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
--------
Income from investment operations:
Net investment income...................................... 0.00
Net unrealized gains on investments ....................... 0.66
--------
Total from investment operations................................ 0.66
--------
Less distributions:
Dividends from net investment income....................... 0.00
--------
Total distributions............................................. 0.00
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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%(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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<PAGE>
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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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
- 13 -
<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
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<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
Joseph E. Stanton
Mark E. Wadach
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.
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<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
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<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
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<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.
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<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
+Joseph E. Stanton 69 Trustee 3,000
+Mark E. Wadach 45 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).
MARK E. WADACH, 1010 James Street, Syracuse, New York, is a Consultant
for Syracuse Securities (a real estate financing firm).
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,
- 11 -
<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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.
- 28 -
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
---------
<PAGE>
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.
