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NEW YORK EQUITY FUND
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ANNUAL REPORT
March 31, 2000
INVESTMENT ADVISOR ADMINISTRATOR
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PINNACLE ADVISORS LLC INTEGRATED 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>
[LOGO]
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New York State
Opportunity Funds
Invest close to home...
May 19, 2000
Dear Shareholders:
As many of you may already know, 1999 was quite a successful year. For the year
ended March 31, 2000, the New York Equity fund returned 38.55% compared to the
S&P 500 Index which returned 17.94% for the same period. While we remain very
constructive on the outlook for the coming year, we wish to remind shareholders
that such lofty returns should be viewed as the exception and not the rule. One
of the reasons we were successful last year was a continued emphasis on
technology stocks. While we always strive to remain adequately diversified in
our portfolio, we will occasionally overweigh in areas where we think there is
greater chance of appreciation.
Looking ahead we will be aggressive in looking for opportunities that meet our
criteria. We will continue investing in high quality companies but with a
greater emphasis on lower P. E. stocks. The rapid rise in the Nasdaq in the
early part of 2000 followed by the greater than 30% drop will make stocks
considered more value oriented, more attractive in the coming year. At March 31,
2000, we were ranked the #2 large-cap value fund in the country for the past 12
months and #1 for the first quarter of 2000.
We expect to see continued upward pressure on interest rates through the first
half of 2000. This will dampen any dramatic rise in stock prices. However, when
the Federal Reserve ultimately feels that they have cooled the economy enough to
a more reasonable growth rate we expect a strong rally in stocks.
INVESTMENT ADVISOR
Pinnacle Advisors LLC 4505 East Genesee Street Dewitt, NY 13214 800-982-0421
SHAREHOLDER SERVICES
Integrated Fund Services, Inc. P.O. Box 5354
Cincinnati, OH 45201-5354 888-899-8344
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Throughout this period we will take advantage of the situation as prudently as
possible by continuing to seek out opportunities whenever they appear. By not
being a multi-billion dollar mutual fund we have the luxury of having tremendous
flexibility and not being stuck in any one stock. As always, thank you for your
investment in our fund and best wishes for the coming year.
Sincerely,
/s/ Gregg A. Kidd
Gregg A. Kidd
President
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
3/31/00
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New York Equity Fund $18,771
Standard & Poor's 500 Index $18,652
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New York Equity Fund**
Average Annual Total Returns
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1 Year Since Inception*
31.97% 24.37%
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Past performance is not predictive of future performance.
* Initial public offering of shares was May 12, 1997.
** Performance figure represents the change in value of an investment
over the periods indicated and include all sales charges assuming
reinvestment of dividends at net asset value.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
ASSETS
Investment securities, at market value (Cost $7,424,604) $ 9,856,194
Cash 118
Dividends receivable 7,811
Receivable for capital shares sold 6,388
Receivable for securities sold 512,761
Organization expenses, net (Note 1) 21,174
Other assets 6,223
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TOTAL ASSETS 10,410,669
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LIABILITIES
Payable for securities purchased 337,931
Payable to affiliates (Note 3) 4,200
Due to Advisor (Note 3) 1,910
Other accrued expenses 6,938
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TOTAL LIABILITIES 350,979
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NET ASSETS $10,059,690
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NET ASSETS CONSIST OF:
Paid-in capital $ 6,747,969
Accumulated net realized gains from security transactions 880,131
Net unrealized appreciation on investments 2,431,590
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NET ASSETS $10,059,690
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Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) 521,986
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Net asset value and redemption price per share (Note 1) $ 19.27
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Maximum offering price per share ($19.27/95.25%) $ 20.23
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See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENT OF OPERATIONS
For the Year Ended March 31, 2000
INVESTMENT INCOME
Dividends $ 63,267
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EXPENSES
Investment advisory fees (Note 3) 76,290
Accounting services fees (Note 3) 24,000
Distribution expense (Note 3) 16,300
Insurance expense 12,892
Administrative services fees (Note 3) 12,468
Shareholder services and transfer agent fees (Note 3) 12,000
Amortization of organization expenses (Note 1) 9,965
Postage and supplies 9,733
Trustees' fees and expenses 9,000
Professional fees 8,867
Custodian fees 7,009
Registration fees 5,213
Shareholder reporting costs 4,366
Pricing costs 590
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TOTAL EXPENSES 208,693
Fees waived by the Advisor (Note 3) (57,638)
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NET EXPENSES 151,055
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NET INVESTMENT LOSS (87,788)
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 1,082,317
Net change in unrealized appreciation/
depreciation on investments 1,655,514
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,737,831
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,650,043
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See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
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Year Year
Ended Ended
March 31, March 31,
2000 1999
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FROM OPERATIONS:
<S> <C> <C>
Net investment loss $ (87,788) $ (20,959)
Net realized gains from security transactions 1,082,317 94,447
Net change in unrealized appreciation/
depreciation on investments 1,655,514 525,613
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Net increase in net assets from operations 2,650,043 599,101
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DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains from security transactions (142,527) (29,519)
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FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,498,021 4,437,691
Net asset value of shares issued in reinvestment
of distributions to shareholders 85,441 18,339
Payments for shares redeemed (327,992) (310,093)
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Net increase in net assets from capital share transactions 1,255,470 4,145,937
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TOTAL INCREASE IN NET ASSETS 3,762,986 4,715,519
NET ASSETS:
Beginning of year 6,296,704 1,581,185
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End of year $ 10,059,690 $ 6,296,704
============ ============
CAPITAL SHARE ACTIVITY:
Shares sold 92,509 341,457
Shares issued in reinvestment of distributions to shareholders 5,041 1,297
Shares redeemed (20,574) (23,480)
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Net increase in shares outstanding 76,976 319,274
Shares outstanding, beginning of year (Note 1) 445,010 125,736
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Shares outstanding, end of year 521,986 445,010
============ ============
</TABLE>
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>
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Year Year Period
Ended Ended Ended
March 31, March 31, March 31,
2000 1999 1998 (a)
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<S> <C> <C> <C>
Net asset value at beginning of period $ 14.15 $ 12.58 $ 10.00
------------ ------------ ------------
Income (loss) from investment operations:
Net investment loss (0.17) (0.05) (0.01)
Net realized and unrealized gains on investments 5.58 1.69 2.59
------------ ------------ ------------
Total income from investment operations 5.41 1.64 2.58
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Less distributions:
Distributions from net realized gains (0.29) (0.07) --
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Net asset value at end of period $ 19.27 $ 14.15 $ 12.58
============ ============ ============
Total return (b) 38.55% 13.07% 25.80%
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Net assets at end of period $ 10,059,690 $ 6,296,704 $ 1,581,185
============ ============ ============
Ratio of net expenses to average net assets (c) 1.98% 1.97% 1.93%(d)
Ratio of net investment loss to average net assets 1.15% 0.60% 0.20%(d)
Portfolio turnover rate 154% 96% 25%
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</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 is not
annualized for periods less than a year.
(c) Ratios of expenses to average net assets, assuming no waiver of fees and
reimbursement of expenses by the Advisor, would have been 2.74%, 4.49% and
13.85%(d) for the periods ended March 31, 2000, 1999 and 1998, respectively
(Note 3).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
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MARKET
SHARES COMMON STOCKS --- 98.0% VALUE
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($)
COMPUTER PERIPHERAL --- 10.2%
5,000 EMC Corporation (a) .............................. 625,000
5,500 Mechanical Technology Inc. (a) ................... 390,500
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1,015,500
CONGLOMERATES --- 7.7%
5,000 General Electric Company ......................... 775,938
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CONSUMER, NON-CYCLICAL --- 6.4%
5,500 Bristol-Myers Squibb Company ..................... 317,625
9,000 Pfizer, Inc. ..................................... 329,062
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646,687
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ENERGY --- 0.7%
700 Amerada Hess Corporation ......................... 45,238
500 Texaco, Inc. ..................................... 26,812
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72,050
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FINANCIAL SERVICES --- 35.9%
2,000 American Express Company ......................... 297,875
10,000 AXA Financial, Inc. .............................. 358,750
10,000 Bank of New York Company, Inc. ................... 415,625
6,000 Bear Stearns Companies, Inc. ..................... 273,750
3,500 Chase Manhattan Corporation ...................... 305,156
5,000 Citigroup, Inc. .................................. 296,563
3,000 J.P. Morgan & Co., Inc. .......................... 395,250
4,000 Lehman Brothers Holdings, Inc. ................... 388,000
100 M&T Bank Corporation ............................. 44,650
3,000 Merrill Lynch & Co., Inc. ........................ 315,000
10,000 Paychex, Inc. .................................... 523,750
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3,614,369
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RESEARCH & DEVELOPMENT --- 4.6%
8,000 Albany Molecular Research, Inc. (a) .............. 467,000
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<PAGE>
NEW YORK EQUITY FUND
PORTFOLIO OF INVESTMENTS
March 31, 2000
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MARKET
SHARES COMMON STOCKS --- 98.0% VALUE
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($)
TECHNOLOGY --- 24.6%
25,000 AppliedTheory Corporation (a) .................... 521,875
5,500 Corning, Inc. .................................... 1,067,000
7,500 International Business Machines Corporation (IBM) 885,000
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2,473,875
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TELECOMMUNICATIONS --- 4.8%
4,000 JDS Uniphase Corporation (a) ..................... 482,250
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UTILITIES --- 3.1%
5,000 Bell Atlantic Corporation ........................ 305,625
100 Consolidated Edison, Inc. ........................ 2,900
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308,525
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TOTAL INVESTMENTS AT VALUE - 98.0%
(COST $7,424,604) ................................ $ 9,856,194
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.0% ..... 203,496
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NET ASSETS - 100.0% .............................. $ 10,059,690
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(a) Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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, 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 Pinnacle Advisors LLC (the Advisor) purchased the initial shares
of the Fund at $10 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 in the state of New York and those companies having a significant
presence in the state.
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 trading on the New York Stock
Exchange (normally 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. Securities 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.
INVESTMENT INCOME AND DISTRIBUTIONS TO SHAREHOLDERS -- Interest income is
accrued as earned. Dividend income and distributions to Fund 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 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
March 31, 2000
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 the Fund's intention to declare as dividends in each
calendar year of 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.
Based upon the federal income tax cost of portfolio investments of $7,460,986 as
of March 31, 2000, the Fund had net unrealized appreciation of $2,395,208,
consisting of $2,584,035 of gross unrealized appreciation and $188,827 of gross
unrealized depreciation. The difference between the federal income tax cost of
portfolio investments and the acquisition cost is due to certain timing
differences in the recognition of capital losses under income tax regulations
and generally accepted accounting principles.
RECLASSIFICATION OF CAPITAL ACCOUNTS -- For the year ended March 31, 2000, the
Fund had a net investment loss of $87,788 which was reclassified to accumulated
net realized gains from security transactions 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
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $12,467,338 and
$11,557,394, respectively, for the year ended March 31, 2000.
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 $57,638 of its investment advisory fees for the year ended
March 31, 2000.
Certain trustees and officers of the Trust are also officers of the Advisor.
<PAGE>
NEW YORK EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement between the Trust and Integrated
Fund Services, Inc. (IFS), IFS supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
administrative services for the Fund. IFS 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, IFS 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 minimum of $1,000.
Certain officers of the Trust are also officers of IFS.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between the Trust and IFS, IFS 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. IFS 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 IFS 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 IFS,
IFS calculates the daily net asset value per share and maintains the financial
books and records of the Fund. For these services, IFS receives a monthly fee of
$2,000 from the Fund.
PORTFOLIO TRANSACTIONS
All of the Fund's portfolio transactions are executed through Pinnacle
Investments, Inc., an affiliate of the Advisor. For the year ended March 31,
2000, brokerage commissions of $84,621 were charged to 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 year ended
March 31, 2000, the Fund incurred $16,300 of such expenses under the Plan.
4. FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions to shareholders from net realized
gains made by the Fund during the tax year ended March 31, 2000. On December 15,
1999 the Fund declared and paid a short-term capital gain distribution of
$0.0034 per share and a long-term capital gain distribution of $0.2915 per
share.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of New York Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of New York Equity Fund as of March
31, 2000, the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements) are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at March 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial statements for the year ended March
31, 1999, including the financial highlights for each of the periods prior to
March 31, 2000 were audited by other independent accountants whose report dated
April 23, 1999 expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
New York, New York
May 19, 2000
<PAGE>
Change in Independent Accountants
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of New York Equity Fund, (hearafter referred to as the Fund) pursuant
to an agreement by PricewaterhouseCoopers LLP (PwC) to acquire McGladrey's
investment company practice. The McGladrey partners and professionals serving
the Funds at the time of the acquisition joined PwC. The reports of McGladrey on
the financial statements of the Fund during the past two fiscal years contained
no adverse opinion or disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles. In connection with its
audits for the two most recent fiscal years and through August 13, 1999, there
were no disagreements with McGladrey on any matter of accounting principle or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of McGladrey would have
caused it to make reference to the subject matter of disagreement in connection
with its report. On March 16, 2000, the Fund, with the approval of its Board of
Trustees and its Audit Committee, engaged PwC as its independent auditor.
