Registration Nos. 811-7963
333-17381
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
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Post-Effective Amendment No. 2
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 3
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(Check appropriate box or boxes)
THE NEW YORK STATE OPPORTUNITY FUNDS
(Exact Name of Registrant as Specified in Charter)
4605 E. Genesee Street
DeWitt, New York 13214
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (315) 251-1101
Gregg A. Kidd
Pinnacle Advisors LLC
4605 E. Genesee Street
DeWitt, New York 13214
(Name and Address of Agent for Service)
Copies to:
Tina D. Hosking
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on August 1, 1998 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
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THE NEW YORK STATE OPPORTUNITY FUNDS
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Operation of the Fund;
Investment Objective,
Investment Policies and Risk
Considerations
5. Management of the Fund Operation of the Fund
6. Capital Stock and Other Securities Cover Page; Operation of the
Fund; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Shareholder Services;
Distribution Plan;
Calculation of Share Price
and Public Offering Price;
Application
8. Redemption or Repurchase How to Redeem Shares;
Shareholder Services;
Distribution Plan
9. Pending Legal Proceedings Inapplicable
PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
(i)
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12. General Information and History The Trust
13. Investment Objectives and Policies Definitions, Policies and
Risk Considerations; Quality
Ratings of Corporate Bonds
and Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Principal Security Holders
of Securities
16. Investment Advisory and Other Services The Investment Advisor;
Distribution Plan;
Custodian; Auditors;
Countrywide Fund Services,
Inc.
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Trust
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price and Public Offering
Price; Redemption in Kind
20. Tax Status Taxes
21. Underwriters The Underwriter
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Annual Report
PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
(ii)
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[Artist's rendition of New York state.]
New York State
Opportunity Funds
Invest close to home...
PROSPECTUS
August 1, 1998
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PROSPECTUS
August 1, 1998
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 August 1, 1998, 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
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Prospectus Summary ........................................................ 2
Expense Information ....................................................... 3
Financial Highlights ...................................................... 4
Investment Objective, Investment Polices and Risk Consideration ........... 5
How to Purchase Shares .................................................... 9
Shareholder Services ...................................................... 12
How to Redeem Shares ...................................................... 13
Dividends and Distributions ............................................... 14
Taxes ..................................................................... 15
Operation of the Fund ..................................................... 15
Distribution Plan ......................................................... 17
Calculation of Share Price and Public Offering Price ...................... 18
Performance Information ................................................... 18
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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
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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. Due to the Fund's concentration in companies located in New York,
a change in the economic environment of the state will have a greater impact on
the Fund than on a Fund not concentrated in such companies. 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. (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.")
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
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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 (After Waivers).................................... .00%(1)
12b-1 Fees......................................................... .12%
Other Expenses..................................................... 1.86%(2)
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Total Fund Operating Expenses (After Waivers)...................... 1.98%(3)
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(1) Absent waivers of management fees, such fees would have been 1.00% for the
fiscal period ended March 31, 1998.
(2) The Fund may incur 12b-1 fees in an amount up to .25% of its average net
assets. 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.
(3) Absent waivers of management fees and expense reimbursements by the
Advisor, total Fund operating expenses would have been 13.85% for the
fiscal period ended March 31, 1998.
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 109
5 Years 154
10 Years 277
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 amounts incurred during the most recent fiscal year, except that they
have been restated to reflect current fees as if they had been in effect during
the entire 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
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The following information, which has been audited by McGladrey Pullen, LLP, 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 March
31, 1998 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) or by writing to the Trust at the
address on the front of this Prospectus.
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE
PERIOD ENDED MARCH 31, 1998(a)
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Net asset value at beginning of period .................... $ 10.00
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Income from investment operations:
Net investment loss .................................. (0.01)
Net realized and unrealized gains on investments ..... 2.59
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Total from investment operations .......................... 2.58
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Net asset value at end of period .......................... $ 12.58
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Total return(b) ........................................... 25.80%
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Net assets at end of period ............................... $ 1,581,185
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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
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(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).
(d) Annualized.
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INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
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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.
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
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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.
Due to its concentration in companies headquartered in or having a significant
presence in New York, a change in the economic environment of the state will
have a greater impact on the Fund than on a Fund not concentrated in such
companies. However, a majority of the companies in the Fund's portfolio have
significant global operations which mitigates the impact of the New York economy
on the Fund's performance. 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 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.
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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 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
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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
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, shares of money market investment companies, 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 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
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Fund is required to hold and maintain, in a segregated account until the
settlement date, cash or liquid portfolio securities 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 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.
9
<PAGE>
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.
<TABLE>
<CAPTION>
Initial Sales Charge as % of: Dealer
----------------------------- Reallowance
Public Net as % of
Offering Amount Public
Amount of Investment Price Invested Offering Price
- -------------------- ----- -------- --------------
<S> <C> <C> <C>
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
</TABLE>
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.
10
<PAGE>
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 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.
11
<PAGE>
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.
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, including Roth IRAs and Educational IRAs
- -- 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
12
<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 on the 15th and/or the last
business day of the month. 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.
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.
13
<PAGE>
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 you of the Fund's
intention to close 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 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.
14
<PAGE>
TAXES
- --------------------------------------------------------------------------------
The Fund has qualified and intends to continue 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 capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses) by the Fund to its shareholders are
taxable to the recipient shareholders as capital gains, without regard to the
length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held for more than 12 months,
but not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. 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.
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 13214 (the "Advisor"), to manage the Fund's investments. The controlling
shareholder of the Advisor is Gregg A. Kidd. 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
15
<PAGE>
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 13214 (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 45201-5354 (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.
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.
16
<PAGE>
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; 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 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.
17
<PAGE>
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) 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 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
18
<PAGE>
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.
Further information about the Fund's performance is contained in the Fund's
Annual Report which can be obtained by shareholders at no charge by calling the
Transfer Agent (Nationwide call toll-free 888-899-8344) or by writing to the
Fund at the address on the front of this Prospectus.
19
<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, (In case of custodial
Organization, 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 Trust
o Joint Tenant o Custodial
(Right of survivorship o Non-Profit
presumed) o Other
o Partnership
o Corporation
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 to my bank checking or savings account.
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 l 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 my 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 ABA Routing Number ____________________
month in the New York Equity Fund.
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
City State o both the 15th and last business day
X___________________________________ X______________________________________
(Signature of Depositor EXACTLY as (Signature of Joint Tenant - if any)
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 undersand that the wire will be completed in one business
day and that there is a $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
4605 E. Genesee Street
DeWitt, New York 13214
BOARD OF TRUSTEES
Gregg A. Kidd
Joseph Masella
R. Earnie Seibert
Joseph E. Stanton
INVESTMENT ADVISOR
PINNACLE ADVISORS LLC
4605 E. Genesee Street
DeWitt, New York 13214
UNDERWRITER
PINNACLE INVESTMENTS, INC.
4605 E. Genesee Street
DeWitt, New York 13214
LEGAL COUNSEL
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 Third Avenue 41st Floor
New York, New York 10022-3852
INDEPENDENT AUDITORS
MCGLADREY & PULLEN, LLP
555 Fifth Avenue
New York, New York 10017-2416
CUSTODIAN
THE BANK OF NEW YORK
90 Washington Street
New York, New York 10286
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
312 Walnut Street
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Services
Nationwide: (Toll-Free) 888-899-8344
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell
shares in any State to any person to whom it is unlawful for the Fund to make
such offer in such State.
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
August 1, 1998
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
August 1, 1998. 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.
<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 ..................................................... 11
THE INVESTMENT ADVISOR .................................................... 13
THE UNDERWRITER ........................................................... 14
DISTRIBUTION PLAN ......................................................... 15
SECURITIES TRANSACTIONS ................................................... 16
PORTFOLIO TURNOVER ........................................................ 18
CALCULATION OF SHARE PRICE AND PUBLIC OFFERING PRICE ...................... 18
OTHER PURCHASE INFORMATION ................................................ 18
TAXES ..................................................................... 20
REDEMPTION IN KIND ........................................................ 21
HISTORICAL PERFORMANCE INFORMATION ........................................ 21
PRINCIPAL SECURITY HOLDERS ................................................ 23
CUSTODIAN ................................................................. 24
INDEPENDENT AUDITORS ...................................................... 24
COUNTRYWIDE FUND SERVICES, INC ............................................ 24
ANNUAL REPORT ............................................................. 25
-2-
<PAGE>
THE TRUST
- ---------
The New York State Opportunity Funds (the "Trust") was organized as a
Massachusetts business trust on November 20, 1996. The Trust currently offers
one series of shares to investors, the New York Equity Fund (the "Fund").
Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to the Fund with each other share of the Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of the Fund into a
greater or lesser number of shares so long as the proportionate beneficial
interest in the assets belonging to the Fund are in no way affected. In case of
any liquidation of the Fund, the holders of shares of the Fund being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to the Fund. No shareholder is liable to further
calls or to assessment by the Fund without his express consent.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of any instance where such result has occurred. In addition, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Agreement and Declaration of Trust also provides for the
indemnification out of the Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Moreover,
it provides that the Trust will, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. As a result, and particularly because the Trust assets are
readily marketable and ordinarily substantially exceed liabilities, management
believes that the risk of shareholder liability is slight and limited to
circumstances in which the Trust itself would be unable to meet its obligations.
Management believes that, in view of the above, the risk of personal liability
is remote.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objective, Investment
Policies and Risk Considerations") appears below:
-3-
<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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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, 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.
-7-
<PAGE>
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 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.
-8-
<PAGE>
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.
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;
-9-
<PAGE>
(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;
(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.
-10-
<PAGE>
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the Trust
and their compensation from the Trust for the fiscal year ended March 31, 1998.
Each Trustee who is an "interested person" of the Trust, as defined by the 1940
Act, is indicated by an asterisk.
Compensation
Name Age Position Held From the Trust
- ---- --- ------------- --------------
*Gregg A. Kidd 35 President $
and Trustee 0
+Joseph Masella 48 Trustee 2,250
+Joseph E. Stanton 71 Trustee 2,250
+Mark E. Wadach 47 Trustee 2,250
Robert G. Dorsey 41 Vice President 0
Mark J. Seger 36 Treasurer 0
Tina D. Hosking 29 Secretary 0
John F. Splain 41 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).
-11-
<PAGE>
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio 45202, is President
and Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent)
and CW Fund Distributors, Inc. (a registered broker-dealer) and Treasurer of
Countrywide Investments, Inc. (a registered broker-dealer and investment
adviser) and Countrywide Financial Services, Inc. (a financial services company
and parent of Countrywide Fund Services, Inc., CW Fund Distributors, Inc. and
Countrywide Investments, Inc.) He is also Vice President of Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust, Dean Family of Funds, Maplewood
Investment Trust, Lake Shore Family of Funds, Wells Family of Real Estate Funds,
UC Investment Trust, Boyar Value Fund, Inc., Atalanta/Sosnoff Investment Trust,
Bowes Investment Trust and Profit Funds Investment Trust and Assistant Vice
President of Firsthand Funds, Schwartz Investment Trust, The Tuscarora
Investment Trust, Williamsburg Investment Trust, The James Advantage Funds, The
Gannett Welsh & Kotler Funds, Albemarle Investment Trust and The Westport Funds
(all of which are registered investment companies).
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio 45202, is Vice
President of Countrywide Financial Services, Inc., Countrywide Fund Services,
Inc. and CW Fund Distributors, 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, Williamsburg
Investment Trust, Albemarle Investment Trust, Dean Family of Funds, Lake Shore
Family of Funds, Maplewood Investment Trust, Bowes Investment Trust, Wells
Family of Real Estate Funds, UC Investment Trust, Profit Funds Investment Trust,
and Atalanta/Sosnoff Investment Trust and Assistant Treasurer of Firsthand
Funds, The James Advantage Funds, Schwartz Investment Trust, The Tuscarora
Investment Trust, The Gannett Welsh & Kotler Funds, The Westport Funds and Boyar
Value Fund, Inc.
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio 45202, is Assistant
Vice President and Associate General Counsel of Countrywide Fund Services, Inc.
and CW Fund Distributors, Inc. She is also Secretary of Dean Family of Funds and
the Atalanta/Sosnoff Investment Trust and Assistant Secretary of Boyar Value
Fund, Inc., Albemarle Investment Trust, The Gannett Welsh & Kotler Funds, The
Westport Funds, Wells Family of Real Estate Funds, UC Investment Trust, The
James Advantage Funds and Lake Shore Family of Funds.
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio 45202, is Secretary and
General Counsel of Countrywide Fund Services, Inc., CW Fund Distributors, Inc.,
Countrywide Investments, Inc. and Countrywide Financial Services, Inc. He is
also Secretary of Countrywide Investment Trust, Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment
-12-
<PAGE>
Trust, Markman MultiFund Trust, The Tuscarora Investment Trust, Williamsburg
Investment Trust, Boyar Value Fund, Inc., Lake Shore Family of Funds, Maplewood
Investment Trust, Profit Funds Investment Trust and Wells Family of Real Estate
Funds and Assistant Secretary of Firsthand Funds, Schwartz Investment Trust,
Dean Family of Funds, The Gannett Welsh & Kotler Funds, Bowes Investment Trust,
Albemarle Investment Trust, Atalanta/Sosnoff Investment Trust, UC Investment
Trust, The James Advantage Funds and The Westport 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 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. For
the fiscal period ended March 31, 1998, the Fund accrued advisory fees of
$7,289. However, in order to reduce the operating expenses of the Fund, the
Adviser voluntarily waived its entire advisory fee and reimbursed the Fund for
$79,997 of its other operating expenses.
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.
-13-
<PAGE>
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.
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.
For the fiscal period ended March 31, 1998, the aggregate commissions collected
on sales of the Fund's shares were $57,628, of which the Underwriter paid
$10,288 to unaffiliated broker-dealers in the selling network and earned $47,340
from underwriting and brokerage commissions.
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
-14-
<PAGE>
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 Underwriter. 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. For the fiscal
period ended March 31, 1998, the Fund incurred $851 in distribution expenses for
the preparation of prospectuses and reports for prospective shareholders.
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 outstanding shares of the Fund. In the event the Plan is
terminated in accordance with its terms, the Fund will not be required to make
any payments for expenses incurred 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
-15-
<PAGE>
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.
By reason of his controlling interest in the Advisor and the Underwriter,
Gregg A. Kidd may be deemed to leave a financial interest in the operation of
the Plan.
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. The Fund paid brokerage
commissions of $4,299 for the fiscal period ended March 31, 1998. All such
brokerage commissions were paid to the Underwriter, which effected 100% of the
Fund's securities transactions during the fiscal period ended March 31, 1998.
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.
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.
-16-
<PAGE>
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 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
-17-
<PAGE>
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. For the fiscal period ended March 31,
1998, the Fund's portfolio turnover rate was 25%.
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.
-18-
<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.
-19-
<PAGE>
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 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 has qualified and intends to continue 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.
-20-
<PAGE>
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.
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:
n
P (1 + T) = 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)
-21-
<PAGE>
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 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 total return (excluding the effect of applicable sales loads) since its
inception on May 12, 1997 through March 31, 1998 is 25.80%.
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.
-22-
<PAGE>
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 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 July 10, 1998, Cowen & Co., Financial Square, New York, New York,
owned of record 8.7% of the outstanding shares of the Fund and NFSC/FMTC IRA FBO
David Woolston, 176 Lake Road, Dryden, New York, owned of record 6.5% of the
outstanding shares of the Fund.
-23-
<PAGE>
As of July 10, 1998, the Trustees and officers of the Trust as a group
owned of record or beneficially 1.8% 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.
INDEPENDENT AUDITORS
- --------------------
The firm of McGladrey & Pullen, LLP has been selected as independent
auditors for the Trust for the fiscal year ending March 31, 1999. McGladrey &
Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, 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:
-24-
<PAGE>
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
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 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.
For the fiscal period ended March 31, 1998, the Transfer Agent received
fees of $9,000 for providing these administrative services to the Fund.
ANNUAL REPORT
- -------------
The Fund's Annual Audited Financial Statements as of March 31, 1998, which
have been audited by McGladrey & Pullen, LLP, are attached to this Statement of
Additional Information.
-25-
<PAGE>
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]
- --------------------------------------------------------------------------------
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 (commencement 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
----------
225,344
----------
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
----------
309,683
----------
ENERGY - 4.3%
380 Amerada Hess Corporation 22,159
750 Texaco Inc. 45,187
----------
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
----------
325,335
----------
INDUSTRIAL - 6.0%
1,640 Paychex, Inc. 94,608
----------
<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
----------
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
----------
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
<PAGE>
THE NEW YORK STATE OPPORTUNITY FUNDS
------------------------------------
PART C. OTHER INFORMATION
- ------- -----------------
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) (i) Financial Statements included in Part A:
Financial Highlights for the Period Ended March 31, 1998
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, March 31, 1998.
Statement of Operations for the Period Ended March 31, 1998
Statement of Changes in Net Assets for the Period Ended March 31,
1998
Financial Highlights for the Period Ended March 31, 1998
Notes to Financial Statements
Portfolio of Investments, March 31, 1998
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement with Pinnacle Advisors LLC*
(6) Underwriting Agreement with Pinnacle Investments, Inc.*
(7) Inapplicable
(8) Custody Agreement with The Bank of New York*
(9)(i) Administration Agreement with Countrywide Fund Services,
Inc.*
<PAGE>
(ii) Accounting Services Agreement with Countrywide Fund
Services, Inc.*
(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement with Countrywide Fund Services, Inc.*
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital*
(14) Inapplicable
(15) Plan of Distribution Pursuant to Rule 12b-1*
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- -----------------------------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
Item 25. Persons Controlled by or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 26. Number of Holders of Securities.
- -------- --------------------------------
As of June 30, 1998, there are 143 holders of the shares of beneficial
interest of the Registrant.
Item 27. Indemnification
- -------- ---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
- 2 -
<PAGE>
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject
to and except as otherwise provided in the Securities Act of
1933, as amended, and the 1940 Act, the Trust shall indemnify
each of its Trustees and officers, including persons who serve at
the Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, and
except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's
office (disabling conduct). Anything herein contained to the
contrary notwithstanding, no Covered Person shall be indemnified
for any liability to the Trust or its shareholders to which such
Covered Person would otherwise be subject unless (1) a final
decision on the merits is made by a court or other body before
whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of disabling conduct or, (2)
in the absence of such a decision, a reasonable determination is
made, based upon a review of the facts, that the Covered Person
was not liable by reason of disabling conduct, by (a) the vote of
a majority of a quorum of Trustees who are neither "interested
persons" of the Company as defined in the Investment Company Act
of 1940 nor parties to the proceeding ("disinterested, non-party
Trustees"), or (b) an independent legal counsel in a written
opinion.
- 3 -
<PAGE>
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person in
defending a proceeding, upon the undertaking by or on behalf of
the Covered Person to repay the advance unless it is ultimately
determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is
met: (i) the Covered Person shall provide security for his
undertaking, (ii) the Trust shall be insured against losses
arising by reason of any lawful advances, or (iii) a majority of
a quorum of the disinterested non-party Trustees of the Trust, or
an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as
opposed to full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled
to indemnification.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such Covered
Person may be entitled. As used in this Article VI, "Covered
Person" shall include such person's heirs, executors and
administrators; an "interested Covered Person" is one against
whom the action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar grounds
is then or has been pending or threatened, and a "disinterested"
person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened. Nothing contained in this article shall affect any
rights to indemnification to which personnel of the Trust, other
than Trustees and officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed
- 4 -
<PAGE>
in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Trustee, officer
or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy. The
policy provides coverage to the Registrant, its Trustees and officers,
Pinnacle Advisors LLC (the "Advisor") and Pinnacle Investments, Inc.
(the "Underwriter"). Coverage under the policy includes losses by
reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
The Advisory Agreement with the Advisor provides that the Advisor
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by the Advisory Agreement, or in accordance with (or
in the absence of) specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have resulted
from the Advisor's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to
the Advisor in its actions under the Advisory Agreement or breach of
its duty or of its obligations under the Advisory Agreement.
The Underwriting Agreement with the Underwriter provides that the
Underwriter, its directors, officers, employees, shareholders and
control persons shall not be liable for any error of judgement or
mistake of law or for any loss suffered by Registrant in connection
with the matters to which the Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on
the part of any of such persons in the performance of Underwriters's
duties or from the
- 5 -
<PAGE>
reckless disregard by any of such persons of Underwriter's obligations
and duties under the Agreement. Registrant will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is
not entitled to indemnification.
Item 28. Business and Other Connections of the Investment Adviser
- -------- --------------------------------------------------------
(a) The Advisor is a registered investment advisor organized in
November, 1996 to provide investment advisory services to the
Registrant. The Adviser has no other business of a substantial
nature.
(b) The directors and officers of the Advisor and any other business,
profession, vocation or employment of a substantial nature
engaged in at any time during the past two years:
(i) Gregg A. Kidd - Managing Member and Controlling Shareholder
of the Advisor.
President and a Trustee of the Registrant.
President of Pinnacle Investments, Inc., 4605 E. Genesee
Street, DeWitt, New York 13214, a registered broker-dealer
and Registrant's principal underwriter.
Vice President of Smith Barney, Inc. until September, 1995.
(ii) Daniel F. Raite - Managing Member of the Advisor.
Vice President of Pinnacle Investments, Inc.
Item 29. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
(b) Position with Position with
Name Underwriter Registrant
---- ----------- ----------
Gregg A. Kidd President President and
Trustee
Daniel F. Raite Vice President None
- 6 -
<PAGE>
The address of the above-named persons is 4605 E. Genesee Street,
DeWitt, New York 13214.
(c) Inapplicable
Item 30. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are maintained by the Registrant at its offices
located at 4605 E. Genesee Street, DeWitt, New York 13214 as well as
at the offices of the Registrant's transfer agent located at 312
Walnut Street, 21st Floor, Cincinnati, Ohio 45202.
Item 31. Management Services Not Discussed in Parts A or B
- -------- -------------------------------------------------
Inapplicable
Item 32. Undertakings
- -------- ------------
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) The Registrant undertakes to call a meeting of shareholders, if
requested to do so by holders of at least 10% of the Fund's
outstanding shares, for the purpose of voting upon the question
of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
- 7 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of DeWitt and State of New York, on the
31st day of July, 1998.
THE NEW YORK STATE OPPORTUNITY FUNDS
By: /s/ Gregg A. Kidd
-------------------------------
Gregg A. Kidd
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Gregg A. Kidd President July 31, 1998
- ----------------------------- and Trustee
Gregg A. Kidd
/s/ Mark J. Seger Treasurer July 31, 1998
- -----------------------------
Mark J. Seger
- ----------------------------- Trustee By:/s/ Tina D. Hosking
Joseph Masella* Tina D. Hosking
Attorney-in-Fact*
July 31, 1998
- ----------------------------- Trustee
Joseph E. Stanton*
- ----------------------------- Trustee
Mark E. Wadach*
<PAGE>
INDEX TO EXHIBITS
-----------------
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement*
(6) Underwriting Agreement*
(7) Inapplicable
(8) Custody Agreement*
(9)(i) Administration Agreement*
(9)(ii) Accounting Services Agreement*
(9)(iii) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement*
(10) Opinion and Consent of Counsel*
(11) Consent of Independent Auditors
(12) Inapplicable
(13) Form of Agreement Relating to Initial Capital*
(14) Inapplicable
(15) Plan of Distribution Pursuant to Rule 12b-1*
(16) Inapplicable
(17) Financial Data Schedule
(18) Inapplicable
- ----------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated April 10, 1998, on the
financial statements of New York Equity Fund, a series of The New York State
Opportunity Funds, which is included in the Statement of Additional Informaiton,
in Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under the
caption "Financial Highlights" and in the Statement of Additional Information
under the caption "Independent Auditors".
/s/McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 31, 1998
<TABLE> <S> <C>
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<NAME> THE NEW YORK STATE OPPORTUNITY FUNDS - NEW YORK EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<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
<ASSETS-OTHER> 55,709
<OTHER-ITEMS-ASSETS> 7,664
<TOTAL-ASSETS> 1,618,149
<PAYABLE-FOR-SECURITIES> 25,088
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<OTHER-ITEMS-LIABILITIES> 11,876
<TOTAL-LIABILITIES> 36,964
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,346,562
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (15,840)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 1,581,185
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<EXPENSES-NET> 14,138
<NET-INVESTMENT-INCOME> (1,492)
<REALIZED-GAINS-CURRENT> (15,840)
<APPREC-INCREASE-CURRENT> 250,463
<NET-CHANGE-FROM-OPS> 233,131
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 122,154
<NUMBER-OF-SHARES-REDEEMED> 6,418
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,481,185
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 101,424
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<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 2.59
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<PER-SHARE-NAV-END> 12.58
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