New York Equity Fund
--------------------
Annual Report
March 31, 1998
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
1.888.899.8344
<PAGE>
[LOGO]
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New York State
Opportunity Funds
Invest close to home...
Dear Shareholders,
I would first like to thank and congratulate you, the shareholders in the New
York Equity Fund. Not only have you participated in the first mutual fund of its
kind, but you have also realized a return of over 25% in less than a year.
Removing the first month's performance, when we waited for our first inflows and
did not invest, our performance was actually in line with the S&P 500 Index.
You are now witnessing first hand why I believe New York State is a terrific
backdrop for a mutual fund. New York is the tenth largest economy in the world,
home to over 60 Fortune 500 companies, and a diverse mix of businesses covering
all relevant sectors, making the Empire State second to none. Our investment
approach of owning great companies without heavy turnover has and should
continue to be the best way to participate in the stock market.
In an era of multibillion dollar funds having to close to new investors, it is a
plus for us to be small. No matter how much you have entrusted us with be
assured you are very important to us. We are owned and operated in New York. We
will strive to see that your investment is profitable and that your service
needs are resolved immediately. If you have a question or concern you can feel
comfortable in calling me directly. I will personally see that any situation is
resolved in an appropriate manner.
In closing, I would like to comment on the markets. We generally will not try to
be market timers, instead focusing our efforts on owning great companies. The
last several years have been outstanding for stocks. With moderate economic
growth and little or no inflation, the outlook continues to be positive. I
recommend a disciplined investment approach through regular systematic
investments on a monthly basis. Over a long period of time, regardless of the
short term volatility of the markets, this is a proven way to build wealth. Talk
to your Financial Advisor about how for as little as $50.00 a month you can get
started with this program. Again thank you for letting us have the opportunity
to show you how "Investing Close To Home" can be a rewarding experience.
Sincerely,
Gregg A. Kidd
President
Investment Advisor
Pinnacle Advisors LLC 4505 East Genesee Street Dewitt, NY 13214 800-982-0421
Shareholder Services
Coutrywide Fund Services, Inc.
P.O. Box 5354 Cincinnati, OH 45201-5354 888-899-8344
<PAGE>
Comparison of the Change in Value since May 12, 1997 of a $10,000 Investment
in the New York Equity Fund and the Standard & Poor's 500 Index
Standard & Poors New York
500 Index Equity Fund
--------- -----------
Inception $10,000 $ 9,525
May 97 10,141 9,525
Jun 97 10,595 9,630
Jul 97 11,439 10,135
Aug 97 10,798 9,668
Sep 97 11,389 10,154
Oct 97 11,009 10,020
Nov 97 11,518 10,411
Dec 97 11,716 10,678
Jan 98 11,846 10,611
Feb 98 12,700 11,135
Mar 98 13,350 11,982
New York Equity Fund
Total Return Since Inception*
19.82%
* Initial public offering of shares was May 12, 1997.
Past performance is not predictive of future performance.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
ASSETS
Investment securities, at market value (cost $1,271,189) $ 1,521,652
Cash 6,388
Receivable for capital shares sold 30,802
Dividends receivable 2,322
Due from Advisor (Note 3) 15,851
Organization expenses, net (Note 1) 39,858
Other assets 1,276
-----------
TOTAL ASSETS 1,618,149
-----------
LIABILITIES
Payable for securities purchased 25,088
Payable to affiliates (Note 3) 8,000
Other accrued expenses 3,876
-----------
TOTAL LIABILITIES 36,964
-----------
NET ASSETS $ 1,581,185
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 1,346,562
Accumulated net realized losses from security transactions (15,840)
Net unrealized appreciation on investments 250,463
-----------
NET ASSETS $ 1,581,185
===========
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 125,736
===========
Net asset value and redemption price per share (Note 1) $ 12.58
===========
Maximum offering price per share (Note 1) $ 13.21
===========
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF OPERATIONS
For the Period May 12, 1997 (commencement of operations) to March 31, 1998
INVESTMENT INCOME
Dividends $ 12,646
---------
TOTAL INVESTMENT INCOME 12,646
---------
EXPENSES
Accounting services fees (Note 3) 18,000
Insurance expense 15,450
Amortization of organization expenses (Note 1) 9,964
Administrative services fees (Note 3) 9,000
Shareholder services and transfer agent fees (Note 3) 9,000
Investment advisory fees (Note 3) 7,289
Trustees' fees and expenses 6,750
Printing of shareholder reports 6,448
Postage and supplies 5,905
Professional fees 5,734
Registration fees 4,405
Custodian fees 2,141
Distribution expense (Note 3) 851
Pricing costs 487
---------
TOTAL EXPENSES 101,424
Fees waived and expenses reimbursed by the Advisor (Note 3) (87,286)
---------
NET EXPENSES 14,138
---------
NET INVESTMENT LOSS (1,492)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (15,840)
Net increase in unrealized appreciation on investments 250,463
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 234,623
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 233,131
=========
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period May 12, 1997 (commencment of operations) to March 31, 1998
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (1,492)
Net realized losses from security transactions (15,840)
Net unrealized appreciation on investments 250,463
-----------
Net increase in net assets from operations 233,131
-----------
FUND SHARE TRANSACTIONS:
Proceeds from shares sold 1,323,067
Payments for shares redeemed (75,013)
-----------
Net increase in net assets from Fund share transactions 1,248,054
-----------
TOTAL INCREASE IN NET ASSETS 1,481,185
NET ASSETS:
Beginning of period (Note 1) 100,000
-----------
End of period $ 1,581,185
===========
FUND SHARE ACTIVITY:
Shares sold 122,154
Shares redeemed (6,418)
-----------
Net increase in shares outstanding 115,736
Shares outstanding, beginning of period 10,000
-----------
Shares outstanding, end of period 125,736
===========
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share
Outstanding Throughout the Period Ended March 31, 1998 (a)
Net asset value at beginning of period $ 10.00
------------
Income from investment operations:
Net investment loss (0.01)
Net realized and unrealized gains on investments 2.59
------------
Total from investment operations 2.58
------------
Net asset value at end of period $ 12.58
============
Total return (b) 25.80%
============
Net assets at end of period $ 1,581,185
============
Ratio of net expenses to average net assets (c) 1.93%(d)
Ratio of net investment loss to average net assets (0.20%)(d)
Portfolio turnover rate 25%
Average commission rate per share $ 0.1989
(a) Represents the period from the initial public offering of shares (May 12,
1997) through March 31, 1998.
(b) Total return shown excludes the effect of applicable sales loads and is not
annualized.
(c) Ratio of expenses to average net assets assuming no waiver of fees or
reimbursement of expenses by the Advisor was 13.85%(d) (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
Market
Shares Value
------ -----
COMMON STOCKS - 92.5%
BASIC MATERIALS - 0.5%
310 Albany International Corporation $ 8,099
----------
CONGLOMERATES - 6.1%
1,125 General Electric Company 96,961
----------
CONSUMER, CYCLICAL - 14.2%
1,000 Chrysler Corporation 41,563
1,000 Eastman Kodak Company 64,875
1,275 Oneida Limited 38,887
470 J.C. Penney Company, Inc. 35,573
740 Tommy Hilfiger Corporation (a) 44,446
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225,344
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CONSUMER, NON-CYCLICAL - 19.6%
820 Bristol-Myers Squibb Company 85,536
300 Colgate-Palmolive Company 25,988
1,020 PepsiCo, Inc. 43,541
785 Pfizer Inc. 78,255
1,830 Philip Morris Companies, Inc. 76,363
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309,683
----------
ENERGY - 4.3%
380 Amerada Hess Corporation 22,159
750 Texaco Inc. 45,187
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67,346
----------
FINANCIAL SERVICES - 20.6%
725 The Bank of New York Company, Inc. 45,539
675 Citicorp 95,850
1,400 Community Bank System, Inc. 47,600
50 First Empire State Corporation 24,994
330 ONBANCorp, Inc. 22,852
1,475 Travelers Group, Inc. 88,500
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325,335
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INDUSTRIAL - 6.0%
1,640 Paychex, Inc. 94,608
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<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
Market
Shares Value
------ -----
COMMON STOCKS - CONTINUED
TECHNOLOGY - 20.0%
2,025 Computer Associates International, Inc. $ 116,944
790 Corning Inc. 34,958
950 International Business Machines Corporation 98,681
625 Xerox Corporation 66,523
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317,106
----------
UTILITIES - 1.2%
400 Consolidated Edison Company of New York 18,700
----------
TOTAL COMMON STOCKS (COST $1,212,719) 1,463,182
----------
MONEY MARKET FUND - 3.7%
58,470 The Milestone Funds Treasury Obligations
Portfolio - Investor Shares (Cost $58,470) 58,470
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TOTAL INVESTMENT SECURITIES (COST $1,271,189) - 96.2% 1,521,652
OTHER ASSETS IN EXCESS OF LIABILITIES - 3.8% 59,533
----------
NET ASSETS - 100.0% $1,581,185
==========
(a) Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 was capitalized on February 18, 1997, when
affiliates of the Advisor purchased the initial shares of the Fund at $10.00 per
share. 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
March 31, 1998
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 $1,283,346 as of March 31, 1998:
Gross unrealized appreciation................................$ 241,995
Gross unrealized depreciation................................ (3,689)
---------
Net unrealized appreciation..................................$ 238,306
=========
Reclassification of capital accounts -- For the year ended March 31, 1998, the
Fund had a net investment loss of $1,492 which was reclassified to paid-in
capital on the Statement of Assets and Liabilities. Such reclassification, the
result of permanent differences between financial statement and income tax
reporting requirements, has no effect on net assets or net asset value per
share.
2. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investment securities, other
than short-term investments, amounted to $1,389,183 and $160,624, respectively,
for the period ended March 31, 1998.
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; 0.95%
of such assets from $100 million to $200 million; and 0.85% 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 $7,289 for the period
ended March 31, 1998 and reimbursed the Fund for $79,997 of other operating
expenses.
Certain trustees and officers of the Trust are also officers of the Advisor.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 monthly fee at an
annual rate of .15% of average daily net assets up to $25 million; .125% of such
assets from $25 million to $50 million; and .10% of such assets in excess of $50
million, subject to a monthly minimun of $1,000.
Certain officers of the Trust are also officers of CFS.
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 at an annual rate
of $17.00 per shareholder account, subject to a $1,000 monthly minimum. 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 of
$2,000 from the Fund.
DISTRIBUTION PLAN
The Trust has adopted a Plan of Distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan provides that the Fund may directly incur or
reimburse the Advisor for certain costs related to the distribution of the Fund
shares, not to exceed 0.25% of average daily net assets. For the period ended
March 31, 1998, the Fund incurred $851 of such expenses under the Plan.
<PAGE>
[LOGO]
McGLADREY & PULLEN, LLP
--------------------------------------------
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
The Board of Trustees and Shareholders
New York Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of New York Equity Fund as of March 31, 1998, the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the period from May 12, 1997 (commencement of
operations) to March 31, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1998, by
correspondence with the custodian and brokers. 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 statements and financial highlights referred to
above present fairly, in all material respects, the financial position of New
York Equity Fund, as of March 31, 1998, the results of operations, the changes
in net assets and the financial highlights for the period indicated, in
conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
April 10, 1998
<TABLE> <S> <C>
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<NAME> THE NEW YORK STATE OPPORTUNITY FUNDS - NEW YORK EQUITY FUND
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<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 1,271,189
<INVESTMENTS-AT-VALUE> 1,521,652
<RECEIVABLES> 33,124
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