- --------------------------------------------------------------------------------
New York Equity Fund
--------------------
SEMI-ANNUAL REPORT
September 30, 1998
(Unaudited)
INVESTMENT ADVISOR ADMINISTRATOR
------------------ -------------
PINNACLE ADVISORS LLC COUNTRYWIDE FUND SERVICES, INC.
4605 E. Genesee Street P.O. Box 5354
DeWitt, New York 13214 Cincinnati, Ohio 45201-5354
1.315.251.1101 1.888.899.8344
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<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
(Unaudited)
ASSETS
Investment securities, at market value (Cost $2,230,572) $ 2,203,064
Receivable for capital shares sold 61,460
Receivable for securities sold 111,846
Dividends receivable 4,066
Due from Advisor (Note 3) 14,985
Organization expenses, net (Note 1) 36,121
Other assets 11,343
-----------
TOTAL ASSETS 2,442,885
-----------
LIABILITIES
Payable for securities purchased 183,594
Payable to affiliates (Note 3) 8,000
Other accrued expenses 1,255
-----------
TOTAL LIABILITIES 192,849
-----------
NET ASSETS $ 2,250,036
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 2,185,561
Accumulated net investment loss (3,405)
Accumulated net realized gains from security transactions 95,388
Net unrealized depreciation on investments (27,508)
-----------
NET ASSETS $ 2,250,036
===========
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 194,286
===========
Net asset value and redemption price per share (Note 1) $ 11.58
===========
Maximum offering price per share (Note 1) $ 12.16
===========
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1998
(Unaudited)
INVESTMENT INCOME
Dividends $ 15,805
---------
EXPENSES
Accounting services fees (Note 3) 12,000
Investment advisory fees (Note 3) 9,702
Administrative services fees (Note 3) 6,000
Shareholder services and transfer agent fees (Note 3) 6,000
Insurance expense 5,625
Trustees' fees and expenses 5,108
Amortization of organization expenses (Note 1) 4,983
Professional fees 4,000
Postage and supplies 3,655
Custodian fees 2,566
Registration fees 2,157
Reports to shareholders 750
Pricing costs 317
---------
TOTAL EXPENSES 62,863
Fees waived and expenses reimbursed by the Advisor (Note 3) (43,653)
---------
NET EXPENSES 19,210
---------
NET INVESTMENT LOSS (3,405)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 111,228
Net change in unrealized appreciation/depreciation
on investments (277,971)
---------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (166,743)
---------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(170,148)
=========
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended September 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
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Six Months
Ended Period
September 30, Ended
1998 March 31,
(Unaudited) 1998 (a)
- ---------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss $ (3,405) $ (1,492)
Net realized gains (losses) from security transactions 111,228 (15,840)
Net change in unrealized appreciation/depreciation on investments (277,971) 250,463
----------- -----------
Net increase (decrease) in net assets from operations (170,148) 233,131
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 971,442 1,323,067
Payments for shares redeemed (132,443) (75,013)
----------- -----------
Net increase in net assets from capital share transactions 838,999 1,248,054
----------- -----------
TOTAL INCREASE IN NET ASSETS 668,851 1,481,185
NET ASSETS:
Beginning of period (Note 1) 1,581,185 100,000
----------- -----------
End of period $ 2,250,036 $ 1,581,185
=========== ===========
CAPITAL SHARE ACTIVITY:
Shares sold 79,223 122,154
Shares redeemed (10,673) (6,418)
----------- -----------
Net increase in shares outstanding 68,550 115,736
Shares outstanding, beginning of period 125,736 10,000
----------- -----------
Shares outstanding, end of period 194,286 125,736
=========== ===========
</TABLE>
(a) Represents the period from the commencement of operations (May 12, 1997)
through March 31, 1998.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Six Months
Ended Period
September 30, Ended
1998 March 31,
(Unaudited) 1998 (a)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value at beginning of period $ 12.58 $ 10.00
----------- -----------
Income (loss) from investment operations:
Net investment loss (0.02) (0.01)
Net realized and unrealized gains (losses) on investments (0.98) 2.59
----------- -----------
Total from investment operations (1.00) 2.58
----------- -----------
Net asset value at end of period $ 11.58 $ 12.58
=========== ===========
Total return (b) (7.95%) 25.80%
=========== ===========
Net assets at end of period $ 2,250,036 $ 1,581,185
=========== ===========
Ratio of net expenses to average net assets (c) 1.98%(d) 1.93%(d)
Ratio of net investment loss to average net assets 0.35%(d) 0.20%(d)
Portfolio turnover rate 48% 25%
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) Represents the period from the initial public offering of shares (May 12,
1997) through March 31, 1998.
(b) Total returns shown exclude the effect of applicable sales loads and are
not annualized.
(c) Ratios of expenses to average net assets, assuming no waiver of fees and
reimbursement of expenses by the Advisor, would have been 6.47%(d) and
13.85%(d) for the periods ended September 30, 1998 and March 31, 1998,
respectively (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS - 96.0%
CONGLOMERATES - 5.3%
1,500 General Electric Company $ 119,344
------------
CONSUMER, CYCLICAL - 13.2%
1,400 Eastman Kodak Company 108,237
5,000 Oneida Limited 85,000
2,500 Tommy Hilfiger Corporation (a) 102,500
------------
295,737
------------
CONSUMER, NON-CYCLICAL - 24.7%
1,300 Bristol-Myers Squibb Company 135,037
1,400 Colgate-Palmolive Company 95,900
100 PepsiCo, Inc. 2,944
1,300 Pfizer Inc. 137,719
4,000 Philip Morris Companies, Inc. 184,250
------------
555,850
------------
ENERGY - 3.7%
800 Amerada Hess Corporation 46,150
600 Texaco Inc. 37,613
------------
83,763
------------
FINANCIAL SERVICES - 19.4%
2,400 The Bank of New York Company, Inc. 65,700
1,400 Chase Manhattan Corporation 60,550
400 Community Bank System, Inc. 11,425
250 M & T Bank Corporation 115,250
1,300 Merrill Lynch & Company, Inc. 61,588
550 J.P. Morgan & Company, Inc. 46,543
2,000 Travelers Group, Inc. 75,000
------------
436,056
------------
INDUSTRIAL - 11.8%
790 Corning Inc. 23,256
2,560 Paychex, Inc. 132,000
1,300 Xerox Corporation 110,175
------------
265,431
------------
<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Market
Shares Value
------ -----
COMMON STOCKS - Continued
TECHNOLOGY - 15.4%
4,500 Computer Associates International, Inc. $ 166,500
1,000 International Business Machines Corporation 128,000
1,000 Symbol Technologies, Inc. 51,312
------------
345,812
------------
UTILITIES - 2.5%
1,100 Consolidated Edison Company of New York 57,337
------------
TOTAL COMMON STOCKS (COST $2,186,838) 2,159,330
------------
MONEY MARKET FUND - 1.9%
43,734 The Milestone Funds Treasury Obligations
Portfolio - Investor Shares (Cost $43,734) 43,734
------------
TOTAL INVESTMENT SECURITIES (COST $2,230,572) - 97.9% 2,203,064
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.1% 46,972
------------
NET ASSETS - 100.0% $ 2,250,036
============
(a) Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The New York Equity Fund (the Fund) is a non-diversified series 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 (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 the common stocks and other equity
securities of publicly-traded 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 the regular session of trading on 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 TO SHAREHOLDERS -- Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Dividends arising from net investment income, if any, are declared and paid
annually to shareholders of the Fund. Net realized short-term capital gains, if
any, may be distributed throughout the year and net realized long-term capital
gains, if any, are distributed at least once each year. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations.
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.
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 and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
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 the 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.
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 $2,243,699 as of September 30, 1998:
Gross unrealized appreciation......................... $ 174,443
Gross unrealized depreciation......................... (215,078)
-----------
Net unrealized depreciation........................... $ (40,635)
===========
The difference between the federal income tax cost of portfolio investments and
the financial statement cost is due to certain timing differences in the
recognition of capital losses under income tax regulations and generally
accepted accounting principles.
2. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $1,738,818 and
$875,926, respectively, for the six months ended September 30, 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
its average daily net assets. Accordingly, the Advisor voluntarily waived its
investment advisory fees of $9,702 and reimbursed the Fund for $33,951 of other
operating expenses for the six months ended September 30, 1998.
Certain trustees and officers of the Trust are also officers of the Advisor.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
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 these
services, CFS receives a monthly fee at an annual rate of 0.15% of the Fund's
average daily net assets up to $25 million; 0.125% of such assets from $25
million to $50 million; and 0.10% of such assets in excess of $50 million,
subject to a $1,000 monthly minimum fee.
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. For these services, CFS receives a monthly fee at an annual
rate of $17.00 per shareholder account, subject to a $1,000 monthly minimum fee.
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,
based on current asset levels, of $2,000 from the Fund. In addition, the Fund
pays certain out-of-pocket expenses incurred by CFS in obtaining valuations for
the Fund's portfolio securities.
UNDERWRITING AGREEMENT
Pinnacle Investments, Inc. (the Underwriter), an affiliate of the Advisor, is
the Fund's principal underwriter and, as such, acts as exclusive agent for the
distribution of the Fund's shares. Under the terms of the Underwriting Agreement
between the Trust and the Underwriter, the Underwriter earned $32,903 from
underwriting and broker commissions on the sale of shares of the Fund during the
six months ended September 30, 1998.
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's shares, not to exceed 0.25% per annum of the Fund's average daily net
assets. For the six months ended September 30, 1998, the Fund incurred no such
expenses under the Plan.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027657
<NAME> NEW YORK EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 2,230,572
<INVESTMENTS-AT-VALUE> 2,203,064
<RECEIVABLES> 192,357
<ASSETS-OTHER> 36,121
<OTHER-ITEMS-ASSETS> 11,343
<TOTAL-ASSETS> 2,442,885
<PAYABLE-FOR-SECURITIES> 183,594
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,255
<TOTAL-LIABILITIES> 192,849
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,185,561
<SHARES-COMMON-STOCK> 194,286
<SHARES-COMMON-PRIOR> 125,736
<ACCUMULATED-NII-CURRENT> (3,405)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 95,388
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (27,508)
<NET-ASSETS> 2,250,036
<DIVIDEND-INCOME> 15,805
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 19,210
<NET-INVESTMENT-INCOME> (3,405)
<REALIZED-GAINS-CURRENT> 111,228
<APPREC-INCREASE-CURRENT> (277,971)
<NET-CHANGE-FROM-OPS> (170,148)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 79,223
<NUMBER-OF-SHARES-REDEEMED> 10,673
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 668,851
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15,840)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,702
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62,863
<AVERAGE-NET-ASSETS> 1,938,750
<PER-SHARE-NAV-BEGIN> 12.58
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.98)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.58
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
