculations contemplated under this Agreement.
19. TAX RETURNS AND REPORTS.
Countrywide will prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies and, if required,
mail to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
20. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
21. ACCESS TO SHAREHOLDER INFORMATION.
Upon request, Countrywide shall arrange for the Trust's
investment advisor to have direct access to shareholder information contained in
Countrywide's computer system, including account balances, performance
information and such other information which is available to Countrywide with
respect to shareholder accounts.
22. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
Countrywide will provide and maintain adequate personnel,
records and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. Countrywide will answer
written correspondence from shareholders relating to their share
- 9 -
<PAGE>
accounts and such other written or oral inquiries as may from time to time be
mutually agreed upon, and Countrywide will notify the Trust of any
correspondence or inquiries which may require an answer from the Trust.
24. PROXIES.
Countrywide shall assist the Trust in the mailing of proxy
cards and other material in connection with shareholder meetings of the Trust,
shall receive, examine and tabulate returned proxies and shall, if requested by
the Trust, provide at least one inspector of election to attend and participate
as required by law in shareholder meetings of the Trust.
25. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee in accordance with the
schedule attached hereto as Schedule A. The Trust shall promptly reimburse
Countrywide for any out-of-pocket expenses and advances which are to be paid by
the Trust in accordance with Paragraph 27.
27. EXPENSES.
Countrywide shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) the use of
data processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 27 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any other shareholder correspondence and any and all assessments, taxes or
levies assessed on Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide three business days prior to the
mailing date of such materials.
- 10 -
<PAGE>
28. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
29. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
30. EQUIPMENT FAILURES.
Countrywide shall take all steps necessary to minimize or
avoid service interruptions, and has entered into one or more agreements making
provision for emergency use of electronic data processing equipment. Countrywide
shall have no liability with respect to equipment failures beyond its control.
31. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its shareholders, officers,
directors, employees, agents, control persons or affiliates of any thereof shall
be subject to any liability for, or any damages, expenses or losses incurred by
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
- 11 -
<PAGE>
B. Any person, even though also a director, officer, employee,
shareholder or agent of Countrywide, or any of its affiliates, who may be or
become an officer, trustee, employee or agent of the Trust, shall be deemed,
when rendering services to the Trust or acting on any business of the Trust, to
be rendering such services to or acting solely as an officer, trustee, employee
or agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of Countrywide or any of its
affiliates, even though paid by one of these entities.
C. The Trust shall indemnify and hold harmless Countrywide, its
directors, officers, employees, shareholders, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of any and every
nature which Countrywide may sustain or incur or which may be asserted against
Countrywide by any person by reason of, or as a result of: (i) any action taken
or omitted to be taken by Countrywide in good faith in reliance upon any
certificate, instrument, order or share certificate reasonably believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the oral instructions or written instructions of an authorized
person of the Trust or upon the opinion of legal counsel for the Trust or its
own counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
32. INDEMNIFICATION OF THE TRUST.
Notwithstanding any other provision of this Agreement,
Countrywide shall indemnify and hold harmless the Trust, its trustees, officers,
employees, shareholders, agents, control persons and affiliates, from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which the Trust may
sustain or incur or which may be asserted against the Trust by any person by
reason of, or as a result of, Countrywide's gross negligence, willful
misconduct, bad faith, or reckless disregard of its duties hereunder.
33. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for two years from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in
- 12 -
<PAGE>
person at a meeting called for the purpose, of a majority of the Trust's
trustees who are not parties to this Agreement or interested persons (as defined
in the 1940 Act) of any such party, and (3) by vote of a majority of the Trust's
Board of Trustees or a majority of the Trust's outstanding voting securities.
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
34. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
35. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust, personally, but bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust and signed by an officer of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust.
- 13 -
<PAGE>
36. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
37. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
38. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: The New York State Opportunity Funds
4605 E. Genesee Street
DeWitt, New York 13214
Attention: Gregg A. Kidd
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 38. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
- 14 -
<PAGE>
39. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
40. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
41. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
42. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
43. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW YORK STATE OPPORTUNITY FUNDS
By: /s/ Gregg A. Kidd
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Robert G. Dorsey
Its: President
- 16 -
<PAGE>
Schedule A
COMPENSATION
Services FEE
As Transfer Agent and Shareholder (Per Account)
Servicing Agent:
New York Equity Fund Payable monthly at
rate of $17.00/year;
subject to a minimum
of $1,000 per month
- 17 -
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
New York State Opportunity Funds Trust
We hereby consent to the use of our report dated February 25, 1997 on
the financial statement of New York Equity Fund series of New York Opportunity
Fund Trust referred to therein in Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, file No. 333-17381, as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under
the caption "Independent Auditors" and in the Statement of Additional
Information under the captions "Independent Auditors" and "Financial
Statements".
/s/McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
October 29, 1997
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
WHEREAS, The New York State Opportunity Funds (the "Trust"), a business
trust organized under the laws of the Commonwealth of Massachusetts, engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares
of beneficial interest with a par value of $.01 per share (the "Shares"), which
may be divided into two or more Series of Shares; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Rule 12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
and
WHEREAS, the Plan has been approved by the vote of at least a majority
of the outstanding voting securities (as defined in the 1940 Act) of each Series
of the Trust;
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the 1940 Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the Trustees
of the Trust, the Trust may, directly or indirectly, engage in any activities
related to the distribution of Shares, which activities may include, but are not
limited to, the following: (a) payments to securities dealers and others who are
engaged in the sale of Shares and who may be advising shareholders of the Trust
regarding the purchase, sale or retention of Shares; (b) expenses of maintaining
personnel (including personnel of organizations with which the Trust has entered
into agreements related to this Plan) who engage in or support distribution of
Shares or who render shareholder support services not otherwise provided by the
Trust's transfer agent, including, but not limited to, office space and
equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and
- 1 -
<PAGE>
providing such other shareholder services as the Trust may reasonably request;
(c) formulating and implementing of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (d) preparing, printing
and distributing sales literature; (e) preparing, printing and distributing
prospectuses and statements of additional information and reports of the Trust
for recipients other than existing shareholders of the Trust; and (f) obtaining
such information, analyses and reports with respect to marketing and promotional
activities as the Trust may, from time to time, deem advisable. The Trust is
authorized to engage in the activities listed above, and in any other activities
related to the distribution of Shares, either directly or through other persons
with which the Trust has entered into agreements related to this Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed in any fiscal year an amount calculated at the rate of
.25% of the average daily net asset value of any Series of the Trust. Such
payments for distribution activities may be made directly by the Trust or the
Trust's investment advisor may incur such expenses and obtain reimbursement from
the Trust. Unreimbursed expenditures may be carried over from year to year
provided, however, that the total of all expenditures incurred by a Series
pursuant to this Plan in any given fiscal year does not exceed .25% of such
Series' average daily net asset value.
3. TERM AND TERMINATION. (a) This Plan shall become effective on the
date hereof. Unless terminated as herein provided, this Plan shall continue in
effect for one year from the date hereof and shall continue in effect for
successive periods of one year thereafter, but only so long as each such
continuance is specifically approved by votes of a majority of both (i) the
Trustees of the Trust and (ii) the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on such approval.
(b) This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Trust.
4. AMENDMENTS. This Plan may not be amended to increase materially the
amount of expenditures provided for in Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of the
Trust (as defined in the 1940 Act), and no material amendment to this Plan shall
be made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.
- 2 -
<PAGE>
5. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
the selection and nomination of Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust shall be committed to the discretion of
the Trustees who are not interested persons of the Trust.
6. QUARTERLY REPORTS. The Treasurer of the Trust shall provide to the
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
7. RECORDKEEPING. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan, the agreements or
such reports, as the case may be, the first two years in an easily accessible
place.
8. LIMITATION OF LIABILITY. A copy of the Agreement and Declaration of
Trust of the Trust is on file with the Secretary of the Commonwealth of
Massachusetts and notice is hereby given that this Plan is executed on behalf of
the Trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon the Trustees or shareholders
of the Trust individually but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of
the date set forth below.
Dated: April 4, 1997
THE NEW YORK STATE
Attest: OPPORTUNITY FUNDS
/s/ Tina D. Hosking By: /s/ Gregg A. Kidd
Secretary President
- 3 -
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027657
<NAME> THE NEW YORK STATE OPPORTUNITY FUNDS - NEW YORK EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 582,501
<INVESTMENTS-AT-VALUE> 615,391
<RECEIVABLES> 20,680
<ASSETS-OTHER> 70,360
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 706,431
<PAYABLE-FOR-SECURITIES> 15,506
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,681
<TOTAL-LIABILITIES> 21,187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 652,107
<SHARES-COMMON-STOCK> 64,253
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 247
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,890
<NET-ASSETS> 685,244
<DIVIDEND-INCOME> 3,706
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,459
<NET-INVESTMENT-INCOME> 247
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 32,890
<NET-CHANGE-FROM-OPS> 33,137
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,549
<NUMBER-OF-SHARES-REDEEMED> 1,296
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 585,244
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,896
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 36,903
<AVERAGE-NET-ASSETS> 493,556
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .66
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
